What caused this 80% increase? And should I be adding it to my portfolio? Let’s take a look.

A mining stock for the future

The company is engaged in vanadium mining – a precious metal that is a critical ingredient for large electrical batteries. BMN can be broken down into two segments. The first oversees the extraction of vanadium from the ground in South Africa, which hosts the world’s largest high-grade primary deposits of the metal.

Once processed, its second division steps in. It focuses on manufacturing, developing, and promoting the role of vanadium flow batteries within the energy sector. As a result, this makes BMN a vertically integrated company with complete control over its own supply chain.

The pandemic has wreaked havoc on the mining industry worldwide. With many sites being shut down and plenty of expenses to pay, the BMN share price crashed in March last year, falling by nearly 50% since the start of 2020. However, following its Q3 results in November, the stock began to recover rapidly.

Why? Because its operations returned to nearly pre-pandemic levels, while overall production expanded significantly. Meanwhile, vanadium demand in China continues to rise, boosting the price of the metal. Overall, total vanadium sales for the first nine months increased by 74% compared to 2019. Needless to say, this sounds like a thriving business. But as always, there are some risks to consider.

Penny stocks can be risky

Due to the limited number of vanadium flow battery manufacturers currently in business, BMN has some pricing power when selling its products. However, because manufacturing costs are still dependent on fluctuating vanadium prices, the extent of this power is questionable.

Currently, the rising demand and limited supply of the metal are causing prices to increase. This is obviously fantastic news for the BMN share price. But with more vanadium mining companies expanding their production capabilities, the metal’s value may soon stabilise or even reverse if the market becomes saturated.

Another risk to consider is the fact that the firm operates in South Africa. This means expenses are paid using South African rand rather than the British pound. As a result, the company is exposed to fluctuating foreign exchange rates that can significantly impact the bottom line.

BMN share price: time to buy?

Vanadium flow batteries make up an interesting technology that currently appears to be the best energy storage solution for renewable electrical infrastructures. The UK has even begun implementing them into the national grid as it seeks to revamp its energy sector by 2030.

Yet despite this rising demand, the battery industry still has a relatively small number of active manufacturing businesses. To me, this makes the company look like an attractive opportunity to buy-in early. And with a P/E ratio of 10, the BMN share price looks undervalued to me, considering the growth potential that lies before it. 

Therefore it’s definitely a penny stock that I would consider adding to my portfolio today.

The post Penny stocks: can the BMN share price climb higher? 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 Bushveld 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.

A leading vanadium producer

FAR is a vanadium producer – a rare metal that’s a critical component for energy storage devices such as batteries. The company has only been public since 2019 and has continued to trade well below its IPO price of 64p. It was 9.5p a year ago. Even after the most recent surge, the FAR share price is still only trading at 25p. But is that all about to change?

A few days ago, the firm provided an operational update for investors. It announced the successful completion of a second roasting oven within its vanadium plant, boosting its processing capacity by 80 tonnes per month. That’s a 500% increase compared to 2019.

Unfortunately, the business was heavily disrupted by Covid-19. And its processing plant was taken off-line for a cumulative total of five months in 2020. Yet despite these interruptions, overall production for the year grew by 56% to 237 tonnes of vanadium.

The management team hasn’t provided any guidance for full-year revenue. However, looking at the current price of vanadium today (which is around $18,000/tonne), I have estimated it will be somewhere in the region of $4.2m. That’s a 130% increase on 2019’s $1.8m. Furthermore, this revenue figure doesn’t include the additional 400 tonnes that could have been achieved had there not been any interruptions by the pandemic.

Needless to say, 2021 could be an explosive year for the FAR share price.

There are always risks

The vaccine rollout appears to be progressing well in the UK. However, in countries like Kazakhstan, where FAR operates, progress is much slower. The country began distributing vaccines in early February and expects to vaccinate six million people by the end of the year. However, that only represents around 25% of the population. Consequently, I believe the business will continue to suffer from operational disruptions throughout 2021 and potentially even 2022.

Another risk to consider is the fact that the company has no pricing power. It sells vanadium to its customers at a price set by the market. Looking back at historical performance, the company reported a record $4.2m of revenue in 2018. However, in the following year, revenue dropped to $1.84m, taking the FAR share price down with it.

What happened? Production continued as normal, but the price of vanadium collapsed by 75%. And with no other assets in its portfolio, total revenue took a big hit. While vanadium prices might be slowly rising today, they can always drop again in the future if demand falls or the industry becomes over-supplied.

The FAR Share price: time to buy?

The demand for vanadium is currently on the rise as many countries, including the UK, begin to upgrade their energy infrastructure. Part of the government’s Green Industrial Revolution involves installing many energy storage farms that use vanadium-flow batteries.

This presents a fantastic opportunity for FAR and its share price to grow in the future. However, its current market capitalisation of £97m looks like it’s being propped up by significant investor expectations that may not be fulfilled. Therefore I’m not adding the stock to my portfolio today. But I will be keeping a close eye on it.

The post Why is the FAR share price surging and 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 Ferro Alloy Resources. 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.

Greatland Gold’s blazing trailing 12-month performance leaves the FTSE AIM in its wake (click chart to enlarge): 

Credit: London Stock Exchange

Bushveld Minerals trails the index in this regard. However, excluding its 2018–19 outlier year, the vanadium miner is trading at prices it’s not seen since 2012.

Every investor wants to buy stocks that perform above the average over time. Indeed, growth stocks such as these miners could be one way to do exactly that.

But, can these two mining stocks be expected to maintain this performance in the future?

Greatland Gold

One person who believes in Greatland Gold’s prospects is its CEO, Gervaise Heddle. Back in March, Heddle bought enough shares in the gold miner to bring his ownership stake to 1.5%.

Some investors believe that putting all your eggs in one basket is a good way to make a fortune. Judging by the optimal timing of his share purchase, this could be true for Heddle, who has intimate knowledge of Greatland’s business.

Not having that intimate knowledge, I’d personally be more hesitant to make a bulk purchase in Greatland, especially after the recent share price hike. Currently trading at around 12.5p, Greatland Gold has no price to earnings (P/E) ratio. This is because it hasn’t reported any previous earnings or any profits with which to calculate a ratio. The current share price is based purely on future optimism.

However, the future could be gold. Greatland’s Havieron gold-copper discovery in Western Australia looks promising. And on Monday, the firm announced a series of agreements, which are now in place, relating to the exploration of the region with partner organisations. These will help with obtaining a mining lease to enable Greatland to begin mining operations. But it will still be a while before the firm begins revenue generation from any gold found.

Bushveld Minerals 

Bushveld Minerals is another stock where the majority broker consensus is to buy. The firm produces Nitrovan vanadium, an additive for high-strength, low-alloy steel that can lower steel production costs.

The Bushveld share price is currently reflective of the trade-off between low vanadium prices and good business management. The former reduced revenue while the latter produced the lower overheads that compensated for that drop.

Although the effects of the Covid-19 pandemic are concerning for the firm, its Vametco mine’s first-quarter vanadium production rose despite the lockdown. Indeed, many analysts are expecting an increase in production for 2020.

As for Bushveld’s future, the recent three-year wage agreement with Vametco’s workers gives stability. Moreover, the firm hopes that the recent addition of the Vanchem plant will turn Bushveld Minerals into one of the most significant low-cost, and most vertically integrated, miners.  

I’m not convinced a portfolio of growth stocks will yield a better return than a more balanced one. It also comes with greater risk, as does gold mining. Greatland Gold’s current price is too speculative for me as its future is too uncertain. But, I am tempted by Bushveld as a speculative purchase in an otherwise balanced portfolio.

The post Greatland Gold and Bushveld Minerals. Could this be the future? 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.