Penny shares carry a well-earned reputation for risk, but every so often one emerges as a diamond in the rough. And over the past 12 months, Strategic Minerals (LSE:SML) has seemingly done exactly that.
The penny stock has skyrocketed 1,019% since last August. That means anyone who put £1,000 to work a year ago now has closer to £11,190 today. And for investors with really high conviction, a braver £10,000 stake is now closer to £111,900!
Yet even after this spectacular surge, Strategic Minerals shares still only trade around 3.6p. So is this just the beginning?
What just happened?
Let’s start with a quick introduction. Strategic Minerals is a small mining company with three primary projects:
- Cobre – a magnetite operation in New Mexico which already generates steady, reliable cash flow, selling ore to a diversified customer base.
- Leigh Creek – a copper project in Australia which management is divesting to free up capital.
- Redmoor –a tungsten-tin-copper deposit in Cornwall that had been largely overlooked for years.
While Cobre has already reached its production phase, the real growth story is Redmoor. In 2025, Strategic Minerals began executing drilling tests for the first time since 2018. And as a result, it turned up some of the highest-grade tungsten in the entire history of the site.
After further analysis, the firm subsequently increased its mineral resource estimate by 49% to 17.4 million tonnes and raised the net present value (NPV) of the project all the way to $1.54bn at a 40% estimated internal rate of return.
Those sorts of numbers and economic potential are a dream come true for young mining enterprises. And with the Cornwall council approving further drilling activity, Redmoor looks like it could single-handedly transform this business once a full-scale mining operation begins.
With that in mind, it’s no wonder this penny share has exploded!
What should investors expect next?
With management sucessfully raising capital through an equity raise, Strategic Minerals’ balance sheet is looking relatively well funded for the immediate term.
Moreover, with Cobre providing its own small-but-steady supply of cash flow, the firm looks like it’s in a far better position than most young miners to see Redmoor through from exploration to production. And that’s particularly exciting given the geopolitical push to become less reliant on China, which currently dominates in global tungsten supply.
However, while the recent progress is undeniably exciting, it’s important not to lose focus. Even with these promising drilling results, production is still years away. And mineral resource estimates have a habit of changing constantly.
Even if Redmoor proves to be everything that investors hope, there’s still the regulatory landscape to navigate. Then there’s also the cost of running a mining operation in the UK, which is significantly more expensive compared to other countries around the world, harming future profit margins.
In other words, we’re still very much in the early innings of this story.
The bottom line
Strategic Minerals looks nowhere near finished telling its story, with drilling activity steadily scaling up. But whether Redmoor can become a fully developed mining operation or just an exciting exploration tale remains an unknown.
Some investors might be comfortable taking on this risk. But personally, I’m keeping this business on my watchlist for now.
Should you invest £5,000 in Strategic Minerals Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
