Exciting times for emerging chrome and platinum player
10 June 2016
Speculative Buy
Earlier this week Jubilee published an update focusing on production rates at its Dilokong chrome tailings operations. The announcement also highlighted the potential to quadruple chrome production now it has operational control of the Dilokong primary concentrator. This 75,000 tonne per month plant needs feeding with run of mine ore, which means Jubilee will be looking to nearby chrome mines for supply.
There is some uncertainty as to whether Jubilee will become the permanent operator of the primary concentrator. However, as the current operator, and given its agreement to mine and process Dilokong’s tailings for up to 10 years, we believe Jubilee is well placed to take full control and ownership. This might also include the Dilokong underground mine and would transform Jubilee into a significant chrome player.
Meanwhile, Jubilee is full steam ahead on constructing the Hernic tailings plant. This will include an upfront fine (tailings) chrome concentrator and a platinum recovery circuit. The chrome circuit should be operational in October, followed by the platinum circuit in December. Jubilee’s revenues at Hernic will primarily be from its platinum production.
Dilokong chrome tailings – beating nameplate capacity
At its recently built chrome tailings plant, a sustainable feed rate of 75 tonnes per hour is now being achieved which translates to production of c.6,500 tonnes of chromite concentrate per month. This equates to annual production in excess of 75,000t of concentrate compared with original plans of closer to 40,000t.
Dilokong primary concentrator - operatorship
Jubilee now has operational control of the primary concentrator at Dilokong, opening up various opportunities to process run-of-mine chrome ore in the area. Jubilee is now looking at buying-in ore from nearby chrome mines and upping chrome concentrate production from the current 6,500 tonnes per month level towards capacity of 25,000 tonnes per month of concentrate at the same grade.
Leveraging the Hernic agreement
Jubilee’s hidden value is in its metallurgical/processing expertise i.e its ability to maximise recoveries from chrome and platinum tailings feedstocks. This explains how it won both the Dilokong and Hernic tailings contracts and could result in it securing similar agreements with other ferrochrome companies in future.
Valuation and recommendation
Jubilee’s business is evolving and could soon include a larger chrome component and/or a new tailings agreements. As a result we are unable to produce financial forecasts or a Jubilee Platinum valuation. We do however maintain a Speculative Buy recommendation based on the Dilokong tailings operations and the fully financed Hernic tailings project.
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Summary
The situation is at Dilokong is dynamic. It is a huge opportunity for Jubilee which could result in Jubilee becoming a primary chromite concentrate producer (i.e. producing chrome concentrates from ore) and potentially a chromite mining company. On the other hand, Dilokong could end up being a tailings only operation for Jubilee. It will depend on the results of the business recovery process.
Meanwhile the Hernic tailings project is being built and progress there will provide newsflow throughout 2016. In 2017, Jubilee should be producing platinum from Hernic and chromite and platinum from Dilokong. We are also hopeful that Jubilee will negotiate one or more new Hernic type (chrome tailings to platinum) agreements with other Ferrochrome players. These are interesting times for Jubilee Platinum.