The rising Jubilee Metals (JLP) share price

Jubilee Metals is a mining exploration company operating within Zambia. The firm used to primarily focus on finding and extracting platinum. But, more recently, its diversified portfolio now includes chrome, copper, and cobalt too.

The rising value of these metals throughout 2020 undoubtedly helped push the JLP share price higher. However, a lot of the growth appears to stem from the anticipation surrounding Project Roan.

After securing the rights to approximately 150m tonnes of copper-rich surface tailings in June last year, Project Roan was announced. The goal is to establish a facility to process and produce more than 25,000 tonnes of copper per year by 2025. Based on today’s market value of copper, that’s worth around $250m. That’s more than five times the revenue generated in 2020 alone.

Needless to say, this is a massive opportunity for the business. And, so far, everything appears to be going according to plan. The first of three construction phases has already been completed, with phase two and three scheduled for completion in Q3 2021 and Q1 2022 respectively.

Meanwhile, its platinum and chrome operations continue to flourish, with both seeing production volumes in the second half of 2020 increasing 34% and 72% respectively.

Seeing the JLP share price explode on this impressive performance isn’t at all surprising. And if it can continue delivering results, I believe the stock can climb even higher.

The risks that lie ahead

As exciting as these developments are, the mining industry is still fraught with risk, especially for smaller operators like Jubilee. One major disadvantage is their lack of pricing power. After all, the value of the metals dug up is driven by market demand, which can be highly cyclical.

This is why metal commodity prices have a habit of fluctuating. Due to lockdowns around the world, many mining sites remain unoperational, or are working at reduced capacity. This lack of supply has ultimately raised the value of metals like copper to their highest point in nearly 10 years.

Obviously, rising commodity prices hugely benefit the JLP share price. However, if the supply becomes over-saturated, these prices can crash just as fast as they went up.

The bottom line

It’s going to be a good number of years before Project Roan reaches its target production levels. And during that time, the value of copper could decline significantly.

But Jubilee already has established facilities processing other precious metals that continues to provide substantial growth. What’s more, even if Project Roan has inflated the JLP share price, the stock is still trading at a reasonable P/E ratio of around 11.6.

So, to me, this looks like it could be a relatively cheap high-growth opportunity for my portfolio, especially since the world is transitioning to renewable technology that requires a lot of the materials Jubilee is digging up.

The post Can the Jubilee Metals (JLP) share price climb even higher? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Jubilee Metals. 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 reason for that is clear too, as the oil and gas explorer’s previously high-flying profits nearly halved that year, and then crashed to losses in 2015 and 2016.

But while there is certainly some justification for the sell-off, I think it’s overdone now that there’s a recovery on the cards. Analysts are predicting a return to profit this year, albeit a tiny one, but the impressive earnings forecast for 2018 would drop the P/E to a lowly 10.

Admittedly that’s more than a year ahead, and oil prices are still low and potentially volatile — so there’s risk, but I see it as overblown.

More oil discovered

An update from the company’s Platanillo-25 well, which is the 20th in the Platanillo drilling campaign, has been “successfully side tracked to a total depth of 8,620 ft measured depth, on time and budget“, and the early signs suggest there’s an oil column of 22 feet in the ‘U sand’ formation. The company says it “expects to initiate commercial production from the U sand … in approximately 10 days.“

This follows on from the interim report in September which revealed a 69% rise in production to 4,475 bopd, with 8 mmbo produced from Platanillo by that time. Revenue was up 57% to $38.2m and adjusted EBITDA came in at $7.6m with net cash of $8.5m generated. I reckon forecasts of pre-tax profit for the full year of around £6m (approx $8m) are looking too conservative.

Amerisur had cash of $29m too, so I see no liquidity problems. Profits over the coming years could be erratic, but I rate Amerisur a buy.

Desirable metal

Another resource stock I like the look of is Jubilee Platinum (LSE: JLP), which released a Q3 update Thursday. 

Operating revenue grew by 48% to £2.67m, with operating earnings up 193% to £0.85m. The firm’s Hernic mine saw operational earnings soar fivefold to £0.5m, with a production cost per ounce down to $476 from $901 at the same stage the year before.

