Amur Minerals Corporation vs Polyus Gold International Limited vs Petra Diamonds Limited: Which Miner Should You Buy?

Of these 3 mining stocks, which is the best buy? Amur Minerals Corporation (LON: AMUR), Polyus Gold International Limited (LON: PGIL) or Petra Diamonds Limited (LON: PDL)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The present time is a rather uncertain one for investors in mining stocks. After all, it seems as though very few commodities have not seen their prices hit hard in recent months, with a global deflationary spiral causing prices of commodities such as iron ore, gold and oil to hit multi-year lows.

As a result, many mining companies have endured rather difficult periods, with their profitability coming under severe pressure. One such company is Polyus Gold (LSE: PGIL), which is Russia’s largest gold producer. It made a loss in 2014 and, while gold has hit a five year low this year and recently caused its quarterly sales to fall by 8%, it is expected to bounce back strongly in the current year. In fact, its earnings are due to reach 13.7p on a per share basis this year, which puts the company on a price to earnings (P/E) ratio of just 13.8.

And, looking ahead, it is forecast to increase earnings by over 21% in 2016 which, when combined with its rating, equates to a price to earnings growth (PEG) ratio of just 0.7. This indicates that upbeat share price performance could lie ahead, with gold producers having the added advantage of being inversely correlated to the outlook for the global economy.

Of course, there are other mining companies with capital gain potential. For example, Petra Diamonds (LSE: PDL) may have posted a fall in its share price of 20% since the turn of the year, but its upbeat earnings forecasts could cause investor sentiment to pick up. In fact, the diamond mining business is expected to grow its bottom line by around 46% next year and, encouragingly for its investors, such a strong rate of growth does not appear to be priced in.

For example, Petra Diamonds currently trades on a P/E ratio of 24.6 which, when combined with its earnings growth prospects, equates to a PEG ratio of just 0.5. This indicates that its shares offer a very wide margin of safety so that if the company disappoints and earnings come in lower than expected, its shares may not be hit as hard as would normally be the case. And, with Petra Diamonds set to raise dividends by 45% next year, it shows that management is confident in the outlook for the business and is not hoarding all available cash in case of further declines.

Meanwhile, Amur Minerals (LSE: AMUR) continues to experience very encouraging news flow. Most recently, it has signed an agreement with the Far East and Baikal Region Development Fund which should make it a lot easier for the company to attract financing for its Kun-Manie project. Clearly, there is still a long way to go and Amur Minerals needs to overcome the major question as to how it will fund the $1bn+ project. But, the deal makes things easier and, crucially, it shows that the project has local backing. And, with it being a world-class asset, this combination should provide the cash needed for Amur Minerals to deliver excellent profitability in the long run.

However, with the current uncertainty within the mining sector, it seems prudent to stick to companies that are profitable now and, with Petra Diamonds offering stronger growth prospects at a more appealing price than Polyus Gold, it seems to be the pick of the three stocks at the present time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Female analyst sat at desk looking at pie charts on paper
Investing Articles

2 FTSE 100 shares I plan to avoid like the plague in 2025

Mark Hartley identifies two FTSE 100 shares he wouldn't go near in 2025, explaining why their fundamentals don't align with…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This hot growth stock has smashed the FTSE 100 in 2024. Time for me to sell?

After a brilliant few months for this FTSE 100 stock, could there be signs of it overheating? Paul Summers considers…

Read more »

Investing Articles

2 no-brainer FTSE 100 value shares to consider buying with just £500?

These FTSE 100 shares offer exceptional all-round value at today's prices. Could they end up supercharging investors' long-term returns?

Read more »

Investing Articles

These FTSE 250 growth shares could soar over the next year!

The FTSE 250's risen strongly as demand for British assets like shares has recovered. I think these two top companies…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

If an investor put £30,000 into the S&P 500 a decade ago, here’s what they’d have today!

A lump sum investment in S&P 500 shares would have created spectacular returns between 2014 and now. Can the US…

Read more »

Investing Articles

Is Games Workshop a top stock to consider buying in December for the long haul?

With Games Workshop updating on its deal with Amazon, is the UK company a stock to think about buying for…

Read more »

Investing Articles

What does 2025 hold for the Lloyds share price?

Lloyds' share price could be in for a rocky ride next year as tough economic conditions and a fresh mis-selling…

Read more »

Investing For Beginners

3 ways to try and build a bulletproof ISA

Jon Smith explains factors such as allocating funds to defensive stocks as a way to try and smooth out volatility…

Read more »