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Do Rare Earth Minerals PLC’s Latest Results Make It A Better Buy Than Anglo American plc & Randgold Resources Limited?

Shares in Rare Earth Minerals (LSE: REM) are around 3% higher today following the release of its first half results. That’s despite the company reporting a wider pretax loss for the first half of the year versus the same period last year, with it being £1.2m compared to £200k in 2014.

The key reasons for the increased loss were higher administrative costs, with them increasing by around two-thirds to over £1m, as well as the lack of a one-off gain from an equity swap settlement which occurred in 2014. In fact, Rare Earth Minerals recorded a loss in its equity swap settlements of £100k against a profit of £450k last year. Furthermore, finance costs also rose from just £6k last year to £110k in the first half of the current year, which contributed to a greater pretax loss.

Despite this, Rare Earth Minerals remains bullish on its future. It remains committed to making further investments in its key projects and, on this front, clearly has considerable future potential. That’s at least partly because demand for lithium, for example, is set to rise over the medium to long term as the world shifts to cleaner power. So, while it currently has no revenue and is burning through cash, Rare Earth Minerals could become a highly profitable business in the medium to long term – especially since its various projects have considerable potential.

However, for many investors, making a profit right now is of utmost importance. That’s especially the case since the resources industry is enduring a challenging period, which arguably makes investment within the sector more difficult to come by. As such, buying shares in profitable companies could limit risk moving forward, which is why Anglo American (LSE: AAL) and Randgold Resources (LSE: RRS) are very enticing buys right now.

In the case of Anglo American, it is shifting its focus away from South Africa, which is a sound move due to the challenges it has faced (notably with employee relations) in its traditional home market. This should lead to fewer production issues in future and, while Anglo American made a loss last year, it is due to turn that performance around and post a pretax profit of £1.65bn, with growth of 7% forecast for next year. This puts Anglo American on a forward price to earnings (P/E) ratio of just 10.7, which indicates that there is upward rerating potential.

Similarly, Randgold Resources is also expected to have a strong 2015 and 2016. It is due to follow five years of profitability with another year in the black in the current year, with next year forecast to see earnings rise by 23%. This has the potential to improve investor sentiment in Randgold Resources – especially since the company has a price to earnings growth (PEG) ratio of just 1. And, while the price of gold is continuing to disappoint, global economic turmoil could strengthen demand for the precious metal and cause Randgold Resources’ profitability to head northwards at an even faster rate.

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Peter Stephens owns shares of Anglo American. 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.