Lithium stocks are the hottest trend in the market. Investors seeking a speculative punt have poured into lithium plays. Zenith Minerals Ltd [ASX:ZNC] is a tiny miner looking for the next big lithium project.
Billionaire looks for next big lithium play
Today, ZNC announced that they had secured funding for exploration. The company doesn’t yet produce anything. Therefore they need capital to cover exploration and mining cost. Basically, they need to stay afloat before they pull any lithium from the ground.
But they didn’t receive funding from a bank or hedge fund manager. The funds came from a UK billionaire.
Jim Mellon, a prominent UK investor, has agreed to spend US$500,000 on exploration and drilling. Over three years, Mellon is allowing ZNC to spend US$5 million on exploration costs. In return, Mellon will receive a 55% interest in the process.
Where to from here for Zenith Minerals?
ZNC looks like a bet that could go one way or the other. If it does pay off, you could double, even triple, your investment. If it doesn’t, you could lose everything. But how likely is it to pay off?
I’d suggest waiting until ZNC has identified lithium and is ready to drill. That way, you can be sure you’re jumping into a company with a tangible product to sell.
Junior Analyst, Money Morning
PS: We likely won’t see another turnaround in resources like we did in 2016. And if we do, it could be a long time from now. Unless commodity prices suddenly move higher, earnings will likely stagnate.
That’s why some investors prefer the smaller end of the market.
Smaller miners like Zenith are a riskier investment, there’s no running away from it. But they could potentially grow earnings 10-fold in a short space of time. Resource specialist Jason Stevenson is no stranger to explosive resource stocks.
In his advisory service, Resource Speculator, Jason has made gains of 142%, 145% and 242%.
To find out more, click here.