2020 was a tough year for UK share investors as the Covid-19 crisis hit town. It looks like 2021 will be another testing time for stock pickers as the public health crisis rolls on. Even with mass vaccine rollouts, the economic recovery could splutter should the pandemic battle hit unexpected obstacles. Shareholder returns could well disappoint again following last year’s broad washout.
This doesn’t mean that I think stock pickers should pull up the drawbridge, however. There are still plenty of UK shares that could thrive despite another tough year for the global economy. For example, I consider Bushveld Minerals Limited (LSE: BMN) to be a great stock for 2021 and beyond. The business is a vertically-integrated vanadium producer that I think could generate huge shareholder returns as demand for vanadium-based energy storage systems takes off.
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The AIM company’s operations are split into two. Bushveld Vanadium pulls the element out of the South African ground and then processes it. Then Bushveld Energy manufactures energy storage components with the stuff and helps energy producers with project development.
The outlook for the Vanadium Redox Flow Batteries (or VRFB) market is compelling in my opinion as renewable energy like wind and solar takes off. The International Energy Agency reckons that green energy sources like these will account for 95% of the net increase in global power capacity through to the middle of the decade.
News this week illustrates the huge profits potential for UK shares like Bushveld Minerals. CEP Energy announced it was building the world’s largest mega-scale battery in New South Wales. With a capacity of 1,200 megawatts and costing a whopping $2.4bn, it is the latest in a line of such colossal investments planned in Australia alone. The biggest battery today in South Australia was built in 2017 and has a capacity of a (by comparison) piddly 150 megawatts.
I’d bet on this UK share!
Bushveld Minerals isn’t without its risks of course. Like any mining company it carries huge operational risks. Disappointing payloads and exploration results can put a serious dent in future revenues and create large unexpected costs.
It is also at the mercy of wider economic conditions, which could damage investment in green energy projects and associated infrastructure. A weak economy could also damage Bushveld’s top line as broader construction activity would also likely suffer. Vanadium is a key ingredient in steel because of its strengthening qualities.
Today the UK mining share trades on a forward price-to-earnings (P/E) ratio of 14.1 times. It’s a figure I consider to be hugely attractive given the pace at which renewable energy is taking off. And it’s also an attractive figure given Bushveld’s plans to ramp up production to capitalise on this growing market. The company aims to produce 8,400 tonnes of vanadium over the medium term through a blend of organic investment and brownfield acquisitions. This is a considerable lift on the 3,631 tonnes Bushveld Minerals produced in 2020.