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.

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?

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.

Earnings results are a great way for investors to judge a company. They’re used to determine whether companies are on track with their initial guidance. These results can often radically move share prices in either direction, depending on the numbers reported. So, here’s an earnings preview for three FTSE firms reporting results this week.

The usual approach is to compare firms’ new numbers to those from prior years. But certain revenue figures may have been impacted by the pandemic, so it’s important to get context from pre-pandemic levels too. It can also be useful to consider whether a company can perform better than its previous year’s numbers, or if it can beat analysts’ annual forecasts. Analysts in the UK don’t always publish earnings previews for quarterly or half-year periods, but given their popularity, the shares covered below are exceptions. All of them have financial years that end in December.

Rio Tinto (H1 Earnings)

Rio Tinto (LSE: RIO) is an Anglo-Australian multinational company. It’s the world’s second-largest metals and mining corporation. The FTSE 100 firm’s main export is iron ore. Rio is set to reveal its H1 numbers for its six months performance ending June on 27 July.

Its earnings preview seems to indicate a slowdown in both its top and bottom lines. This is most likely due to the perpetual lockdowns in China that have been limiting construction activity. China is the group’s biggest customer, hence the gloomy forecasts. That being said, a sudden change in health policy in China could see Rio edge closer to its FY21 figures and could spell a healthy jump in its stock.

Barclays (Q2 Trading Update)

Barclays (LSE: BARC) is one of the UK’s biggest banks. It operates in many countries across the globe, and also operates an investment banking division. The bank is expected to disclose its Q2 figures for its three-month performance ending June on 28 July.

Analysts covering Barclays are expecting the bank to improve on its total income marginally this half, on a year-on-year basis. However, its most recent earnings per share estimate has been downgraded from 7.6p in the last week. The increase to its top line is most likely due to the effects of higher interest rates. Nonetheless, a decrease in investment banking activity from the current bear market is going to cause its bottom line to suffer. But if the dual-listed stock surprises investors with better than expected figures, a rally could be a possibility.

NatWest (H1 Earnings)

NatWest (LSE: NWG) is another UK bank reporting results this week. The group operates a wide variety of banking brands, offering personal and business banking, private banking, insurance, and corporate finance. It’s scheduled to unveil its H1 earnings for its six months performance ending June on 29 July.

Just as is the case with its sector peer, analysts are expecting the same trend. Alongside that, investors in its shares and the wider stock market will be paying attention to its remediation figure and number of late-stage loans to determine whether the UK is heading for a recession. The former is essentially the amount of money allocated as a buffer to cover potential defaults from customers.

The post Earnings preview: Rio Tinto, Barclays, NatWest appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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.

Income stocks are a great way to protect my portfolio against rising inflation. With it currently sitting at over 9% in the UK for May, the situation across the pond isn’t faring much better. Yesterday the US saw rates spike to a 40-year high.

With rising inflation meaning volatility is running rife, I’m on the lookout for stocks with healthy dividend yields to put my money to work. Here are two I’ve got my eye on.

Lloyds

My first pick is FTSE 100 constituent Lloyds (LSE: LLOY).

The stock’s current dividend yield is an attractive 4.77%, which sits firmly above the FTSE 100 average. This isn’t inflation-beating, but it’s most certainly more rewarding than keeping my cash in the bank.

There are other reasons to pick Lloyds too. I like the bank’s low valuation. With a price-to-earnings (P/E) ratio of 5.6, this falls well within the ‘value’ benchmark of 10. And compared to its peers, Lloyds also looks cheap. For example, HSBC currently trades on a P/E of 11.

Hiking interest rates could see the firm suffer if its customers default on their loans. Yet on the other hand, higher rates will also allow Lloyds to charge borrowers more when lending. Interest rates were recently set at 1.25%. And with another review scheduled for August, there have been hints of a 0.5% hike. It could benefit from this.

Lloyds is also the UK’s largest mortgage lender. With loans for properties accounting for over two-thirds of its lending, the business may see a slowdown in growth for the foreseeable future as the booming housing market hits the brakes. However, I still think it would be a strong addition to my portfolio.

Rio Tinto

I also like the look of Rio Tinto (LSE: RIO). With an impressive dividend yield of 12.1%, this trumps that of Lloyds. It also beats the UK inflation rate, offsetting the possibility of my cash eroding.

It’s the second-largest mining company in the world, and it currently trades for around £47 per share.

Just like Lloyds, the stock looks cheap. It has a 4.4 P/E, considerably lesser than that of competitor Glencore (13.3).

