Minimum Disclosure Document

Minimum Disclosure Document


Holdings- Recent Results – December 2021

Jubilee Metals (JBL.SJ): 7% of the fund

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.

Recent Results:

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.

Holdings- Recent Results – November 2021

Grindrod Shipping (GSH.SJ): 19% of the fund

Improving Fundamentals:

Dry bulk freight rates, for small and mid-sized vessels, are at multiyear highs. Although shipping demand from China has cooled recently, demand from the rest of the world remains strong. The new build order book is the smallest it has been in decades. With limited vessel supply growth, freight rates are expected to remain attractive, over a potentially multi-year window.

Extracting Value from the Long Term Charter-in Fleet:

Grindrod Shipping’s long term charter-in fleet has 5 vessels with fixed price purchase options. These options, at current asset prices, are deep in the money. Two of the purchase options are exercisable in 2022. Management intend to take two Ultramax ships (5-6 year old vessels worth about $30m each) into the core fleet. Funding the purchase will be done with the sale of two 11-12 year old Handysize vessels. As the expected sale and purchase values will be similar ($18-$16m), a significant profit on the sale of vessels, and option value realisation (~$26m), will result from this transaction.

Recent Results:

For the 9 months to September 2021, Grindrod Shipping increased revenue by 65% to $366m, adjusted EBITDA by 247% to $131.5m and earnings per share increased to $3.44 from a loss of $1.31 per share. The company declared an interim cash dividend of $0.72 per share. Fourth quarter guidance suggests the company will earn at least $5.82 per share for the year, and pay out a total dividend of about $1.44 per share. Grindrod Shipping trades on 2.4x FY21 earnings, and a 10% dividend yield.

Hosken Consolidated Investments (HCI.SJ): 5% of the fund

Hosken Consolidated Investments (HCI) is an investment holding company which trades at a 48% discount to Net Asset Value. Although debt levels are high, it has an interesting portfolio of assets with strong cash generating ability, and some near term catalysts that should unlock value:

Core Portfolio:

  • Gaming and Hotels- HCI owns 47% of Tsogo Sun Hotels, Tsogo Sun Gaming, Vukani Gaming and Galaxy Bingo. Tsogo Sun Hotels is the leading hotels group, with over 100 hotels in Africa, Seychelles and the Middle East. Tsogo Sun Gaming has 13 casinos. Galaxy and Vukani have 23 bingo sites and multiple slot machine operations throughout South Africa.
  • Media and Broadcasting- HCI owns 63% of eMedia Holdings which owns, enca, openview HD and The group is the largest television broadcaster in South Africa, with a 32% market share, which is benefitting from SABC’s demise.
  • Transport- HCI owns 74% of Frontier Transport, a bus and coach business operating as Golden Arrow Bus Services.
  • Diversified Investments- HCI owns 84% of Deneb which owns textile manufacturing and toy distribution businesses.
  • Properties- HCI owns 100% of a property portfolio comprising conference and exhibition, industrial, inner city housing, mixed use precincts, office, student accommodation and retail properties.
  • Energy- HCI owns 100% of HCI Coal and a controlling interest in Impact Oil and Gas. HCI Coal has two thermal coal collieries, situated near Bronkhorstspruit and Ogies. Impact Oil and Gas owns various offshore oil and gas exploration rights, around southern Africa.


Hotels- easing of travel restrictions: hotel occupancy has increased from an average 5.2% in the 6 months to September 2020, to 21.9% for 2021. In October this year room sales had recovered to pre-pandemic levels of 59%. With severe cost cutting and current occupancy levels profitability will be materially improved in 2022.

Properties- Sale of various properties with a carrying value of R390m and R260m od associated liabilities will be sold in the next 6 months.

Energy- Impact Oil and Gas: Impact owns a 20% interest in the Venus-1x exploration well off the Namibian coast. Total Energies owns a 40% interest and is currently drilling the site. (The other partners in the project are Qatar Energy with 30%, and the Namibian government with 10%). According to management Venus-1x is a world-class, basin opening well which, if successful, could be transformative for Namibia, and HCI. Impact Oil and Gas also has a 50% working interest, together with Royal Dutch Shell, in Transkei and Algoa exploration rights. With 6000 square km of seismic testing about to commence, management believe significant potential could be proved in the South African Natal Trough.

Recent Results:

For the 6 months to September 2021 HCI increased group income by 63% to R8.6bn, EBITDA increased by 237% to R2.14bn. Debt at the holding company level is R2.5bn and will be repaid out of increasing dividend received from the investment portfolio.