Jubilee Metals (LON:JLP), the AIM and Altx traded metals processing company, has announced its audited results for the year ended 30 June 2019.
FINANCIAL HIGHLIGHTS
• Group revenue for the year increased by a strong 66.83%, to £ 23.59 million (ZAR1 432.61 million) [2018: £ 14.14 million (ZAR 245.53 million)]
• In 2019, the Group delivered positive earnings of £ 7.00 million (ZAR 128.28 million) [(2018: loss of £ 2.11 million (ZAR 36.72 million)] and a return on equity of 10.50%, compared to a negative return of 3.67% in the previous year
• In 2019, the Group delivered positive earnings per share of 0.48 pence per share (ZAR 8.75 cents) [(2018: loss of 0.18 pence (ZAR 3.05 cents)]
• Total project attributable earnings almost doubled to £ 9.87 million (ZAR 181.03 million) [2018: £ 5.03 million (ZAR 86.80 million)]
• The Group posted an operating profit up significantly to £ 4.87 million (ZAR 89.38 million) [2018: profit of £ 0.06 million (ZAR 1.04 million)], with an operating margin of 20.64%
• The Group’s balance sheet strengthened substantially, with total assets increasing by 47%, to £102.04 million (ZAR1.82 billion)
• Total equity increased to £ 78.69 million (ZAR 1.40 billion), from £ 58.80 million (ZAR 1.07 billion) a year earlier, maintaining a strong equity ratio of 77.11% (2018: 84.64%)
• The Group delivered strong cash flows from its operating activities of £ 4.76 million (ZAR 84.79 million) [(2018: positive cash flow of £ 0.96 million (ZAR 17.44 million)], with Cash and cash equivalents tripling from the previous year, to £ 18.9 million
• Overall, the Group’s gearing remains low with the positive net debt position and current assets covering a comprehensive 126.74% (2018: 106.96%) of total short and long term liabilities
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.
OPERATIONAL HIGHLIGHTS FOR THE PERIOD UNDER REVIEW
• Inyoni PGM2 Operations delivered a record production of 23 847 ounces (2018: 17 354 ounces) for the year, generating revenue of £ 14.90 million (ZAR 273.36 million) compared to £ 9.52 million (ZAR 164.37 million) in the previous year
• The newly acquired Windsor Chrome Operations delivered 149 272 tonnes of chrome concentrate since January 2019, generating revenue of £ 5.75 million (ZAR 105.48 million)
• Windsor Chrome Operations was established by the execution of a sale and purchase agreement through Jubilee’s subsidiary Jubilee Processing to acquire all of the chrome beneficiation assets including plant, equipment, intellectual property and all rights to the existing surface material estimated in excess of 1.8 million tonnes owned by PlatCro and associated companies, for a combined consideration of £ 8.26 million (US$10.5 million). Jubilee’s subsidiary Windsor SA is the appointed operator of the Windsor Chrome Operations.
• DCM Fine Chrome Operations produced a total of 32 675 tonnes of chrome concentrate (2018: 46 191 tonnes) for the year, with additional revenue of £ 2.09 million (ZAR 38.24 million) [(2018: £ 4.62 million (ZAR 80.05 million)]
• Combined chrome performance of 181 947 tonnes of chrome concentrate delivered generated revenue of £ 7.84 million (ZAR 143.72 million) [(2018: £ 4.62 million (ZAR 80.05 million)], increasing the chrome operations contribution to one third of Group’s total revenues
2= 6 Element Platinum Group Metals (platinum, palladium, rhodium, ruthenium, iridium + gold)
HIGHLIGHTS POST THE PERIOD UNDER REVIEW
• The significant growth in earnings delivered during the period under review continued on its steep growth trajectory demonstrated by the jump in operational earnings to £ 3.38 million delivered for the three month period July to September 2019, which equates to a 90% jump from the comparative period in 2018
• This jump in earnings reflects only one full month of production at the Windsor PGM Operations, which commenced operations in late August 2019 and exceeded expectations by delivering 5 337 PGM ounces for the month of September 2019 alone, which is more than double that of the PGM ounces produced from the Inyoni Operations
• Jubilee has executed a share purchase agreement for the acquisition of the Sable Zinc refinery in Kabwe Zambia. The refinery is situated immediately adjacent to the large stock piles of zinc, lead and vanadium that Jubilee has contracted from BMR Group PLC. Jubilee executed the acquisition from two subsidiaries of Glencore plc for a consideration of £ 9.16 million (US$ 12 million) (ZAR 175.97 million)
• Jubilee acquired 100% of the rights to PGM earnings from the current and future tailings produced at Jubilee’s Inyoni Operations (previously Hernic) located in the Bushveld Complex, South Africa. In addition to the current unprocessed 1.70 million tonnes of historical tailings at the Hernic Operations and the 630 000 tonnes of previously processed tailings, Jubilee has acquired the rights to some 1.0 million tonnes of PGM rich material
• Jubilee has acquired 100% of all further chrome rights to the chrome contained in all of the historical tailings at Inyoni as described above
CHIEF EXECUTIVE OFFICER’S OVERVIEW
Jubilee has continued on its positive growth trajectory, delivering strong growth in earnings and operational performance for the period under review. Group Revenue increased to £ 23.59 million (ZAR 432.61 million), delivering positive Group earnings of £ 7.00 million (ZAR 128.28 million). Group operations produced 181 947 tonnes of chrome concentrate and 23 847 PGM ounces during the period under review. This growth has been achieved as a result of both the performance of the Company’s flagship Inyoni Operations (previously known as Hernic Operations) and the contributions from new production facilities being brought on-line during the period under review.
