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Jubilee Metals Group

Jubilee Metals Group Plc delivered another strong operational performance

The directors of Jubilee Metals Group Plc (LON:JLP) today released its audited results for the year ended 30 June 2018.

You can catch the interview with Leon discussing these results and more here.

NOTICE OF ANNUAL GENERAL MEETING

The Company also hereby gives notice of the Company’s 2018 Annual General Meeting, which will be held on 6 December 2018 at 11:00 am UK time at Fladgate LLP, 16 Great Queen Street, London, WC2B 5DG to transact the business as stated in the notice of Annual General Meeting. The Group’s Annual Report for the year ended 30 June 2018 has been posted to the website, www.jubileemetalsgroup.com, with the notice of the Company’s 2018 Annual General Meeting. Shareholders are advised that the Notice of Annual General Meeting, including a Form of Proxy, for the year ended 30 June 2018 has been posted to Jubilee shareholders today, 14 November 2018.

FINANCIAL HIGHLIGHTS
· Combined project revenue up 44.14% to £ 14.14 million (ZAR: 245.53 million) [2017: £ 9.81 million (ZAR 166. 97 million)]

· Combined project attributable earnings up 206% to £ 5.03 million (ZAR 86.80 million) [2017: £ 1.64 million (ZAR 28.20 million)]

· Group delivers positive cash flow from operating activities of £ 0.96 million (ZAR 17.44 million) [(2017: negative cash flow of £ 0.53 million (ZAR 9.16 million)]

· Group revenue up 44.14% to £ 14.14 million (ZAR: 245.53 million) [2017: £ 9.81 million (ZAR 166. 97 million)]

· Group operating expenses before impairments and non-cash, down 30.82 % to £ 1.92 million (ZAR 33.34 million) [(2017: £ 2.77 million (ZAR 47.87 million)]

· Group operating profit of £ 0.06 million (excluding impairments in an amount of £ 0.80 million) (ZAR: 1.04 million) [2017: loss of £ 1.67 million (ZAR 28.89 million) (excluding impairments in an amount of £ 18.57 million)]

· Group loss per share reduced by 83.63 % to 0.18 pence per share (ZAR 1.88 cents) [(2017: 1.07 pence (ZAR 18.55 cents)]

OPERATIONAL HIGHLIGHTS FOR THE PERIOD UNDER REVIEW

· Hernic Operations achieved PGM1 production of 17 354 (2017: 808 ounces) ounces for the year, generating revenue of £ 9.5 million (ZAR 164 366 million) [(2017: £ 0.46 million) (ZAR 7.60 million)]

· DCM Operations achieved Chrome production of 46 191 tonnes (2017: 78 588 tonnes) for the year, generating revenue of £ 4.62 million (ZAR 80.05 million) [(2017: £ 9.50 million (ZAR 162.04 million)]

· DCM Operations commenced with the construction of state of the art fine chrome recovery plant with a targeted processing capacity of 300 000 tonnes per annum

· PlatCro PGM project commenced with the construction of the dewatering and classification circuit to facilitate the ramp up to 720 000 tonnes per annum of the delivery of PGM rich material to Northam Platinum’s Eland Platinum operation with PGM production targeted to commence in Q1 2019

· Tjate PGM project progressed the implementation of the social labour plan with the construction of an expanded water reticulation system to service the Tjate community targeting commissioning in Q4 2018

· Jubilee executed agreement to gain sole processing rights of the Kabwe zinc, lead and vanadium project in Zambia through Kabwe Operations agreement and acquiring a 29.01% interest in BMR increasing Jubilee’s effective interest in the Zambian Kabwe Project to 57.41% (91.10% post the period under review)

1= 6 Element Platinum Group Metals (platinum, palladium, rhodium, ruthenium, iridium + gold)

2= For income statement purposes conversions are at the average £:ZAR rates for the period under review and for balance sheet purposes at the spot rate as at year end. All other conversions are at rates at the time announced.

