The recent surge

I’m talking about Jubilee Metals Group (LSE:JLP). The stock’s up 56% over the past month, and 20% over a one-year period.

It’s received a starburst recently, thanks to the completion of the sale of its South African chrome and platinum group metals assets. This provides several reasons for investors to cheer.

Firstly, it provides cash from the sale being received in instalments. Further, this simplifies its business and strengthens its balance sheet. Finally, it allows the company to focus now on related copper projects, which could have large potential.

Tied to this last point is optimism about copper prices. Back in late November, the firm reported a 65% rise in quarterly copper production versus the previous quarter. Since then, the price of copper has skyrocketed. Therefore, investors are logically expecting the business to benefit from this move in the coming quarters. It should result in higher revenue and, ultimately, higher profit.

Direction from here

Jubilee’s strategy has pivoted strongly towards copper production in Zambia. I think this is a very smart move, as the metal’s becoming increasingly valuable as the global economy shifts to electrification, renewable energy, and infrastructure build-outs.

Jubilee production forecasts for fiscal 2026 show copper output potentially more than doubling from the previous year. Copper’s up 45% in the past year, with some analysts forecasting it could gain a similar rise in the coming year. Therefore, if Jubilee can double output and double the sale price of the copper it produces, profits could increase significantly.

Remember that the company will also have more cash (from the South African sale), allowing it to invest more heavily in growth areas, such as Zambia. This leads me to conclude that the share price overall could benefit in the coming year.

The bottom line

With a market-cap of just £154m, the potential for the share price to increase by a large amount is definitely there. I think we could see earnings per share rise to £0.022 ($0.03) in the coming year. Given the nature of this growth stock, if it traded at a price-to-earnings ratio of 20, it could be trading at 44p, almost 10x the current price. If someone had £100k to invest as a lump sum, it could indeed be considered a millionaire-maker stock.

Of course, there are risks. Commodity price volatility can work both ways, so weaker metals markets would dampen financial results. Further, with a lot of hope pinned on just one area, it doesn’t have much diversification to help earnings if copper doesn’t perform as expected.

Even with these concerns, I feel it’s a stock worthy of consideration for investors who acknowledge the risks involved.

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Details worth noting

I’m talking about Jubliee Metals (LSE:JLP). The company operates an interesting business model, specialising in recovering and processing metals. It takes metals such as copper, chrome, and platinum group metals from low-cost feedstocks, including overlooked mining waste. Using modular processing units placed near sites in South Africa and Zambia, Jubilee can quickly scale operations and turn waste into high-grade concentrate for sale or further refining.

The company’s market cap is now £94m, indicating it has fallen into penny stock territory. It hasn’t always been this way, but the 45% drop in the stock over the past year has tipped the scales. Part of the decline has stemmed from disappointing financial results, with rising operating costs and increasing finance expenses eroding overall profitability.

Another factor has been weaker commodity prices, particularly in copper this year. The company is exposed to the volatile swings in these prices, which ultimately mean revenue takes a hit when it has to sell at the prevailing market price. This has also led to negative investor sentiment surrounding the company and remains a risk going forward.

Reasons for optimism

Despite these problems, I think the stock could be a smart value play right now. While profits have been squeezed by weaker commodity prices and rising costs, these challenges appear cyclical rather than structural. This means profit margins should recover as commodity markets stabilise.

Importantly, Jubilee’s diversified revenue base across different metals reduces reliance on any single one. With expansion projects in Zambia ramping up and capital raised to fund future growth, the company has the potential to deliver significantly higher earnings once commodity prices firm.

In late spring, the company announced strong year-on-year growth in output. The higher production means it should exceed the original targets for the full year. Even if commodity prices don’t recover quickly, the increase in output should still allow revenue to grow.

Managing the risk

I’m not going to pretend that this is a low-risk stock. However, I can look to diversify some of the risk away in my portfolio. For example, I’d consider only adding a small amount of money to the company, relative to the rest of my portfolio. Further, by including it alongside my existing broad range of holdings, I’m not solely owning this as my only exposure to the stock market.

On balance, I do think the company could rally back in the coming year, so am seriously thinking about adding it to my portfolio.

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CVS Group

The amount people spend on their pets has grown rapidly over the past decade. And it’s tipped to keep growing strongly even as the cost-of-living crisis endures. Analysts at Statista think the veterinary care market, for example, will expand at a compound annual growth rate of 8.46% between 2023 and 2027.

