Rare Earth Minerals PLC vs Sirius Minerals PLC: Which One Do You Dig?

Rare Earth Minerals PLC (LON: REM) and Sirius Minerals PLC (LON: SXX) are enjoying strong tailwinds at the moment, says Harvey Jones.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If you want a bit of edgy fun with your portfolio, speculative mining plays such as Rare Earth Minerals (LSE: REM) and Sirius Minerals (LSE: SXX) can deliver it in spades. Shares like these offer you all the highs and lows that stock market investing can bring, and will ultimately either shower you in riches or leave you in a hole. But which of these two AIM-listed mineral miners is likely to shine?

Tesla Boys

Investors in Rare Earth Minerals are sitting pretty following recent news of its tie-up with electric sports car and energy storage company Tesla Motors, which is ordering lithium hydroxide from its Sonora lithium project in Northern Mexico, a joint venture with Bacanora Minerals.

Meeting Tesla’s terms will be quite a challenge, however, as Sonora has to hit the company’s demanding “performance milestones”, and any reversal will hit the share price hard. But with the deal running for five years, plus an option to extend for another five, this high-profile partnership is a real boost for REM’s credentials.

REM remains a high-risk, high-reward play, but the potential rewards are now even higher than before. Management is ramping up activities at Sonora with a second drill rig in operation and looking to strike deals with more lithium partners. It has to raise yet more finance, but the Tesla tie-up should help to generate investor interest. Trading at 1.12p, REM is still down 27% over the last year. This certainly isn’t easy money.

Siriusly

Sirius Minerals has also cheered investors after North York Moors National Park Authority green-lighted its plans to construct the world’s largest potash mine over the summer. The company’s share price has doubled in the last six months, but it has one final planning hurdle to complete, with results in at the end of this month. Assuming the lights stay green, it still has a long road ahead, as it needs to raise £1.7bn to drill a mile-deep shaft and 23-mile tunnel to transport its high-grade polyhalite deposits to Teeside for export.

Again, investors have to commit themselves for the long haul. Some analysts have noted that Sirius is an all-or-nothing play on York potash, whereas REM has the diversification benefits that come from several different operations, suggesting that this makes the latter a bit more robust. I reckon that REM’s Tesla deal changes that: if it can’t deliver on that front, the company will suffer a serious blow. These are both ‘do or die’ stocks, but doing looks more likely than dying right now.

Dig In

It has taken both companies years to get where they are, and it will take many more years to get where they want to be. But the demand is there for their products, with Sirius striking a series of polyhalite supply agreements with major agri-business customers — and, barring global market shocks, REM and Sirius will hopefully secure the funding they need. Right now, there is plenty to dig about both stocks in my opinion. Take your pick.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »