It’s since taken a step back on some light profit taking. But make no mistake, investor demand for the safe-haven remains rock-solid. And this was underlined by recent data from the World Gold Council. According to the body, some $5.5bn worth of inflows, equivalent to 127 tonnes, went into global gold-backed exchange-traded funds (ETFs) in June “as geopolitical uncertainty increased and central banks signalled a shift to a more accommodative policy over the coming months.”

More to come?

This was the largest monthly inflow (in dollar terms) since 2012, and there are numerous reasons to expect gold holdings to keep on bulging.

As signs of a more doveish monetary policy from the Federal Reserve have risen, expectations of interest rate cuts from Brussels and London to Beijing have also gained traction. And the relentless stream of poor economic data from all over the globe means the prospect of several benchmark rate reductions is only likely to rise as 2019 progresses.

Throw the unresolved issue of US-related trade wars into the bargain, Britain slipping closer to the Brexit cliff-edge, and Iran showing little signs of backing down in its high-stakes diplomatic spat with Washington, well there’s plenty of reason to expect bullion prices to keep making progress.

But there’s more than one way to capitalise on the rampant gold price right now. Rather than buy physical bars or coins, or invest in one of those aforementioned ETFs, I believe a much better way to make your money work for you is by buying into London’s listed gold producers.

Dividend darlings

Why? The payment of dividends to investors by such mining stocks are extra rewards which don’t come with playing the gold market. And some of the predicted dividends of  these businesses are pretty darn impressive.

Take Pan African Resources and Polymetal Resources and their forward yields around 4.5%. Or Trans-Siberian Gold and its 5.5% prospective yield.

Of course investors need to be prepared to take some of the risk associated with the mining industry, namely uncertainty over potential payloads and unexpected production disruptions which can hammer output levels and ramp up costs.

However, those diggers I’ve mentioned are all making brilliant progress operationally. Speaking of which, Acacia Mining announced this week gold production surged almost 20% year-on-year in Q2, thanks to blowout production in Tanzania. And what’s the forward yield over at this particular share? A monster 6.2%, if you’re asking.

While all of these yields are pretty delicious, it’s possible to get hold of some bigger dividend payers in the near term at least. However, if you’re looking for a blend of jumbo payouts and the possibility of some stratospheric share price gains in the months ahead, you may well be better off ploughing your investment cash into these mining mammoths instead.

The post Hot right now! Are these the best dividend stocks to buy today? appeared first on The Twelfth Magpie.

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Royston Wild 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.

Despite environmental concerns, the world won’t stop needing materials such as iron ore (for steel) and copper (for all things electrical) any time soon. These two natural resources would probably be my top picks for the 21st century, as modern infrastructure and technology simply can’t be built without them.

One big digger I’d buy

A company that shares this vision is FTSE 100 mining group Rio Tinto (LSE: RIO). Rio has sold its coal mines and is now focused on iron ore, copper and aluminium.

In each of these areas, the company has large, good quality assets. The benefits of this approach are clear. In 2018, Rio generated free cash flow of almost $7bn from sales of $40.5bn. That represents a free cash flow yield of 17%, which is an exceptionally good figure.

The company’s profit margins are currently being boosted by strong iron ore prices and some disruption at other major producers. But chief executive JS Jacques is keeping tight control on costs and spending. Having reduced Rio’s debt levels to minimal levels, Mr Jacques is returning most of the company’s spare cash to shareholders.

In 2018, dividends and share buybacks totalled $13.5bn, giving a total shareholder return of about 14% on the current share price.

Returns are likely to be more modest this year. But analysts still expect Rio shares to provide a dividend yield of 5.7%. I suspect more share buybacks are likely as well.

What about the risk of a crash?

It’s no secret that the mining sector is heavily cyclical. Periodic downturns are a fact of life.

The sector crashed in 2015 and I suspect it will happen again at some time in the next 10 years. But I don’t see this as a reason to avoid diversified miners like Rio, which are financially strong and prioritise shareholder returns.

I’d be happy to buy Rio for income today. I’d then plan to buy more during the next downturn, in order to lower my average purchase price and boost future returns.

I wouldn’t do this

As a general rule, I stay away from smaller miners, such as Tanzanian gold firm Acacia Mining (LSE: ACA).

