If you want a bit of edgy fun with your portfolio, speculative mining plays such as Rare Earth Minerals (LSE: REM) and Sirius Minerals (LSE: SXX) can deliver it in spades. Shares like these offer you all the highs and lows that stock market investing can bring, and will ultimately either shower you in riches or leave you in a hole. But which of these two AIM-listed mineral miners is likely to shine?
Tesla Boys
Investors in Rare Earth Minerals are sitting pretty following recent news of its tie-up with electric sports car and energy storage company Tesla Motors, which is ordering lithium hydroxide from its Sonora lithium project in Northern Mexico, a joint venture with Bacanora Minerals.
Meeting Tesla’s terms will be quite a challenge, however, as Sonora has to hit the company’s demanding “performance milestones”, and any reversal will hit the share price hard. But with the deal running for five years, plus an option to extend for another five, this high-profile partnership is a real boost for REM’s credentials.
REM remains a high-risk, high-reward play, but the potential rewards are now even higher than before. Management is ramping up activities at Sonora with a second drill rig in operation and looking to strike deals with more lithium partners. It has to raise yet more finance, but the Tesla tie-up should help to generate investor interest. Trading at 1.12p, REM is still down 27% over the last year. This certainly isn’t easy money.
Siriusly
Sirius Minerals has also cheered investors after North York Moors National Park Authority green-lighted its plans to construct the world’s largest potash mine over the summer. The company’s share price has doubled in the last six months, but it has one final planning hurdle to complete, with results in at the end of this month. Assuming the lights stay green, it still has a long road ahead, as it needs to raise £1.7bn to drill a mile-deep shaft and 23-mile tunnel to transport its high-grade polyhalite deposits to Teeside for export.
Again, investors have to commit themselves for the long haul. Some analysts have noted that Sirius is 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 REM’s Tesla deal changes that: if it can’t 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.
Dig In
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 Sirius will hopefully secure the funding they need. Right now, there is plenty to dig about both stocks in my opinion. Take your pick.
