Why my grandkids will thank me for buying this penny stock

last week, Atlantic Lithium (LSE: ALL) attracted attention due to its sharp 37% decline after the release of negative news reports about it. After looking more closely at penny stocks over the past few days, I think that the company could be a great addition to my portfolio. Granted, as a small stock, it plays more risk than others, but it can have great long-term potential.

Finding opportunities

The news that caused the sharp fall was a report released by Blue Orca Capital. This money manager made accusations against Atlantic Lithium and its partners, Piedmont Lithium Districtincluding licenses in Ghana obtained through corruption and bribery.

Atlantic Lithium has come out and disputed that claim and pointed out that Blue Orca is a short stock. This means that Blue Orca makes a profit if Atlantic Lithium’s share price falls. So, these claims can be biased, with the aim of scaring investors.

The share price has rallied since hitting bottoms of around 20p, but is still close to its 52-week low at 26p. I think that this knee-jerk reaction below allows me the opportunity to buy on the cheap.

Do I like stocks

As an exploration and development company focused on lithium, Atlantic Lithium is in the right sector for the future. Demand for lithium, especially in electric vehicle batteries, is only going one way. I’m not just talking about popularity this year or next year. I think that in the coming decades, we will all be driving electric vehicles.

What is more interesting is that Atlantic Lithium has a flagship project as the first lithium mine in Ghana. A new pre-feasibility study said the project has “Significant profitability potential”. This includes details such as the mine’s 12.5-year life and potential earnings of $4.84bn.

Of course, the proof is in the pudding. But given the uniqueness of this location in Ghana, if this potential is to be exploited commercially, Atlantic Lithium is in the best place to take advantage of it.

Risk but also potential reward

I think I will invest a small amount in penny stocks in the coming days. If this takes off and the decades-long predictions of electric car adoption come true, the long-term profits could be enormous, my grandchildren will thank you.

But I have to keep my feet on the ground. As I often flag up with exploration companies, there is little or no revenue coming through the door. However, exploration costs for 2022 are almost $9m. They have the backing of Piedmont Lithium. But finances must be carefully monitored to avoid cash flow problems.

The stock price is down 34% over the past year. As an opportunistic purchase for long-term value, I think it makes sense for me to put my toes in the water.