OPERATIONAL HIGHLIGHTS POST THE PERIOD UNDER REVIEW

· Hernic Operations reaches 8 551 ounces of PGM concentrate produced in first four months following the period under review (increase of 96 % compared to the similar period in 2017)

· Jubilee increases its effective beneficial interest in the Kabwe Project to 91.10% in the Kabwe Project

· DCM Operations nears completion of the state of the art fine chrome recovery processing plant targeting commissioning in Q4 2018

· PlatCro PGM project nears completion of the dewatering and classification (“Feed prep”) circuit to ramp-up deliveries to Northam Platinum’s Eland operations. Targeting completion of Feed prep circuit in Q4 2018 and commencing PGM production in Q1 2019

· Kabwe zinc, lead and vanadium project concludes its execution strategy, first targeting the completion of the zinc refinery prior to the lead and vanadium circuit. The zinc refinery circuit includes the potential of securing exclusive access and revamping of an existing zinc refinery circuit to accelerate the production of zinc metal

OVERVIEW

Jubilee has delivered another strong operational performance during the period under review which continued post this period.

In addition Jubilee continued to grow its project pipe line of surface metal recovery projects expanding both in South Africa and into Africa through its Zambian acquisitions. Jubilee’s project pipe-line contains a diversified metals of Chrome, PGMs, Zinc, Lead and Vanadium. This project pipe-line supports Jubilee’s drive to diversify its earnings generation and is well buffered against metal price fluctuations operating at the low end of the metal production cost curve in the absence of any mining related costs.

Jubilee is actively pursuing further metal recovery projects. Jubilee’s brand is gaining strength on the back of our successful track record and is engaging with global mining companies to target the formation of strategic relationships.

In line with Jubilee’s strategy to rapidly grow its surface metal recovery project pipe line, Jubilee has executed framework agreements and non-disclosure agreements with large global mining companies to define the metals recovery opportunities and prepare an asset waste portfolio for these companies.

The Company has successfully responded to the current challenges and risks inherent to a metals production business that also holds an exploration asset and will continue to formulate preventative measures.

JUBILEE’S METALS RECOVERY PROJECTS

HERNIC OPERATIONS – SOUTH AFRICA

The Hernic Operation targets the recovery of platinum group metals and chrome contained in surface material. The metals recovery operation avoids any exposure to mining risk.

The Hernic Operation is the second of the Company’s operating platinum-bearing surface tailings projects and targets processing in excess of 600 000 tonnes tailings per year. The project has access to an estimated 3 000 000 tons of surface platinum containing material, to which Hernic continues to add further material. The project, which is estimated to contain in excess of 224 000 (3PGM + Au) ounce in the historical tailings alone, is one of the largest PGM beneficiation plant in South Africa to process surface chrome tailings. Jubilee was awarded the exclusive right to process and recover the chrome and PGM’s from these surface tailings.

The Hernic Operation was constructed and commissioned within budget and on time. Key project milestones were:

· Concluded construction January 2017

· First Chrome production February 2017

· First Platinum production March 2017

· Positive project earnings from June 2017

· Consistent project earnings growth quarter on quarter reaching £1.92 million (ZAR 35.52 million) in Q3 2018 alone

· Unit cost of production below USD 400 per PGM ounce produced

· Achieved record monthly production of PGMs reaching 2 542 PGM ounces in October 2018

Jubilee strives at all times to provide a safe working environment for its employees and stake holders and achieved a safety performance for the period under review of 183 903 of no lost time injury hours worked.

The graph below depicting the quarter on quarter project performance, illustrates the continuous step improvement achieved by the project.

The Jubilee attributable earnings shows that the project turned profitable within 2 months of commencing operations and within 16 months of commencing with project capital expenditure.

The Hernic Operation continues to offer further upside in the performance by targeting increased feed supply to the chrome and PGM recovery circuits.

