However, rare earth mining stocks are currently booming due to China tightening export controls, which has led to a global shortage. So, could Rainbow Rare Earth explode even higher over the next few years? Let’s dig in a little deeper.

A rainbow in South Africa and Brazil

The company is focused on rare earth elements (REEs) that are needed for the green energy transition. Unlike traditional miners though, it’s aiming to get them from industrial waste rather than raw ore.

Its flagship Phalaborwa project in South Africa intends to extract REEs from phosphogypsum, a by-product of fertiliser production. It says this project has a base case net present value of $611m.

And due to the much lower operating cost than traditional mining, Phalaborwa could be one of the most profitable rare earth projects in development today outside of China. It has strong financial backing from the United States International Development Finance Corporation.

Meanwhile, Rainbow says its Uberaba project in Brazil “represents an exciting opportunity to replicate Phalaborwa at a potentially larger size”. It’s working with partner The Mosaic Company to rapidly complete an assessment of this phosphogypsum project, though its seems some way away at this stage. 

Bullish trend

As mentioned, rare earth stocks are hot right now. Rainbow’s UK peer Pensana has seen it share price shoot up 318% year to date!

Rare earths have special magnetic properties, making them vital components in electric vehicles, defence equipment and across the semiconductor industry. China has a near-monopoly on them and has been using them as bargaining chips in the trade negotiations with the US.

Needless to say, the West is really prioritising rare earths right now, especially since President Trump came to power. So there’s a big potential commercial opportunity on the horizon for Rainbow.

There have been four big booms. You had the gold boom in the 19th century, the oil boom in the 20th century, in the early 21st century you had the tech boom — and now you’ve got the rare earths boom.

Tony Sage, CEO of Critical Metals, speaking to CNBC.

No sales

As exciting as this all sounds, the firm isn’t yet generating any revenue, let alone profits. So this is most definitely a speculative small-cap, and there’s likely to be dilution with new share sales along the way.

Last month, Rainbow said that Phalaborwa’s definitive feasibility study is expected to be finalised in 2026, with construction expected to start in 2027. After that, it could expand globally, with strategic partnerships in Saudi Arabia, Morocco and Canada being evaluated.

Chasing rainbows?

Personally, this share is too speculative for me. I remember the 2020-22 boom in lithium stocks, then the painful bust afterwards. Lithium shares still haven’t recovered from their peak, and I fear we might see something similar with rare earths.

Investors still considering Rainbow stock should assess the risks as well as the rewards. It could mint a fortune, or crash and burn.

The post Up 95% since April! Is this ex-penny stock ready to explode at 17p? 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.

Here, I’m going to take a look at two penny shares that are flying right now, Rainbow Rare Earths (LSE: RBW) and Gulf Marine Services (LSE: GMS). Should I buy these growth stocks for my portfolio?

A renewable energy play

Rainbow Rare Earths is a small mining company focused on producing rare earth oxides to drive the green energy transition. Its projects include the Phalaborwa Project in South Africa and the Gakara Project in Burundi. Trading for around 13p, it currently has a market-cap of about £80m.

Now, I can certainly see some reasons to be bullish here. Rainbow’s two key products are both rich in the four most economically important rare earths – neodymium and praseodymium (NdPr), dysprosium (Dy), and terbium (Tb). These are crucial inputs in electric vehicles, renewable energy technologies (eg wind turbines), smart phones, and robotics.

Meanwhile, the company has signed some big deals lately. Last month, for example, it entered into a Memorandum of Understanding (MoU) with potash giant The Mosaic Company to conduct a preliminary economic assessment on extraction of rare earths from a phosphogypsum stack in Brazil.

Ultimately though, this stock is just a bit too speculative for me. At present, the company has minimal revenues and no profits. And it looks like it only has enough cash to last until 2024, meaning it may have to raise capital at some point in the near future (which could negatively impact the share price).

So I won’t be buying the shares for now.

Significantly undervalued?

Turning to Gulf Marine Services it operates a modern fleet of liftboats (self-propelled, self-elevating vessels that are used in various offshore exploration and production activities) used across the oil & gas, renewables, and platform maintenance industries. It currently trades for around 8.5p and has a market-cap of approximately £86m.

There are a number of things to like about GMS, in my view. For starters, it’s profitable. This year, the company is expected to generate earnings per share of 1.6 cents on revenues of $142m.

