Investors attracted to the high-returning but volatile penny stock space, loosely composed of any stock trading under C$5 per share, can gain a leg up on the market by favouring profitable companies that eschew mere potential for cash in the bank.
This is because cash-generating operations, propelled by industry tailwinds, represent a stock’s best chance at cutting through temporary macro noise and achieving long-term shareholder returns.
So, to end the week on a prospective note, let’s take a quick survey through three profitable penny stocks wallowing in the obscurity of low market capitalizations, ready and waiting for seasoned allocators to notice the value they’re creating.
Rubellite Energy
Rubellite Energy (TSX:RBY), est. 2021, is a pure-play junior oil explorer and producer developing its Clearwater asset base in Alberta, which features multiple exploration prospects with material inventory potential.
The company has grown production from 350 bbl/d in September 2021 to 4,700 bbl/d as of the first week of January 2024, with cash costs of only about US$19.50 to US$21.00/bbl driving attractive netbacks, adding to the overall Clearwater Play region’s growth from nil to more than 150,000 bbl/d since 2017.
Management has looked out for shareholders’ best interests – which is no surprise, given 37.4 per cent insider ownership – through strategic advancement of Rubellite’s 530 net sections of land, including approximately 250 development/step-out drilling locations, generating net income of C$7.70 million in 2021, C$24.61 million in 2022, and positive net income in each of the past five quarters.
Sue Rose, Rubellite’s president and chief executive officer, spoke with Stockhouse’s Ryan Dhillon about new strongly performing step-outs in Clearwater’s Figure Lake area, Q4 2023 production, and what investors can expect from the company moving forward as oil maintains its current floor of US$75 per barrel.
The profitable penny stock (TSX:RBY) last traded at C$2.22 per share. The stock has gained 0.45 per cent year-over-year and more than 550 per cent since inception in 2021.
GoGold Resources
GoGold Resources (TSX:GGD) is a Halifax-based silver and gold producer focused on low-cost, high-margin projects in Mexico.
The company’s Parral tailings mine in the state of Chihuahua has produced more than 1 million ounces silver equivalent (AgEq) every year since 2018, including a high of 2.3 million ounces in 2020, at all-in sustaining costs (AISC) just over US$18 per ounce AgEq, creating a healthy margin between silver’s current price of US$22.78 per ounce for GoGold to continue developing Parral’s 31,585 koz AgEq in reserves.
The company’s Los Ricos South and Los Ricos North exploration projects in the state of Jalisco offer investors the security of robust 2023 preliminary economic assessments detailing diversified production across silver, gold, copper, lead and zinc, including a combined NPV of US$871 million, 186 million ounces AgEq measured & indicated, and 87 million ounces AgEq inferred.
GoGold management’s substantial skin in the game, at approximately 20 per cent insider ownership, had led it to produce positive net income in four out of the past five years, with a high of US$43.15 million in 2020, as gold tempts all-time-highs above US$2,000 per ounce.
Recent unprofitability in two out of the past five quarters resulted from inventory adjustments associated with restacking material at Parral to enable quicker metal recoveries and enhanced positive cash flow.
Bradley Langille, GoGold Resources’ president and chief executive officer, spoke with Stockhouse’s Brieanna McCutcheon about the company’s bright outlook for 2024, including adding zinc precipitate to its revenue stream and ushering Los Ricos South through definitive feasibility towards a potential construction decision.
GoGold Resources stock (TSX:GGD) last traded at C$1.26 per share. The stock has given back 45.69 per cent year-over-year, but has gained 406 per cent since 2019.
Click here to read GoGold Resources’ latest investor presentation.
Silvercorp Metals
Our third profitable penny stock to keep on your radar is Silvercorp Metals (TSX:SVM), a mining company producing silver, gold, lead and zinc in China harboring ample growth potential.
The company distributed more than US$520 million in profits from 2006-2023 through consistent production growth totaling more than 93 million ounces of silver (AISC US$9.73) and more than 1.3 billion pounds of lead and zinc, with more than 15 years of mine life remaining across its Ying, BYP and GC properties. As per its last estimate, the company generates its profits at the astounding rate of more than US$50 per tonne of ore mined, substantiating its prolific 2,500-plus kilometres of combined drilling since 2004.
Silvercorp has put up some impressive numbers as of late, translating its low-cost operations into high-grade results and net income of between US$20.61 million and US$46.38 million in each of the past five years, while maintaining a healthy interest in taking stakes in prospective miners to bolster shareholder value, including:
- A 27.4 per cent stake in New Pacific Metals (TSX:NUAG), which is developing two major discoveries in Bolivia.
- Its proposed takeover of OreCorp, which has the Nyanzaga project boasting a pre-feasibility study (August 2022) detailing average production of more than 200,000 ounces of gold over its first decade. Lon Shaver, Silvercorp’s president, joined Stockhouse’s Coreena Robertson to discuss the TSX’s conditional approval of the OreCorp acquisition.
Backed by robust reserves, and about US$189 million in cash to finance future exploration, as well as silver and zinc‘s starring roles in global decarbonization, Silvercorp’s diversified mining profits are highly likely to re-rate the stock price over a long-term holding period.
Silvercorp Metals stock (TSX:SVM) last traded at C$3.22 per share. The stock is down by 30.94 per cent year-over-year and has gained only 14.36 per cent since 2019.
Click here to read Silvercorp’s latest investor presentation.
Join the discussion: Find out what everybody’s saying about these profitable penny stocks on the Rubellite Energy, GoGold Resources and Silvercorp Metals Bullboards, and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Rubellite Energy, GoGold Resources and Silvercorp Metals, please see full disclaimer here.