The table below presents the operational performance of the Hernic Operation for the period under review (The Hernic Operation was commissioned during March 2017 with operations only commencing during Q2 of 2017):

Tailings

processed

tonnes

PGM

ounces

delivered

Project revenue1(£’000)

Project revenue2(ZAR’000)

Project earnings3(£’000)

Project earnings (ZAR’000)

Jubilee attributable earnings (£’000)

Jubilee attributable earnings (ZAR’000)

Unit cost/ PGM ounce (USD)

Q2 2017

80 828

808

459

7.604

(110)

(1.928)

(110)

(1.928)  

901

FY 2017

80 828

808

459

7.604

(110)

(1.928)

(110)

(1.928)  

901

Q3 2017

105 673

2 943

1.539

26.581

562

9.725

562

9.725  

460

Q4 2017

 121 644

 3 708

 2.047

 37.011

 954

 17.291

 954

 17.291  

 390

Q1 2018

 110 409

 4 894

 2.651

 44.013

 1.141

 18.897

 1.141

 18.897  

 430

Q2 2018

 119 479

 5 810

 3.308

 56.761

 1.635

 28.059

 1.635

 28.059  

 410

FY 2018

 457 204

 17 354

 9.546

 164.366

 4.291

 73.972

 4.291

 73.972  

Q3 2018

 135 146

 6 009

 3.356

 61.785

 1.920

 35.523

 1.920

 35.523  

 311

1= Revenue from the current project phase – 100 % attributable to Jubilee until full capital recovery. Revenue is projected based on latest average PGM market prices and USD exchange rates and results are only final once final Quotational Period has passed

2= Average monthly conversion rates used

3= Project Earnings include all incurred operational costs, management services and mineral royalties

DILOKONG CHROME MINE (DCM) OPERATIONS – SOUTH AFRICA

Jubilee’s subsidiary, Jubilee Tailings and Treatment Company Proprietary Limited  holds the exclusive rights to beneficiate the PGMs and chrome from the platinum and chrome-containing surface material at DCM. The agreement between DCM and JTTC gives Jubilee access to more than 850 000 tons of surface material containing an estimated 74 000 ounces 4E PGM (elements platinum, palladium, rhodium and gold).

During the period under review, and in an ongoing co-operation with DCM, Jubilee executed a new framework treatment of tailings and chrome ore agreement (“New Agreement”) with DCM, thereby cancelling and superseding all existing agreements in respect of chrome processing and PGM recovery at DCM. The New Agreement transforms Jubilee’s DCM operations as an equal joint venture with DCM, on all chrome ore including 3rd party chrome ore. This New Agreement now affords Jubilee the right to 50 % of all chromite earnings generated including from the processing of third party or other Chromite Ore. This New Agreement captures the growth of the DCM Project from initially Jubilee holding no rights to earnings from chromite ore at the outset of the DCM Project to a 50/50 joint venture with DCM. The New Agreement further secures Jubilee’s unencumbered PGM rights from all material processed at DCM irrespective of source.

DCM Operation

The DCM operations maintained a strong safety performance achieving 219 761 of no lost time injury hours worked.

During the period under review the DCM operations produced 46 191 tonnes of saleable chrome concentrate. Jubilee expects to deplete the initial coarse recoverable chrome from the tailings material during Q4 2018. In-line with the expected reduced chrome production Jubilee commenced with the construction of a state of the art fine chrome recovery circuit targeting the fine chrome available in the approximate 1 000 000 tonnes of surface material. This new highly automated circuit is targeted to commence commissioning during Q4 2018 ramping up to a processing rate of 300 000 tonnes per annum. The fine chrome circuit will be an industry first and Jubilee expects to deploy the solution to its other operations. If offers the unique benefit of targeting the recovery of chrome previously discarded to the waste streams which opens a new potential source of chrome.

During the period under review the DCM operations performed to plan with its second full year of operation despite challenging market conditions and pressure on the chrome price. Jubilee looks forward to bringing its new fine chrome recovery plant into full operation during the first quarter of 2019.