With the company’s existing ops starting to bring in the cash, we could be looking at the start of a long-awaited turnaround now, after years of net cash burn. Losses have been falling quickly, with 2012’s loss per share of 2.43p falling to just 0.27p in 2016, and investors have been confident enough to keep buying the shares over the past couple of years.

In fact, at 4.4p today, the price is around double its early 2014 levels. But there is one major caution here…

Penny share risk

Penny shares can mean volatility. And no company starts out with penny shares — Jubilee shares were fetching as much as 120p back at their 2007 peak. That really does show the chance you’re taking when you invest in a speculative cash-burning ‘jam tomorrow’  stock and the jam takes much longer than hoped to turn up.

You should only invest in a share of this type if you really know what you are doing, but I can’t help thinking that Jubilee could finally have a profitable future ahead of it — and it does have further exploratory projects in its pipeline in addition to its productive mines.

If I did buy, it would be for at least 10 years and hopefully longer, to counter short-term volatility.

The post 2 undervalued growth stocks I’d buy and hold for 10 years appeared first on The Twelfth Magpie.

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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Amerisur Resources. 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.

Making progress 

During the past year, Jubilee has transformed from a struggling speculative miner into a cash cow with bright prospects. Even though the company reported a loss for its financial year when it announced the figures at the end of last year, according to chairman Colin Bird, the firm earned a total of £2.3m during the third calendar quarter of last year, which fell just outside the end of the fiscal year. 

Income from a full year of tailings processing at Jubilee’s flagship Dilokong mine is likely to come in at between $8m and $10m. The nearby Hernic mine is set to come on-stream as well in the near term, which will add a similar-sized contribution to the group’s bottom line. 

On top of the two South African chrome and platinum projects, Jubilee announced today that it had inked a deal to process copper tailings from Resilience Mining Australia’s Leigh copper mine. RMA will receive A$8m payable in stages and dependent on certain milestones being hit. 

According to today’s press release on the matter, the project has potential production of 12,000 tonnes of copper at a production cost of US$2,569/t compared to a current price of $6,000/t. With such impressive economics, it’s no surprise Jubilee expects the project to be cash flow positive within six months. 

Finding a value 

City analysts are not yet covering the company, so it’s difficult to try and place a value on the shares. However, considering the income projections above, and Jubilee’s current market capitalisation of £60m, it looks as if the company could be undervalued considering its potential. 

As an estimate, if income for the Dilokong mine comes in at $9m for the full-year, that’s earnings of around £7m, excluding income from any other sources. Put simply; it looks as if the company is trading at less than 10 times earnings. 

Tricky business 

Jubilee’s move into the tailings business comes after the company’s unsuccessful venture into deep-level platinum, a business Lonmin (LSE: LO) knows is fraught with risks. 

Lonmin and Jubilee’s fortunes could not be more different. As shares in Jubilee have rocketed over the past two years, Lonmin has lurched from one disaster to another, and over the previous five years, the shares are down by 99.9%. 

It looks as if there could be further declines to come as well. For the three months to the end of December, the company reported lower production volumes and higher costs, exactly the opposite of what management wanted to achieve.  

Management had promised shareholders lower costs and higher production volumes to promote the last equity fund raising. The question is, for how much longer will major shareholders be willing to support the company? 

The post Jubilee Platinum plc has four-bagged in 2 years: is it a buy? appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.

The shares are still up 34% from their 29 February low, at 16.1p, so are we looking at a recovery bargain now? There really are two sides to the answer. On the upside, Xcite does have some pretty impressive assets in the shape of its Bentley oil field in the North Sea, with estimated reserves uprated in the firm’s Q3 update.

But on the downside, Xcite has $139m in bonds due for repayment in June, but doesn’t have the cash to meet its obligations in full, and at Q3 time the company also told us it will need new financing before the bond maturity date — maybe there will need to be a new equity issue? This is not the kind of risk I like, so I wouldn’t buy right now.

Precious

Jubilee Platinum (LSE: JLP) shares have gained 125% in the past 12 months, to 3.4p, with news that the firm’s platinum processing plant at its Dilokong Mine is fully commissioned and has reached 85% of its design throughput. This, together with the firm’s other plants, should provide a processing capacity of more than 900,000 tons per year — with 2016 hopefully being a turnaround year that will propel Jubilee towards future profit.

