Jubilee Metals Group PLC (LON:JLP /Altx: JBL), a leader in diversified metals processing, with operations in Africa, has announced its six-month operations update for the period ending 31 December 2022 and an update to its Zambian copper and cobalt strategy. The Company expects to release its interim results for the six-month period ending 31 December 2022 on or about 20 March 2023. Figures in this announcement are unaudited.
The Company is pleased to have delivered operational performance broadly in-line with management’s expected earnings and revenue targets for H1 FY2023, mainly supported by the performance of its South African PGM and chrome operations which largely buffered the impact of the power and water infrastructural challenges faced in Zambia which have since been addressed.
Key Highlights
South Africa
· The Company’s newly expanded Inyoni Facility continued to perform, delivering 18 208 PGM ounces for the six-months to December 2022 (100% from own operations) despite increased power outages experienced at the Company’s South African operations.
· Chrome production benefited from the increased capacity delivering 634 111 tonnes of chrome concentrate, with chrome production on track to exceed full-year guidance of 1.2 million tonnes of chrome concentrate.
· Jubilee’s enlarged chrome processing capacity was utilised to accelerate the production of PGM feed material to increase PGM feed stock by a further 5 016 PGM ounces to better buffer the Inyoni PGM facility against increased power outages.
· In November 2022, Jubilee implemented back-up power units at its Windsor 8 chrome operations. The expansion of the power facility is currently under review to further protect the chrome operations that supply the feed to the Inyoni Facility. Since commissioning, the back-up power units have delivered in excess of 650 hours of back-up power.
· Operational cost net of chrome credits remained tightly under control at US$ 516 per PGM ounce, which is well below target despite a much lower credit from chrome production due to a softer chrome metal price.
· PGM and chrome metal prices were softer over the period with chrome recovering sharply post the reporting period.
· The South African operations experienced additional operational downtime relating to a safety incident at an engineering service provider that sadly resulted in a fatality. Following the incident, Jubilee has implemented measures to assume a more direct safety management role of its service providers.
· The combined South African operations have achieved 52 days without a lost time injury (LTI) with a lost time injury frequency rate (LTIFR) of 1.0.
Zambia
· Copper production was down 10% on the previous six months to 1 149 tonnes with in-process stock from processed material at Roan increasing to approximately 830 tonnes of contained copper.
· Overall production fell below the targeted 3 000 tonnes of copper for the period, with the Zambian operations suffering severe disruptions due to country wide power outages that resulted in prolonged down-times and damage to plant and equipment which impacted its ability to operate as intended and effectively.
· Jubilee has taken decisive corrective action to invest a further approximately US$2.5 million to end January 2023 to address and overcome the infrastructure challenges which has delivered an upgraded privately owned water infrastructure, further upgraded power infrastructure with additional secured power and replacement of damaged equipment.
· The upgraded and expanded water and power infrastructure at Roan now offers the potential to more than double the capacity of the existing 780 000 tonne per annum processing capacity.
· At Sable, Jubilee successfully completed the first cobalt production runs from waste. The success of the trials has motivated the further expansion of the cobalt circuit to increase cobalt production from waste and offers a buffer to the impact on Group earnings from reduced copper production.
Refined Zambian Strategy
· Jubilee has updated the implementation of its copper and cobalt expansion strategy to better align the targeted increased operational footprint with the in-country available power infrastructure, resulting in the potential to accelerate the roll-out of the Northern copper and cobalt strategy. The refined strategy follows a joint review by the Zambian authorities and the Jubilee project team.
· The Company’s new refined strategy will allow the Zambian operations to maximise the use of available and renewed infrastructure by expanding existing operations such as Roan, which offers the potential to bring forward the delivery of its Northern Refining Strategy through a centralised operation and reduced capital outlay.
· Sable Refinery holds the ability to pivot production between copper and cobalt metals which, accommodates the staged expansion of the operations while at the same time optimising profitability.
· The Sable Refinery will initially maximise cobalt production in the short-term to facilitate the targeted expansion of the Roan copper operations, targeting output of 450 tonnes per month of cobalt hydroxide (125 tonnes of contained cobalt) from recycled waste alone by end May 2023.
Leon Coetzer, Jubilee Metals CEO, commented: “It has been a challenging period during which we have overcome infrastructural related challenges in both of our operating jurisdictions. Reliable power and water supply are two critical ingredients for efficient and stable operations.