The table below presents the operational performance of the DCM operations for the period under review:

Chromite concentrate produced tonnes

 

Project revenue (£’000)

 

Project revenue1(ZAR’000)

 

Project earnings2(£’000)

 

Project earnings (ZAR’000)

 

Jubilee attributable earnings (£’000)

 

Jubilee attributable earnings (ZAR’000)

 

Total Q3 2016

 26 848

 2.141

 38.368

 1.581

 28.320

 587

 10.505

Total Q4 2016

 19 108

 2.642

 45.714

 1.714

 29.668

 368

 6.367

Total Q1 2017

 14 973

 3.372

 55.224

 2.407

 38.862

 408

 6.664

Total Q2 2017

 17 659

 1.348

 22.731

 386

 6.504

 399

 6.727

FY 2017

 78 588

 9.503

 162.037

 6.088

 103.354

 1.762

 30.263

Total Q3 2017

 15 134

 1.129

 19.526

 376

 6.474

 381

 6.562

Total Q4 2017

 11 788

 1.254

 22.858

 515

 9.308

 257

 4.654

Total Q1 2018

 9 810

 1.240

 20.628

 243

 4.033

 121

 2.016

Total Q2 2018

 9 461

 993

 17.036

-47

-807

-24

-404

FY 2018

 46 191

 4.616

 80.048

 1.086

 19.007

 736

 12.829

 

1 = Average monthly conversion rates used                  

2 = Project earnings include project expenditure on plant and equipment

3 = Figures as announced, which can differ from annual audited figures due to conversion at the time of the announcement being different to conversion for the whole period under review.

PLATCRO PROJECT – SOUTH AFRICA

Jubilee holds the rights to PlatCro’s estimated 1 900 000 tonnes of new platinum-bearing surface material containing an estimated 2.7 g/t 4E PGMs (platinum, palladium, rhodium and gold) as well as all future platinum bearing material processed.

Jubilee entered into a processing agreement (“the Agreement”) with Eland Platinum Proprietary Limited (“Eland Platinum”), a subsidiary of Northam Platinum Limited, for the further refining of the PGM rich surface material. The Agreement is on the basis that Jubilee will deliver its platinum rich PlatCro material, post chrome removal, to Eland Platinum at a targeted rate of 60 000 tonnes per month. All capital associated with the refurbishment of Eland Platinum’s platinum recovery plant will be carried by Eland Platinum.

It is expected that the Eland Platinum processing plant will commence processing of the Jubilee material from February 2019 ramping up to a targeted rate of 60 000 tonnes per month at an agreed fixed processing cost. In return Eland Platinum will acquire the platinum material from Jubilee and recover the contained PGMs at a targeted rate of approximately 2 800 PGM ounces per month. All earnings generated by the sale of the recovered PGM ounces will be shared at an agreed earning split, with Jubilee retaining a majority of the earnings.

Jubilee has commenced the construction of the dewatering and classification circuit at PlatCro to facilitate the ramp up of deliveries to Eland Platinum. The project remains on track to commence the production of PGMs during Q1 2019.

KABWE PROJECT – ZAMBIA

The Kabwe Project provides Jubilee a position in Zambia offering a potential to lead, zinc and vanadium contained in historical surface mine tailings and discards. JORC compliant lead and zinc in Kabwe Dumps is estimated at 164 000 tonnes of zinc and 272 000 tonnes of lead excluding the further significant non-JORC compliant surface resources and the contained vanadium estimated to contain 6 400 000 tonnes of lead, zinc and vanadium rich material at surface

During the period under review Jubilee acquired 29.01% of BMR and executed agreements with BMR where Jubilee would provide access to funding for the Kabwe Operations to the value of £ 300,000 to secure a 15% equity interest in Kabwe Operations held as a Preferred Share. The funding will be utilised towards the confirmation by Jubilee of the initial design, work programme and budget for construction of the Kabwe Project.

Post the period under review, the agreements for the Kabwe Project were updated (“Updated Agreements”) to better align with Jubilee’s role to deliver a successful project. The Updated Agreements places Jubilee in full control of the execution methodology and funding requirements to bring the project to account. In return Jubilee will hold a minimum of 87. 5% shareholding in Kabwe Operations assigned with all intellectual property developed for the execution of the Kabwe Project as well as the right to fund and execute the Kabwe Project.

