Member Info for Jammer1

BB2, thanks for the Info from Tharisa’s recent quarterly report. And the targetted 20% input improvement would help to shorten break even to just over a year.

Going back to the webcast in September 2017, when all the excitement was the additional 3rd party chrome ore at DCM ( what happened to that?), Leon stated the processing cost at DCM then was $9 per tonne of ore processed. Assuming at Windsor 2.5 tonnes of ore is required to produce 1 tonne of concentrate indicates $23 processing cost per tonne of concentrate. The toll fee would have a decent gross margin so for simplicity it would not be unreasonable to assume we would charge a toll fee of $40 per tonne of concentrate produced. We produced around 15,500 tonnes of fine chrome concentrate according to the last corporate presentation. So around 150000 tonnes of concentrate was produced at Windsor. If we toll processed it at $40 per tonne of concentrate produced then we would have toll fee revenue of $6m, which at 30June would have converted to about £4.8m. Assuming we got £100 for each tonne of fine chrome concentrate, we arrive at around the total revenue figure for chrome concentrate in the first half of 2019. Yes a few assumptions above but not an unrealistic scenario! So my money is on the total chrome revenue figure in first half of 2019 was a mix of mainly toll processing revenue from Windsor and the fine concentrate revenue from DCM. If Jubilee is getting something like £100 per tonne of chrome concentrate, rather than £40 per tonne, it would make a lot more sense of the $16m paid up front for the chrome that will take about 3 years to extract, and where Jubilee takes on all the commodity price risk.

Kalan, whilst the total chrome revenue figure in the first half of the 2019 calendar year divided by the tonnes of chrome concentrate produces a figure of £40 per tonne, the question is what does the revenue figure actually relate to? A lot of the chrome ore will have been toll processed, as we had no rights to the chrome itself. Could the revenue comprise of both toll fees and some actual revenue for any chrome concentrate for which Jubilee had the beneficial rights to. I have got to admit if the £40 figure was the actual chrome concentrate price per tonne, then paying $16m for the chrome rights seems far too high to me.

Totaltrader, I hope you are right about the price range, but you might have got the £ and $ signs wrong. Being a bit more cautious, if we assume $100 a tonne of chrome concentrate and assume a 20% increase in the material feed rate at Inyoni, the break even would occur after around 16 months. The chrome value from the additional 1m tonnes has to be added in as well. So a pretty good deal if the $100 per tonne figure is right.

Last week's deal on the PGMs looked a bit too good to be true. I must admit I wasn't expecting a significant $16m price tag for the chrome option, but realistically we have to look at the two parts of the deal as a whole. Jonah has hit the nail on the head. We cannot draw any clear conclusions on the value of the chrome part of the deal until we have some idea of the current and sensible projection of the chrome concentrate price. Sadly that figure is (deliberately!) not mentioned.

Strategically the deal looks to be perfect with the relationships between Samancor and Northam now both bearing fruit. Visible earnings for both chrome and PGMs can now be seen at Inyoni for the next 3 to 4 years with clear costs for the raw materials. The probable addition of a fine chrome plant to follow within the next 2 years. Inyoni input will be increased by around 20% in the near future, immediately enhancing both the chrome and PGM earnings. The two chrome and PGM hubs at Windsor and Inyoni will place Jubilee in a very strong position in the Western Bushveld. Furthermore the separate million tonnes of material will probably ensure the current capacity underutilisation at Windsor chrome is rectified, and extends the visible earnings to at least 3 years on both the chrome and Pgm rights. If the chrome price increases and the PGM prices are maintained the whole deal with Samancor could be massive for Jubilee.

Wobf the interesting part is the massive increase in Q3 earnings on the back of surging PGM prices and strong dollar. The September earnings of £1.4m indicate earnings for Q3 will exceed £3m. Furthermore the earnings in October are likely to be close to those in September. The reported September figures in the last RNS further indicate the typical gross margin had increased from $450 a PGM ozs to nearer $750 an ozs,, an astonishing increase of 66%., on the back of surging PGM prices. The start of commercial Windsor PGMs production could not be occurring at a better time. No wonder the share price is surging.

Welloil as you say a little bit cynical, and for those holding shares from more than three years ago I perfectly understand. Despite one or two hiccups, in particular the bad start at Kabwe, the last three years has seen Jubilee transformed from one of Colin's opportunistic project venture companies, to a serious company with very good profit prospects over the medium to long term. As the new strategy has started to bed down and Leon's influence grow, the speed of transformation over the last 12 months has been remarkable. Jubilee is not now relying on a series of small short term projects anymore, but is building longer term regional processing centre businesses. DCM could also become one, particularly if a good long term deal can be done with the prospective new Chinese owners at DCM. With excellent cash flow coming in on the back of current PGM basket prices, the days of rip off placings to keep the lights on are now well behind us. If placings are required they will be for serious investment, not for a high risk Colin hunch.
Over the weekend I did consider top slicing a considerable part of my investment as I was beginning to wonder if the share price had now started to get a little bit ahead of itself. But the more I thought about it, and in particular if the PGM commodity prices don't fall back considerably, Jubilee could easily be reporting half year pre tax profits of well over £5m next February and well over £10m at the next year end. With Kabwe still to come and the deal at Hernic both ensuring earnings from there will not fall off a cliff at the end of next year, and the Windsor PGM earnings being supported for at least an additional year, I decided not to sell and buy some more shares , prepared to take an 18 month to 2 year view. I hope I am right.

