Junior mining stocks have the ability to make early investors very wealthy indeed. So long as you can stand the higher levels of capital risk and possess a healthy amount of patience, I think there are a number of such opportunities on the market right now. Here are just two.
A play on clean energy
With the price of uranium at a 12-year low, it’s not all that surprising if Berkeley Energia (LSE: BKY) has been flying under many investors’ radars. However, it’s for this very reason — along with the huge potential of its wholly-owned and fully-funded Salamanca mine near Madrid — that I think the shares warrant closer inspection by those who believe the demand for clean energy can only go in one direction.
Once up and running, the mine is expected to churn out 4.4m lb of uranium concentrate every year, making Berkeley one of the top 10 global producers. What’s even more remarkable, however, is the fact that the £120m cap still expects to make a profit even if uranium prices don’t budge. According to the company, it will have one of the world’s lowest production costs at $15/lb — far cheaper than FTSE 100 mining giants Rio Tinto or BHP Billiton.
To be sure, there’s no knowing when — exactly — the price of uranium will recover. Nevertheless, there are a number of potential catalysts. China is expected to double its nuclear capacity in two years (and double again by 2035) and Japan is restarting its nuclear programme after it was brought to a sudden halt following the Fukushima disaster in 2011. With hundreds of US and EU utilities also re-contracting up to one billion pounds of uranium over the next five years, Berkeley believes we are approaching a major demand/supply tipping point.
Based on the notion that the only way to outperform the market is by doing the things that the majority of investors can’t or won’t, Berkeley looks a very interesting proposition at the current time.
Cop a load of this
Whether you like the idea of driving an electric vehicle or not, you’d better get used to the fact that the automotive industry is changing at a furious pace.
One potential way of profiting from this is to buy shares in copper-focused miners such as Asiamet Resources (LSE: ARS), particularly as the current oversupply of the metal won’t last forever.
The £54m cap’s shares have rallied over the last few days following the release of an encouraging update on recent drilling near the company’s Beruang Kanan Main (BKM) prospect on the island of Kalimantan. In addition to its huge feasibility-stage copper project, Asiamet now believes it has found a standalone polymetallic deposit with tests revealing high grades of zinc, lead, silver and gold.
Aside from its assets (which also include the Jelai Gold project and part-owned Beutong resource), one other thing worth bearing in mind is the track record of Asiamet’s management team. Chairman and significant shareholder Tony Manini, for example, built up a $20m miner (Oxiana Ltd) into a £6bn commodity giant in just eight years. Sounds to me like he’s a good person to have around.
Like Berkeley Energia, Asiamet isn’t a stock for those with short investing horizons. Nevertheless, the prize for those able to sit on their hands could be worth the wait.
A less risky way to quit the rat race?
Of course, investing in small-cap mining stocks won't be for everyone. That's why the Fool's analysts have produced a BRAND NEW report highlighting other ways in which you can achieve financial independence. It's totally FREE to read and comes with no obligation whatsoever.
Just click here for your copy.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.