The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Chesterfield I assume have a number of dumps on their Cyprus licences, and a similar need to monetise them to pay for future exploration work, even though they have a FTSE 100 strategic partner in Polymetal. Just taken a small punt on Chesterfield. Their exploration side side looks interesting, but surely they must be talking to Jubilee as well?
Thank you everyone for your detailed responses to my concerns, particularly the one about the potential large overhang. Very reassuring.
F79 thanks for the clarification. That is still a large potential overhang of shares that might need to be cleared over the coming months, whether it be done in an orderly way or not. Of course the debt for equity bond holders may decide to become longer term holders but that from my experience is not the norm.
I though the lock in period for the equity swap bond holders didn’t come to an end until early June. They had 40% of the company’s shares. Why do most think the potentialoverhang from these ex bond holders cleared? The other concern is over half of this year’s production has been presold and similar hedging arrangements may be dictated to Rambler by the new institutional bond holder next year.
Shiner, without the detailed update on the Elephant copper and cobalt projects any price forecast on the copper projects as in the broker note is complete guesswork as far as I am concerned. I was really surprised this note was not held back until the update later this quarter.
Sumoskier, a detailed timetable has not been released for the Elephant projects. Elephant 1 is expected to start construction Autumn 2021 and be built over a 9 month period. There have been hints it will be a phased construction similar to Project Roan, so as to bring on line a copper concentrate revenue stream as early as possible presumably in the early part of 2022. We have been promised by Leon a detailed update of the Elephant projects during the current quarter.
The four year target period for reaching 25000 copper units started I believe around the middle of last year. There is now just over 3 years to go, and in the last broadcast I am sure I heard Leon say that he expected the 25000 tonne target to be met well within the time period. Hopefully this should all come clear when the detailed update is released, which also hope contains news of anew Elephant 3 project which has also been hinted at in broadcasts, with details on how the copper refining capacity is going to be increased to align with the huge output expected from the Elephant projects.
Shiner, from the comment made by Leon in his last interview there will not be any significant cobalt produced until project Elephant 1 is up and running. The cobalt circuit was probably developed to prove it could be produced before landing the Elephant 1 deal last year.
Billyboy thanks for sharing some of the points arising from your conversation with Paul Smith. I was surprised to see a broker note with forecasts produced at this stage, as Paul seems to have admitted himself the copper figures are largely a complete guess at this stage so no wonder he has been cautious. I thought a broker note would only be produced after the promised RNS on the Project Elephant feasibility study is released during this quarter and with an update on how things are progressing on Project Roan. But he has probably been put under pressure. The Broker Note appears not to take into account Project Elephant 2 but as that will not start contributing largely until the latter part of the 2023 financial year that is not too much of an issue just yet. Other than the point I make below I thought the note was very good and personally I prefer conservatism over the more often ridiculous rampy house broker notes.
The main criticism I have of the note is a point made by others. We are only 3 months away from the financial year end 2021, but the EBITDA forecast seems to be well below any reasonable figure based on the PGM basket price during the 1st quarter of the calendar year 2021. By my calculation using the Platinum Matthey spot price averages, the net of smelter and PRILL splits shown in the broker note, the average PGM basket margin earned on each PGM oz in the 1st quarter, is around 70% higher than the average margin earned in the first half of the financial year 2021. It doesnt take a genius to work out that unless there was a large PGM basket price correction for the final quarter of the 2021 financial year, the EBITDA forecasted in the broker note is far too low. Paul is using a net of smelter basket price average for FY 2021 of $2042. This implies an average of about $2200 for the final quarter whilst the current spot is around $3000. Paul's EBITDA forecast implies operational earnings for of around £63m for FY 2021, so roughly £33m for H2 of the FY 2021. For what it is worth my own figures for the first quarter of the calendar year 2021 indicate operational earnings of £24 on the PGMs alone and that is with an average of just 4500 PGM ozs per month. This excludes anything for chrome or copper. If I am right, and not made a stupid mistake, on any reasonable assumptions on data in the public domain Jubilee should smash through the £63 operational figure implied in Paul's forecast for FY 2021.