Jubilee also holds a further option, at its sole election, to acquire 100% of the issued shares of EML, a subsidiary of BMR and the company that owns the Project through BMR’s Zambian based EPL. BMR will hold either the remaining 12, 5% shareholding in Kabwe Operations or should Jubilee acquire EML outright a 12, 5% share of earnings generated by the Kabwe Project (“Royalty”). Such Royalty payments will only be due and payable by the Kabwe Project once Jubilee has secured a minimum of a 20% rate of return on the investment made into the Project and only once EPL or Kabwe Operations have received all generated earnings in cash.

Post the period under review Jubilee concluded the process review and project implementation strategy. The strategy includes separating the zinc and lead recovery circuits and completing first the zinc recovery circuit. The option is being considered to gain exclusive access to a nearby zinc refinery currently under care and maintenance. This option would include refurbishing the existing refinery which significantly reduces the project time line to commence production of zinc. The tailings from the zinc circuit would be fed to a new constructed lead recovery circuit for the production of a lead concentrate. The final decision on whether access to the zinc refinery can be secured is expected during Q4 2018, failing which Jubilee will accelerate the construction of a dedicated zinc recovery circuit at the EPL Kabwe property.

Jubilee further holds the right as part of the existing agreements with BMR to offer tolling refining services to future zinc ore from the large scale exploration rights also held under EPL. BMR has entered into a joint venture agreement with Galileo Resources to further the exploration of these assets. Initial drilling results have confirmed the potential of significant shallow zinc resources suited for further refining by the Jubilee proposed zinc recovery circuit.

TJATE PLATINUM PROJECT – SOUTH AFRICA

Tjate was awarded a Mining right granted 2 March 2017 for the mining of platinum group metals and associated base metals and chrome on three farms Quartzhill, Fernkloof and Dsjate totalling some 5 100 hectares, which comprise the Project. The Project covers the feasibility of the development of a medium size underground mine to extract the Merensky and UG2 reefs containing platinum group minerals, chromite and other associated metal ores. The Project property’s farms are down dip of Impala Platinum’s operating Marula platinum mine and of Anglo Platinum’s developing Twickenham platinum mine.

Jubilee commissioned an independent review and update of the project and economics in order to assess the most suitable and appropriate way forward for the project.

Jubilee on behalf of Tjate has progressed with the implementation of the Social Labour Program during the period under review. The activities included the construction of an expanded water storage reticulation system to service the Tjate community.

CHAIRMAN’S STATEMENT

Dear shareholder,

Our stated mission is to establish Jubilee as a leading global player in the recovery of metals from surface material previously regarded as waste or discard by applying project appropriated cutting edge metallurgical solutions. This mission, while remaining free of any mining risk, secures Jubilee access to low capital, quick to market projects diversified across metals and country. Reflecting on the period under review I am proud to report that Jubilee has demonstrated it progress in delivering this mission. We responded aggressively to market dynamics by solidifying our existing earnings generative projects and focussing on efficiencies to fully capture the benefit from strong palladium and rhodium prices included in the PGMs produced, while diversifying our project portfolio to include the energy associated metals such as vanadium and zinc in Zambia.

The year under review has seen significant progress made by Jubilee both operationally, delivering record earnings and associated PGM ounces, as well as strategically with Jubilee expanding its operational footprint and diversifying into energy related base metals associated with acquisition of the Kabwe project in Zambia.

Our Hernic operation’s quarterly published results confirmed the project as one of the premier projects in the arena achieving a unit cost per PGM ounce produced of below USD 400. Hernic delivered 17 354 ounces for the 12 months period of under review. At the time of writing this report, the Company has announced the monthly production of PGMs for October alone this year to be some 2 542 ounces, which is in excess of the forecasted production rate.

At our DCM operation, we announced on 5 September 2017 a new partnership agreement with DCM. The agreement gave Jubilee an increase from 0 to 50 % in all chrome produced from the DCM operation and also extended Jubilee’s sole right to all PGMs from material at DCM irrespective of source.

With the depletion of coarser chrome in the surface stock Jubilee commenced the construction of a state of the art fine chrome recovery circuit targeting the recovery of the significant quantity of fine chrome remaining in the more than 1 000 000 tonnes surface stock at DCM. We anticipate that the fine chrome recovery project will be commissioned during the 4th quarter 2018. The completion of this project is expected to significantly enhance revenues and earnings from the DCM Project. The DCM fine chrome recovery plant will capture chrome currently being lost prior to the introduction of the capability. This loss is common to the industry and the Company considers this process capability to be generally marketable within the chrome industry of South Africa.