On top of this, it also had £1.6bn of net cash, according to its 2021 full-year report, so the firm is in a healthy financial position to pay dividends.

It will also benefit from the large investments we’re set to see in the renewable energy sector. Electric vehicles and their charging infrastructure, along with renewable energy power plants, will see a rise in the long-term demand for iron. The business has also been increasing its stake in mining lithium – including the recent purchase of Rincon lithium project.

It does, however, faces headwinds, as ongoing Covid concerns continue to plague China. Demand for iron ore may wane in the months ahead. China accounts for around half of global steel output, and iron ore is a key material, meaning Rio Tinto may suffer.

However, with its low valuation and strong long-term outlook, I’d buy the stock today.

The post 2 income stocks I’d buy today! appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
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• Here’s how much I think Lloyds shares will be worth by the end of 2027
• How to target a tax-free passive income of £1,275 a month on top of your State Pension

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. 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.

Going b(A)ck to (B)asi(C)s

Google’s parent company, Alphabet (NASDAQ: GOOGL) is one blue-chip that cannot be ignored. The conglomerate has a track record of beating the S&P 500, and produces stellar returns with a 30.2% return on equity. Alphabet earns the bulk of its revenue from advertising and search.

Its cloud segment is also starting to gain momentum as it races towards profitability. Given the firm’s dominance in these rather monopolistic industries, I believe Alphabet has what it takes to continue growing while holding a defensive position in my portfolio.

The blue-chip boasts an extraordinary balance sheet with close to zero debt and huge sums of cash. Its profit margins are that of a mining company, currently standing at close to 30%. With such an excellent track record and a forward price-to-earnings (P/E) ratio of 22, I’ll definitely be buying more shares. Although this evening’s earnings report could disappoint, I’m confident in Alphabet’s ability to generate long-term returns.

Dune forget Dunelm

One of Britain’s biggest homeware retailers, Dunelm (LSE: DNLM) has been largely overlooked since Covid restrictions were lifted. Many thought that the stock would dip as consumers opt to spend money outside of their homes. However, the blue-chip continues to impress. Its most recent earnings report showed a a 25% increase in its earnings, and total sales were up 10.6% year over year.

Even though recent GDP and retail sales numbers were lacklustre, Dunelm remains strongly positioned. The fine print within the retail sales figures showed that household goods stores saw a 2.6% increase in sales. With Dunelm’s 8.5% increase in active customer growth to go with that, the firm has strong pricing power to battle the inflationary storm. A forward P/E ratio of 13 and a decent dividend yield of 3% makes this stock an intriguing one to look out for, once the next set of retail sales data is released.

A saucy dip for this blue-chip

Rio Tinto (LSE: RIO) is one of the world’s largest iron ore miners. Its share price has taken a tumble due to recent disappointing Q1 production numbers and lockdowns in China. While I do expect the share price to continue dipping, I reckon there may be a buying opportunity sometime in May and beyond.

Mining companies are notorious for, “Using windfalls to dig more materials out of the ground. And the opposite is true when prices hit rock bottom. Production is reigned in and cash is conserved. These are the supply forces that self-regulate commodity cycles”, as FreeTrade analyst Paul Allison states.

Therefore, the blue-chip will eventually have an influx of demand for iron again, driving iron prices back up. This should happen once China eases its Covid restrictions. Buying shares before this occurs could possibly see my portfolio getting a bumper gain. Moreover, a 10% dividend yield could see me earning a little bit of passive income while waiting for iron ore prices to climb.

The post 3 blue-chip shares I’d buy in May appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). 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.

Mining its business

When in times of uncertainty, it always help when companies have solid fundamentals. Thankfully, Ferrexpo’s financials look great. With a 0.8% debt-to-equity ratio, decent levels of cash and equivalents, as well as heavy assets, I believe Ferrexpo is in a good financial position to withstand the current economic and political hardships.

Furthermore, the firm boasts an extraordinary profit margin of 46% in its most recent earnings report, showing good quality earnings. This allows the company to pay a generous annual dividend of £0.43 per share. Nonetheless, I attribute this to the spike in iron ore prices in recent times.

Ferrexpo troubles

Despite the iron ore exporter’s solid fundamentals, I see its revenue stream remaining choppy in the short-to-medium term. There are several reasons for this. I worry that Ferrexpo might not be able to continue its mining operations at optimal levels. This would limit potential revenue, as its latest trading update cited an 11% decline in production from the previous quarter. Additionally, it faces logistical issues with almost half of its products sitting in inventory. This is due to the closure of the Pivdennyi port in south west Ukraine. Having said that, management is “reviewing alternative methods of delivering products to seaborne markets.”

