These are dreadful times for miners focusing on industrial metals such as copper and iron ore, as Chinese demand slows but miners of rare or precious metals dance to a different tune. Here, the good news is just as likely to outweigh the bad.
Good As Gold?
AIM-listedXtract Resources (LSE: XTR) has seen itsshare price soar by 175%in the lastyear but dont get too excited, that is from 0.08p to todays 0.22p. Still, investors have made money from this penny stock and it could bea tempting prospect.
Xtract is agold and copper exploration and development company thatboasts two main prospects, the Chepica gold and copper mine inChile and the OKiep and Carolusberg copper sulphide dumpprojects in South Africa. Ithas sufferedsetbacks at its Chipeca Gold Mine in Chile wherethe authorities suspended operations followingtwo fatal accidents, although it hopes to be granted permission to restart next week. Last year it suffered mixed results in South Africa, where feasibility studies continue.
Xtract is pursuing a range of other prospects, including a joint-venture in Mozambique, which should give it some much-needed diversification. Forecasts suggest it will make profits of 2.5m this year, on revenues of 9.8m, which I certainly find tempting. Today you can buy it at nine times earnings. This stock could merit a bit more digging
Petra Diamonds Forever
Diamond miner Petra Diamonds (LSE: PDL) has had a tougher year, its share price falling 54%, which is the kind of number you expect from miners these days. Itslatest trading update showed the company beating production targets in the last six months of 2015, but unfortunately revenue fell28% to US$154m and diamond sales fell7% to 1,303,051 carats.
Chief executiveJohan Dippenaar flagged up its expansion programmes, which remain on track to deliver the first significant input of undiluted ore in second half of this year, which shouldboost grades and product mix, while, its new plant at Cullinan is on track. City forecasts suggesta drop in profits from 85m to 57m in the year to 30 June and a forecast 14% drop in earnings per share, which takes some of the shine. Petrais reasonably pricesat 10.8 times earnings and yielding 2.7% but it is hardly a diamond prospect right now.
Back Down To Earth
It has been a disappointing year for investors in Rare EarthMinerals (LSE: REM), whoseshare price is down 20% over the last year to 0.71p. The stock did geta boost last year following its dealto supplyTesla Motorswithlithium hydroxide, albeit with stiff two-year performance milestones. Results from theCinovec Lithium-Tin-Tungsten project, in which REM has a 12% equity interest, and the Sonora Lithium Project byBacanora Minerals, 17.19% owned by REM, have been encouraging.
It is always an act of faith investing in fledgling miners, until therevenues start rolling in, even ones mining highly-valued metals as lithium. Demand from battery producers is expected to surge as renewable energy storage becomes a global issue, but investors will need strong nerves and bags of patience.
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Harvey Jones 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.