Sufficient funding “from a major financial institution” has been secured to bring the platinum projects into operation, so there doesn’t seem to be any great risk on that front. It’s hard to put a value on Jubilee shares in the absence of any profit forecasts, and brokers recommendations are thin on the ground, but I’m cautiously optimistic.

And the price of platinum has been creeping up a little recently after a lengthy fall, which all helps — Jubilee Platinum could turn out nicely for shareholders.

Hydrogen power

AFC Energy (LSE: AFC) is another company that has yet to reach profitability, but it has hit a few important milestones of late and has an impressive plan in place for the development of its fuel cell technology through 2016.

There is one key fact that cannot be ignored, however, and that’s a 73% share price fall since July 2015 to 16p today. Investors don’t seem to be impressed, so what’s the problem? One thing that keeps cropping up with blue-sky technology companies is that expectations can run ahead of reality, and when a firm does not meet those inflated expectations there can be something of an exodus — and 2016’s progress could be seen by some as disappointingly slower than 2015’s.

But I can’t help feeling that there’s been something of an over-reaction and that the shares are too heavily sold. Again we don’t have brokers’ recommendations to help us, but AFC could be a risky bargain.

The post Should You Buy Xcite Energy Limited, Jubilee Platinum PLC And AFC Energy plc Today? appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft 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.

However, each company has its pros and cons, and some investors may not feel comfortable buying all three darlings to minimise risk and profit from the upside available.

So, if you could only pick one of these three AIM champions, which one deserves your cash?

Impressive qualities

Jubilee, 88 Energy and Xtract all have their attractive individual qualities. But rather than trying to figure out which company has the best prospects (a process that involves a significant degree of guesswork) I’m going to evaluate each company based on its most recent financial statements and progress over the past 12 months.

Jubilee’s management has been working flat out over the previous 12 months to get the company producing platinum and generating profit for investors. Today, the company announced that the erection of the ASA Metals processing plant has now been completed and when combined with the Hernic Tailings project, Jubilee will have an annualised process capacity of more than 900,000 tons from the two platinum surface tailings projects. Both projects are set to come on-stream this year. Jubilee has received funding terms from a major financial institution for the debt element of the project financing required to bring its platinum projects into operation.

So, if everything goes to plan, Jubilee should be a fully functioning platinum producer by the end of 2016 giving investors a concrete timeframe with which to judge Jubilee’s management.

Hitting targets

Xtract has transformed itself into one of AIM’s most exciting small businesses over the past year. Indeed, the company has acquired a number of small mining assets for attractive prices, which have short payback periods.

City analysts expect Xtract to report a pre-tax profit of £2.9m for full-year 2016, the company’s first profit in more than five years. On a per share basis, forecasts suggest Xtract could earn 0.02p this year, which implies that the firm’s shares are trading at a forward P/E of 9. If everything goes to plan and Xtract meets City forecasts, the company could be a great long-term investment for your portfolio.

A long way to go

Lastly, 88 energy, which surged last week following the release of the latest results from the Icewine well. Unfortunately, when compared to the likes of Jubilee and Xtract, 88 Energy looks like the odd one out. The company still has a long way to go before it can claim to be on the verge of production, and funding for its flagship Icewine project could still be an issue.

Overall, Xtract has shown over the past 12 months that the company can be trusted to meet its output goals and generate a return for investors. With this impressive record behind it, Xtract looks to be the best AIM champion.

With production targets in place and financing secured, Jubilee comes a close second.

The post Which AIM Star Should You Pick: Jubilee Platinum PLC, 88 Energy Ltd Or Xtract Resources PLC? appeared first on The Twelfth Magpie.

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• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.

Lonmin’s decline has been breathtaking — the company’s shares were trading above £19.50 five years ago, and were still trading as high as 175p in January. On top of this, a humiliating $407m rights issue last month, a move designed just to keep the lights on at the embattled firm, added an unwanted cherry on the cake.

