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This is one of the FTSE 100’s worst performers. Would I buy it for my ISA?

South American gold and silver mining giant Fresnillo (LSE: FRES) has been one of the FTSE 100‘s worst performers over the last three years. Its shares have lost 56.7% of their value, putting it ahead of only tobacco group Imperial Brands (-57.2%) and British Gas owner Centrica (-66.1%).

Fresnillo has suffered a number of operational and production setbacks. However, if these are now behind it, there could be massive upside from the current depressed share price and lowly dividend. This could make it an ideal candidate to hold in a Stocks and Shares ISA, which shields you from paying tax on any capital gains or income.

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Here, I’ll discuss the prospects of Fresnillo rocketing to recovery. I’ll also look at Trans-Siberian Gold (LSE: TSB), a small-cap peer with ambitions of becoming a premier mid-tier producer. In contrast to Fresnillo, this company has been delivering strong operational performance and production.

Wrong time to throw in the towel

The Fresnillo share price closed at a new multi-year low of 540p yesterday. It’s easy to understand why many investors have become increasingly frustrated and exited the stock in droves. A Q3 production report in the latter part of October was far from sparkling, and a fallback in gold and silver prices in the first week of November hasn’t helped sentiment.

In the Q3 update, the company said it now expects production for 2019 to be at the lower end of the guided range. This has become a familiar refrain over the last couple of years. However, I’m not convinced Fresnillo’s experienced management team has lost a grip on the group’s operations, and I reckon now could be precisely the wrong time for investors to throw in the towel.

The company is continuing to implement a performance improvement plan, which includes “intensive infill drilling to improve the geological model, dilution control and raising development rates, whilst also taking actions to address maintenance performance, contractor productivity and equipment availability.”

While City analysts expect a 45% fall in earnings this year, they’ve pencilled-in a 40% rebound in 2020. And I’m expecting further advances beyond next year, as the company’s development projects — including construction of its next major mine — are progressing well. Trading at 20 times forecast 2020 earnings, with a prospective 2.6% dividend yield, I rate the stock a ‘buy’ for a strong medium-to-long-term recovery.

Tempted to buy a small stake

Trans-Siberian Gold is a low-cost, high-grade producer at its Asacha mine in Far East Russia. It also holds a licence to develop one of the largest gold fields in the region, 50km down the road.

In a Q3 production update last month, it reported a continuing strong operational performance. As a result, it said it expects production for 2019 to be at the upper end of guidance.

The share price began the year at 35p, peaked at 129p late summer, and is currently 70p. There are no analyst forecasts I can see, but this looks very cheap to me, based on 6.2 times trailing 12-month earnings, and with a dividend yield of 3.6% (or 9.3% including a special dividend paid in the period).

There’s currently some doubt about existing resource estimations for the Asacha mine, and the company has engaged competent persons to produce an updated report (due by the end of the year). Despite this uncertainty, I’m tempted to buy a small stake in the stock.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo and Imperial Brands. 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.