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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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.

However, beating the index remains a challenge. Uncertain prospects across a number of industries mean that investors may wish to focus on investments with growth and/or income potential which is significantly stronger than that of the wider index. With that in mind, here is one dividend stock and one growth share which could be worth a closer look.

Improving outlook

Reporting on Friday was natural resources exploration and development company Metals Exploration (LSE: MTL). Its quarterly performance has been relatively upbeat, with 10,593 ounces of gold poured during the quarter. It was able to sell 11,338 ounces of gold during the quarter at an average realised price of $1,328 per ounce.

The company also announced that in the last week it has achieved and maintained 100% design throughput at its BIOX circuit. This could prove to be a major achievement for the business, and maintaining this level of throughput could lead to higher gold recoveries.

With Metals Exploration having the potential to deliver further operational progress, its future appears to be relatively bright. It may continue to benefit from a firmer gold price, with the prospect of higher inflation and volatility across global stock markets having the potential to increase demand for precious metals. As such, and while relatively risky, it could prove to be a sound long-term buy.

Dividend potential

Also offering strong total return potential over the medium term is fellow mining stock Anglo American (LSE: AAL). It has experienced a hugely challenging period in recent years, with commodity price falls causing its profitability to come under severe pressure. This caused dividends to be suspended in 2016, although they were reinstated in 2017 as the company’s financial outlook improved.

Contributing to a stronger financial performance has been the decision to restructure the business. It is now more streamlined following the disposal of a number of assets, and appears to have a more competitive position on costs versus sector peers.

With Anglo American forecast to yield as much as 4.9% in the current year, it appears to have a strong income outlook. Dividends are expected to be covered around three times by profit, which suggests that the company’s income prospects are sustainable. It also means that there is likely to be sufficient capital available to reinvest in the business for future growth.

While commodity prices could experience further volatility over the medium term, the prospects for the industry are generally bright. Since Anglo American trades on a price-to-earnings (P/E) ratio of around 11, it seems to offer a wide margin of safety at the present time.

The post One FTSE 100 dividend stock and one growth stock I’d buy with £1,000 today appeared first on The Twelfth Magpie.

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Peter Stephens 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.

On the flip side, though, the potential rewards from buying out-of-favour stocks can be significant. They are often trading with wide margins of safety included in their price, and investor sentiment can quickly change should announcements become more positive. With that in mind, could this 15%+ share price faller be worth buying right now?

Disappointing update

The company in question is natural resources exploration and development company, Metals Exploration (LSE: MTL). It announced on Tuesday that the Runruno gold mining operation has continued to experience difficulties in the BIOX (bacterial oxidation) circuit ramp-up. The company has reported encouraging results when the BIOX circuit ramped-up strongly to around 50% throughput. However, it has once again passivated with currently limited material being processed through the BIOX circuit.

Initial test work has suggested the presence of algae in the return process water has interfered with the performance of the BIOX bacteria. Engineering solutions have been identified to manage the presence of the algae and are currently being implemented. Clearly, there is no guarantee that the issues experienced will be solved within the near term, and this could lead to further pressure on the company’s share price.

The company also reported that it is in advanced talks with its major shareholders to try to procure mezzanine finance which would be sufficient to repay the $12m bridging loans it currently has, as well as meet working capital requirements.

Given the wide range of stocks with bright futures in the resources sector, Metals Exploration may be a stock to watch, rather than buy, at the present time. It appears to have a highly uncertain future which could lead to a further decline in investor sentiment. Therefore, even though it is now much cheaper than it has been of late, it may be a stock to avoid for the time being.

Difficult trading conditions

Also falling heavily after releasing news on Tuesday was Action Hotels (LSE: AHCG). Its shares fell by as much as 10% after it released results for the first half of the year. They showed growth in revenue of 10%, while gross profit moved 6% higher. The company benefitted from having a 13% increase in operating rooms versus the same period of the prior year. Its occupancy rate at its mature hotels, however, fell by 2% to 72.7%.

Trading conditions remain tough in certain markets in the Middle East, although the company has confirmed that it is on track to meet market expectations for the full year. It has conducted a review of its pipeline and has decided to delay the openings of two of its leasehold hotels in Saudi Arabia. This is designed to efficiently manage its cash and debt position, and only minimally impacts on its 2017 forecasts.

With a sound growth strategy and strong performance in Australia and the Middle East, despite mixed conditions, Action Hotels could recover from its recent share price fall. It remains a relatively risky stock which may have an uncertain future. However, for less risk-averse investors it could be worth a closer look.

The post Is this value small-cap stock a falling knife to catch after dropping 15%+ today? appeared first on The Twelfth Magpie.

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Peter Stephens does not own shares in any of the companies 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.

Bank Bankruptcy 

Ferrexpo issued an update today on its “transactional bank in Ukraine, Bank Finance and Credit JSC, a related party ultimately controlled by Ferrexpo’s largest shareholder Kostyantin Zhevago“.

It’s very bad. 

“Following the close of business on the 17^th of September 2015, the National Bank of Ukraine made an announcement on its website stating that it had adopted a decision to declare Bank F&C insolvent.”  

But just how bad is the situation? 

Cash

“As of the 16 September 2015, the group’s total cash balance was approximately $280m after the payment of the interim dividend. Of this cash balance, approximately $174m was held at Bank F&C with the remainder held offshore.”

Its operations “are not currently affected,” the miner added, and the board is assessing the situation and will update the market as necessary.

A supplier of iron ore pellets to the steel industry, Ferrexpo had a net debt position of $653m in the first half (1H) of the year ending 30 June, for a net leverage of 1.9x (1.2x on 31 December 2014). Revenues have plunged and operating cash flow have declined fast in recent months, and these trends are likely to persist, in my view.

Even if we assume that its level of adjusted operating cash flow (Ebitda) in the second half will be in line with 1H at $176m, then its net leverage could easily soar to between 2.4x and 2.8x, based on its cash balances, according to my calculations.

Also noteworthy is that the group’s net leverage must stay within “net debt to Ebitda covenant of 3x“, according to the agreement with its lenders, and this could be a real problem.

A dividend cut is a base-case scenario right now, in my view, yet more bad news could be around the corner. Incidentally, Citigroup raised its price target from 38p to 58p on Thursday, but the stock today plunged from 59p to 39p. The analysts, who have a sell recommendation, could not predict what was about to hit Ferrexpo, and I’d agree that its valuation wasn’t incredible high — yet its price-to-book value already testified to a very risky investment. 

Placing 

Elsewhere in the resources space, Metals Exploration announced today that it had “obtained commitments to raise US$5 million via the issue of a total of 108m new ordinary shares (…) at a price of 3 pence per new ordinary share, from certain existing shareholders.“

It stock traded around 3.3p around midday. 

A much smaller entity with a market cap of less than £50m, and whose stocks trade on thin volumes, it kindly reminds us what kind of risk we face investing in tiny explorers, and why diversification rules!

Moreover, the group said that “is in final discussions to receive commitments from certain shareholders to raise up to a further $5m for working capital and contingency purposes by way of the creation and issue of debt securities up to a maximum nominal amount of $5m.” 

The post Why Ferrexpo Plc & Metals Exploration Plc Are Plummeting Today appeared first on The Twelfth Magpie.

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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.