A strong recovery

Shares in Fresnillo (LSE: FRES), the world’s biggest producer of silver and Mexico’s second largest gold producer, have put on a storming 76% since the end of September, to 1,026p today. That comes after a four-year decline in earnings is set to come to an end with a strong recovery forecast this year — and growth forecasts put the shares on attractive-looking PEG ratios of 0.2 and 0.5 for this year and next.

Fresnillo’s production has been rising along with the soaring price of the shiny stuff, and that should further boost this year’s profits. But the shares are now on a forward P/E of 52 for this year, dropping only as far as 31 based on 2017 forecasts — with a 2017 dividend yield of only around 1.5% on the cards. A valuation like that is based on an assumption that precious metals prices will continue on up, and it seems like a very risky one.

Soaring gold shares

The price of gold has been pushing Randgold Resources (LSE: RRS) shares through the roof too, with a 62% gain since September to 5,660p. And with three years of falling earnings set to reverse with a forecast 39% rise this year, Randgold shares aren’t quite as highly rated as Fresnillo’s — they’re on P/E multiples of a relatively modest 30 and 26 for this year and next, though expected dividend yields are even lower at less than 1%.

With Randgold being very conservative in the exploration projects it undertakes, and with a total production cost of a little under $800 per ounce, any further gold price rises should be geared up nicely to Randgold’s bottom line.

If you really must invest in a gold miner, Randgold could be the one to go for — but you’d be gambling purely on sentiment towards gold prices, with no real rational valuation of the stuff possible. And any drop in the price would result in a bigger fall in Randgold’s earnings.

Safety in insurance

I think we’re on more solid ground with insurer Admiral Group (LSE: ADM) and its 60% share price rise in 18 months, to 1,919p, as that gain has been on the back of a sound fundamental performance rather than on the fancies of gold watchers.

With a policy of returning cash to shareholders, Admiral is expected to provide a total dividend yield of 6.1% this year, rising to 6.5% next, so you’d actually have enjoyed a better return than just the share price appreciation. But the company will be pushed to maintain dividend levels like these unless its business can keep on growing. Fortunately, Admiral has been doing well from the motor insurance business in the UK with premiums rising, and there’s further overseas expansion on the cards over the next few years.

All in all, Admiral is easily my pick of these three for the one most likely to sustain its share price growth with the least risk.

The post Can Fresnillo plc, Randgold Resources limited and Admiral Group plc keep on flying? appeared first on The Motley Fool UK.

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Alan Oscroft has no position in any shares mentioned. 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.

But by the same token, surely the best time to buy such companies is when prices in their sectors are staging a comeback, as they’re more likely to reward us with multi-bagger gains than the FTSE 100 giants.

Brighter prospects

Look at Amur Minerals (LSE: AMC), for example, whose share price has been in a bit of a slump — at 4.8p as I write, Amur shares are down 90% from their high point in June 2015. But the latest independent update on the Kubuk nickel-copper deposits at the firm’s Kun-Manie project, just published a few days ago, has increased the likely available resources again. Amur now says the total measured and indicated resources at the mine in the far East of Russia have doubled since April 2015, and this latest step concludes the evaluation phase of Amur’s Definitive Feasibility Study.

There is, of course, still a long way to go, but any progress in the prices of nickel and copper will surely help. Both have been picking up, though both have dropped back a little of late — but if metals prices really have bottomed out, the prospects for Amur will surely have brightened a little.

Oil opportunity

With the price of a barrel of Brent crude getting ever closer to the magic $50 mark, the future for Xcite Energy (LSE: XEL) must be looking a little rosier too. Xcite shares are down over the past 12 months, to 14.9p, but we’ve actually seen a 32% recovery since a recent low on 20 January.

Sustainable profits from Xcite aren’t expected before 2018, and there will be plenty of debt that needs to be serviced before then — in fact, when its full-year results were released in March, the firm told us it was in talks with bondholders in order to “develop financial flexibility” regarding bond payments due on 30 June.

With Xcite’s reserves update issued the same day looking pretty positive, the chances of the firm getting its finances sorted for the longer term are looking increasingly good to me — although it’s clearly still only for those who can handle a bit of risk.

