SMALL CAP SHARE IDEAS: Jubilee Metals

Why is it that shares in it? Jubilee Metals Group have nearly tripled in the past two years, while most other mining and commodities participants struggled?

Admittedly, much of that stock price growth was generated in 2021 rather than 2022, which was instead a year of solid consolidation.

Still, in a market wary of ongoing Covid lockdowns in China, recession in the US, war in Ukraine and inflation around the world, you get the sense that momentum is staying with Jubilee.

The two most recent announcements – both major advancements – only serve to illustrate this point.

The most recent, released in the first week of September, details how Jubilee’s Zambian copper concentrator in Zambia has reached nameplate capacity.

This is part of a wider plan to turn Jubilee into a copper refinery in South Africa.

And a few weeks before that, Jubilee announced the recent completion of a £58 million investment program in South Africa that would allow the company to significantly increase production of metals and chromium from the platinum group.

Production capacity in South Africa has now reached 44,000 tons of platinum group metals per year and 1.2 million tons of chromium concentrate.

Continued growth in difficult business conditions is good. But to get to the heart of why Jubilee continues to offer clear value in these uncertain times, you need to dig a little deeper into what it actually does.

It would be fair to say that Jubilee is more of a processing company than a mining company.

Yes, years ago, in the heady early days of the Aim market, Jubilee had its roots in platinum exploration.

But a useful merger in the mid-2000s with a South African processing specialist named Braemore changed the outlook significantly.

For starters, the deal brought in much-needed cash flow, an advantage not lost on then-chairman Colin Bird.

But more importantly, it brought platinum and waste disposal expertise that is hard to find anywhere else in the world.

Leon Coetzer, the current chief executive of Jubilee, came in at the time of Braemore, and it is largely due to a combination of him and Mr Bird, who has now stepped down from the board, that Jubilee has become the established middle class . tier miner it is today.

What was it they saw then that allowed Jubilee to distance themselves from the huge platoon of micro-capitalization Aim-traded junior explorers?

After all, making a business of reprocessing other people’s mining waste doesn’t seem like an attractive business plan at first glance.

But there are actually several attractions. First, the difficult and costly mining operations are already done.

Jubilee, as we said, isn’t much of a miner. It lets other companies do that. What it does instead is scoop up the waste from chromium mines and extract platinum group metals from it. That’s not easy, that’s why the waste is there in the first place.

But Jubilee can do it – and most importantly, at a low cost.

In the year to June 30, 2022, Jubilee produced a total of just over 41,000 platinum group metal ounces.

The net cost of platinum production per ounce was $441, while net revenues, including chrome credits, were $1,609 per ounce. That brought net earnings per platinum group metal ounce to a handsome $1,162.

And of course, when you start punching all those numbers into an income statement, they start adding up. Turnover for the six months to June 2022 was £76 million, up 21 per cent on the previous six months.

This is real growth realized in an industry known for long promises and short deliveries.

What it also means, of course, is that Jubilee now has and has had the firepower to look at further expansion.

Hence the foray into copper production in Zambia, where net profit for each of the 2,604 tons of copper produced in the past 12 months was over $3,000.

We’re not quite up to date on the platinum operations here, but the direction of travel is clear. Jubilee has built a strong, high-margin cash-generating business and is not afraid to make new acquisitions to sustain growth.

In Zambia it already has expansion potential in the processing of lead, zinc, vanadium and cobalt. It has also looked at opportunities further afield, including in Cyprus, which is historically one of the first major copper mining districts in the world.

Like most companies born of the junior mining world, Jubilee is wary of taking on debt.

Cash position was around £16m at the end of June and could now rise given the robust situation the company is now in.

In that context, it’s no wonder that investors continue to support Jubilee (share price 12p) over other, less well-funded and riskier proposals.