# Jubilee Metals Group  delivered record earnings on the back of increased production

- Link: https://www.directorstalkinterviews.com/jubilee-metals-group-delivered-record-earnings-on-the-back-of-increased-production/412809968
- Published: 2020-03-26T10:24:59+00:00
- Author: Amilia Stone

**[Jubilee Metals Group](https://www.directorstalkinterviews.com/company/jubilee-metals-group-plc/jlp.l)
PLC** ([LON:JLP](https://www.directorstalkinterviews.com/company/jubilee-metals-group-plc/jlp.l)),
the AIM and Altx traded metals processing company, has today announced its unaudited
interim results of the Group for the six months ended 31 December 2019.

**HIGHLIGHTS**

**Financial highlights**

·    Group earnings increased 778 % to £ 6.67 million (ZAR 115.2 million) (2018:
£  0.76 million (ZAR 13.2 million))

·    Cash generated from operations up 570 % to £ 4.89 million (ZAR 84.7 million)(
2018: £ 0.73 million (ZAR  12.5 million))

·    Revenue increased 205 % to £ 25.40 million (ZAR 439.4 million) (2018: £ 8.32
million (ZAR 143.9 million))

·    Attributable group earnings  increased 146 % to £ 9.85 million (ZAR 170.4 million)(
2018: £ 4.0 million (ZAR 69.9 million))

·    The group balance sheet strengthened further on the back of the strong financial
performance and large strategic investments, with total assets standing at £ 118.8
million, up from £ 102 million at the end of June 2019, total equity increasing 
by 12 % to £ 88 million, for the same period, maintaining a high 74 % equity ratio(
30 June, 2019: 77 %)

·    The group paid a substantial £ 17.7 million in cash for investments made during
the period under review, whilst at the same time reducing external debt by £ 2.2
million, keeping the net gearing ratio at a low 0.3 %

·    Backed by a strong £ 4.89 million cash generated from operating activities 
and proceeds of £ 6.5 million from an oversubscribed capital raise, the cash and
cash equivalents stood at £ 10.2 million, with short term assets covering a healthy
166 % of short term liabilities

·    Basic earnings per share for the period 0.35 pence (ZAR 6.09 cents^((i))) (
2018: 0.06 pence (ZAR 99 cents))

(i)                    Conversion rates used for revenue and earnings are at the
average conversion rate for the period and for balance sheet at the spot rate at
period end. Conversion rates used for capital expenditure and acquisitions are at
current spot rates

**Operational and projects highlights**

·      PGM^((ii)) production up 72 % to 21 082 ounces (2018: 12 288 ounces)  

·      PGM revenue up 130 % to £ 16.28 million (ZAR 281.6 million) (2018: £ 7.09
million (ZAR 130.6 million))

·      PGM attributable earnings up 137 % to £ 9.70 million (ZAR 167.7 million) (
2018: £ 4.09 million (ZAR 75.60 million))

·      Chrome revenue up 707 % to £ 9.12 million (ZAR 157.8 million) (2018: £ 1.13
million (ZAR 19.5 million))

·      186 249 tonnes (2018: 17 011 tonnes) of saleable coarse chromite concentrate
produced

·      Completed the acquisition of the Sable Zinc Refinery in Zambia and produced
first high grade copper metal in December 2019 while also commencing with the construction
of the zinc refinery circuit

·      Inyoni Operations acquired 100 % of current PGM surface tailings (estimated
at 3.33 million tonnes) as well as future PGM tails, further extending the project
life and taking full control of all operational aspects and gaining 100 % economic
rights

·      Inyoni Operations also secured rights to all chrome contained in estimated
3.33 million tonnes of surface tailings and produced first chrome concentrate for
own sales in November 2019

·      Oversubscribed placing of £ 6.5 million to support targeted growth

(ii)                  Platinum Group Metals (6E platinum, palladium, rhodium, iridium,
osmium, and gold)