Shiny

Platinum is one of those precious metals that has uses other than just sitting around looking shiny, and the price of the stuff has been picking up lately, to $1,055 per ounce at the time of writing. And that hasn’t done Jubilee Platinum (LSE: JLP) any harm at all, with Jubilee shares having more than doubled in the past 12 months — they’ve been on a bit of a slow fall for a few months recently, but an operational update on 12 May gave the shares a boost, and they stand at 3.3p today.

The chrome recovery plant operated by subsidiary Jubilee Tailings Treatment Company is now fully operational and has achieved a sustainable processing capacity that’s 30% ahead of expectations. Production of 6,000 tonnes of chromite is targeted for May, rising to 8,000 tonnes in June, and that surely makes Jubilee shares that bit more attractive.

The post Is it time to buy Amur Minerals Corporation, Xcite Energy Limited and Jubilee Platinum plc? appeared first on The Motley Fool UK.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended BP and Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Gold has climbed by 13% since the end of 2015 and now sells for $1,200 an ounce, with some City pundits calling for $2,000 before much longer (but they have to have their fun, don’t they?), and silver is up 10% to $15.30. So should we be buying the miners who delve for this desirable glittery dirt?

After a lacklustre 2015, shareholders in Centamin (LSE: CEY), which extracts the yellow metal mostly from its Sukari mine in Egypt, have been enjoying a recent boost. The shares are up 29% since 20 January, to 78.9p, rising more than twice as fast as gold itself over a similar period. The firm’s January Q4 production update helped, reporting a 16% rise in full-year production to 439,072 ounces — at the upper end of previous guidance.

Centamin has endured two years of crashing earnings, but a gold turnaround could see a brighter year in 2016.

Even more…

There’s an even better story at Randgold Resources (LSE: RRS), where we’ve seen a 45% share price rise so far in 2016, to 5,975p. Randgold, whose mining operations are mainly in Mali, also released an upbeat final quarter in 2015, with chief executive Mark Bristow talking of “one of the best years in the company’s history“. The firm reported record annual production of 1.2 million ounces, up 6% on 2014, with production costs down.

Randgold has seen double-digit earnings  falls for three years in a row, but there’s an uptick of 15% on the cards for 2016 — and that’s largely based on forecasts that are lagging the gold price rise. The downside, however, is that the consensus suggests a rather high P/E of 37.

Fresnillo (LSE: FRES) benefits from the price rises of both gold and silver — it’s the world’s largest producer of silver from ore, and Mexico’s second-biggest gold miner. The share price has suffered a slump over several years with earnings declines accelerating in the past two years — EPS fell by 81% in 2014, after a 58% fall in 2013.

But there’s a big EPS rebound of 150% predicted for the year just ended and a further 81% penciled in for this year, but we’re still looking at a 2016 P/E of nearly 40. Still, the renewed interest in precious metals has given Fresnillo a boost too, with the shares putting on 37% since 20 January, to 887p.

Glittery enough for you?

Should you buy any of these to take advantage of further gold and silver rises? Well, don’t forget that gold is actually very expensive to get out of the ground and into the shiny form that people want — Randgold’s cost is around $680 an ounce. And that’s the reason for the extreme volatility of these stocks, as their profits are geared-up from the metal prices — at today’s prices, profits should rise about twice as fast as gold prices.

But profits will fall twice as fast if gold drops again, and I’m nowhere near as convinced as some pundits that we’re in for a bull-market. But if you like the roller-coaster ride that is gold itself, then perhaps you’ll relish the white-knuckles that come with buying gold miners.

The post Have Soaring Gold & Silver Turned Centamin PLC, Randgold Resources Limited And Fresnillo Plc Into Buys? appeared first on The Motley Fool UK.

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• Consider these FTSE 100 bargain shares in a Stocks and Shares ISA!
• How to invest £5,000 in the FTSE 100 today
• Fresnillo share price rebounds as a FTSE 100 top mover after a 30% sell-off — what’s next?

Alan Oscroft has no position in any shares mentioned. 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.