If you want a bit ofedgy fun with your portfolio, speculative mining plays such asRare Earth Minerals (LSE: REM) andSirius Minerals (LSE: SXX) can deliver it in spades. Shareslike theseoffer youall the highs and lows that stock market investing can bring, and will ultimatelyeither shower you in riches or leave you in a hole. But which of these two AIM-listed mineral miners is likely to shine?
Investors in RareEarth Minerals are sitting pretty following recent news of its tie-up with electric sports car and energy storage company Tesla Motors, which is orderinglithium hydroxide from itsSonora lithium project in Northern Mexico, a joint venture with Bacanora Minerals.
Meeting Teslas terms will be quite a challenge, however, as Sonora has to hit the companys demanding performance milestones, and any reversalwill hit the share price hard. But with the deal running for five years, plusan option to extend for another five, thishigh-profile partnership is a real boost for REMs credentials.
REM remains a high-risk, high-reward play, but the potential rewards are now even higher than before. Management is ramping up activitiesat Sonora with a second drill rig in operation and looking to strike deals with more lithium partners. Ithas to raise yetmorefinance,butthe Tesla tie-up should help to generate investor interest. Trading at 1.12p, REM is still down 27% over the last year. This certainly isnt easy money.
Sirius Minerals has also cheered investorsafterNorth York Moors National Park Authority green-lighted its plansto construct the worlds largest potash mine over the summer. The companysshare price has doubled in the last six months, butit has one finalplanning hurdle to complete, with results in at the end of this month. Assuming the lights stay green, it stillhas a long road ahead, as it needs toraise 1.7bn todrill a mile-deep shaft and23-mile tunnel to transport itshigh-grade polyhalite deposits to Teeside for export.
Again, investors have to commit themselves for the long haul. Some analysts have noted thatSiriusis an all-or-nothing play on York potash, whereas REM has the diversification benefits that come from several different operations, suggesting that this makes the latter a bit more robust. I reckon that REMs Tesla deal changes that: if it cant deliver on that front, the company will suffer a serious blow. These are both do or die stocks, but doing looks more likely than dying right now.
It has taken both companies years to get where they are, and it will take many more years to get where they want to be. But the demand is there for their products, with Sirius striking a series of polyhalite supply agreements with major agri-business customers and, barring global market shocks, REM and Siriuswill hopefully secure the fundingthey need. Right now, there is plenty to dig about both stocks in my opinion. Take your pick.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.