South America

The main gold and copper interests of SolGold (LSE:SOLG) are in Ecuador.

To date, the company has raised $494m from investors, and has borrowings of $139m. It still hasn’t earned any revenue, but its directors are confident it soon will. They haven’t yet specified a date for the start of commercial operations. But the company’s website claims that is reserves are worth $2.9bn — nearly six times its current market cap.

Under a worst-case scenario, the company has sufficient cash to continue until November. The most optimistic view is that it will run out of money in January 2024. Either way, it’ll soon have to go fundraising.

And that’s the problem with small mining companies. They’re cash hungry. Looking for precious metals deep underground is an expensive business. If I bought shares in SolGold today, I’d have no idea by how much by shareholding would be diluted by the time its mines start producing.

So it’s no surprise that the company’s share price is down 38% over the past year.

The price fall could be a buying opportunity and some share chat forums are full of speculation about a possible takeover bid. Personally though, I think it reflects concerns about how much more cash SolGold will have to find before it becomes commercially viable. I’m not buying.

Down Under

I already own shares in Greatland Gold (LSE:GGP), another popular mining stock with smaller investors.

And to be honest, my investment has been a bit of a disaster. Even after the company starts generating revenue from its 30% stake in the Havieron mine, I don’t think I will ever recover my initial outlay.

In September, it reached an agreement with Wyloo Metals that means it now has access to the necessary finance to fully fund production at Havieron.

Wyloo invested when the share price was 7.8p. Since then, its fallen by nearly 5%. Greatland now has a stock market valuation of £375m but this looks on the high side to me.

An independent expert recently valued its stake in Havieron at $360m (£300m). The company does have other interests, but I don’t see how they can be worth £75m given that they’re at an early stage of development.

The verdict

I know how easy it is to get caught up in the hype surrounding mining companies.

But I’ve learned my lesson. Because of the risks associated with exploration, I’m now only interested in miners with proven reserves that are generating revenue. They also need to be of sufficient scale to pay a generous dividend to shareholders. That’s why I own shares in Anglo American.

Its share price has taken a bit of a battering lately, falling by 13% over the past month. And it’s down 27% since March last year. Last month, the company released disappointing results for 2022, showing a 30% drop in profit.

Even though the total dividend for last year is 60% lower than it was for 2021, the stock is still yielding 5.9% — above the FTSE 100 average. That’s the sort of mining stock I like!

The post Could I strike gold with these penny stocks? appeared first on The Motley Fool UK.

A renewable energy stock on my radar

Things are looking extremely sunny for renewable energy stock US Solar Fund (LSE: USFP) as we move into 2022. Industry analysts are expecting demand for green electricity to pick up the pace as the battle against climate change steps up.

In a recent report, Deloitte, for example, said that it expects growth in the US renewable sector to accelerate next year. It reckons the industry will grow as “concern for climate change and support for environmental, sustainability, and governance (ESG) considerations grow and demand for cleaner energy sources from most market segments accelerates”.

Government support for green energy specialists is particularly helpful in the States. This is another reason why I like US Solar Fund specifically — the assets it’s invested in are located in California, North Carolina, Utah and Oregon. I’d buy this penny stock even though the intermittent nature of solar power generation can often cause profits turbulence.

A great inflationary hedge

I’m also thinking of buying Solgold (LSE: SOL) to protect my portfolio from the ravages of inflation. This is because the precious metal the penny stock produces attracts greater buyer interest when fears over paper currencies rise, in turn pushing prices higher.

Latest data from the World Gold Council shows how investment in gold-backed ETFs is hotting up. But it’s not just individual investors who are ramping up their exposure to the safe-haven metal. Developed central banks have added to their gold reserves for the first time since 2013, the WGC notes, with Ireland and Singapore making their first purchases since 2008 and 2000 respectively.

The World Gold Council recently suggested that gold purchases from central banks could hit 450 tonnes in 2021. That’s up considerably from the 255 tonnes they collectively snapped up last year. I think there’s a good chance bank policymakers will keep bulking up their assets in 2022 and beyond too.

Another dirt-cheap UK share

Tharisa (LSE: THS) is another precious metals producer I think stands to gain from the inflation boom. Like gold, platinum group metals (PGMs) also rise in value when inflation increases. They could also keep moving northwards if the Covid-19 crisis continues to roll on. 

Conversely, though, values of the PGMs Tharisa produces could rise if the economic outlook brightens. This is because industrial demand for the dual-role metals would likely improve. In this way I think Tharisa’s a great way for me to hedge my bets.

