In the last three months, the gold price has risen over 3%. That’s an impressive return – especially since the FTSE 100 is down almost 2% during the same time period. However, while the price of gold has made gains, not all gold miners are in positive territory during the last quarter. Here are two gold miners that are down in the last three months, but which could be about to deliver impressive share price gains in future.
A troubled period
Reporting on Monday was gold miner Acacia Mining (LSE: ACA). Its shares dropped 10% following an operational update. This takes their fall in the last three months to over 35%. The reason for this large drop in valuation is difficulties which the company is experiencing in Tanzania. The government has imposed a ban on gold/copper concentrate exports in the last six months, which has caused a reduction in cash flow and a build-up of inventory for the company.
Its update detailed the intention to reduce its operational activity in Tanzania. Previously, the company has stated that this may be a realistic option, since it now has negative cash flow of $15m per month. Although it is still keen to engage in discussions with the government in order to find a solution to the ban, the reality is that it could remain in place for the foreseeable future.
While Monday’s announcement was a disappointment for the company’s investors, it was not particularly unexpected. Looking ahead, the company continues to have a strong asset base, with 65% of its production unaffected by the export ban. Therefore, if the price of gold continues to remain robust then the company’s share price could make gains as gold miners become more popular among investors.
Also falling in value in the last three months have been shares in Centamin (LSE: CEY). The North Africa-focused gold miner has recorded an 8% fall in the last quarter, although its recovery potential remains high. Investors seem to be becoming more bullish on gold due to geopolitical uncertainty, but also because of potential political issues in the US.
Instability in North Korea could mean that investors turn to defensive assets, such as gold. Similarly, with US debt ceiling negotiations likely to become more challenging in the coming weeks as President Trump seeks to commence work on a border wall with Mexico, gold may be seen as a safe haven for nervous investors. This increased demand could continue to push the precious metal’s price higher and lead to higher profitability for Centamin and its peers.
With Centamin forecast to increase its bottom line by 13% next year, it appears to offer growth potential. Its price-to-earnings growth (PEG) ratio of just 1.3 suggests that it offers a wide margin of safety and while the gold price may remain volatile, the general trajectory could be up. This could help the company to deliver a successful recovery in the coming months.
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Peter Stephens owns shares of Centamin. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.