The Australian Mines Limited (ASX: AUZ) share price has this month gone from 1.6 cents to close on Tuesday at 11 cents, representing a gain of more than 587%.
The staggering gains prompted the ASX to ask Australian Mines for answers.
But the company, which intends to mine cobalt, said it wasn't aware of any information that hasn't been released to market that could have fuelled the rapid rise.
However, Australian Mines Managing Director Benjamin Bell is currently in London for meetings with large institutional investment funds on the back of "successful meetings" in Hong Kong, according to the company.
He told the ASX that at the opening of trade on Monday that Australian Mines' market cap was $155 million, taking the company above the threshold of $100 million required by some London-based funds in order to invest in a company.
"As a result, these institutional funds, whom Australian Mines is meeting this week, are now able to invest directly in Australian Mines," Mr Bell said.
"It may be, therefore, that some of these large institutional investment funds sought to obtain an initial position in Australian Mines prior to the commencement of the company's UK road show in expectation that its share price may strengthen during the course of this week's meetings."
Mr Bell also said that Canadian broking and investment firm, Canaccord Genuity Group Inc, released a 'buy' recommendation on Clean TeQ Holdings Limited (ASX: CLQ) late this month.
The target price for the 'buy' recommendation was $2.00, which values the Syerston project (having a mineral resource tonnage of 101 million tonnes at an average grade of 0.13% cobalt and 0.59% nickel) at $1.1 billion, according to Mr Bell
"In comparison, Australian Mines, whose Sconi project has a mineral resource tonnage of 89 million tonnes at an average expected feed grade of 0.11% cobalt and 0.80% nickel, was valued at only $208 million," Mr Bell said.
"This market capitalisation of $208 million for Australian Mines overlooks the inherent value of the company's Flemington Cobalt-Scandium-Nickel Project in New South Wales, which is the immediate continuation of Clean TeQ Syerston project."
Cobalt and nickel are key ingredients for electric vehicles and many are expecting demand to surge.
All this sounds promising and I must admit I'm tempted to jump on board.
But, it must be remembered, this is a speculative stock.
Sure, it may gain another 500% this month or it could go the other way, like another company Mr Bell ran a few years back, Ausgold Ltd (ASX: AUC).
Mr Bell was appointed CEO of Ausgold in November 2009, according to Bloomberg.
Under his leadership, AusGold's share price underwent a rapid rise from mid-2010 to mid-2011, going from around 10 cents to more than $1.50.
But Ausgold's share price went down almost as fast as it went up, plunging to below $1 in November 2011 as Mr Bell departed from his position as CEO with the company.
On Tuesday, Ausgold's share price closed at 2.8 cents, a long way from the heady heights of mid-2011.
Hopefully for Australian Mines' shareholders history does not repeat and the company proves a success.
But I'm bound to urge TMF readers to take caution when dealing with speculative stock such as Australian Mines.
If you're looking for something that could prove safer, check this out…