> **Leon Coetzer, CEO says: **“It is a challenging time to express one’s appreciation
> and satisfaction to a team for delivering an outstanding performance The Jubilee
> team has delivered yet another exceptional set of results during the period under
> review. We call it ‘the Jubilee Way’, which focusses on translating leading in-
> house technical excellence and innovation into industry leading operational efficiencies.
> “We have made some very significant progress, including the completion of two 
> strategic transactions, and the results as a whole, demonstrate the robustness
> of our business model generating significant cash flow for the Group. Despite 
> volatile metal prices, including in particular the volatility we have seen in 
> chrome prices, our diversity across commodities has meant we have delivered record
> earnings on the back of increased production.
> “We have continued to invest significantly in our business having advanced in 
> excess of £ 17 million into our future growth with the acquisition of the Zambian
> based Sable Zinc Refinery, which completed in August 2019, and the acquisition
> in November 2019 of 100 % of the PGM and chrome surface rights at our Inyoni Operations.
> The Sable Zinc Refinery has further enhanced the Company’s operational earnings
> capability, expanding Jubilee’s operations to other geographical areas and metals.
> These strategic investments are quickly translating Group investments into cash
> generation.
> “In addition, and to assist with the financing of these transactions, we were 
> very grateful for the support from investors which raised £ 6.5 million in an 
> oversubscribed placing. 
> “In what has been an incredibly fast moving and evolving situation, as a group
> we are not immune to the current global COVID-19 pandemic. The safety of our team
> and employees is our highest priority at this time and we therefore applaud the
> pro-active decision taken by the South African government to enforce a 21-day 
> nationwide lockdown. Whilst we are aware that the COVID-19 situation is evolving,
> we have a robust business model and are confident that the business will be able
> to withstand this disruption having, in anticipation, already taken proactive 
> measures to minimise costs and maximise production leading up to this guidance.
> Furthermore, whilst work on the ground has been temporarily halted, we will continue
> to work remotely where possible, to progress operations and continue to advance
> our growth strategy.
> “We would like to take this opportunity to send our thoughts and best wishes to
> all at this unprecedented and difficult time.”

**KEY STATISTICS**

| **GROUP** | **Unit** | **6m toDec-19** | **6m to Dec-18** | **12m toJun-19** | 
| Revenue | £’000 | 25 403 | 8 327 | 23 586 | 
| Adjusted attributable earnings **_^(1)_** | £’000 | 9 849 | 4 040 | 10 055 | 
| Adjusted attributable earnings margin | % |                  39 |            49 |                 43 | 
| EBITDA | £’000 | 10 269 | 2 419 | 12 546 | 
| Adjusted EBITDA **_^(2)_** | £’000 | 8 679 | 2 809 | 8 952 | 
| Adjusted EBITDA margin | % | 34 | 34 | 38 | 
|   |   |   |   |   | 
| **PGM** |   |   |   |   | 
| PGM £ revenue | £’000 | 16 280 | 7 093 | 14 855 | 
| PGM $  revenue | $’000 | 20 516 | 9 290 | 18 866 | 
| Attributable PGM £ earnings | £’000 | 9 695 | 4 093 | 8 158 | 
| Attributable PGM $ earnings | $’000 | 12 218 | 5 361 | 10 361 | 
| Attributable PGM earnings margin | % |                  60 |            58 |                 55 | 
| Attributable PGM ounces produced | oz | 21 082 | 12 288 | 23 847 | 
| PGM $ revenue per ounce | $/oz |                973 |          756 |               791 | 
| PGM attributable $ earnings per ounce | $/oz |                580 |          436 |               434 | 
| Adjusted PGM production $ unit cost**_^(3)_** | $/oz |                519 |          422 |               470 | 
|   |   |   |   |   | 
| **CHROME** |   |   |   |   | 
| Chrome £ revenue | £’000 | 9 123 | 1 126 | 7 725 | 
| Chrome $ revenue**_^(4)_** | $’000 | 11 497 | 1 475 | 9 811 | 
| Attributable chrome £ earnings | £’000 | 271 |         (267) | 1 309 | 
| Attributable chrome $ earnings | $’000 | 341 |         (350) | 1 662 | 
| Attributable chrome earnings margin | % |                    3 |           (24) |                 17 | 
| Attributable chrome tonnes produced | tonnes | 186 249 | 17 011 | 181 947 | 
| Chrome $ revenue per tonne | $/t |                  62 |            87 |                 54 | 
| Chrome attributable $ earnings per tonne | $/t |                    2 |           (21) |                   9 |

