I’m always searching for small-cap stocks that could be diamonds in the rough. One penny stock I’m currently considering adding to my holdings is Savannah Resources (LSE:SAV). Let’s take a closer look at the bull and bear case to help me decide if I should buy the shares.

Lithium miner

As a quick introduction, Savannah is an early-stage miner with a focus on a few different metal types. Although small in size, it possesses the largest lithium mining asset in the whole of Europe. This is where I believe its growth prospects lie, but more on that later.

It is worth remembering that a penny stock is one that trades for less than £1. As I write, Savannah shares are trading for 2.95p, so they qualify. At this time last year, the stock was trading for 3.5p, which is a decline of 15% over a 12-month period.

To buy or not to buy?

So let’s take a closer look at the pros and cons of me buying Savannah shares.

FOR: Savannah owns the Barroso lithium project in Portugal. This is perhaps the reason I’m most excited when it comes to the miner’s growth prospects. Lithium is set to play a huge role in the coming years in the energy and transport sectors. Lithium ion batteries are used in electric vehicles, for example. Demand for EVs is only rising as governments look to cut carbon emissions. Increased demand, coupled with the largest lithium project Europe, could be lucrative for Savannah.

AGAINST: The issue for a penny stock like Savannah is that larger competitors out there could out-muscle and outmanoeuvre them. The mining sector is competitive and saturated. A few big names dominate the market and can often buy out or overtake smaller firms like Savannah.

FOR: At less than 3p per share, Savannah seems to me like a very low risk way for me to open a position in a business that could experience a meteoric rise. That said, I am aware there is a long way to go and many ifs and buts.

AGAINST: Savannah hasn’t actually received sign off from authorities to begin mining at the Barroso mine. With this in mind, there are a couple of things that could occur for the penny stock. The biggest risk for me is that it could run out of money, which means it would need to take on debt to keep the lights on or risk being taken over by a larger competitor. I will monitor events.

A penny stock I would buy

In conclusion, I would add a small number of Savannah Resources shares to my holdings. I do believe that if it receives approval for its Barroso project, it could be quids in. This could be good news for an investor like me looking to get in at current levels.

I am conscious Savannah is a penny stock with some tangible risks, however. Ultimately, this is the case with many small caps entering large markets, looking to make a name for themselves. I’ll buy some shares and keep a close eye on developments.

The post 1 penny stock with huge potential for growth! appeared first on The Twelfth Magpie.

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Jabran Khan has no position in any of the shares 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.

Lithium is one of the metals at the forefront of the electric vehicle (EV) revolution. This means it could experience a surge in demand in the coming years. With that in mind, I wonder if lithium stocks could be a shrewd addition to my holdings with a view to long-term growth and returns. Let’s take a closer look.

Why lithium stocks could be a good option

According to the International Energy Agency (IEA), 8.9 kg of lithium is needed to manufacture each EV. Based on current supply and demand, there is a huge shortage. In fact, analysts believe there is currently a 5,000-tonne deficit in 2022 production alone. This deficit could mean that demand and prices will soar in the coming years as EV adoption rises.

And EV adoption is rising on the back of directives to cut carbon emissions throughout the world. Many existing vehicle retailers have committed to stop producing traditional petrol and diesel vehicles, some by 2030.

A core aspect of my investment strategy has always been to look at the long term. When it comes to lithium stocks and EV demand, the general signs are positive. Over 200m EVs will be on the road globally by 2030, according to the IEA. This is more than 10 times the number seen currently. This should mean demand for lithium will increase exponentially. All of this could be excellent news for lithium miners and potential investors like me.

Risky business

There are two main issues I found when looking at lithium stocks.

Firstly, the process of mining lithium is complex, time consuming, and subject to regulation. A lithium mining project could take up to 10 years from inception to actually mining the metal. Even then, many years could go by before a firm realises that it may not be able to mine lithium to be sold. Finally, like most mining projects, there are strict regulations to abide by. These could hamper progress or even halt a mining project altogether. All these issues could have a negative impact on performance, and investor sentiment.

Next, an issue that is of concern to me right now is the fact that many lithium stocks don’t have much of a track record to view to learn more about them as a business. Many have never even posted a profit. I do understand that past performance is not a guarantee of the future. However, I like to review a business and its past record to help me decide if I should invest.

My verdict on lithium stocks

Overall, I have come to the conclusion that lithium stocks are high-risk. There is the potential for them to be high-reward too, however. But at this time, there are too many unknowns for my liking. This is unsettling for me as a potential investor.

For now, I won’t be buying any lithium stocks, but I will keep a keen eye on developments in the market as well as a couple of specific stocks such as FTSE All-Share incumbent Atlantic Lithium.

The post Should I buy lithium stocks as EV numbers are set to soar? 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?
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• 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?

Jabran Khan has no position in any of the shares 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.

Thanks to the electronic vehicle (EV) revolution, lithium prices have surged nearly nine times since 2020. Car manufacturers are clamouring to secure lithium reserves after reports show that prices for the soft metal could continue this historic rise. To capitalise, I am looking at two UK shares in the EV space that fit my portfolio. 

Wonder metal 

While most commodity prices have taken a hit in 2022, lithium is still trading close to all-time highs of US$70,000/ tonne. And analysts expect lithium prices to rise anywhere between 150% and 250% year over year until 2028. 

To put the current inflation in lithium prices in perspective, let us look at the price action across 2022. In January, lithium cost $10,000 per tonne. Right now, it is trading close to $68,000. This 580% jump in seven months has made it one of the fastest growing commodities in history. 

And with European EV sales at an all-time high, I think this is the perfect time for me to look at lithium shares in the UK.

Two top UK shares I’m watching

To cut out crude oil, the first step is to develop the battery tech to power our machines. And Ilika (LSE:IKA) is a British battery manufacturer with a focus on lithium-based batteries for EVs and medical devices. 

The firm is working on its ‘Goliath’ battery line, which could become a premium option for the automobile belt in Europe. After years of research, Ilika is finally looking to scale up manufacturing efforts to meet this sudden spike in demand. 

The company is already working with the UK Battery Industrialisation Centre (UKBIC) to create a dedicated 100 MWh manufacturing line. Also, Ilika’s tech was recently accepted into the coveted APC programme to help the UK automotive industry reach net-zero emissions.

The next UK share on my list, Rio Tinto (LSE:RIO). The FTSE 100-listed mining giant has actively been securing lithium reserves across the world. These include the Rincon lithium project in Argentina for $825m and the highly promising $2.4bn Jadar lithium project in Serbia. 

The Serbian government recently revoked the license for the Jadar project, citing environmental concerns. This forced Rio Tinto to propose a new plan that promises a 15% reduction in emissions. According to estimates, lithium from Jadar would meet 90% of Europe’s current needs. And Rio’s board is confident that a resolution can be reached.

Concerns and verdict

Despite the estimated demand for batteries, projects like Ilika could meet huge roadblocks. The company is yet to become cash-positive given its high R&D budget. And the journey to being a new product to the market is tough, especially for smaller firms.

Miners like Rio always run the risk of government interventions that could affect operations. Also, with lithium prices skyrocketing, some analysts are wary of the instability. If the demand from China cools down, lithium prices could drop again, effectively ending the surge. 

However, the EV industry looks unstoppable right now. Even Elon Musk has stated that Tesla could enter the lithium mining market to cut costs. And the two UK shares on my watchlist can help address this demand. If the demand for EVs extends into 2022, I would be tempted to make an investment in both to cash in.

The post Lithium prices skyrocket: 2 UK shares I’d buy to capitalise  appeared first on The Twelfth Magpie.

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• The only FTSE 100 stock I own right now

Suraj Radhakrishnan has no position in any of the shares 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.

The demand for EVs (electronic vehicles) is growing at a rapid rate. In just a few years, it has gone from a niche product to a dominant force in the automobile industry. It is estimated that EV sales will outstrip traditional cars by 2040. And to capitalise on this projected growth, I have identified the top UK shares that could power the EV revolution as possible additions to my portfolio. These two companies address a very specific problem in the industry right now, making it the perfect time for me to invest.

Why am I bullish on the EV industry?

It is clear to me that EVs are the future of the automobile industry. The top automobile manufacturers in the world have adopted the tech and are busy developing all-electric cars. And further mainstream adoption is already underway. 

Sweden is consistently ranked as the most sustainable country in the world. And the nation just witnessed record-breaking EV sales last month. EVs made up 50.1% of all automobile sales in July 2022. This was a big jump from 2021’s 37.6%. In fact, globally, June saw the highest EV sales in history with 913,479 new registrations in June, which is 54% more than a year ago. This could take global sales past 10m units next year.

And as manufacturing steps up pace to meet the demand, battery metals like lithium and copper have become highly valuable. There are some emerging mining UK shares with a focus on soft battery metals. And I think investing in these companies could boost my growth portfolio returns over the next decade.

UK shares to buy in the EV sector

Elon Musk stated earlier this year that the lack of battery-grade lithium is a major roadblock in EV production today. And Atlantic Lithium (LSE:ALL) is a company looking to address this issue.