The biggest problem with such companies is that they tend to rely on a handful of assets, often in a single country.

This leaves them heavily exposed to political risk and operational problems. Acacia is a good example. Today’s first-quarter results revealed that the firm is still no nearer to a settlement with the Tanzanian authorities relating to a major tax dispute.

In the meantime, the group’s gold production fell by 13% during the first quarter, due to a ground fall and various other technical problems. Although Acacia remains profitable and may seem cheap, the eventual cost of settling with the Tanzanian government could be high. All of the firm’s revenue-producing mines are in Tanzania, so it can’t afford to walk away.

I believe that gold miners can be a good long-term investment. But Acacia faces unknown risks and has all of its eggs in one basket. At 150p, the shares have risen by 50% from last year’s lows of under 100p. In my view, that’s enough. I’d stay away.

The post A 5%-yielding FTSE 100 dividend stock I’d buy and hold forever appeared first on The Twelfth Magpie.

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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.

The share prices of gold miner Acacia (LSE: ACA) and oil exploration company Hurricane Energy (LSE: HUR) have been volatile in recent months. On Friday, the former released a trading update which sent its shares as much as 15% lower, while the latter has seen its stock price rise by 67% in the last year.

Looking ahead, does either company offer investment appeal? Or, are they simply too volatile to buy at the present time?

Political risk

Acacia’s trading update showed that the company continues to face significant political risk in Tanzania. There have been criminal charges brought against several current or former employees of the business. This could clearly have an impact on the outlook for the company, although it has been able to deliver impressive operational performance despite the challenges it has faced.

For example, in the third quarter it produced 136,640 ounces of gold at an all-in sustaining cost of $880 per ounce sold. It has been cash flow positive in the third quarter, with it now having a net cash position of $74m. It is targeting production of 500,000 ounces of gold for the full year, which would be a strong performance given the risks it has faced.

Although Acacia’s share price may continue to be volatile and its operational outlook is highly uncertain, it offers a wide margin of safety. Based on next year’s profit forecast, the stock trades on a price-to-earnings (P/E) ratio of around 6. This suggests that it may offer investment appeal for less risk-averse investors.

Changing outlook

As mentioned, the performance of Hurricane Energy has been impressive in the last year. The company has been able to move ahead with plans for first production from its Lancaster field in 2019. Recent updates have suggested that this is on track.

The company has also benefited from improved sentiment towards the wider oil and gas industry. A higher oil price has encouraged investors to take more risks within the industry, and this has led to higher valuations being placed upon a number of industry incumbents.

Looking ahead, Hurricane Energy is expected to report a pre-tax profit of $58m in the next financial year. This puts it on a P/E ratio of around 20, which seems fair given the potential for it to increase production in future years.

Clearly, the price of oil could fluctuate depending on the performance of the world economy, as well as supply growth over the medium term. But with what seems to be a sound strategy and the potential to generate improving financial performance in future, the stock could be another one of interest to less risk-averse investors over the medium term.

The post Think the Hurricane Energy and Acacia Mining share prices are bargains? Read this now appeared first on The Twelfth Magpie.

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Peter Stephens 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.

That’s none other than miner Rio Tinto (LSE: RIO), whose new CEO has focused his efforts on juicing shareholder returns and reducing debt levels at a time when rising commodity prices have boosted the company’s earnings power.

This sounds like a common sense move, but for an industry that has long spent the good part of its business cycle overpaying for mediocre assets, it’s a big change. That Rio’s focus has shifted is clear in the company’s first-half results.

In the six months to July, its operations generated $5.2bn in net cash. Of this, a solid $2.4bn was reinvested in the business in the form of $1bn in ongoing maintenance requirements and the remaining in expansion opportunities. But the bulk of cash generated went straight back to shareholders via dividends totalling $3.2bn and share buybacks of $1.5bn.

For shareholders, this dividend works out to a whopping 5.7% yield. Of course, eagle-eyed investors will notice management returned more in cash than the business generated in H1. But this isn’t a big problem as the company was able to afford these excess payouts because it is selling non-core assets to focus only on its most profitable business lines where it has low production costs, advantages over rivals, and good long-term growth prospects.

