With that in mind, here are two mining stocks that could be worth buying for the long term. While relatively risky, their return potential appears to be high.

Positive outlook

Reporting on Friday was lithium exploration and development company Bacanora Minerals (LSE: BCN). Its interim results showed that it continues to offer significant long-term growth potential. During the period, it completed a feasibility study which confirmed the economics and favourable competitive position of a 35,000 tonnes per year battery grade lithium carbonate operation at the company’s key Sonora Project in Mexico.

The growth potential of the business appears to be substantial. Demand for lithium products is expected to grow in future, with emerging industries such as electric vehicles and energy storage forecast to be key drivers. This could provide a tailwind to the company and with its progress being impressive in recent months, it appears to have a bright future.

Bacanora’s feasibility study estimates a pre-tax project net present value (NPV) for the Sonora Project of $1.25bn. With the company having a market cap of around £126m, it appears to offer upside potential. While risky and some way off first production, the stock could be a strong performer given the current outlook of the world economy.

Low valuation

Also offering upbeat investment potential at the present time is copper and gold miner KAZ Minerals (LSE: KAZ). The company has experienced a resurgence in the last couple of years, returning to profitability after a lossmaking period. This was largely driven by a ramp-up in production, as well as more favourable commodity prices.

Looking ahead, the company is forecast to grow its bottom line by 37% in the current year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.2, which suggests that it could offer significant upside potential.

Of course, commodity prices could fall, and this would put KAZ Minerals’ forecasts under pressure. However, with the company being a gold producer, it may offer some defensive characteristics in case the outlook for the world economy deteriorates. Gold has historically been seen as a store of wealth during more challenging economic periods, and this could offset falls in other commodity prices for the business.

With dividends due to start this year, the company’s management team appears to be upbeat about its future prospects. Even after a share price rise of 63% in the last year, the stock still appears to offer significant capital growth potential over the long run.

The post 2 top stocks I’d buy in March appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in KAZ Minerals. 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.

The fans have had reason to cheer, however, as both have enjoyed some good news in recent months. In August, Rare Earth Minerals announced a tie-up with electric sports car and energy storage company Tesla Motors that did wonders for its prospects and profile.

Deep Resources

Sirius Minerals has been edging closer to full approval for its potash project beneath the North York Moors, where it hopes to dig the planet’s largest polyhalite mine to fertilise the world’s farms. Neither company has dug up any money, but they have massive potential. The “will they, won’t they” nature of both stocks has captured investors’ attentions but ensured volatile share price performance.

Sirius is up 73% over the last six months to 18.25p, as it awaits the planning green light for its polyhalite plans. Over the same period, Rare Earth Minerals is down around 20% to 0.98p, albeit with plenty of highs and lows in between. Both companies have a long journey before they actually generate any revenues, but markets clearly seem to that Sirius now has the smoother road.

Battle Of York

We should know for sure quite soon, as news emerges that the North York Moors National Park Authority will circulate its final decision notice and other relevant documentation for signatures this week. The verdict should be issued shortly afterwards: investors will be crossing their fingers and toes.

If it gets the answer it wants, chief executive Chris Fraser still has to raise up to £2bn to develop the potash mine and Teeside export links. Management has struck a series of morale-boosting polyhalite supply agreements with major agri-business customers, but none will bear any fruit until the mining starts, and that is some way off.

The Bacanora Story

Investors in REM also face an anxious wait. Tesla has high standards and has set tough “performance milestones” for the lithium hydroxide it needs to manufacture batteries at its $5bn Gigafactory in Nevada. It could be two years before we know for sure whether it has met those milestones. That said, Tesla has a strong interest in the success of REM and its partner Bacanora Minerals, and won’t want to see the project fail. If it succeeds, REM has the tasty carrot of a five-year contract, with a potential five-year extension to follow.

Both stocks have been relatively quiet in recent weeks as investors await the next development. Many traders have quit the scene, as the prospect of a short-term gain recedes. Even if Sirius gets the final decision it wants, as markets appear to assume, it still won’t make any money for several years. Rare Earth Minerals faces a similar challenge.