_1= Attributable earnings refers to earnings attributable to the group based on 
its contractual rights in each project._

_2= Adjusted EBITDA refers to EBITDA adjusted for non-cash expenses including impairments,
gain on bargain purchase and foreign exchange differences on transactions._

_3= The adjusted PGM production unit cost includes all direct and indirect costs
attributable to the project including allocated corporate charges. The Dec 19 period
includes all operating costs for the Windsor PGM Joint Venture allocated to the 
Jubilee attributable PGM ounces._

_4= The chrome revenue is recognised on an ex-works basis after costs of export 
logistics including freight, shipping and marketing._

| **TRANSACTIONS** |   | **6m to Dec-19** | **6m to Dc-18** | **12m to Jun-19** | 
|   |   | **£ ‘000** | **£ ‘000** | **£ ‘000** | 
| **Acquisition of chrome plant (South Africa)** |   |   |   |   | 
| Fair value of the assets acquired |   |   |   | 8 289 | 
| Fair value of  purchase consideration |   |   |   | (8 289) | 
|   |   |   |   |   | 
| **Acquisition of Sable Zinc Limited (Zambia)** |   |   |   |   | 
| Fair value of the assets acquired |   | 12 253 |   |   | 
| Fair value of the purchase consideration |   | (9 944) |   |   | 
| Gain on bargain purchase |   | 2 309 |   |   | 
| Purchase consideration outstanding at period end |   | 2 275 |   |   | 
|   |   |   |   |   | 
| **Acquisition of PGM and chrome rights (Mauritius)** |   |   |   |   | 
| Fair value of the assets acquired |   | 14 472 |   |   | 
| Fair value of the purchase consideration |   | (14 472) |   |   | 
| Purchase consideration outstanding at period end **_^(1)_** |   | 4 531 |   |   | 
|   |   |   |   |   | 
| Total purchase consideration of acquisitions |   | 26 726 |             –   |             8 289 | 
| Funded from external loans |   | (10 303) |             –   |                  –   | 
| Funded from share placings |   | (9 209) |             –   | (1 463) | 
| Funded from own cash |   | (7 214) |             –   | (6 826) | 
|   |   |   |   |   | 
| **GROUP CASH** |   |   |   |   | 
| **Opening balance** |   | **18 865** | **6 376** | **6 376** | 
| Cash from operations |   | 4 895 | 726 | 4 757 | 
| Acquisition of chrome plant (South Africa) |   | – | – | (6 826) | 
| Acquisition of PGM and chrome rights (Mauritius) |   | (11 129) | – | – | 
| Acquisition of Sable Zinc Limited (Zambia) |   | (5 295) | – | – | 
| Purchase of intangible assets |   | – | (636) | (2 182) | 
| Purchase of property plant and equipment |   | (1 101) | (2 379) | (4 496) | 
| Issue of Jubilee ordinary shares |   | 5 902 | – | 10 672 | 
| Net proceeds/(repayment) of loan funding |   | (2 154) | 1 595 | 10 303 | 
| Other |   | 263 | 86 | 262 | 
| **Closing balance** |   | **10 247** | **5 768** | **18 865** |

_1= Post the period under review a further payment of £ 3.3 million was made towards
the PGM and chrome rights acquisition as announced on 4 November 2019. The final
payment on the transaction was made on 19 March 2020. In terms of the acquisition
agreement the final payment was adjusted for certain PGM and chrome variables which,
resulted in a downward adjustment to the total purchase consideration of £ 2.2 million.
The total foreign exchange conversion difference for the transaction amounted to
a gain of £ 0.004 million. At current conversion rates the foreign exchange gain
on the transaction would have been £ 0.77 million._