The company owns and operated the Ewooya lithium project in Ghana. While still under exploration, the mine is estimated to hold 30.1Mt of Lithium ore. And recent drillings have found deposits much closer to the surface, which reduces the time required to reach extraction. 

Copper is another metal that batteries require. And thanks to the demand, copper prices have gone up by 125% since 2020. Taseko Mines (LSE:TKO) is a copper producer in Canada that owns and operates the Gibraltar Mines. The company produces an average of 130m pounds of copper and 2.5m pounds of molybdenum per year.

While most UK shares in this space are still under exploration, Taseko is an established business. It had its best quarter ever this year, amassing US$38m in revenue, up 61% from Q1 2021.

However, there are some big risks to consider. Mining is a cash-intensive operation and profits are highly dependent on commodity prices. Prices of these metals are currently high but could fall rapidly when demand stabilises, cutting profits.

Atlantic Lithium is yet to reach production, making it highly speculative. But I think its tie-up with Piedmont Lithium, a Nasdaq-listed mining giant, is a huge plus. Piedmont has a deal with Tesla that could make Atlantic Lithium a direct supplier to the most-recognised EV brand in the world.

Both UK shares are well-backed and fit right into the EV supply chain. And this is why I am willing to invest a £1,000 lump sum in these two companies if market performance is positive across 2022. 

The post 2 top UK shares I’m buying for the EV revolution appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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Suraj Radhakrishnan has no position in any of the shares 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.

Lithium stocks could be set to rise in prominence in the coming years. Government initiatives to cut carbon emissions have led to a rise in demand for electric vehicles.

And lithium is a vital component in EV car batteries. There are a number of stocks related to the metal that could be primed to benefit. One I am considering for my holdings is Atlantic Lithium (LSE:ALL).

West Africa-focused

Atlantic Lithium is an Australian-based mining business that concentrates on assets in West Africa. It has a flagship mine in Ghana that is set to become Africa’s first lithium producing asset.

So what’s happening with the Atlantic share price currently? Well, shares are trading for 37p as I write. At this time last year, they were trading for 23p, which is a 60% rise over a 12-month period.

Lithium stocks have risks

Many of Atlantic’s assets are currently exploratory only. This means there is no guarantee that they will successfully mine lithium to sell. If Atlantic’s mines don’t bear fruit, I could see its performance and investor sentiment dwindle.

Another risk is that competition in the lithium mining sector is intensifying. Competition is natural but the issue I have with Atlantic is the fact there are better equipped businesses with bigger budgets and better infrastructure vying to dominate the market. One name that springs to mind is Rio Tinto, one of the largest mining businesses in the world.

Why I like Atlantic and my verdict

The general market for lithium is a positive point, in my opinion. Demand for it should only increase in the coming years with lots of different applications available. The most lucrative application should be for EV batteries. Demand for EVs has increased and there is a consensus that EV vehicles will outsell conventional cars in the coming years. In fact, many governments and manufacturers will only sell EVs in the future.

So what about Atlantic Lithium itself? Well, recent updates have been positive. In past months, Atlantic has invested significantly to upgrade the infrastructure at its flagship Ewooya mine. Furthermore, it is also increasing drilling capacity, which I see as a sign of its confidence in the mine producing lithium.

At current levels, the shares look dirt-cheap to me. I could be entering the potentially lucrative lithium stocks market at a rock-bottom price. My investment strategy has always been to buy and hold for the long term. If I added a small number of shares and the stock did not perform, I would not have lost much of my hard-earned cash.

Overall, I would add a small number of shares of Atlantic Lithium to my holdings. I believe it is a great entry point to access lithium stocks for my holdings. If I’m buying shares for 37p per share, I’m not worried about losing lots of money on the shares. However, based on the current lithium market, rising demand, and Atlantic’s confidence in its projects, I expect it to perform in the longer term and provide me with returns.

The post Lithium stocks could be set to soar! Here’s 1 I like appeared first on The Twelfth Magpie.

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• 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?

Jabran Khan 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.

In 2021, 6.4m electric cars were sold, which is 98% higher than in 2020. Global manufacturing powerhouses are stepping up battery production to keep up. And lithium prices are skyrocketing in China, where the demand is at an all-time high. The cost of battery-grade lithium is up over 20% since December and closing in on the US$40,000 per tonne mark. Does this demand mean that lithium shares will see exponential growth in 2022 as well?

The lithium market supply chain is not a straightforward one, where companies can simply increase supply to quell demand. Natural resources come with a multitude of governmental restrictions and lobbying which makes this tricky to call. Here I will look at the pros and cons of investing in lithium today and two UK lithium shares on my watchlist that could benefit.

Will the lithium demand cool down?

