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Pensana

What it does: Pensana is a rare earths miner planning to reduce China’s stranglehold in the market for these critical minerals.

By Mark Tovey. Pensana (LSE:PRE) has a mixed rare earth sulphate mine in Angola. When ore is extracted from such mines, there are only two options: send it to Australia or China to be processed. The latter country currently controls 85% of rare earths processing. This matters because neodymium, lanthanum, and other metals in the rare earths family are essential to electric vehicles, wind turbines, and smartphones.

Pensana’s plan is to challenge China’s dominance by setting up a processing facility in the Humber Freeport, northern England. It won £4m of UK government support through the Automotive Transformation Fund in October 2023.

However, Pensana is yet to generate revenue, and its ambitious production targets have drawn criticism.

Despite these challenges, the strategic importance of rare earths and Pensana’s potential to disrupt the market make it an attractive addition to my portfolio. I plan to invest in this AIM stock when I next have spare cash.

Mark Tovey does not own shares in Pensana.

YouGov

What it does: YouGov is a fast-growing international research company gaining insights from analysing marketing and opinion data.

By Kevin Godbold. YouGov (LSE:YOU) has a strong record of earnings growth and City analysts expect double-digit percentage gains for the current trading year to July 2024 and next year.

February’s half-year trading update is impressive and the outlook statement upbeat.

The directors acknowledged challenging market conditions and said client budgets had been under pressure.  But YouGov’s customers are looking for high-quality, data-driven solutions, they said. Despite longer sales cycles, momentum accelerated in the second quarter of the firm’s trading year.

The top managers pointed to the robust sales pipeline and said they are “confident” in achieving current market expectations for the full year to July.  

However, with the forward-looking price-to-earnings rating for next year in double digits, there’s plenty of potential for the share price to slide if the company misses its earnings estimates.

Nevertheless, despite the risks, the business is a high-quality growth outfit and may be worth its premium rating.

Kevin Godbold does not own shares in YouGov.

YouGov

What it does: YouGov is a market research company that focuses on public opinion, consumer intelligence, and data analytics.

By Charlie Carman. The YouGov (LSE:YOU) share price has risen 140% over five years and the strong growth trajectory may well continue.

Investment in technology has boosted margins, especially for the group’s customised research unit. This bodes well for YouGov’s existing long-term relationships and multi-year contract opportunities with new clients also show promise.

Elsewhere, YouGov’s acquisition of German consumer panel firm GfK has proved to be a success. The acquired business is currently trading ahead of expectations. Plus, new behavioural data sets on FMCG and retail consumer insights strengthen YouGov’s long-term client offering.

Handily, the company should also benefit from increased publicity during an election year, although political opinion polls are now only a small revenue source.

Granted, the shares aren’t cheap at over 25 times forward earnings. If demand for YouGov’s services proves weaker than expected, the valuation might not be justified.

Nonetheless, as things stand, I think this AIM stock merits serious consideration.

Charlie Carman does not own shares in YouGov. 

The post Best AIM stocks to consider buying in March appeared first on The Motley Fool UK.

Here’s one such firm that’s just come on my radar.

Understanding the stock

The company on my radar is Pensana Metals (LSE:PRE). The business has a market-cap of £88m with a share price of 30p. Over the past year the stock’s down 45%.

Pensana explores and develops sites for rare earth deposits. It has two main projects at the moment, one in the UK and one in Angola. Its flagship Saltend rare earth refinery project in the UK is the one that could send the stock soaring if things go well.

The facility in East Yorkshire aims to process neodymium and praseodymium. If you haven’t heard of those before, don’t worry, I hadn’t either. They are critical minerals used in the creation of magnets. As such, there’s huge commercial impact here, with components linked to electric vehicles (EVs) as one of the largest benefactors.

Looking at the numbers

Let’s not beat around the bush. The business lost $5.1m in the last financial year. Most of this was driven by expenses and research involved with the two projects.

The net assets for Pensana stand at $56m, which did rise by 48% versus 2022, but most of these assets are intangible, so that doesn’t help me much.