In total, Rio announced $5bn in asset disposals in H1 with around 80% of these sales already completed. With earnings robust and growing despite asset disposals, I reckon Rio Tinto shareholders should continue to receive cash payments well ahead of the FTSE 100 average. And with plenty of non-core assets still to sell and the company’s gearing ratio at just 10%, its balance sheet is in great health and can support increased returns.  

When a government plays hard ball 

Unfortunately, not all miners are in as good a position as Rio Tinto is. Foremost among those whose shareholders are suffering is gold miner Acacia (LSE: ACA). The company currently pays no dividends to shareholders as its board is conserving cash due to the relatively new government in Tanzania, where all three of its mines are, banning the export of some of its gold until the company pays what it claims is $190m in back taxes due.

This dispute has dragged on for more than a year now and while its majority owner Barrick Gold continues to work on a resolution, I’d be hard pressed to recommend buying its shares. This is a shame because the company is doing well in a tough environment with its operations still profitable and contributing to a solid net cash position.

But while the price of gold Acacia receives may be rising quickly, the company’s earnings are falling and with the high level of uncertainty over its operations in Tanzania, I do not see this as the opportune moment for long-term investors to begin a position with an eye towards dividend-paying retirement stocks. 

The post Why 5.5%+ yielder Rio Tinto may be the best FTSE 100 dividend stock appeared first on The Twelfth Magpie.

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Ian Pierce 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.

Dispute blocks gold profits

Most mining companies run into trouble because they fail to hit pay dirt.

Tanzania-focused gold miner Acacia Mining (LSE: ACA) has plenty of gold. The problem is that about 50% of its potential production is subject to an export ban. To lift the ban, the Tanzanian government is demanding about $190bn in back taxes and penalties.

Shares in the firm have fallen by about 75% since the ban was imposed in March 2017. Despite this, today’s half-year results show that after making some changes to its operations, it’s still able to operate profitably.

Gold production during the first half of the year was 254,759 ounces, 41% lower than in 2017. Gold sales generated revenue of $333.4m and after-tax earnings of $30.9m, That’s 51% lower than in the first half of 2017, but it was enough to boost the firm’s net cash balance by $9.5m to $63.3m.

Why I’d avoid this stock

This company and its shareholders are at the mercy of the Tanzanian government. Acacia isn’t even negotiating its own settlement — that job has been left to the firm’s largest shareholder, Canada’s Barrick Gold.

As outside investors, we have no way of knowing what kind of settlement will eventually be reached. I don’t expect Acacia to be asked to pay $190bn. But even a much smaller payout could leave the firm lumbered with a big pile of expensive debt.

This could clear the path for rumoured Chinese buyers to sweep in and buy the assets, potentially leaving shareholders with almost nothing. Although the shares look cheap on 5.5 times forecast earnings, I believe the risks are much too high. I’d stay away for now.

Progress in Alaska?

Small-cap oil explorer 88 Energy (LSE: 88E) has also been a big faller over the last year. Its shares have lost around 40% of their value, as investors appear to have lost faith in the promise of a big oil discovery on Alaska’s North Slope.

The latest news from the firm has provided very little encouragement. Flow testing of the HRZ Icewine#2 well delivered disappointing results. Despite trying various techniques to stimulate the well, a 28-day testing period in June only produced 1,372 barrels of stimulation fluid (i.e. no oil) and an average of 26,000 cubic feet per day of methane gas.

88 Energy says that this result “is not considered representative of the reservoir fluids in situ”. The company seems to think that what is needed next is a programme of horizontal appraisal wells. Management is now looking for a farm-out partner to share the cost of such a programme, which I’d expect to be significant.

Still some hope?

In the meantime, 88E is processing seismic surveys tp look for additional drilling opportunities in the HRZ play. It’s also planning a 2019 exploration well in its Western Blocks acreage, along with two partners.

88 Energy may yet hit oil and make a lot of money. But it may not. With no production assets or cash flow, investing in this stock is little better than a gamble. I’m not keen on such risky plays, so I’ll be steering clear of this stock too.

The post Warning: The 88E share price isn’t the only threat to your wealth in 2018 appeared first on The Twelfth Magpie.

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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.

All that glisters

First quarter production fell 45% year-on-year to 120,981 ounces, primarily due to Acacia’s Bulyanhulu operation transitioning to reduced operations, while Buzwagi’s production is now primarily sourced from lower grade ore stockpiles.

Gold sales fell 37% to of 116,955 ounces, while the group’s All-in Sustaining Cost (AISC) figure rose 4% to $976 per ounce sold. Cash costs also jumped 24% to $715 per ounce sold. Q1 revenue dropped 33% to $157m due to lower sales, offset slightly by higher realised gold prices, even if the sale of a non-core royalty asset for $45m pushed up EBITDA by 4%.

Lost dividend

Interim CEO Peter Goleta put a brave face on things, saying that “Acacia continued to demonstrate resilience during the first quarter” and claiming that production at its three assets puts it in a good position to deliver against full year guidance of 435,000-475,000 ounces. “The switch to stockpile processing at Buzwagi and the move to reduced operations at Bulyanhulu in late-2017 were effectively executed and we are pleased to report an increase in our cash balance to US$107m.”

The group is taking steps to further stabilise its balance sheet. But investors remain concerned with today’s drop coming on top of a similar one in February. Acacia now trades at a forecast valuation of 8.9 times earnings but there is no dividend anymore, scrapped in February. Meanwhile Acacia is waiting to see the outcome of talks between its majority shareholder, Canadian giant Barrick Gold, and the Tanzanian government. Avoid for now.

Monarch of the GLEN

But here’s a miner I would buy, £54b FTSE 100-listed mining giant Glencore (LSE: GLEN). It had deep-rooted problems of its own in 2014 and 2015. But those are now largely in the past, after a successful clean-up policy that involved dumping non-core assets, reducing headcount and boosting efficiency.

However, nothing is steady for long in the mining and minerals sector. President Donald Trump’s sanctions against Kremlin-backed companies and oligarchs are the latest concern, due to Glencore chief executive Ivan Glasenberg’s directorship of Russian aluminium producer Rural (since renounced). However, threats against Russia work both ways, with nickel prices up 9% today on fears that sanctions could threaten supplies.

War talk

Glencore has now rebuilt its balance sheet, boosted its capital efficiency and is focusing on growth again, having bolted on five acquisitions in the last year. Its share price is up 9% in the last week, helped by the wider share price recovery as fears abate over a worsening Syria crisis and US trade war with China.

Glencore currently trades at just 10 times forecast earnings, a figure my Foolish colleague Peter Stephens believes is too low to ignore. He also notes that the group is positioning itself nicely to benefit from the acceleration in electric vehicles. For my part, a forecast yield of 3.9% covered 2.4 times looks tempting. As does the forecast 46% jump in earnings per share growth for 2018.

The post Why I’d shun this mining flop and buy the Glencore share price dip instead appeared first on The Twelfth Magpie.

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Harvey Jones 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.

Neither company has reported any real change in their underlying business, but both face specific problems which have spooked the market. If these problems can be resolved, then I believe both stocks could potentially double from current levels.

Outside interference

Tanzania-focused gold miner Acacia Mining (LSE: ACA) fell by another 10% on Monday as investors digested the group’s latest financial results.

A government ban on exporting gold and copper concentrate hit the group hard in 2017 as this form of export accounted for around 30% of revenue. Mining activity has been scaled back, but this didn’t stop the group clocking up a painful $707m net loss for the year ending 31 December.

In fairness, the majority of this loss resulted from a $644m non-cash impairment charge against the reduced value of the group’s mining assets. But it also reported $264m of lost revenue and a cash outflow of $237m last year as a result of the export ban.

What hope?

A year ago, Acacia was a profitable, dividend-paying stock with net cash of more than $300m. Today the cash balance has fallen to $81m and the outlook for 2018 is uncertain. The group’s majority shareholder, Canadian giant Barrick Gold, is working to negotiate a settlement with the Tanzanian government. A proposal is expected during the first half of this year.

This is very much a special situation — if things go well, Acacia’s earnings and shares could rebound rapidly over the next two years. But there’s no guarantee of this. Even if a settlement is agreed, reports suggest it could include back payment of up to $300m in tax.

The shares currently trade on a 2018 forecast P/E of 6.2. This may seem cheap, but shareholders need to accept the risk of further losses.

A Woodford 6% yielder

Roadside assistance group AA (LSE: AA) is one of the UK’s best-known brands. But the group’s share price has skidded 54% lower over the last year despite stable trading. Investors have been spooked by lacklustre growth and concerns about debt levels.

