Ringing endorsement for this penny stock

As deals go, this is top drawer stuff. Today, Seeing Machines announced a global framework agreement with top-tier oil giant Royal Dutch Shell to provide its distraction and fatigue tech — otherwise known as Guardian — to the latter’s fleet as part of its overall risk management plan.

Given that its workforce covers an estimated 500m kilometres every year (and what they are transporting tends to be rather flammable), this agreement makes clear sense from a safety perspective.

Naturally, it will take some time to fully implement this agreement. According to today’s statement, the installation of Seeing Machines’ tech is likely to begin this year. However, the sheer scale of Shell’s operations means the rollout might take “several years“.  

Still, an endorsement from Shell is hugely significant in my eyes. If you have one of the UK’s largest listed companies making it clear how much importance they place on driver safety, I think it’s fair to expect others to follow suit.

Naturally, it’s very easy to become biased on stocks one already owns. However, with the company being the global leader in this space, I do find it hard to be neutral on the outlook for this part of Seeing Machines’ business. 

Great outlook

Of course, today’s agreement is just one reason why I continue to hold the stock. Seeing Machines actually has its fingers in many pies at the moment. And, for me, the Guardian part of the business is actually the least exciting part.

The one that really grabs my attention is the huge earning potential of its automotive division. Back in August, the penny stock reported on the commencement of royalty revenues as over 100,000 vehicles loaded with its driver monitoring system (DMS) tech left showrooms. With the introduction of new legislation likely to boost demand, the company has already identified more than A$900m in potential revenue that it could/will now bid for.

On top of this, Seeing Machines has also been making moves into the aviation sector. This is the beauty of distraction-detecting tech — the sheer number of potential applications is hard to fully comprehend.

Long-term winner?

Naturally, any investment involves risk. Seeing Machines is no exception. Despite having a market cap of around £350m, this AIM-listed business is still unprofitable. This makes it particularly susceptible to general sell-offs. During the last market crash, for example, SEE’s share price fell from 5.5p in January 2020 to just 1.7p in March. It’s now at 9.8p, highlighting the huge volatility penny stock hunters should expect. One also can’t discount the possibility of future cash calls further down the line.

Along with would-be nickel miner Horizonte Minerals, however, Seeing Machines is one of few shares in my portfolio that I consider to be both very risky but also worth holding for the long term.

Time will tell if I’m fantastically right, utterly mistaken, or somewhere in between. For now, I’ll simply conclude that today’s news means I won’t be selling this penny stock anytime soon.  

The post This penny stock just signed a deal with Royal Dutch Shell! appeared first on The Motley Fool UK.

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Paul Summers owns shares in Seeing Machines Ltd and Horizonte Minerals. The Motley Fool UK owns shares of and has recommended Seeing Machines Ltd. 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.

Investors have clamoured for Eurasia Mining (LSE: EUA) shares over the last week. In fact, the penny stock was recently the most popular pick among Hargreaves Lansdown clients. That’s right — this AIM-listed resource play was more in demand than FTSE 100 members such as IAG and Lloyds Bank.

All this has helped the Eurasia Mining shares more than double in value since 27 August. That leaves it with a market capitalisation of over £1bn. My Foolish colleague Roland Head noted at the start of the month that investors are keen to get exposure to the Russia-focused miner. This is due to its focus on extracting palladium, platinum, rhodium, and iridium. These should all be in huge demand going forward. 

Today however, I’m highlighting another penny stock that could be about to spring violently to life. 

Is this penny stock next to pop?

Would-be producer Horizonte Minerals (LSE: HZM) is a share I’ve owned for five long years. Partly due to the electric vehicle revolution, it’s my play on what’s set to be a booming nickel market.

The AIM-listed company owns two Tier-1 projects, Araguaia and Vermelho, in Brazil. Right now, it’s the former that’s really in focus. News of how Aragiua will be financed into production is due by the end of Q3. It could be the catalyst for some serious share price action.

At least that’s what I’m hoping. Mining companies aren’t known for their willingness/ability to stick to deadlines. If there’s a delay, HZM shares could experience some sharp selling pressure as short-term traders head for the exits.

