Here’s why these penny stocks are rocketing in price!

A pile of British one penny coins on a white background.

Jubilee Metals Group (LSE: JLP) is a penny stock making plenty of headlines in Tuesday business. The mining company has risen 16% in value on news of a bumper refining capacity deal. It was last trading at 15.75p per share.

The company said that it has signed a binding Memorandum of Understanding with Mopani Copper Mines “for the implementation of additional copper and cobalt refining capacity through the recapitalisation of existing refining capacity placed under care and maintenance by Mopani”. The penny stock said that the move will increase its current refining capacity by 17,000 tonnes of copper a year. Consequently group capacity will soar to above 31,000 tonnes per annum when combined with capacity at the Sable refinery.

Jubilee Metals said that the accord will speed up its Zambian copper strategy “at significantly reduced capital and project risk”. Jubilee Metals said that it will establish its Northern Zambian refining footprint for the refining of copper and cobalt concentrates produced at its Kitwe and the Luanshya copper and cobalt tailings.

It’s possible that the deal will seriously bolster earnings growth at the company, hence today’s mighty share price gains. However, it’s also important to remember that Jubilee Metals’ profits are tied closely to the price of the underlying commodities it processes. Any weakness on this front could therefore cause profits forecasts to disappoint.

This penny stock is rocketing too!

UK healthcare share Open Orphan (LSE: ORPH) has also soared today thanks to news of a significant contract win. It was recently trading 13% higher at 23.5p per share.

Open Orphan is a contract research organisation specialising in the fields of vaccines and antiviral testing. And on Tuesday the stock announced the signing of an £8.1m contract with “a major global pharmaceutical company” to test an inhaled human rhinovirus (hRV) antiviral product.

Testing, which is scheduled for the first half of 2022, will be carried out through Open Orphan’s hVIVO subsidiary. The small-cap expects the majority of revenue from the contract to be recognised across 2021 and 2022.

It said that “this new contract further underlines the increased international focus and investment into respiratory and infectious diseases following the outbreak of Covid-19, in areas such as the common cold, influenza, and many other areas which were previously underserved by the pharmaceutical industry”. Open Orphan estimates that the market for new infectious and respiratory disease products will be worth $250bn by 2025. The market was valued at $20bn last year.

This is a market that clearly offers plenty of opportunity for companies like Open Orphan. Though the company is one of many healthcare testing companies out there and competition is consequently significant. A high forward price-to-earnings (P/E) of 29 times could suddenly look expensive and cause investors to sell if work begins to dry up.

The post Here’s why these penny stocks are rocketing in price! appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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