With demand for natural gas, uranium and copper expected to rise over the next decade and beyond, commodity investors can position themselves to reap outsized returns by allocating into related small-cap stocks with green flags for strong conviction, including high-quality, long-life assets, proven management, and value-accretive financial or developmental results.
LNG Energy Group
Let’s start with LNG Energy Group, market capitalization C$46.53 million, an acquirer and developer of natural gas production and exploration assets in Latin America with over 50 per cent insider ownership.
The company, active in Colombia and Venezuela, holds over 800,000 acres of land for development and exploration in close proximity to markets and pipelines allowing for rapid monetization of new production. It was producing 19 million cubic feet of natural gas equivalent per day (bcfe/d) and sitting on 98 bcfe of proven and probable reserves valued at US$306 million as of March 2024, and boasts a management team whose extensive M&A and capital markets experience in oil and gas, including at Bank of America and British Petroleum, sets it up for future expansion across Latin America.
If LNG Energy’s robust turn to profitability, posting net income of US$18.47 million in Q3 2023 after years of losses, is any indication, it’s that the company is now capable of putting up solid results in the midst of active growth, as detailed in its year-end 2023 results.
LNG Energy Group stock (TSXV:LNGE) last traded at C$0.30 per share. The stock has given back 31.82 per cent year-over-year, but only 6.25 per cent since inception in September 2023.
Ur-Energy
Ur-Energy, market capitalization C$691.39 million, is a uranium mining company that has produced and packaged approximately 2.8 million pounds of U3O8 from its Lost Creek in-situ recovery facility in Wyoming since 2013, with an estimated 12.7 million pounds eU3O8 measured and indicated and 6.1 million pounds eU3O8 inferred remaining to be exploited over a 13-year mine life.
The company is also building Shirley Basin, its second in situ recovery facility in Wyoming, which will be able to produce up to 1 million pounds of U3O8 per year and is expected to recover 6.4 million pounds of an estimated 8.8 million pounds eU3O8 measured and indicated. Construction is estimated to finalize in 2025 with operating costs estimated at US$24.40 per pound.
With uranium prices up by about 5x over the past five years to US$93.50 per pound, Ur-Energy’s long-tenured management team, de-risked by working lifetimes in mining and uranium, benefits from a runway extending from 2024 well into the next decade to continue creating shareholder value.
Ur-Energy stock (TSX:URE) last traded at C$2.44 per share. The stock has added 83.46 per cent year-over-year and 119.82 per cent since 2019.
Pampa Metals
Our final small-cap stock pick to bolster the commodity sleeve of your portfolio is Pampa Metals, market capitalization C$17.53 million, a copper-gold explorer developing the Piuquenes copper-gold porphyry project in Argentina, on which it holds an option to acquire an 80 per cent interest.
The junior miner has backed up historical intercepts from the 1990s, including 558.2 m grading 0.38 per cent copper, 0.42 g/t gold and 2.4 g/t silver, with 422 m at 1 per cent copper equivalent (CuEq), including 132 m at 1.45 per cent CuEq in March 2024, and 448 m grading 0.42 per cent copper and 0.46 g/t gold, including 126 m at 0.66 per cent copper and 0.74 g/t gold in May 2024. Piuquenes’ highly mineralized porphyry system remains open to depth and to the northeast, with results pending for Pampa’s third drill hole.
Management – ex Rio Tinto, BHP, Goldman Sachs, UBS – believes Piuquenes could be a company-maker, seeing the potential for a cluster of deposits across the property, with a second undrilled outcropping porphyry identified at Piuquenes East and numerous other nearby targets still to be explored.
When we consider copper’s current nearly 40-year high at US$4.61 per pound – including a massive 28 per cent gain since Feb. 2024 – the metal’s essential role in the energy transition thanks to its unmatched electrical conductivity, and Pampa stock’s approximately 60 per cent gain since optioning Piuquenes in November 2023, it seems plain as day that the market is warming up to the copper stock’s long-term value proposition.
Pampa Metals stock (CSE:PM) last traded at C$0.26 per share and is down by 53.64 per cent over the past five years, positioning it for a significant re-rating upon positive results should copper hold or shoot higher.
Have other high-potential stocks in mind when it comes to essential resources? How are you allocated in terms of energy and materials?
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