Jubilee Metals Group plc (LON:JLP), the AIM and Altx traded metals processing company has announced its audited results for the year ended 30 June 2020.
Financial Highlights
· Total revenue for the year increased by a strong 132 %, to £ 54.8 million (ZAR 1.1 billion)1 [2019: £ 23.6 million (ZAR 432.6 million)]
· Adjusted Group EBITDA increased sharply by 132 % to £ 22.6 million (ZAR 446.4 million) (adjusted EBITDA excludes depreciation, impairments and other non-cash charges and gains)
· Earnings growth of 162 % to £ 18.3 million (ZAR 361.1 million) [2019: £ 7.00 million (ZAR 128.3 million)] and a return on equity of 21.2 %, [2019: 10.5 %]
· Earnings per share up 96 %, to 0.94 pence (ZAR 18.47 cents) [2019: 0.48 pence (ZAR 8.75 cents)]
· Jubilee delivered strong cash flows from its operating activities of £ 19.4 million (ZAR 415.4 million) [2019: positive cash flow of £ 4.76 million (ZAR 84.79 million)]
· During the year under review, a total of £ 26.1 million (ZAR 557.9 million) was invested in acquisitions and purchases of property, plant and equipment, nearly doubling the previous year’s total investment of £ 13.5 million (ZAR 240 million), while at the same time, a further £ 4.2 million (ZAR 89.1 million) of external debt obligations were repaid
· Operating profit boosted by 226 %, to £ 15.9 million (ZAR: 313.2 million) [2019: profit of £ 4.87 million (ZAR89.38 million)], with an operating margin of 29 % (2019: 20.7 %)
· Balance sheet strengthened substantially, with total assets increasing by 28 %, to £ 130.6 million (ZAR 2.8 billion) [2019: £ 102.0 million (ZAR 1.8 billion)]
· Total equity increased to £ 94.2 million (ZAR 2 billion), from £ 78.7 million (ZAR 1.4 billion) a year earlier, maintaining a strong equity ratio of 72 % (2019: 77 %)
· Overall, the Group’s gearing remains low, with current assets* covering 92.7% (2019: 126.74 %) of total short and long term liabilities
* current assets include inventory, trade and other receivables and cash and cash equivalents
Operational Highlights
• PGM2 Operations delivered a record production of 40 743 ounces (2019: 23 847 ounces) for the year, generating PGM revenue of £ 34.5 million (ZAR 681.9 million), compared to £ 15.8 million (ZAR 288.9 million) in the previous year
· Chrome Operations delivered 377 883 tonnes of chrome concentrate (2019: 181 947 tonnes), generating chrome revenue of £ 17.2 million (ZAR 338.2 million) [(2019: £ 7.8 million (ZAR 143.7 million)]
· Jubilee completed the acquisition of the Sable Zinc Refinery in Kabwe, Zambia for a cash consideration of £ 9.2 million (US$ 12.0 million) (ZAR 176.0 million). The refinery is situated immediately adjacent to the large stock piles of zinc, lead and vanadium that Jubilee has contracted from BMR Group Plc (“BMR”)
Investment Highlights
· Jubilee acquired 100 % of the rights to the PGM tailings situated at Jubilee’s Inyoni Operations (previously Hernic) located in the Bushveld Complex, South Africa
· Jubilee has also acquired 100% of all further rights to the chrome contained in all of the historical tailings at Inyoni Operations as described above
· Jubilee implemented its option to acquire Enviro Mining Limited from BMR. Enviro Processing Limited is a subsidiary of Enviro Mining Limited that owns the small scale mining licence in Zambia
· Jubilee has secured the rights to approximately 150 million tonnes of copper containing surface tailings, targeted to be upgraded at site and refined at its Sable Refinery in Zambia. This will be done through a joint operation with the mining rights holder. Project Elephant alone holds the potential to produce copper concentrates in excess of the total Sable Refinery capacity of 14 000 tonnes per annum of copper cathode
· Post the period under review Jubilee secured the rights to approximately 2 million tonnes of copper run-of-mine (“ROM”) material with the potential of increasing the ROM material to 4 million tonnes, as well as a targeted 2.5 million tonnes of copper containing tailings (“Project Roan”)
· Post the period under review Jubilee secured the rights to an additional 115 million tonnes of copper and cobalt tailings. This increases Jubilee’s total secured rights to copper and cobalt tailings to approximately 270 million tonnes
1= For income statement purposes conversions are at the average £:ZAR rates for the period under review and for balance sheet purposes at the spot rate as at year end. All other conversions are at rates at the time announced.
2= 6 Element Platinum Group Metals (platinum, palladium, rhodium, ruthenium, iridium + gold).