CVS Group (LSE:CVSG) is a UK share I’ve bought to capitalise on this theme. And I’m thinking about adding to my holdings following recent share price weakness. This business owns more than 500 vet surgeries across the country along with diagnostics centres and crematoria.

Latest financials showed organic sales rose 7.4% in the four months to October. This was at the top end of the company’s 4-8% target. I’d buy CVS even though labour shortages in the animalcare market could dent its growth plans.

Lok’nStore Group

Britain’s self-storage market could slow in the near term as the housing market cools. A need for temporary storage by home movers is the chief driver is this fast-growing industry.

But the long-term outlook remains robust, thanks to themes like population growth and the rise of e-commerce. So I’m considering adding Lok’nStore Group (LSE:LOK) shares to my portfolio.

The company is one of the largest players in the industry and has ambitious expansion plans to turbocharge earnings over the next decade. It wants to open four new major stores in the 12 months to October. And its secured pipeline of 10 sites (as of July 2022) will increase its owned space by a whopping 44.1%.  

The UK self-storage industry looks set to remain undersupplied for years to come. So rental incomes (which hit record highs last year) should continue rising strongly. Average rents shot 9% higher last year, according to real estate services business Cushman Wakefield.

Jubilee Metals Group

The green energy revolution provides excellent opportunities for UK share investors. One stock I’m considering buying to capitalise on the climate change battle is Jubilee Metals Group (LSE:JLP).

This AIM business recovers platinum group metals (PGMs), copper, cobalt and other industrial commodities. These are all in high demand as electric vehicle sales soar and increasing amounts of metal are loaded into catalytic converters.

I think now is a great time to build a position in Jubilee Metals too. Successful copper production trials recently using direct leaching could open up fresh growth opportunities in Zambia. On top of this, the miner currently trades on a price-to-earnings (P/E) ratio of just 6.2 times.

I’d buy Jubilee despite the threat of oversupply in some of its markets. This could hit prices and consequently profits growth.

The post 3 AIM shares I’d buy to hold for the next 10 years! appeared first on The Motley Fool UK.

Increasing production

Jubilee Metals (LSE:JLP) is the first business that catches my eye. At the time of writing, the shares are trading at 13.3p. 

For the six months to 30 June, the AIM 100 metals recovery firm reported that it had invested £58m into expanding its operations in the recovery of platinum group metals (PGMs), copper, and cobalt.

These metals are in long-term high demand, given their importance to decarbonisation projects, like electric vehicles (EVs).

There are also new operations in South Africa that could increase annual output by 44,000 PGM ounces per year. This is an exciting development for the rapidly growing company.

Over the first half of the year, Jubilee Metals saw a 5% increase in PGM production, despite a number of interruptions and stoppages. There was also a 14% increase in copper production for the firm.

However, there’s a risk that military action could threaten the firm’s operations. It’s based in several countries in Africa that have volatile political systems.

On the flip side, it has a cash balance of £18.69m and total debt of £11.17m. To that end, I feel that the company could survive any near-term threats to its operations. 

An airline recovery?

Next, Jet2 (LSE:JET2) grabs my attention with its share price currently at 903p. 

The short-haul airline was battered during the pandemic because international flying ground to a halt.

For the years ended March, in 2021 and 2022, the business reported widening pre-tax losses of £370m and £388m.

At the current time, the climate of fewer international restrictions and a slightly lower oil price are both helping the company recover from the battering of the past couple of years.

But there remains the threat of further pandemic variants. These could cause more disruption to international travel, even if it’s not as extreme as it was during lockdowns.

Despite this, summer on-sale seat capacity was 14% higher in 2022 compared to pre-pandemic levels.

In addition, the AIM 100 constituent has operating cash flow of £653m. This means that it’s should be able to withstand any further disruption to its operations. 

Also, its total cash balance of £1.94bn far exceeds its total debt of £1.37bn. This strong balance sheet is another reason why I’m attracted to this growth stock.

Overall, these two companies may provide good scope to grow my initial investments. Given their higher-risk nature, however, I think a good approach for me is to buy the shares gradually. As such, I’ll put £200 aside every month for investment in these two businesses and will add them soon.

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Penny stock #1: PetrolTal

An oil and gas production company focused on operations in Peru, PetroTal (LSE:PTAL) is listed on the AIM 100 index. It is currently trading at 40p and is in prime penny stock territory.

