Pos­si­ble plat­inum price re­cov­ery on the cards

Financial Mail - Investors Monthly - - Analysis - Char­lotte Mathews

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.