Even if the news arrives, it’s a question as to whether the terms of that financing are beneficial for existing owners like me. They might not be. Covid-19 could also impact construction at Araguaia on top of this. 

Horizonte vs EUA

A positive to owning Eurasia Mining shares over Horizonte’s are that the company already has one project in production. Obviously, HZM won’t be ready to deliver the goods for a while yet. 

The company’s mergers and acquisitions officer Dmitry Suschova owns a big portion of EUA. That’s another thing I like. This is through a direct holding and a controlling interest in Deloan Investments Limited. This should mean his interests are aligned with those of private investors. By sharp contrast, managerial ownership of Horizonte’s stock leaves a lot to be desired.

Then again, the latter’s shareholder register is hardly shabby. Teck Resources — Canada’s largest diversified miner — owns a little over 12% of the company. London-listed Glencore owns another 5.2% of HZM’s stock. There are worse bedfellows to have! 

At £130m, Horizonte’s market-cap also feels far more palatable. For perspective, EUA is now eligible for inclusion in the FTSE 250 index. That’s if it were to list on the main market, of course. Does this make sense? I’m not sure it does. The company barely makes any revenue and generates zero profit. It could also be forced to tap investors for more cash going forward.

Staying diversified

I’m keeping my fingers crossed that HZM is able to replicate some of the recent performance seen in Eurasia Mining shares. A near-24% rise in the last month bodes well.

Nevertheless, I’m not getting ahead of myself. As always, I’ll be ensuring that the rest of my portfolio is diversified into other sectors, just in case.

The post Eurasia Mining (EUA) shares have soared. Is this penny stock next? appeared first on The Motley Fool UK.

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Paul Summers owns shares in Horizonte Minerals. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. 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.

Pick well and you can make a shedload of money. Pick poorly, however, and you could lose all your capital. Here’s one stock that I think might just do the former.

Soaring small-cap

I’ve owned shares in would-be nickel producer Horizonte Minerals (LSE: HZM) for a few years now. For much of this time, my investment has been under water. Mercifully, that’s now changed.

Horizonte’s share price is up a little over 50% in the last month alone. Had you picked up the shares back in the dark days of March, you’d already be sitting on a gain of around 240%.

Aside from the bounce seen in markets generally, the reason for the price charge is down to Horizonte getting ready to build its Araguaia ferro-nickel mine in Brazil. This is one of two Tier 1 projects that, importantly, are 100% owned by the company.

Show me the money!

Earlier this month, Horizonte announced that it had mandated five international financial institutions to raise up to $325m in debt to part-fund the Araguaia build. Coronavirus-dependent, this should be done by the end of 2020. The remainder of the money needed ($125m) will then come from offtakes and a likely equity raise. 

Should things go swimmingly (and existing holders aren’t massively diluted), I can see the small-cap’s shares being worth multiples of their current value in a few years. This is assuming, of course, that Horizonte isn’t acquired beforehand. With few nickel-focused assets so close to production, it must surely be on the radars of the usual (mining) suspects.

Nickel price play

A takeover becomes even more likely if the price of nickel keeps rising. Thanks to growing demand from the EV battery sector and stainless steel market, there’s certainly a chance it could hit the $16,133/t analyst consensus for when Araguaia is ready to roll.

The ‘Tesla-effect’ can’t be discounted either. Let’s not forget that Elon Musk recently urged miners to dig up as much nickel as they could, adding that Tesla would award a “giant contract for a long period of time” to the company that does so in an efficient and environmentally friendly way. This is where Horizonte’s second Tier 1 asset — Vermelho — comes into play. 

Before you buy this small-cap…

But let’s not get ahead of ourselves. Despite recent progress (and a £15.6m cash position), Horizonte remains a high-risk proposition. Plenty of miners come a cropper on funding and the small-cap could still rip the shirt from your back.

Even if all the funding is secured, there will be traders ready to bank profits. This ‘sell on the news’ strategy means those intending to hold for the long term should brace themselves for volatility.

It also makes it essential for them to be diversified elsewhere (as I am) and not bet the house (which I haven’t). Like all investments, your exposure should take into account your financial goals, age and risk tolerance. If your stake keeps you awake at night, you’re probably doing it wrong. 

