A project in the heart of Europe

The first company that excites me is European Metal Holdings (LSE:EMH). It’s a small-cap stock with a market value of £84.4m.

The business is a mineral exploration and development company, with a focus on lithium. To this end, hope is being pinned on the Cinovec project in the Czech Republic. Progress is ongoing, with Covid-19 providing delays last year. In the latest update, the company was positive about the outlook to make it commercially successful.

I think there’s large upside here due to the location of the project. It’s in Europe, with easy distribution networks available to ship resources. This could be to major car manufacturers in Germany or electronic companies based in Eastern Europe.

The share price has halved in value over the past year. I put some of this down to a retracement from the middle of 2020 when the price soared on rumours around the project. With the net present value of the project estimated to be $1.94bn but the European Metal Holdings shares valued at a fraction of that, the potential here is large.

One risk here is the unknown. Even though things look promising, until lithium is successfully on the way to end users, there’s always the fear that the project never materialises.

A top lithium stock with upside

The second stock I’m thinking about buying now is Trident Royalties (LSE:TRR). The business is a streaming and royalty firm in the commodity space. It’s not solely focused on lithium, but does have an interest in it via the Thacker Pass project.

The Thacker Pass is operated by an American company. But Trident has a 1.75% gross revenue royalty from any lithium proceeds, as well as a 60% interest in the project. The Thacker Pass is one of the largest known lithium resources in North America. Trident has recorded the stage of the project as advanced.

Clearly, even with what seems to be a small percentage of the revenue, this could offer significant benefits given the size of the project. It has an estimated 3.1m tonnes of lithium carbonate equivalent, with the average price of carbonate last year being $17,000. The potential revenue output here is in the billions!

The share price is up 28% over the past year, with gains in July due to a positive trading update.

My concern here remains the same as European Metal Holdings, in that production hasn’t started. However, I have to accept that in order to potentially have serious returns, I do need to accept that there will be a higher level of risk involved.

The post 2 top lithium stocks with eyebrow-lifting potential appeared first on The Motley Fool UK.

According to a report by the US Geological Survey, lithium production jumped 21% in 2021, versus global demand’s rise of 33%. With supplies quickly running out, lithium prices have gone through the roof.

In January last year, the price of lithium carbonate (the primary ingredient in lithium-ion batteries) stood at $7,000 per tonne. Today, it’s closer to $55,000, with analyst forecasts indicating even higher prices on the horizon. With that in mind, let’s explore which UK mining stocks are perfectly positioned to capitalise on this seemingly massive opportunity.

An industry leader

One of the biggest mining companies in the world is Rio Tinto (LSE:RIO). And it’s the first lithium stock that came onto my radar this week, which may seem odd for investors familiar with this business. Why? Because Rio Tinto doesn’t produce any lithium. At least not yet.

In March, management signed and completed an $825m acquisition of the lithium Rincon project in Argentina. That’s not cheap by any means. But Rincon is a long-life, scalable extraction site containing battery-grade lithium carbonate.

That’s obviously an exciting prospect. And providing lithium prices continue in their upward trajectory, the firm may recoup its investment relatively quickly. Having said that, it’s important to note that Rincon is currently undeveloped. That means quite a bit of work needs to be done before any production can begin. And with commodities being cyclical, there’s the risk of prices falling before Rio Tinto can profit from the opportunity.

Personally, I feel this is a risk worth taking. Even if lithium prices stumble, the group has plenty of other metals in its portfolio, enjoying similar tailwinds from the renewable energy transition.

An opportunity among penny lithium stocks?

Lithium stocks are notorious for their extensive risk profiles. After all, running a mining enterprise is not exactly easy, or cheap, requiring a lot of capital to even get started. And this risk only gets amplified when venturing into the realm of penny stocks. But for early investors in the companies that manage to beat the odds, immense returns are to be had.

That’s what’s brought Trident Royalties (LSE:TRR) onto my radar. It’s similar to another mining group in my portfolio called Anglo Pacific because the company doesn’t actually do any mining. Instead, it finances projects worldwide in exchange for a portion of the extracted materials as a royalty fee.

Much like Rio Tinto, Trident doesn’t have any producing lithium steams at the moment. However, its investment in the late-stage Thacker Pass lithium project could soon change all that. The mine has received all necessary environmental permits, and site construction is expected to commence sometime after the third quarter of 2022.

That’s still a fair amount of time away. And with other lithium stocks looking to take advantage of the increased prices, the value of the commodity might begin to fall as supply catches up.

Fortunately, this business is not a one-trick pony, with iron, copper, and gold royalty streams already generating profits despite the group’s small size. That’s why I’m considering it as potential speculative addition to my portfolio today.

The post Did these lithium stocks just hit the motherlode? appeared first on The Motley Fool UK.

Good as gold

Getting exposure to gold remains a good idea in my opinion as inflation shoots through the roof. The yellow metal rises in value when prices rocket and it increased again following some shocking data today from the US. The Consumer Price Inflation (CPI) rate in the US jumped to 7.9% in February, a fresh 40-year high. It’s likely to keep advancing too as the price of energy grows.

I’d buy shares in Shanta Gold (LSE: SHG) to make money from gold’s move towards new record highs. Investing in producers of the metal instead of the commodity itself — or a financial product that tracks price movements like an ETF — involves a higher degree of risk because it exposes investors to the complicated and often expensive business of mining.

However, purchasing certain gold-producing stocks gives me the chance to receive dividends while piggybacking on the gold price too. The dividend yields over at Shanta Gold are pretty handy, if not exactly spectacular. A predicted reward of 0.2p per share creates a decent yield of 2.1%.

I don’t think Shanta’s current price of 9.4p per share fully reflects the bright outlook for gold prices as tragic events in Ukraine drag on and global inflation soars. This gives me a chance for me to nip in and grab a bargain. Today the Tanzania-focussed miner trades on a forward price-to-earnings ratio of just 7.2 times.

Another penny stock I’d buy today

The soaring cost of raw materials in response to sanctions on Russia poses a significant threat to electric vehicle sales in the near term. Prices of critical commodities like nickel, copper, and zinc have all leapt on concerns of metal shortages and disruptions to supply chains. A sharp slowdown in auto production and a spike in vehicle costs could well be coming down the pipe.

Both of these threats could hit revenues at Trident Royalties (LSE: TRR). The royalties company holds stakes in a variety of base and precious metals assets across the world. And two of its key holdings are the Thacker Pass and Sonora lithium projects, in the US and Mexico, respectively. The former is due to start producing the key battery-making material in the next few months. And first production from the Latin American project is scheduled for 2023.

However, as a long-term investor I still find Trident Royalties highly attractive. Electric vehicle sales might take a whack in the short-to-medium term. But over an extended timeline, sales of these low-carbon vehicles still look set to soar as concerns over the climate worsen. The gradual phasing out of petrol and diesel vehicles over the next decade should certainly supercharge demand for the company’s lithium.

I also like Trident Royalties because it has exposure to various commodities across the globe. This gives it excellent strength through diversification. Like Shanta Gold, this is a penny stock I’d happily invest in right now.

The post 2 of the best penny stocks to buy right now! appeared first on The Motley Fool UK.