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Jubilee Platinum update - mostly very good news: on track: buy

By HotStockRockets | Thursday 25 August 2016

Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

The latest trading update from Jubilee Platinum (JLP) is nearly all good news. The update covers the Dilokong Chrome mine tailings project (DCM) and the Hernic PGM-bearing chrome tailings project.

To DCM first where we are told that Chromite concentrate production rose by 29% from June to July to 9670 tons and that saw revenues up by 33% at £692,000 with earnings up by 46% to £520,000 and earnings attributable to Jubilee up by 30% at £293,000. Jubilee says that

"Upgraded platinum values in surface material after chromite removal continue to exceed design expectations further increasing expected saleable value of the contained platinum concentrate"

Things will get better still. Jubilee is concluding the audit of the operational readiness at an existing platinum operation and is scheduling a full scale commercial trial, which forms part of the option study for toll processing as an alternative to building its own platinum plant at DCM. This option potentially offers significant project upside
Meanwhile construction at the Hernic Project of the 660 000 tons per annum platinum and chromite processing plant continues to progress to schedule targeting commencement of commissioning in December 2016. So far capex spend is on track.

All of this demonstrates clear reasons to believe the sort of forecast ramp up in profits for Jubilee that we have discussed here previously which - if met will see the shares trade ( if not re-rated from 3.3p-3.5p) on a derisory two year out PE of well under five.

The one fly in the ointment was news that an escrow payment from the buyers of the Middleburg project of £510,000 has not been made. Jubilee says: " Release of this escrow amount to the Company has been frustrated by an unsubstantiated warranty claim submitted by the SPV. The Company has informed the SPV that it rejects the legitimacy of such a claim and will take all necessary steps to ensure the release of the escrow amount due to the Company. "

That is a bummer but, in the greater scheme of things, it is a glitch. The key point is that Jubilee's march to cash cow status is accelerating. The shares are cheap. Still a buy at up to 3.6p - target to sell 4.5p.

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