On Page 64 of the report and accounts up to 30 June 2018, note 9 shows a breakdown of the intangible assets. The PGE Exploration part relates to Tjate for the mining right and its carrying value was just over £39m.

The rerate of Jubilee over the last 5 weeks has been well overdue and the Hernic deal certainly seems to be exceptionally good. But with an expected profit of about £1m for the last financial year to be declared in the early part of November, and with a company now valued at £80m, the share price is reflecting a company expected to be making more like £10m annual profit. In theory a share price is supposed to be looking at a company’s future profits. So will it make such a profit in the current financial year when it will be receiving very little, if any, profit contribution from Kabwe? It will have to make it from its platinum and chrome projects. Certainly at current PGM basket prices the platinum projects could get the company to such a profit level, despite the low chrome prices depressing the profitability of the chrome projects. But the share price now seems to be already pricing in all of the likely profit growth for this current financial year with little room for anything to go wrong. Of course, Kabwe will only start to come on stream from the beginning of the next financial year, but we may not have much idea how well things are going financially until early in 2021. So over the weekend I will be wondering if I should cash in a good portion of my holding as I am beginning to believe the share price is starting to get ahead itself.

Of course, getting the Star Zinc project going should vastly improve Galileo’s short term finances, but any profits will be spent on the the real long term value potential of the Ka****u project. But Galileo will not only need the Star Zinc small scale mining licence, but also the approval of the Zambian authorities for the Kabwe residual rights deal with BMR, which includes the large scale mining licence in which the Ka****u project is based. This particular licence will also need the to be extended beyond Autumn 2020 as well. Quite a few regulatory hurdles to jump through. And of course Jubilee is also mixed up in all of this, although that should help Galileo make progress with the Zambian authorities.

For the life of me I cannot work out why the Revelo deal is good for BMR shareholders, including Jubilee with its near 30% holding in the company. I couldn’t see anything in the recent BMR EGM document that even considered BMR remaining private and being frugally run to return the annuity payments in respect of the Kabwe tailings to the shareholders. It was not surprising there were some angry shareholders at the EGM and the meeting had to be postponed. It’s not alright for Colin to dismiss the Jubilee shareholding as just a cost to obtain the Kabwe tailings deal. Unfortunately he has a massive conflict of interest and it should be the other Jubilee directors to explain clearly why the Revelo deal is good for Jubilee’s shareholding, something they have thus far been rudely silent on. The potential Revelo deal’s terms have now worsened, so it is even more important they make it clear why they support BMR at a new EGM, should they do so, to try and get BMR restated as a listed company. Any reinstatement would blow away the Kabwe tailings annuity payments in a very high risk copper venture in Chile after massive dilution of Jubilee’s shareholding.

The last financial year saw significant losses at DCM in excess of £1m, although half of the losses may well be recovered from DCM out of their share of future positive chrome earnings. Some of the operating losses were expected as the coarse chrome processing ran down and the build of the fine chrome plant occurred. But the slower than expected ramp up of the fine chrome operation and the declining chrome price led I am sure to operating losses far greater than expected by Jubilee.
The positive news though is the fine chrome plant has now been ramped up to full targeted inputs, and from month to month since June seems to be generating positive earnings at the operational level even at the current low chrome prices. However, there is an unused coarse chrome plant and the never ending issue of obtaining approval for the PGM plant.
Good news though might be in the wings. The proposed XGL chinese company takeover of DCM has just been approved by the South African government but on tough conditions,. The chrome mine would need to be reopened and the chrome ore will have to be processed through to at least the chromite stage before being exported. I hope Jubilee's agreements with DCM remain watertight if the takeover proceeds. If so in a couple of years time this project could be turned round significantly and Jubilee could have a thriving long term chrome and PGM processing business in a joint venture with XGL.

