27 Sep Reviewed provisional results for the year ended 30 June 2013
Registration number (4459850)
JSE share code: JBL
AIM share code: JLP
27 September 2013
Jubilee Platinum PLC
(“Jubilee” or the “Company”)
REVIEWED PROVISIONAL RESULTS FOR THE YEAR ENDED 30 JUNE 2013
The Directors of JSE listed and AIM traded Jubilee, the ‘Mine-to-Metals’ exploration and development company, are pleased to announce its condensed reviewed provisional results for the year ended 30 June 2013. Shareholders are also advised that the Group’s auditors, Saffery Champness, have reviewed these results as required by the JSE Listings Requirements.
The Company would like to clarify the timing of the announcement. The timing is in compliance with the Listings Requirements of the JSE Limited (“JSE”) that requires the short form of the announcement to appear in print in the relevant South African press on Monday 30 September. Therefore, the full announcement must be released on the JSE today and as such we have co-ordinated the release in London.
• Revenue up 28% to £4.8 million (ZAR72.0 million) (2012: £3.7 million (ZAR55.5 million)). The increase in revenue is in line with new electricity sales by Power Alt Pty Ltd (Power Alt), a 70% held subsidiary of Jubilee, to
the South African national electricity public utility while maintaining production revenues at RST Special Metals Pty Ltd (RST) in Middelburg for the period under review
• Gross profit up 864% to £1.9 million (ZAR28.5 million) (2012: £0.2 million (ZAR3.0 million)), which is in line with both the electricity sales and a sustainable reduction in operational overheads at RST during the period
under review Headline and diluted headline earnings remained in line with the previous period whilst earnings improved marginally
Mining and Exploration
Tjate Platinum Corporation Pty Ltd (Tjate) concluded a sale of rights agreement, pursuant to a ZAR75 million (£5 million) cash offer from a major mining company for its non-core Quartzhilll farm portion of the Tjate
In August 2012, in Madagascar, Jubilee entered into a farm-in agreement with iron-ore focused Indian Pacific Resources Limited (IPR), in terms of which IPR has the exclusive right to earn in to commodities on the
Company’s Ambodilafa concession, other than platinum group elements, metals traded on the London Metal Exchange and chrome
Surface Operation and Processing
Jubilee’s subsidiary Pollux Investment Holdings Pty Ltd (Pollux) was awarded the processing right to recover the platinum group metals (PGM) contained in the 800,000 tonnes Dilokong Chrome Mine surface tailings
(DCM Tailings or Tailings)
Jubilee concluded a toll processing agreement in November 2012 (Toll Agreement) with PhokaThaba Platinum Pty Ltd (PhokaThaba or Smokey Hills), a subsidiary of Platinum Australia Limited (PLA) (under
administration), for the processing of the Tailings at the Smokey Hills concentrator
The Toll Agreement enables Jubilee to commence processing of the Tailings starting at a rate of 10, 000 tonnes per month and ramping up to a targeted 35,000 tonnes per month over a 6 month period
Jubilee’s subsidiary Power Alt was awarded a tender for the sale of electricity to the South African national electricity public utility. The maximum contract value totals £6.3 million (ZAR98 million) per annum.
Sales commenced during December 2012 with revenue totaling £1.3 million (ZAR 20.2 million) for the period under review
Jubilee increased its interest in Power Alt to 70% from 51% through the acquisition of minority shareholders. This enabled Jubilee to leverage this asset towards funding its short and medium term platinum Mine-to-Metals
The Company also increased its shareholding to 100% in Jubilee Smelting and Refining Pty Ltd (JSR) through an earn-in agreement based on the capital invested by Jubilee. Jubilee consequently holds 100% of RST Special
Metals Pty Ltd (RST) in Middelburg
Jubilee has secured project funding, post the period under review, totaling US$ 3 million (ZAR29.7miilion) for both the capital and working capital required to commence with the processing of the Tailings leveraging off its
Power Alt asset
Targeted Acquisition of Platinum Australia Limited
Jubilee executed an Implementation Deed (ID) with PLA (under administration) to acquire all of the issued shares of PLA by way of a scheme of arrangement (Scheme) in accordance with Australian Law
Jubilee shareholders voted in favour of the acquisition of PLA on 28 May 2013
Jubilee reduced the offer in-line with the prevailing platinum market conditions and increased debt retained in PLA from approximately 1 Jubilee share for every 2.593 PLA shares to offering approximately 1 Jubilee share
for every 5.68 PLA shares. The revised offer has been recommended by the PLA board. As such, PLA shareholders would hold approximately 16.5% of the issued share capital of Jubilee following implementation of the Scheme
Jubilee concluded a Memorandum of Understanding (MOU) with PLA’s major creditor, Macquarie Bank Limited (MBL), for the settlement and re-financing of the existing debt held by MBL
At the time of this report the only remaining conditions precedent to the implementation of the Scheme are:
– securing funding of approximately US$19 million (£12 million (ZAR180 million) towards the transaction and the restart of the processing and mining operation;
– Australian Court approval of the Scheme; and
– final PLA shareholder approval.