On the positive side, it has $9.7m of cash on hand. It also has debt facilities with banks that it can draw on, for credit if cash flow gets tricky.

Given the positive benefit to the environment of utilising the rare earth deposits, the UK government is onboard. In a recent business update, the Secretary of State for Business and Trade has offered a £4m grant towards the Saltend project.

Bringing it all together

I completely understand that Pensana doesn’t have a track record to boast about to entice investors. The main risk I see is that timelines get pushed back, with hopeful investors losing patience with the business. Given the trend lower in the stock over the past few years, I think some have already thrown in the towel, fed up of waiting.

However, two things make me positive about the outlook for the penny stock. The first is that the Saltend project is unique. It has the potential to hold 5% of the world market supply of neodymium which, if realised, would have major financial implications for the stock.

The other factor is that unlike some other commodity explorers, Pensana has strong government backing. This is by grants, exposure and other support in both the UK and Angola. Although this doesn’t guarantee success, it certainly provides a helping hand.

So when I look at the market-cap and share price versus the unearthed potential value in the projects, I think the stock is cheap right now. I’m considering adding a small amount of money to the stock now.

The post This EV-linked penny stock looks dead cheap to me at 30p appeared first on The Motley Fool UK.

In the past few years, sustainability initiatives have become a top priority for leading nations worldwide. To meet the demand for the rare elements required in renewable energy production, new forms of mineral mining have emerged.

I’m talking about rare earth elements (REEs).

Increased demand

REEs like neodymium and praseodymium are critical for manufacturing batteries, magnets, and microchips used in the production of offshore wind farms and electric vehicles. In late 2023, China enacted a ban on the export of technology used to make rare earth magnets in response to a US bill to reduce reliance on Chinese suppliers. China being the world’s largest producer of REEs, the move ramped up demand for REE mining in Western nations. 

Subsequently, I’m considering the prospects of two REE companies listed on the London Stock Exchange that I think have growth potential.

Rainbow Rare Earths

Today (18 January) Rainbow Rare Earths (LSE:RBW) announced the welcome of a US Congressional staff delegation to their Phalaborwa REE development project in South Africa. The project could result in significant profits for the company, prompting analysts to forecast an earnings growth of 60% per year for Rainbow.

With an £80m market cap, Rainbow Rare Earths is comparatively small globally but is an REE industry leader in the UK. The company enjoyed a £7.9m boost to its market cap last week, with retail investors now owning over 50% of the stock. 

RBW shares are currently trading at only 13p, making it an easily accessible penny stock for me to get into while low. However, it’s worth noting that revenue has been declining at around 55% per year and, with a negative return on equity (ROE), the company is not yet profitable. 

As with any emerging market, getting in early is risky – but the payoff can be rewarding. I think Rainbow Rare Earths shares have decent growth potential so I’ll certainly be considering it as a good addition to my portfolio in 2024.

Pensana Metals

Pensana Metals (LSE:PRE) is an even smaller penny stock than Rainbow Rare Earths, with a £55m market cap and 20p share price. The past 12 months have not been kind to the company, with the share price down 66% since January last year. What’s more, earnings have declined 27% per year for the past five years.

Still, I think the growing demand for REEs has the potential to turn Pensana’s fortunes around.

The company is building an REE refinery in the UK and assessing the feasibility of further investment in the Longonjo NdPr mining project in Angola. In April last year, Pensana received a much-needed injection of $10m from major UK investment firm M&G and the sovereign wealth fund of Angola (FSDEA). This helped push the share price up briefly at the time but growth has mostly declined since.

With less than a year’s worth of free cash flow remaining, Pensana may need to turn profitable soon if it hopes to survive. I have a lot of faith in renewable energy and I hope to see Pensana do well. For now, however, I’ll continue researching this sector and keep an eye on Pensana’s development.

The post Forget flying cars, could this burgeoning industry hold the UK’s next biggest growth stocks? appeared first on The Motley Fool UK.

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Anglo Asian Mining 

What it does: Anglo Asian Mining is an AIM-listed mining share whose precious and base metals projects span the globe. 

