Jupiter Mines Ltd

ASX:JMS

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Thank you for standing by. Welcome to the Jupiter Mines Q1 Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Brad Rogers, Managing Director. Please go ahead.

[Brad Rogers, executive]

Thanks, Rachel, and good morning or good afternoon, everyone. Thanks for joining the call. As usual, I have Ian Murray, our Chairman; and Melissa North, our CFO, also on the call today. You'll notice that this call is being held earlier than we ordinarily would. We've had some feedback that people would prefer us to hold these calls a bit earlier in the day to make it easier for East Coast Australian people to join within their working days. So we do intend to continue these calls at this time. And hopefully, that works better for everyone, and thank you again for joining.

As usual, I'll just run through some overarching comments on the quarterly activities report that we released this morning, and then I'll pause at the end of that to see if there are any questions, and I'm happy to take those. And as I mentioned, Ian and Melissa are on the line as well.

So as you would have seen from the document that we released this morning, the September quarter saw quite strong sales, which was good, 14% up on last quarter and also up on last year's prior comparative period. Production was down 15% on the previous quarter, but roughly in line with last year's prior comparative period and in general, in line with our expectations of where we need production to be in order to support the target sales that we require for the full year.

We said in the report that there were some minor operational challenges during the quarter that affected production. They were relatively minor though, and you can obviously see that given how overall production lined up, as I said with prior year's comparative period. But those challenges included some -- a short period of downtime in our primary crusher that was unscheduled, maintenance related. That was rectified quite quickly. And in September, that crushing circuit had a record performance. So that was good.

We also had some ongoing minor labor availability issues, and that's principally within the contractor labor organization, and that's something that we're managing, not new, but that did have some minor impacts operationally during the quarter as well. You'll also see that from a safety perspective, we had 2 lost time injuries during the September quarter. Both of them were minor in nature, both of them were ankle roles, and they were both within the Moolmans contractor organization. So that's something understandably that the team is focused on at site. Overall, Tshipi is rightly proud of their outstanding safety track record, notwithstanding we did have 2 minor injuries that resulted in some lost time during the quarter. When these things happen, good teams double down, and that's what our team is doing at site.

From a logistics perspective, rail volumes were strong, stronger than expected, not surprisingly, given the strong sales quarter. So we had very limited truck haulage on road in South Africa during the quarter. We continued our Luderitz haulage, part of which is on road, but from a South African trucking perspective, given where manganese prices are through the quarter, there was relatively limited truck haulage, but pleasingly, quite strong rail volumes, and that's because of the manganese price as well. Some of the other producers within South Africa not taking up their rail allocations through that period of time because of low manganese prices. So Tshipi was able to take some advantage of that.

Costs are relatively in line with the last quarter and lower than prior comparative period USD 1.95 per dmtu for the quarter. So that was good. From a pricing perspective, what we saw through the quarter was a relatively soft manganese market, really because of trends that we would have spoken about last quarter, continuing weaker-than-expected Chinese end demand for steel and ultimately, for steelmaking materials, like manganese, and that was a key driver. Combined with some excess stockpiles in China earlier on this calendar year, there was some expectation from Chinese traders that China's end steel demand this year will be stronger than it ended up being.

But in anticipation of that strong demand, traders brought up manganese and that's resulted in some stockpiles in China. So what you've got at the moment and providing through the quarter that we're speaking to today is a combination of end demand being weaker than people expected along with stockpiles that need to be consumed back to normal levels. And what that's meant has been relatively modest CIF prices for manganese have drifted slightly lower through the quarter, but actually been relatively stable.

In July, the CIF price of manganese was about $3.62, talking market benchmark prices and reduced the $3.56 by September. FOB prices trended down much more than that, and that is because freight rates increased during the quarter. So while CIF prices were low, but relatively stable as I just mentioned, gently declining from a market benchmark perspective, FOB prices in July were $2.98, and by September were $2.77. So that much larger movement in FOB prices rather than the gentle decline in CIF prices was driven by shipping rates, which were lower than $25 in July, in fact, slightly under $24 and had moved up to just under $30 by the end of September. And they're at about that level right now.

So freight rates were also a feature during the quarter, and a negative feature for the quarter. That was mostly unrelated to actual manganese demand that was related to grain demand out of South America and stronger volumes coming out of that market, therefore, competing with the same size ships that we use out of South Africa and that's what drove the freight rates up.

Analysts are expecting manganese prices to improve over coming quarters as a general consensus around that. And the drivers of that expectation are a few things. One is reduced supply out of South Africa in the main and out of other markets as well. I mentioned before that we're getting more rail allocation than we would expect because some other producers are not taking up their rail allocation. So that's one clue to reducing supply, but I also mentioned that road haulage, including our own road haulage through South Africa since it's the most expensive logistics path the market has also reduced during the quarter and naturally bringing that supply out of the market provides go-forward price support for the manganese price.

