That was more than a month ago. Since then, the enterprise has continued to push ahead with its growth and expansion plans, and we’ve also had a positive trading update too.

Moving forward 

Bushveld’s figures for the first half of 2019 showed progress on all fronts. Even though the ferrovanadium alloy price fell during the first six months of the year, from $65.5 to $56.3, the firm managed to post improved profit and cash flow numbers. Profit after tax rose $2.3m to $30.8m, and free cash flow from operations came in at $23.3m, up from $16.4m at the same point last year.

Bushveld’s cash balance also increased. At the end of its first half, the company had $66m in the bank. 

Going forward, management wants to increase the company’s output. It’s targeting vanadium production of 3,400m tonnes per annum from Bushveld’s Vametco operation, up from the current 2019 guidance of 2,800-2,900 mtV. The long term production target is currently 4,200 mtV. 

To complement this growth, Bushveld is currently in the process of acquiring another vanadium producer, Vanchem. Management had agreed to pay $68m for this business, funded mostly with cash resources. However, due to market conditions, they’ve managed to push the price tag down to below $54m.

This reveals quite a lot about management, in my opinion. All too often small- and mid-cap mining companies are happy to throw good money after bad and waste shareholder funds to buy up growth. The fact Bushveld’s management is trying to push the cost of doing business down tells me they’re trying to put investors, and the company, first. 

The current plan is to spend $45m improving the assets of Vanchem to take production up to 4,200 mtV per annum, putting the group on track to hit its long-term production target of 8,400 mtV per annum. 

Double or nothing 

It looks to me as if Bushveld has tremendous long-term potential, but I’m not so sure about the company’s valuation. At the time of writing, analyst estimates have the stock trading at a forward P/E at 15, which is a bit on the expensive side for a mid-cap mining business. 

However, considering the fact management is planning to double production over the next few years, I think there’s a good chance earnings per share could double as well. This implies the stock could double from current levels if its valuation remains constant as profits surge.

That said, as with all mining companies, there’s a risk Bushveld will run into operational problems and won’t hit its growth targets. Considering what management has already been able to achieve, I think the chances of this are low, although there’s always going to be a risk of failure in any mining operation — it’s just part of the business. 

If this worries you, it might be better to avoid Bushveld and seek out safe growth stocks instead. 

The post Can the Bushveld Minerals (BMN) share price double your money? appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. 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.

Following this decline, the BMN share price looks cheap. However, before you buy in, there are several things you should know about this business and its potential. 

Growth market 

Bushveld is a dedicated producer of vanadium, a rare-earth metal that is used in the aerospace and automotive industries. Last year, the price of the metal hit a 13-year high, which ignited a surge of interest in companies with exposure to the commodity. Bushveld is one of the few publicly traded vanadium producers in the world, so naturally, investors flocked to the shares.

Thanks to this price spike, and production growth, Bushveld reported a net profit of $30m or three cents per share for 2018. 

The small-cap miner is currently supplying approximately 3,000 million tonnes per annum, 3% of the global vanadium market. It plans to increase production to more than 8,400 mtV within the next five years taking its share of the market to around 8.4%. If the company can meet this output target, sales should expand substantially from current levels.

City analysts are also expecting the company to profit from the rising vanadium price. Reports suggest that raw vanadium prices should reach $45 per kilo by 2020, up from the current price of $36 per kilo.

Risks ahead

It looks as if the only way is up for the BMN share price over the next few years if the company can meet its growth targets. However, as with any commodity producer, it is best to take these growth forecasts with a pinch of salt. There is just so much that can go wrong as Sirius Minerals shareholders have discovered. 

Mining projects are usually delayed and come in above budget. Meanwhile, commodity prices are volatile and difficult to predict. Rising prices typically lead to increased sector output, which drives down prices and profits. That’s just how the free market works. 

To try and offset some of these risks, management has diversified the business into new areas such as vanadium electrolyte batteries, and tin mining. These projects are still in their early stages, but they are progressing. According to the firm’s second-quarter trading update, Bushveld has produced its first batch of electrolyte. This has now been sent for testing at various battery producers. The group has also “delivered our first vanadium battery rental product.” 

Self-sustaining

Bushveld certainly looks to be an exciting business operating with plenty of potential for growth over the next few years. Most importantly, the company is also self-sustaining. 

Its second-quarter trading update reports that the business’s mining arm, Vametco, is cash flow positive providing vital cash to support the rest of the business. On top of this, the company had $44m of net cash on the balance sheet at the end of 2018 and no debt, giving the group plenty of financial flexibility. 

The bottom line

So overall, if you are thinking about buying the BMN share price, it is worth taking into consideration the risks that face the business as well as its growth prospects. In my opinion, the firm’s cash generation and strong balance sheet mitigate the threats to the business model here.

The post Thinking about buying the BMN share price? Read this first appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. 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.

With there being a range of companies with high forecast returns and low valuations, it may seem unclear to many investors why the company in question, Sirius Minerals (LSE: SXX), has investment potential. However, over the course of this year and in future years it could generate high returns.

Further progress

The progress made by Sirius in recent months has been steady, rather than spectacular. It is on track to deliver its polyhalite production facility on time and on budget, while it has also signed a deal with Wilmar Group. It is for the resale of up to 750,000 tonnes per annum of POLY4 fertiliser over an initial seven-year period.

While positive, the news has failed to excite investors. Buyers of the company’s shares in recent months are likely to be sitting on losses, and this situation could continue in the near term. After all, more news of offtake agreements and the project being on time and on budget may fail to catalyse investor sentiment – especially with first production a number of years away.

Investment potential

However, the appeal of the company remains high. Its valuation has the potential to rise significantly if it is able to meet its forecasts. Its valuation could rise by several hundred percent if it is able to start production on time and generate sales of its POLY4 fertiliser as per its business plan. And with demand for fertiliser expected to remain buoyant across the world, the prospects for further marketing agreements seem high.

Whether or not this leads to a doubling of the Sirius Minerals share price in 2018 remains uncertain. In the long run, though, such a rise is very much on the cards.

Share price growth

Another lossmaking mining company which could have investment appeal is Bushveld Minerals (LSE: BMN). It is a vanadium producer which has additional investments in coal, power and tin. It is due to record a loss of £5.1m in the current financial year and yet its share price has risen by 180% in the last year as investor sentiment has continued to improve.

On Monday, the company reported that it continued to make progress in the fourth quarter of 2017. It benefitted from a buoyant vanadium pricing environment which boosted revenue by 44%. It continues to invest in its expansion projects, which could help it to deliver improving financial performance in future years.

Clearly, Bushveld is a speculative investment and comes with relatively high risks. However, with the company’s performance seemingly on track and it having the potential to build on the improved performance, the potential rewards also seem to be high.

The post Can you double your money with Sirius Minerals plc in 2018? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Peter Stephens owns shares in Sirius 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.