Until these logistical issues can be resolved, Ferrexpo’s outlook remains uncertain. I expect revenue to take a hit for the foreseeable future. This could in turn affect the firm’s future dividend payments. On top of that, Ferrexpo normally declares a dividend in March, but it is yet to do so this year. Hence, dividend investors are steering clear for now, despite its attractive yield.

Ironing things out

There were silver linings from its latest trading update though. Firstly, Ferrexpo is still running its operations, provided that it’s safe to do so. This comes as a bit of a relief to me because its operations are located outside the main conflict zones. Secondly, the delivery of pellets to customers in Europe has also resumed via rail and barge. These customers have historically represented approximately 50% of its revenue. This should give investors some hope that the dividend giant can resume payments soon. Finally, with iron ore prices currently trading at $145 a tonne, this should push the company’s margins higher.

Nevertheless, I think this cheap dividend stock still remains a high risk one to invest in. Although the firm has historically declared a dividend in April, I do not see it happening this time due to the current climate. So with all that in mind, I will not be buying Ferrexpo shares for my portfolio.

The post Can this cheap dividend stock help me beat inflation with an 18% yield? 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?

John Choong has no position in any of the shares mentioned at the time of writing. 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.

Is Polymetal a bargain compared to its competitors or are there better options out there? Let’s explore.

Will FTSE 100 mining stocks go higher?

Three Footsie mining stocks on my watchlist have made flying starts to 2022.

The Anglo American (LSE: AAL) share price climbed 34% following a $12bn increase in operating profit and a $1.7bn net debt reduction. Over a third of the miner’s 2021 EBITDA came from platinum group metals. Looking ahead, the company should prove resilient to geopolitical uncertainty. Anglo American, which is up 33% in a year, operates on six continents and has no Russian presence, unlike Polymetal.

Antofagasta (LSE: ANTO) is also racing ahead of the Polymetal share price, rising 22% this year (but down 10% over 12 months). As copper mining is the lifeblood of this Chilean multi-national’s business, shareholders will be encouraged by Goldman Sachs‘ 12-month copper price target of $13,000 per tonne. Antofagasta can build on a robust financial position after earnings per share rocketed by $87.80 last year.

Rio Tinto (LSE: RIO) stock completes the trio — it’s up 25% in 2022, but only up 4% in a year. Iron ore production accounts for almost 78% of its underlying earnings. In 2021, Rio Tinto generated +60% net cash and ordinary dividends per share rose 71%. Moreover, China’s iron ore imports remain stable in 2022, despite its economic slowdown. This is good news for the Rio Tinto share price.

With global interest rates rising, metal prices and mining stocks may fall so all of these shares come with risks. However, I believe the metals bull market could just be beginning as production seems unlikely to meet demand. For me, the outlook remains positive while supply side issues persist.

Will the Polymetal share price go lower?

Polymetal’s focus is precious metals, particularly gold and silver. It has operations in Russia and Kazakhstan. Although it consistently increased production over five years, the share price has been hurt by liquidity troubles caused by sanctions on Russian banks.

In further worrying signs, Polymetal postponed its decision on its 2021 final dividend payment. And Deloitte recently resigned as its auditor, threatening its London Stock Exchange listing.

Arguably, the stock’s substantial decline and a dirt cheap price-to-cash-flow ratio of 1.4 mean the risks it faces are priced in. Nascent plans to separate its Kazakh assets from the rest of the business lifted the Polymetal share price somewhat in recent days.

Nonetheless, I’m pessimistic about Polymetal shares. Headquartered in Cyprus, it avoided direct sanctions like those levied on Roman Abramovich’s Evraz. In a rapidly evolving situation, this could change.

The mining shares I’d buy now

Exposure to metals plays an important role in my diversified portfolio. I’m impressed by all three FTSE 100 stocks on my watchlist. They have strong balance sheets and are collectively spread across different geographies and commodities. I’d divide any spare cash between them.

By contrast, I see potential for further declines in the Polymetal share price. It’s simply too risky for me to buy at present, so I’m looking elsewhere for a solid gold miner.

The post Will FTSE 100 miners outshine the Polymetal share price in 2022? 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?

Charlie Carman 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.

What caused this impressive growth? And should I be adding this company to my portfolio?