Secondly, it recently said market demand for its services remains strong. It noted that it started 2023 with a backlog ‘not seen for many years’ ($369m).

Third, the company is aggressively paying down debt in an effort to strengthen its balance sheet. It also recently announced a decrease in finance charges.

Now, this stock does look quite interesting from a value perspective. If the earnings forecast above is accurate (and it may not be), this company could be undervalued.

At its current share price, GMS has a forward-looking price-to-earnings (P/E) ratio of less than seven. That’s about half the UK market average.

One thing that puts me off here however, is the fact that leverage is still quite high. At the end of 2022, net debt stood at $315.9m. In a world of higher interest rates, this adds risk.

In light of this large debt pile, I think there are better (and safer) growth stocks to buy today.

The post Should I buy high-flying penny stocks Rainbow Rare Earths and Gulf Marine Services? appeared first on The Motley Fool UK.

Gaming Realms

A change to gambling legislation is a constant threat to Gaming Realms (LSE:GMR). But the profits potential here remains immense as online gaming goes from strength to strength.

This UK share builds and licences casino games that are played on mobile phones and tablets. Its most famous franchise is the Slingo line of games, the popularity of which helped drive group revenues 27% higher in 2022.

Unsurprisingly Gaming Realms remains committed to developing its cash cow. It launched three new Slingo titles last year and signed an intellectual property (IP) agreement to release a Tetris-based game later in 2023.

I also like the company’s ongoing commitment to rapid expansion to boost user numbers. It has launched with 13 new partners in the year to date (including with Bet365 in the UK and Betway in Pennsylvania). I’m especially excited by plans for further launches in the gigantic US marketplace.

OnTheMarket

The dangers to Britain’s homes market remain severe as interest rates rise and the cost-of-living crisis endures. Property listings business OnTheMarket (LSE: OTMP) is one UK share that could suffer if housebuyer appetite remains weak.

Yet encouragingly the company continues to grow revenues at a rapid pace. And its technology-led approach is proving popular with major estate agency chains.

OnTheMarket is moving away from simply providing property listings. It’s designing technologies that provide a one-stop-shop for estate agents and housebuilders, its platforms also providing data and information management and marketing functions.

This provides considerable potential for earnings. And pleasingly the company has a strong balance sheet to help it develop its suite of tech products. It had cash of £10.4m on its books at the end of 2022.

Rainbow Rare Earths

Profits at commodities businesses like Rainbow Rare Earths (LSE:RBW) are very vulnerable during economic downturns. As consumers and businesses feel the pinch, the amount they spend on products loaded with metals can be impacted.

But this wouldn’t deter me from investing in certain mining stocks given that we’re likely on the cusp of a new ‘commodities supercycle.’ Demand for rare earth minerals (such as neodymium and praseodymium) is tipped to grow strongly too as the manufacturing of electric vehicles and renewable energy projects both heat up.

Rainbow Rare Earths owns the Phalaborwa mining project in South Africa and Gakara asset in Burundi. Both of these are significant sources of such minor metals. They also have other benefits like close proximity to good infrastructure and low cost bases when production begins. The profits potential here is colossal.

Mine development is a risky business and setbacks can place huge strain on the balance sheet. But Rainbow is well capitalised following a recent $7.52m share placing that will fund Phalaborwa through to early 2024. This provides an added layer of protection to investors and makes the stock worthy of serious attention, I feel.

The post 3 penny shares I’d buy to hold for the next 5 years! appeared first on The Motley Fool UK.

Follow the rainbow

Investing in small-cap mining companies can be risky business. Problems at the exploration, development, and production phases can be common. And these can stretch the balance sheets of modest operators to the limit.

However, I still believe Rainbow Rare Earths (LSE:RBW) is worth close attention right now. This is because demand for the uncommon metals it digs for is expected to soar. These materials are used in vast quantities in electric cars and wind turbines, to name just a couple of their applications.

These rare metals include neodymium, praseodymium, dysprosium, and terbium. And analysts at Adamas Intelligence expect consumption of them to rise at an annualised rate of around 8.6% between 2022 and 2030.

At the same time, a lack of new rare earths supply means the market faces a colossal shortfall. Adamas thinks production growth will rise just 5.4% over the same eight-year period. So Rainbow Rare Earths can expect to command a premium price for its product.

I like this penny stock in particular because of the quality of its assets. Metal grades at the Phalaborwa project in South Africa are impressive and cash costs are likely to be extremely low. The company also owns the Gakara project in Burundi, a site that’s been described as one of the planet’s richest rare earths deposits.