Amazing that a better presentation than normal released via an RNS Reach (I.e a corporate advert) can improve sentiment so much. For me there was nothing hugely new in it, although the mention of Vedanta as a corporate partner is interesting as no project has yet been announced with them.
The clarification of time scales for the Kabwe Tailings project was welcomed but only phase 1 is shown as being completed by end of 2021, when half of the full targeted tonnage amounts will be achieved. Presumably the phase 2 ramp up to full target amounts will occur starting in 2022 and will be funded from the expected significant positive earnings after phase 1 has been completed. If the development of the Kabwe regional centre continues to go well over the next 12 months, Jubilee's credibility will soar, and further regional development centres on the Kabwe scale in Zambia would be highly probable. Maybe that is where Vedanta come in, and their need to get back into the Zambian government good books.
It can be seen from the under utilisation of resources on the chrome side of the business that there are a number of issues in this area. But there is also some good potential here as well and I will cover that in a separate message.

Significant transfer of shareholding- could be Platcro gradually offloading some of their 52.5m of Jubilee shares. No lock in details given at time of purchase of chrome plant. Using shares to purchase an asset at the then 2.5p price is all well and good but as we found with BMR it leaves an overhang that can take a while to clear. Anyway the unusual large trades are being done responsibly so as not to crash the share price.

TBTT Thank you for pointing out I had got the targeted zinc metal tonnage incorrect. Yes it is 12K tonnes p.a and not 6K. That certainly makes the figures stack up a lot more. The additional points from TT are also extremely helpful. It will be interesting to see how all this pans out, but the discussion today has certainly put a reality check in place.

The revenue figure of $13-15m is for zinc metal at current prices assuming the 6K tonnes of zinc metal can be produced each year after mining the ore and then processing it. Precisely what the $2m AISC figure is covering is anyone's guess. I suspect it is solely for the mining of the ore. Now add on the transport costs, the processing costs first to a zinc concentrate and then to a zinc metal and you may start to get somewhere near the true costs. In particular we do not yet know the processing costs from the ore through to a zinc metal , as these will be in the eventual agreement with Jubilee. Anyway no where near $10m will be generated in earnings (or implied free cash flow) for Star Zinc each year at current zinc prices after Jubilee has taken its cut. On top of that there will be significant Zambian taxes as well as the Zambian's 5% cut in the Star Zinc project from their no risk shareholding. The return should of course still be good for Galileo , but nothing like what has been touted or assumed on this board. The remaining free cash flow arising will presumably then be invested in proving up the Kash itu prospect, assuming the Zambian government agree to the Kabwe residual rights buy out from BMR. This particular project could be in say 3 years time far more lucrative for Galileo, but has a long way to go yet.

Jubilee's development of the Sable Zinc refinery has two broad stages. In relation to zinc the first phase will convert the zinc ore presented into a zinc concentrate. Commissioning of the first phase circuit is due to commence in December 2019. The second phase takes the concentrate through to a zinc metal and commissioning of this phase is expected some 6 months later in mid 2020. The concentrate produced up to the 2nd phase will probably be sold to produce early revenues to help cover some of the CAPEX being invested in Sable Zinc by Jubilee and to provide some return to Galileo, assuming the Star Zinc is up and running in early 2020.

Stout, Petro has only just sorted out the Convertible Bond now with repayment in 2024. The $500m Guarantee Notes are not due to be repaid until Nov 2022 and already have an interest rate that is slightly lower than that for the recent new bond issue. So I cannot see any further refinancing at the moment. If things are going well over the next 12 months with excellent free cash flow generation , maybe at that time they will see if they can start to pay off some of the Guarantee Notes early in some way. Alternatively maybe they will start to consider the shareholders and pay a small dividend. Wouldn't that be nice! More will be revealed soon after the half year results in early September. I am sure that soon after they will have a forward looking presentation covering the next couple of years for the various investor days they normally attend during the Autumn.

Maybe Kalan, but a direct investment in a mining company would not be in line with the strategy to eliminate mining risks. Unlike BMR we do not strategically need a shareholding in Galileo. If Jubilee is going to help out Galileo at all with getting the Star Zinc mining up and running, an indirect "short term loan" through an advance payment in the off take agreement is more likely. The presentation is then much more palatable as well as the method of financing being of much lower risk. The advance payment would be presented as securing medium term high grade zinc ore supplies for Sable so that the overall unit cost of producing the zinc concentrate/metal can be significantly reduced when it is mixed with the upgraded Kabwe tailings.

Totally agreed Shedulike. Very good to see such a reputable independent third party recognising the significant risk reduction in the business. Be even happier if they were not involved with IRC, but if no major unforeseen event occurs, the outlook for the next couple of years looks extremely positive.

Looks like there was a large seller of Galileo yesterday when there was a lot of liquidity. Perhaps some of the shares held by BMR? If so where have we seen that before? Placing theory at the moment may not be quite on the money. Probably still to come in about 3 months time after news has been released of a processing and offtake agreement with Jubilee, and perhaps by then a successful small scale licence application. With rose tinted spectacles for Galileo shareholders a big dilutive placing might be avoided if Jubilee in particular through offtake agreement, and maybe mining contractor to secure contract, chip in to get the Star Zinc operation up and running. Or better still news of a sale of the Nevada gold asset comes through.