Of course there’s no guarantee that gold or PGM prices will rise. They could reverse for a variety of reasons, spelling trouble for Tharisa and Solgold’s top lines. What’s more, profits could take a hit if production problems occur. This is an ever-present threat to companies like these. As things stand today, though, I think both are highly attractive from a reward-to-risk perspective.

The post 3 cheap UK shares (including 2 penny stocks) to buy for 2022! appeared first on The Motley Fool UK.

The rising SolGold (SOLG) share price

The primary catalyst behind last week’s surge in the SOLG share price appears to be a new set of drilling results. Specifically, those of its Tandayama-Ameríca deposit located approximately 3km north of its flagship Alpala site. The company has confirmed the presence of medium-grade copper & equivalents across the first 13 test drill holes. Assay results from holes 14 to 23 are still being analysed. And drilling for 24 to 27 is now under way.

This discovery is undoubtedly good news. But what seems to have investors excited is a preliminary detection of visible chalcopyrite veining with a 2% concentration at drill hole 24. That’s a fancy way of saying it found high-grade copper. For reference, anything above 1.5% is typically considered excellent. The news is even more promising given that trace amounts of gold were also found.

Beyond confirming the presence of minerals, the purpose of drilling assays is to isolate the best location to establish a fully developed mining site. By the sounds of it, SolGold may have just found what it was looking for. And with an 85% equity stake in the Cascabel project, the SOLG share price could have the potential to explode over the long term.

Taking a step back

As exciting as these results may be, there remains a lot of work to be done.  A mineral resource estimate for Cascabel is expected to be released later this year. But even after this is published, developing a fully functional mining site is a long and expensive process. In other words, it could be several years before any form of ore extraction takes place.

Another important factor to consider is the fact that SolGold is still a pre-revenue business. With no active sites in its portfolio, the company is dependent on external financing to keep the lights on. As it stands, SolGold has around £105m of debt on its balance sheet. The loans have granted it a big chunk of capital to work with. But it may not be sufficient over the long term. So, I wouldn’t be surprised if its equity stake in Cascabel gets smaller or if SolGold decides to issue additional shares. Either way, these actions would likely hurt the SOLG share price.

Can the momentum continue?

Suppose the next set of drilling results also come back positive? In that case, I think it’s likely that the SOLG share price will continue its current upward trajectory. However, as it stands, the stock’s market capitalisation is being driven by future expectations of performance rather than underlying fundamentals. That’s not the sort of investment I’m personally interested in making. Therefore, I’m keeping SolGold on my watchlist for now.

The post Can the SolGold (SOLG) share price continue climbing? appeared first on The Motley Fool UK.

The rapidly recovering SolGold share price

I’ve previously explored this business. But as a quick reminder, SolGold is an early-stage mining group operating out of Ecuador and Australia. Despite its small size, the firm successfully managed to secure the rights to a large region of land containing what could be the world’s best-underdeveloped gold and copper mining location. At least, that’s how the management team describes it. And that may not be a exaggeration.

This area was titled the Alpala project. It contains a multi-billion-dollar mountain of wealth responsible for sending the SolGold share price up by nearly 70% in 2020 alone. However, the recent growth appears to originate from progress made at the firm’s Cascabel project.

Located approximately 3 km north of the Alpala deposit, Cascabel is 85% owned by SolGold through a subsidiary. While it is currently unknown how much ore is present at the site, seven of the 10 drill hole assays detected consistent levels of copper and equivalents in densities similar to what was initially found at Alpala. Further assays need to be carried out. But the management team has stated it aims to release a mineral resource estimate later this year.

This is excellent news for the business and its investors. Therefore seeing the SolGold share price take off is not that surprising to me.

What’s next?

The progress made at both Alpala and Cascabel is promising. However, there remains a long road ahead where many things can go wrong. The pre-feasibility study for Alpala has been consistently delayed, with a current release date set for late 2021. And until this is completed, the deposit will remain untouched. Cascabel, on the other hand, is in a much earlier stage of development. Therefore even if it reveals itself to be a second Alpala, it could be several years before any mining actually starts.

Why does this matter? Being a mining business, SolGold has no pricing power. It is almost entirely at the mercy of fluctuating commodity prices. At the moment, due to supply restrictions caused by the pandemic and fears of inflation, the price of copper and gold have been rising rapidly. However, there is no guarantee they will stay that way. In other words, SolGold may not be able to take advantage of the currently elevated material prices. And therefore, any decline in the value of these metals will likely adversely affect the SolGold share price.

The bottom line

My opinion on SolGold remains largely unchanged. The latest results from Cascabel are exciting, but as a whole, the company is still very young with no source of revenue.

