I think these cheap UK shares offer value that’s too good to ignore. Here’s why.
Production set to double?
A surging gold price has swept Serabi Gold (LSE:SRB) shares higher in 2025. Yet at 193.5p per share, the South American miner still offers exceptional value, based on an expected 87% earnings increase this year.
Its price-to-earnings (P/E) ratio sits at just 3.8 times. This also leaves Serabi’s price-to-earnings growth (PEG) ratio well below the value watermark of one.
Investing in mining stocks provides a leveraged way to gain exposure to the gold market. This can lead to superior returns as during bull markets company profits can rise more sharply than the bullion price.
However, this leveraged angle can be a double-edged sword. While earnings can soar during bull markets, they can also nosedive when metal prices retreat, making this mining stock more volatile than the commodity itself.
But I’m confident that gold, which hit record peaks above $3,500 per ounce earlier this year, can continue rising. Macroeconomic and geopolitical uncertainty is growing, meaning investor appetite for precious metals should be here to stay.
A survey from eToro shows 45% of its UK investors have bought gold in the last two years, and that 29% of non-bullion holders are considering investing. The majority (62%) of those surveyed also think gold prices will rise in next six-12 months.
My enthusiasm for Serabi shares extends beyond just a short-term horizon, however. Holding gold stocks over the long term can be an excellent portfolio diversifier to reduce risk and provide a smooth return over time.
And Serabi is an especially attractive one to consider as it ramps up production at assets like Coringa in Brazil. By 2028, the company expects to reach annual output of up to 100,000 ounces. That’s more than double the 45,000 ounces it’s targeting for this year.
Another cheap gold stock
Another cheap mining share to think about that has massive growth potential is Hochschild Mining (LSE:HOC).
Like Serabi, it produces a lot of gold — in 2024, 69% of revenues came from the yellow metal. But with considerable silver operations too, it allows investors to diversify into a metal that has both investment and industrial qualities.
In fact, given that silver has greater momentum than gold at the moment, getting exposure to it could be especially wise. Silver prices this week struck their highest for 14 years, around $39.20 per ounce.
These price gains have pushed the gold-silver ratio to 88:1. But this measure — which calculates how many ounces of silver are needed to purchase an ounce of gold — is still well above the long-term average of 60:1. This suggests silver could have much further to climb.
Another thing with mining stocks is the ever-present threat of operational difficulties. Hochschild’s own shares dropped this year after it warned of higher costs due to slow production increases and inflationary pressures.
But then again, I think such threats are baked into the low valuations of both these bargain mining shares. At 278.4p per share, Hochschild’s forward P/E ratio is 11.1 times and its PEG is 0.1. These reflect predictions that earnings will swell 85% in 2025.
