All indicators seem to be pointing to a brand new bull run and UBS for one has been scaling up its price forecasts in the past few hours. For 2019, the bank’s improved its average estimate to $1,370 per ounce, from $1,325 previously, while it’s been boosting its figures through the next few years as well — a mean of $1,450 is anticipated for 2020 and $1,500 for 2021.

Bullion values have surged by $100 per ounce over the past month alone and are now banging on the door of the critical $1,400 level. That advance would likely prompt further rounds of significant buying. And who would bet against such a scenario in the current climate?

A perfect picture for safe havens

We seem to be entering a perfect storm for precious metal prices right now. Most prescient in investor minds might be the escalating political and military crisis in the Middle East, one which has worsened following Tehran’s downing of a US drone and subsequent cyber attacks from the Pentagon on Iranian missile installations.

Unsurprisingly, the conflict in the region has had a cataclysmic impact on oil prices too, another driver for gold on the back of increased inflationary fears. Brent broke back through the $65 per barrel marker late last week, and while there remains some uncertainty over this run given ongoing supply and demand concerns, there’s no reason to dismiss some more punchy gains in the short term.

The other main driver for gold prices of late has been the growing expectation of some serious central bank rate cutting, driven by a steady deterioration in economic indicators across the globe, as well as the possibility of President Trump’s trade wars dragging on for some time.

The prospect of fresh Federal Reserve rate slashes adds another string to gold’s bow, namely the likelihood of more pressure on the US dollar, a situation that makes it cheaper to load up on the greenback-denominated asset.

Take the High road

There’s no shortage of brilliant miners to buy on the London markets today, though those seeking to capitalise on a possible gold price run and who also have a penchant for big dividends may want to give Highland Gold Mining (LSE: HGM) a close look.

Don’t think booming bullion is the only reason to buy into Highland right now, though. It’s also growing gold production at an electrifying pace and, during the last quarter, total output rose 21% year-on-year to a mega 71,961 ounces.

This mining giant’s share price is trading at record highs above 200p per share on the back of those renewed gold prices and yet, as I type, it still provides exceptional value for money. As well as boasting a sub-10 forward P/E ratio, Highland also trumpets a whopping 6.6% corresponding dividend yield at current prices, too.

If you’re looking to get some exposure to precious metals right now, then this AIM hero is worth serious attention right now. I’m seriously considering snapping it up in anticipation of some more serious share price rises in July, and probably beyond too.

The post Go for gold! A top dividend stock I’d buy in July as bullion prices soar appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

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.

• A 5.6% forward dividend yield, a reading which smashes the FTSE 100 corresponding average of 4.5% to smithereens.
• A bargain-basement prospective P/E ratio of 8.2 times, a reading which fails to reflect DS Smith’s long record of chubby profits growth.
• Recent predictions from Zion Market Research that the global fast-moving consumer goods (FMCG) packaging market will be worth a staggering $657.3bn by the end of 2024, growing at a compound annual growth rate of 4.2% and soaring from $492.8bn in 2017.

Investor sentiment towards DS Smith may still be flat on the expectation of increased packaging supply from Chinese producers, but I believe the company’s 40%-plus share price fall over the past year represents a terrific buying opportunity.

I’ve long lauded DS Smith’s expansion programme to bolster its global and operational reach, moves designed to improve its relationships with the world’s largest FMCG companies. And in recent years, it’s made potentially game-changing strides in both respects, first by entering the US marketplace in 2017, and in recent months by taking over industry giant Europac and its operations spanning France, Spain and Portugal.

What’s more, DS Smith has been taking steps to improve its position in the e-commerce packaging market through both M&A activity and organic investment, measures which put it in the box seat to ride the global internet shopping boom.

Another hot buy

I’m not worried about DS Smith for a second, then. I’m disappointed by its share price run over the past year, but I’m convinced that, despite those fears over rising market supply and future sales growth, it still has the tools to keep its mantle as a deliverer of continuous and considerable earnings and dividend expansion year after year.

I’d also say that Highland Gold Mining (LSE: HGM) is another share to buy today and stash away for the years to come. Gold prices may go up and down, but as insurance for your investment portfolio when the global economy struggles and markets go sideways, having exposure to safe-haven precious metals can help you to offset losses.

Not that I’m expecting bullion values to fall, mind. The only way is up, in my opinion! Consider the rising tension between the US and China over trade tariffs and the prospect of similar bickering between Washington and European capitals in the months ahead. Think about Brexit, sharp economic cooling in China and Europe, the growing political struggle in Italy, threats of military action between the US and Iran…

It’s no wonder City analysts are expecting earnings at Highland Gold, like DS Smith, to surge by double-digit percentages in the current fiscal year, and for dividends to keep rising too. As a consequence, the dirt digger yields a splendid 4.1%, a figure which, like its low forward P/E  ratio of 11.5 times, I think makes it a brilliant buy right now.