If the management team successfully executes its current strategy, then I believe the SolGold share price could see some explosive long-term growth. However, with so many unknowns at this stage, I’m still keeping this stock on my watch list for now.

The post What going on with the SolGold share price? appeared first on The Motley Fool UK.

There are those who won’t touch these low-cost shares with a bargepole. This is because they can be prone to bouts of severe share price volatility. But then there are others who think penny stocks — so-called because of their sub-£1 price tags — provide a chance to discover some gems that have been overlooked by the market.

As a long-term UK share investor I’m not afraid to buy these cheap shares for my own Stocks and Shares ISA. Sure, prices of low-cost equities can be choppy at times. But as someone who buys shares and holds them for a number of years, this doesn’t worry me. Like any stock, penny stocks with strong fundamentals can be expected to provide great returns over a long time horizon.

A golden penny stock

I’m seriously thinking of adding SolGold (LSE: SOLG) — which trades at 30p per share — to my ISA today. Having exposure to gold is always a good idea as it can protect my stocks portfolio from total washout when social, economic or political crises unexpectedly emerge. This was certainly the case in 2020 when the shock Covid-19 outbreak supercharged demand for safe-haven precious metals. The gold price’s subsequent surge to record highs propelled the share prices of gold producers and explorers like SolGold.

Gold values have fallen quite a bit from last summer’s all-time peaks around $2,067 per ounce (that was in August). But I think yellow metal prices could move higher again as ultra-loose monetary policy reigns. As the World Gold Council (WGC) notes: “A levelling in interest rates on the back of accommodative global monetary policies, combined with rising money supply and further inflationary pressures, may support gold investment demand.”

I think the stage could be set for gold prices to rise from their current levels of $1,750 per ounce. And especially so if the recent resurgence in coronavirus cases continues and fear-based buying of bullion re-emerges. It’s a scenario that could pull penny stock SolGold’s share price to the stars once more.

An attractive UK share

Of course there’s no guarantee that gold prices will soar again. But this is not the only danger. SolGold’s share price might fall even as gold prices jump if the company encounters fresh operational problems. Exploration is often no walk in the park and this penny stock is no stranger to experiencing delays in recent times. What’s more, disappointing results when that exploratory work comes in is another potential issue that can hammer the prices of UK shares like these.

That being said, I still think SolGold is an attractive penny stock to consider buying today. I think the quality of its assets on the Andean Copper Belt, and the bright outlook for precious metal prices, both make it worthy of serious attention.

The post A UK penny stock to buy for my Stocks and Shares ISA appeared first on The Motley Fool UK.

A hidden mountain of wealth

As previously stated, SolGold is a young mining business that’s still firmly within its exploratory phase. It operates primarily within Ecuador at the Andean copper belt. But it also has operations in Australia and the Solomon Islands.

What makes the company quite unique is its Alpala project. Despite its youth, it’s secured the rights to a site that sits directly on top of a vast copper, silver and gold deposit. The management team has already proclaimed it to be among the world’s best-underdeveloped locations, with an estimated mining lifetime of 55 years. And based on the preliminary results, I’d certainly agree.

The multi-billion-dollar project is estimated to contain up to 9.9 Mt of copper, 21.7 Moz of gold and 92.2 Moz of silver. Needless to say, that’s a mountain of wealth to be extracted. So, given the enormous opportunity this project presents, why is the SOLG share price behaving like it’s on a rollercoaster?

SolGold’s volatile share price

It seems there remains quite a bit of uncertainty surrounding the Alpala project. There have been consistent delays in the completion and publication of the company’s pre-feasibility study. Consequently, it’s unlikely SolGold will be able to take advantage of current high commodity prices.

However, the business of metals exploration is fraught with risk. And while delays are frustrating, the additional due diligence of the management team does seem a prudent decision, in my opinion.

But delays raise costs. So far, the Alpala project’s expenses are estimated to be between $2.4bn and $2.8bn. This is particularly troublesome as SolGold currently has no revenue stream. That means the company is entirely dependent on external funding, which created some problems for Cornerstone Capital Resources.

The Canadian firm owns a 15% stake in the Alpala project as well as an 8% interest in SolGold itself. And unfortunately, the two firms have a conflict of interest. The first wants to sell the project, while the second intends to develop it. The situation only got worse after a failed hostile takeover, adding even more uncertainty to the SOLG share price.

The bottom line

There’s no denying the Alpala project is an enormous opportunity for this business. And if executed correctly, I believe the SOLG share price could explode in the next few years. However, early-stage mining companies are already exceptionally risky. And seeing stakeholders in the project have significantly different strategies on how to proceed raises some alarm bells.

