One of the things I like most about investing in Canadian stocks is the relative advantage I think I can get from some of these names. Many of the best dividend and growth stocks in the Canadian market are largely overlooked by global investors. I don’t think this is a controversial statement: some mega-cap companies attract the vast majority of well-deserved investor attention because of their size and importance.
But that doesn’t mean there aren’t companies in the Canadian market worth exploring. Outside of a number of top growth stocks that I’m still on the table with, there’s one small-cap name that I think could be primed for astronomical growth and is worth considering.
based in Vancouver The Metal Company (NASDAQ:TMC) is a unique company in many ways. The underlying business model, of siphoning off golf ball-sized nodules from the ocean floor, filled with crucial minerals used in battery development, is one that I think investors should probably be more excited about, given the electrification trends that are underway (and that I think may even increase over time).
This business model at this point is just that: a model. While the company has engaged in early exploration activities and has obtained mining permits in certain jurisdictions, more work remains to be done to initiate large-scale production.
Therefore, this is currently a high operational risk business. Investors cannot be sure if or when TMC will achieve desired production levels, or even what those levels might be.
That, of course, is the job of analysts and market participants to try to model what the future looks like for an emerging company in an entirely new industry. Deep-sea mining is not yet carried out on a large scale, so TMC is truly a pioneer in this field. I like that.
How big can this market be?
It’s very difficult to estimate what TMC’s total addressable market looks like because the nodules the company is putting forward contain different mixtures of nickel, cobalt, manganese and other key battery minerals. I would have to say we need more data to determine what the company can actually produce and what the final margins will be.
That said, given the fairly abundant mineral resource on the seabed ready to be picked up, I wouldn’t be surprised if we see total deep-sea mining become a trillion-dollar space. If that’s the case, and TMC were valued at roughly one-time sales, its valuation could theoretically increase two hundredfold from here.
That’s not a prediction; that’s just a rationalization of what the company’s potential is. No doubt other competitors will enter this space if it is profitable, so TMC is unlikely to reap the full benefits of future success. But at a valuation of only about $5 billion right now, this seems like a pretty asymmetrical bet.
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