Does This Week's News From Enquest Plc, Sirius Minerals PLC And Shanta Gold Limited Make Them Star Buys?
East Africa-focused gold producer and explorer Shanta Gold(LSE: SHG) has today provided a regional exploration update for its flagship asset, the New Luika Gold Mine.
A reverse circulation drilling programme has been completed at the Askari mineralised target, which is one of the early stage targets that form Shanta's exploration programme. The company has encountered mineralisation in 24 out of the 26 holes that were drilled as part of its first phase of drilling. Phase two of drilling at the Askari target is expected to include step-out and in-fill drilling, with the work due to be incorporated in Shanta's wider 2016 exploration programme.
With shares in Shanta Gold having increased by 51% since the turn of the year, the company has clearly benefitted from the rising gold price during the period. Looking ahead, it would be of little surprise for the price of gold to continue its upward trajectory, since investors continue to view the asset as a store of wealth. With market uncertainty set to remain high, gold continues to offer strong defensive characteristics in an uncertain world.
Of course, Shanta Gold is a relatively high risk stock, owing partly to its small size. As such, while it may be worth a closer look for less risk averse investors, other gold producers and explorers may be preferable for most investors.
Meanwhile, shares in Sirius Minerals(LSE: SXX) have almost fully recovered from their slump at the end of January. They fell heavily on the back of news regarding a delay to the definitive feasibility study for the planned potash mine in York, the results of which will now be announced at the end of March rather than at the end of January. The reason for the delay was simply the large volume of information which it entails, as well as Sirius wishing to avoid mistakes on such a large and complex project.
Alongside the delay, Sirius also announced that it is moving towards the selection of preferred tenderers for the three initial critical path components for project implementation. They are site preparation, mine shafts and the mineral transport system. And with it this week highlighting the potential for its polyhalite fertiliser on crop growth, it could have a very bright long term future.
Clearly, such a major project is unlikely to run smoothly and on schedule throughout the whole process, so delays and disruptions are bound to be expected. However, with such appealing stocks available elsewhere in the mining sector, Sirius may be worth watching rather than buying at the present time.
Also in the news this week has been Enquest(LSE: ENQ), with the oil and gas company increasing its stake in the Kraken development by 10.5%, which brings its total interest to 70.5%. This is positive news for the company, since the Kraken development is expected to begin production in the first half of 2017 and has recently been able to reduce full cycle gross project costs by around 10%. This should improve its competitiveness in a low oil price environment.
Despite this news, Enquest continues to offer significant risks. It has a highly leveraged balance sheet which given the prospect for a fall in the price of oil, could lead to financial challenges over the medium term. And with a number of oil and gas sector rivals being highly profitable and trading on low valuations, there could be better options elsewhere.
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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.