By Royston Wild. Commodities are popular wealth preservers with investors during uncertain times. And by extension so are producers of raw materials like metals. This is why I believe Anglo Asian Mining (LSE:AAZ) could be a top investment for April. 

This UK mining share produces gold, silver and copper from its assets in Azerbaijan. It also owns a stake in Libero Copper & Gold Corporation, a business with precious and industrial metal assets in The Americas. 

The prices of Anglo Asian’s metals could continue climbing if worries about high inflation and a banking sector crisis persist. They could also keep rising if factory data from commodities glutton China impresses. Manufacturing PMI readings from the country soared to their highest in more than a decade recently. 

I think this small-cap stock is especially attractive for income investors. It carries a meaty 5.9% dividend yield at current prices.

Royston Wild does not own shares in Anglo Asian Mining. 

Atlantic Lithium

What it does: Atlantic Lithium is an Australia-based lithium exploration company, operating in West Africa.

By Alan Oscroft. Lithium for batteries is in great demand from the electric vehicle industry. But demand for shares in lithium explorers has gone off the boil.

Atlantic Lithium (LSE:ALL) has always been hard to value, as it’s not making any profit yet. But nearly all of the share price gains of 2021 and 2022 have now been reversed.

I suspect that’s more likely to be due to a turn away from growth stocks than anything else.

Forecasts suggest relatively small losses for this year and next. But there’s a profit down for 2025, putting the shares on a price-to-earnings (P/E) ratio of under six.

The company had cash of AU$19.1m at 31 December. So how long that will last and what new cash might be needed before profitability is reached looks like the big risk.

But I think I’m seeing a buying opportunity in this small-cap stock.

Alan Oscroft does not own Atlantic Lithium shares.

Bioventix

What it does: Bioventix is a UK biotech firm developing and supplying high-affinity diagnostic antibodies for the medical industry.

By Zaven Boyrazian. Bioventix (LSE:BVXP) is a biotech firm specialising in sheep monoclonal antibodies. These antibodies serve a pivotal role in human medical diagnostics, and are most commonly used on blood testing machines in hospitals and research labs.

Despite being a critical supplier to the healthcare sector, the firm took quite a stumble during the pandemic. With the industry primarily focused on tackling Covid-19, blood diagnostic antibodies weren’t exactly in high demand.

With Covid-19 no longer dominating hospitals, demand for Bioventix’s niche products is back on the rise. And thanks to its antibodies specialising in detecting vitamin D deficiency, pre-tax profits have returned to double-digit growth.

Bioventix looks like it’s back on track. And while trading at a P/E ratio of 25 is certainly not cheap, it may be a justifiable price given the small-cap stock’s long-term potential.

Zaven Boyrazian does not own shares in Bioventix Plc.

Calnex Solutions

What it does: Calnex Solutions is a Scottish company that specialises in testing and measurement services for telecommunication networks.

By Edward Sheldon, CFA. Calnex Solutions’ (LSE: CLX) share price took a big hit recently after the company warned that performance in FY2024 was likely to be below that of FY2023. It noted that in the current macro environment, some customers are taking a more cautious approach to investment decisions.

However, the company also said that it is confident that, as the industry spending cycle normalises, it will see an uplift in orders from the current, more subdued, levels. And looking further out, it said that it remains well placed to capitalise on the underlying long-term growth drivers in the telecoms and cloud computing markets. “We are well-placed to return to a growth trajectory once market confidence returns,” said founder and CEO Tommy Cook.

Given management’s confidence in the long-term growth story, I’m looking at the recent share price weakness here as a buying opportunity. I think it’s only a matter of time until growth picks up and the share price moves higher.

Edward Sheldon owns shares in Calnex Solutions.

Everyman Media Group  

What it does: Everyman Media Group is the owner of the premium cinema chain.  

By Charlie Keough. Everyman Media Group (LSE: EMAN) shares have failed to excite this year, down 15% as I write. Yet despite this, I think the future looks bright for the small-cap stock.  

2022 saw revenues increase by a whopping 62.5% compared to 2021. And while this might be expected given the impact of the pandemic, the 20% jump its latest revenues represents from the pre-pandemic year highlights Everyman’s strong growth.  