Stock price performance over at Jubilee Platinum (LSE: JLP) has been more promising by comparison, the company spiking to multi-year peaks during the summer above 4.6p. The selling of assets to fund Jubilee’s revolutionary ‘surface processing projects’ was responsible for sending share prices through the roof.

Platinum keeps on tanking

Still, giddy investor appetite at Jubilee has settled back since then as platinum prices have resumed their downtrend. Following a solid break back above $1,000 per ounce in late summer, prices have collapsed once again, and the metal struck seven-year troughs below $825 just today.

Platinum has conceded a third of its value since the start of the year, and plenty of problems persist that could send prices still lower.

The metal’s main industrial usage is in the production of autocatalysts, particularly for those deployed in diesel vehicles. But thanks to the ongoing Volkswagen emissions scandal, regulators are re-examining the carbon footprint of diesel technology, a situation that could have massive repercussions for platinum demand.

Moreover, the possibility of slowing Chinese car and jewellery demand could throw another spanner in the works. Auto sales in the country flipped 11.3% higher in October, to 1.85m vehicles, as tax cuts on small vehicles kicked in. But these efforts could have little long-term value on aggregate platinum demand should Chinese macroeconomic cooling intensify.

Indeed, the boffins over at Morgan Stanley expect things to get worse before they get better — an average price of $1,079 per ounce for 2015 is anticipated to fall to $1,032 next year, a terrifying omen for both Lonmin and Jubilee.

Lonmin’s production issues set to reign

In response to these worrying demand factors, Lonmin elected back in August to shutter its Hossy and Newman shafts at its Marikana complex, a decision that will remove 100,000 ounces of production by 2017.

While a positive step in addressing the market imbalance, the prospect of falling volumes puts even more burden on Lonmin’s top-line prospects as platinum prices steadily erode.

And in spite of recent capex reduction and cost-cutting schemes, the financial considerations of mining in South Africa is likely to keep the pressure on Lonmin’s balance sheet as electricity, labour and general operational costs canter higher. Against this backcloth I believe the prospect of further capital raising cannot be ruled out.

The post Why Shares Should Keep On Collapsing At Lonmin Plc & Jubilee Platinum PLC appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Royston Wild 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.

Indeed, Lonmin seems to be at the end of its life, while Jubilee Platinum is just starting out and could benefit hugely from Lonmin’s demise. That said, it’s unlikely (at least in the short term) that Jubilee will be able to achieve the multi-billion pound valuation awarded to Lonmin back in 2007. However, the company has a serious shot at becoming one of London’s premier platinum producers. 

Pushing ahead 

Lonmin has been struggling with high labour costs and volatile platinum prices for the past six years, and the company has been unable to get its operations into a position where they are consistently profitable. 

On the other hand, Jubilee is starting from a position that should ensure that the company avoids the problems that have plagued Lonmin. 

According to Jubilee’s February investor presentation, the company’s platinum surface processing projects have the potential to produce 80,000 tons per month of platinum-containing surface material. Figures presented at the beginning of this year show that Jubilee’s production target of 80,000 tons per month could yield $14m per annum in operational cash flow.

Initial construction of Jubilee’s operations has already begun. The total projected capital cost for the completion of the company’s Platinum Processing Project is estimated at £4.9m. This cost will be covered by the £5.3m raised from the sale of Jubilee’s Middelburg operations. 

So, unlike Lonmin, which has always been reliant on debt to fund and finance operations, Jubilee is using cash to develop its business. Cash financing should give Jubilee more flexibility over the long term. 

Starting small

Jubilee is starting small, but the company has big potential. Management is hoping to start platinum production at the beginning of next year. Because the company is producing from highly sought-after platinum surface beneficiation projects, there’s little associated risk or cost of mining since all the material is at the surface. 

Lonmin doesn’t have the same advantage. Most of the company’s mines are high-cost, labour-intensive mines, which are complex to manage. The company did try to modernise its mines around 10 years ago, spending hundreds of millions on a programme to introduce more mechanised mining.

But this costly modernisation programme proved ineffective, left the company with plenty of debt and soured relations with its workers. A $475m rights issued followed in 2009 after the company had reported a pre-tax loss of $196m and revenue tumbled from $907m to $423m. During the first six months of 2009, Lonmin cut 7,000 staff and booked $44m of restructuring charges. 