Both of these stocks could prove big winners for your portfolio, but investors will have to dig deep into their reserves of patience to find out, without a single dividend as a reward.

The post Dig In For Victory With Rare Earth Minerals PLC And Sirius Minerals PLC appeared first on The Twelfth Magpie.

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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

On the condition that Rare Earth and Bacanora’s Sonora lithium project in Northern Mexico reaches certain performance milestones during the next two years, Tesla will buy lithium hydroxide to feed the manufacturing of batteries at its Gigafactory in Nevada.

One of the conditions attached to the deal will be that the Sonora project has to be able to produce lithium hydroxide in accordance with the parameters determined by Tesla. 

The deal between Rare Earth, Bacanora and Tesla will last for five years, starting from when Tesla places its first order. There’s an option to extend the contract for a further five years. 

Commenting on the deal, Rare Earth Chairman David Lenigas said:

“The selection of the Sonora lithium project as one of the lithium suppliers to the Tesla Gigafactory is a landmark transaction that will support the development and commercialisation of the Sonora lithium project. This key supply agreement with Tesla will hopefully be the first of a number of potential lithium off-take partners for the Sonora lithium project…”

A big deal

There’s no doubt that this deal between Rare Earth, the company’s partners, and Tesla is a big deal. 

Tesla Motors designs and manufactures premium electric vehicles, which have gained a reputation for being the best electric cars in the world. Tesla’s newest model, the P85D, an all-wheel-drive version of the battery-powered of the company’s Model S car, has recently earned a 103 out of a possible 100 in an evaluation by Consumer Reports magazine, setting a new standard for comfort, quality, reliability and overall perfection. 

And to meet the rising demand for its vehicles Tesla is building a $5bn Gigafactory in Nevada, which will be able to supply enough batteries to meet the projected demand for Tesla’s vehicles. Along with strategic partners such as Panasonic, the Gigafactory will help reduce the cost of manufacturing batteries by around 30%. 

Tesla’s Model S uses around 7,000 lithium-ion batteries, and Tesla is planning to produce 500,000 cars per year in the latter half of this decade. So, the company needs a reliable lithium supplier to feed production at its Gigafactory. The factory is set to commence production during 2017 and reach full capacity by 2020. 

A long way to go

A deal with Tesla is a game-changing development for Rare Earth, but the company still has a lot to do before the contract translates into revenue. For example, today’s press release warned that:

“…the Sonora Lithium Project Partners will need to design and construct a suitable mining and processing operation. This will require the Sonora Lithium Project Partners to secure significant financing through debt and/or equity.”

What’s more:

“Bacanora and REM will be pursuing next steps to raise finances in order to achieve this goal. There can be no assurance that the conditions to supply product under the Supply Agreement will be met or that the agreement will prove to be economic.”

In other words, while Rare Earth and Bacanora may have a provisional agreement with Tesla, there’s no guarantee that the partnership will register any economic benefit from the deal. 

The post Rare Earth Minerals PLC Signs Supply Contract With Tesla Motors Inc. appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves 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.

Bacanora Minerals

“The board of Bacanora has noted the sharp increase in the company’s share price during trading in Canada last night,” Bacanora said today. “The board is not aware of any reason for the price movement (and) will continue to work towards delivering value for all shareholders.“

Its shares rose 46% to CAD2.05 yesterday on the other side of the Atlantic, and the rally continued today in London. 

Canada-based Bacanora, a lithium and borates development company focused on Mexico, released on Friday an update on its upcoming milestones, which relate to “its on-going transition from an exploration to a mine development company”.

On the face of it, the statement didn’t seem to add much to the investment case, but could the imbalance between supply and demand in lithium be behind the rally? 

Or should Tesla‘s development plan be praised? 

