I believe gold digger Acacia Mining (LSE: ACA) could be a growth pick to buy in April as bullion prices appear in great shape to keep on ascending.
Concerns over a range of geopolitical and macroeconomic issues continues to keep precious metal demand ticking over nicely, and latest World Gold Council data showed total holdings in gold-backed ETFs and similar investment vehicles rising a further 5.9m tonnes last month. This took the total to 2,251.8 tonnes as of the close of March.
Not only is Acacia benefitting from bulging gold values, but the company has worked hard to boost earnings through its aggressive cost-savings programme. Indeed, the African digger saw cash costs topple 17% during 2016 to $640 per ounce.
Acacia has seen its share price take a dent in recent weeks after the Tanzanian government placed an export ban on copper and gold concentrates, a market which makes up around 30% of the company’s revenues. However, while costing Acacia lost revenues of around $1m per day, the ban is largely expected to be wound back sooner rather than later.
The City expects earnings at Acacia to rise 89% in 2017 and by a further 1% in 2018, forecasts that leave the commodities play dealing on a P/E ratio of just 13.3 times. I reckon this is great value given the long-term potential of its assets across Africa.
Paper powerhouse
The Square Mile also expects earnings at paper producer Mondi (LSE: MNDI) to keep rattling higher in 2017 and beyond.
For the current year, a 10% earnings ascent is predicted, followed by a 5% rise in 2018. As a side note, this means Mondi changes hands on a very reasonable prospective earnings multiple of 15.2 times.
And it is easy to share the City’s optimistic take. Like industry rivals such as Smurfit Kappa, Mondi has successfully hiked containerboard prices in recent months, and this trend is expected to persist into the second half of 2017. The boffins at UBS estimate that a 5% price rise in Packaging Paper should benefit Mondi’s earnings to the tune of around 8%.
Moreover, the price outlook remains positive for Mondi over a longer time horizon as aggregate supply growth is expected to remain flat while demand steadily gathers pace.
In addition to this, Mondi’s ability to generate huge amounts of cash (cash generated from operations jumped 10% in 2016, to €1.4bn) should also supplement future growth by funding the company’s ongoing M&A quest.
It made four acquisitions during the course of 2016, totalling €185m, and snapped up UK-based flexible packaging producer Excelsior Technologies for €38m in February. The manufacturer specialises in supplying the food sector in both the US and Britain.
With Mondi also benefitting from its exceptionally-cheap cost base (more than three-quarters of group production takes place in low-cost nations), I believe the company has all the tools to deliver solid earnings expansion long into the future.
