This FTSE AIM-listed penny stock has recently grabbed headlines for its significant titanium discovery. The company is Empire Metals (LSE:EEE), based in Western Australia. Its Pitfield project, which is three times the size of Birmingham, could turn out to contain the world’s biggest reserve of titanium. Yet the company currently has a puny market cap of £63m.
Titanium, essential in various sectors from defence to consumer products, is on many Western countries’ critical minerals lists.
Houston, we have lift off
On New Year’s Eve, The Mail on Sunday tipped the company’s shares as a top buy for 2024. This was followed by a 20% one-day rally on the first trading day of the year, from 9.3p to 11p.
It’s possible the Empire Metals share price will cool off in the short term, as the enthusiasm created by the coverage dissipates.
Strong geology
The company’s 2023 interim results have been particularly encouraging. The share price surged over 150% last year, primarily driven by the Pitfield discovery.
Early exploration activities, including soil geochemical sampling and induced polarisation surveying, have reinforced the belief that Pitfield hosts a giant metal-rich mineral system.
The maiden drilling campaign has further confirmed the presence of a large-scale titanium deposit with consistently high TiO2 grades. The findings also indicate potential for multiple copper deposits within this system.
What tomorrow brings
The company reported a loss of £1m for the six months ended 30 June 2023. Its cash position was £1m at the time of the report. Following a successful £3m placing, the cash position is around £3.8m. This allows Empire Metals to expand its exploration campaign at Pitfield.
Empire Metals is now intensifying its exploration efforts. The current drilling program focuses on confirming high-grade titanium mineralisation and exploring the high-density core identified by an airborne gravity survey.
Despite the focus on Pitfield, Empire Metals also holds other promising projects in its portfolio. For example, the Walton Project, granted an exploration licence in April 2023, is located in a highly prospective area for copper, gold, and lithium. Exploration at Walton is expected to commence in 2024.
Given the potential of the Pitfield project to develop into one of the largest primary titanium mineral deposits ever discovered, the shares at 11p could represent a significant opportunity. The recent exploration success positions the company well on the global stage.
However, as with any early-stage exploration firm, investing in Empire Metals comes with risks. Technical and permitting delays have a habit of causing costs to spiral for early-stage exploration companies. That usually leads to the company diluting existing shareholders through new issuance. Indeed, the company will have no choice but to raise a lot more capital if it plans to build a functioning mine at Pitfield.
In light of substantial capital requirements and the euphoria surrounding the company currently, I have no plans to add Empire Metals to my portfolio.
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Mark Tovey 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.
