Best UK penny stocks for traders and investors
We explain what you need to know about penny stocks and outline the top 10 penny stocks to watch in 2021. We’ll also show you how to take a position on UK penny stocks.
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What is a penny stock?
Penny stocks or penny shares are common stock that trade with a share price below £1 in the UK and below $5 in the US. The companies will also have a market cap below £100 million in the UK, and below $300 million in the US. As they are small, low-valued businesses, they offer higher risk and reward to traders.
Penny stocks are regarded as a more speculative investment than larger businesses because they are geared for growth, with many yet to generate any income or develop a viable product or service. In the UK, penny stocks are listed on the FTSE AIM index.
Best UK penny stocks to watch in 2021
The below list includes 10 penny stocks to watch in 2021 – based on their share price increase in 2020.
|Description||Share price movement - year-to-date (YTD) 2 January 2020 – 15 December 2020||Share price - 15 December 2020|
|Galantas Gold Corp||Gold miner||+1100.00%||15.00p|
|Wishbone Gold||Gold miner||+564.89%||12.63p|
|Conroy Gold||Gold miner||+506.60%||36.70p|
|Alien Metals||Copper and silver miner||+393.45%||1.12p|
|Alba Mineral Resources||Multi-commodity miner||+134.11%||0.40p|
|Thor Mining||Tungsten and molybdenum miner||+100.47%||0.84p|
|Eve Sleep||Mattress maker||+78.89%||4.20p|
|Red Rock Resources||Multi-commodity miner||+67.20%||0.72p|
Galantas Gold Corp
Galantas Gold Corp is an Irish mining company with a dual listing on Toronto’s TSX Venture Exchange and the FTSE AIM All-Share in the UK.
Galantas owns and operates a producing open-pit gold mine near Omagh, County Tyrone, Northern Ireland. The mine also produces silver and lead as a by-product. The company’s mine has received planning permits to continue to mine underground with about a kilometre of underground development completed in December 2020.
Part of a drilling exploration program was completed in 2020, with a significant increase in resources discovered. The company intends to continue that program in 2021 – which could be a reason for its meteoric share price increase.
Maestrano Group is a data analytics firm that has patented cloud-based platforms used by key sectors, such as banking, with products ranging from business intelligence to data visualisation. It has expanded into the infrastructure sector, targeting the likes of road, rail and energy networks, since buying engineering surveyor AirSight in 2019.
The company signed several deals in 2020 and expanded its reach by securing new distributors for its technology. For example, Network Rail has awarded a contract to the business for its automation technology. Plus, in July 2020 it signed up its first North American distributor for its Nextcore subsidiary that designs and makes lightweight drones, and a new joint distribution deal with a Dutch company that ‘is expected to substantially increase the distribution networks and sales volumes for both companies.’
Maestrano Group released annual results in July 2020 showing a 2% rise in revenue and a much narrower loss before interest, tax and amortisation of £844,000 compared to a £2.7 million loss in 2019.
Wishbone Gold shares jumped from 1.4p to 2.5p on 19 August 2020 after it announced it had started drilling as part of exploration work at its Wishbone II gold project in Australia. On the back of this news, the company’s shares continued to gain ground in 2020.
It has hired Terra Search to ‘fast track’ exploration work and identified ‘several high priority gold and gold-copper targets’ at Wishbone and another asset named White Mountains. Terra Search believes the targets have the characteristics in terms of grade and thickness that could allow Wishbone Gold to make a significant discovery in the near future.
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Conroy Gold and Natural Resources
Conroy Gold and Natural Resources shares started to gain ground in July 2020, when the company revealed it had signed a deal with Anglo Asian Mining that would step-up development of the Clontibret gold mine in Ireland.
Anglo Asian Mining, which is already producing gold, copper and silver in Azerbaijan, will spend €2 million on development in return for a 17.5% stake, and another €2 million to take its interest up to 25%. It will have the option to acquire a majority 55% stake by covering the costs to get the project to ‘construction ready status’.