ACCELERATION OF JUBILEE’s MINE-TO-METALS STRATEGY
During the period under review, Jubilee has been successful in securing key assets, which will be used for the execution of the Company’s stated Mine-to-Metals strategy.
Jubilee, through its Toll Agreement, is able to commence production of platinum concentrates containing approximately 800,000 tonnes DCM Tailings in the Smokey Hills mine processing plant. The processing of the DCM Tailings is not dependent on the acquisition of PLA and can commence prior to the conclusion of the PLA transaction.
Jubilee leveraged its power plant asset, Power Alt, to secure the capital and working capital funding in order to commence the platinum operations as soon as possible. Jubilee received an unsolicited offer to purchase (Sale Agreement) its holding in Power Alt from Global Renewable Energy Pty Ltd (GRE).
Under this Sale Agreement GRE was due to pay Jubilee an amount of US$8.9 million (£5.6 million (ZAR87.1 million) for the acquisition of 40% of the issued shares in Power Alt as well as 65% of the issued shares in RST. To date Jubilee has received the non-refundable deposit of US$0.2 million (ZAR2 million) as well as US$0.56 million (ZAR5.5 million) non-refundable investment in the upgrade of power Alt’s facilities and a further US$0.123 million (ZAR1.2 million) nonrefundable payment towards the working capital of RST by GRE.
GRE did not honour the contractual payment deadline and is currently in breach of the Sale Agreement. Jubilee will initiate the necessary action to rectify the breach and has reserved all its rights under the Sale Agreement.
Notwithstanding the absence of the GRE payment due under the Sale Agreement, Jubilee has been successful in fast tracking its Mine to Metals strategy by securing project funding leveraging off its Power Alt asset for both the expansion of electricity sales to the South African national electricity public utility as well as securing all capital and working capital required to commence with processing of the DCM tailings. This funding ensures that Jubilee is able to maintain its drive to grow its earnings in the short term through the implementation of its Mine-to-Metals strategy while continuing to focus on the conclusion of the PLA transaction.
The directors believe that the combination of Jubilee and PLA’s assets is strongly complementary, which allows Jubilee to accelerate its objective of establishing a fully operational mine-to-metals platinum company. The combination of Jubilee’s acquired processing rights to platinum-bearing surface material with the fully operable PLA mining and processing assets potentially ensures that the combined entity is able to establish itself as one of the lowest cost producers of platinum concentrates.
The central location of Smokey Hills within the Eastern Limb of South Africa’s platinum region makes the operation attractive for the processing of 3rd party material in the region. This has the potential to add significant flexibility to the PhokaThaba operation through increased toll processing, to counter the volatility in the platinum price.
Jubilee has been approached to process 3rd party material in the region that would add to the DCM Tailings. This offers the proposed enlarged group the option of combining toll processing of 3rd party material with the processing of own material from the PhokaThaba mine, thereby allowing a gradual mine ramp-up and a significant reduction in the capital required for the mine to reach full operation and in turn the required transactional funding. The funding condition as stated in the ID was amended to reflect this option.
My report of last year was fairly pessimistic on conditions within the platinum industry and factors outside the industry affecting the Company’s ability to pursue its business objectives.
While the period under review has continued to be challenging, I am pleased to report that platinum prices are improving in Rand terms due largely to a weak Rand Dollar exchange rate. Labour unrest, while not completely settled, is showing signs of improvement as evidenced by the early resolution of the recent gold mine strike.
Jubilee has remained focused on its Mine-to-Metals strategy and has been successful in securing key assets towards bringing into operation this strategy. Jubilee is currently in negotiations with a number of entities with a view to
expanding on its platinum containing surface assets to further build on this strategy.
