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I like the line:
"We see Jubilee as highly cash-generative with exceptional ESG credentials."
,,,"Exceptional ESG credentials" are important for many investment funds.
Homey,
I don't think we will see a drop in EPS unless something dramatic happens with metals prices (which I don't expect) for the following reasons:
1. I seriously doubt we will have £17m put through the expenses line for historical write offs (Only Tjate really left in this regard)
2. Inyoni will be the primary PGM plant which is low cost and Eland will only be used for excess material
3. Eastern Limb material will increase the basket price via higher Rhodium content
4. Contribution from Copper and as I mentioned previously I think we have a fair amount of ROM stockpiled at the end of the last financial year.
Our growth may not be as explosive this FY as it was last year but we will grow in my opinion.
Northern
Plus No E, we have now discovered under the joint venture at Elland Jubes was giving away 40%. From memory Elland was targeted at 2,800 oz per month. At full production that’s equivalent to giving away 1,120 oz. Going forward with the emphasis on production at Inyoni ( 100% owned) that’s a massive boost to the earnings. Then I ask myself, what is Inyoni actually capable of going forward, when you realise they plan to catch up the loss of the first half in the second half. Ok some of this may come from the flexible arrangement at Elland, but looks great going forward. Our first clue to this will be in the Jan report. Plus at current prices, there is still good profit, with a recovery in the car industry very likely to begin next year, the PGM strategy is looking very well managed indeed. Copper production may be better than expected depending when the ROM processing began. I recall July or August being targeted. There is also reference in the report this may contain cobalt. No facts there, but time to cross fingers as this could make a big difference as well.
Moneyhawk,
Are you sure regarding your comment re cobalt ?
My research seems to suggest that cobalt hydroxide typically contains 20-40% cobalt but the 80% is based upon the full cobalt price and not on the 20-40% contained cobalt. Reading the WHI Broker Note, it seems to imply 5k tonnes payable at 80%.
However, assuming their $55,100 per tonne $25 per lb), this would provide revenue of approx $220m which seems excessive. Looking at the increase in revenue (Sable and Leopard) from 2023 to 2024 (and adjusting for estimated increase of copper production from 28.3kt to 44.5kt) there appears to be an increase in revenue of approx $100m. This is well above your suggested revenue figure but only half of my above calculations.
So I am confused!!!!
I will draft a question (or two) regarding this for the AGM presentation and post on here.
BB2
Also in the RNS dated 17 Nov 2021, JLP stated:
Jubilee's PGM operational target for the current financial period remains at 50 000 PGM ounces, despite the interruptions to operations during the construction and commissioning of the upgrade programme.
I think there is sufficient confidence in the company that they’ll reach at least 50K PGM ounces by end June 2022 (having reconfirmed this expectation in the latest annual report).
Homey, on your first point in the latest annual report (bottom of pg 10) it says:
The disruption to production caused by this significant Inyoni PGM upgrade during the current H2 CY2021 period is expected to be recovered during H1 CY2022.
Hopefully therefore we’ll see at least 50K of PGM ounces in next year’s accounts to end June 2022.
JLPpositive, I don't think JLP will hit 1.9p for a few of reasons
- Lower PGM production based on disruption during expansion and loss of ounces from Eland.
- Significant drop in PGM basket prices.
- Copper ramp-up expected to have a higher unit cost.
- More shares on register due to recent dilution.
I don't have sufficient numbers to come up with a proper estimate but I am guessing a 5-10% fall in EPS at this stage. I will be happy to be wrong.
That seems to answer some of the questions about plans for the kabwe tailings and how much cobalt we might be producing.
Table on page 14:
Kabwe tailings - the current plan now looks like nothing next year, and then zinc only from 2023 to 2025. Lead and Zinc from 2026 onwards. Capex costs to mainly come in two phases, next year and then again in 2025. Vanadium TBC. (a random 49.9 Mlbs of V appears in the table for 2022, assume thats a mistake, no revenue is expected for kabwe further down the table)
Cobalt - 5.3kt of cobalt hydroxide per year from 2024. Contains approx 20% cobalt, which WHI expect we'll recevied 80% of the price for the contained cobalt. I make that to be the equivalent of 848t of cobalt per year
The re-issued WH Ireland research falls now back to their much more conservative outlook. I do believe Jubilee will beat their earnings estimate of 1.9p, again will also be dependent on how much Copper is produced and only because the basket prices have come off the boil.
@Homey - Not sure why you don't think Jlp can make 1.9p when they made 1.8p for 2021. The PGM's and chrome should get close to that number by my estimates.
The outlook for Jubilee is definitely a golden copper and I am in agreement that the earnings growth driver will be from a stable Sable.
GLA
Yes it seems that WH Ireland have updated the errors. Most importantly EPS for FY21/22 was changed from 4p to 1.9p and the Sable copper revenue for the same period was changed from USD$84M to USD$37.7M. The copper revenue is now in line with my expectations. It sucks to be right sometimes. I still think EPS of 1.9p for FY21/22 is a bit optimistic but I don't think it matters all that much, the Sable copper earnings is the main driver for the next 12-18 months.