The Company’s operations at the date of this announcement expanded to include:
Period under review
• Inyoni Operations (previously Hernic Operations) – a South African based PGM and chrome beneficiation facility processing both historical tailings, as well as on-going tailings produced by the Hernic Operations (now owned by a subsidiary of one of the world’s largest ferrochrome producers). Inyoni holds a capacity to process 55 000 tonnes per month of feed material, producing both chrome and PGM saleable concentrates. The transaction post the period under review, has transformed the operation from a co-operation processing agreement, to eventual full ownership, by Jubilee, of all historical chrome and PGM tailings at Inyoni Operations.
• Windsor Chrome Operations – a South African based chrome beneficiation facility principally supplied by offtake agreements with third party chrome ore suppliers. In addition, Windsor Chrome has access to historical chrome tails produced under its previous ownership. Windsor Chrome, which was acquired by Jubilee in January 2019, holds a capacity to process approximately 70 000 tonnes per month of feed material.
• Dilokong Chrome Mine Operations (“DCM”) – a South African based chrome beneficiation facility holding Jubilee’s industry leading fine chrome recovery process, with a design capacity to process up to 30 000 tonnes per month of feed material. The project was ramped up to commercial production levels in May 2019.
Post the period under review
• Windsor PGM Operations – a South African based PGM recovery joint venture (“JV”), with Northam Platinum’s Eland Plant operations. Under the JV, Windsor PGM has secured access to the PGM recovery operations for the recovery of the PGMs contained in the tailings produced by Windsor Chrome Operations. The JV has significantly exceeded its target of processing 60 000 tonnes per month of PGM containing feed since being brought on-line during August 2019.
• Integrated Kabwe Operations – a Zambian based multi metal refining facility currently under construction, which includes nearly 6.4 million tonnes of vanadium, zinc and lead containing surface material and further supplemented by third party ore supply.
• Inyoni Operations – a South African based chrome and PGM operation. As announced on 24 October and 5 November 2019, Jubilee increased its scope at Inyoni through the acquisition of all PGM and chrome rights contained in the historical tailings material. Jubilee targets to accelerate the implementation of its successful Fine Chrome solution at Inyoni to improve the chrome recovery. The DCM Fine Chrome recovery plant has shown the potential to increase chrome concentrate mass-yields by up to 21%. The combination of the increased operational scope and the expanded chrome recovery circuit, which now includes taking control of the feed supply to our processing plant, offers Jubilee the opportunity to increase both feed rates as well as improving chrome recoveries. This combination holds the potential for Jubilee to increase its PGM production to 2 700 PGM ounces per month while the expanded chrome processing operation could produce up to a total of 500 000 tonnes of recoverable chrome concentrate from the historical tailings located at the Inyoni operation. The increased PGM ounce production would equate to an approximate US$ 450 000 of additional revenue per month with chrome offering a significant revenue boost to the project with chrome concentrate CIF prices fluctuating over the quarter between US$ 135 to US$ 157 per ton of chrome concentrate. At current operating margins, these additions to revenue have the potential to add significantly to earnings.
Further projects in the pipeline include the DCM PGM Operations, which targets the recovery the PGMs contained in the nearly 800 000 tonnes of tailings from the DCM Chrome Operations and the Tjate Platinum Project, which is an underground PGM exploration asset currently under review.
Jubilee has successfully expanded and diversified its earnings base across metal groups and mining jurisdictions, targeting surface material previously discarded or overlooked due to inherent process inefficiencies in the mining industry. Jubilee has unlocked significant value from these surface assets by leveraging its in-house technical expertise and process development capabilities to implement fit for purpose, cost effective, cutting edge process solutions. Jubilee has incorporated a zero-effluent policy in its processing designs, resulting in the natural rehabilitation of these historical surface waste materials. The Company has a distinct expansion plan aimed at utilising its team, diversifying commodity and jurisdictional exposure to build cash flow and maximise the international opportunity.
The increased global awareness and focus on mine tailings globally continues to drive renewed interest from both governments and corporates to decrease the global footprint of legacy mine waste and reduce the environmental risk this poses. This creates ideal opportunities for Jubilee to engage in mine waste reduction through reprocessing, which meets local environmental obligations, whilst also realising economic benefit.
The Company has successfully responded to the current challenges and risks inherent to a metals processing business that also holds an exploration asset and will continue to formulate preventative risk management measures.
