Jubilee Metals Group PLC (JLP) Earnings Call Transcript & Summary

Hello, it's Leon Coetzer, CEO of Jubilee Metals Group, to present to you our interim results for the period ending December 2023. I'm joined by Neal Reynolds, our CFO, who will be presenting some of the financial numbers in this presentation. It's particularly pleasing to present a set of results that reflects Jubilee's strategy, the value of a strategy that is agile to respond to market dynamics where the results show the significant growth we experienced in our chrome division with the expansion of our operations and continued expected expansion of those operations, while our copper business unit in Zambia is starting to show its value, with the increase in copper production starting to come through on the back of an investment program in Zambia, showing the value of a diversified metals portfolio that can counter industry trends and markets. Maybe just as a start, if we look at who Jubilee is and who are we as a company. For those who aren't familiar with our group, we are a leading metals recovery group recognized by many in the industry for our expertise to be able to recover metals from materials, reefs, wastes and other sources that are often overlooked by the industry. As we've said, we have a diversified exposure. Our exposure to chrome with this byproduct in the PGMs, the Platinum Group Metals and a growing portfolio in copper. We are innovative. If you look at our deployment and the driver behind our chrome growth, it comes on the back of our modular approach where we currently operate 8 and targeting to add a further 2 operating modules in South Africa on our chrome operations that is set to deliver a target of 2 million tonnes of chrome concentrates, making us one of the largest in the world. Equally in our Zambia copper industry, on the back of our resources we have secured, we look to deploy these modular processing units that are low capital that can be rapidly deployed and simplifies the operations of these processes. What drives our growth is our ability and our access to a wealth of surface materials in the industry. These materials come from historical processing of historical mining, where mining companies have discarded materials regarded as either too complex, wrong grade or noneconomical to process. These materials mostly at surface is what Jubilee thrives on through our in-house development of bespoke processing solutions, which are rapidly deployed into industry. Of course, our success is underpinned by a highly experienced management team that's earned the respect in the industries that we operate in. Our business. We are listed on 2 stock exchanges, Johannesburg and London. We are profitable, diversified low-cost metal producer, particularly important in the volatile markets where we are, both diversified and low cost. As we've said, we unlock value out of reefs and materials overlooked by industry. If you look at our chrome operating unit, we seem to be one of the largest, if not the largest chrome concentrate producer in the world. Most of this production comes off reefs, surface waste materials thought by the industry to be either too complex or not economical. We, of course, constantly review our performance. We drive ourselves to set new efficiency targets, challenge industry norms as we unlock these opportunities in both our copper and South African operations. If we then look at our actual performance for the period with our revenue sitting at GBP 75 million, EBITDA at GBP 12 million in a time showing both growth in revenue and earnings when most of our peers are reporting reduction in revenues and significant reductions in earnings. Again, demonstrating the power of an agile strategy focused on 2 key core metals, which are forward-looking, chrome and its use in stainless steel, copper and its use in electrification of the world. If we move on to the next slide. Our strategy, as we said, agility. What brings our agility is our processing ability. We are able to rapidly deploy process solutions, targeting our key 2 business units in chrome and in copper. In chrome, we have profitable business. We have a business capable of funding its own growth. Our strategy to migrate from initially a tolling chrome concentrate business where we were processing chrome materials for others. We have migrated onto a business that processes both our own chrome resources together with our tolling partners. This has not only driven growth in output in our chrome operations as our numbers reflect, but very importantly, a significant increase in our margins of our operations as we process more and more of our own resources. In our copper side, we have a clear pathway to reaching our goal of 25,000 tonnes and beyond of copper per annum. This pathway is set by our access to our resources we have secured. And these resources allow us to focus on establishing 3 operational units in Sable Refinery, which currently is under expansion to expand its capacity to 16,000 tonnes of copper per annum. Our second is our Roan operation, currently concluding the upgrade of its front end to take it up to 13,000 tonnes of copper during this financial period. And of course, announced in December, the acquisition of our surface Waste Rock Project, one of the largest in Zambia, our partnership with the IRH from Abu