After falling 66% over the past 12 months, the Rambler Metals and Mining (LSE: RMM) share price jumped nearly 75% in April.
And it seems possible this could be just the start of a more significant move higher for the stock as the group progresses with its development plans.
Rambler Metals and Mining share price outlook
The most positive news to emerge from the group last month was the announcement that the business had closed the previously announced sale of non-core assets to Maritime Resources Corp.
The disposed assets include Rambler’s existing gold circuit at the Nugget Pond metallurgical facility and several Canadian exploration properties and royalties. The firm has received $2m of cash for the assets and CAD$0.5m worth of Maritime shares.
As well as this positive update, the company also published its audited financial results for the year ended 31 December 2020.
Management described 2020 as a “year of rethinking and replanning.” The coronavirus crisis pushed Rambler to undertake a “major financial restructuring and rescue.” This ultimately resulted in the company’s debt being restructured and several share placings to raise $15m.
Investors seemed happy to support this cash call, providing the company with more than enough funding to progress with its restructuring and accelerate its strategy.
And this is why I think the outlook for the Rambler Metals and Mining share price is so positive. The company ended 2020 with cash on the balance sheet of $6.2m and net debts of $3.5m. At the end of 2019, the firm reported a cash balance of just $1.9m with net debts of $13.8m.
Restored production
This should provide the firm with enough capital to restore copper and gold production at its flagship Ming Mine to 1,350 tonnes per day, or 493,000 tonnes per year. That’s ahead of 2019’s production level of 406,000 tonnes.
If the company can hit this level of production, I think it has a bright outlook. In 2019, earnings before interest tax depreciation and amortisation (EBITDA) were negative to the tune of $2.6m. However, that was based on an overall cash cost per pound of copper for the year of $2.58. Today, the price of copper is above $4.30 per pound.
As such, I’d buy this firm for my portfolio as a speculative growth play. If it can increase production at its flagship asset, I reckon profits could rip higher, which could send the Rambler Metals and Mining share price surging.
That said, investing in small-cap mining enterprises is an incredibly speculative pastime. Therefore, this stock may not be suitable for all investors. The stock was suspended for an extended period last year when the company’s survival was called into question. There’s no guarantee the business won’t be able to stay away from the edge as we advance.
What’s more, commodity prices can be incredibly volatile. Just because the copper price is high today doesn’t mean it will remain at the current level for the rest of the year. If the price of copper suddenly slumps, the Rambler Metals and Mining share price could follow suit.