In my view, investors are right to be concerned. In its most recent accounts, the AA reported net debt of £2.7m. That’s equivalent to 6.7 times the group’s earnings before interest, tax, depreciation and amortisation (EBITDA). As a rule of thumb, a net debt/EBITDA ratio above 2.5 times is considered high.

A potential opportunity

The AA was loaded up with debt by its previous private equity owners, who floated the business in 2014. That’s a shame, because the business itself is very profitable and highly cash generative. Operating margin was 30% last year, and 92% of operating profit was converted to cash. With lower debt levels, this could be a great dividend stock — a view shared by fund manager Neil Woodford, who owns the shares in his income funds.

As things stand, the outlook is less certain. It’s not clear whether the company will manage to bring debt levels down without raising some cash from shareholders. The stock’s forecast P/E of 5.7 and prospective yield of 6.5% reflect this uncertainty.

In my view, risk and reward are finely balanced, but I’m staying away for now.

The post This 6% yielder isn’t the only turnaround stock that could double in 2018 appeared first on The Twelfth Magpie.

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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.

Looking ahead, increased spending and reduced taxes in the US could cause higher inflation, which may be a key driver for gold in future years. With this in mind, buying gold miners could be a shrewd move. After a dip in its share price in recent months, now could be the perfect time to buy this FTSE 100 miner.

Improving outlook

The company in question is Randgold Resources (LSE: RRS). Its share price has fallen by around 10% from its September 2017 high, and this could be an opportunity to buy when it includes a large margin of safety. The business seems to be making good progress with its strategy. Its large net cash position means that it has sufficient capital to focus on exploration and development, while also increasing production.

This rise in production is expected to contribute to an increase in its bottom line of 28% in the current year. Despite such a strong rate of growth, the stock currently trades on a price-to-earnings growth (PEG) ratio of just 0.9. This suggests that it could be worth a much higher share price in the long run. And with dividends forecast to grow by 64% over the next two years, the forward dividend stock yield is 3.2%. This could make it an enticing income option.

Defensive appeal

Of course, Randgold Resources also offers defensive characteristics. If the world economy’s outlook deteriorates, investors are likely to increase their exposure to gold due to its track record of being a store of wealth. This could push the price higher and lead to increased demand for gold miners, while also helping to boost profitability across the sector.

However, gold miners are clearly not without risk. Evidence of this can be seen in the performance of Acacia Mining (LSE: ACA), which has recorded a share price fall of 55% in the last year. This is due to an export ban on gold and copper in Tanzania. As a result, the company’s financial performance has suffered greatly and its cash flow has come under severe pressure.

Challenging outlook

In fact, in an update released on Monday, it reported that its cash balance had fallen by a further $15m during the final quarter of the year to stand at $81m. Production was also down 30% on its fourth quarter 2016 level, although it was ahead of expectations.

Although the company has been able to adapt some of its operations in light of the export ban, its bottom line is due to come under severe pressure. As such, with Randgold Resources offering growth at a reasonable price, it appears to be the stronger option at the present time.

The post This FTSE 100 stock looks like a stunning dip buy to me appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Randgold Resources. 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.

Get out of jail free?

Has troubled Tanzania-based gold miner Acacia Mining (LSE: ACA) just been given a ‘get out of jail free’ card by its majority shareholder?

A statement on Thursday morning certainly suggests to me that the company has new grounds for optimism in its dispute with the government of Tanzania.

The firm’s share price has fallen by more than 50% since May as a dispute with the government has prevented normal levels of gold exports. Acacia’s majority shareholder, Barrick Gold Corporation, has been negotiating on its behalf with them.

Last week it was reported that Barrick had agreed a solution, but that Acacia might have to pay $300m as part of a settlement. This looked like a problem. Andrew Wray, Acacia’s chief financial officer, was quoted in the Financial Times as saying: “We don’t have the ability to make an upfront $300m payment”.

Problem solved?

Fast-forward a few days and Acacia has issued a new statement. The company notes that Barrick Gold has increased its provision with respect to Acacia’s historical tax liabilities, from $128m to exactly $300m.

Is this just a coincidence, or is this part of a plan by Barrick to ease Acacia’s path back to normal operations? In my view, the latter is more likely. The firm’s shares have risen by 5% following the news, suggesting that other investors are cautiously optimistic.

