Further gains
Shares in gold miner Centamin (LSE: CEY) continue to rise and are now up by more than 30% since the turn of the year. While this is a very pleasing return in a short space of time, there is the prospect of further gains in the coming months and years since the price of gold has the potential to move much higher.
That’s mostly because the uncertainty which gripped the first part of 2016 has not yet gone away. In fact, the problems which investors were reacting to, namely the US interest rate rise and Chinese growth prospects, have not materially changed in recent days and so there is a good chance that markets will continue to be volatile. Therefore, gold may continue to be viewed as a store of wealth and its price could continue to rise in future.
Allied to this is Centamin’s planned ramp-up in production, which is set to see its annual production reach 500,000 ounces of gold by 2017. As a result, its bottom line is likely to increase at a rapid rate over the medium term, which makes its current price to earnings (P/E) ratio of 15.5 remain very appealing.
Staggering turnaround
Also rising rapidly in recent weeks have been shares in Lonmin (LSE: LMI). In fact, they are up by 98% in the last month, which is perhaps one of the most staggering turnarounds in recent times by any company. That’s because Lonmin was deeply unpopular among many investors, with its recent rights issue take up of 71% highlighting this fact.
With Lonmin having a more stable financial position following its fundraising and also having the cash to put in place its new strategy, its future appears to be much brighter than it was a few months ago. Certainly, further falls in commodity prices would hurt Lonmin’s financial performance, but with a sound strategy which focuses on cutting costs, generating efficiencies and developing higher profitability in the long run, Lonmin could be of considerable interest to less risk averse investors.
Very volatile
Also at the riskier end of the investment spectrum is 88 Energy (LSE: 88E). Its shares have soared by 185% since the turn of the year and while their performance has been exceptional, 88 Energy’s shares are very volatile. For example, they have been twice as high as their current level within the last few weeks.
The key reason for their major share price gain is exploration success, with the company announcing earlier this week that the bulk of its acreage in Alaska is within a thermal maturity sweetspot. This is excellent news for the company and could help it to generate additional fundraising in future.
However, with a number of other resources companies offering clear paths to profitability and low valuations, 88 Energy may only be of interest to the least risk averse of investors owing to its high volatility and the likelihood of further fundraisings being required.