The post Have £3k to spend? 2 ‘buy and forget’ dividend stocks I think could help you retire early appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Royston Wild owns shares of DS Smith. The Motley Fool UK has recommended DS Smith. 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.

Gold prices may have come off the boil recently but there’s enough macroeconomic and geopolitical intrigue to keep investors interested in the safe-haven asset. It’s why latest World Gold Council data showed holdings in global gold-backed exchange traded funds (ETFs) rising by three tonnes in March to 2,489 tonnes as inflows continued in North America and Europe.

It’s well known how tension surrounding Brexit keeps driving retail demand for the yellow metal, and with many in the European Union running out of patience with the UK and increasingly tipping a ‘no deal’ EU withdrawal, there’s plenty of scope to expect gold prices to spike again soon.

Other troubles for the global economy have emerged over the past month that could escalate and drive gold demand still further, like the currency crisis in Turkey, German factory orders hitting multi-year lows and slashed economic forecasts in Italy.

A bright future

Highland Gold was smacked by lower ore grades and recoveries last year, problems which caused total annual production to slip fractionally to 269,500 ounces.

But the company is confident that it can roar back from 2019 onwards. In recent weeks it upgraded its production forecasts for the current year to between 290,000 and 300,000 ounces because of the acquisition of the Valunisty complex in late 2018. And things look good further out too — on top of recent studies that extended the life of its other prestige mine, Mnogovershinnoye, to 2029, it’s set to embark on exploration work at around a dozen of its brightest assets across Russia in 2019 alone.

Drive on!

Given the quality of Highland Gold’s assets in Russia, its busy drive to bring these online, and therefore the company’s exceptional long-term outlook, I consider the firm to be a steal at its current valuation, a forward P/E ratio of 12.7 times.

This is in spite of the unpredictability that comes with the mining industry as we witnessed at the firm last year. In  fact, an additional sweetener in the form of its prospective dividend yield of 3.8% goes some way to boosting its appeal too.

There are plenty of bigger yielders I’d happily ignore to buy Highland Gold instead, one of which is Marshall Motor Holdings (LSE: MMH), a stock that boasts a chubbier corresponding yield of 5.1% (and a cheaper earnings multiple of 7.3 times). In fact, I’d be happy to sell out of the car retailer in order to buy the precious metals digger given that news flow surrounding the auto market continues to go from bad to worse.

Latest figures from the Society of Motor Manufacturers and Traders, in fact, showed new car registrations in March at their lowest since 2013, and things are unlikely to get any better soon as Brexit-related fears crush car demand, as does ongoing uncertainty surrounding diesel.

Marshall Motors saw new car sales tip 8.2% lower last year on the back of those diesel troubles and stock shortages. I find it hard to envisage when things will start to pick up either, and for this reason I’m steering well clear of the retail giant.

The post Why I’d sell this 5%-yielding dividend stock to buy this 3%+ yielder appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

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.

Before that, I’d like to consider a smaller stock with a 7% dividend yield that looks very cheap to me.

Gold provides dividend boost

Operating profit at Russian firm Highland Gold Mining (LSE: HGM) rose by 47% to $102.2m in 2017, according to figures released today. Earnings per share climbed 38% to $0.20 per share. 

Shareholders — including Chelsea FC owner Roman Abramovich — will enjoy a total dividend for the year of 10.4p per share, giving the stock a trailing yield of 7.3%.

Profits were helped higher by gold production, which rose by 4.3% to 272,274 oz. last year. The price of gold also improved, with the company reporting a average sale price of $1,162/oz. — a 2.3% increase on 2016.

But these profits are also a return to business as usual, in some ways — the group’s 2016 profits were dented with $22.8m of one-off impairment charges.

Why I’d buy

Highland Gold has a secret weapon — its costs are very low. The group reported a total cash cost of just $507/oz. last year. That’s lower than most rivals, including Africa-focused FTSE 100 miner Randgold Resources, which reported an equivalent figure of $627/oz.

Despite the firm’s low costs and proven ability to generate cash, the stock’s valuation remains very modest. At the last-seen share price of 142p, the stock trades on 9 times forecast earnings and with a 14% discount to book value.

With a 7% dividend yield on tap, I think that’s too cheap. I’d rate the stock as a buy, despite the political risk of investing in Russia.

