Risky business

It’s true that buying junior mining companies can be a headache for investors. There’s no guarantee that a mining company will find a commercially-viable resource. Even if they do, it can years to get through exploration and development and into the production phase. During that time a host of problems can pop up to put back production timings.

The dangers can be particularly severe for junior miners too. They don’t have the financial resources of bigger businesses like a Rio Tinto to compensate for revenues delays and rising costs. This means they often have to issue more shares to raise money, diluting the holdings of existing shareholders.

A bargain buy?

The question for investors is whether the potential rewards of owning a junior mining share outweigh these risks.

In the case of Cornish Metals I believe the high rewards it could potentially make it a top buy. And especially so after recent heavy share price weakness. The Cornish Metals share price has fallen 32% since the beginning of June.

Impressive testing work

Penny stock Cornish Metals is a Canada-based junior whose flagship projects are the South Crofty tin project and United Downs copper/tin asset in Cornwall, southern England. It also owns projects in North America containing tin, copper, nickel and cobalt.

Testing work at South Crofty — the backbone of Cornish Metals’ investment case — has been particularly encouraging to date. Last summer, mineral resource estimates here were upgraded by 10% (to 2.08m tonnes).

The business has this week began an 8,000-metre drilling programme to accelerate the South Crofty feasibility programme. I’m hopeful of more good news that pushes Cornish Metals’ share price northwards again.

Riding the commodities supercycle

Looking much further ahead, I think profits could surge at Cornish Metals. Over the next decade consumption of its commodities looks set to rise robustly, pushing revenues at the firm through the roof.

Demand for these metals are tipped to grow strongly as industries such as consumer electronics, electric vehicles (EVs) and renewable energy soar. Analysts at Mordor Intelligence think tin demand, for instance, will rise at an annualised rate of around 3% between now and 2027.

I also like Cornish Metals because of its exposure to the lithium market, a critical commodity that keep EVs on the move. It’s signed a deal allowing Cornish Lithium rights to explore for lithium on its properties in exchange for royalty rights and an interest in any future projects.

The verdict

As I say, investing in junior mining companies can be risky. But Cornish Metals’ strong balance sheet and the quality of its assets means this metals miner could still be a brilliant buy today. And especially after those recent share price falls.

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