Last year also saw the business beat expectations with EBITDA coming in at around £14.5m. On top of this, it managed to maintain its market share with its 38 venues.  

Looking to this year, Everyman is set to open venues in five new locations, including the likes of Durham and Plymouth.  

Consumers tightening their belts may impact the business in the short term. But with a strong pipeline of releases lined up for 2023 alongside the unique service Everyman provides, the stock could present a solid opportunity in April.  

Charlie Keough does not own shares in Everyman Media Group.  

Everyman Media

What it does: Everyman is a premium and luxury chain of cinemas located across the UK.

By John Choong: With the cost-of-living crisis continuing to bite down on consumer spending, many would expect discretionary spending to take a hit. However, Everyman (LSE:EMAN) has bucked the trend with its premium experiences. Cinema goers don’t normally pay more than £10 per ticket, but at Everyman, customers pay upwards of £20 for luxurious and comfortable seats with at-seat service.

This proposition sets this small-cap stock apart from its competitors, as its products are catered towards more affluent spenders. As such, sales have managed to stay robust through difficult times. In fact, they’re expected to continue growing in the medium term as the UK’s fourth-largest cinema chain is anticipated to open another four venues this year. 

Combine the above with resilient retail sales data so far this year and reasonable multiples, and it’s not difficult to see why I’m keen on adding Everyman shares to my portfolio.

John Choong has no position in any of the shares mentioned.

Income & Growth VCT

What it does: Income and Growth is a venture capital trust that owns stakes in a variety of small and medium businesses.

By Christopher Ruane. A weak economy and rising interest rates could make this a challenging time for young businesses.

Some will still do well, though – and spotting them could be lucrative. That is what the fund managers at venture capital trust Income & Growth (LSE: IGV) aim to do. A recent successful example is the trust’s investment in software provider Tharstern. An investment of £1.5m has generated cash proceeds of £4m in under nine years.

Not all picks will be as successful. A difficult economy risks worsening investment results.

But the small-cap stock has a strong track record, and successful investments could help fund future dividends. The current yield is 10.7%. Dividends have moved around from year to year but have often been substantial.

I like the strong income potential and would be happy to buy the shares for my portfolio in April if I had spare cash to invest.

Christopher Ruane does not own shares in Income & Growth VCT.

Pensana 

What it does: Pensana is a rare earth metals company aiming to break China’s monopoly on the processing of the critical minerals. 

By Mark Tovey. Rare earths include a list of 17 chemical elements with strange names but familiar applications. Neodymium, for example, is used in the magnets that make smartphones vibrate. Promethium is needed in pacemakers.  

China is responsible for processing 85% of the world’s supply of rare earths. Outside of China, there are only two rare earth processing plants. That number will soon rise to three, thanks to Pensana’s (LSE:PRE) planned separation facilities in the Humber Freeport.  

For the project, Pensana received an undisclosed sum from the UK government. Western leaders are anxious to free the rare earths supply from China’s stranglehold.  

I plan to buy shares in Pensana, although it will only be a very small proportion of my portfolio. That’s because Pensana has no revenues, putting it at the mercy of capital markets. In addition, its neodymium-praseodymium mine in Angola could be struck by any number of geological or political catastrophes.  

Mark Tovey does not own shares in Pensana. 

Somero Enterprises

What it does: Somero Enterprises designs, assembles, remanufactures, sells, and distributes concrete leveling, contouring, and placing equipment.

By Paul Summers: Shares in laser-guided equipment maker Somero Enterprises (LSE: SOM) have sunk by 25% or so in the last year as the market has fretted over rising interest rates. The concern is that this will cause a recession in construction. Since Somero’s tech helps to lay perfectly flat floors, that makes sense.

As an existing shareholder, however, I’m not worried. In fact, I’m contemplating increasing my position in this high-quality, cash-rich company.

March’s full-year results read just fine to me. Revenue remained steady and profit dipped only slightly due to higher costs. 

This makes the valuation of a little over eight times earnings look like a steal. There’s even a monster 7% forecast dividend yield in the offing while I wait for the share price to recover. 

