Broker says this speculative ASX stock could rise over 200%

This high risk option could have major upside according to analysts.

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Man drawing an upward line on a bar graph symbolising a rising share price.

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Investors that have a high tolerance for risk, may want to check out the speculative ASX stock in this article.

That's because one leading broker believes this risky investment could triple in value from current levels.

Which speculative ASX stock could triple in value?

The stock in question is Meteoric Resources NL (ASX: MEI).

At present, its shares are being anything but meteoric. In afternoon trade, they are down 16% to 13 cents.

This means that the rare earths developer's shares are now down a sizeable 28% since the end of last week. This has been driven by the release of the scoping study results for the Caldeira ion-adsorption clay rare earth project in Brazil.

While this is disappointing, analysts at Bell Potter think it could have created a buying opportunity for investors that are willing to take the risk.

Commenting on the scoping study, the broker said:

MEI have released the results of its scoping study (SS) on the Caldeira ion-adsorption clay rare earth project in Minas Gerais. The SS outlined a post-tax NPV8% of US$699m with Capex of US$297m (excluding $104m contingency) and operating costs of US$7/kg TREO on a basket price of US$45/kg (US$20/kg at spot) less payability discounts of ~30% provides an achieved price of US$31 (spot US$14/kg). On this basis, The Caldeira project makes a ~50% operating margin at spot before accounting for royalties (4.75% Togni Family & 2% Government) and transport costs. We have updated our model to incorporate the new information and provided some first-pass commentary.

And while its capital costs are higher than Bell Potter was expecting, this hasn't been enough to put off its analysts. In response to the update, it has retained its speculative buy rating on the ASX stock with a reduced price target of 40 cents (from 50 cents). This implies potential upside of 207% from current levels. The broker concludes:

The results confirm the Caldeira project is of superior quality, with the ability to operate through all stages of the pricing cycle. Critical path items for the business now shift towards the permitting phase, with three distinct licences needed and an EIA prior to production commencement. Our valuation is reduced to $0.40/sh (previously $0.50/sh) in this note on the inclusion of higher capital costs and associated equity financing, and adjustments to our pricing formulas. At current levels MEI remains an attractive business and we retain our Spec Buy recommendation.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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