From 2020 to 2021, crude oil revenues increased over two times, from $76m to $159m. Despite this, profit before tax has declined between 2019 and 2021, falling from $20m to a loss of $1.45m. This is a trend I would like to see reverse in the near future. 

In better news, the company recently reported that its Well 10H in Peru set a new record of over 10,000 barrels per day. This well was also constructed for 17% less than expected.

In addition, for the three months to 31 March, production and sales were up 58% and 48%, respectively, year on year.

Penny stock #2: Breedon

The second penny stock I’m buying in May is UK construction materials producer Breedon (LSE:BREE). It currently trades at 81.8p and specialises in cement.

Between 2017 and 2021, revenue increased markedly from £650m to £1.2bn. Furthermore, profit before tax grew from £71m to £114m. 

It should be noted, however, that past performance is not necessarily indicative of future performance.

For the three months to 31 March, revenue rose 16%, year on year. Additionally, the company announced that there was stable long-term demand for projects.

There is the added risk of further volatility in relevant commodities and the potential for rising costs of raw materials.

Penny stock #3: Jubilee Metals

Finally, Jubilee Metals (LSE:JLP) is a penny stock firm engaged in the metals recovery industry in South Africa and Zambia. 

For the years ended June, between 2017 and 2021, the company swung from a £20.42m loss to a £43m profit. 

What’s more, revenue has surged from £9.81m to £132m over the same period. This performance, together with the firm’s sustainable business model, prompted investment bank Berenberg to initiate a target price of 21p. This penny stock currently trades at 15.3p. 

There is always the risk, however, of political and military instability in the areas where Jubilee Metals operates. If any of these risks come to fruition, this could be bad news for the share price.   

Overall, each of these businesses is strong and in prime penny stock territory. They could provide me with growth over the long term and I will be buying shares in each firm in May.

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The FTSE AIM index — or the Alternative Investment Market — contains a variety of stocks. But many of them are relatively small, higher-risk growth stocks. Among these is Jubilee Metals (LSE:JLP), a metal recovery firm operating in Zambia and South Africa. 

I’ve previously written about this company and believed it could be a good addition to my portfolio. With recent results available, I want to analyse these to gauge if this business is still strong. Let’s take a closer look. 

Recent results

On 8 February, the company released its operational update for the six months to 31 December 2021. A financial update followed in March. The operational update was overwhelmingly positive.

For the period, chrome concentrate production was up by 41% year on year. In addition, revenue from chrome concentrate increased by 28%. This is a mineral that’s used for steel and alloy production and traded by big businesses like Rio Tinto and BHP Group. The firm produced 80,000 tonnes of chrome concentrate per month during the second half of the 2020 calendar year.

What’s more, Jubilee Metals decided to upgrade its processing plant for platinum group metals (PGMs) in South Africa. Investing £17.5m, this allowed the production of 44,000 PGMs ounces for the period, compared with 30,000 ounces in the final six months of 2020. 

Financial results for this FTSE AIM stock

In the final six months of 2021, revenue increased to £63.27m. This grew from £53.44m, year on year. Despite this, earnings before interest, taxes, depreciation, and amortisation (EBITDA) shrank from £29.33m to just £14.91m. While this may appear disappointing, it’s worth noting that the South African processing plant upgrade likely ate into these earnings.  

I’ve already written elsewhere about Jubilee’s strong historical earnings. Suffice to say, between the 2019 and 2021 calendar years, earnings-per-share (EPS) rose by nearly 400%. This is growth at lightning speed and suggests the management is expanding the firm in a responsible way. It should be noted, however, that past performance is not necessarily indicative of future performance.

It’s also possible that Jubilee Metals is undervalued. By comparing its trailing price-to-earnings (P/E) ratio to a competitor, Central Asia Metals, we see that Jubilee’s 8.2 is lower than its rival’s 10.08. It’s always good to know that I might be getting a bargain when I invest in a business and I think Jubilee Metals might fit the bill. It currently trades at 14.7p, down 6.65% in the past year.

Overall, this is a business that’s growing and expanding. The recent operational updates are encouraging and production output is increasing. Although earnings have narrowed, I’m confident that this is a short-term issue that will subside over a longer period of time. I will be buying shares soon. 

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Market volatility has been particularly severe for penny stocks as traders sell smaller and more financially vulnerable companies.

The immediate outlook for penny stock prices is packed with uncertainty as the crisis in Eastern Europe worsens. But as I recently explained, I plan to continue investing in UK shares, despite this near-term risk.