As big as this opportunity may be, the level of uncertainty and discord gives me pause. Therefore, I’ll be keeping SolGold on my watch list for now. At least until more information becomes available.

The post Is the Solgold share price about to explode? appeared first on The Motley Fool UK.

However, this can create an indirect benefit for eagle-eyed investors to pounce upon. It means that many quality stocks have been overlooked by the market, allowing those that do their research an opportunity to nip in and grab a bargain or two.

Let me talk you through an attractive penny stock I’m thinking of buying this April after recent price weakness.

Gold set to rebound?

Major global stock markets might be trading higher than at beginning of 2021. But investor nerves remain frayed as the Covid-19 crisis threatens to explode again at any moment. The third wave of infections washing across Europe, and the subsequent reintroduction of severe restrictions in the region, is being watched carefully by market makers.

This explains why gold prices have continued to trade within a tight range during March. Sure, yellow metal prices might be some $300 off last summer’s record peaks. But I believe investor demand for safe-haven assets like gold could soar again before long.

In fact, with low interest rates likely to persist for long into the future, and huge money-printing exercises continuing in order to stimulate the global economy, I think there’s plenty of reasons to expect bullion prices to spike soon.

A 24-carat penny stock

A fresh price spike would play into the hands of penny stock Solgold (LSE: SOLG). This UK share explores for the shiny stuff primarily out of the Andean copper belt in Ecuador, though it also has operations in Australia and the Solomon Islands.

It’s therefore in prime position to benefit from any fresh rise in gold prices. The Cascabel formation in the Andes is one of the largest untapped gold resources on the planet. And penny stock Solgold’s Alpala asset sits slap bang on top of it.

Bear in mind though, there’s no guarantee gold prices will soar again. Any rise in risk appetite and rising bond yields could well put pay to that. On top of this, the business of commodities exploration is packed with risk and is hugely costly. This means operators like Solgold can quickly find themselves in a massive financial hole.

That said, I think Solgold’s shares are still worth close attention at current prices. The UK mining shares have almost halved in value in less than six months and were recently trading around 22p. Ongoing drilling work at its core Ecuadorian projects continues to reap encouraging results. And, again, there are very good reasons to expect gold prices will shoot higher before long.

Solgold is one penny stock I’d be happy to buy in my Stocks and Shares ISA this April.

The post A top penny stock I’d buy in my ISA in April appeared first on The Motley Fool UK.

The project, which is on the Cascabel concession in northern Ecuador, is the firm’s flagship asset. It’s ranked as the ninth-largest undeveloped gold deposit in the world. I think this shows the company’s potential. But it also highlights the risks. Developing large mining prospects can be hugely expensive and time-consuming. The projects can become money pits and bankrupt their backers. 

Why is the SolGold share price falling? 

The challenges of bringing a large mining prospect to the market are displayed in SolGold’s latest trading update. The company’s pre-feasibility study for the Alpala project will now not be complete until “late 2021.“

Management said the company needs the extra time to address “a number of mine development and metallurgical alternatives and potential upsides, including the resource potential on other targets within the Cascabel concession.“

The press release went on to add the firm’s project committee has “noted that it would be advisable to consider adjusting the current draft mine development plan and the draft mine production plan to de-risk the project.“

It seems to me that the SolGold share price has fallen on this news because it’s now going to take longer for the company to develop its Alpala project and take advantage of high gold prices. I think this is both a benefit and a drawback. Delays to mining projects are never good.

However, jumping into a project without first understanding the capital requirements and potential rewards would be even worse. Therefore, while the delay is disappointing, in my opinion, management has made the right decision.

Trying to reduce initial capital requirements and optimising output in the early stages could significantly increase initial profitability, although it’s not guaranteed. 

Buy, sell or hold

Even though the company owns one of the world’s largest undeveloped gold mines, I believe the SolGold share price is a risky proposition. Developing large mines is very challenging, and there’s no guarantee the project will live up to initial expectations. Investors will only really find out if the mine is as good as promised when shovels are in the ground. Up until that point, there’s no guarantee the corporation will ever find anything.

Still, pre-feasibility studies will de-risk projects if they’re executed correctly. So, it seems to me as if management is doing everything possible to reduce the challenges facing the business. 

As such, I’d consider using today’s decline to acquire a small position in the group for my portfolio. It’s clear to me the SolGold share price is a speculative investment. But it also has terrific potential.

I’m comfortable with that level of risk with a small position in my diversified portfolio. 

The post The SolGold share price is falling today. Here’s what I’d do right now appeared first on The Motley Fool UK.