CHAIRMAN’S STATEMENT
Dear Shareholder,
This has been another fantastic period for Jubilee as we look to build an industry leading international metal recovery business focused on the treatment of surface tailings materials and primary mineral ore generated from third party mining operations. Through the successful implementation of a defined strategy, we have significantly expanded Jubilee’s operational, jurisdictional and earnings footprint, which has resulted in a current portfolio of five operations in South Africa and Zambia, a defined and valuable metal inventory, exposure to a broad commodity basket that includes PGMs, chrome, copper, lead, zinc, vanadium and cobalt and a sharp swing from an operating loss to an operating profit to £ 4.87 million.
We are a global leader with first mover advantage in a market that is rapidly expanding due to the increasing awareness and legislation, both from government and corporate mining entities, driving the need to reduce mine waste exposure and the vast amount of historic above ground material accumulated. With the environmental obligations and the rising cost and difficulty of mining, majors are, not only increasingly needing a waste treatment solution, but viewing surface material as a potential source of cash flow. However, they do not necessarily have the means nor expertise to implement mine waste recovery projects; this is where we step 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 don’t have the expenses related to traditional mining techniques. Our bespoke solutions have exceptionally low capital intensity and operating costs which delivers robust margins. The ability of our team is recognised, and we already have a blue-chip industry partnership base including Mitsubishi, Northam, Lonmin and Vedanta.
Drilling down on the operational front and underlining our delivery capabilities, we continue to optimise and expand our project portfolio. We now have inventory of £ 1.66 million and are actively looking to increase existing production and revenue streams. Our South African chrome and PGM operations have seen significant growth with a combination of productivity and optimisation input and the addition of new operations. Importantly, we were able to continue to produce an increase in earnings quarter on quarter despite softer chrome prices.
In December 2018, we acquired a major chrome processing operation, owned by PlatCro Minerals (Pty) Ltd (now Windsor SA (Pty) Ltd) with an operational capacity to process up to 75 000 tonnes of chrome ore, offering the potential to boost our operational cash flow. The acquisition, which included 1.8 million tonnes of surface dump material containing chrome and platinum, positions Jubilee in a pivotal position in the Western Bushveld, South Africa, where it has easy access to material for treatment from numerous nearby sources. Windsor SA is performing well and the team has shown its ability to deliver strong results.
We are continually focused on innovation, which was clearly demonstrated with the successful commissioning of the fine chrome plant at our DCM Fine Chrome Operations. Through our conceptual approach we targeted the recovery of fine chrome from existing mine waste material, which had previously been considered to be irrecoverable. Our fine chrome capability now has the potential to be rolled out into the whole of the chrome industry and we expect it to be applicable to other commodities where fine material has been judged to be irrecoverable. The underlying test work, design and implementation is an absolute credit to our research and engineering team.
Underlining our ambition to expand, was taking our interest in Kabwe up to 87.5%, which combined with a 29.01% shareholding gives us a 91.13% beneficial interest and the commencement of discussions to acquire the Sable Zinc Refinery, located near our tailings and primary oxide ore. The acquisition of this plant will be beneficial in many respects, including but not limited to: a reduced project implementation time-line and project implementation risk, as well as reduced capital expenditure against the acquisition of a major refinery at a significant discount to new build. These events represent transformational milestones in the Company’s aspirations and our plans in Zambia.
Market
During the initial part of the period under review chrome prices were satisfactory and PGMs were somewhat depressed. However, at the time of writing this report chrome prices retracted sharply but has been offset by an improving PGM basket price buoyed in particular by palladium and rhodium. These volatile metal prices show the benefit of having a diversified commodity basket which has provided us with considerable resilience in the face of varying performances, ensuring that we continue to produce an overall value.
Financial
Jubilee is now producing considerable cash, meeting its market promises and delivering its development strategy. For the period we reported earnings of 0.48 (2018: loss of 0.18) pence per ordinary share. We delivered strong cash flows from operating activities of £ 4.76 million (2018: £ 0.96 million), with cash and cash equivalents tripling from year earlier, to £ 18.9 million.
Outlook
This is a truly exciting time for Jubilee Metals. We are looking at a number of acquisitions and cash accretive investments within our portfolio, with a determination to continue the exceptional growth shown during the financial year under review. We have a robust project pipeline and acquisition opportunities to augment our rapid growth strategy and believe our unique positioning, technical knowhow and team will enable us to create significant further value for shareholders.
We are mindful that growth and success can bring its own problems and we review, on a routine basis, the risks against the business. These risks are often outside our control and as such, we are determined to position ourselves and work diligently on all matters, which might not lead to an enhanced cash flow, but will lead to security of tenure and community acceptance.
I conclude by thanking our Chief Executive, Leon Coetzer, who has put in extreme effort over all fronts to achieve these results, supported by an excellent team. I also welcome our newcomers in the various disciplines, who I have no doubt will continue to drive this Company onwards and upwards.
Colin Bird
Non-executive Chairman, Jubilee Metals