Another mining star

Economists believe we are at the early stages of a fresh commodity supercycle. I think Rainbow Rare Earths could be a great way for investors to make huge returns from it. And so might Phoenix Copper (LSE:PXC).

Demand for red metal is also tipped to shoot higher over the long term. Its high conductivity means it will have an important role to play in the green revolution. Meanwhile, its wide use in construction means consumption should surge as urbanisation rates in emerging markets increase.

Analysts at mining advisory firm RFC Ambrian expect copper demand to reach 33.6m tonnes in 2030, representing an annualised growth rate of 3.1%. And like the rare earths sector, only weak supply increases are predicted, which could leave copper with a large market deficit.

Phoenix Copper owns the Empire mine in Idaho. It’s an asset which contains 129,641 tonnes of copper as well as substantial amounts of zinc, silver, and gold.

The penny stock also owns two cobalt projects in the same US state. The material is a key component in electric vehicle batteries and gives the business an extra way to capitalise on the energy transition.

Commodity prices can be volatile. And as a consequence, company earnings can also be choppy. But as a long-term investor I still find Phoenix Copper an attractive investment. I think profits could soar in the years ahead.

The post 2 top penny stocks I’ll be looking to buy in February appeared first on The Motley Fool UK.

Here’s one penny stock that looks a smart buy to me today. However, it may well take some time for this one to play out. That’s why I’d tuck some shares away for the long term.

Rare earth minerals

Rainbow Rare Earths (LSE: RBW) is a Guernsey-based mining company focused on producing rare earth oxides required to drive the green energy transition. The firm’s projects include its flagship Phalaborwa Project in South Africa and a high-grade project in Burundi. It is also investigating other sites in South Africa and Morocco.

The company is focused on producing four magnet rare earth metals: neodymium, praseodymium, dysprosium, and terbium. These are essential for permanent magnets in wind turbines, EV motors, and much else.

To call rare earth elements ‘rare’ is actually a bit misleading. They’re quite widely distributed around the earth’s crust, but they’re hidden behind other metal and mineral deposits. This makes them difficult to mine because they’re not usually found in commercially exploitable quantities.

If they are extracted, then they have to be processed. Today, that almost always happens in China. In fact, China produces more than 80% of the world’s rare earth-refined products. But Rainbow plans to build its own downstream production facility, which will see it separate rare earth oxides using patented IP and technology.

Alternative supply chains

In 20 years time, the world is expected to need four times as many critical minerals for clean energy technologies as it does today. So the UK government wants to become less reliant on China and establish alternative supply chains for rare earth minerals.

It wants this in place by 2030, when all new vehicles manufactured will be electric.

This is a very supportive backdrop for Rainbow Rare Earths, which is hoping to profit from all this. But how long do we have to wait?

Projects

The company plans to build a pilot plant at the Phalaborwa deposit early this year. This will likely be financed through debt. The company then expects to go into full production in 2026.

Rainbow expects to process 2.2m tonnes of phosphogypsum per annum over 14 years. This will produce 26.208 tonnes of separated rare earth oxides. Based on the average cost today, management claims this will deliver a 75% EBITDA operating margin.

However, its Gakara Project in Western Burundi remains on hold, pending approval from the appropriate mining ministry. Given this is one of the world’s richest rare earth deposits, I do expect the government to ultimately give the nod for this project.

Obvious risks

There is significant risk here. The obvious issue is that production at these mines still needs financing, likely through a combination of debt and equity. But interest rates continue to rise, which adds risk. And selling more shares means diluting existing shareholders.

The company has $4m of cash, so isn’t at risk of going under anytime soon.

At 10p, the stock is down 13% since the company went public in 2017. Overall, I’m encouraged enough to start a small position in this high-risk, high-reward miner in the coming days.

The post 1 penny stock I’d buy and hold till 2030! appeared first on The Motley Fool UK.

A penny stock for the EV revolution

It’s obvious by now that electric vehicle (or EV) sales are set to explode over the next decade. Major carmakers are doubling down on the production of low-emission vehicles, a trend that bodes well for suppliers of key EV materials. This is why I’d buy Rainbow Rare Earths (LSE: RBW) for my shares portfolio.