The mine is Conroy Gold’s primary asset, and the venture means it retains a significant stake in the project without having to worry about paying for the work. Conroy said Anglo Asian ‘expressed intentions to proceed with the project in the immediate term’, suggesting development could accelerate in 2021.
Alien Metals had a busy 2020, having progressed a string of early stage mining projects. Under the leadership of its new chief executive Bill Brodie Good, the company raised £1.25 million through a placing in early September 2020 priced at 0.55p, which it is putting toward several projects.
These include an exploration programme at its Los Campos and San Celso silver projects in Mexico, and further drilling at the Donovan 2 copper-gold project. Plus the company is beginning work on the Elizabeth Hill silver project, which it bought in an all-share deal on 25 September 2020.
The company is still a long way from producing metals and generating money, but it is well diversified and has demonstrated that it can progress several projects involving different commodities and geographies. The swathe of drilling it is doing should start to de-risk the projects and increase the value.
Alba Mineral Resources
Alba Mineral Resources is a junior mining company progressing several projects targeting different commodities. After struggling to develop its mining projects earlier in 2020 thanks to the coronavirus and lockdown measures, the share price found momentum as it started to deliver real progress.
To that end, the company announced it had started underground bulk sampling and a drill programme on the Clogau gold project in Wales in September 2020 after securing approval the month before.
On top of this, an exploration programme on Clogau started in October 2020, which hopes to provide the insight needed to decide whether reopening the old mine is worthwhile. The exploration work on Clogau could propel shares higher if successful as it will try to find new sources of gold in the old mine.
The company raised £450,000 in August 2020 priced at just 0.065p and a further £1.3 million at 0.275p in September 2020. Proceeds went towards the work on Clogau, but they were also used to take its earlier stage projects forward, including its mines in Greenland that are prospecting for graphite and iron ore.
Thor Mining is another junior mining company that was busy in 2020, with all of its projects having made material progress. One of its primary assets is the wholly-owned Molyhil tungsten and molybdenum project in Australia, where it is trying to secure the $43 million in financing it needs to build the project in a 12-month time frame. It was also awarded ‘Major Project’ status in 2020 by the Australian government, which means it is recognised as being important for the country’s economic development.
Staying in Australia, where it also has an interest in two copper mines through a stake in EnviroCopper, it is looking to start drilling on the Kapunda mine and further de-risk the project. Elsewhere, in the US, Thor Mining decided to add vanadium and uranium to its growing portfolio of commodities after agreeing to buy mines within the Uravan Mineral Belt that have been in production in the past.
Thor conducted a placing on 15 September 2020 priced at 0.6p to help fund development, and garnered interest from new and existing institutional shareholders. Fellow AIM-listed Metal Tiger, the biggest investor in Thor, took part in the fundraising, as did ASX-listed Artemis Resources.
Eve Sleep, which designs and makes mattresses, beds, pillows and other sleep products, has been rebuilding itself since 2018. It was previously focused on expanding into new markets but is now concentrating on making a profit and building a sustainable business – and its work appears to be paying off.
Although sales were initially hit by Covid-19 lockdown in March 2020, sales since then have remained above expectations. Revenue in the first six months of 2020 fell 5% to £12.2 million, but that was better than expected, and its pre-tax loss narrowed to £800,000 from £5.9 million the year before. Notably, it also reported its first positive operating cashflow in a six-month period, generating £1.8 million compared to a £5.4 million cash burn in 2019. It expects positive cashflow to continue into 2021.
The company expected annual revenue for FY 2020 of ‘at least’ £22 million and for its underlying loss of earnings before interest, tax, depreciation and amortisation (EBITDA) to be narrower. It reported £23.9 million in revenue in 2019 (which has been declining as it pulled out of territories) and an underlying EBITDA loss of £10.7 million. The company still has some way to go to achieve its goals but it is certainly on the right path.
Red Rock Resources
Red Rock Resources has interests in a variety of commodities, including copper and cobalt projects in the Congo and gold projects in Kenya and Australia. Red Rock posted a strong end to 2020, with the main driving force being news that ASX-listed Jupiter Mines was in the process of spinning-off its iron ore assets into a new listed entity to capitalise on higher iron ore prices.
