At a market cap of £23.9m, the Alien Metals Ltd (LSE:UFO) share price is trading near 0.435p. Founded in 2006, the mineral mining company has come a long way towards development via expansions and diversification.

While Alien’s income statement still reports losses, its balance sheet is seemingly growing stronger with each passing year. Looking at its latest interim results, the company reported total assets of $16.9m, $3m of which was cash¹.

Not only is this 94% higher than a year ago, but it also provides some notable financial flexibility to continue operations. Yet, it’s worth pointing out that short-term liabilities also appear to be on the rise.

With that in mind, what is the future of Alien Metals’ share price? And can it surge in 2023? Let’s explore.

Key points

• Alien Metal’s balance sheet is seemingly growing stronger.
• The mining company recently acquired the Munni Munni Platinum Group Metal Project and 100% of the Vivash Gorge Iron Ore Project.
• In 2020, the Alien Metals share price went from 0.095p to the peak of 2.24p.

What does Alien Metals do?

Alien Metals Ltd engages in the acquisition and development of mineral resource assets. The company explores copper, zinc, lead, silver, gold, iron ore, and precious metal deposits worldwide. During 2022, the mining company undertook multiple exploration programs across Australia and Mexico. One of the biggest projects is the acquisition of the Munni Munni Platinum Group Metal Project and 100% of the Vivash Gorge Iron Ore Project.

While the firm is still reporting losses, the positive impact of these expansionary projects may soon start to bolster the group’s cash flows in the near future. Of course, this is assuming there are no unexpected delays.

Moreover, the company is further advancing its existing portfolio of prospective silver and copper/gold projects in Mexico and silver and iron ore projects in Australia, as well as seeking joint venture opportunities. It certainly sounds like the start of an exciting growth story. And patient investors could be well rewarded in the long run. However, there are, of course, risks to consider.

Related: How to analyse drilling results

The bull case for the Alien Metals share price

The Alien Metal shares’ bullish journey was precise yet attention-grabbing. Within four months, in 2020, the stock went from 0.095p to a peak of 2.24p. That’s a 2,257% return in less than half a year! This extraordinary price rise attracted a lot of investor attention, making it one of the hottest stocks in the market.

One of the key reasons for this price rise was the announcement of a conditional raising of £1.25m (gross) in a Placing
and Subscription of new ordinary shares. This driver was also coupled with the metal demand soaring in the face of aggressive monetary policy and governmental stimulus, boosting the expectation of significant post-pandemic infrastructure investment.

The bear case

Sadly the upward momentum didn’t last. And as of September 2020, the Alien Metal share price started on a downward path. And to date, the stock has fallen by almost 78% since hitting its peak price of 2.24p. Even in 2023, this bearish trend has continued with another 9% decline so far.

The pandemic created a whole new world of uncertainties and volatility in demand as well as supply.

Uncertain demand and new business models have been among the key risk factors which are creating volatility for the mining company. Also, environmental, social and governance (ESG) factors have become a bigger priority for investors, shareholders and a broader group of stakeholders in recent years.

While many investors are assertive toward the bearish trend coming to a stop this year, I am still apprehensive about an investment in Alien Metal shares.

Alien Metals share price prediction

The company no longer garners as much attention from industry experts and analysts today. At least, not since the abrupt end of the stock’s bullish journey. However, the few analysts that continue to follow the business have a wide range of share price predictions ranging from 1p to 2.7p over the next 12 months.

It’s impossible to predict whether these target prices will be hit. But a sudden upward momentum of a small mining business is not unheard of, especially if they end up striking “gold”.

Should I buy Alien Metals shares today?

Alien Metal’s objective is to create a multi-commodity portfolio of mining projects in jurisdictions with established mining communities, stable political backgrounds, and where strong operational controls can be assured. Personally, I believe the UK-based mining company’s current path is an exact reflection of its objective.

Moreover, Alien Metal’s focus on key commodities related to the global demand for green commodities is the key component of its future plan, which I believe will make it escalate its growth. However, this will take time to reflect on the company’s stock performance.

All things considered, the depressed valuation of Alient Metal shares today could very well be an excellent buying opportunity. But it’s not one I intend to pursue. There remains plenty of work to do and a lot of opportunity for things to go wrong. For now, I’m staying on the sidelines until more tangible results are delivered to shareholders.

Article sources

1. Alien Metals Ltd. “Interim Results 2022“

Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.