When it comes to penny stocks, earning triple-digit gains isn’t unrealistic. After all, smaller companies have far more room for growth if they prove to be successful. Of course, that’s a big ‘if’ in many cases since they also come with extremely high levels of risk compared to larger FTSE 350 enterprises.
Nevertheless, this immense growth potential keeps this class of equities popular among investors comfortable with volatility. And one penny stock that continues to grab attention in 2024 is Anglo Asian Mining (LSE:AAZ).
Explosive potential
As an early-stage mining business, Anglo Asian is filled with literal untapped potential. The group is currently sitting on over 585,000 tonnes of copper across its prospective projects. And since demand for copper is expected to skyrocket thanks to the electric vehicle revolution, the business appears on track to propel itself to new heights.
It’s not surprising that current analyst forecasts predict the stock price to reach just shy of 205p within the next 12 months. That’s almost three times the current stock price. And if accurate, snapping up this stock today could be a very lucrative investment.
So, is this forecast correct? Quite a few things are working in Anglo Asian’s favour. Most recently, the firm has received regulatory approval to increase the height of one of its tailings dams by another seven metres. As a quick crash course, a tailings dam is used to store leftover materials from the mining process. This approval allows the company to bring the dam to its completed design specs and allows mining operations to continue as planned.
This is yet another positive step for the group’s portfolio of projects. The firm’s Gilar project is expected to enter production by the end of this year, adding another 10,000 ounces of gold equivalents to its production capacity each year. And with other projects on track to enter production over the coming years, the long-term potential for this mining enterprise is undoubtedly promising.
Where’s the risk?
Mining is a tough business. Apart from the immense capital expense of scouting, developing, and operating a mining site, there’s a mountain of paperwork and regulatory hurdles to jump through. In this respect, Anglo Asian already has the upper hand against many of its penny stock peers. Since the business already has an active portfolio of producing mines, revenue and profits are already flowing in. But that doesn’t make its explosive potential a guarantee.
The rising demand for copper hasn’t gone unnoticed, especially among industry titans that are also ramping up copper production. If the supply of this metal starts exceeding demand, prices will naturally start to drop. And that could put Anglo Asian’s stellar growth potential in jeopardy.
The group also produces both gold and silver, which adds some welcome diversity to the product portfolio. But just like other commodities, these, too, are affected by the balance of demand and supply. And with only around $4.5m of cash on the balance sheet, a sudden downturn in metal prices could be enormously problematic.
All things considered, just like other penny stocks, Anglo Asian’s risk profile is pretty high. And it’s not a business I’m eager to add to my own portfolio. But for investors who are comfortable with the volatility, this enterprise may merit a closer look.
