Why Are Traders Moving GCM Resources PLC, Energy Assets Group PLC And SolGold plc?

Should you pile into these 3 major movers? GCM Resources PLC (LON: GCM), Energy Assets Group PLC (LON: EAS) and SolGold plc (LON: SOLG)

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Shares in SolGold (LSE: SOLG) have been down by as much as 18% today despite the company releasing a statement saying that its operations in Ecuador have not been impacted by the earthquake which occurred there yesterday.

Of course, SolGold’s shares are still up by a whopping 54% since the turn of the year and a key reason for this has been the improving prospects for the gold price. With many investors believing that the price of gold would decline this year as US interest rates increased and made non interest producing assets less appealing on a relative basis, uncertainty regarding the global economy has made gold a popular asset for nervous investors.

SolGold’s most recent news was last week when it announced a new copper-gold mineralisation discovery in Ecuador. This was positive news for the business and while it remains a small and relatively high risk play, the upbeat outlook for gold in particular means that less risk averse investors may wish to take a closer look.

Also among the major movers today is GCM Resources (LSE: GCM), with the resource exploration and development company recording a rise in its share price of 18%. In response to this, the company has released a statement to say that it is not aware of any disclosable price sensitive information in relation to the company which has not yet been made public.

Of course, the most recent news release by GCM was at the end of March when it reported a wider pretax loss for the first half of the year due to higher share-based payments on its road to securing approval for the Phulbari coal project. It has been subject to delays in the past, with approval from the Bangladeshi government having been slower than hoped for. However, with GCM stating in its results that it was confident that approval would be granted, its shares could continue to rise in the short run, although they clearly remain relatively high risk.

Meanwhile, shares in Energy Assets Group (LSE: EAS) have soared by around 40% after it accepted a £198m takeover offer from Alinda Capital Partners. The infrastructure manager will pay a 40% premium to Energy Assets’ closing price from last week, with the gas metering specialist being valued at 22.6 times the most recent financial year’s earnings.

This may seem like a relatively high price to pay for Energy Assets Group, but with the company having upbeat earnings growth prospects, the buyer may be getting a good deal. For example, Energy Assets Group is forecast to grow its bottom line by 14% this year and by 24% next year, which puts it on a price to earnings growth (PEG) ratio of only 0.9. This indicates that while a 40% premium is being paid, it could be argued that Energy Assets Group is worth more if it is able to deliver on its strong medium term forecasts.

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.

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