Jupiter Mines Ltd

ASX:JMS

Earnings Call Transcript 2020-Q4

[Operator]

Good afternoon, and I would like to welcome everyone to the Jupiter Mines' Quarter 4 Call. Today, we have Jupiter, Chief Executive Officer, Priyank Thapliyal, to provide a brief update on the fourth quarter of the 2020 financial year. And then we will open up to questions from callers. Thank you, Priyank. Please go ahead.

[Priyank Thapliyal, CEO & Executive Director]

Thank you, everyone. Good evening, and welcome to the fourth quarter call for Jupiter Mines. I think you must have had a chance to receive the report, which was circulated by Jupiter Mines this morning. So I will use that to form the basis of our call and then more than happy to answer any questions which you might have.So for this current financial year we just finished a couple of weeks ago, Tshipi again achieved most of its milestones despite a very challenging year, especially in the fourth quarter of this financial year. We shipped around 3.4 million tonnes. Out of that, 2.9 million tonnes was our bread-and-butter, high-grade lump and fine product, and the rest was supplemented with the low-grade product, which we always use when we have spare logistics capacity to make additional profit for our shareholders.That said, as most of you must have followed with the recent coronavirus and before that, the trade war between the U.S. and China, the manganese price did go down sharply over the course of November and December, so we broke even in those 2 months. But despite that breakeven cost of around $2.30 which we have, we finished this current financial year with approximately ZAR 1.1 billion of cash in the bank at Tshipi.Considering the market and the challenges which we anticipate in the near future, we decided to retain most of it within the company in South Africa largely to weather the storm. Secondly, we retained a couple of ZAR 100 million to fund our stripping exercise to address some of the mining challenges we had in this current financial year but also as a good lead up into the ramp-up, which we again announced to the market around December of last year. As we have announced, we want to go to 4.5 million tonnes. And the major challenge is going to be on the logistics and on the mining side.On the logistics side, as the report says, and we had flat to the market, we were going to trial the shipments out of Namibia. And I'm very pleased to say that we have had phenomenal success. We have been shipping through Namibia for the last 5 months at approximately 30,000 tonnes per month. And the number for this financial year reflects that we have shipped around 170,000 tonnes through the Port of Lüderitz in Namibia.Our strategy now going forward for the next financial year is again to achieve our 3 million tonnes target. And as and when the market can take it, we will supplement it if we have the stockpile available for the low-grade product. What we have now set ourselves is a very ambitious target to push the Namibian channel further. So over the next 12 months, we will try to see if we can almost double the shipments out of Lüderitz to go from 30,000 tonnes to 60,000 tonnes per month because our mid-term strategy is to achieve costs through that channel, which are almost on par with the MECA cost, which we have through the ports of Port Elizabeth, Saldanha and Durban in South Africa.As I've always said, we rely on the MECA allocation to Transnet, and Transnet has done a phenomenal job again this financial year. We have achieved rail allocation and port allocation of Transnet at almost 100% strike rate, which is a record for us. And if we can move every time, which we have planned from the roads to the rail through MECA, and in the mid-term through Lüderitz in Namibia, we potentially save around AUD 30 per tonne. So that is our big target for this upcoming financial year, which will reduce our costs and help us to almost balance the inflationary costs, which we get in South Africa every year on account of labor, on account of Transnet. But if we can achieve that, then we have unlocked a very cost-effective list of channels through the port of Lüderitz in Namibia.What we are also going to do in this upcoming financial year is to try to open our pit further. So we have, along with our mining contractors, revised our mining plans, so that it is a good lead up again for our expansion, which we have again flat to the market, which will mean that we will be looking at bringing in some extra equipment and some bigger equipment so that we can mine faster and we can mine much more efficiently than what we have done in the past because the pit constraint is what is restricting us to 3 million tonnes. And if we have to go to 4.5 million tonnes, we have to open a pit further. But at a high level, we feel that with our MECA allocation through Lüderitz and [ complicated by the road ], which is available in South Africa and this new revised mining plan with bigger equipment, we are on our path to our expansion work, which will be finalized over this coming financial year.Apart from that, I think the only other point, which I would like to make is that these are very challenging times. Everybody is seeing what is happening in the world, and our thoughts and prayers with everyone who is going through this experience. But the fact that we are a very low-cost operation, we have got no debt in the company, and our contracts are structured very flexibly, we believe that we are highly positioned to weather this storm. And when we come out on the other side, we will be ready to take advantage of the market like we have always done in the past for the benefit of the shareholders.I think that's largely what I wanted to say about the quarter 4 report, some guidance for the next financial year. And on that basis, I'm more than happy to take any questions.