NorthernShark, I will be very surprised to see a first quarter report including operational earnings even though they should be incredibly good on the back of the surging PGM basket price as you reported. As indicated by Leon in his interview we should get fairly regular operational updates, which for me are more important during this period of rapid developments. What I am hoping to see is a report on project Roan successfully ramping up after phase 1 completion in mid May combined I hope with a detailed statement on the feasibility study for Project Elephant. Some news about the additional copper refining capacity would be a bonus. Around the same time we should be able to hear in more detail exactly what is happening at Inyoni and the implications of the developments. Bringing on line , a large upgraded chrome plant, integrated to an enlarged ultra fine chrome facility plus an additional 1000oz PGM processing facility all within a few weeks of each other is quite a project and very little mentioned because of the focus on copper. But the Inyoni development is the cash cow for the funding of the massive copper expansion in Zambia, so its importance cannot be over emphasised.
I have noted some concerns about the likely end of the Northam JV later this year. For me it is very good news. An it is not unexpected. In various interviews and shareholder questions Leon has indicated this was likely to happen as the cost of the JV to Jubilee is very high .It was a great JV at the time it was created about 2.5 years ago and it has provided excellent cash flow and additional profitability just when Jubilee needed it to. In effect it significantly helped to underpin the out of the blue opportunity to purchase all of the chrome and platinum rights at Inyoni for $21m and even more important to be able to run that site as Jubilee wanted to. The benefits of that independence will become much clearer later in the next quarter after all the current developments at the site are finished , and the additional PGMs generated far more efficiently will replace the apparent lost earnings from the JV. By my reckoning it costs at least $200 more to generate an attributable PGM ozs through the JV. This is because Jubilee is paying to supply all of the feed to Northam including the 40% share Northam hive off. So not only will the same feed be much cheaper to process through Inyoni, but it will also save the 40% of feed, which can then be processed at a later date solely for Jubilee's benefit. We have already had an indication of what can be done at Inyoni with better quality feed using ROM material and which has been already processed to uplift the PGM grade. In November and December output exceeded 3000 ozs per month. And that was supposed to be through a PGM plant with a maximum capacity of 2500 ozs.( but taht figure was established for historic tailings sitting at the site from the old Hernic operation).) So what will happen when the additional (apparent) 1000 ozs comes on stream and the expanded ultra fine chrome plant integrated with the new large upgraded Samancor plant is in full operation. In my opinion it will easily maintain the current monthly average of 4500 ozs of PGMs currently being obtained through Inyoni and the JV, but at a much better margin and using far less input. so extending the feed life for inyoni.
The rocketing basket price has by my estimates produced PGM earnings around £15.5m in the first two months of 2021, and this may be slightly conservative. Key assumptions are rhodium percentage is still the same as in WHI broker note last year, and 5000ozs of PGM's were produced in each month. Chrome and copper earnings on top of this figure, and hopefully accelerating copper earnings to start coming through starting this month.
As far as I am aware the term of the JV was not announced. What was clear is that the processing plant would be needed for the Eland Mine development which at the one was assumed to be about the end of the current financial year .if that is right there may well be spare capacity for at least another year. So a further deal could be on the cards but surely not on the incredibly favourable terms to Northam which the current deal is!
Mikiesunday your assumption about 78K PGM ozs being produced at year end depends on the existing JV with Northam continuing at the same level as at present. This is very unlikely. Leon has on more than one occasion in presentations indicated the increased production at Inyoni is going to replace the much higher cost production of the JV. It appears to me unless we hear of a brand new development, that a matured annual target of about 50K ozs PGMs is going to soley come from Inyoni at very low costs. Even if the total PGM ozs is slightly lower going forward the earnings margin will be a lot bigger so maintaining the same level of absolute profit. The big gain will be that the production of more high grade PGM tailings than we would need from day to day, would build up the future feed material so extending mine life.
Mogli' thank you for publishing your post tax profit fòrecasts and the assumptions you have made. Certainly in the near term they seem a little more realistic than some of the figures that have been suggested.
The latest demand and supply report for PGMs. From Platinum Matthey published today and not surprisingly consistent with interview with head of WPIC. No wonder the PGM spot prices are starting to surge.