Dhabi, where this new project looks to establish its own independent operating footprint for the rollout of our copper modular plants on this area. So we look forward to a period with these 3 operational units or operational areas become fully operational on the back of the investment program currently underway. If we look at our prospects going forward, it's an impressive graph showing constant sustained growth in our 2 key pillars. On copper, we've given the guidance of 5,850 tonnes, roughly doubling our previous period in copper output. This is driven by the expansion of our Roan concentrator, where the front-end upgrade affords it the ability to process a multitude of feed sources simultaneously. If one extrapolates that expansion of Roan together with our expansion of our Sable, we are set to achieve and exceed our target of 25,000 tonnes of copper. In chrome, we've given our guidance of 1.45 million tonnes of chrome concentrate for this financial period. Our results show that we set to exceed even that growth target. And with the announced 2 further operating modules to be included at top -- Thutse, we are set to exceed our 2 million tonnes of target we've set for ourselves for chrome as a stretch target. Our PGM production, which is a byproduct from our chrome concentrate, we remained steady at our 42,000 ounces. And we currently are reviewing whether, in fact, to engage and activate our partnership with Northam Platinum on the processing of our increasing PGM surface stock. Because as we increase our chrome production, we, of course, make more PGM feed material for our Platinum Group Metals refinery. On our financial review, I'm going to hand over to Neal to talk us through the key financial numbers, speaking to this strategy driven by chrome and driven by copper.

Thanks, Leon. Good afternoon and good morning. As we start off, it's normally a good spot to look at our commodity prices that influence the business. As we look at the copper LME price, largely flat year-on-year. That is reflected into the average price received of $6,600 per tonne, relatively consistent versus the prior year. What influences that number is the split between cathode and copper in concentrates. That split is approximately 50%. And that drives the delta between the LME price and the price that we actually receive. As we shift on to chrome concentrates on average, and this is a mix of both the own source material as well as our cornerstone fixed margin contract, we get $90 per tonne. That's 36% up. And that's really commensurate with the average market price of 40%, 42% of chrome concentrate material, that's sitting at $291 a tonne to date. If we look at the red marker on PGM basket, I think the industry is fully aware that we're in a challenging market. The price that we do get by PGM basket is at $895 per ounce for the last 6 months. So we are achieving [ $126 per ounce margin ] for the $1,021 per ounce figure that we received this last 6 months. It's a dire picture that we're seeing. I would like to highlight to the market that we do have the upside through the market return on that PGM material, and we do sit within the lower quartile of the industry when it comes to PGM material processing. In terms of the key financial highlights, our group revenue sitting at GBP 75 million, an 18% increase year on -- period-on-period. That is made up of our copper production contributing GBP 6 million. That's alone a 23% increase. Our chrome contributing GBP 52 million. That's a 46% increase period-on-period. And our PGMs at GBP 16.5 million. That's a 26% decline. If you go and look at the revenue by product split in the current period, you can see that our chrome contributions increased to 70% from 56%. That's the growth profile and expansion to chrome that you're seeing. You should see that market move a little more. Our PGMs have reduced with the chrome increasing as well as the price retraction and our copper remains relatively stable. This culminates into an increase of EBITDA of 13.3%. Obviously, not as high as the revenue. But as we are not a traditional miner, we acquire quite a significant amount of raw material, run-of-mine material to process. So to fund the expansion of our cost profile will increase with the revenue profile. Our capital expenditure has decreased period-on-period. This is predominantly due to most of our projects concluding in the remaining part of the year, you should see a similar profile given the announcements that we did previously in December and highlighting the expansion of the copper sulfide circuits, our Project M, as well as the Slag projects and our Roan projects. Our copper after tax is GBP 4.4 million. That's also an increase of 7%. This culminates to 16p per share market. And our cash to date is GBP 5 million. That's a decrease from our year-end of June 2023. Our cash profile, we have funded our CapEx out of our opening balance. But, I would like to highlight to the market that we did on the 4th of January raise [ GBP 30 million ] at 5.5p, and that comes through in this -- in the post balance sheet period. And we also need to highlight that $1.75 million was paid in December to secure the option and secure the deal on the waste rock opportunity in Zambia, which will be refunded to us on conclusion of that transaction. All right. Leon, back over to you.

