The majority of penny stocks see very large amounts of volatility. This is because they may be less established companies, have lower levels of liquidity or operate in volatile industries. While I try to stay away from severe volatility, this doesn’t mean penny stocks don’t pique my interest. Here are two that particularly appeal to me, due to their potential room for growth.
A gold miner
In 2020, Greatland Gold (LSE: GGP) soared. This was partly due to the rising price of gold, yet mainly due to news that the company is sitting on a huge load of the metal. A massive amount of gold can be found in the company’s Havieron deposit, where it’s estimated that there may be as much as 4.2m ounces. This deposit is jointly owned by Newcrest Mining, a far more established gold miner that has helped fund the mining venture.
Even so, despite the massive potential of the Havieron deposit, the GGP share price has sunk from highs of 38p at the end of 2020, to its current price of around 15p. Such a large drop has occurred as many investors have decided to bank profits, especially as the company remains pre-revenue. This means there’s a risk that the gold miner will never reach the production stage.
But I see this as a minor risk. All studies of Havieron are extremely positive, and there have also been positive developments in other mines around the world, such as the Juri joint venture. Further, due to the current volatility in Eastern Europe, the price of gold has been soaring. While this will not have an impact on the company right now, it could have major benefits in the long term. This is specially true if the price of gold can remain at the $2,000 per ounce mark. Therefore, I feel this penny stock has enormous growth potential, which is why it makes up a small part of my portfolio.
Another mining penny stock
Atlantic Lithium (LSE: ALL) is another mining stock I really like. But as the name suggests, instead of gold, Atlantic Lithium is involved in the production of lithium. This may have great future benefits, as lithium is a critical component of electric vehicles, and demand is expected to soar over the next decade. Further, although production has not yet started, initial drilling work at its mine in Ewoyaa has revealed massive potential. In fact, initial estimates reckon there may be around 21.3m tonnes of lithium. This means that this penny stock could be a great way to profit from the global conversion to electric vehicles.
Even so, this stock certainly does not come without risks. For one, like GGP, it remains pre-revenue. This meant that the loss after income tax for the group was nearly $5m in the FY21. Such large losses increases the chances of the group running out of cash before it’s able to reach production. As such, I’d only open a very small position in Atlantic Lithium.
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Stuart Blair owns shares in Greatland Gold. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