**Chairman’s Statement**

Dear Shareholder,

This interim period has, again, produced exceptional results arising from maturing
operations, strategic acquisitions, productivity improvements and an austere approach
to our business activities.  At the time of writing this statement we, like every
other company and individual, are facing the challenges of the COVID-19 pandemic.
We remain very optimistic for the long-term outlook but are mindful of short-term
risk.  On 24 March 2020 we provided an update to our shareholders relating to the
announcement by the South African government of a 21-day nationwide lockdown and
its potential immediate impact on our operations.  The measures that have implemented
by the Group are focussed on preserving the Company’s liquidity and ensuring that
we are able to rapidly restart operations following the enforced stoppage.  At the
time of writing this statement, our operations in Zambia remain unaffected by the
COVID-19 virus. However, the guidance being given in respect of the COVID-19 outbreak
is evolving and the Company will continue to monitor the situation closely.

Our longer-term vision for the Company remains and has been clearly demonstrated
with the expansion of the business during the period under review, having grown 
and diversified our earnings base.  On 23 August 2019, we announced the completion
of the acquisition of the Sable Zinc Refinery in Kabwe (the ‘Refinery’).  This acquisition
presents Jubilee with a very well-placed platform from which to enjoy the various
base metal opportunities presented by Zambia. The Refinery expands our commodity
basket to include copper, vanadium, zinc and lead. Having a diversified commodity
basket, such as we now have, provides us with considerable resilience in the face
of fluctuating metals prices, some of which we have seen of late – both very strong,
and much weaker.  In addition we have acquired a facility that was brought in part
into operation within 4 months of the acquisition therefore reducing our lead time
to production. The copper circuits are advanced with a capacity of some 15 000 tonnes
of contained copper per annum so we are accelerating our copper endeavours, whilst
updating the zinc facility.

In July 2019, our Windsor PGM project in South Africa commenced operations and by
the end of August 2019 all circuits were functional with productivity initiatives
being implemented, during this interim period to date. 

On 4 November 2019, we announced that we had acquired 100 % of the earnings of the
Inyoni Operation in South Africa (previously named Hernic). The objective of this
acquisition was to transform Jubilee from a contracting joint venture partner to
a full owner of 100 % of the economic rights, without additional risk.  In acquiring
full control, Jubilee has increased its flexibility and now has the opportunity 
to increase throughput, respond to market conditions and optimise certain aspects
of the operation to its ultimate benefit. 

To support these acquisitions and to assist in financing targeted expansion plans
both in Zambia and South Africa, we completed an oversubscribed placing of some 
£ 6.5 million in mid-November 2019.

Looking forward, the Board is convinced that the long-term fundamentals for copper
are exceptional and as such have put focus on the Kabwe copper project to ensure
that maximum production capability is achieved.  Our presence in Zambia has demonstrated
and re-asserted that many opportunities exist to expand our business model into 
all aspects of copper production in the country.  We are currently exploring and
prioritising these opportunities and will continue to advance due diligence on potential
acquisition or partnership opportunities with a view to expand future earnings in
a sustainable manner.

With our sustainable business model, Jubilee and our brand is now well recognised
globally. With the ever increasing requirement across all continents for legacy 
environmental clean-up and a cleaner planet, we are known as being a company able
to deliver on this need. We are unique with in-house technical excellence, high 
technological capabilities, and vast knowledge in the field of reprocessing mine
waste and metals recovery across a broad basket of metals.

With so much opportunity for growth from our current business activities alone, 
the Company will be focussing on maximising this benefit from current operations
in the medium term, where we know the risks and where we believe incremental benefit
can be substantial. We will of course, however, continue to assess strategic business
and acquisition opportunities for the long-term benefit of Jubilee and all shareholders.
Despite the current volatile economic climate globally, we continue developing our
business activities, consistent with our mission, and remain positive that our unique
position in the industry will be exploited for the benefit of all our shareholders.

Colin Bird

Non-Executive Chairman, Jubilee Metals Group

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