There's also rising costs globally. The oil price has gone up and other costs, and so that provides some support for the manganese price as well and an expectation of higher Chinese demand. And that's usually the time as we come into our end of calendar year, there will be an increase in steel demand. And there's been quite muted conditions in China, as I mentioned before, people expect that to improve. So that's what's sitting behind kind of consensus view that we've been bouncing around the bottom in terms of CIF prices for a couple of months now, but people are expecting that to increase to FOB prices between $3 and $4, which has been around about where manganese prices have been range trading over the last few years.

The 5-year low FOB price was $2.61, and that was in November 2020. I mentioned I think that FOB prices for manganese got down to $2.74 in September, though where we've been in this quarter and where we're hovering around now is closest to 5-year low levels. But as I said, CIF prices have been relatively stable, and the expectation is over the coming quarters that those manganese prices should improve for the reasons that I just mentioned. All of that's resulted in Tshipi financial's earnings in line with that movement in manganese price and also freight rates and cash at a Tshipi level increased by AUD 17.2 million quarter-on-quarter, and Jupiter share of that cash increased commensurately.

Just finally, I'll note that on our last quarterly call, I mentioned that we would be scheduling a strategy update, which we obviously haven't done yet. The reason for that is that we've been busy on competing internal priorities, but I'm mindful that we said we would do that. All elements of the strategy are progressing. We have an AGM scheduled for the end of November, in which I'll be providing a CEO presentation, and I'll include a few slides within that presentation on the status of each of our strategic initiatives. But obviously, we've been busy on those, behind the scenes, so looking forward to providing an update in that regard, and apologies that I didn't schedule that workshop, but it is something that we'll come back on, and the reason is that we've been busy internally.

So hopefully, that's provided a good overview of performance for the quarter. As I said, it's actually been, I think, quite a pleasing quarter against a relatively muted manganese price and an increased freight rate. The team has also against that backdrop done a good job on sales and costs, and that's resulted in a solid result that you have in front of you.

I'll pause there, Rachel, and see if there are any questions on the line.

[Operator]

[Operator Instructions] I've got one question from Mark Fichera with Foster Stockbroking.

[Mark Fichera, analyst]

Brad, just a couple of questions. I guess, firstly, on the -- you mentioned that you shipped low-grade material during the quarter. And just given obviously the weakness with some manganese price, what prompted you, I guess, to -- or what markets were this for that product? And could you also secondly give a price indication of what you see the mine gate for that low-grade material?

[Brad Rogers, executive]

Yes. Thanks, Mark, and good question. I've mentioned on previous calls that low grade is a market that doesn't necessarily exist through the cycle when you're in a low-priced manganese environment that we are currently for high-grade material. Low grade is not just low price, but it's also may not even be there in terms of the volume of demand. Noting that our low grade is 30% to 32% manganese contained, as a lot of people in the manganese world wouldn't necessarily call that low grade, but roughly it is low grade because our benchmark material is 37%.

So the low-grade sales that we completed during the quarter, as you indicated, Mark, were at mine gate. And I called out in the quarterly report that, that was about 4% of all tonnes sold. So relatively immaterial, sold to a single customer. For that reason, I won't disclose the price, but it's not a big revenue driver. This is about getting some cash from material that we've got sitting on the stockpile. In a market like this, you shouldn't expect that we're not targeting very significant low-grade sales. But to the extent that we're able to generate some cash at a relatively simple level at mine gate. So we're not managing the logistics, then we are prepared to do that. So hopefully, that gives you a bit of a background without actually, as I say, disclosing a single counterparty price.

[Mark Fichera, analyst]

No, that's fine. And just a final one from me. FOB costs, they were quite flat over the preceding quarter. Yes, I was just wondering, should we be assuming sort of a similar cost profile for the remainder of the next few quarters? Or do you see sort of movements around that cost?

[Brad Rogers, executive]

Yes. Thanks, Mark. So it has been relatively flat at low levels. There's obviously a bit that goes into the FOB cost, including not just physical, but also mine plan and exchange rate. We expect next quarter to be around about these sorts of levels as well. And then I can provide more guidance next quarter for the outlook for the remainder of the year. But a lot of the fundamentals going into that FOB cost on the site in terms of the operating costs and exchange rates, obviously been favorable as well. So without providing a forecast for too long, we expect next quarter to be around about these levels, and then I can provide another update next quarter.

[Operator]

We have no other questions at this time.

[Brad Rogers, executive]

Great. Thanks, Rachel, and thank you again, everyone, for joining the call.