China controls a majority of the global lithium production and supply, which gives the nation a lot of pricing power. But the US and Europe recognise the need to establish other supply routes to prevent China from having a lithium monopoly. The Biden government released a National Blueprint for Lithium Batteries 2021-2030. This highlights ways in which the US can gain a competitive edge in the lithium market.

In fact, analysts are expecting a global lithium regulatory body in the coming years that will govern the global supply chain. All these developments could affect lithium prices in the future. But the estimates suggest that demand for lithium will remain high throughout 2022 given EV backorders and new model launches.  

But EV tech is growing fast, which means recycling methods and alternatives are not far behind. This puts lithium firmly in the price discovery phase right now. Also, a single mine can take 10 years to mature into expected production levels and seasoned analysts are unsure on how lithium supply can quickly grow to meet demand. The 548% jump in lithium carbonate price since 2020 could just be the start or a reactionary jump that could stabilise in the coming years.

EVs are here to stay

Despite making up just 4% of the automobile market in 2020, EVs have received governmental backing after COP 26 and engineers expect the tech to grow rapidly. And battery production has to match demand in the wider EV market.

What does this mean for UK lithium shares? Well, I think the growing demand for lithium as an opportunity for focused miners like Zinnwald Lithium. Its mining project in Germany has the capacity to produce and process 665,238 tonnes of lithium carbonate over 30 years. But mining efforts can be subject to strict regulations, highlighted by the Serbian government’s decision to revoke licenses from mining giant Rio Tinto’s $2.4bn lithium mine in the Jadar Valley.

This brings me to Ilika, a battery R&D company specialising in solid-state battery technology for a wide range of applications including EVs. This could replace liquid-based lithium batteries in EVs, which could improve battery recyclability. And the tech is widely applicable across multiple sectors.

But again, Ilika is still in its infancy and remains loss-making. The company raised £2m last year and could take two years to reach production. But the technology the company is working on could be very valuable, which is why its share price has jumped 322% since 2020. Both lithium shares could benefit from the demand, which is why I would consider a £1,000 investment if the EV market remains healthy. 

The post EV boom: should I invest in UK lithium shares amid explosive demand? appeared first on The Twelfth Magpie.

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• 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?

Suraj Radhakrishnan has no position in any of the shares 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.

But, and there’s a big but, the apparent price rise is due to a 1-for-5 share consolidation as part of the firm’s capital reorganisation plan.

This means, on 1 September, every five shares owned by a Hammerson investor were consolidated into one single share, reducing the number of shares available on the FTSE by five times. Consequently, the price of a single share increased fivefold, with a bit extra for increased demand.

The consolidation is necessary for Hammerson to raise more funds as part of its upcoming rights issue. Hammerson needs cash. And it’s flooding the FTSE with stock for sale to get it. This will cause its shares to drop in price.

Hence, the initial share consolidation before the dilution occurs.

How will the rights issue affect Hammerson’s share price?

The company is hoping to raise £825m from a £552m rights issue and by selling £274m of assets. Hammerson is bringing 153m shares to market, which will lower the current share price substantially. It may also mean Hammerson’s relegation from the FTSE 250. 

The firm is hoping this course of action will bring down its loan-to-value (LTV) ratio from 51% to 42%. This ratio compares the level of borrowing to the value of property owned by the firm and is important to debt rating agencies when analysing Hammerson’s commercial bonds. The higher the ratio, the more severe the debt ratings, and the more expensive Hammerson’s financing becomes.

However, the current challenges facing retailers means keeping this ratio lower will be difficult.

The future for Hammerson

Hammerson owns many large shopping centres, such as Birmingham’s Bull Ring, and Bicester Village. Many of these have been empty since the coronavirus-induced shutdown earlier this year. And with many people still shunning in-person shopping, the problems for retailers continue.  

It is the drop in rents for premises like these that has caused a revaluation of Hammerson’s assets, and with it, the increase in its LTV ratio. Unless the current climate changes for retailers, valuations will stay low, meaning Hammerson will have to keep its debt even lower.

In a climate where many firms are borrowing to survive, Hammerson will likely find this a struggle. Its efforts are certainly not helped by a 28% shortfall in rent for the first half of this year. On top of this, only 34% of the rent due to the company was collected by August.

However, management is hoping the rights issue and disposal will provide much-needed cash, and with it an improvement in the Hammerson share price. In addition, it also has other plans for the future, such as a new leasing model that could see turnover-based rent and more flexible leases.

But I think its hopes are dependent on finding a buyer for premises that rely on the future of bricks and mortar retail.

The post Tempted by the Hammerson share price? Here’s what you should know 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?

Rachael FitzGerald-Finch has no position in any of the shares 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.