Jubilee Metals LON:JLP the AIM-listed, waste-to-metal company, producing chrome, platinum group metals (PGM), copper and cobalt from mine tailings in South Africa and Zambia is due to publish its audited annual results for the year to the end of June on Wednesday (11th October).
When The Armchair Trader wrote about Jubilee last year, it was after a disappointing set of results, as earnings had fallen 25% to GBP37m and profits had collapsed 40% from the year before to GBP26.5m, despite a 5.4% jump in revenue. The company’s share price took a similar trajectory, down over 30% on the year.
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However, Leon Coetzer, CEO, a veteran miner who cut his teeth at Anglo-American LON:AAL promised disgruntled shareholders that: “After the expansion into Northern Zambia, I can’t see any more large-scale capital events on the horizon,” signing off with the boosterish declaration that he “can’t wait” to start paying the firm’s shareholders dividends, but in the year that had passed, his management team had committed every spare rand to building out mine waste processing facilities in the copperbelt region of Zambia.
At first look, what Jubilee has built its business upon is reasonably straightforward, in that it combs over mine tailings – or waste dug out from underground by another mine operator and piled up in slag heaps – for metals and minerals that have been missed by the primary miner. This means that a tailings operator does not have to build extensive mineworks and can get an operation up-and-running quite quickly, compared to an underground miner or even a surface mining operation.
Timely production of chrome
However, Jubilee has flattered to deceive and spent the year battling power and infrastructure issues in South Africa and metal price issues.
So, what has Jubilee done over the last year? Operationally it’s been a busy year for Coetzer and his team. In South Africa, Jubilee had a good year and managed to produce more PGMs (Platinum Group Metals) than it expected to, beating previous guidance producing 42,474 ounces (oz) up 2% on production to end of June 2022, after guiding production of 38,000oz. The company managed to sidestep the worst of the South African power outages by installing its own back-up power units on site.
The company did even better in terms of chrome, bringing in 1.3m tonnes, up 7% year-on-year and exceeding guidance of 1.2m tonnes. Jubilee also switched on a 360,000 tonnes per annum (Tpa) chrome concentrate facility in June and had started delivering sellable product by the end of the month.
The firm invested in expanding its South Africa operations, upgrading, expanding and modernising its processing unit in the Bushveld region and signed new partnership agreements from its chrome business that had the potential to increase chrome processing capacity to 360,000 tonnes adding 200,000T of chrome concentrate and 10,000oz of PGMs at its Inyoni facility.
The ability to produce more chrome was well-timed, as 2023 pricing for the metal was strong, and with one partnership in the bag, Jubilee opened discussions with another party that could contribute an additional 600,000T of chrome.
Jubilee Metals copper production
Copper production was its biggest winner, however, albeit on lower pricing, with production up 29% year-on-year to 2,923 tonnes, but behind guidance of 3,000T, as a result of water disruptions in Zambia slowing down the ramp-up of its concentrator. The tailings company had been having issues with the new private-sector owned water company near its operations, but managed to come to an amicable settlement as 2022 closed.
The big question that Jubilee had to answer last year was whether it was going to double-down on copper and given the volumes of potential waste in Zambia took the decision to expand its Roan facility and integrate new copper waste streams.
Coetzer and team decided to take the plunge and once they pushed the ‘go’ button the ramp-up process has made rapid progress, with the miner ahead of schedule for works completed for the year. Commissioning should happen some time during this month and once the Roan complex is completed it will be able to process a multitude of waste products, and earlier on in the year Jubilee secured an additional six-year copper contract, which will almost immediately bring the new facility up to 60% of capacity. The Roan facility will also be able to produce chrome concentrate.
Copper wastes better than expected
As a bonus, Jubilee found that the copper wastes in the historical tailings of the northern part of its copperbelt operations were better-than-expected, which confirmed its suspicions and supported the proposal to develop a semi-commercial pilot facility in Luanshya.
Coetzer said: “I am particularly excited by the results achieved from our Northern Refinery trials. The copper recoveries exceeded our expectations and confirmed the potential of the process route that we are developing. This process solution offers tremendous potential to deploy a low-cost efficient copper processing solution for the vast historical tails in Zambia.”
To date, said the CEO, Zambia’s historical tailings have been overlooked by the industry as the wastes were previously thought too complex to exploit, however Jubilee’s proprietary solutions, said Coetzer, “[…] offers tremendous potential to deploy a low-cost efficient copper processing solution for the vast historical tails in Zambia.”
Potential to develop a cobalt stream
The company is also looking at the potential to develop a cobalt stream, but is holding off on investing in new processing lines until global cobalt prices recover, as it makes more sense to use its capacity to make copper, whilst the price of the transition mineral remains strong.To be fair, there has been a new sharpness and lack of slackness about Jubilee in the past year, and its boast that it has evolved into a multi-commodity producer is not as hollow as a few years ago when it was firmly in the PGM pack.
Compared to this time last year when Jubilee disappointed, this time around the work on the ground is clear to see, but has the market appreciated the effort?
Jubilee’s shares opened the week (9th October) at 6.9p, which is -42.7% behind where it was last year. Year-to-date, the share price is 35% behind where it was at the start of January and its shares have slalomed between 6.3p and 13.92p over 52-weeks.
But is the market wrong about Jubilee – is this just myopia, looking at the minutiae of the next month and not considering the potential of the next three years? Compared on a number of matrices Jubilee is behind its peers in Return on Equity, and it has spent a lot of money lately, putting its short-term earnings well behind the average for its industrial sector. But you could argue that Jubilee is speculating to accumulate, it has increased its processing capacity significantly in the last twelve months, and has started operations in a new area that offers immense potential – the copperbelt has been in business in Zambia for over 100 years and still contributes around 70% of the earnings for this upwardly-mobile developing nation (although Zambia remains at the bottom of most development indices).
Jubilee Metals offers above average earnings over longer term
If you look at the earnings picture over a longer period, Jubilee has more than double the earnings growth than the industry average and because it hasn’t been paying dividends, it’s been pumping the money not given back to investors back into its operations to increase earnings, and presumably profitability, which over the long term, promises greater potential for sustainable dividend returns.
For 2024, Jubilee is expecting to increase PGM production to 42,000oz, hit a new 1.45mT chrome output and double copper production to 5,800T rising to 25,000Tpa by 2025. A new CFO joined the firm at the beginning of the month, Neal Reynolds coming from DRC copper and cobalt producer, Chemaf to look after the pennies. Reynolds also worked at Pan African Resources LON:PAF, Mopani Copper Mines and was CFO of Glencore Copper Africa. Joining Reynolds in the building is Ricus Grimbeek in operations, who was hired to develop Jubilee’s growth into transition minerals, especially copper, and has been around the industry for more than 30 years.
The subdued share price might also be a rection to a somewhat downbeat set of results at the half-year point. Revenue was down marginally year-on-year to GBP63.1m, copper sales down on the year from GBP8.5m to GBP5.1m and EBITDA down to GBP10.3m against GBP13.7m at the halfway point in 2022. The investment in expansion also saw Jubilee’s cash position decline by 45.6% to GBP11.7m. Again, half-way through the race this year Jubilee disappointed, but Coetzer again promised jam tomorrow.
We will find out on Wednesday whether Jubilee is turning a corner later this week. Given the investments made, and the new units coming online, surely it’s time for a bit of good news for investors in Jubilee.
