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Jubilee Metals Group

Jubilee Metals Group PLC Profit for the period up 274 %

Jubilee Metals Group PLC (LON: JLP) has today announced its unaudited interim results of the Group for the six months ended 31 December 2018.

HIGHLIGHTS

Financial highlights

· Positive earnings per share for the period 0.06 pence (ZAR 0.99 cents(i)) (2017: loss of 0.025 pence (ZAR 44.15 cents))

· Profit for the period up 274 % to GBP 0.76 million (ZAR 13.17 million) (2017: loss of GBP0.44 million (ZAR 7.79 million))

· Revenue up 39 % to GBP 8.33 million (ZAR 143.92 million) (2017: GBP 5.99 million (ZAR 105.80 million))

· Gross profit up 71 % to GBP 4.04 million (ZAR 69.85 million) (2017: GBP 2.37 million (ZAR 41.85 million))

· Cash generated from operations up more than fourfold to GBP 1.17 million (ZAR 20.29 million) (2017: cash utilised in operations of GBP0.38 million (ZAR 6.77 million))

Operational and projects highlights

· PGM(ii) production up 85 % to 12 288 ounces (2017: 6 629 ounces)

· PGM revenue up 98 % to GBP 7.09 million (ZAR 130.59 million) (2017: GBP 3.59 million (ZAR 63.59 million))

· PGM operational earnings up 180 % to GBP 4.09 million (ZAR 75.60 million) (2017: GBP 1.46 million (ZAR 26.06 million))

· 17 011 tonnes (2017: 26 922 tonnes) of remaining saleable coarse chromite concentrate produced at DCM

Post period under review

· PlatCro Chrome operation acquired in January 2019 and already contributing to Group earnings, ahead of schedule, of GBP 0.9 million (ZAR 16.06 million) combined for January and February 2019

· The PlatCro PGM project accelerates deliveries of PGM containing material to Northam’s Eland platinum concentrator, scheduled to commence PGM recovery and refining during May 2019

· Jubilee completes commissioning and bringing into operation of the DCM fine chrome plant delivering saleable chrome concentrate to the market

· Jubilee executes share purchase agreement for the acquisition of Sable Zinc refinery in Kabwe Zambia

· The acquisition reduces construction time of zinc, vanadium and lead refinery by 18 months and project capital to below US$ 25 million

· Jubilee fully funded for the acquisition and completion of the project construction through a combination of project funding and equity placing

(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 are at current spot rates

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

INTERIM PERIOD OVERVIEW

The results for the period under review highlights Jubilee’s continued growth in earnings as Hernic continues to deliver strong operational and financial results which will be further supported by the acquisition of the PlatCro Chrome operations and the commissioning of the DCM Fine chrome operation.

Further earnings growth drivers are targeted in the near term with the acceleration in deliveries of its platinum material to Northam Platinum’s, Eland platinum recovery plant expected to start processing material in May 2019, as well as the significant move into Zambia through the acquisition of the Sable Zinc refinery for the processing Jubilee’s zinc, vanadium and lead containing material at Kabwe.

The diversification of our operations and projects portfolio across borders and into base metals, underpins Jubilee’s clear strategy to become a global, diversified processor of surface material.

Hernic PGM operations – South Africa

Jubilee operates a chrome and platinum recovery plant at the Hernic Ferro chrome operation in South Africa.

For the period under review the Hernic PGM operation achieved a unit cost per PGM ounce produced of below US$ 400, which makes the operation one of the lowest cost platinum producers in the industry. The operations nearly doubled its PGM ounce production to 12 288 PGM ounces from 6 629 PGM ounces for the comparative 6 month period, with revenues increasing to GBP 7.09 million (ZAR 130.59 million). Operational earnings increased to GBP 4.09 million (ZAR 75.60 million) (2017: GBP 1.46 million (ZAR 26.06 million)) assisted also by increased palladium prices.

The Hernic PGM operation continued to deliver strong earnings post the period under review, despite a delayed start-up following the December break and the challenges posed by increased power outages from the South African power grid. The Company expects production to return to previous levels from March 2019. Hernic delivered operational earnings of GBP1.10 million combined for January and February 2019. The Company expects to further grow the earnings potential as it targets to increase delivery of feed material to the Hernic PGM operation.

The table below presents the performance of the Hernic PGM operation for the period under review.

Tailings processed tonnes

PGM ounces delivered

Project revenue (i)(GBP’000)

Project revenue(ii)  (ZAR’000)

Project earnings(iii)(GBP’000)

Project earnings (ZAR’000)

Jubilee attributable earnings (GBP’000)

Jubilee attributable earnings (ZAR’000)

Total Q3 2018

  135 146

  6 009

 3.356

    61.785

  1 920

35.523

      1 920

35.523

Total Q4

2018

 132 037

    6 279

 3.737

    68.807

  2 173

40.078

        2 173

40.078

Total H1 2018

 267 183

 12 288

  7.093

  130.592

 4 093

75.601

        4 093

75.601

 

Project Summary

Revenue / PGM oz (US$)

Earnings / PGM oz

(US$)

Total 2018

756

362

 

 

(I) 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 US$ exchange rates and results are only final once final Quotational Period has passed

(ii) Average monthly conversion rates used

(iii) Project Earnings include all incurred operational costs including management services and mineral royalties

DCM chrome and PGM projects – South Africa

The DCM operation for the recovery of the coarse chrome from the surface material approached the project’s end of life during the period under review and was replaced by the implementation and commissioning of the industry first fine chrome recovery circuit.

