1 penny stock under 1p for me to snap up right now?
Despite their reputation for extreme volatility, the allure of penny socks remains as strong as ever. These tiny businesses have a lot to prove and enormous challenges to overcome.
But one successful story can unlock phenomenal returns for investors who buy shares early in their lifecycle. And in the long run, that can even translate into millionaire-making gains.
It’s with this ambition that Kodal Minerals (LSE:KOD) has been drawing in a lot of investor attention. With a share price at just 0.27p, a simple £500 investment is enough to snap up 1,851 shares. But is this actually a good idea?
Explosive potential
As a tiny company, Kodal doesn’t get a lot of attention or coverage from institutional analysts. And yet there’s one expert tracking this company, rating it as a Buy and even putting a 1p share price target on the stock within the next 12 months.
If this projection’s accurate, that means a 285% capital gain could be just around the corner, enough to transform a small £500 investment into £1,923 and a £5,000 investment into £19,231!
But is this really realistic?
Projections always need to be taken with a pinch of salt, especially when they’re coming from just one analyst’s opinion. Having said that, Kodal might indeed be sitting on explosive growth potential.
The early-stage mining enterprise operates in West Africa. And its flagship project, the Bougouni lithium mine, has just begun commercial production with an anticipated mine life spanning through to 2038.
Given the rising global demand for lithium, particularly for its use within batteries for electric vehicles, the timing of production seems almost perfect.
In 2026, providing no surprise spanners are thrown into the works, Kodal will have transitioned from a developer into an active, cash-flow generating producer. And with plans to further ramp up production volumes, alongside anticipated higher lithium prices, a revenue surge could indeed be just around the corner.
Investigating the risks
Unlike most of the mining penny stocks out there, Kodal is massively ahead of the pack with all its mining licenses and flagship project fully funded and already entering production. That eliminates an enormous chunk of risk and makes buying Kodal shares more like an investment rather than speculation.
However, there’s still considerable risk to consider carefully. Bougouni is going to be responsible for almost the entire revenue stream of this business. That means, if there are any operational hiccups, the impact on Kodal’s cash flow could be substantial.
The project is located in Mali, a landlocked country with a reputation for political and regulatory instability compared to other OECD mining jurisdictions. Even if the mine runs flawlessly, growing tensions with neighbouring countries, as well as the rise of militant groups, could prevent Kodal from actually exporting and selling its extracted materials.
The bottom line
Compared to most mining penny stocks, Kodal’s quite exemplary. Reaching commercial production is an exceptionally difficult feat and makes this business worthy of closer inspection. Having said that, the geopolitical climate of Mali introduces significant risks that management has very little control over.
That’s why I’m personally not rushing to buy shares even with the optimistic outlook. But investors with a higher risk tolerance may still want to take a closer look.
The post 1 penny stock under 1p for me to snap up right now? appeared first on The Motley Fool UK.
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Zaven Boyrazian has no position in any of the shares mentioned. 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.
