Penny stocks are known for their high-risk nature, with many small companies failing. However, there are occasional success stories that can lead to significant wealth for patient investors. One such company on the London Stock Exchange is Anglo Asian Mining (LSE:AAZ), which is attracting attention from long-term investors due to its potential in the electric vehicle (EV) industry.
Anglo Asian Mining specializes in extracting gold, silver, and copper from its sites in Azerbaijan. Copper, in particular, is a crucial component in EV manufacturing, with an estimated 83kg needed for each EV, significantly more than traditional combustion engine vehicles. As governments aim to phase out combustion engine vehicles, the demand for copper is expected to increase dramatically.
The company is investing heavily in developing new copper projects, with an estimated 585,373 tonnes of copper awaiting extraction across its sites, primarily in the Garadag project. This amount is valued at approximately £4.6bn at current prices, significantly higher than the company’s market capitalization.
Despite the potential in the copper market and rising prices, shares of Anglo Asian Mining have dropped by 40% in the past year. Production challenges, including regulatory approvals and operational disruptions, have led to a decrease in revenue and profits. These challenges are especially concerning for a smaller company like Anglo Asian compared to industry giants.
Management remains optimistic about the future, with new projects like Gilar and Xarxar expected to begin production in the coming years. The Garadag project is scheduled to start in 2028, seven years before the UK government’s ban on new petrol and diesel car sales. While there are risks associated with mining operations, the company offers a potentially lucrative opportunity for long-term investors who are willing to tolerate volatility.