The DCM fine chrome plant was brought into production during January 2019 and ramped up to reach commercial production levels during March 2019. The project targets the recovery of the super fine chrome component currently lost to tails by the chrome industry. The DCM plant holds a capacity to process up to 25 000 tonnes per month of chrome containing tailings material. Jubilee will target to roll-out this process to its other operations.

PlatCro chrome and PGM operation – South Africa

Jubilee completed the acquisition of the PlatCro chrome operation in January 2019. The acquisition of this chrome processing facility provides Jubilee with a strategically placed chrome processing footprint in the heart of several established chrome mining operations in need of an efficient chrome processor of choice.

The acquisition complements the large platinum and palladium (and other PGM containing) surface tailings material (in excess of 1. 45 million tonnes) already owned by Jubilee. Jubilee plans to recover the chrome contained in this material and process the remaining platinum and palladium containing material in partnership with the nearby Eland platinum recovery plant.

Jubilee accelerated deliveries of this PGM containing material to Northam’s Eland platinum recovery plant from February 2019, scheduled to commence PGM recovery and refining during May 2019. The PlatCro PGM operation targets to process up to 60 000 tonnes per month of PGM material equating to a production potential of 30 000 PGM ounces per annum which is equivalent to the targeted production levels at the Hernic PGM operation.

Kabwe Project – Zambia

Jubilee executed a share purchase agreement for the acquisition of the Sable Zinc refinery in Kabwe Zambia in March 2019. The refinery is situated immediately adjacent to the large stock piles of zinc, lead and vanadium that Jubilee has contracted from BMR Group PLC (“BMR”). This transaction extended Jubilee’s reach beyond the borders of South Africa into both PGMs and base metals, thus leveraging off its in-house metallurgical skill, project execution track record and operational performance.

The Kabwe Project targets an initial processing rate of 20 tonnes per hour producing a zinc concentrate and vanadium pentoxide before ramping up to a targeted 40 tonnes per hour producing zinc metal, vanadium pentoxide and a lead concentrate. The Project targets to produce annually over 8 000 tonnes of zinc, 1 500 tonnes of vanadium and 15 000 tonnes of lead as it ramps up to full capacity over a 2-year period. The Kabwe Project comprises an estimated 6.4 million tonnes (3.2 million JORC compliant) of surface assets.

During the period under review and prior to the acquisition of the Sable Zinc refinery, Jubilee’s 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 holds a minimum of 87.5 % shareholding in Kabwe Operations Limited (“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 Enviro Mining Limited (“EML”), a subsidiary of BMR and the company that owns the Project through BMR’s Zambian based Enviro Processing Limited (“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.

Project Pipeline

Jubilee is well positioned to secure a significant position in the global metals recovery market as it continues to refine its project execution schedule for various targeted pipeline surface processing projects. These pipe-line projects offer significant growth potential in the short term and we are actively in discussions to secure further such surface projects.

Chairman’s statement

Dear Shareholder,

This interim period has delivered exceptional results with much activity settling down developed projects, negotiating new projects, raising the necessary finance and increasing production productivity.

The Hernic operation advanced very positively and the final quarter saw a production of 6 279 ounces, which was achieved taking into account the Christmas season which can be very disruptive.

The second half of 2018 showed PGM ounces being produced at less than US$ 400 per ounce with the average of the year being US$ 362 per PGM ounce produced. This makes the Company one of the cheapest platinum producer in the world. The Dilokong Chrome Mine (“DCM”) continued to perform well whilst in the process of constructing the fine chrome recovery plant. The financial performance was slightly inhibited during this development phase and commissioning commenced during the latter part of the year. I am pleased to announce that during March 2019 the plant has reached commercial production achieving forecast recovery and concentrate grade. This fine chrome plant is a milestone for the Company and is representative of the innovative approach the Jubilee brings to all its projects.

On 10 December 2018 we announced our targeted acquisition of a major chrome operation for a consideration of GBP 8.6 million, which was concluded on the 7th of January 2019. This operation on purchase was processing some 70 000 tonnes of material from various sources with good operational cash flow and earnings of approximately GBP 4.3 million per annum. This facility was bought with the intent of expanding throughput and thereby improving financial contribution to the group.

I am pleased that at the time of writing this interim report that throughput is increasing and management has been effected seamlessly with no interruption.

On 6 August 2018 we announced that we had gained full control of the Kabwe Project increasing our interest to 87.5 % with the remaining interest being held by BMR, benefits to be received after certain schedule payments have been repaid to the Company. Jubilee also acquired a 29.01 % shareholding in BMR which took its beneficial interest up to 91.5 % of the Kabwe Project. During the period, the Kabwe Project has seen significant work aimed at design and optimisation of processing circuits employing all of the innovation that our Company is known for.

I am pleased to announce that at this stage we have a very full understanding of the Kabwe Project and are confident that revenues from Kabwe will be achieved during the fourth quarter of this year. Since acquisition from BMR and all of our development work, we are convinced that, whilst the zinc and lead project was potentially a good earnings platform, the contribution of vanadium will significantly enhance our earnings potential from the Kabwe Project.

We continue to investigate new business development concepts and are investigating a pipeline of projects, a number of which have the potential to even more significantly increase earnings and the Jubilee Metals profile. The industry is now aware of our capability and this has led to a number of approaches from major players in the industry to assist them with their tailings and other secondary deposits.

Colin Bird

Non-Executive Chairman