Earn 10% from the FTSE 100

What about that FTSE 100 stock I mentioned with a 10% yield? The company concerned is coal and steel group Evraz (LSE: EVR).

Although this is a Russian company, it operates facilities in a number of countries around the world, including the US and Canada. I’d guess that this should reduce the likelihood of the firm being targeted by US sanctions, as this would place American jobs at risk.

Evraz shares have trebled in value as the mining market has recovered over the last two years. But with profits still rising, the share’s trailing P/E of 8.1 still looks cheap to me.

Too cheap to ignore?

The main weak spot in the group’s finances is that it carries quite a lot of debt. However, net debt has now fallen from a 2013 peak of $6.3bn to $4bn at the end of 2017. That gives the business a net debt/EBITDA ratio of 1.5 times, which is acceptable.

Now that debt is under control, strong cash generation is being used to fund generous dividends.

Analysts expect profits to double in 2018, putting the stock on a 2018 forecast P/E of 5.4 with a prospective yield of 10%.

The picture is less certain for 2019, when profits are expected to fall. But even then, the shares still look affordable, on a P/E of 8 and a dividend yield of 8%.

I continue to rate Evraz as a buy.

The post Can you afford to miss this FTSE 100 10% yielder? appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

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.

This AIM-listed firm has a market cap of £78m and I see it as a dirt-cheap growth stock that continues to fly under the radar of many investors. I’d be happy to buy a slice of the business today, as I reckon the shares can rise a lot higher, driven not only by strong increases in earnings, but also by a potential re-rating as the firm gains wider attention.

Hugely attractive valuation

AFH is delivering tremendous organic growth, as well as proving itself to be a shrewd acquirer and consolidator in the sector. The latter provided half of the year’s top-line growth and I expect more of the same, with the company telling us today that it had £8m cash on the balance sheet at the year-end and a “strong pipeline of potential acquisitions currently under negotiation.”

As revenues increase, we can expect profits to rise even faster, due to margins expanding under operational gearing. For example, ahead of today’s update, a broker forecast had revenue rising 31% but earnings per share (EPS) increasing 93%, followed by a 27% rise in revenue and a 53% increase in EPS for fiscal 2018.

I expect to see the forecasts upgraded after today’s news that fiscal 2017 revenue was up 35%. However, even based on the pre-update forecasts, the valuation looks cheap. The forward price-to-earnings (P/E) ratio stands at 12, while a price-to-earnings growth (PEG) ratio of 0.22 indicates great value against the PEG ‘fair value’ marker of one.

Finally, this growth stock is also a highly cash generative business, paying a small but fast-growing dividend, which is forecast to yield 1.8% for fiscal 2018. The dividend only adds to my conviction that AFH is a hugely attractive stock to buy at the current share price.

Bargain-basement rating

Also offering terrific growth appeal, in my view, is Highland Gold Mining (LSE: HGM). This established Russia-focused miner, which counts Chelsea FC owner Roman Abramovich among its major shareholders, posted solid first-half results in September. It said it was well placed to meet its production guidance for the full year, as well as making “substantial progress in each of the projects targeted for the company’s future growth.”

Reporting at the end of Q3 last month, it said it now expects production for the year to be near the upper end of its guidance range. This leads to some very attractive financials. The City consensus forecast is for EPS of 21 cents (16p at current exchange rates), 45% ahead of last year. At a current share price of 147p, the P/E and PEG are at bargain-basement levels of 9.2 and 0.2, respectively.

What’s more, in addition to its growth prospects, Highland Gold has a significant focus on delivering generous dividends for its shareholders. A current-year forecast payout of 11 cents (8.4p) gives a terrific yield of 5.7%. Listed on AIM and capitalised at £478m, this is another under-the-radar stock I rate a ‘buy’.

The post 2 dirt-cheap growth stocks that could make you brilliantly rich appeared first on The Twelfth Magpie.

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• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

G A Chester 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.

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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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

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.

However, there are still a number of companies which could post impressive share price performance. You just have to look for them. Here are two smaller stocks that could fall into that category. While potentially riskier and more volatile than their large-cap peers, the upside is that they could also offer significant potential rewards over the long run.

Bright future

Reporting on Wednesday was Highland Gold Mining (LSE: HGM). The company announced its operating results for the third quarter of the year today and said production at its MNV, Novo and Belaya Gora projects was 71,767 ounces of gold and gold equivalent, versus 62,601 ounces in the same period of the prior year. This represents an increase of 14.6%, with its production in the first nine months of the year being 6.6% up on the same period of the previous year.

The company recorded an average realised gold price of $1,280 per ounce. It is on track to deliver total production of gold and gold equivalent at the upper end of its guidance range of 255,000-265,000 ounces for the full year.

