Blockchain technology seems likely to find many long-term commercial uses, but it’s not yet clear whether Bitcoin will be one of them. The original cryptocurrency has lost 58% of its value over the last year. In my view, Bitcoin investors face two problems.
The first is Bitcoin isn’t widely accepted, so it’s not a realistic alternative to a national currency. The second problem is this cryptocurrency lacks any asset backing, such as gold, property, or shares in a business.
From what I can see, Bitcoin usage seems to be limited to black market transactions and a handful of enthusiasts. I think the price is likely to continue falling.
A better buy for ‘miners’?
If you’re interested in mining special situations, I think there are much better opportunities available in the stock market. One stock that’s caught my eye following recent developments is FTSE 250 firm Acacia Mining (LSE: ACA).
This Tanzania-based gold miner hit trouble in 2017 when the government banned the company from exporting gold-bearing ore and hit the firm with claims for $40bn of unpaid taxes and $150bn of penalties and interest owed.
Acacia denies any wrongdoing, and these figures do seem far-fetched to me for a medium-sized company. But I’m starting to think the chances of a favourable outcome are improving.
The company has been forced to adapt its operations so it only exports gold bars and not gold-bearing ore. Acacia’s latest results suggest its operations are now stable and profitable under this new regime. The firm reported adjusted net earnings of $44m for 2018, compared to a loss of $146m in 2017.
Mining costs came in well ahead of expectations, with an all-in sustaining cost of $905 per ounce, compared to forecasts of $935-$985 per ounce. Cash generation also seems good and the group ended the year with a net cash balance of $88m.
There’s still a risk that a settlement with the Tanzanian authorities will leave the firm in financial difficulties. But Acacia is a major employer in the country and contributed $400m to the local economy last year through taxes, royalties, and spending with local suppliers.
Negotiations with the government are now being led by Mark Bristow, who founded Africa firm Randgold Resources and built it into a FTSE 100 business. Randgold recently merged with Barrick Gold, which is Acacia’s largest shareholder.
This stock remains a very speculative buy, in my view. But I think Bristow’s involvement has improved the chances of a favourable outcome.
Don’t dismiss this dividend
Iron ore, copper and aluminium generate most of the dividends paid to shareholders of FTSE 100 giant Rio Tinto (LSE: RIO). This stock is unlikely to deliver fireworks for investors, but what it does offer is a generous and reliable income.
Rio stock currently yields more than 5%. The company is very profitable, with an operating margin of 35% over the 12 months to 30 June.
Although a cyclical downturn is a risk, Rio has some of the largest, cheapest iron ore mines in the world. Demand for this product is unlikely ever to disappear, in my view.
I’d buy the shares for income today and then wait to buy more during the next mining downturn. In my view, this is one of the few mining stocks worth considering for a buy-and-hold portfolio.
Roland Head has no position in any of the shares mentioned. 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.