With 13% more gold produced than in the previous quarter, reaching 45.1 koz from Q2’s 39.9 koz, full year output is now “expected to be at top end of 160-175 koz guidance range.“

On top of that, copper production rose by 7% to 77.2 kt (from 72.3kt in Q2), and the company says it’s on track for meeting full-year guidance of 270-300 kt.

The KAZ share price had been in a bit of a tailspin, having lost more than 50% of its value since its 2018 peak in June. But a month ago, fellow Fool writer Peter Stephens rated the turnaround potential for a recovery as high, and this latest update will surely strengthen that sentiment.

Price recovering?

The share price rise on the day, while welcome, does need to be taken in context — it has actually only just returned to the level it stood at a week ago, before dropping in the days before the current update.

Analysts are predicting modest earnings rises for this year and next, but those would be sufficient to drop the stock’s forward P/E to only 5.6 this year, and as low as 4.8 in 2019. And with the share price so low, dividend forecasts suggest yields of 2% and better, even though the cash would be covered nine times by earnings.

What are the downsides? Net debt of $2bn at the halfway stage at 30 June looks scary, but that’s only approximately 1.5 times annualised EBITDA, which is a multiple that’s generally considered manageable.

We’re looking at an impressively low PEG ratio for 2019 of 0.6 too, which is often a good growth indicator.

KAZ is risky, certainly, but I’m also feeling positive about the recovery potential here.

More glitter

Gold miners tend not to excite me too much, but I can’t help but notice a recent share price spike at SolGold (LSE: SOLG). After a big slump in 2017, the price has soared by nearly 90% in less than two months.

Part of the boost comes from confidence in the firm shown by BHP Billiton which, this month, subscribed for 100 million new shares in SolGold at 45p apiece, to raise £45m for the company.

There are a number of conditions attached to protect BHP’s interest, including the right to appoint a director to the SolGold board. To me, it all adds up to a step forward in governance and a lowering of the risk for private investors.

Some risk

My colleague Peter again appears cautiously optimistic, suggesting that “while potentially volatile in the near term, the stock could have investment appeal.” That was before the BHP involvement was announced, and I think the latest news reinforces Peter’s thoughts.

I’m always wary of the fact that gold has little actual use other than as artificially desirable shiny stuff. But it’s in a reasonably buoyant phase at the moment, and with world political and economic uncertainty likely to continue for some time, this could be a good time to get into gold stocks.

I rarely go for risky growth stocks these days, but a younger me could have been tempted by both of these.

The post Could KAZ Minerals beat the SOLG share price in 2019? appeared first on The Motley Fool UK.

Not all resources stocks have enjoyed such strong performance, though. Reporting on Friday was a mining company which could offer investment potential after a volatile period.

Uncertain outlook

The company in question is gold miner SolGold (LSE: SOLG). Its final results showed that it’s been an eventful year for the company, having progressed with substantial parts of its Ecuadorian portfolio. For example, its Cascabel project has moved ahead, while the company has also identified 10 key regional projects to progress on. It also raised £45m in November 2017 to continue drilling at Cascabel, and seems well-placed to deliver further progress over the medium term.

The company’s share price performance has been highly volatile in the last year. While it’s up 16% during the period, there have been large parts of the last 12 months where it’s also been significantly down.

Looking ahead, SolGold could experience further volatility. A rising US interest rate is making income-producing assets more attractive to investors, while a stronger US dollar is also hurting demand for gold, to some degree. In the long run, however, the prospects for the gold price could be positive due to the potential for higher inflation and economic uncertainty. As such, and while potentially volatile in the near term, the stock could have investment appeal.

Improving financial performance

Gulf Keystone Petroleum’s financial prospects are set to improve dramatically over the medium term. The company is expected to post a rise in earnings of 63% in the next financial year, and this could help to improve investor sentiment. With the company’s shares trading on a price-to-earnings growth (PEG) ratio of 0.1, they seem to offer an impressive buying opportunity, based on their risk/reward ratio.

Clearly, there’s still the potential for heightened geopolitical risk in areas the company operates. This could cause high volatility in future, but ultimately, this risk appears to have been priced into the company’s valuation when compared to both sector and index peers.

With the prospect of a buoyant oil price due to stable demand and an uncertain outlook for supply, the oil and gas sector could continue to perform relatively well. While there may be less risky options than Gulf Keystone Petroleum that have greater diversity and more stable balance sheets, for less risk-averse investors the stock could hold investment appeal. A 200% share price rise over the next year may not be possible, but significant capital growth could nevertheless be ahead over the long term.

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