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Should You Add These 3 Small-Caps To Your Portfolio? Rare Earth Minerals PLC, Amur Minerals Corporation And Monitise Plc

Rare Earth Minerals

On the face of it, Rare Earth Minerals (LSE: REM) looks like a rather unappealing investment opportunity. After all, it has no revenue, is expected to make a loss of around £1m per year for the next couple of years, and trades on a price to book (P/B) ratio of 16.4, which is incredibly high. And, with mining companies’ valuations having taken a hit in recent months, there are certainly better value options elsewhere in the sector.

However, Rare Earth Minerals undoubtedly has excellent long-term potential. Demand for lithium is on the up and the results of a pre-feasibility study from one of its two mines could have a positive impact on the company’s share price. As such, its shares could keep moving upwards as they have done in the last year, with them rising by 132% in the last twelve months.

Despite this, Rare Earth Minerals remains something of a gamble, with its long term success as a business highly dependent upon the results of the aforementioned pre-feasibility study. Certainly, its shares could spike on positive news flow, but equally they could fall heavily if expectations are not met. As such, there appear to be better risk/reward opportunities elsewhere.

Amur Minerals

Although shares in Amur Minerals (LSE: AMC) have posted gains of 217% in the last year, it remains a relatively high risk play. Certainly, it has potential to deliver further positive news flow, as was evidenced with the announcement that its Kubuk project contains a healthy haul of nickel and copper.

However, the political risks from investing in Amur Minerals remain relatively high. For example, it operates in Russia and, while there may prove to be little effect from any further sanctions, investor sentiment in Amur Minerals has the potential to weaken over the medium to long term. Furthermore, with the company having no revenue at the present time and trading on a P/B of 1.9, as with Rare Earth Minerals, there seem to be better opportunities elsewhere in the mining sector.

Monitise

The future of banking is set to be centred on online and mobile applications. This is great news for Monitise (LSE: MONI), since it provides such services and has already built up an enviable client base that includes the likes of RBS and HSBC.

However, Monitise is currently undergoing a transitional period that has included a change in CEO, the loss of a major shareholder (Visa) and a switch towards a subscription based model. All of these things will take time to adjust to and, in the meantime, investor sentiment has weakened considerably, with shares in Monitise falling by 80% in the last year.

And, while Monitise trades on a P/B ratio of just 0.8, its share price could come under pressure as it seeks to make the changes necessary in order to post a maiden profit. As such, and while it is a company with considerable future potential, now may not be the right time to buy a slice of it.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended shares in HSBC and owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.