In the last month, though, the company’s stock price has risen from 1p to 2p. Although it is clearly a long way behind its previous highs, could this be the start of a recovery? And could it be worth buying alongside another resources sector stock that has also delivered disappointing share price performance in the recent past?

Improving outlook?

Recent weeks have seen an improvement in the financial standing of UKOG. It has raised around £12.5m in the last month (with £2m raised just a couple of days ago), and this is expected to be sufficient to fund its operational activity over the next 18 months. This may cause investor sentiment to improve to some degree, since any immediate risk of running out of cash seems to have been overcome. As such, investors may now be able to focus on the medium-term potential of the business.

In the near term, the results of flow testing operations could have a significant impact on its share price. They are focused on longer-term flow testing after the company has reported mixed results in the past. For example, in 2016 aggregate oil flow was 1,688 barrels of oil per day, but this was undertaken over relatively short time periods.

Clearly, UKOG is a relatively risky stock, given the nature of its business and its volatile share price. But with an improving financial position and the company targeting first stable oil production in 2019, it could offer turnaround potential.

Recovery potential?

Also seeing its share price fall in recent months has been gold miner Acacia (LSE: ACA). It is down by 54% in the last year, with the company reporting declining production in its second quarter production update that was released on Friday. Gold production was down by 36% to 133,778 ounces versus the second quarter of the previous year, with scaled-back operations being to blame as a result of the continued dispute with Tanzanian authorities regarding tax payments.

Despite this, the company’s future prospects may be brighter than the stock market is pricing-in. Production in the first half of the year was at the top end of estimates, and the company remains on track to meet guidance for the full year.

Acacia is expected to deliver 8% profit growth in the 2019 financial year. However, its shares trade on a price-to-earnings growth (PEG) ratio of just 0.7. This suggests that they may be undervalued at the present time. While risks are high, the recovery potential of the stock appears to be significant. As a result, it could be worth buying for the long term.

The post Has the UKOG share price finally turned a corner? 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.

Certainly, the risks from declining commodity prices remain. The global economy’s performance could come under pressure and lead to a general slowdown. But with wide margins of safety, these two mining companies appear to be worth a closer look right now.

Improving performance

Reporting on Tuesday was zinc/gold miner Griffin Mining (LSE: GFM). The China-focused operator delivered a 91% increase in revenue, with its operating profit of $64m 319% higher than in the previous year. It delivered record production in 2017, while cash generated from operations of $77.4m enabled all bank loans to be repaid. It also allowed the company to invest $13.3m in further development of the Caijiaying mine, as well as in exploration and equipment purchases.

Looking ahead, Griffin Mining is expected to deliver a modest 3% rise in earnings in the current financial year. While there are mining stocks with higher forecast growth rates, the company’s price-to-earnings (P/E) ratio of around 9 suggests that it could offer good value for money. That’s especially the case since demand for gold miners could increase if global inflation expectations continue to rise.

Of course, the company is relatively small and seems to lack the diversity of some of its sector peers. Therefore it may mean a relatively risky investment opportunity. But with strong progress being made in its operational and financial performance, its low valuation suggests that it could deliver high rewards in the long run.

Turnaround potential

Also offering upside potential within the sector is gold miner Acacia (LSE: ACA). The company has experienced a hugely challenging period, with an export ban in Tanzania hurting its financial performance. For example, in the last financial year the company’s bottom line moved into the red despite a relatively strong year for the gold price.

Looking ahead, there could be further uncertainty for the business. The trading conditions it faces may remain tough and while it seems to have a solid strategy, it could experience significant volatility over the medium term.

However, investors may have factored in potential challenges for the business. Acacia trades on a forward P/E ratio of around 8. And with its bottom line due to return to the black in the current year, investor sentiment could improve – especially since earnings growth of 10% is forecast for the 2019 financial year.

With the gold price having the potential to rise due to a mix of uncertainty in the prospects for the global economy and the recent volatility in riskier assets such as shares, now could be the perfect time to buy gold miners. Acacia may be at the riskier end of the investment spectrum, but its potential rewards could be high.

The post 2 stocks that seem absurdly cheap right 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.

Looking ahead though, another resources company could offer superior capital growth prospects. Here’s why.

Improving performance

The company in question is gold producer Acacia (LSE: ACA). It released results for the three months to 31 March on Thursday which showed it has made operational gains. Gold production was 219,670 ounces versus 190,210 ounces in the same period of the prior year. And with cash costs falling from $693 per ounce to $577 per ounce in the same time period, the company’s profitability was boosted.

In fact, thanks in part to an average realised gold price which was $71 per ounce higher than in the same quarter of the previous year, Acacia’s net earnings went from being in lossmaking territory to a profit of over $26m. This allowed it to increase capital expenditure, reduce debt levels and yet retain a relatively healthy cash balance in order to provide a sustainable growth platform for the long run.

Growth potential

Clearly, Acacia’s strategy of reducing costs and increasing production is working well. However, the company could also benefit from an improving outlook for the gold price. This is a key reason why its shares could outperform those of Hurricane Energy, since their futures may take very different paths.

Demand for gold may increase over the medium term. Higher spending plans in the US and lower taxation may cause inflation to spike. While this has not yet taken place, President Trump’s plans have not yet begun to bear fruit. Should they do so, investors may seek a natural store of wealth such as gold, which may increase its price. And with various geopolitical factors such as North Korea providing risks to the global economic growth outlook, buying gold-mining shares such as Acacia could be a sound move.

By contrast, the Oil & Gas industry may endure a tougher period in 2017 and beyond. The price of oil may come under pressure if the OPEC deal to cut production is not extended beyond the middle of 2017. This could cause uncertainty among investors in the sector and lead to depressed share prices. In addition, supply and demand imbalances in the Oil & Gas industry continue to exist and this may force valuations lower.

Profit potential

Clearly, Hurricane Energy has been a stunning investment in the last year. However, today its attractiveness from an investment perspective may be inferior to that of gold mining shares such as Acacia. Despite uncertainty regarding its Tanzanian operations, its growth outlook remains upbeat and now could be the perfect time to buy it for the long run.

The post Why this growth stock is set to beat Hurricane Energy plc in 2017 appeared first on The Twelfth Magpie.

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Peter Stephens 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.

Acacia’s gold production rose to almost 205,000 ounces, which is 25% up on the same quarter of the previous year. This drove revenue higher by 48% and when combined with a reduction in cash costs of 26%, it had a positive effect on Acacia’s profitability. The company’s EBITDA (earnings before interest, tax, depreciation and amortisation) was $104m higher than in the third quarter of 2015 at $125m. And with its net cash position having increased by $32m to $203m, Acacia is in a stronger financial position than it was just a few months ago.

Looking ahead, Acacia is forecast to increase its bottom line by 53% in the next financial year. Despite this rapid rate of growth, it trades on a relatively low valuation. For example, Acacia has a price-to-earnings (P/E) ratio of 19.6. When combined with its earnings growth outlook, this equates to a price-to-earnings growth (PEG) ratio of only 0.4. This indicates that now is a great time to buy Acacia.

Of course, the outlook for the price of gold is uncertain. US interest rates are forecast to rise before the end of the year and this would have a negative impact on the gold price. That’s because interest-producing assets would become more popular relative to gold, which could dampen demand for the precious metal.

Furthermore, the US election result may now be swinging towards a Clinton victory. If this occurs, there may be a more predictable outlook for US government policy. That’s because we’ve had eight years of a Democrat President, so it would probably be more akin to a continuation rather than a change. This could also reduce demand for gold, since the precious metal tends to be popular during uncertain periods.

Lower risk?

Clearly, Acacia lacks diversity. Therefore, less risk-averse investors may prefer to buy a mining company that has a lower risk profile in this respect. For example, Rio Tinto (LSE: RIO) produces a range of commodities including iron ore and aluminium. This helps to diversify its income stream and makes its risk profile lower than that of Acacia.

In addition, Rio Tinto offers good value for money. It trades on a forward P/E ratio of just 15.3 and has significant growth potential thanks to its sound financial footing. This provides it with substantial cash flow that can be invested in developing its asset base to produce higher profitability in future. And with Rio Tinto yielding 3.3% from a dividend covered 1.9 times by profit, it’s a better income stock than Acacia, which yields 1.2% from a dividend covered 4.4 times by profit.

The post Is this growth stock a buy after reporting a 25% rise in production? appeared first on The Twelfth Magpie.

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Acacia’s shares have fallen heavily because of continued disruption to its production. Part of this was pre-planned, but further challenges were unexpected and have therefore caused investor sentiment to come under pressure.

For example, the two-week shutdown of Acacia’s vertical shaft at Bulyanhulu for refurbishment and modernisation was planned. However, Acacia has been unable to run the plant consistently since the shutdown. That’s because of repeated overheating of the ball mill trunnion bearing. At the moment, there’s no set timeline for the asset coming fully back onstream.

Clearly, this is disappointing for Acacia but nevertheless, it has maintained guidance for the full year. It’s expected to return to profitability this year and then record a stunning rise in earnings of 50% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.2, which indicates that it offers growth at a very reasonable price.

Despite the risk involved in buying a mining company such as Acacia in terms of commodity price falls, gold miners provide a useful hedge against a deteriorating outlook for the global economy. With US interest rates now unlikely to rise at a rapid rate following weak economic data and the US election just around the corner, it wouldn’t be a surprise for the gold price to rise over the coming months. In this situation, Acacia would be likely to rise and with its shares being cheap, there’s significant scope for it to do so.

A better buy?

However, Acacia lacks the financial strength and diversity of sector peer Rio Tinto. Rio Tinto’s balance sheet and cash flow mean that it should be able to outlast the vast majority of its sector peers should commodity prices fall. And with it having an ultra-low cost base, Rio Tinto’s long-term profit outlook is highly positive.

Unlike Acacia, however, Rio Tinto isn’t expected to deliver stunning growth over the next couple of years. Its bottom line is due to flatline next year, but its exposure to a wide range of commodities means that its risk profile is more appealing than that of Acacia. Furthermore, its new CEO is likely to attempt to diversify the company to an even greater extent, which should provide a more stable and consistent level of profitability in future years.

Of course, demand for iron ore has come under pressure due to the economic challenges experienced by China. Demand for steel could stay below previous levels due to the country’s gradual transition towards a more consumer-focused economy. But with infrastructure growth likely to remain high across the emerging world, Rio Tinto should be able to deliver strong profit growth in the coming years. Allied to its stronger finances and greater diversification, this makes it a better buy than Acacia at the present time.

The post Is this resources stock a better buy than Rio Tinto plc? appeared first on The Twelfth Magpie.

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• The only FTSE 100 stock I own right now

Peter Stephens owns shares of Rio Tinto. The Motley Fool UK has recommended 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.

Clearly, the news has been well received and has helped Gulf Keystone to have a current cash position of $69.5m. However, with the company facing a number of major risks, investing now may not prove to be a sound move. That’s because there’s scope for further uncertainty in the geopolitical outlook for the Northern Iraq/Kurdistan region, while there’s no guarantee that payments will continue in the long run. And with a number of other oil producers being less risky and still offering high potential rewards, it may be prudent to invest elsewhere at the present time.

Improving profitability

Meanwhile, Acacia Mining (LSE: ACA) today announced a 21 April release date for its first quarter results. They may be more eagerly anticipated than usual since investor sentiment in Acacia has improved significantly as the company’s last results release, with the price of gold moving higher and the outlook for the wider sector improving dramatically.