Thank you. With that financial results showing, as we said, growth in all our key indicators bucking the trend of the industry. If we dip into Zambia, as we've discussed, it's a critical focus for the company as we shift into our copper growth, as we invest into setting the road map for achieving and exceeding that 25,000 tonnes of copper per annum. Yes, our copper production increased significantly on the back of Roan being brought on stream, even though it's operating at 50% of its throughput only, awaiting the front-end completion of Roan. As we say there, the Roan concentrator front-end upgrade is a critical step as we set up our chrome -- our copper production significantly. With its capacity of 13,000 tonnes per annum, you can see that Roan's ability to produce up to 1,000 tonnes of copper per month in its own right, that copper, which is split in between an oxide and sulfide copper, the sulfide copper being sold directly into the market and roughly 60% of that being refined at Sable to produce cathode alongside the other feed sources at Sable. The second area of expansion as we look forward for Zambia and currently underway is a sulfide circuit, which is the copper sulfide recovery circuit at Sable Refinery. This expansion is being driven to ensure that Sable is ready for both Roan and, of course, the exciting Munkoyo project coming along strongly. And we have targeted to increase the Sable Refinery capacity to 16,000 tonnes per annum. You can therefore calculate that the total capacity of copper, if you add the Roan and the Sable is roughly 60% of Roan as cathode -- sorry, as copper sulfide concentrate, in addition to the 16,000 tonnes of Sable Refinery capacity. Combined, you can therefore see that we're reaching our 25,000 tonnes of copper capacity already within this year. Our copper Waste Rock Project, very exciting project. We announced our partnership with the IRH from Abu Dhabi. IRH is also a company who has recently announced the completion of their transaction to acquiring Mopani Copper Mines in Zambia, one of the largest copper-producing mines and refinery in Zambia. On the back of that project, we have completed the resource review and definition and are currently completing the designs of our modular plants to be implemented onto this project. The modular plants are a replica of what is going in to Roan's at front-end, and therefore, it's a tested and tried method of ensuring we are able to take a Waste Rock Project and upgrade that copper significantly prior to extracting the copper through a chemical process. As we say in the slide, this year, the past year, looking forward to Zambia is a company that is now set to deliver its expansion on copper. Our investment is coming to fruition, as Neal spoke of earlier. Our capital expenditure is dropping significantly on the copper Waste Rock Project. As part of that joint venture agreement, IRH will be our funding partner to the deployment of those modular plants. And with Roan coming to the end of its investment cycle, we can foresee a significantly lower capital investment program lying ahead of us as we now deliver these projects towards the 25,000 tonnes of copper. Our outlook for Zambia, as we said, guidance of 5,850 tonnes of copper, linking in to the commissioning of Roan will be indicated to the market. We expect Roan to be completed and upgraded and running at capacity by end of April, offering us 2 full months of run rate in this financial period. The second very critical expansion is the Sable Refinery's copper sulfide circuit, which affords Sable the ability to better process both the copper sulfide and the copper oxide material from its feed sources. The copper sulfide material is upgraded to a sulfide concentrate, which is sold directly in the market while the oxide component is refined to copper cathode. Project Munkoyo is a very exciting project. It is one of what we expect many examples of these type of projects to follow, as Jubilee demonstrates not only to Zambia but to the industry, how we take small-scale mining at surface with its surface materials and turn it into a viable operation, exactly replicating our success in the chrome industry in South Africa. Munkoyo project is part of the development of this project. We've processed to date nearly 80,000 tonnes of sampled material to confirm the process dynamics, the process circuit and links in to the expansion of the Sable Refinery copper sulfide circuit. Munkoyo has been flown. We've done the topographies. We've done the [indiscernible] of this area. It confirms the exceptionally large copper anomaly at surface and currently is undergoing trenching as we prepare to open this copper material, with first production at scale expected towards the end of this calendar year. Munkoyo itself has the ability to not only full Sable, but to full Sable for a very long time. The other project, which, of course, is on our horizon and currently been driven really hard is our Waste Rock Project, where we enjoy a fully funded position with our partners in the IRH, where we look to deploy up to 3 to 4 processing modules at the site alone. Our strategic goal to expand operations to exceed our 25,000 tonnes initial target for Zambia is well in our reach as we pursue that over the coming period. If we then dip into South Africa. South Africa is a foundation of our group. It's