Why I’d consider Zanaga Iron Ore Co Ltd after almost four-bagging in a year

Zanaga Iron Ore Co Ltd (LON: ZIOC) is one of the market’s best-performing stocks this year and I think it’s worth a look.

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.

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.

Shares in Zanaga Iron Ore (LSE: ZIOC) have exploded higher over the past four weeks, making the stock one of the market’s best performers during this period. 

Since mid-October, the shares have gained 350%, and since the beginning of October, the stock has surged by 420%. Even after this rally, I believe there’s more upside on offer for shareholders in the months ahead. 

Building the business

Zanaga’s rally started at the end of September when the firm announced alongside its half-year results that it is continuing to assessthe opportunity for a small-scale early production start-up project.” Such a project has been under consideration for several months, and the company is planning to be able to inform shareholders of the details towards the end of the year. 

If this start-up project goes ahead, it would be a significant development for it, turning the business from an exploration company, into a fully functioning iron ore miner. Funds generated could then be used to progress the development of the rest of the Zanaga Iron Ore Project, one of the most significant iron ore deposits in Africa. 

The second piece of good news for shareholders arrived on November 8. Management announced that the company had been awarded an Environmental Permit by the Ministry of Environment of the Republic of Congo. This permit “covers the Zanaga Project’s first phase of development pursuant to its Mining Licence granted in August 2014.

This approval is a huge step forward for the company. With the permission in place, outside investors should be willing to commit capital, and the firm can start to move forward with other plans. 

Plenty of risks ahead

It might be sitting on one of Africa’s most significant natural resource deposits, but the firm still has an enormous amount of work to do before it reaches the production stage and cash is in short supply. 

At the end of August, the business reported a cash balance of $4.2m. The company only used $434,000 of cash in the first half, so it can keep the lights on for some time yet, but it’s likely Zanaga will have to seek funding shortly if it wants to start a small project. 

It’s worth noting that it has been trying to develop its resource for many years and so far, there’s little to show for it. The last time I covered the business in 2014, the share price was still just under 19p. 

Nonetheless, the awarding of the environmental permit could be the catalyst that the company needs to get started developing its operations.  This is why I’m positive on the firm’s outlook. Even though it will probably be several more years before the business is generating a profit for investors, Zanaga’s outlook is now much improved. 

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.

Rupert Hargreaves does not own any share 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.

More on Investing Articles

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

How I could make a 10% yield for high passive income a reality

Jon Smith explains how he can target high passive income from top-yielding stocks, including one specific example he'd consider.

Read more »

Investing Articles

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

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

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »