Investors find it hard to resist high-flying growth stocks, which explains the recent excitement over the Kodal Minerals (LSE: KOD) share price.
The West Africa-focused lithium miner was bumping around the 0.29p mark for ages, before jumping to 0.42p in January then spiking to 0.86p in April. Suddenly, everybody was talking about Kodal, judging by the message boards and Google traffic.
While it’s a long way from hitting Tesla levels of interest, there are similar forces at play here. Every investor dreams of buying into a fantastic growth opportunity at an early stage, and generating what could be a transformative amount of wealth, if they’re lucky.
There’s an opportunity here
Kodal isn’t the only stock getting investors worked up. Chinese electric car maker NIO is also generating a buzz. It may be a coincidence that Kodal Minerals, Tesla and NIO are all set to benefit from the net zero shift from fossil fuels to an electric new future, or it may not.
Investors are excited about Kodal’s Bougouni Lithium Project in Southern Mali, which can potentially produce 220,000 tonnes of spodumene, a major source of lithium, which is of course a key element in mobile phones, computers, battery storage and electric cars.
Management has now secured a $100m funding package from China’s Hainan Mining Co. It has also issued a $17.57m subscription for ordinary shares in Kodal. Hence the first spike.
The second and bigger spike was driven by positive drilling updates, which suggested Bougouni had “additional prospects”. It’s all very exciting. Especially since revenues could top $1bn within four years.
Of course this tiny operator is a long way from Tesla levels. Its market cap is less than £150m, compared to Tesla’s $488bn. Yet that’s also a reason for the excitement. Small companies have much bigger growth prospects. Although many investors still dream about making their fortune from Tesla, it’s unlikely to happen now.
Two electric opportunities
Despite its volatility, somebody who bought Tesla shares five years ago would now be sitting on a handsome 682% return. That’s despite the stock crashing by half over the last 12 months. Investors who saw the crash as a buying opportunity have been well rewarded though, with the stock up 42.23% year-to-date. That’s still pretty exciting.
Kodal could be more exciting still. It’s up 208.65% year-to-date (and 143.94% over 12 months). It’s currently waiting for mining approval from the Mali authorities, but if it gets that, it could enjoy another upwards leap.
Unlike some mining projects, which can take years to generate revenues, Bougouni appears to have a relatively short payback time of just a few months.
Naturally, there are risks. Kodal may not get the necessary permission. Those “additional prospects” may not come through. There’s a worldwide hunt for lithium, which if it produces more deposits could drive the price down. Also, it’s a fast-moving world, and the West is exploring alternatives to lithium, fearing geopolitical rival China has already cornered the market.
Kodal is risky, but also potentially hugely rewarding. As was Tesla. It will never grow anywhere near as big, of course, but it does offer some of the early excitement factor. It’s too risky for me, but then so was Tesla. And I missed out there.