I’ve just had another look, following the link someone posted below, and the numbers are different!!!
If you access the broker report on Jubilee’s website it is now dated 9th December. It has obviously been changed since the original was released on 7th December
Thought I was going a bit mad for a minute there
For me, in terms of the numbers, I’ve concentrated on the cash flow and financial tables on pages 14 and 31.
The former breaks down forecast rev and GP for all metals and areas in $ and the latter just has the totals in £.
I added up the rev and GP in the cash flow breakdown and it coverts almost exactly to the financial table using 1.35 ER for all years
So, unless I’m missing something, the Copper GP forecast for next financial year is $20m which seems reasonable, it then ramps up to $78m in YE 2023 and $161m in 2024
All this equates to a profit after tax of £47m £89m and £130m in the next 3 financial years but crucially:
1. Doesn’t include any Cobalt earnings
2. Nothing for Cyprus
3. No expansion on the PGM front
4. And obviously no future deals
As others have said it is a very detailed report, the likes of which we have never seen before
I thought I had done a lot of research into JLP over the last 6 months, but after a 30 second glance, there looks like a lot of content in the note.
I will download and read at my leisure
I’m curious about the broker’s notes and how these are marketed? Fair value is on an upward trajectory and seemingly getting ever further from the SP! What do WHI actually do with them as whatever it is seems fairly ineffective!
Very impressed with the handling of Elland as well. I was led to believe the processing facility was being withdrawn from Jubilee. Quite the contrary- it would appear to be Jubilees choice to reduce production in favour of Inyoni 100% owned as opposed to a 60% profit share. However really appreciate the carefully negotiated use as necessary arrangement. I wondered how we were going to use all the chrome concentrate. Looks like Inyoni is way over max capacity and there will be a nice little bonus from Elland. The scene appears to be set to make way for Inyoni 2.
I never thought the Jubilee profits would be as high as WH Ireland forecast for 2022 but have no problem with the forecasts from 2023.
Adding to the list I believe Jubilee will go into Cypress as well as building a second Inyoni on the east limb(makes sense).
Perhaps the plant could be built at Tjate as eventually I believe an agreement of sale will be reached with Jubilee retaining the rights to the tailings. Just putting myself in Leon's shoes
Adding to NS's excellent list, I noticed a couple of references to a process under investigation to leach out finely ground sulphides. "However, Jubilee also has a small
pilot plant to learn how to leach the sulphide concentrates. If this pilot plant is
successful, it could revolutionise Jubilee’s plans in Zambia. "
This would indeed be revolutionary if it works. Could this be the process LC referred to with a nod and a wink about six months ago? I had alsways assumed it was something to do with cobalt, but now I'm not so sure.
Homey,
I too was a little surprised at the earnings forecast for Copper, so I did a little more digging.
If you look at the end of year balance sheet there was £17.7m in inventories (Up from £2m the year before). Note 14 says £14.4m of this is in respect of ROM material that will be processed in the next 12 months. In prepayments there is £5.3m for 516k copper tailings stored in a bonded warehouse, ownership of which passes once tails are delivered to site.
What I think (but stand to be corrected) is that they have a lot of material already on site to be processed into final product prior to project Roan coming on stream. We should get a better understanding of this once the half yearly operational review comes out in Jan-22.
Main news to come out of the Broker note for me in terms of opportunities:
1. Likely expansion into DRC
2. Mufulira potential to add to the copper streams
3. Eventual capacity for copper processing - Leopard 34k tpa, Sable 12-14k tpa plus room for expansion
4. Zinc 2023 (including potential finished product rather than 70%) and Lead 2026
5. Cobalt as Mikey points out could be massive if they can sort the processes out
6. Eastern Limb expansion on PGM's highly likely
Some really good detail which will take a while to get through and fully understand so other peoples interpretations most welcome
Northern
Only Jubilee have the key to their value! What a USP!!
How can WHI have a NAV at 6.4p which equatesd to £155million when we own tailings with billions of dollars of value?
Beware, there are definitely some sloppy numbers in the latest WH Ireland note. EPS for FY21/22 is 4p which is completely wrong, even the breakdown of the estimated financials don't support such a high figure. WH IE also estimate copper revenue to be USD$84M in FY21/22, JLP might hit USD$40M based on the copper production estimates.
Much easier access at https://jubileemetalsgroup.com/wp-content/uploads/2021/12/FN-JLP-071221.pdf
https://*********************/companies/uk/precious-metals/jubilee-metals-group-plc/research/whireland/jubilee-metals-jlp-growth-and-opportunity/41_2021120704091877432/51b73985-0535-475f-8586-7578064b57fd
A new document been published, very detailed.. unrisked share price of 41p