“Our ability to leverage off our multi-commodity production capability has been vital in being able to deliver the operational performance and resultant revenues and earnings. We aim to continue to maximise this multi-metal production flexibility and therefore benefit from the cumulative earnings potential it provides.
“Our South African operations delivered a very solid result in the period under review, despite the aforementioned challenges. We moved quickly with our chrome and PGM feed material suppliers to better manage stock levels and synchronise operational activities, while prioritising the implementation of back-up power supply units at the hardest hit operational areas.
“This has allowed our South African operations to temper the impact of the ongoing load-shedding, a term used to describe the reduction of power availability in designated areas by the national power utility of South Africa. With the measures taken and systems implemented I fully expect the operations to closely match targeted up-time resulting in improved processing efficiencies.
“At our operations in Zambia, the impact of nationwide power shortages has been more acute, and we have taken bold steps to not only overcome the immediate challenges faced by operations, but also to actively update the implementation strategy of our copper and cobalt expansion. Through a concerted joint effort between the Jubilee teams and the Zambian authorities, we have been able to alleviate the immediate impact of power outages on our operations through the implementation of a new power management plan, while adapting our copper and cobalt expansion strategy to better align with available power and water infrastructure.
“The updated, expansion implementation plan, offers the potential to accelerate the increase of copper and cobalt production at an initial lower capital outlay, by increasing our existing operational footprint in Zambia to fully utilise the available infrastructure, compared with an initial targeted Greenfields expansion.
“At the Roan concentrator, the large available surface area and upgraded water and now power infrastructure, now offers the potential to expand operations at Roan by establishing it as a concentrator hub for projects associated both with the Northern and Southern copper refining strategy. The expansion of Roan therefore offers the opportunity to accelerate the roll out of our operational footprint at the nearby Northern Refining projects.
“Based on the initial review of our technical teams, Roan can be expanded in phases to more than double its current capacity, while avoiding a complete shutdown of operations to accommodate the full upgrade. The initial phase will expand and upgrade the material handling and classification circuits, to accommodate the simultaneous processing of copper tailings and copper containing ROM material, which immediately facilitates the implementation of the first Northern linked refining project at Luanshya, and the supply of further third-party ROM material.
“At the Sable Refinery, we have taken the decision to debottleneck and further expand the cobalt refining circuit to add to our ability to increase revenues from cobalt especially during the expansion of Roan. The impact, therefore, of the addition of cobalt production and upgrades to the Roan operations during February, will impact our production guidance for FY2023 which we will clarify along with the release of our interim results due in March.
“We have suffered short term losses in the production of copper but, the learnings we have taken from the severe challenges we faced, and the decisive steps taken, we expect clear long-term benefits from the joint efforts. We are extremely thankful for the support of the Zambian authorities who helped keep us on track to achieve our copper and cobalt aspirations.”
Prospects for FY2023
Zambia
· Jubilee has refined the implementation of the Northern Strategy against the backdrop of the upgraded power and water infrastructure at Roan and the expansion at Sable. The updated implementation strategy targets the expansion of Roan to double its processing capacity as part of the roll-out of the expansion strategy.
· The Company looks to complete the debottlenecking and initial expansion of the cobalt refining circuit during February 2023 to target a production capacity of 450 tonnes of cobalt hydroxide product from waste alone, following the further expansion in May 2023.
· The targeted addition of higher margin cobalt production and upgrades at Roan operations, will displace copper production to some extent in the short term. Guidance for FY2023 will be updated following the completion of the initial expansion of the cobalt refining circuit currently underway as soon as possible but no later than as part of the release of the Company’s interim results expected on or about 20 March 2023.
South Africa
· The new enlarged PGM and chrome operations have set the platform to deliver up to 44 000 PGM ounces and 1.2 million tonnes of chrome concentrate per annum from Jubilee’s own capacity.
· Due to the continued uncertainty over stable power supply, and the expected time-lag to expand the back-up power supply for operations, the Company feels it prudent to update its full year guidance to 38 000 PGM ounces from own production for FY2023, with the continued option to add a further 8 000 PGM ounces from third party processing agreements dependent on stock and power availability.
· Jubilee continues to progress discussions to secure a further PGM processing footprint in the Eastern Limb of the Bushveld (north-eastern region of South Africa’s chrome and PGM mining region) with final design reviews underway for the chrome beneficiation facility that will precede the PGM facility in the Eastern Limb.
· During the period, Jubilee has increased its ownership of existing tailings resources in support of the expansion target on the Eastern Limb and is reviewing the option to either secure a decommissioned PGM facility that will be repurposed by Jubilee, or to construct a new facility in the region.