I’ll keep taking a long-term view and search for quality companies on course to deliver great returns. With some decent research I’m confident of finding top stocks that will deliver strong eventual returns, despite the impact of near-term market volatility.

AFC Energy

Take AFC Energy (LSE: AFC) for instance. I expect profits here to balloon over the next decade as demand for low-carbon energy soars. This penny stock not only manufactures hydrogen fuel cells, but it uses renewable sources to produce the gas rather than fossil fuels.

It’s been estimated that hydrogen cells using the latter emit larger emissions than coal and gas compared with AFC’s ‘green’ hydrogen. As a consequence, it threatens to become more and more unfashionable.

I am worried that AFC Energy probably won’t generate profits for many years. In that time it might be forced to take on lots of debt, or even tap its investors for cash.

Still, as a long-term investor, I could be persuaded to accept this risk and buy it. Research house Facts and Factors think the ‘green’ hydrogen market will be worth $1.42bn by 2026. That’s almost double its valuation in 2020.

I believe AFC’s sinking share price provides an opportunity for me to grab the stock at a bargain price. The energy business fell to fresh 14-month lows in recent hours and has halved in value over the past 12 months.

Jubilee Metals Group

I also think Jubilee Metals Group’s (LSE: JLP) share price also looks mighty attractive at current levels. The platinum group metal (PGM) producer has fallen by a more modest 6% during the past year. It has also dipped fractionally following Russia’s invasion of Ukraine, the prices of the precious metals it produces rising on strong safe-haven demand. This has helped limit the fall.

However, at recent levels, I think Jubilee Metals still looks mighty cheap on paper. The penny stock now trades on a forward price-to-earnings (P/E) ratio of just 10.5 times. I don’t think this rating reflects the fact that, like AFC Energy, sales look set to soar as the battle against climate change heats up.

Platinum and palladium are critical materials in reducing pollution from catalytic converters in cars. On the one hand, Jubilee Metals is therefore exposed to the supply chain crisis hitting auto production right now.

But to my mind, this danger is outweighed by the possible long-term rewards the company could reap as legislators demand more and more of its metal be loaded into cars to cut carbon emissions. I think its a top stock for me to buy.

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A high-growth penny stock miner

Miner Jubilee Metals (LSE: JLP) could well benefit significantly from a rise in commodities, especially from increased demand for copper as a result of an electric car boom. Electric cars use huge amounts of copper so there will be ongoing demand for this commodity. Jubilee has ambitions to process 25,000 tonnes of copper units per annum.

The biggest risk with this share is that its mines are in countries that face more political and social instability than many others. The mines are mostly in Southern African countries, including Zambia and South Africa.

But the miner has a number of treatment plants and operations so isn’t reliant on any one location, unlike some other listed miners. It also processes a number of different commodities so isn’t fully dependent on the price of any single commodity, which I think is positive for the investment case.

Overall with a P/E of just nine, the shares represent decent value given rapid revenue growth in recent years. But it should be borne in mind that it doesn’t pay a dividend.  

If I didn’t already own Sylvania Platinum, I’d be tempted to add Jubilee Metals to my own investment portfolio. I think it looks like a high growth miner with good operations and a lot of potential. With a share price of 16p, Jubilee is a penny stock I really like.

Panning for gold

Pan African Resources (LSE: PAF), the South African gold miner, released very positive results on 16 February. The results showed gold production was up in the first half, along with a rise in cash and profit after tax, while production costs declined. All in all a very pretty picture.

Again, like Jubilee, Pan African is at the mercy of South African politics, which may put some investors off buying it. It’s also clearly reliant on the gold price, which can fluctuate, so revenue and profits aren’t the most consistent. The share price has never tended to show any sustained growth.

All that aside, there are reasons to think that Pan African is a very decent growth and income share. Operating profit went from £15m in 2018 to £112m in 2021. The dividend yield is 4.2%, which is very good. When this is combined with a P/E of seven, giving it a very cheap valuation, there’s a lot to like, so I’m considering buying shares in this gold miner. Inflation might give the share price another boost.

The post Are these penny stock miners set to surge because of inflation? appeared first on The Motley Fool UK.

Let’s consider a few successful penny stocks of the past decade. Package holiday firm Jet2 and data analytics business YouGov have been phenomenal investments in recent years. Ten years ago, both were penny stocks. If I had invested £500 into each of them a decade ago, I’d currently have a whopping £21,000.