If you are keen to invest in Bacanora, I suggest you read this, while also considering that Molycorp, a flagship US-based rare earths miner, is reportedly about to go belly-up…

Creston 

Creston, a marketing firm with a market cap of £75m, announced a strategic investment and unaudited full-year results today. The deal, according to which Creston will take a 27% stake in 18 Feet & Rising, gives the buyer access to such clients such as Allianz, Cuprinol, Kopparberg, Nando’s, and House of Fraser.

Creston said that “50% per cent of the £1 million cash payment for the shareholding will be invested in the business to help accelerate its future growth,” which valued the target’s equity at £3.7m, or about 1.4x the value of 18 Feet & Rising’s trailing revenue, which stood at £2.7m at the end of 2014. 

Creston’s unaudited full-year results for the year ended 31 March 2015 show that like-for-like revenues rose 2% to £76.6m, a growth rate in line with that of its core operating income. The group proposed a full-year dividend of 4.20p per share (2014: 3.90p per share), for a dividend yield in the region of 3%, while reporting a net cash position of £8.3m (2014: £7.5m). 

“Digital and online revenue up 7 per cent in absolute terms representing 55 per cent (2014: 53 per cent) of group revenue,” Creston noted, adding that it spent £1.8m buying back its own stock at an average price of 111p per share.

Based on its forward trading multiples, its shares do not look expensive right now, although Creston has to work hard to become a more profitable entity at operating level, in my view. Creston trades at 132p, and is flat year to date, but has risen 14% since early February and 40% over the last two years. 

The post Why Bacanora Minerals Ltd & Creston plc Are Flying High Today appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alessandro Pasetti 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.

Today I’m going to take a look at three companies that, on the face of it, don’t have a lot in common.  That could be true at the moment, but this could well change in a matter of weeks, bringing security and the potential of much improved earnings visibility, going forward. So let’s take a deeper look….

Rare Earth Minerals

Rare Earth Minerals (LSE: REM) is a United Kingdom-based minerals investment and development company. Its purpose is that of the identification, development and mining of rare earth minerals.

 

Tesla Motors

Tesla Motors (NASDAQ: TSLA.US) designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components.  It is headed by Elon Musk, an entrepreneurial designer, engineer and inventor.  He is the driving force behind a number of companies and concepts.

With the stock trading at over 131 times earnings, there seems to be high expectations here.

Bacanora Minerals

Bacanora (LSE: BCN) is a Canadian-based mineral exploration company. The company is engaged in the exploration and development of industrial minerals in Mexico with a focus on borates and lithium.  As we can see from the chart below, this recently listed stock has underperformed the FTSE 100, but seems to have rallied from lows seen at the start of the year.

In a similar vein to Rare Earth Minerals, the company doesn’t make any money — as a consequence, it is equally as hard to value as Rare Earth Minerals.

Putting It All Together…

I would be the first to admit that this is a rather odd selection of companies, so what’s the connection?

Well, Tesla is rumoured to be planning to unveil a new home battery, meaning that it will need more lithium to keep up with potential demand.  Bacanora has a lithium project located in Sonora State, Northern Mexico, not a million miles from Tesla’s factory currently being built in Nevada.  The additional lithium requirement could well mean large orders for Bacanora – this, in turn would please management of Rare Earth Minerals, who have built up 15.4% in the company – I wouldn’t be surprised to see this rise further in due course.

The post What Do Rare Earth Minerals Plc, Tesla Motors Inc And Bacanora Minerals Ltd Have In Common? appeared first on The Twelfth Magpie.

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Dave Sullivan 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.

Risk Profile

Clearly, Bacanora Minerals is a very different proposition to the likes of Rio Tinto (LSE: RIO) (NYSE: RIO.US) and BHP Billiton (LSE: BLT) (NYSE: BBL.US), with the latter two companies offering a size, scale and financial stability that Bacanora Minerals simply cannot match.

For example, both Rio Tinto and BHP Billiton have endured highly challenging periods in recent months, with the falling iron ore price hurting their top and bottom lines. However, they have remained highly profitable in spite of tough trading conditions, which is a very different experience to that of Bacanora Minerals which, as mentioned, has seen its losses widen in its most recent results.