OPERATIONAL KEY PERFORMANCE INDICATORS
| COMBINED OPERATIONAL PERFORMANCE (UNAUDITED) | Unit | 6 months to31 Dec 2022 (H1 FY2023) | 6 months to30 Jun 2022(H2 FY2022) | 6 months to31 Dec 2021(H1 FY2022) | % changeH1 FY2023 vsH2 FY2022 | % changeH1 FY2023 vsH1 FY2022 | 12 months to30 Jun 2022 FY2022 |
| Unaudited | Unaudited | Unaudited | Audited | ||||
| KEY UNITS OF PRODUCTION | |||||||
| PGM ounces: | |||||||
| – Inyoni Facility | Oz | 18 208 | 20 166 | 15 152 | (10%) | 20% | 35 318 |
| – Third party joint venture | Oz | – | 1 104 | 5 164 | (100%) | (100%) | 6 268 |
| Total PGM ounces | Oz | 18 208 | 21 270 | 20 316 | (14%) | (10%) | 41 586 |
| Chrome tonnes | Tonne | 634 111 | 602 552 | 619 900 | 5% | 2% | 1 222 452 |
| Copper tonnes produced | Tonne | 1 149 | 1 279 | 1 314 | (10%) | (13%) | 2 593 |
| Copper tonnes sold | Tonne | 915 | 1 388 | 1 216 | (34%) | (25%) | 2 604 |
| Copper tonnes held in stock | Tonne | 280 | 46 | – | – | – | – |
| UNIT REVENUE | |||||||
| – PGM revenue per ounce | US$/oz | 1 456 | 1 599 | 1 632 | (9%) | (11%) | 1 615 |
| – Chrome revenue per PGM ounce | US$/oz | 2 292 | 2 486 | 2 042 | (8%) | 12% | 2 269 |
| Total PGM revenue per ounce | US$/oz | 3 748 | 4 085 | 3 675 | (8%) | 2% | 3 884 |
| Copper revenue per tonne | US$/t | 7 953 | 8 932 | 9 527 | (11%) | (17%) | 9 210 |
| UNIT COST | |||||||
| Net cost per PGM ounce (after chrome by-product credits) | US$/oz | 516 | 283* | 540 | 83% | (4%) | 408 |
| Net cost per copper tonne | US$/t | 6 468** | 5 248 | 5 873 | 23% | 10% | 5 386 |
| UNIT EARNINGS | |||||||
| Net earnings per PGM ounce | US$/oz | 939 | 1 316 | 1 092 | (29%) | (14%) | 1 207 |
| Net earnings per copper tonne | US$/t | 1 485** | 3 684 | 3 654 | (60%) | (59%) | 3 824 |
* Net cost per PGM ounce for the period was lower as a result of stronger chrome earnings and a once off chrome stock adjustment
** Cost and net earnings per copper tonne includes disproportionate copper fixed charges at US$300 per copper tonne produced, to secure full power allocation for Sable at 100% capacity
South African Operations Review
Health and Safety
The combined South Africa operations have achieved 52 days without a lost time injury (LTI) with a lost time injury frequency rate (LTIFR) of 1.0. Over the period 253 610 tonnes of historical tailings were uplifted, processed, and placed on a modern tailings facility by the Jubilee tailings operations.
Operational Performance
The expanded PGM operational processing capacity holds the potential to produce 44 000 PGM ounces per annum, depending on feed grades received. The expansion program included the expansion of the chrome processing operations which holds the potential to produce 1.2 million tonnes of chrome concentrate per annum. The chrome operations play a key role in Jubilee’s PGM operations by not only acting as a feeder system to the PGM operations, but also having the potential to subsidise the PGM unit cost through the sales of chrome concentrate. PGM basket prices and chrome metal prices were under pressure, retreating by approximately 18% per PGM ounce over the period and 12% per tonne of chrome concentrate. The notoriously volatile chrome markets have seen highly fluctuating metal prices over the past period, with a strong recovery in metals prices post the period under review.
Jubilee sold 18 208 PGM ounces for the six-month period. Notably, 100% of the PGM production stemmed from the new Inyoni Facility. The upgraded facility benefits from the scale of operations, and the period under review highlighted the exposure of such a single large facility to unplanned downtime and introduced circuit instability brought on mainly as a result of interrupted power supply.
