Is Jubilee Platinum PLC A Better Stock Selection Than Kenmare Resources plc Or Beowulf Mining plc?

Royston Wild runs the rule over Jubilee Platinum PLC (LON: JLP), Kenmare Resources plc (LON: KMR) and Beowulf Mining plc (LON: BEM).

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Today I am looking at the investment prospects of three of the FTSE’s downtrodden diggers.

Revenue woes continue to swirl

Battered minerals play Kenmare Resources (LSE: KMR) announced in Friday business that a combination of lower commodity prices and production problems pushed revenues 9% lower during January-June, to $73.9m, a result that caused operating losses to widen to $27.2m, from $17.9m a year earlier.

The miner, which produces titanium minerals and zircon, has introduced a massive cost-cutting scheme to offset the effects of a sickly top-line, and total cash operating costs obligingly fell 17% in the first half to $69.1m. But Kenmare faces the prospect of further weakness in the ilmenite price — Melior Resources mothballed its Goondicum mine in Queensland earlier this month thanks to a weak market — a situation which threatens to smash its earnings outlook.

Indeed, the City does not expect Kenmare to flip into the black any time soon. Losses of 3.62 US cents per share last year are expected to narrow to 1.72 cents in 2015 and to 1.14 cents next year, but today’s results could result in downgrades to these sickly results, not to mention a subsequent collapse in Iluka Resources’ takeover attempt.

Swedish digger under pressure

The story was somewhat better for Beowulf Mining (LSE: BEM) in Friday trading, with the business announcing that it booked a £330,276 pre-tax loss in the first six months of 2015, a vast improvement from the £1.32m loss recorded in the same period last year. The Sweden-focussed miner had falling corporate overheads and zero derivative losses to thank for the result.

Beowulf said that it is “looking forward to a busy second half of the year” as it hunts an exploitation concession for the Kallak North iron ore asset. But although the explorer received a boost last month as authorities in Norrbotten County decreed that the project would create vast “economic benefits,” plenty of uncertainty still faces the company.

The necessary paperwork is still to be signed off for work to commence, of course, while Beowulf’s fragile capital position is also casting concerns — cash and equivalents of £172,955 have dived from £554,436 at the same point in 2014. And should the iron ore price continue to crash, the economic viability of Beowulf’s operations could come under fresh scrutiny.

Jubilee losing its lustre

So should the problems facing Kenmare and Beowulf prompt investors to park their cash in Jubilee Platinum (LSE: JLP)? In my opinion the answer is a resounding ‘no’, even though a 12.5% share price advance in Friday trade suggests the wider market is far more optimistic over the firm’s investment potential.

Shares in Jubilee also rocketed in July following news it had hived off its Middleburg non-platinum businesses to raise £5.8m, a critical step in financing the company’s two surface tailings projects. And the company has since secured debt funding to create what its two “transformational” platinum-processing assets.

But naturally Jubilee remains at the mercy of a volatile platinum price, and this week’s dive towards $970 per ounce took it to levels not visited since 2009. With Chinese demand on the wane and usage in the critical auto sector gradually eroding — automakers are opting increasingly for cheap palladium in exhaust systems — I fully expect platinum prices to continue falling, a terrifying prospect for Jubilee’s earnings outlook.

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.

Royston Wild 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.

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