With low-cost, low-risk surface mining operations and a cash rich balance sheet, Jubilee is unlikely to suffer the same pressures as Lonmin. 

The post Is Jubilee Platinum PLC The New Lonmin Plc? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.

Investor sentiment for platinum has returned as further delays in Federal Reserve rate hikes have dented the value of the US dollar. Indeed, the Dollar Index — a measure of the greenback versus a basket of currencies — struck seven-week lows just this week. In addition, platinum has been caught in the gold price updraft, the yellow metal having advanced 7% during the past couple of weeks, too.

With buyers now charging back into the precious metals markets, could now be the time to pile back into embattled platinum group metal plays Lonmin (LSE: LMI) and Jubilee Platinum (LSE: JLP)?

Prices primed to pump higher?

Well, Bank of America-Merrill Lynch certainly feels that platinum could be in for strong price gains in the months and years ahead. The broker expects an average price of $1,065 per ounce for 2015 to advance to $1,100 next year, before marching to $1,250 in 2017 and $1,425 in 2018.

Bank of America believes that Chinese platinum demand has now stabilised, and fully expects physical off-take from the jewellery and autocatalyst segments to rebound strongly next year, pushing the market into deficit.

However, the broker acknowledges a range of factors that could keep platinum prices under the cosh. Adding to the risk of rising prices on jewellery demand, and lower sales to European buyers, Bank of America notes that “producers in South Africa need to show more production discipline,” adding that “putting more ounces into the market at lower cost is not a recipe for success.”

Lonmin responded to such calls in July by announcing it was reducing production by some 100,000 ounces each year by 2017, achieved through the closure of its Hossy and Newman shafts in South Africa. And Glencore announced just this month it was closing its Eland mine in the country.

Auto demand set to dive?

Although a welcome step in the right direction, I believe the platinum market remains a risky bet at the current time.

As Bank of America notes, demand from Europe remains a critical factor for metal prices looking ahead. And with the fallout of the Volkswagen emissions-rigging scandal threatening the future of the diesel engine — 48% of platinum demand comes from autocatalyst builders — sales to this key European-centric market could nose-dive in the years ahead.

On top of this, the likes of Lonmin also face the ongoing problem of breakneck cost inflation. Lonmin itself has taken the decision to concentrate on immediately available ore reserves for mining activities, but the issue of rising wages, power tariffs and general operational costs remain a millstone around the industry’s neck. When you throw in the potential for fresh strike action — a common problem in South Africa’s mining sector — costs are in danger of spiralling still higher.

Platinum prices have risen as quickly in recent weeks as they had previously fallen, reflecting the volatile nature of market sentiment at the current time. Should further disappointing data emerge from China in the near-term, I believe the metal — and consequently shares in Lonmin and Jubilee Platinum — could be sent hurtling lower once again.

The post Should You Buy Lonmin Plc And Jubilee Platinum PLC As Metal Prices Surge? appeared first on The Twelfth Magpie.

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• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Royston Wild 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.

Proactis Holdings

Shares in software company Proactis rose by as much as 8% to 102p today, after a strong set of results and news of a new deal with Screwfix.

Proactis, which has a market cap of around £35m, provides software to help control corporate spending by managing purchasing, invoicing and supplier relationships.

Last year’s sales were boosted by acquisitions, and revenue rose by 69% to £17.2m, while underlying organic sales growth was 12%.

Unlike many small-cap tech stocks, Proactis is profitable and even pays a dividend. Adjusted earnings per share rose by 126% to 6.1p last year, while the firm’s final dividend has risen by 9% to 1.2p, giving a yield of around 1.2%.

I was impressed to see that £14.3m (83%) of the firm’s revenue is now recurring. This suggests that most of the firm’s customers are on rolling subscriptions, which I like. A reported operating margin of 9.3% is also encouraging, while the firm’s cash and debt levels remain reasonable, with net cash of £1.5m.

Small companies like this can be expensive to buy and sell, due to the big spread between bid and offer prices. However, for long-term investors, I believe Proactis could be worth a closer look.