where we formed our company and our expertise. If we dip into those results, in South Africa, again, chrome delivers, yet again expanding fourth year in a row, our chrome operations, quite an impressive number of [ 718,000 ] tonnes or 720,000 tonnes roughly of chrome concentrate in a 6-month period. Particularly impressive if you dial the clock back to 2019, where we made 40,000 tonnes for a full 12-month period. That gives you a sense of the ability to rapidly expand on the back of a modular plant rollout. We have not stopped at this level. We already announced that we are looking at the implementation of two further chrome operating modules on our Thutse project. Once implemented, those 2 modules will take our operational capacity to 2 million tonnes of chrome concentrate per annum. The benefit of the chrome operation, of course, is the PGM byproducts. And as much as Neal has indicated that the PGM markets are depressed, metal prices have come off sharply. We fortunately had the benefit from PGM as a byproduct from our chrome operations. And therefore, our PGM operations enjoy that subsidized position where the material that is fed to them comes as a byproduct from our chrome operations where the chrome has been removed prior to refining the Platinum Group Metals. Critically on the right in those tables, you'll note the significant increase in our chrome margin per tonne. As we predicted, as we moved into our own resources, processing our own chrome that our margin will grow significantly beyond the margin received from [indiscernible] chrome for other companies. That margin is set to continue to grow as the bottom graph shows where the own resources production percentage continues to grow. We expect that number to grow beyond 50% in the current period as more of our expansion capacity comes online. PGM production remains stable and on target to meet its guidance. And as expected, the margin of PGMs have come down. What should be noted in the PGM margin is for the past 6 months, we had a cyclical period where we processed a particularly low recoverable Platinum Group Metals feed, as the chrome producing this byproduct of our PGM was sourced from very shallow material and traditionally, your PGM recoverability reduces the shallower, the chrome material is because of the oxidation nature of Platinum Group Metals. We, therefore, expect that margin to grow even at current prices during the current 6-month period. If we go on to the next one. On South Africa outlook, as we said, we are 1.45 million tonnes of chrome for this period is well in sight as we drive to exceed that. But more importantly, as we step up and self-fund through the South African operations, the expansion of the chrome operations stepping up to its 2 million tonne target, to reach that goal, where 2 million tonnes, of course, we can expect the PGM profile to also expand alongside that expansion in South Africa. Looking ahead, I think we've touched on it during the presentation. Yes, there's innovative growth strategy. As we've said, our results show it. When peers are reporting a drop in earnings, a drop in revenue, we countered that with an increase in revenue, increase in earnings and really importantly, an increase in margin to the company. Our expansions in our copper side are clear. We are driving our Roan expansion. We are driving our Sable Refinery expansion to combine holder capacity for our 25,000 tonnes of copper. The resources to feed these expanded processing capacity has been secured and is the anchor on which we expand. And of course, as we said, project Munkoyo is just one example of which we expect to replicate in Zambia, our small-scale mining in working as an integrated partnership how these projects at surface can become sustainable long-term operations. Our Waste Rock Project, a very exciting project, where yet again, we are looking to demonstrate to the copper industry how Waste Rock Project through our innovative modular plant approach can become a significant operation of copper in a sustained copper operation. Our copper road map for our growth is now clearly set. Our capitalization of this road map, we have passed that bump, as Neal has shown us that copper -- that the capital investment now reduces. If we step into that South Africa, it's a self-funded mature operation, that's cash flow positive in South Africa, driving its expansion to become -- to reach the 2 million tonnes target we have set for ourselves. The target to reach it is well defined, anchored by critical resources that drive that growth, Thutse being that example. And again, Thutse being one of many such examples currently existing in South Africa, where our processing excellence unlocks what people have thought were nonviable resources. So looking ahead is an exciting future for Jubilee. It's a future where the copper has got the clarity of how we reach and step up our production. Our resources that anchors and underpins that growth in copper has been secured. And we have significant further growth opportunity in Zambia. In South Africa, operations are stable. It's a mature business, funding its own growth as we continue to capture market we developed 4 years, 5 years ago, demonstrate to the industry that through process excellence, you can make a sustainable business at scale in South Africa. Just on corporate information, and that concludes