All caution (and bias) aside, however, there’s a chance the reward might be worth the wait.

The post Want £10,000? I’d buy £2,000 of this risky UK small-cap stock and wait appeared first on The Motley Fool UK.

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• How scared should investors be about a stock market crash? I say, not at all
• Time to buy IAG shares now they’re down 19% and trading at just 6 times earnings?

Paul Summers owns shares of Horizonte Minerals. 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.

One way of potentially profiting from this interest, other than buying a fund that tracks the spot price, is to buy shares in a miner. Today, I’m looking at one example from way down the market spectrum. 

Going great

Greatland Gold (LSE: GGP) is unlikely the be familiar to the majority of retail investors. That said, a 52% rise in the share price since this time last year suggests the £60m-cap is beginning to hit an increasing number of market participants’ radars. 

Greatland has six projects in its portfolio, four in Western Australia and two in Tasmania. This part of the world is clearly far more politically stable compared to where some miners operate (e.g. Africa), making the company more attractive to prospective owners.

In its most recent update, Greatland revealed it had located additional gold nuggets at its 100%-owned Panorama project. These were found roughly 1km south-west from a find almost two months earlier.

According to CEO Gervaise Heddle, this discovery “is evidence of the growing scale of Panorama” and increases management’s confidence in its viability. In addition to this, he reflected that the company’s recent fundraise would enable further exploration of projects such as this in the hope of finding and developing tier one assets (low cost, large and long-life).  If it succeeds, Greatland’s share price could easily multi-bag, in my opinion. 

Naturally, buying shares in a junior miner is probably about as risky as investing gets. As such, I’d caution anyone considering an investment in Greatland to consider whether they can maintain their composure when things get volatile before making a purchase. 

Going vertical

Gold isn’t the only metal to rally in price lately. Nickel — used in stainless steel — has been trading almost 50% higher than at the beginning of the year as supplies of the metal hit multi-year lows. One of the few ways of gaining exposure to this surge in popularity in the small-cap arena is AIM-listed miner (and Glencore-backed) Horizonte Minerals (LSE: HZM). 

Horizonte owns two world-class assets in Brazil, the Araguaia ferro-nickel project and the Vermelho nickel-cobalt project. The former is due to begin construction next year. The latter was purchased from mining giant Vale back in late 2017 with the view to profiting from the likely huge demand from the electric vehicle battery market.

On Thursday, it was announced the company had signed a royalty agreement with highly-regarded Orion Mine Finance to provide funding to advance Araguaia. Horizonte will now be handed $25m in cash to support the mine’s construction in exchange for a 2.25% royalty of the first 426,o00 tonnes of nickel produced and sold. Importantly, this agreement hasn’t diluted the value for existing shareholders, hence the 40% jump in Horizonte’s shares by the close of play on Thursday. At one point, they were up 100%. 

Clearly, there’s still a long way to go and the high-risk nature of investing at this level must be repeated. That said, I remain very positive on Horizonte and will likely retain my shares until the mines are fully operational or — more probable — the firm receives a bid from a major player.

The post The Greatland Gold share price isn’t the only mining stock I think could soar appeared first on The Motley Fool UK.

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• Time to buy IAG shares now they’re down 19% and trading at just 6 times earnings?

Paul Summers owns shares in Horizonte Minerals. 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.

Buying shares in small-cap companies can be hugely rewarding for risk-tolerant investors, particularly if game-changing news is just around the corner. Here are two examples from my own portfolio that I think could be set for a transformative 2018.

Positive developments

I last looked at AIM-listed fertiliser play Harvest Minerals (LSE: HMI) almost a year ago. Back then, the company had only just received the trial permit for its Arapua resource in Brazil.

Despite making nothing but solid progress, Harvest’s shares fell out of favour with investors for most of 2017. Recent developments suggest all this could be about to change.

In November, Harvest announced hugely encouraging test results relating to its direct application natural fertiliser and remineraliser product — KPfrtil. In contrast to traditional sources, it was found that only a very small amount of potassium from KPfrtil was lost from leaching before it could be used by plants. As a result, Harvest’s product will only need to be applied in a single dose — a massive draw for potential customers.