The chrome operations, as a by-product of the PGM operations, continued to perform, delivering 634 111 tonnes of chrome concentrate over the period against a targeted 600 000 tonnes. The disproportionate increase in chrome operations over the period offered Jubilee the opportunity to increase PGM feed stock levels by 5 016 PGM ounces in stock to better buffer the Inyoni PGM Facility from power outages suffered at the chrome operations.
The Company has taken decisive steps to integrate its operations more closely with its key suppliers of PGM and chrome containing feed material, to better manage buffer stock capacity. The Company has also implemented its first back-up power units at its chrome facilities to ensure a more constant feed supply and performance. The expansion of the back-up power units is currently under review, with the existing system already delivering 650 hours of backup power to operations since its installation in November 2022.
Operational PGM efficiencies came under pressure due to a scheduled drop in PGM feed grade over the initial four months from third party suppliers, which has since returned to previous higher levels that has continued during the current period.
The PGM basket price over the period decreased by 18% to US$2 019 per PGM ounce compared with the previous period while chrome CIF prices decreased by 16%.
Zambian Operations Review
Health and Safety
The Zambian operations maintained their record of no reportable occupational health or environmental incidents over the six-month period. The combined operations and projects have achieved 170 days without a LTI with a LTIFR of 2.9.
Operational Performance
The Zambian operations faced severe power and water interruptions over the period, which extended into January 2023, and impacted its ability to operate as intended and effectively. The water infrastructure was successfully upgraded during December 2022, with the implementation of new private infrastructure under licence from the Zambian authorities. A further concerted joint effort between the Jubilee teams and the Zambian authorities to alleviate the reduced power availability, has resulted in an action plan that addresses not only the immediate operational challenges, but also offers an incentive to accelerate the roll-out of Jubilee’s copper and cobalt expansion strategy in Zambia.
The jointly agreed and implemented new power management plan better synchronises operational planned maintenance with scheduled power outages to ensure more consistent and stable operations for a prolonged period. Simultaneously power and water infrastructure has been upgraded to offer operations, such as Roan, the opportunity to expand its operational footprint. The benefits of the new joint power management plan are clearly visible in the improved stability of power and operations and the impact on operations will be better reflected during the second half of FY2023.
During the period under review, and to mitigate the risk of equipment damage and loss of product quality caused by outages, management has taken the decision to curtail copper production at Sable and instead increase stockholding of partially processed material at its Roan concentrator, which is targeted to be refined at Sable following the implementation of the new power management plan.
Through the success of this intervention, Jubilee has updated its copper and cobalt expansion strategy to focus on maximizing its operational footprint through the expansion of existing operations to fully utilise the expanded available infrastructure. This offers the opportunity to not only accelerate the implementation of the expansion strategy but also to reduce the early capital requirement through Brownfields expansion of existing operations. The expansive surface area supported by upgraded infrastructure at Roan, offers the potential to more than double the existing 780 000 tonne per annum operational capacity at a significantly lower capital outlay than building a new Greenfields concentrator facility, and without the uncertainty of available infrastructure.
Roan operations can be expanded through a phased approach, similar to the successful expansion implemented at the Inyoni PGM Facility in South Africa. The initial target is the upgrade of the feed material handling and classification circuit at Roan to offer the flexibility to simultaneously process both copper tailings and ROM copper material supplied by third party miners. Such an upgrade can be completed within an 8-week period immediately facilitating the implementation of the first Northern Refining project tailings project.
During the period the Sable Refinery continued to expand its operational capability through the addition of the copper sulphide refining circuit and the successful completion of the operational trial to produce cobalt hydroxide saleable product.
As a result of the successful cobalt production trials, the decision was taken by the Company to debottleneck and expand the cobalt refining capacity to increase Sable’s capability to produce saleable cobalt hydroxide concentrate from recycled waste materials in Zambia. The debottlenecking of the circuit will be completed during February 2023 which, targets to increase the processing capacity of waste materials to an equivalent production rate of some 270 tonnes per month of cobalt hydroxide (75 tonnes of contained cobalt) from recycled waste alone. A further expansion is currently under review to target some 450 tonnes per month of cobalt hydroxide (125 tonnes of contained cobalt) from recycled waste alone. The capacity is feed grade dependent and can be increased by further preconcentration of the secured feed supply.
Sable’s ability to now pivot between metals offers the opportunity to offset a short-term reduction in revenues from copper production due to the expansion of Roan, with an increased higher margin cobalt output. This is of noteworthy value during a time when responsibly soured cobalt from recycled material has seen a significant increase in demand.