The Company has aggressively pursued its decision to provide a country and commodity hedge. The first move in this direction was with the BMR in Zambia. BMR’s Zambian subsidiary, Enviro Processing Limited, holds the rights to the secondary materials at the former Kabwe mine in Zambia. The initial intent was to joint venture with BMR, with Jubilee providing the expertise and initial financing to develop a small plant, with Jubilee enjoying a 40 % share of profits.

We announced on 15 January 2018 that we had acquired a 29.01 % in the enlarged issued share capital of BMR. The effect of this acquisition was to increase our overall beneficial interest in the Kabwe Project to 51.41 %. This decision was inspired by our confidence in the Project and its potential future opportunities. The holding in BMR was supported by our intent to make other dump and secondary material acquisitions in Zambia using BMR as our initial footprint and platform for progression.

On 7 February 2018 we were advised by BMR that the Zambian government had terminated, with immediate effect, BMR’s mining right to the Kabwe operation with 30 days to appeal. Jubilee and BMR worked diligently together in an appeal to reinstate the license and announced on 5 April 2018 that the license has been reinstated, effective immediately, by the Minister of Mines and Mineral Development. This reinstatement of the mining license paved the way for Jubilee and BMR to commence joint execution of the Project. Post balance sheet, Jubilee announced that it had gained full control of the Kabwe Project by increasing its stake to 87. 5 % with an option to acquire 100 % of the Kabwe Project, while BMR retains a maximum of 12.5 % of generated earnings after Jubilee has first secured a return on its project capital. The Jubilee board is convinced that this acquisition will represent a major step in its stated mission to take its brand into the global arena. The mission being, to secure projects, which are low risk with high operating margins and no exposure to mining or exploration risk. In pursuing this mission, Jubilee have assembled an enviable project pipeline ranging across a range of commodities and secondary material types. A number of projects have advanced to final negotiation stage and we look forward to further announcements in this regard in the near future.

One of the key necessities to pursue this mission is that of finance and to this end, Jubilee secured a USD 50 million project funding agreement as announced on 9 August 2017. The key feature of this funding is that it will be directed at asset level and will be drawn down based on individual project criteria. This initial funding arrangement is for a 33 month period with options to extend and/or increase the level of commitment. Jubilee has been active throughout the year in establishing a network of various institutional individual investors who recognise the brand and management vision in respect of dump and secondary material treatment on a global basis.

Jubilee at the time of writing this report has the technical, engineering and financing capability to execute projects of a similar size to the projects already in our arsenal, should the fundamentals permit. Our brand and model will allow third party major resource companies to clean up their secondary material problems, receiving significant income without capital risk. The strength of this model is supported by the level of enquiry and interaction currently being experienced by Jubilee in this particular field.

I firmly believe that 2019/2020 will see inflation continue, apace producing a supportive environment for commodities, with demand increasing and ability to supply being limited with the outcome of general price increases. Our project line does not require either extended time or capital to implement new projects and as such we will be able to take full and quicker advantage over companies who have to embark upon primary mining activities to meet the new metal demand.

On 21 June 2018 we announced the retirement of Andrew Sarosi from the board. The decision of Andrew Sarosi to step down from the board was a sad moment in the Company’s history since his untiring efforts, intellectual contribution and sheer hard work will be sorely missed. We wish Andrew Sarosi well in his retirement and we thank him for his exemplary contribution. Andrew Sarosi has been replaced by Dr Evan Kirby, who has a wide experience in our industry and has operated in a senior level therein. Like Andrew, Dr Kirby is a metallurgical engineer and therefore his contribution will have significant impact on decisions being made going forward. We welcome
Dr Kirby to the board.

Finally, I would like to thank everyone concerned with the sterling effort, which has produced two highly cash generative projects and a pipeline of enviable future investments. I look forward to the next year producing even stronger earnings and several of our pipeline project being consummated.