In addition to this, Harvest stated that its pre-certification sales drive for KPfrtil was “progressing well” with the company expecting demand to increase once it is officially certified by the Brazilian Ministry of Agriculture, Livestock and Supply (MAPA). Approval on this is likely to come early in the new year.

In a further positive development, Harvest informed shareholders that the Brazilian Government had approved a bill that would see a reduction in royalty rates of fertiliser projects from 3% to just 0.2% as part of an effort to boost the country’s mining sector and the general economy. Thanks to its low production costs and potentially huge margin, Harvest is expected to “benefit significantly” from this decision.  Indeed, assumed royalty costs of $1.58/t based on sales of $60/t of product have now been slashed to just $0.12/t.

With Brazil determined to become self-sufficient in fertilisers by 2020, I’m quietly confident that Harvest could easily test previous share price highs in 2018. 

Multi-asset company

Horizonte Minerals (LSE: HZM) is another Brazilian-based company I’ve taken a liking to, albeit more recently. As discussed previously, the £47m cap miner owns the potentially-very-lucrative Araguaia nickel resource. Given that the Feasibility Study on this is both imminent (due to land early next year) and highly anticipated, it’s perhaps not surprising that the business has doubled in value over the last five months.

However, it was last week’s news that I think could convince even more investors to take a position in the company.

In a move that appeared to surprise the market, Horizonte revealed a deal to acquire the advanced stage Vermelho project from mining giant Vale and, in doing so, become a multi-asset company. For just $8m ($2m of which will be paid upfront with the balance due on the first commercial sale of product), Horizonte has purchased an asset which offers annual production capacity of 46,000 tonnes of nickel and 2,500 tonnes of cobalt. 

With Vermelho now under its belt, Horizonte has quickly become one of the largest nickel development companies in the world. This fact, when combined with the huge surge of interest in electric vehicles (which require roughly 11kg of the metal per battery), leads me to suspect that investor sentiment towards the company will continue to steadily grow over the next 12 months.

The post 2 small-cap stocks I’m watching closely in 2018 appeared first on The Motley Fool UK.

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• How scared should investors be about a stock market crash? I say, not at all
• Time to buy IAG shares now they’re down 19% and trading at just 6 times earnings?

Paul Summers owns shares in Harvest Minerals and Horizonte Minerals. 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.

Thursday’s announcement that Sirius Minerals (LSE: SXX) had signed a ‘take or pay’ offtake agreement for the sale of its POLY4 product to one of the leading agribusinesses in South East Asia is a perfect example of the this.

Once delivered, PT Chemical Indonesia — a subsidiary of Wilmar Group — will sell the polyhalite into territories such as Indonesia, Malaysia, Thailand and Vietnam, as well as using it within its own farming operations.

Clearly, having such a massive company as a customer won’t do Sirius’s profile any harm at all. The fact that the FTSE 250 miner will now be supplying “one of the fastest growing fertilizer regions in the world” should bring it to the attention of more potential buyers who may be tempted to agree on something similar to the seven-year deal (with the option of a further three years) made with Wilmar.

Having moved sideways for the last few weeks, I’m beginning to think it won’t be long before Sirius’s shares spring to life and get closer to the 60p price target agreed by numerous analysts. True, production is still a long way off but recent construction updates from the company suggest that everything appears to be on schedule and on budget — no small feat for a mining company.

Still a risky bet? Of course. As a stock to tuck away and forget, however, I think Sirius takes some beating.

High grade deposit

Investors looking for more exposure to the mining sector — but sensible enough to diversify their holdings — may wish to take a closer look at £47m-cap Horizonte Minerals (LSE: HZM).

It might be a market minnow, but Horizonte owns 100% of one of the largest and highest grade undeveloped nickel saprolite resources in the world – in the form of its Araguaia project in northern Brazil. When you consider just how much of the metal is likely to be required as electronic vehicles become increasingly common (not to mention the growing use of renewable fuel technologies such as wind turbines), that’s quite an asset to have in your possession.

Last week, the company submitted its application for a mine construction licence to SEMAS (the Par State authority responsible for environmental licencing) — “a major milestone“, according to CEO Jeremy Martin.