A key reason for this is the slower-than-expected pace of US interest rate rises, with a less hawkish Federal Reserve indirectly boosting sentiment towards gold as it seeks to avoid choking off the US economic recovery. As a result, Acacia’s long-term outlook is brighter and a higher gold price should mean higher profitability moving forward.

With Acacia trading on a price-to-earnings-growth (PEG) ratio of just 0.4, it looks set to continue its excellent share price performance of late. Although it may not repeat its rise of 67% year-to-date in the next few months, it remains a relatively appealing buy for the long term.

Linking up for growth

Also releasing an update today was Amara Mining (LSE: AMA), with the West Africa-focused gold miner announcing details of an investor event regarding the proposed tie-up with Perseus Mining. This is significant for the combined company’s investors since the new entity will have greater financial firepower and a larger asset base through which to deliver improved profitability in the long run.

And with uncertainty set to remain relatively high among the wider investment community, it would be of little surprise for the gold mining sector to remain popular since it has recently been viewed as a store of wealth for nervous investors. Clearly, mergers can take time to come good, but for investors seeking a smaller gold mining play, the combined Amara/Perseus entity could be worth a closer look.

The post Do Today’s Updates From Gulf Keystone Petroleum Limited, Amara Mining PLC And Acacia Mining PLC Make Them Superstar Buys? appeared first on The Twelfth Magpie.

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Peter Stephens 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.

Shares in Acacia Mining (LSE: ACA) have tumbled by as much as 9% today after it released a disappointing set of full-year results for 2015. The company posted a pre-tax loss of $124.2m in 2015, which represents a major decline from the pre-tax profit of $115.2m which was recorded in 2014.

The gold and copper miner booked a significant amount of impairments and they contributed heavily to the fall in profitability, while a decline in revenue was also a key cause of the red bottom line. Furthermore, an increase in costs caused even more pressure to be put on Acacia’s margins.

Despite this, Acacia has decided to maintain its dividend at the same level as in 2014. While this is reassuring for investors, 2015 was clearly a tough year for the business. Even so, Acacia remains confident in its outlook and plans to increase production in 2016, as well as reduce costs in the coming months. And with it forecast to return to profit this year and its shares trading on a forward price to earnings (P/E) ratio of 13.3, now could be a good time to buy it for the long run.

Positive news

Also releasing an update today was Sound Energy (LSE: SOU), with the oil and gas exploration company announcing that all of the required contracts have now been awarded to allow the first well to be drilled at the Tendrara licence area in Morocco. This means that civil works on site at Tendrara have begun, which includes the upgrading of local infrastructure.

The contracts awarded include a binding rig contract with Saipem, with the National 110 UE traditional rig being prepared for mobilisation from Mauritania, which is expected to commence within the next couple of weeks. And with Schlumberger funding 80% of the capital expenditure for the first Tendrara appraisal well, Sound Energy is required to fund only the remainder, with the total cost of the well due to be £9.2m.

Clearly, today’s news is positive for investors in Sound Energy and with further news flow having the potential to be good, too, it could be worth keeping a close eye on the company following its 10% rise in the last month.

Shrewd move

Meanwhile, shares in infrastructure and smart building solutions company Coms (LSE: COMS) have soared by over 35% today following the release of its trading update. It has raised its guidance for the full-year to the end of January 2016, with continued robust trading within the core operating division, Redstone, being a key reason.

In fact, revenue and operating profit have both been significantly ahead of last year, with Coms having resolved the majority of legacy issues which were inherited by the current management team.

Clearly, the disposal of the loss-making telecoms business was a shrewd move and this allowed Coms to strengthen its balance sheet and reduce overheads. It has also invested in its Redstone business, and with a net cash balance of around £1m, it could be worth a closer look for less risk averse investors.

The post Are Coms plc, Sound Energy PLC And Acacia Mining PLC The Perfect Stocks For 2016? appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Peter Stephens 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.