Although pure speculation on my part, I also wonder if we could see a few takeover bids in the near future.

Paul Summers owns shares in Somero Enterprises

The post Best British small-cap stocks to buy in April appeared first on The Motley Fool UK.

These risks are amplified in the natural resources sector, as commodity prices can drop through the floor at a moment’s notice.

However, Pensana Metals (LSE:PRE) is making me re-think that rule. That’s because the company is on the cusp of breaking China’s stranglehold on rare earths.

Rare earths comprise 17 chemical elements (15 lanthanides, plus yttrium and scandium). They are essential for various technologies including electric vehicles, wind turbines, smartphones, and defence systems.

Currently, the Chinese account for 85% of rare earths processing. But Pensana’s planned separation facilities in the Humber Freeport in northern England should put a dent in that dominance.

China’s trump card

Russia’s invasion of Ukraine spiked energy, potash, and nickel prices in 2022. That was a rude wake-up call for western leaders about the precarity of commodity supply chains.

But the alarm on rare earths had already rung out 12 years earlier.

In September 2010, a spat between Japan and China over the sovereignty of the Senkaku Islands led China to flex its muscles, halting all deliveries of rare earths to Japan.

The unofficial embargo was short-lived, but the episode showed the danger of relying on an unfriendly nation for critical supplies.

Government funding: rare-ly refused!

Around the world, governments have drawn up lists of critical minerals and even extended subsidies to domestic producers.

In 2019, the US Pentagon said it would fund mines and processors.

Mountain Pass mine in California is the only rare earth mining and processing facility in the US. Taken over by MP Materials in 2017, the mine had been left dormant through much of the 2000s due to the rise of the ultra-cheap Chinese rare earths that had flooded the market from the 1990s onwards.  

The Australian rare earths miner Lynas also has refining facilities.

Now, Pensana looks set to add a third rare earths processing plant to that list of non-Chinese refineries. To do it, it is relying on an undisclosed sum from the UK government’s £1bn Automotive Transformation Fund.

With the UK government having released its “Critical Minerals Strategy” just last week, I’d wager that Pensana’s plan can rely on more support if needed.

Pensana also mines mixed rare earth sulphate at its Longonjo project in Angola.

The refinery in northern England is estimated to have a hefty capital cost of £160m.

Rocky road

While MP Materials and Lynas are profitable, Pensana does not even have any revenues, with its processing plant not due to open until 2024.

In addition, analysts have criticised Pensana for its executive pay and its level of disclosure. Some also think the company’s goal of producing 12,500 tonnes of rare earth oxides per year is too high.

Still, the demand for rare earths is set to double over the next decade. And with tensions between the West and China already strained, I think Pensana’s stock price could rise faster than a spy balloon if relations broke down further.

I plan to add a small amount of Pensana to my portfolio when I next have spare cash to invest.

The post 1 penny stock under 60p that I’d buy today! appeared first on The Motley Fool UK.

Picking future mining stars can be tough. But I can give myself the best chance to increase my future earning power by investing in high-demand commodities.

UK mining stocks risk/reward

Two UK mining stocks have caught my eye. Neither is a household name. But if successful, both could easily become massive companies. The first has an £85m market cap and the second weighs in at around £187m. So neither are fly-by-night minnows with no chance of financing their projects.

UK mining stocks require huge amounts of cash to run costly drilling programmes and employ scientists to help pick the best locations. And neither company has yet posted a profitable year.

I could get diluted if they run out of money and need to go back to the market to fundraise. A poor result in one project or another could crash the shares as analysts mark down the future earnings of the company. So there is high potential, but also high risk here.

Why to buy these UK mining stocks

AIM-listed BlueJay Mining (LSE:JAY) has gained around 40% over the past 12 months.

[fool_stock_chart ticker=LSE:JAY]

We heard on 25 May that Bluejay had started its first 3,000m drilling programme targeting nickel, copper and cobalt at Enonkoski in east Finland. The company also announced a crucial $20m joint venture deal in November 2020. Partnering with Rio Tinto here has reduced its future share of earnings, but also its ongoing costs.  

