Possible platinum price recovery on the cards

When platinum prices surge, the shares of companies remotely connected with platinum follow, no matter what their fundamentals. That includes Jubilee Platinum, which has made a bottom-line loss every year since at least 2009, but whose shares move sharply on a whiff of good news.

In March, Jubilee’s shares jumped about 50% in two days, to 128c, after it announced the mining right for its Tjate platinum mine project had been executed. Within two months the shares had returned to their previous 60c-75c trading range.

Tjate has a resource of about 22.3m oz of platinum group metals (PGMs) and the original plans were to build a mine producing about 310,000 oz/year. This would cost billions of rand, well beyond Jubilee’s current capacity. Its market capitalisation is just under R800m.

Chairman Colin Bird says the net present value of Tjate in 2007 was US$1bn, when platinum prices were about $1,350/oz. Mine plans are being reviewed, using current prices. He says Tjate is probably the last rich undeveloped project on the eastern limb of the Bushveld complex.

As soon as platinum prices turn there will be an appetite for sinking new mines, Bird says. Jubilee’s plan is to find a partner with the capital and skills to develop Tjate while it retains an equity stake. The money it realises from the sale will be used to extend its activities in tailings processing.

Jubilee turned to tailings processing two years ago. Its more advanced operation is at Hernic, where PGM extraction is expected to be at the targeted 2,500 oz/month by the end of this year. At Dilokong, it is extracting chrome from a PGM waste stream and stockpiling the PGM-bearing material until it completes a PGM extraction circuit. It recently bought a third tailings stream, Platcro.

Jubilee has signed a project funding agreement for $50m with RiverFort Capital Group that will enable it to source

other opportunities.

CEO Leon Coetzer says some large mining companies have invited Jubilee’s executives to present a strategy on how to recover minerals from their tailings, including not only PGMs but also lead, zinc, copper and nickel. Jubilee is also looking at tailings retreatment opportunities in Zambia.

Platinum prices climbed above $1,009/oz in early September, tracking gold. The World Platinum Investment Council, in its latest quarterly report, identified trends that could underpin a price recovery: supply is expected to contract again this year; automobile demand is resilient; and investor demand is stronger than previously forecast.

Jubilee was listed in Johannesburg in late 2006, but it has struggled to achieve a significant place in the SA platinum industry. Its shares never returned to the levels of its first three years on the JSE, when they went as high as R17. From 675c in late 2009, they have tracked steadily downwards.

Having some exposure to the platinum sector, whether through Jubilee or one of the four biggest producers, could pay off handsomely, but there’s an opportunity cost in waiting for an event that could happen in months or years.