Operational Highlights post the period under review
· PGM and chrome operations delivered record quarterly operational earnings of £ 15.17 million (ZAR 332.36 million), surpassing the previous operational record set during the full H1 2020 period
· Jubilee’s PGM operations hit its highest quarterly PGM production, reaching 15 044 PGM ounces produced during Q3 2020
· PGM record production supported by 136 162 tonnes of chrome concentrate produced under tolling agreements from third party ore suppliers during Q3 2020
· Chrome Operations improved its attributable earnings margin, achieving 23 % for Q3 2020 compared to 7 % for H1 2020
Key financial and operational indicators
| GROUP | Unit | 12m to | 12m to |
| 30-Jun-20 | 30-Jun-19 | ||
| GROUP RESULT | |||
| Revenue | £’000 | 54 775 | 23 586 |
| Adjusted attributable earnings 1 | £’000 | 25 088 | 10 055 |
| Adjusted attributable earnings margin | % | 46 | 43 |
| EBITDA | £’000 | 22 664 | 12 546 |
| Adjusted EBITDA 2 | £’000 | 22 643 | 8 952 |
| Adjusted EBITDA margin | % | 41 | 38 |
| PGM | |||
| PGM £ revenue | £’000 | 34 590 | 15 750 |
| PGM $ revenue | $’000 | 43 594 | 20 003 |
| Attributable PGM £ earnings | £’000 | 21 486 | 8 158 |
| Attributable PGM $ earnings | $’000 | 27 079 | 10 361 |
| Attributable PGM earnings margin | % | 62 | 55 |
| Attributable PGM ounces produced | oz | 40 743 | 23 847 |
| PGM $ revenue per ounce | $/oz | 1 070 | 839 |
| PGM attributable $ earnings per ounce | $/oz | 665 | 434 |
| Adjusted PGM production $ unit cost3 | $/oz | 541 | 471 |
| CHROME | |||
| Chrome £ revenue | £’000 | 17 158 | 7 835 |
| Chrome $ revenue4 | $’000 | 21 624 | 9 950 |
| Attributable chrome £ earnings | £’000 | 803 | 1 309 |
| Attributable chrome $ earnings | $’000 | 1 013 | 1 662 |
| Attributable chrome earnings margin | % | 5 | 17 |
| Attributable chrome tonnes produced | tonnes | 377 883 | 181 947 |
| Chrome $ revenue per tonne | $/t | 57 | 55 |
| Chrome attributable $ earnings per tonne | $/t | 3 | 9 |
1. Attributable earnings refers to earnings allocated to the group based on the group’s contractual rights in each project.
2. Adjusted EBITDA refers to EBITDA adjusted for non-cash expenses including impairments, gain on bargain purchase, share based payments and other non-cash charges and gains.
3. The adjusted PGM production unit cost includes all direct and indirect costs attributable to the project including allocated corporate charges. The costs for the period under review includes all the operating costs for the Windsor PGM JV allocated to the Jubilee attributable PGM ounces.
4. The chrome revenue is recognised on an ex-works basis after costs of export logistics including freight, shipping and marketing.
Chief Executive Officer’s overview
This reporting period again showcases the strength and resilience of Jubilee’s business strategy with sustained, strong growth in all aspects of the Company despite the unprecedented challenges faced as a result of the COVID-19 pandemic.
Naturally, Jubilee was not immune to the pandemic as South Africa declared a nationwide lockdown to fight the spread of the virus, forcing the temporary suspension of all operations in March, with a gradual restart of the operations permitted over the following two months. During this period, Jubilee implemented the required safety measures for the protection of all staff in strict adherence with lockdown rules and regulations as set out by the South African Government.
For the reporting period, Group Revenue increased sharply by 132 %, to £ 54.8 million (ZAR 1.1 billion) and adjusted Group EBITDA increased 153 % to £ 22.6 million (ZAR 446.4 million) (adjusted EBITDA excludes depreciation, impairment and other non-cash charges and gains).
Jubilee’s results reinforce the Company’s confidence in what it refers to as “The Jubilee Way”, continuously striving to translate leading in-house processing and metals recovery excellence into industry leading operational efficiencies. Jubilee’s achievements in the chrome industry in particular, with the introduction of its in-house developed Fine Chrome recovery plant and its state of the art Inyoni PGM recovery plant, are examples of “The Jubilee Way” in action.
As a product of these achievements, Jubilee is also seeing an increase in approaches from established industry players looking to partner and work with Jubilee in order to improve overall operational efficiencies and target previously discarded metal values. This is evidence that Jubilee’s brand as a leading metals recovery company has travelled across metal groups and mining jurisdictions and holds the potential to contribute significantly to future growth.
During the period under review, Jubilee further diversified its operations across metals and mining jurisdictions. Notably, the Company added copper and cobalt to its existing chrome and PGM operations. Jubilee has set a bold target of reaching 25 000 tonnes of copper units per annum, and as such has concluded several strategic agreements in this regard.
In Zambia, the Company is seeking to replicate the success of its PGM and Chrome operations, and this has been a significant period seeing rapid growth. Jubilee has already secured the rights to vast copper and cobalt tailings resources following its acquisition of the Sable Refinery, which are in addition to the rights that the Company holds over the Kabwe zinc, lead and vanadium tailings in Zambia. Jubilee is targeting to establish the Sable Refinery as a multi metal refinery in Zambia on the back of its surface held tailings rights.
In August 2019, Jubilee acquired the Sable Refinery from Glencore in Zambia and commenced with the commissioning of the copper refinery circuit in December 2019. This was followed by three key transactions in Zambia, whereby Jubilee secured access to approximately 270 million tonnes of historical copper and cobalt tailings material, which will be upgraded and refined at the Sable Refinery as well as third party partnered refiners. Jubilee is committed to rapidly building its copper production profile, ensuring it is perfectly poised to take a commanding role in the copper space in Zambia.
In June 2020, Jubilee implemented its option to acquire Enviro Mining Limited from BMR. Enviro Processing Limited is a subsidiary of Enviro Mining Limited that owns the small-scale mining licence in Zambia.
Jubilee’s South African operations continued to deliver further growth, despite the operational interruptions experienced during the lockdown period, delivering 40 743 6E PGM ounces (increase of 71 % on the previous period). During the period Windsor PGM Operations reached full operational capacity and in November 2019, Jubilee concluded the acquisition of all rights to the historical PGM and chrome tailings at Inyoni Operations. The chrome operations, which further enable the PGM business by firstly recovering the chrome from the ore to deliver a PGM rich feed stream to the PGM recovery plants, also excelled, producing 377 883 tonnes of chrome concentrate (increase of 108 % on the previous period) thanks to Jubilee’s industry leading chrome recovery efficiencies. This performance facilitated Jubilee’s ability to successfully contract third party run-of-mine chrome feed, coupled with secure offtake agreements for chrome concentrate, ensuring that the production capacity at its Windsor Chrome Operations will be fully utilised throughout the next three years, with the option to further extend the supply agreement. This contract alone significantly increases Jubilee’s access to PGM rich chrome tailings which are in addition to the large tailing resources already owned by the Company.
Post period end, Jubilee continued to expand its chrome operations with the addition of a further 35 000 tonnes of processing capacity through another joint operation agreement, whereby Jubilee takes control of the management of a previously under utilised chrome facility named Windsor 8. Jubilee also entered into a further management and processing agreement, under which Jubilee has been appointed to manage and operate an additional chrome beneficiation plant adjacent to its Inyoni PGM operations. This additional processing includes the processing of a minimum of 40 000 tonnes of chrome ore per month for a 3 year period, which may be extended.
Under each of these agreements Jubilee retains ownership of the PGM containing discard from the chrome operations. While the chrome operations, on their own, now form a notable profit contributing segment of the overall business and continue to grow, at the same time, they ensure a long term, ongoing and sustainable supply of additional high quality PGM rich feed material for the PGM operations, over and above the existing tailing resource already owned by the Company.
The continued growth in operations is further demonstrated by the unaudited operational results achieved for Q3 2020, producing record 15 044 6E PGM ounces and 136 162 tonnes of chrome concentrate for the 3 month period.
As has been evidenced, Jubilee’s South African business has matured substantially, with operations continuing to grow on the back of improved efficiencies and the full contribution of its Windsor PGM operations. The Company has shifted its focus from rapid growth to sustained performance and quality earnings through extended longevity and the strong potential to grow organically, as well as through strategic partnering and acquisitions.
Chairman’s statement
The year under review has again been very strong, with new records being broken, productivity improvements implemented and the acquisition of major new projects in South Africa and in Zambia expanding our operational, jurisdictional and earnings footprint. We have significantly increased our portfolio of operations in Southern Africa and continue with our exposure to a broad commodity basket that includes PGMs, chrome, copper, lead, zinc, vanadium and cobalt, seeing another impressive increase in earnings of 162 % to £18.3 million (ZAR 361 million).
With the increasing awareness globally of the need to reduce mine waste exposure and the vast amount of historic on-surface waste material globally, governments and corporate mining entities have an obligation to implement a mine waste treatment solution. There is the recognition of the potential value of such mine waste, although few companies have the abilities or expertise to implement mine waste recovery projects. This is where Jubilee, with its proven technical know-how, comes in. We turn potential waste liabilities into assets through implementing our bespoke environmentally conscious metal recovery solutions that ensure a zero-effluent policy. Importantly the projects have defined reserves with the tonnage and a grade known in advance, and do not have the expenses related to traditional mining techniques. Our specialised solutions have exceptionally low capital intensity and operating costs, which delivers robust margins that we can see this year.
The Jubilee business has gone through a period of significant maturity during the period and in the immediate months post-period end. We have expanded our project portfolio in both South Africa and, importantly, in Zambia. The expansion into Zambia is significant for us, where we continue to establish our multi-metal recovery and refining operations, and is proof that the know-how and experience we have accumulated from operating in South Africa can be translated into other jurisdictions across the African continent, and beyond.
Our operations in South Africa have all performed to expectation and often above, this being achieved during a period of fluctuating commodity prices where we have seen distressed chrome prices and depressed PGM prices, notwithstanding the high palladium and rhodium prices. Despite the overall lower metal prices, the Company’s strategy of having a diversified commodity basket and integrating PGMs and chrome has paid off handsomely.
The expansion of the operations in South Africa and in Zambia is testament to the team’s proven technical abilities and exceptional hard work during the period. Further details of each of our projects can be found in the Chief Executive’s Report, but with the exception of the Windsor PGM and Chrome projects, most of our acquisitions in South Africa have been in and around expanding existing projects, where, given our knowledge of the operational and financial risks, acquisition and implementation risks have been well managed and mitigated. The year under review, has seen the South African output of PGMs nearly doubling to 40 743 ounces on a 6E basis and reaching 377 883 tonnes of chrome concentrate.
In Zambia, the completion of our acquisition of the Sable Refinery has allowed the Company to become a copper producer, early on after acquisition. The acquisition of the Sable Refinery, brought into operation in December and January, adjacent to our Kabwe tailings resource, has provided Jubilee with the opportunity to enter the copper arena in the country, where primary deposits are still readily available from third parties on various scales and in excess of 1 billion tonnes of dump and tailings material exists. We produced and sold our first copper cathode from tails in March 2020 and has since brought the cobalt steam on-line. The refinery has reached full operational readiness to step up production in-line with the commissioning of our copper tailings projects.
Securing the rights to 150 million tonnes of copper containing surface tailings in June was a further significant step in Zambia for us. This project together with our Project Roan holds the potential to produce copper concentrates in excess of the Sable Refinery’s capacity and the potential result of this on our earnings will be significant. In addition, the joint operation agreement signed in August this year, post period end, secures the rights to process a further feed-stock of 2 million tonnes of copper run-of-mine material. This was followed in November by the very significant agreements to collectively secure a further 115 million tonnes of copper and cobalt tailings. Jubilee has now amassed a total of 270 million tonnes of copper and cobalt tailings. This enables Jubilee to rapidly roll out its strategy of having a decentralised facility feeding capacity at the Sable Refinery and partnering with further refiners to process the quantum of copper targeted to be produced by Jubilee. This further diversifies our revenue streams and most importantly, is very profitable for us.
The copper acquisitions described above take Jubilee into the realm of a significant Zambian producer, well in excess of the aforementioned 2021 build-up. The zinc circuit construction at the Sable Refinery has been delayed due to the COVID-19 pandemic restrictions, but we are planning to recommence construction once border sanctions are lifted. We are expecting to recommence the construction in Q1 2021.
During the year, we have built on our local and global reputation as a maturing specialist dump recovery company and this has brought many potential opportunities to the Company. We are fully engaged in pursuing these opportunities and increasing our cashflows at a pace commensurate with our opportunities. Our brand “The Jubilee Way” is gaining respect from the trade and investment industries and over the last year our space has attracted much attention and we are well placed to take advantage of that attention. Copper prices are currently very strong and are forecasted to be even stronger in the coming years. We feel that chrome has seen an unprecedented bottom, and the fundamentals for PGMs remain good in the mid-term. Our operational, research and business development teams have shown considerable resilience and tenacity during a year of exceptional growth, accompanied by exceptional challenges and we feel well prepared to accept new challenges and increase the rate of growth of the business.
Like most businesses, we have not escaped the challenges of the COVID-19 pandemic and I am personally saddened by the tragic consequences of this pandemic, both to individuals and business undertakings in general. Our employees are our most important asset and the management at Jubilee has applied maximum thought and implementation to schemes directed toward limiting the effect on our employees and our business overall.
I would like to take this opportunity to thank all management and employees, who remain positive during this period of uncertainty which unfortunately is still with us. Global business resumption is likely to be stop start, and the only economy currently performing well is China. They, of course, are dependent on the rest of the world to kickstart their economies in order to have global supply demand fundamentals evident before the outbreak of the pandemic. We as a company are on a strong footing to face the challenges that the remainder of the year will present and are hopeful for an environment which is more stable and therefore more predictable.
Finally, I would like to thank our CEO, Leon Coetzer, for his resilience for maintaining and increasing operational levels and overseeing new business acquisitions. Leon has continued to put together an excellent team of likeminded individuals, who I know will respond well to all of the challenges that our rapid growth presents.
Colin Bird
Non-executive Chairman
9 November 2020