The rising Anglo American share price

With many mining sites being temporarily shut down in the early days of the pandemic, a subsequent shortage of metals began. This is what appears to have triggered the start of the rising commodity prices. As manufacturing businesses slowly reopened their factories, demand built up. However, it quickly started accelerating as many countries worldwide initiated new infrastructure projects, especially within the energy sector.

The limited supply combined with the rising demand naturally led to resource prices going up. This is fantastic news for Anglo American, which is a leading producer of copper, iron and platinum. And so it was able to achieve some pretty impressive results, in my opinion. And that was despite the fact the firm suffered a severe plant outage in its platinum production division.

Looking at the full-year results for 2020, total revenue increased by $1bn, and underlying profits remained relatively flat. These are hardly groundbreaking results. But considering the reduced mining and production volumes, they’re not bad. At least, I think so. Since then, the business has begun executing plans to demerge from its South African coal operations and acquired Sirius Minerals to further diversify its portfolio.

With operations now returning to pre-pandemic levels and metal demand on the rise, I believe the Anglo American and its share price can continue to thrive over the long term. And it seems the management team agrees as they recently increased the shareholder dividends.

Risks to consider

Rising commodity prices have undoubtedly been beneficial to the Anglo American share price. However, the value of metals can be volatile, as shown by the firm’s fluctuating level of profitability. Currently, the demand for metals like Iron and copper far exceeds the available supply. But this will not always be the case. With more mining companies returning to full operational capacity and additional mining sites being established, the market may eventually become saturated.

As a consequence, metal prices could very quickly start falling again. And since the costs of mining remain relatively fixed, the level of Anglo American’s profitability could be significantly impacted.

The bottom line

With the world shifting towards electric vehicles and renewable energy, I believe the need for metals like platinum and copper isn’t going to disappear any time soon. Combining this with Anglo American’s diverse portfolio of materials makes me think the share price can continue to climb higher.

Therefore, while there are some substantial risks, I would consider adding the business to my portfolio.

The post Will the Anglo American share price keep rising in 2021? 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?

Zaven Boyrazian does not own shares in Anglo American. 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 can it climb higher? And should I be adding this business to my portfolio?

The rising Glencore share price

The mining industry was heavily impacted by Covid-19. National lockdowns led to many mining sites being temporarily shut down. And even today, there remains plenty that has yet to return to full operating capacity.

However, this lack of supply created a shortage in several commodities that has sent the prices of metals like copper and nickel surging. And Glencore is a leading provider of these, as well as many other metals.

Looking at the most recent report, the effects of Covid-19 are pretty clear. Top-line revenue fell by 34% as a result of reduced mining volumes. However, due to the previously mentioned rising commodity prices, underlying profits remained flat.

With mining volumes back on the rise and demand for precious metals still going up, Glencore and its share price look to me like they can continue growing in 2021 and beyond. The management team appears to think that, given the recent return of shareholder dividends.

Some risks to consider

Building and operating a mining site is an expensive endeavour with little room for cost-cutting. So the profitability of Glencore, as with other mining businesses, is ultimately determined by fluctuating commodity prices. This lack of pricing power adds considerable risk.

The recent increase in demand has been beneficial. However, if it falls or the supply becomes saturated, prices will once again drop, taking Glencore with it. This is actually why the company’s net income has never been particularly stable in comparison to its revenue.

Beyond this financial risk, the business also has to comply with regulations surrounding mining activity. These rules are put in place to protect the safety of workers as well as the environment. But, Glencore is an international business. It has to comply with different regulations across multiple countries. While I think it’s unlikely, suppose the firm were to breach any of these rules. In that case, it’s likely to suffer severe legal penalties and potentially lose the right to bid on new locations within the region.

The bottom line

Over the past couple of decades, Glencore has become one of the biggest resource businesses in the world. And it spent that time building up a diverse portfolio of assets.

With the world shifting towards green energy technology, I believe that the rising demand for precious metals won’t be slowing down in the near future. Combining this with Glencore’s proven business model makes me think that the share price can continue to rise. And therefore, I would consider adding it to my portfolio.

The post Can the Glencore share price keep climbing? appeared first on The Twelfth Magpie.

More reading

• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
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• Up over 100%, are these FTSE 100 names still among the top stocks to buy?
• Up 103% with a P/E of 261 — is this FTSE 100 stock still worth buying?

Zaven Boyrazian does not own shares in Glencore. 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.

Needless to say, that’s a fairly extraordinary level of growth, especially since the stock was suspended from being publicly traded for nearly six months. What happened? And should I be considering this stock for my portfolio? 