This stock owns the high-grade Gakara neodymium and praseodymium project in Burundi, East Africa. These elements are then used to make the magnets that propel EVs along. To give an indication of the size of the market, the International Energy Agency (IEA) thinks electric car sales will surge to 15m in 2025 and 25m in 2030. This compares with the 3m low-carbon vehicles that rolled out of showrooms last year.

Buying mining shares like Rainbow Rare Earths can be risky business. Unexpected production problems can be commonplace, driving costs higher and hitting revenues hard. Still, it’s my opinion that the potential rewards on offer at this particular miner offset the dangers.

Golden oldie

The Old Mutual (LSE: OMU) share price fared particularly badly in November. It’s fallen a meaty 18% in just a fortnight as a direct result of the ongoing public health emergency. Investors first raced for the exits when the insurer warned it had taken a hit of ZAR6.6bn in the nine months to September due to excessive Covid-19 deaths.

The news worsened the sense of panic around Old Mutual when it subsequently emerged that the Omicron virus variant was spreading rapidly in Old Mutual’s key territory of South Africa. As I type, the financial services provider is now trading well inside penny stock territory blow 57p.

I think this recent drop could provide a decent dip-buying opportunity for me, however. The ongoing pandemic is something that shouldn’t be underestimated. But as a long-term investor there’s a lot I like about Old Mutual. First, I like its position as one of Africa’s most trusted brands, a critical quality when it comes to looking after people’s money.

8% dividend yield!

I also think profits here could jump because of rising wealth levels and historically-low financial product penetration in its emerging markets. Financial institutions in Africa now hold a whopping $1.41trn worth of assets, according to Statista.

Old Mutual now trades on a price-to-earnings (P/E) ratio of just 7.6 times for 2022. This is the sort of value for money that warrants serious attention in my book. Meanwhile the financial giant also sports a dividend yield just under 8%. Like Rainbow Earth Minerals, this is a penny stock I’m seriously considering loading up on today.

The post 2 penny stocks (including an 8% dividend yield) I’d buy as the stock market crashes! appeared first on The Motley Fool UK.

As a long-term investor, however, Revolution Bars is a share that’s still drawing my attention. The business operates dozens of premium bars across the country. It’s therefore well placed to exploit the trend of consumers spending ever-higher proportions of their income on going out. Leisure spending in Britain has been growing at twice the rate of retail in recent times.

Most recent trading data from Revolution Bars has illustrated the robustness of this trend too. Between 19 July and 2 October the business saw sales jump 17% compared with the same period two years earlier.

A rare beauty

I also like Rainbow Rare Earths (LSE: RBW). Demand for rare earth metals has rocketed over the past decade as the manufacture of mobile phones, computers and other consumer electronics has boomed. Elements like neodymium and praseodymium (commonly known as NdPr) are essential components in making such hi-tech devices run. Some analysts think that demand growth will move up several notches too as the green technology revolution kicks off.

Take the boffins at investment firm CITIC, for example. They’re predicting that “downstream demand for rare earths is expected to continue to improve” as sales of low-emission cars, wind turbines and special energy-saving air conditioners rise. At the same time CITIC thinks supply from China, the world’s largest supplier of rare earths, will fall as local lawmakers clamp down on unregulated production.

All this bodes well for NdPr prices for the first part of the decade, and by extension profits at Rainbow Rare Earth. Through its Gakara project in Burundi the company is sitting on one of the richest rare earths resources on the planet. Mining is a notoriously difficult business and setbacks can deal a significant blow to profits. However, I think predictions of soaring demand still make this penny stock very attractive today.

A penny stock for 2022 and beyond?

I think Futura Medical could be on the cusp of delivering explosive revenues growth. In a potentially game-changing year, the business — which has high hopes for its MED3000 erectile dysfunction gel — has received the green light to begin trials in the US. And it now has the critical ‘CE’ marking in European markets, as well as having signed key licensing agreements spanning the globe.

Futura has a battle on its hands to take on Pfizer’s market giant Viagra. But the fast-acting nature of its product could still make it a winner in a rapidly-growing market. That’s providing trials of MED3000 yield positive results in 2022. It’s estimated that global impotence rates will have doubled between 1995 and 2025.

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Here are what I consider to be two of the best penny stocks I’d buy right now.

Pot of gold

I think Rainbow Rare Earths (LSE: RBW) could be a great one to buy for the next 10 years at least.