Nickel and cobalt play an important role in rechargeable electric vehicle (EV) batteries. Higher nickel content helps increases battery energy density to extend vehicle range. With everyone from NIO to Volkswagen now pumping out EVs, the dash for nickel is definitely on.

I’m keen to buy now because the higher-risk stages of identifying targets and finding funding are already complete. BlueJay’s bosses expect to announce Enonkoski results by the autumn. 

New nickel discoveries are also fairly rare, and daily nickel price have jumped 42% since May 2020, which would make a Finnish find particularly valuable.

Rare earth metals

The second UK mining stock I’d buy is Pensana (LSE:PRE). It is one of the only UK mining stocks targeting rare earth elements like neodymium and praseodymium (NdPr). One of its main projects is a 35-year licence at Longonjo in Angola.

NdPr is key for making magnets in EV traction motors, as well as manufacturing wind farm turbine magnets. Prices have rocketed from £41000/tonne last June 2020 to £66,000/tonne this year. And investment bank UBS said in recent research that prices could double as soon as 2024.

Pensana is not just a miner, either. It has won government support for what will be the UK’s first rare earth metals processing plant at the Saltend Chemicals Park in Hull. The company plans to “create the world’s first fully sustainable magnet metal supply chain” here. None of this cash-creating work is yet under way, so it could be a while before any profits hit Pensana’s balance sheet.

Still, I say diversification is key for any serious investor. And I think I can do it by picking the hottest UK mining stocks out there. 

The post 2 hot UK mining stocks to buy today appeared first on The Motley Fool UK.

Pensana’s robust news flow

Since listing on the London Stock Exchange’s main market in July 2020, the company has seen its share price increase from around 27p to near 167p today. And the move has been driven by a flow of positive news cementing the firm’s strategy.

The company is focusing on the development of its rare earth metals projects located in Longonjo and nearby Coola in Angola. But the directors’ vision extends to downstream operations as well. And the company recently submitted a planning application to establish a rare earth oxide separation facility at the Saltend Chemicals Park in Humber, Yorkshire.

If Pensana can develop its upstream and downstream operations, it would provide the UK with the “world’s first” sustainable magnet metal supply chain. And this is exciting because the industry is set to balloon. That’s because of burgeoning demand driven by Electric Vehicle (EV) and offshore wind generator production. However, Pensana reckons China has a near-monopoly supplying around 87% of the world’s rare earths. And the country sources much of it unsustainably.

Pensana’s proposed production facility at Saltend will have a nameplate capacity of 4,500 tonnes per year. And it will be one of only two major producers outside China. It will be “strategically located” on the UK’s busiest ports complex and gateway to Europe. But Lynas Corporation of Australia is the world’s largest non-china producer right now. And last year the company produced around 4,700 tonnes from its facility in Malaysia.

The sector looks set to grow

To put those figures in perspective, the company reckons the new Volkswagen (VW) range of EVs will consume the equivalent of Pensana’s entire production for the next decade. And VW is just one of many EV manufacturers. On top of that, there are the needs of the entire offshore wind industry to consider. And China is planning a 15-fold increase in capacity by 2060, according to Pensana. And the European Union expects to grow its offshore wind facilities by 2,400%.

The company points to forecasts from commodity research and analyst companies Roskill, CRU and Adamas suggesting “substantial” increases in magnet metal prices ahead as demand ramps up. It seems that Pensana has its operations in the right place and there’s a substantial tailwind in the sector to support growth. However, most of the development work is still ahead for both the upstream and downstream operations. So far, activities have been mainly concerned with proving resources in the ground and securing planning permissions.

There’s a long road ahead and a lot more money needed before Pensana begins supplying the world with sustainable magnet metals. And right now, the company is loss-making and spending millions in development costs. This is one of several stocks with a great story and bags of potential. But I reckon the road ahead for shareholders is risky. And I’m watching from the sidelines for the time being until the company’s projects are further advanced.

The post Here’s what I’m doing about Pensana stock appeared first on The Motley Fool UK.