[Operator]

[Operator Instructions] Our first question is from Mark from Fast Stockbroking (sic) [ Foster Stockbroking ]

[Mark Fichera]

Yes, just a question regarding, obviously, the 20 -- 21-day lockdown in South Africa. Can you give me an idea of what the fixed costs are at Tshipi in terms of -- if you can't ship product out and then just maintaining the operation on a sort of a care and maintenance level? Can you give an indication on that quantum?

[Priyank Thapliyal, CEO & Executive Director]

Yes. Mark, firstly, I think as the announcement said, we just -- I mean the President of South Africa announced the lockdown only last night around, I think, 7:00, 8:00 U.K. time. So we have not gone through the full exercise of what we are going to do and how we are going to basically run Tshipi over the next 21 days. That exercise, I think, as the announcement says, will be done over the course of today and tomorrow and the Board will take a call on Thursday afternoon. But what I can say is that we have got very flexible contracts. As the time and again, we use movements on a mining contract. We've got AMC on the crushing side. And only, I think, out of this 700 people who work at Tshipi, around 150 to 200 are on Tshipi's payroll. So what I can say is that out of the ZAR 1.1 billion, we have only distributed [ ZAR 255 million ] to the shareholders, half coming to us, half going through our BEE partner. We have retained roughly ZAR 350 million to weather the storm, roughly ZAR 350 million for the stripping, which I alluded to, to open the mine further, the pit further, and that will help us with our expansion strategy. And we've kept ZAR 150 million for some of the CapEx, which we want to do. We want to look at some repair works on the primary crusher. We want to complete our Esperance project. But our breakeven cost is to $2.30. I think, as I've said time and again, 55% of our cost is Transnet. So in the lockdown, Transnet were also going to lockdown.So our fixed costs will largely be for the 150, 200 employees which we have got because every other contract will also be in lockdown. But apart from that, I really can't give you further guidance until we have had a complete analysis on the ground and had a Tshipi Board meeting.

[Mark Fichera]

Okay. That's fine. I mean that's some good guidance here anyway. Just on the expansion study, in terms of a target for when you're looking to ramp up to your target, is that an FY '22 sort of time line for that? So -- and in terms of preparing the pit and giving the equipment for that, when do you see the CapEx on that starting to been spent?

[Priyank Thapliyal, CEO & Executive Director]

Well, I think, again, as we announced in December, we anticipate the CapEx to be roughly ZAR 1 billion. It was at a very high level. This coming 12 months, we are going to finish that work and also look into the commercial contracting side. So for the next 12 months, nothing is really going to happen on the ground in terms of the expansion. Lüderitz channel, as I've said, we have achieved what we set ourselves to target. Now we want to go for like twice that amount. So that is definitely a key, key part of our expansion strategy, which we are going to test. And hopefully, fuel the next 12 months.Out of the ZAR 1 billion of CapEx, roughly, I would say, 70% of that is in the pre-stripping. Some of that we have already taken in this dividend which we paid out, we retailed within the company. So that will be expanded. Some of the bigger equipment will be on-site from April and May onwards, that was the plan. We have to see like how that gets affected by this lockdown. So whatever we can do, we are doing right, slowly, slowly, but the mine is a big mine. It's got a strip ratio of almost 11 or 12:1. A lot of material needs to be moved. We also have the barrier pillars currently being mined. So everything needs to be now factored and aligned properly, but the expansion is at least 3 or 4 years away.

[Operator]

[Operator Instructions] We have another question from Mark.

[Mark Fichera]

Just one other question, just with Lüderitz, to go from 30,000 tonnes to 60,000 tonnes, what's the key sort of logistics or CapEx needed to go to that level?

[Priyank Thapliyal, CEO & Executive Director]

Well, we don't have to put any CapEx. We truck from the mine to the border. And from the borders, we have a contractor which manages the rail and loading at the Port of Lüderitz. So from our perspective, there is no CapEx from our side. Whatever needs to be done is to be done by the contractor, and that is part of the cost, which we pay them. The port has never shipped manganese in the past. So they have never railed or had any experience of shipments out of Namibia like South Africa has got like decades and decades of history. So it's more like you try to do it. And once you're successful, you see like how far you can go. So that is the exercise which we are now going to go through. But as I said, for the last 5 months, we have shipped on a run rate of almost 30,000 tonnes per month.

[Mark Fichera]

Right. So you might say that gradually, you're just gradually trying to increase that to 60,000 tonnes?

[Priyank Thapliyal, CEO & Executive Director]

Well, that's what we have set ourselves to target, yes.

[Operator]

At this moment, there are no further questions in the queue, Priyank.

[Priyank Thapliyal, CEO & Executive Director]

Great. So on that note, I would like to thank everyone for their time and keep well and keep safe. Thanks a lot.