Looking ahead, Highland Gold is forecast to post a rise in its bottom line of 35% in the current year, followed by further growth of 18% next year. This puts the stock on a price-to-earnings growth (PEG) ratio of just 0.5, which suggests it offers high growth at a very reasonable price.

Furthermore, with a dividend yield of 6.4% from a payout which is covered 1.6 times by profit, its income potential remains exceptionally high. With the potential for a higher gold price should global geopolitical risks increase, Highland Gold Mining could be a star performer in the long run.

Recovery potential

Also reporting on Wednesday was producer of titanium minerals and zircon Kenmare Resources (LSE: KMR). The company’s third quarter was another record three months for its ilmenite production and this keeps it on track for its highest ever annual production. Chinese demand for ilmenite is improving again following a slower period in recent months. And with the zircon market having performed strongly and further price increases anticipated in the second half of the year, the company’s outlook is relatively strong.

Looking ahead, Kenmare Resources is expected to move back into profitability in the current year. In 2018, it is forecast to almost double its earnings, which puts it on a PEG ratio of just 0.1. This suggests that now could be a good time to buy it ahead of what may prove to be a period of improving investor sentiment as the market begins to price in its improved financial performance.

The post 2 small-cap growth stocks that could still make you brilliantly rich appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

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.

Gold-star prospect

Highland’s first-half production of 131,784 ounces, revenue of £147m and average gold price realised of $1,238 per ounce were all slightly ahead of the same period last year. EBITDA was 8% lower (as expected), mainly due to a stronger rouble, higher production costs and utilisation of low-grade ore at its Belaya Gora operation.

Despite the lower EBITDA margin — 50% from 54% — it remains within range of the most efficient gold miners. And total cash costs, which increased 15% to $509 per ounce, are still well below the industry median. Period-end net debt of $204m is reasonable for a company with a market cap of £520m ($670m) and a running net debt-to-EBITDA ratio of 1.3.

Highland’s operating efficiency and affordable borrowing costs mean there’s plenty of cash flow for both investment (it said today it’s seeing “substantial progress in each of the projects targeted for the company’s future growth”) and dividends for shareholders.

The City’s earnings-per-share (EPS) consensus for the current year is for a rise from last year’s 14.5 cents to 18.5 cents (14.3p), giving an undemanding price-to-earnings (P/E) ratio of 11.2 and a price-to-earnings growth (PEG) ratio of 0.4, which is deeply on the value side of the PEG fair-value marker of one. With the company also forecast to pay a dividend of 11.5 cents (8.9p), giving a gold-star 5.6% yield, I rate the stock a ‘buy’.

Substantially undervalued

The board of oil-palm plantations group MP Evans (LSE: MPE) rejected a 640p-a-share offer from Malaysian conglomerate Kuala Lumpur Kepong Berhad last October. And with the “immediate and unequivocal support” of major shareholders, also unanimously rejected an improved offer of 740p. The board said it “continues to believe that the revised offer very substantially undervalues the company, its unique position and its future growth potential.”

The shares are currently trading at 735p, giving a market cap of £405m ($522m). Like the board, I believe this very substantially undervalues the company. It commissioned an independent valuation of its assets at the time of the takeover bid, which gave a valuation of $665m, implying an equity value of 1,082p a share.

In addition to a still-cheap asset valuation, the earnings-growth rating of MP Evans is also attractive. The City’s EPS consensus for the current year is 29 cents (22.5p), rising to 42 cents (32.5p) next year, giving a P/E of 32.7, falling to 22.6, and a great-value PEG of 0.5. The board intends to pay an ordinary dividend of at least 15 cents (11.6p) for the current year, giving a yield of 1.6%. And while this could be bumped up by a special dividend, it’s the company’s cheap asset valuation and PEG rating that leads me to rate the stock a ‘buy’.

The post 2 stunning growth stocks that could make you brilliantly rich appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

G A Chester 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.

If the company’s cost and price forecasts are correct, Sirius could be generating a gross profit of about $1.2bn per year by 2024, when production is expected to reach 10 Mtpa. With a market cap of about $1.7bn, it’s easy to see why many investors rate the stock as a buy.

What could go wrong?

It’s worth remembering that Sirius doesn’t expect to generate any revenue or profit until at least 2021. The investment case for the firm is based on price forecasts for polyhalite which stretch many years into the future. It also assumes that this large and complex mine will be built on time and on budget.

In my view, both of these assumptions carry a lot of risk. One indicator of this is that Sirius has had to offer what look to me like fairly generous terms to its financial backers.