Jubilee is well positioned to commence in the short term with the processing of the platinum containing Dilokong Chrome Mine tails. Jubilee is able to execute this project with-out requiring a dedicated processing plant estimated at US$12milion, by toll processing the material through the adjacent, Platinum Australia owned, PhokaThaba’s Smokey Hills processing plant. Jubilee has secured sufficient funding to commence operations and is in discussions with Platinum Australia to confirm a time line to ensure operational readiness of the processing plant.
The Platinum Australia merger has not been concluded but the Company is optimistic that the scheme of arrangement will be completed by year end. The key obstacles to conclusion of the transaction have been the difficulties in ensuring adherence to listing requirements across three exchanges; being the JSE (South African), AIM (London) and ASX (Australia) including finalisation of financial arrangements for the funding of the acquisition and the re-start of the mining and processing operations.
Jubilee identified its cash generative power plant and leveraged this asset to secure project funding towards the PLA transaction and to bring into operation the surface processing of the DCM tailings.
The financing situation was compounded by the failure of GRE to complete by the expected contracted date, their 65% acquisition of the smelter facility and 40% acquisition of the power plant located at Middelburg. Jubilee has initiated the necessary action to rectify the breach and has reserved all its rights under the Sale Agreement.
The successful leveraging of its power plant asset has enabled project funding for both expansion of the electricity sales as well as the capital and the working capital required to commence with the processing of the DCM tailings material.
Agreement for the sale of the Quartzhill farm, a portion of the Tjate Platinum project, has been formally agreed between the major mining company and the Board of Tjate Platinum. The agreement is for ZAR 75 million in cash to Tjate. The sale is subject to approval of the Department of Mining and Resources (DMR) and it is expected that this approval will be forthcoming in the near future. The Quartzhill farm has no impact on the Tjate mining plan and is considered non-core. Although proximal, the farm is not relevant to the design of the future mine.
The Board is active throughout the Bushveld complex in identifying situations, be it primary or secondary, which link platinum and chrome together in order to utilise the Company’s exclusive ability to process this material through its ConRoast smelter. Jubilee’s access and knowledge of ConRoast will allow it to optimise commercially such situations more effectively than any of its peers.
Jubilee, through its 70% interest in Power Alt, successfully commenced selling electricity into South Africa’s national grid in January of this year. Thus, apart from providing our smelting division with an offset against electricity costs, Power Alt is developing into a standalone business in its own right, which facilitated the ability of Jubilee to secure project financing to fund its short term plantinum Mine-to-Metals strategy. Significant income can be achieved through generation of electricity into the national grid, and the Power Alt Board is currently considering doubling the size of Power Alt’s power station to take advantage of this low risk and low capital source of income.
Further detail design and evaluation work has been carried out with Northam Platinum under the executed Technology Agreement between the two companies. The work to date has satisfied all criteria imposed by the agreement and it’s expected to progress this project in the near future.
The Dilokong chrome mine contract to process platinum-bearing chrome tailings has now been concluded with Jubilee owning significantly more rights than at the time of last year’s report. We expect to commence processing tailing in the very near future. We are also in discussions with a number of companies concerning the toll processing of primary ore.
The Group reported a loss for the year ended 30 June 2013 of 2.41 (36.17 cents) (2012: loss of 2.43 (36.47 cents)) pence per ordinary share. Headline loss for the year was 2.41 (36.17 cents) (2012: loss of 2.43 (36.47 cents)) pence per ordinary share.
Trading conditions in small capped mining stocks have continued to be challenging during the period under review, however, some light is being seen. Trading on the AIM market is increasing and we do see a subtle but steady move of investment being directed into these companies to capitalise on the low valuations placed by the markets. This activity is usually led by the retail sector with institutional money lagging this sector. It is my personal opinion that this lag will be pronounced and protracted in this cycle.
The Company considers the fundamentals for platinum to be outstanding for the coming year. This opinion is led by the upsurge in new car purchases in North America and some improvement in Europe. The demand we feel is improving but we do not see similar positive signs from the supplier side and therefore we remain bullish on the platinum price. We see the South African Rand continuing to weaken although an upturn in commodity prices could reverse the trend. On the whole, however, our confidence remains for a strong Rand denominated platinum price.
I would like to thank my fellow directors for the untiring efforts for the activities for which they are responsible. In particular I would like to thank Leon Coetzer, the Chief Executive, for his resilience and focus across the wide range of challenges he has had to face on a daily basis.
Finally I would like to express my hopes for a more stable platinum market, more economic confidence as a platform to enter next year. I would like to reassure investors of the Board’s total commitment to the Mine-to-Metals strategy.
27 September 2013
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2013 is available in the Financial section of our website