The 17 metallic elements that make up the rare earth spectrum are essential in the manufacture of a broad range of electronic products. They can be found in mobile phones, wind turbines, camera lenses, catalytic converters and x-ray machines among other things. And some experts believe that supply of these special metals will fail to keep pace with booming consumption. Analysts at Adamas Intelligence think the problem will worsen too. They reckon that the “demand growth of the 2020s will soon be dwarfed by the astronomical demand growth of the 2030s.”

This bodes extremely well for prices of the metals and consequently profits at the likes of Rainbow Rare Earths. This particular mining play holds a 90% stake in the Gakara project in Burundi, one of the richest rare earth deposits on the planet. I’d be aware, though, that some electric car manufacturers are taking steps to reduce the use of rare earths in their vehicles. Falling demand from this key market could have a significant impact on rare earths demand.

Another penny stock I’d buy

I think Airtel Africa (LSE: AAF) is a stock that could also deliver splendid returns over the next decade. The company offers telecoms and mobile money services across 14 African countries including continental powerhouses Nigeria and Kenya. It therefore has two chances to exploit soaring personal income levels in these emerging markets.

Airtel Africa’s customer base grew by 8.4% in the three months to June 2021, to a whopping 120.8m people. Its mobile data business grew its base by almost 15% year-on-year in the quarter. And its mobile money division’s customer numbers rose by an eye-popping 25% over the period. No wonder major businesses like Mastercard and the Qatar Investment Authority have been lining up recently to buy a stake in Airtel’s financial services business. EY Club estimates that as many as 60% of Nigerians, for example, don’t have access to a bank account.

It’s important for me to remember that Airtel Africa isn’t the only major player in these fast-growing markets. Telecoms titans like Vodafone and Africell are also spending heavily to build their own customer bases. Global blue-chips like Vodafone and local operators like PalmPay and Paystack are also rapidly investing in the mobile payments market. That doesn’t quash my belief that Airtel Africa could still deliver explosive returns over the next 10 years, however.

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Best of the Best

This time last year, shares in online competition firm Best of the Best (LSE: BOTB) were changing hands for 395p. Yesterday, the price closed at a staggering 3120p. Clearly, people have been very keen to win cars and other prizes while being forced to stay at home.

Back in February, the company revealed that strong trading had continued into the third quarter and that it remains likely to outperform management’s previous expectations. In fact, things have been going so well that BOTB has now removed its ‘for sale’ sign.  

Despite rising by so much, I think this UK share could head higher. Analysts are forecasting a 14% jump in earnings in the next financial year. This gives BOTB a price-to-earnings (P/E) ratio of 21. That still looks very reasonable when you consider the outsize returns on capital and decent operating margins it achieves.

On the flip side, one does need to consider whether trading will remain quite so stellar once lockdown restrictions are fully lifted. So, as much as I like to ‘run winners’, I’d be mightily tempted to take some money off the table if I were invested.

Rainbow Rare Earths

A second company worth highlighting is Rainbow Rare Earths (LSE: RBW). One year ago, its shares were 1.45p. Yesterday, they closed at 17.75p! 

Much of this momentum is probably due to the buzz surrounding renewable energy. Rare earth metals (such as neodymium and praseodymium) are used in magnets for electric vehicles and wind turbines. Importantly, they have no known substitute.

Rainbow looks well placed to capitalise on demand eventually outstripping supply. Its Gakara Project in Burundi gives out one of the highest-grade concentrates in the world. 

However, where the RBW share price goes in the rest of 2021 is difficult to say. Mining stocks are notoriously volatile and some profit-taking would be understandable after such a strong recovery.

Then again, I also wouldn’t be surprised if many investors elected to stay put. With countries looking to secure their supply chains (China already controls 80% of the rare earth market), there could still be quite a bit of upside ahead.

Naked Wines

A final UK share that’s done extremely well for holders is online wine seller Naked Wines (LSE: WINE). Sure, the share price hasn’t performed quite as brilliantly as BOTB or RBW but we’re still talking about a gain of 200% or so. If only I’d backed my judgement back in 2020!

As one would expect, Naked has benefited hugely from the UK lockdowns. Back in November, it revealed a near-80% rise in revenue (to £157.1m) for the six months to 28 September. Since we’ve had yet another lockdown in 2021, I believe the full-year numbers will be just as good. An update is due in a couple of weeks. 

The question, however, is whether demand is likely to moderate when we’re allowed to visit the pub again.  I suspect this might be the case. For this reason, I would probably only take a small position now.

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