our presentation today. Earlier, we had missed a webinar that had been scheduled for our company. Unfortunately, due to our service provider suffering a fatal system flaw, we were unable to host our shareholders which we look forward to. But we thought an opportunity to use this time to quickly go through some questions received from our shareholders and address them during this time. I thought to just quickly read through the key questions, and then we'll address them very quickly to ensure the video and the recording isn't too lengthy. One of the questions, grouping are -- is around the Roan concentrate upgrade. There are 2 groupings of questions. The one was to clarify the progress on the construction of this front-end module at Roan and what the production at Roan could be expected to be once completed. As we've announced, the construction and manufacturing of this front-end module upgrade has been completed, which has been shipped to Zambia, ready for assembly in Zambia, as we target to ramp that operation up by end of April. At its full capacity, as we stated to the market, it means that Roan can ramp up to beyond 1,000 tonnes per month at its full capacity. In the meantime, we are operating Roan roughly about 300 tonnes of copper per month as we're running a portion of the plant while awaiting the full upgrade to be completed. Question around feed sources to Roan. Yes, we've got our secured feed source. And yes to the question, we are in advanced discussions to exceed -- to increase that feed resource for Roan. Roan and its completion is a very unique operation. It's the only one of its kind in Zambia, where the ability it's got to process a multitude of feed sources simultaneously ranging from fine material to coarse run-of-mine to waste rock through its facility. It positions itself very strategically to secure and grow that kind -- that material feed source. The next grouping of questions is around Sable. And it's there to clarify the 16,000 tonnes capacity, to explain that 16,000 tonnes capacity mainly refers to roughly a 12,000 tonne cathode capacity and a 4,000 tonnes of copper sulfide concentrate capacity. The other grouping around Sable is at what stage will we release more information on the Munkoyo project, which is such an exciting development for that region. We are currently -- as the rainy season in Zambia is subsiding, we have recommenced the trenching of that large resource. And we look forward in the coming months before the financial close to bring out the data of why this Munkoyo project is so exciting. And importantly, how many more such Munkoyo projects are in the region that we are engaging with. It's an extremely exciting development within Zambia and is enjoying the focus not only of the industry, but also of the Zambian government. The next grouping is around, of course, our IRH JV. And to -- there were questions around the IRH JV and linking into the Mopani transaction recently announced and how that affects the IRH focus. I think it's fair to comment or very fair to assume that the IRH is focused on completing the Mopani transaction took priority in their focus, that is completed. On the back of that priority, Jubilee certainly is a key priority in their expansion of their operations through our joint venture on our Waste Rock Project, plus, of course, the Mufulira Slag Project, we are partnering with Mopani. It offers copper concentrated materials to further expand and utilize the capacity at the Mopani Refinery. So there's a strong strategic benefit to both parties in accelerating the implementation of those projects. The Mopani Slag Project has been kicked off in full force. Our engineering teams are at Mopani. We've got a working group established. The definition of the slag is nearing completion. And in parallel, the process development work is happening. We expect to bring news out of the Mufulira Slag Project that educates more on the size of the project. The short-term expected investment into that refinery with IRH Mopani to bring that out in the coming months as that project now gets in focus with the new ownership of Mopani completed. There was a news flowing out earlier this week on Chambishi and speculating on Jubilee's acquisition of the Chambishi refinery. We're not in a position or nor do we intend to stir the rumor or comment too much on that announcement made outside of Jubilee, other than to say that we fully recognize that Chambishi is a great refining infrastructure. And of course, as Jubilee will be looking at numerous options on expanding refining capacity in line with our expansion of our copper footprint. Stepping into South Africa. There are questions around our chrome expansion. To clarify, yes, our chrome modules are at 50,000 tonnes a module. It's a blueprint design perfected over the last 8 modules we've implemented in South Africa. And yes, we target to deploy another 2 modules at minimum in the coming year as we expand our operations by deploying more of these modules. Important to note, because they're modular, it means that in that module, it comes with its own power backup system to ensure that they also are able to operate during the current power crisis in South Africa. Maybe just quickly then as the last couple of minutes before we conclude, I'll hand back to Neal for some key financial questions raised by shareholders.

