Why have shares of Jubilee Metals Group nearly tripled in the past two years, when the majority of other mining and commodities companies have struggled?
True, the majority of this share price growth occurred in 2021 as opposed to 2022, which has been a year of robust consolidation.
Even yet, in a market wary of continued Covid lockdowns in China, the recession in the United States, the war in Ukraine, and inflation worldwide, you get the impression that Jubilee’s momentum continues.
The two most recent announcements, both of which represent tremendous advancements, serve mainly to emphasize this point.
The most current report, given in the first week of September, describes how Jubilee’s Zambian copper concentrator has reached capacity.
This is part of a larger strategy to transform Jubilee into a copper refiner in Southern Africa.
A few weeks earlier, Jubilee announced the conclusion of a £58 million investment program in South Africa, which has enabled the company to dramatically increase the production of platinum group metals and chrome.
South Africa’s production capacity has reached 44,000 tonnes per year for platinum group metals and 1.2 million tonnes for chrome concentrate.
Continued expansion under difficult operating conditions is a positive development. To understand why Jubilee continues to provide clear value in these uncertain times, one must delve a bit deeper into its real operations.
It is reasonable to state that Jubilee is a processing firm rather than a mining company.
Yes, Jubilee had its origins in platinum exploration many years ago, in the heady early days of the Aim market.
Midway through the 2000s, a beneficial merger with Braemore, a South African processing specialist, drastically altered the picture.
For starters, the transaction generated much-needed financial flow, a benefit not lost on former chairman Colin Bird.
And most crucially, it brought in platinum and tailings reprocessing expertise that is difficult to find elsewhere in the globe.
The current CEO of Jubilee, Leon Coetzer, joined at the time of Braemore, and it is entirely because of him and Mr. Bird, who has since resigned from the board, that Jubilee has become the well-established mid-tier miner that it is today.
What did they see back then that allowed Jubilee to separate itself from the horde of AIM-traded junior explorers with micro-market capitalizations?
After all, reprocessing other people’s mine waste does not appear to be an enticing business strategy at first glance.
However, there are several attractions. The tough and expensive process of mining has already been completed.
As said, Jubilee is not a miner. It allows other businesses to do so. Instead, it collects waste from chrome mines and extracts metals from the platinum group from it. This is difficult, which is why there is waste in the first place.
But Jubilee can do it, and more importantly, at a low price.
In the fiscal year ending 30 June 2022, Jubilee produced a little over 41,000 ounces of platinum group metals.
Its net cost per ounce of platinum production was $441, while its net revenue per ounce, including chrome credits, was $1,609. This resulted in a net income per ounce of platinum group metal of $1,162.
Moreover, when these figures are entered into a profit-and-loss statement, they begin to mount up. The revenue for the six months ending in June 2022 was £76 million, a 21 percent increase over the previous six-month period.
This is real development in a business that is notoriously short on execution and long on promises.
This also signifies that Jubilee has, and has had for some time, the ability to pursue additional expansion.
Hence, the venture into copper production in Zambia, where the net earnings for each of the 2,604 tonnes of copper produced in the previous 12 months exceeded $3,000.
We’re not quite at the level of the platinum operations, but the path forward is apparent. Jubilee has constructed a highly cash-generating and high-margin firm and is not hesitant to make acquisitions to maintain its growth momentum.
Already in Zambia, processing prospects exist for lead, zinc, vanadium, and cobalt. It has also been exploring the potential in Cyprus, which was historically one of the earliest important copper mining regions.
Similar to the majority of junior mining firms, Jubilee is hesitant to incur debt.
The cash position at the end of June was approximately £16 million, and given the company’s current strength, it is certain to increase.
In light of this, it is not surprising that investors continue to favor Jubilee (share price 12p) over other less well-financed and riskier ventures.