Investors funding the group’s initial $400m bond issue will receive a coupon (interest rate) of 8.5%. Australian group Hancock Prospecting will pay Sirius just $250m to secure a life-of-mine 5% royalty on all production up to 13Mtpa. If Sirius’s 10-year price forecast of $158/tonne is correct, that means Hancock could be receiving $79m per year in royalties by 2024.

Why have these early investors been offered such favourable terms? In my view, it’s because they were the best deals Sirius could negotiate. As a one-trick pony with no other assets, I believe Sirius will remain a risky bet until cash starts to flow. And that isn’t likely to happen for at least four years.

Start with an advantage

Investing often requires a long-term view. But history suggests your chances of making a long-term profit are better if you focus on companies with a proven ability to generate attractive returns.

One company I believe fits this description is Highland Gold Mining Ltd (LSE: HGM). This Russia-based business was founded in 2012 with the goal of building a portfolio of profitable gold mining projects in the Russian Federation.

Chairman Eugene Shvidler has a 12.5% stake in the firm. And while high levels of insider ownership can be a risk, in this case I think it’s worked in favour of smaller shareholders. Highland Gold has paid regular dividends since its flotation, providing an attractive income for shareholders.

Progress looks good

The group’s first-quarter gold output was 65,243 ounces, 14.7% higher than during the same period last year. Broker forecasts suggest the group will generate earnings of $0.18 per share this year, an increase of 24% on 2016. The stock also offers a forecast yield of 5.7%.

Despite this positive outlook, Highland Gold trades at a 10% discount to book value and with a 2016 forecast P/E of 11.5.

In my view, this undemanding valuation could be a good buying opportunity. It could open the door to long-term gains and should provide an attractive income. I recently added Highland Gold to my personal portfolio, and continue to rate the stock as a buy.

The post Why I’d sell Sirius Minerals plc to buy this stock appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
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Roland Head owns shares of Highland Gold Mining Ltd. 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.

It said that although total production dipped fractionally in 2016 — to 261.2m ounces from 262.5m ounces in 2015 — a backdrop of bubbly bullion prices helped revenues shoot 11% higher to £305.9m.

As a result, Highland Gold saw operating profit glide to £69.4m from £22.4m the year before.

Gold buzz

However, the release did not contain anything nasty to spook stock pickers despite today’s share price descent. Indeed, predictions that group output would remain stable within the 255m-265m bracket were in line with the company’s previous updates.

Instead, I reckon today’s weakness represents mere profit-taking following recent bouts of solid buying activity. And I believe Highland Gold could be in store for further northward manoeuvres as gold values appear to be built on firm foundations.

The store-of-value metal reached new five-month tops late last week around the $1,270 per ounce marker, with demand boosted by the fallout from President Trump’s airstrikes on Syria and consequent fears that a new Cold War is on the horizon.

There are plenty of other geopolitical factors that could keep gold values ticking higher, too. On top of concerns surrounding Britain’s withdrawal from the EU and upcoming presidential elections in Germany and France giving gold support, macroeconomic jitters took a step further following last week’s disappointing non-farm payrolls numbers from the States.

And Highland Gold is seeking to keep revenues moving upwards through expansion across its asset base. The digger is aiming to extend the life of its Mnogovershinnoye asset in Russia, and is also taking steps to expand output at its Novo project in the country, for example.

Stormy weather on the horizon?

Hurricane Energy (LSE: HUR) has, like Highland Gold, seen its share price march to all-time peaks in recent weeks, the oil explorer boosted further by promising testing  news.

On Friday, Hurricane upgraded its recoverable resource estimates for its Lancaster field in the North Sea — the company now puts the figure at a mammoth 593m barrels, a massive upgrade from its prior estimate of 200m barrels.

And last week’s update followed news in late March that, following drilling work at its Halifax well, it proclaimed the Greater Lancaster Area as “the largest undeveloped discovery on the UK Continental Shelf.”

The uncertain outlook for oil prices has long caused me to take a cautious view of the entire fossil fuels sector, with a steady ramp-up in global supply threatening to keep the market oversupplied long into the future.

And Hurricane carries an extra layer of risk, of course, its focus on the cash-heavy North Sea region putting massive strain on the explorer’s balance sheet.

The road from resource discovery to delivering sizeable quantities of material is often a frustrating and unpredictable one, and especially so for smaller operators working on tight budgets and unforgiving operational timeframes. 

I would much rather buy into Highland Gold rather than Hurricane Energy right now.

The post Why Highland Gold Mining Ltd is a better commodities pick than Hurricane Energy plc appeared first on The Twelfth Magpie.

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Royston Wild 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.