The rise of the EUA share price

EUA is a mining company that focuses on extracting various metals, including palladium, platinum and iridium. While it has multiple sites in its portfolio, the company is still very much in its infancy. And so the total revenue generation is quite limited. For example, in 2019, it only generated £1.13m in revenue. And that was before the pandemic began disrupting the industry.

So why has the share price started surging? Following a request for more information regarding its relationship with the Chinese investment bank CITIC, the shares of EUA were suspended at 7.2p. After a few months, this relationship was clarified. And in July, the shares began trading again at a price of 12.8p that continued to climb throughout the rest of 2020.

It turns out the company is looking to sell itself. And CITIC and UBS are helping to make that a reality. Since the total value of the resources at its existing mining operations is estimated to be around £1.5bn, the prospect of a sale sent the EUA share price flying.

Taking a step back

The idea of receiving a £1.5bn payday certainly sounds enticing, especially since the current market capitalisation is around £760m. However, there is limited information currently available surrounding this deal. What’s more, it may never happen.

In January 2021, the management team provided an update on the progress (or lack thereof) being made regarding the potential sale of the business’s assets. Despite being approached by “a wide range of parties”, no binding deals have been signed. And given the industry is still in the process of recovering from the disruptions of the pandemic, it could be some time before any formal offer is made.

The bottom line

To me, it looks like the EUA share price is being propped up by the prospect of a future sale, the value of which remains unknown. Should this fail to materialise, the share price could begin to decline rapidly over the short term.

However, the company’s lead asset — the West Kytlim platinum mine — is now fully operational. In addition, its new flagship project — Monchetundra — is set to become a world-class open-pit palladium mine. In my eyes, it looks like the underlying business is performing well. Combining this excellent progress with the rising demand for these metals for use in electric vehicles and renewable energy infrastructure, EUA does sound like a promising mining company.

However, the valuation of the stock is simply too high for my tastes. And so, the firm is staying on my watch list for now.

The post The EUA share price increased 600% in 2020. Should I buy now? 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?

Zaven Boyrazian does not own shares in Eurasia Mining. 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.

So why did the share price surge? Will it continue to do so? And should I be adding the stock to my growth portfolio? Let’s take a look.

A mining company in distress?

As previously stated, Premier African Minerals is a mining business. It digs up tungsten from the ground. But in 2019 that’s not what happened. Due to a complication with Zimbabwe’s National Indigenisation and Economic Empowerment Fund (NIEEF), PREM’s tungsten mine became fully impaired. In other words, it’s currently non-operational, and the management team said it will remain that way until the matter with the NIEEF is resolved.

Consequently, the business generated no revenue in 2019, and the mine is still non-functional today. Needless to say, this isn’t exactly good news. So why did the share price suddenly start climbing?

It seems that PREM finally caught a break and was granted a three-year Exclusive Prospecting Order (EPO) in Zimbabwe. This agreement enables the firm to begin exploring a large area of land that is expected to contain up to 80 million tonnes of lithium oxide — an essential ingredient for electric vehicle batteries.

Given the limited supply and rising demand for the metal, this presents a fantastic opportunity for PREM and its share price. But let’s not get ahead of ourselves here.

The risks are high

The EPO is an exploration license only. Its purpose is to allow mining companies to find suitable sites to start digging in the future. As it stands, PREM doesn’t have any active mines, and its new lithium sites will take a good couple of years before becoming active.

During that time, many things can go wrong. Its tungsten operation (or lack thereof) is proof of that. Developing new mining sites and maintaining existing ones is an expensive process. PREM is not currently generating any revenue and has less than $40,000 of cash on its balance sheet. So the business is entirely dependent on outside funding that may not be available in the future.

What’s more, the mining industry worldwide is subject to numerous regulations designed to protect workers’ safety, the environment, and local economies. However, Zimbabwe is not the most politically stable country, exposing PREM to the risk of sudden regulatory change that may significantly impact its share price.

PREM share price: time to buy?

Securing the EPO is undoubtedly a good development for the firm. It most definitely adds more value to the business, and over the long term, could be a catalyst for the share price to keep on climbing.

But with no revenue, plenty of expenses, and a long road ahead to becoming profitable, the risks are exceptionally high, in my opinion.  Personally, I think the rise in PREM’s share price is a bit premature. Therefore, I won’t be adding the stock to my portfolio today.

The post Will the PREM share price keep climbing? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Premier African 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.