Jubilee Metals - ore supply and processing agreement continues expansion, Buy?...

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Jubilee Metals (JLP) - in which the writers own shares - has announced an ore supply and processing agreement which “not only significantly extends the life of the existing PGM resource but also offers the potential for Jubilee to significantly expand its Inyoni Operations”. Those are metal processing works in South Africa, with the noted agreement for Jubilee to re-commission and operate the existing run of mine chrome beneficiation plant adjacent to its Inyoni operations at a fixed toll fee and a supply of a minimum of 40,000 tonnes per month of ROM feed with the potential for this to be increased to 80,000 tonnes per month for an initial period of three years, and extendable by a further five years. It also sees Jubilee have the rights to all discard material from the chrome ore beneficiation plant, with it noting “the PGM bearing tails produced by the chrome plant will be further processed at Jubilee's adjacent Inyoni PGM recovery plant”.

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It is added “as part of the processing agreement Jubilee will fund an estimated GBP 1.34 million (ZAR 30 million) capital required to upgrade the chrome ore beneficiation plant whereby capital plus interest will be recovered by Jubilee under a fixed charge per ROM ton processed over the first three years of the processing agreement” and “the additional tailings offers Jubilee the opportunity for a modest capital investment, to expand the Inyoni Operations increasing its monthly PGM ounce production to 3 500 PGM ounces per month”.

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We previously noted, earlier this month, the operational earnings already here and this further South Africa progress is with the company also expediting and expanding development in Zambia to reach and exceed South Africa – a half-year operational update included “PGM concentrate delivered reached 19 682 ounces (7% lower than that of H2 2019 due to COVID-19 restrictions)… PGM project revenue up 31% to GBP 21 million (48% increase to ZAR 439 million) from H2 2019… PGM project operational earnings up 54% to GBP 12.5 million (74% increase to ZAR 262 million) from H2 2019… Chrome concentrate produced up 3% to 191 995 tonnes… Chrome project revenue down 5% to GBP 8.4 million (up 7% to ZAR 176 million) from H2 2019… Chrome project earnings up 32% to GBP 0.2 million (up 49% to ZAR 4.7 million) from H2 2019”.

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With its specialist processing solution and continuing, self-funded expansion, we continue to believe full year earnings should be £60 million or more a couple of years out. With a circa £112 million market cap at a current around 5.3p share price, though already well up on the 4.6p offer price initial recommendation, we think the shares are a buy at up to 5.5p, targeting 7p+.

This article first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website for a new share tip from Tom & Steve last Friday and a new shorting piece from Lucian JUST OUT TODAY (with also a new long selection) click HERE

Filed under: Jubilee Metals, Inspirit Energy, Rolls-Royce, URU Metals, Nostrum Oil and Gas, N50 website

2020-08-27 12:56:52

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