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It’s not uncommon to see big moves in small stocks. However, a price doubling in more than a year is a strong performance worth noting. The small one I found when I looked at it Major African Minerals (LSE:PREM) Share price history So what’s the story here?
Core business operations
That business “Currently expanding our portfolio of strategic metals and minerals projects located in Africa”.
The majority of the focus is on two projects. One is the RHA Tungsten Mine and the other is the Zulu Lithium and Tantalum Project in Zimbabwe.
I’m sure ears prick up whenever the lithium project is mentioned, given the huge interest in this area over the past year or so. Commercial uses for lithium are large, particularly in electric vehicle batteries. Thus, the demand for lithium resources increases, as well as the price.
In a recent update on the Zulu site, the CEO commented that “We continue to see good intersections in major spodumene-like pegmatites that can sustain us for the long term and support our decision to start operations.”
Although I’m no expert on pegmatites (who is?), the tone of the report is remarkably optimistic.
The stock price is the highest
Of course, positive reports coming out of Africa helped boost share prices. More than that, I think the stock is being pushed up by investors who are looking forward to the revenue potential. After all, the website claims that it is a Zulu project “Zimbabwe’s largest undeveloped lithium-bearing pegmatite potential”.
Since the first drilling program started in 2016, it has been a long road to achieve the commissioning date for Q1 2023. But a lot of hard work has been done. If the company can bring out the potential of the location, it can make a big profit.
Of course, the business is not profitable in the H1 2022 report. The risk I always note with the company is that the financing is not infinite, and the company needs to generate cash at some point in order to stay in business.
However, the Zulu project came in under budget and was fully funded. This is impressive to me and another reason I think investors like to buy stocks.
My thoughts are from here
After doubling last year, I think a lot of the direction in 2023 will depend on the progress in Zulu. This will put a lot of pressure on updating the project when it is released.
With a market capitalization of £150m and net assets (as of June 2022) of £20m, I am concerned about the potential for a sharp correction on bad news.
For high-risk investors who believe something big can happen here, I know why a small investment can be justified. But I will not invest.
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