As such, Bacanora Minerals clearly remains a much higher-risk investment than either Rio Tinto or BHP Billiton, with its financial standing, scale and diversification being far less appealing than its larger peers.

Strategy

With Bacanora Minerals not having a CEO at the present time, its strategy is, to a certain extent, rather uncertain. Certainly, it is making encouraging progress in terms of its ongoing (and fully funded) pre-feasibility studies at both the Sonora lithium project and the Magdalena borate project. However, investing in the company now poses a risk in terms of strategy change, with a new CEO having the potential to make significant adjustments to the future plans of the business. While this could prove to be a positive, it means that Bacanora Minerals’ future is even more uncertain than it otherwise would be.

On the other hand, BHP Billiton and Rio Tinto have relatively stable management teams that have a clear strategy: to cut costs and rationalise their businesses. Furthermore, both Rio Tinto and BHP Billiton are seeking to increase market share through maintaining high levels of production. In the long run, this tactic could prove to be a winning one and may lead to higher profitability for both stocks.

Looking Ahead

While riskier, Bacanora Minerals clearly has considerable future growth potential. For example, its planned production facility in Mexico could produce up to 50,000 tonnes of lithium hydroxide and, while its financing is yet to be confirmed for the long run, it could prove to be a very appealing growth prospect. And, while risky, pairing it up with the likes of Rio Tinto and BHP Billiton could be a sound move, as you would still have strong growth potential, but also benefit from the more stable performance of Bacanora Minerals’ larger peers.

However, with no CEO in place at the present time, it may be worth waiting until its future strategy and outlook is somewhat clearer. As such, and even though investor sentiment is improving, now may not prove to be the perfect time to partner up Bacanora Minerals with BHP Billiton and Rio Tinto, although it certainly could be one for your watchlist.

The post Is Bacanora Minerals Ltd The Perfect Partner For Rio Tinto plc And BHP Billiton plc In Your Portfolio? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of BHP Billiton and Rio Tinto. 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.

The reason? This morning, REM released a new report claiming that El Sauz and Fleur Lithium Project in northern Mexico, in which REM has a 38.4% stake alongside Bacanora Minerals, could be worth $2,023m.

This suggests that REM’s share of this potential value could be around $775m, a figure that dwarves the firm’s current market cap of around $100m.

Too good to be true?

There doesn’t seem to be much doubt that the lithium assets in which REM has a stake contain some good quality deposits.

However, today’s report is only a preliminary scoping study, not the kind of detailed feasibility study usually required to raise funds for a big project.

In my view, the net present value (the value of all expected future cash profits, in today’s money) of $2,023m provided in today’s report is quite optimistic.

Firstly, the current market price of lithium concentrate is $6,500 per tonne. This has risen strongly in recent years, but the NPV in today’s report assumes that the price will average $6,500 per tonne for the next twenty years.  

Secondly, the report uses a discount (interest) rate of 8% to calculate the NPV, rather than the more commonly used 10%. A lower rate has the effect of boosting the NPV.

Could REM be worth 3p/share?

Today’s report says that $422m would be required to build the mine and buy the necessary equipment, but the report says this is only an estimate, so let’s say that around $600m would be needed to get the mine up and running.

Of this, REM would have to provide $230m, based on its 38.4% interest. The company’s latest results showed cash of just $4m, so all of this would have to be borrowed or raised from shareholders, probably a combination of both.

Based on all of this, and the firm’s $775m share of today’s NPV projection, my rough calculations suggest that REM shares could be worth 3p, if things go to plan and the numbers in this report — which I feel are a bit optimistic — are proved to be correct when a more rigorous feasibility study is carried out.

Overall, I’d say REM still has the potential to deliver a 100% gain — but it’s a fairly risky and speculative buy, in my view.

The post Are Rare Earth Minerals PLC & Bacanora Minerals Ltd A Screaming Buy At Today’s Prices? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head 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.