They each achieved a market-busting annual return of 36%. That’s around 2,000% over 10 years. It’s also far above the average for UK shares. For instance, the FTSE All-Share returned just 7% per year over that period. It’s important to note that most shares would not have gained as much as these two former penny stocks. So picking the right stocks is crucial to finding explosive winners.

Top characteristics

What I’d like to do is find a few penny stocks that could achieve similar returns over the coming years. There are several factors that I noticed about Jet2 and YouGov before they made their explosive share price moves. Both shares had relatively low price-to-earnings ratios (less than 10). Also, the businesses steadily grew both sales and profits every year. Finally, both had strong balance sheets with plenty of cash. This feature can often allow a company to survive during a crisis.

Which penny stocks?

So which penny stocks could I invest £500 in now that show similar characteristics? One share that ticks these boxes is broker and adviser Finncap. With a market capitalisation of just £55m, this is a tiny company. But small companies can often have the greatest potential for share price performance. It’s a well-run business that has demonstrated steady growth. It’s also profitable and highly cash-generative. Finncap operates with a strong balance sheet and offers a relatively generous dividend yield of 5%. There’s much to like about it, but bear in mind that it operates in a cyclical industry. Business can slow during downturns. Overall though, it seems to have managed well through ups and downs.

Mining exposure

Another penny stock I’d consider is metals processing company Jubilee Metals (LSE:JLP), formally known as Jubilee Platinum. In addition to ticking all of the boxes mentioned above, it also benefits from a 30%+ profit margin.

When so much focus is given to fast-growing technology shares, it’s easy to forget some sectors like mining. I reckon Jubilee is a good way to add mining exposure to my Stocks and Shares ISA, particularly at a time of rising inflation. But there are other reasons too. For instance, Jubilee should benefit from some mega-trends over the coming years. It’s significantly exposed to copper prices, which I reckon should grind higher for two reasons.

First, the world will need more copper cables. Think cables for electric car charging. Second, rising infrastructure spending in the US should also keep demand high for new roads and bridges. That being said, forecasting metal prices is difficult. An economic downturn could easily send copper prices falling. It’s something I’ll look out for. Overall though, I reckon Jubilee is in a good place for me to buy a small number of shares for my portfolio.

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Gold prices just hit their highest since mid-November at around $1,842 per ounce. They’re now within striking distance of August 2020’s record high of $2,069 and could be preparing for a fresh run.

I think Petropavolvsk could be a great UK share to ride this boom. And from a long-term perspective, I think there’s much to like too, as the company steadily increases output from its low-cost Pokrovskiy Pressure Oxidation (POX) production hub in Russia.

Gearing up for a gold rush

It’s been said that central bank interest hikes could damage gold prices and, by extension, profits at firms like Petropavlovsk. This has the potential to smack precious metals values and make it more expensive to hold assets like gold.

This is a possibility I need to consider. But I’m also aware that such tightening might actually have little effect on bullion prices. The World Gold Council (WGC) says: “While rate hikes can create headwinds for gold, history shows their effect may be limited.”

Besides this, the WGC also reckons that real rates (interest rates adjusted for inflation) will remain “depressed” even if central banks act again. It says that this is important “since gold’s short- and medium-term performance tends to often respond to real rates.”

Another top penny stock to own

I’m also considering buying Jubilee Metals Group (LSE: JLP) today for a couple of good reasons. First of all, this mining share also specialises in precious metals production, in this case the haulage of platinum group metals (PGMs) from the ground. These so-called hard currencies also attract massive safe-haven interest from investors when inflation soars.

As someone who invests for the long term however, it’s Jubilee Metals’ important role in the green economy which is attracting my attention. PGMs are bought in massive quantities by the auto industry where they are loaded into catalytic converters to reduce emissions. These materials are required in larger and larger quantities in trucks and passenger vehicles because environmental legislation is becoming steadily tougher.

The growing popularity of green hydrogen could also supercharge demand for Jubilee Metals’ product. Platinum is well-suited as a hydrogen fuel cell catalyst due to its ability to withstand high temperatures and complex chemical changes. It’s why the World Platinum Investment Council predicts that green hydrogen could boost annual platinum demand by up to 600,000 ounces by 2030.

Jubilee Metals trades on a forward P/E ratio of just 8.6 times today. Worsening economic conditions could hit demand for its semi-cyclical products hard and Jubilee’s profits too. But all things considered, I believe the possible rewards of me owning this penny stock far outweigh the risks.

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