Okay. Thank you. One of the questions was why is Jubilee's current assets and current liabilities consistently high. So as I highlighted previously in the presentation, that we're not a traditional miner, so we will acquire run-of-mine material within our working capital cycle and also ensure that we are smart about funding that prior to acquiring it. So that is the reason for the higher working capital number with assets and liabilities. You will notice that in the current period that our revolving credit facility sits within current liabilities. As we refinance that by the end -- sorry, middle of April that will then revert back to a split predominantly in noncurrent assets. Right. We have a question around the [ GBP 28 million ] loss on translation of foreign subsidiaries. For the more technical accountants out there, that is a book entry associated with IAS 21, which deals with how we translate functional currencies or the local currencies in Zambia and South Africa into pounds as a result of the rand to pound depreciating by 13% [indiscernible] by [ 50% ]. That drives that book entry when you go and translate them at the closing rates. So it's purely a book entry that flows to your equity and then gets reported under comprehensive financial income. Okay. One of the questions was our cash is tied up, both the current and noncurrent inventory. I think I did deal with that now previously in the prior question, but I'd also like to highlight any -- if we constantly review any materials sitting under noncurrent assets to see if we can realize value. We have a question of what type of CapEx should we see in the remainder of the financial year. I did highlight in the presentation that we could see a similar profile given the expansionary projects that we're undertaking both in Thutse in South Africa as well as in Zambia. Okay. Now that -- one of the questions now that Jubilee is not cash positive and the current capital investment is nearing completion, how will future new projects be funded? Will it be equity raises or buy bank and investor loans. I'd just like to highlight that our immediate expansions like Thutse, the capital expenditure itself has got sufficient cash flows to fund its own $12 million increase in CapEx through its own cash flows. I would like to highlight we do then fund the working capital, the run-of-mine purchases with prepayments and offtaker facilities to go then fund that working capital cycle. Then the rest is we've just recently done a cap raise. So we are well funded both from a CapEx perspective, the working capital aspect. And then if we had to go and look at any new transaction, each one is reviewed on its own merits. Obviously, the more attractive of the transaction, the more attractive debt is. But we do deal in difficult areas and challenging areas. So a certain perspective on how we mix the ratio between equity and debt is constantly reviewed by ourselves as well as the Board. Okay. The other one is when we'll be issuing a dividend policy. I think as you can see, we're in a growth phase right now. As that CapEx winds down into a lower cycle and we start seeing the benefits of the return on those investments in likely [ CapEx life ] period over the next 2 years, we'll then start reassessing how do we look at a different policy. Would you consider a reverse stock split? So in other words, a share consolidation? We are consistently reviewing our share capital that how we report that. And it's something that we have actually discussed even at a Board level. It's just a matter of deciding the timing of such an event as well as the requisite shareholder approvals, but it is something that we are looking at.

Thank you, Neal. I think just as a last question, which is quite a pertinent question before we conclude, is a production question about when do we give guidance for 2025 lying ahead because so much -- so many expansion projects are underway. The short answer is we are reviewing as soon as we have the numbers coming through our upgrade of Roan and its operational capacity increase as expected by end of April, we would be in a position to also look at the progress made in our copper sulfide expansion at Sable as well as the expansion of our copper -- of our chrome 2 modules. We therefore expect to be in a position towards May of this year to give better guidance for the coming year that lies ahead. As you can recognize, it's an exciting year. It's a vitally important year as both the copper comes to fruition and the expansion of our chrome towards its 2 million tonnes is expected to come to fruition. And with that, I would like to close. Thank you for taking the time to listening to us and listening to our presentation, and we hope to host you on a live webinar soon. Thank you.