2 Penny Stocks Flying Under the Radar Right Now

In the crowded Australian Securities Exchange (ASX), big-name blue chips often steal the spotlight. However, hidden within the vast pool of small-cap stocks are some lesser-known companies quietly making progress. For investors willing to look beneath the surface, penny stocks can sometimes offer compelling opportunities. Two such stocks flying under the radar right now are Heavy Minerals (ASX: HVY) and Otto Energy (ASX: OEL). Both companies operate in vastly different sectors but share a common profile as emerging small-caps with potential upside.

Heavy Minerals (ASX: HVY): Riding the Industrial Wave

Heavy Minerals Limited is an explorer specializing in industrial minerals, with key projects located in Australia and Africa. Its flagship asset, the Port Gregory Garnet Project in Western Australia, is well-positioned to capitalize on growing demand for garnet and related minerals such as ilmenite, zircon, and leucoxene. These resources serve critical roles in various industrial applications, including abrasives and waterjet cutting technologies. In July 2025, Heavy Minerals’ stock trades around $0.34 per share—a substantial rise from $0.068 at the end of 2024, marking a remarkable 275% increase over the last twelve months. While the stock’s journey has been volatile, this price rebound indicates speculative interest and renewed confidence in its prospects.

The Port Gregory Garnet Project covers an extensive area of 227 square kilometers and remains the company’s primary focus. Beyond Australia, Heavy Minerals also holds tenements in Mauritius and Mozambique, offering potential geographic diversification and growth avenues. Exploration activities have intensified in 2025, reflecting an industry-wide surge in the need for high-quality industrial minerals. Financially, Heavy Minerals is still operating as a classic early-stage growth enterprise, reporting a half-year loss of around $495,700 in the first half of 2025—an improvement of 25% compared to the same period in 2024. While this loss translates to roughly $0.007 per share, the company shows signs of progress, including director stock purchases that signal confidence in its future. Nevertheless, risks remain, especially concerning capital raising, execution of exploration strategies, and dilution potential, making this a high-risk investment suited primarily to speculative investors.

Otto Energy (ASX: OEL): Small-Cap Oil & Gas Refocus

Otto Energy operates as a micro-cap oil and gas producer focused mainly on the US Gulf Coast. With a market capitalization of approximately $19.18 million, it is a true penny stock, trading near $0.004 per share as of July 2025. The past year has been challenging for Otto, with its share price declining by about 20%. Despite this, the stock has experienced bursts of trading volume, reflecting investor interest in the company’s ongoing transformation.

Otto Energy manages a portfolio of five producing assets and recently embarked on a strategic pivot under new leadership. The company’s board has approved a significant capital return of up to $40 million—roughly $0.008 per share—which is a bold move considering the company’s size. This capital return plan demonstrates Otto’s commitment to delivering shareholder value directly and reflects an abundant cash position stemming from improved operations. Otto’s strategy now focuses more on maximizing cash flow and operational efficiency rather than pursuing aggressive reinvestment or expansion. Financially, for the fiscal year 2024, Otto generated revenues of approximately $31 million but recorded a net loss of $2.52 million amid tough industry conditions. However, cash flow from operations stood at a healthy $11.7 million, and levered free cash flow was positive at $4.28 million—signifying progress toward a sustainable business model compared to many cash-burning peers.

Why Heavy Minerals Is Flying Under the Radar

Heavy Minerals’ quick price recovery and strong exploration efforts make it a stock quietly catching investor attention. Its specialized focus on high-demand industrial minerals provides a unique niche—especially as global industrial sectors grow more dependent on materials like garnet for manufacturing and maintenance. The company’s expansion into international regions such as Mauritius and Mozambique adds geographic breadth, increasing its exposure to emerging markets. Furthermore, insider buying by company directors often serves as a positive indicator of confidence. Despite these promising traits, investors should recognize that Heavy Minerals carries considerable risks, including high price-to-book ratios, ongoing operational losses, and the possibility of dilution from future fundraising. As such, it remains a speculative, longer-term investment.

Otto Energy’s Hidden Strength: Cash and Capital Returns

In contrast, Otto Energy’s appeal lies in its established production base combined with a leaner, more shareholder-focused approach. Its announcement to return up to $40 million in capital is notable for a company of its size and sends a positive signal about cash flow strength and capital discipline. Otto’s positive levered free cash flow in 2024 indicates operations are moving toward sustainability despite a reported net loss. The company’s low share price and price-to-book ratio position it as an attractive turnaround candidate for investors seeking value within the energy sector. However, its reliance on volatile commodity prices and the cyclical nature of the oil and gas industry can present ongoing risks, and investors must carefully monitor macroeconomic developments.

Risks and Watchouts

Both Heavy Minerals and Otto Energy share common challenges typical of penny stocks. They exhibit low liquidity, meaning trading volumes are modest, which can lead to sharp price fluctuations and difficulty entering or exiting positions. Heavy Minerals faces execution risks related to developing its projects and the need for significant capital to advance operations, while Otto Energy is subject to commodity price volatility and industry headwinds. Neither company currently pays dividends, underscoring their status as speculative investments where capital preservation and risk management should be prioritized. Investors should be aware of these factors and approach with caution, ensuring these stocks represent only a small part of a diversified portfolio.

Conclusion: Two Bets Worth Watching

Heavy Minerals and Otto Energy represent two contrasting but compelling under-the-radar penny stock opportunities within the ASX small-cap universe. Heavy Minerals offers exposure to industrial minerals that play an essential role in emerging technological and industrial sectors, paired with strong exploration momentum. Otto Energy, on the other hand, presents a micro-cap energy play focused on operational cash flow improvements and shareholder capital returns. Both present asymmetrical risk/reward profiles, making them best suited for experienced investors who understand the speculative nature of penny stocks and can tolerate heightened volatility. For those seeking diversification beyond mainstream market leaders, these two stocks merit closer examination—but always with disciplined risk management and realistic expectations.

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