Jubilee Platinum

Shares in Jubilee have doubled over the last three months thanks to the sale of the firm’s Middelburg platinum smelter and power operations.

On 9 October, Jubilee received £5.4m cash for the sale of the Middelburg operations. This, along with cash from a placing and some new debt, should enable Jubilee to fund the development of its two platinum surface mining projects.

As things stand, recent shareholders are sitting on a decent profit, but I’m not sure the shares are still a buy.

Jubilee says that the firm’s surface mining and tailings projects offer “significant earnings potential”. But there are no broker forecasts for the firm. A presentation published in February suggesting that the two sites could generate operating cash flow of $14m per year was based on a platinum price of $1,250 per ounce. That’s 27% higher than today’s price of $980 per ounce.

In my view, it might be wise to wait for more detail on the economics and funding of the projects before deciding whether to invest.

Optimal Payments

Online payment processing company Optimal made waves in March when it agreed a $1.2bn deal to acquire Skrill, another, larger, digital payment firm.

The Skrill acquisition completed in August and Optimal shares have risen by 40% since July. The group’s first-half results showed that sales rose by 40% to $223m, before any contribution from Skrill.

Brokers are forecasting full-year sales, including a contribution from Skrill, of $582m, with a net profit of $93m. This puts the shares on a 2015 forecast P/E of 20, falling to about 15 in 2016, when net profit is expected to rise to $97.5m.

In my view, Optimal’s current valuation already reflects a fair amount of growth. I’m not sure now is the best time to buy — it might be worth waiting until we have a little more information about the combined firm’s trading.

The post Is Now The Time To Buy Optimal Payments Plc, Jubilee Platinum PLC And Proactis Holdings Plc? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.

Undervalued 

The first reason to buy these three mining minnows is that they are all currently trading for less than the value of their reserves.

For example, Rare Earth’s Sonora lithium project has an in-ground value of $50bn. The net present value of the asset, which includes all the costs and incomes that would be associated with the project over its lifetime, amounts to $4.4bn. Rare Earth’s share of this total stands at just under $1.3bn, eclipsing the company’s current market cap of £65.5m. 

Similarly, Jubilee and Kibo are both trading below the value of their asset NPVs.

According to Jubilee’s February investor presentation, the company’s platinum surface processing projects have the potential to produce 80,000 tons per month of platinum-containing surface material. Figures presented at the beginning of this year show that Jubilee’s production target of 80,000 tons per month could yield $14m per annum in operational cash flow — not bad for a £30m company.

Kibo’s coal projects have an NPV of between $211m and $244m — and that’s without placing any value on the rest of the company’s operations.

Making progress 

The second reason tyat now could be the time to buy these miners is to do with the progress they’ve made this year.

Specifically, at the end of August Rare Earth signed a landmark deal to supply Tesla’s world-class Gigafactory with lithium. On the condition that Rare Earth’s Sonora lithium project reaches certain performance milestones during the next two years, Tesla will buy lithium hydroxide for its Gigafactory in Nevada for five years, starting from when Tesla places its first order. There’s an option to extend the contract for a further five years.

Jubilee has disposed of unwanted assets, raising £5.8m after the sale of its South African Middleburg operations, and has secured funding for the continued simultaneous execution of its Surface Platinum Projects. 

Kibo has been busy during the first half of the year as well. Management signed a joint development agreement with SEPCOIII for its flagship Mbeya coal to power project in Tanzania. The deal is expected to close by December, with construction to start in the second quarter of 2016 and first power by 2019.

Risk/Reward 

The third and final reason you should consider buying these miners is the attractive risk/reward ratio on offer. All three miners are trading at a significant discount to the value of their assets. If everything goes to plan, their shares could double, triple or even, in the case of Rare Earth, rise ten-fold from present levels.

Of course, there’s a chance that investors could lose everything, so these miners are high-risk investments that aren’t suitable for everyone. But if you think the risk/reward is attractive and want to take the risk, the best strategy is to use a basket approach. 

The post 3 Reasons To Buy Rare Earth Minerals PLC, Jubilee Platinum PLC And Kibo Mining PLC appeared first on The Twelfth Magpie.

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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.