The Papyrus Australia Ltd (ASX: PPY) share price is rocketing today as the company released an update on a new opportunity in China. Shares in the paper producer are currently trading 19% higher at 5.6 cents after reaching an early afternoon high of 6 cents.

Papyrus develops technology that converts the waste trunk of banana palm into alternatives from forest wood products. It can be used to make paper, packaging, furniture, building and also in construction.

Why is the Papyrus share price flying today?

Shares in Papyrus are performing well today as the company was granted 'first right' to exploit technology in China.

Papyrus aims to sell turn-key factories that produce banana fibre products to operators in banana-growing countries. With China being the second-largest banana producer worldwide, this makes it an ideal destination for the company's tech. What's more, China has a plastic packaging waste problem which the Chinese Government demands be addressed.

Papyrus claims it can address this problem by selling 'turn-key' factories and licensing the rights to establish banana fibre manufacturing facilities in China. Crucially, there is potential for this to occur with the company's memorandum of agreement (MOA) signed on 7 February.

The process

The MOA contemplates a 5-stage milestone process which Papyrus outlined in today's release.

1. Stage 1 contemplates establishing a joint venture (JV) company under Chinese law, with a completion date at the end of March.
2. Stage 2 requires the JV company to undertake a comprehensive research project in China regarding the government and all other requirements to establish the first project within or near the banana-growing areas.
3. The third stage would require the JV to organise field trips for the Papyrus officers to travel to China and assess the proposed site for manufacturing purposes.
4. Stage 4 would require the company to set out a business plan for its plan's first project.
5. The final stage would require executing a contract between Papyrus and the JV company no later than the end of July 2021. Together with the deposit by Papyrus to buy the plant and equipment necessary for the first project.

About the Papyrus share price

It has been a great 12 months for the materials company that has seen its share price jump 480%, albeit from a low trading base of 1 cent last February.

Based on the current Papyrus share price, the company has a market capitalisation of $24 million.

The post Why the Papyrus (ASX:PPY) share price is rocketing 21% today appeared first on The Motley Fool Australia.

Papyrus Australia Ltd (ASX: PPY) shares were on fire today. They rose 26.32% to 7.2 cents per share this morning (before the ASX was suspended anyway). The Papyrus share price had closed at 5.8 cents on Friday afternoon last week. But it opened at 6.7 cents this morning and rose to 7.2 cents before the ASX was suspended (it remains suspended at the time of writing).

It's been an… interesting year for the Papyrus share price. This company has spent most of 2020 (and indeed, most of the past decade) stuck at around just 1 cent per share, with the occasional spike to 2 cents. However, last month, we began seeing some volume come into this company, which pushed up Papyrus shares to 4 cents. Then, between 5 and 9 November, the company jumped to 7 cents a share before bouncing around over the following days.

Today's moves mean Papyrus is up 260% since 5 November, and 620% since late August. So what is this company? And why are Papyrus shares swelling again today?

What is Papyrus?

The more historically-literate readers out there might recognise the term 'papyrus' from the Ancient Egyptians' precursor to modern paper. Papyrus was fashioned out of fibres from the papyrus plant back then. It was made into a crude form of paper that was used for both writing/scribing and as a building material.

And that's where this ASX company presumably finds its inspiration.

Papyrus Australia describes itself  as "the developer of a world-first technology that converts the waste trunk of the banana palm into alternatives to forest wood products to be used in the paper, packaging, furniture, building, construction and other industries." It currently operates a factory to this end in Egypt.

The company has identified that fibres produced from 'secondary fibre crops' like banana, sugar cane, cereals, palm oil and tobacco, have far lower environmental and economic costs that 'primary fibre crops' like cotton, hemp and flax. The company focuses on banana and plantain (a less popular species of banana that isn't as nice to eat) trees. That's because it has identified these plants as being "sustainable, renewable and abundant secondary fibre crop available all year round" in comparison to other options.

Papyrus has developed its '"proprietary technology" as a result of "15 years of research and development". The company tells us that its technology can facilitate the manufacture of a variety of products. These include plywood components, cartons, moisture-resistant laminates for cartons and boxes, grease-resistant packaging, stationery, and furniture.

Why did the Papyrus share price rocket today?

We can probably put Papyrus' share price movements today down to an ASX announcement the company released to the market before open. In this release, Papyrus told investors that it has completed a major institutional investment. This "cornerstone" investment comes from L39 Capital, a venture-style wholesale fund. Papyrus also noted it has recently received a funding round from Union Pacific Equities as well. These funding rounds have reportedly provided a much firmer financial footing for the company. Papyrus stated this "ensures that the Company is currently in a financially healthy state meeting all near-term working capital needs, and securing a platform for business growth".

As part of the arrangement, L39 Capital has nominated its director, David Attias, to join the Papyrus board as a director. Here's some of what Mr Attias had to say on this development:

We have now formally completed an in-depth due diligence of Papyrus with no major areas of concern highlighted. We are now ready to begin working actively with Papyrus to achieve the vision of zero-waste micro-factories globally as part of the circular economy. Shareholders can expect to see a lot of news flow from Papyrus as it undergoes this transformation.

Papyrus chair, Ted Byrt, also commented:

The days of us worrying about funding and liquidity are over. This is a rebirth of Papyrus where we can focus on the business and the growth strategy for the next 12 months… We are delighted to now formally collaborate with L39 Capital. David will enhance our corporate governance and strategic planning to help us build a global business

The post ASX stock of the day: Papyrus (ASX:PPY) share price swells on funding announcement appeared first on The Motley Fool Australia.