Red Rock holds a stake in Jupiter Mines and owns a royalty over one of its iron ore deposits, meaning it is well placed to benefit from the spin-off. The company is also considering spinning off all or some of the gold assets it holds in a separate joint venture named Red Rock Australasia. Red Rock Resources holds a 50.1% stake in Red Rock Australasia, and it’s considering launching an initial public offering (IPO) on a ‘North American stock exchange’.
The Red Rock share price hit 1.13p on 15 September, its highest level since 2015, but it lost some ground after the company decided to raise £1 million through a placing priced at 0.8p on 28 September 2020. Notably, there was a warrant attached to each of the 125 million shares that were issued, allowing investors to exercise them at 1.2p any time before March 2023.
ValiRx is a life science company that develops clinical stage cancer treatments. The company was on the verge of bankruptcy in early 2020 when it admitted it was relying on creditors to keep going. But, its fortunes have turned around following several rounds of fundraising.
It consolidated its shares in January 2020, turning every 125 shares into one new one, which supported the price by taking its issued share capital from over 1.5 billion shares to just over 12 million. Still, investors have been heavily diluted already, considering it conducted three further issues throughout 2020, meaning its share count bloated to nearly 59 million. That dilution has also been aided by the number of warrants it has issued, which have been exercised thanks to the higher share price.
Still, ValiRx, which generates no revenue and is loss-making, said in its interim results in September 2020 that the money it has raised means it is now financially secure.
ValiRx’s share price increased in the last few months of 2020 on the back of breakthroughs in certain treatments. For example, shares gained more than 145% from 17 to 24 September 2020, possibly driven by the anticipated release of clinical trial results of its lead asset, VAL201, which it hopes can treat prostate cancer. The Phase 1/2 trial suggested six of 12 patients that were dosed responded to the treatment and that no serious safety or tolerability issues were discovered.
How to trade or invest in penny stocks
- Do your research on the penny stocks you want to buy or short
- Open an account to get started quickly and easily, or try your strategy out risk-free by opening a demo account
- Place your first trade. You can trade or invest in penny stocks in seconds
With us, you can invest in penny stocks, or trade them long or short. With investing, you buy UK shares outright from just £3 commission with an IG share dealing account.1 You’ll also receive any dividends that are paid out.
When you trade penny stocks, you do so with derivatives like spread betting and CFDs. You won’t own the stock, but you can use leverage to open a position while putting up just a percentage of the capital. This boosts your risk and return. You will also be able to go short on penny stocks – profiting if the share price falls. With spread bets, you can trade tax-free and won’t have to pay a commission.2
What are the risks and rewards associated with penny stocks?
A number of well-known companies started off as penny stocks. Those that invested in companies such as Ford Motor Co or JD Sports Fashion in the early stages have been well rewarded, however it is important to stress that many penny stocks ultimately fail and that investing can be highly speculative.
The share prices of penny stocks can be volatile, either as a result of lower liquidity or because they are sensitive to news and market developments. Penny stocks can turn into a huge success or an utter failure overnight: winning or losing one contract or the level of success of a new product, for example, can decide their future. Many penny stocks have no track record and it is not uncommon for them to have no assets, operations or revenue.
Products and service offerings are often still in development and yet to be tested in the actual market. This could range from a small pharma stock developing a new drug to a junior miner digging for gold in foreign destinations, both of which are highly risky endeavours but ones that can be transformational if they are successful.
News coverage and analysis of penny stocks is harder to come by compared to gaining insight into larger, more popular stocks, and issues of corruption and fraud tend to be more prominent, although even the largest stocks are exposed to these matters too.
It is also worth noting that penny stocks are more likely to raise equity from investors on an ongoing basis as it gives them a way of securing vital funds for growth if traditional lenders refuse to provide debt, or if any available debt is too pricey. Each fundraising dilutes the shareholding of existing investors and devalues the price per share.
1 Trade in your share dealing account three or more times in the previous month to qualify for our best commission rates. Please note published rates are valid up to £25,000 notional value. See our full list of share dealing charges and fees.
2 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
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