With a fully-funded feasibility study of the Araguaia project now due for completion in Q1 next year, it wouldn’t be surprising if Horizonte began to hit more investors’ radars, particularly given the hugely attractive economics of the project. Once in production, it has been suggested the company could be one of the lowest cost producers around, generating $1.3bn in free cash flow over the mine’s 28-year life, based on a nickel price of $12,000 per tonne.

A further positive to Horizonte is the strong institutional backing the company has. With investors including Glencore and JP Morgan, you can be fairly certain that raising finance to construct the mine won’t be an insurmountable obstacle.

The post Sirius Minerals plc isn’t the only stock with a promising future appeared first on The Motley Fool UK.

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• Time to buy IAG shares now they’re down 19% and trading at just 6 times earnings?

Paul Summers owns shares in Sirius Minerals. 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.

Horizonte Minerals

Mining play Horizonte Minerals (LSE: HZM) failed to ignite the market in Friday following its latest results, and the company was last dealing flat on the day. The business, which focusses on nickel production in Brazil, announced that it had made “good progress” on its Araguaia project in the country during January-June.

The business completed an infill resource drilling programme to convert the initial 7-8 years of the mine’s life to the measured resource category, while it also received encouraging results from first stage testing of its Rotary Kiln Electric Furnace pilot plant. Still, a lack of revenues forced Horizonte to swallow a pre-tax loss of £1.16m, worsening from the £304,054 loss printed in the corresponding 2014 period.

And I believe too much uncertainty continues to swirl around the business to make it a viable stock selection. Not only is Horizonte still awaiting a preliminary licence for work at Araguaia, but a worsening supply/demand imbalance in the nickel market is casting doubts on the economic viability of the project should the necessary paperwork be received.

Mytrah Energy

Unlike Horizonte Minerals, I believe Mytrah Energy (LSE: MYT) could provide substantial gains for investors despite the release of a mixed report in Friday’s session. Although revenues ticked 10.7% higher during the first six months of 2015, to $32.59m, the business swung to an underlying pre-tax loss of $2.46m from a profit of $5.91m in the same 2014 period.

The company put this bottom-line deterioration down to higher depreciation and financing costs, while a slower start to the windy season in India also contributed to its performance in January-June. However, the company advised that “the power industry in India continues to develop favourably for Mytrah,” supported by the government’s rising focus towards renewable energy sources.

And the operator’s bubbly pipeline puts it in the box seat to enjoy strong returns in the coming years, in my opinion. Mytrah — which currently controls 543 MW of wind assets in India — has a further 200 MW worth of assets due to come online in time for next year’s storm season at its Vajrakarur, Viswa, and Viraj projects. With wind power demand in the country ticking steadily higher I expect revenues to explode in the years ahead.

Lamprell

I am not so bullish over the investment prospects of oil services provider Lamprell (LSE: LAM), however, owing to the worsening outlook of the world’s major fossil fuel producers. The company made headlines in Friday trade by announcing chief executive James Moffat would be standing down from next year, sending shares in the business 2.8% lower on the day.

The stock has seen its value tick lower again since July as Brent prices have resumed their familiar downtrend, while negative messages from the world’s major oil and gas producers has done nothing to shore up confidence in the sector — just yesterday Glencore slashed its capex target for this year to $6bn from $6.5bn-$6.8bn thanks to sagging black gold prices, while it also swallowed a $790m writedown on the value of its Caracal Energy division in Africa.

With demand for Lamprell’s rigs looking increasingly perilous, the City expects the firm to endure a 42% earnings decline in 2015, resulting in a P/E ratio of 12.9 times. Although by no means a poor reading, I reckon the firm could still be considered too expensive given that the poor newsflow emanating from the oil industry shows no signs of slowing, a situation that could drive the company’s shares still lower.

The post Are Horizonte Minerals Plc, Mytrah Energy Ltd And Lamprell Plc A ‘Buy’ Following Today’s News? appeared first on The Motley Fool UK.

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• What on earth’s happening to Babcock, Rolls-Royce and BAE Systems shares?
• Will Tesco shares plunge in May or June? This latest news spells trouble…
• How scared should investors be about a stock market crash? I say, not at all
• Time to buy IAG shares now they’re down 19% and trading at just 6 times earnings?

Royston Wild 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.