Holdings- Recent Results – December 2021
Jubilee recovers metals from mine-waste. It generates at 35% Return on Equity with no debt. Jubilee’s Zambian Copper Project has started production. It will be extremely profitable.
Ingenious Business Model:
Compared to deep-level mining, metals recovery from mine-waste is a low risk, high return business. Mine-dumps are easily measured and accessed. It requires relatively small labour and electricity inputs. Returns are high as the capital intensity of securing mine-waste and installing processing plant, is relatively low. Competitive barriers to entry are high, as significant technical ability is required to design each processing plant, specific to each dump’s metallurgical composition, and then ensuring volume efficiency. Supply risk is reduced by having multiple operating sites, and fixed price off-take agreements. Regulatory risk is limited as operations occur at existing licensed mining facilities.
Jubilee owns and operates four mine-waste processing plants, situated on the Western Limb of the Bushveld Complex. It processes 250kt per month of feedstock secured through multiple long term fixed price offtake agreements. It locks in a small but predictable margin, by selling the primary chrome concentrate product, also on long term fixed price offtake agreements. It sells the secondary PGM product in the spot market. Jubilee currently produces 750kt pa of chrome concentrate, and 50koz pa of PGM. Jubilee should produce more than 1mt of chrome concentrate and 67koz of PGM in FY22:
- Western Limb (Brits): In September 2021 the Inyoni plant increased feed processing capacity by 45%, to 75ktm. It has been reconfigured to process a variety of third party feed sources. (Inyoni produced all of FY21’s PGM). Windsor Chrome acquired in 2019, has 60ktm processing capacity and has recently signed a three year ROM feed stock offtake agreement. Windsor 8 commenced operations in November 2020, it processes 35ktm of feedstock in a JV with Northam Platinum. OBB Chrome fully commissioned in October 2021 processes 80ktm, with four integrated chrome recovery circuits.
- Eastern Limb (Lydenburg): Two long term PGM supply agreements were secured in 2021. Both mine-dumps contain high Rhodium content LG6 reef. This feedstock will be trucked 400km, and processed by Jubilee plants in the Western Limb. A decision to commission a processing plant on the Eastern Limb is pending.
The Green Energy Transition and Copper Prices:
Global electric-vehicle sales are expected to be more than 15m units by 2030, from a current 3m. Each electric vehicle requires about 80kg of copper, four times more than a conventional vehicle. Goldman Sachs expects the copper market to remain in a long term supply deficit, and the copper price to be more than $15kt by 2025.
Jubilee plans to produce 25kt pa of copper cathode within the next four years in Zambia. It has acquired the Sable Refinery, and has contractually secured over 600mt of copper mine-dumps with various JV partners. As a by-product it will also recover cobalt, zinc, lead and vanadium pentoxide. In August 2021, Jubilee signed an agreement with Mopani Copper Mines, which is operated by the Zambian government. This agreement provides Jubilee access to Mopani’s refinery at Kitwe and offtake from four tailings dams. Jubilee needs to recapitalise and refurbish the refinery:
- Southern Refining- Project Roan: Sable Refinery situated at Kabwe with concentrator and feedstock, with an additional concentrator and feedstock at Ndola. It has commenced production, and will reach steady state of 12ktpa by Q3 2022. At a current copper price of $9700t, and a targeted cash cost of $4500t, Jubilee will make an annualised operating profit of $62m (before JV costs), on a $31m capital investment.
- Northern Refining- Project Lechwe: Feedstock secured at Mufulira and Luanshya, a concentrator and the Leopard (Mopani) Refinery at Kitwe is under construction, and will start producing in Q4 2022, reaching 2ktpa by Q3 2023.
- Northern Refining- Project Elephant: Feedstock secured at Kitwe, a concentrator is under construction, will start production in Q1 2023 and reach 3ktpa steady state by Q3 2023.
For the 12 months ended June 2021, Jubilee increased revenue by 143%, and operating profit by 183%. Adjusted (headline) Earnings per share increased 163% to 46.7 cps. Jubilee ended the year in a net cash position, and generated a 35.4% Return on Equity. All future capital expenditure will be funded out of internal cash flow, and non-recourse project finance debt.