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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.
Shares in Jubilee Platinum (JLP) have taken a bit of a battering in recent months, but I can still see plenty of upside here on any sort of positive reversal in platinum prices, and it is also worth remembering that other platinum group metals have been more robust.
It has been a while since the company released any major news and the share price has been steadily drifting and is now back down around the 4p level, a drop of over 40% from the peak of almost 7.5p which it hit in early March.
The company certainly hasn’t been helped by the large drop in platinum prices from the start of the year, with the precious metal trading around $930/oz currently, and we have also seen wild currency fluctuations and instability in South Africa, where a lot of its operations are based.
The company is still at a fairly early stage but has already begun production at the Dilakong Chrome Mine and has been ramping up production, and alongside that has been using its exclusive ConRoast technology to process tailings from other chromite operations, which had previously been uneconomical using more traditional processes – it basically separates out base metals to leave a high grade PGM residue, without going too deeply into the technical side of things.
The Dilakong operation produced over 47,000 tonnes of saleable chromite concentration during the six months up until the end of 2016, resulting in revenue of over £4.8 million, and a gross profit of over £900,000.
It also completed the Hernic platinum and chromite Hernic processing plant with a capacity of 660,000 tonnes per annum and the update today shows that it is now achieving the maximum design capacity of 55,000 tonnes of feed material per month. This caused a brief spike in the share price, but I would expect a more sustained response once revenue figures are released.
I would expect revenues from this to make a significant contribution to the full year results for 2017, given that it is capable of generating annual revenue of over £18 million at a PGM basket price of $906/oz, and more should we see any sort of recovery in PGM prices.
Alongside the potential upside from the third party processing operations and its own tailings projects, there is also a lot of potential at the Tjate project, in which the company has a 63% direct interest and was recently granted the mining rights. This has potentially massive resources and plenty of upside to current indicated and inferred resources of 22Moz of PGMs and gold, based on exploratory drilling dating back to 2009.
The company believes that potential resources at Tjate could be triple the current estimates, and although it is still early days and I wouldn’t be getting too excited just yet, that does give it the upside potential to justify its current market cap of around £45 million, when taken alongside the likelihood that it will soon be making a net profit.
The last financials showed a net loss of just over £500,000 for the six month period (as compared to a £1.5 million loss in the same period up until the end of 2015), and I’d expect the next update to show further improvement.
There is too much going on to go into all the tiny details of each project, but if you are looking for a company that is at a more speculative stage, but is already well down the road in terms of its operations and funding them, then I believe that Jubilee is well worth a look at the current share price, and any positive news could well send it on an upwards trajectory again. So for me it is a buy at this price.
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