A potential bargain

A proposal for a settlement with the Tanzanian government is expected early in 2018. If a deal is agreed, I believe that Acacia should be able to return fairly quickly to normal operations.

If you share this outlook, then you may want to note that the firm’s shares currently trade on a 2018 forecast P/E of just 5.5, with a prospective yield of 6.6%.

These forecasts clearly imply that the mining company will return to business as usual next year. There’s still a risk this won’t happen. But if it does, the shares could be a bargain at current levels.

My top choice for income

Shareholders at Highland Gold Mining (LSE: HGM) don’t need a get out of jail free card.

The Russia-focused firm’s shares currently trade at an attractive 10% discount to their book value, with a forecast P/E of 9.

This company has always been run with a focus on providing an income for shareholders, and brokers expect a full-year dividend of $0.11 per share this year. That’s equivalent to a tasty 5.8% dividend yield.

One potential risk is that more than 40% of this firm’s shares are controlled by a small group of wealthy Russia-based businessmen. These include Chelsea FC owner Roman Abramovich and Highland’s executive chairman, Eugene Shvidler. Should they choose, I’d expect this group to be able to change the future direction of the firm.

However, there’s no sign of this so far. The group’s operational performance seems good too, with gold production up by 14.6% during the third quarter. Broker forecasts have also edged higher, suggesting to me that this stock remains a strong buy.

The post Two turnaround gold stocks I’d buy today appeared first on The Twelfth Magpie.

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Roland Head owns shares of Highland Gold Mining. 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.

The government had maintained claims of outstanding tax against Acacia, and halted the export of gold concentrates in March. That, plus a later confirmation that no progress had been made in lifting the ban, together with a subsequently disappointing interim report, led to a share price crash — between 1 March and 18 October we saw a plunge of 65%.

Though details of the new agreement are unclear and Acacia has not yet received a formal proposal, talk is of the Tanzanian government taking a 16% stake in the company’s three gold mines, 50% of the mines’ revenues, and a one-off payment of $300m to settle the tax dispute.

Production steady

A Q3 update Friday reported gold production of 191,203 ounces in the quarter at an all-in sustaining cost of $939 per ounce sold. That’s far from the cheapest production cost in the sector, but with gold selling at around $1,300 per ounce there’s a decent margin there (and gold has held above $1,000, usually comfortably so, for the past five years).

The shares lost some of Thursday’s initial gains as investors reacted negatively to the news that Acacia itself didn’t fully understand what was happening, but the price reached 220p in early trading Friday, so we’re looking at a 20% gain at the time of writing.

That gives it a forward P/E of under nine, dropping to 7.5 on 2018 forecasts, and if this latest progress is confirmed I can see further uplifts to come.

More efficient?

If you want a gold miner with lower production costs, Centamin (LSE: CEY) could fit the bill.

Focused mainly on its Sukari mine in Egypt and with exploration interests in Burkina Faso and Côte d’Ivoire too, Centamin can get the shiny stuff out of the ground for an all-in sustaining cost of just $790 per ounce, which provides an extra $149 per ounce of profit over Acacia and a correspondingly wider safety margin.

The shares have been pretty volatile over the past 12 months, but since a low in June 2014 they’ve multiple 4.5-fold to the current 144p, with most of that coming in the last two years. 

Centamin has been paying decent dividends too, with yields of 3.5% and 3.8% on the cards for this year and next. There’s a 40% fall in earnings per share (EPS) forecast this year (after an exceptional EPS last year), but the cash should be well enough covered and earnings growth should pick up by 10% in 2018.

Production rising

A Q3 production report from the Sukari mine revealed record gold production of 156,533 ounces, 26% up on the previous quarter, and beating the previous record which was set in the third quarter of 2016.

The company reckons it should unearth around 540,000 ounces of the coveted metal by the end of the year, which would make 2017 the eighth year in a row of increased production. And as long as production keeps going at these high levels, the dividend should be pretty much assured.

The shares are on P/E ratios of 16 to 17 based on forecasts, which is significantly above the valuation of Acacia shares. Does that give some clue of what might happen to Acacia shares should the firm’s problems finally be resolved?

The post These 2 gold stocks could be the ones to hold for the next year appeared first on The Twelfth Magpie.

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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. 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.