Jupiter Mines Ltd

ASX:JMS

Earnings Call Transcript 2021-Q4

[Operator]

Good afternoon, and I would like to welcome everyone to the Jupiter Mines fourth quarterly call. Today, we have Jupiter, Chief Executive Officer, Priyank Thapliyal, to provide a brief update on the fourth quarter of the 2021 financial year. And then we will open up for questions from callers.Thanks, Priyank. Please go ahead.

[Priyank Thapliyal, CEO & Executive Director]

Thanks, Erica, and good evening, everyone. Welcome to the Jupiter Mines fourth quarter conference call.I think the key themes, which Tshipi has basically been challenged within the fourth quarter has firstly been COVID, which has been rampant in South Africa and has resulted in a lot of challenging issues in terms of absenteeism of the team. And then the other challenge which has also been faced by Tshipi has been the excessive rainfall. I mean just for example, over the course of November, we had 155 millimeters of rain, whereas the historical average is around 10 millimeters; same thing went for December, 170 versus 44. And in February, we lost almost 8 or 9 days due to excessive rainfall. So that has been the primary challenge.Transnet has also had severe issues. The railway line, which is about 1.5 meters above the ground level, was all submerged. But that said, whereas Transnet and the other producers in the Kalahari declared force majeure, Tshipi, through their capable stockpile management and logistics planning, were able to avoid that situation despite these challenges. The pit was submerged. There was underground seepage, but we had the stockpile available and some more available, which we were able to mine in these challenging times.So that is largely the reason why we have had a very good quarter considering the challenges we have faced. The proof is in the pudding, as they say. We had our second best financial year in terms of production. Again, we were the biggest producer in the Kalahari. Out of the 3.4 million tonnes, we sold about 2.6 million was high-grade material and about 800,000 was low-grade material. And we finished the year with about ZAR 1.75 billion cash in the bank, of which we kept ZAR 650 million for our...

[Operator]

We have just lost the host for the call. Please just hold as I reconnect him. Thank you.[Technical Difficulty]

[Priyank Thapliyal, CEO & Executive Director]

Apologies for being cut off. So I think when I was cut off, I was largely summarizing that despite these challenges, we had our second best production in the history of Tshipi. We sold 3.4 million tonnes, made us, again, the biggest exporter out of Kalahari as a single mine. And about 2.6 million tonnes was in high-grade material, 800,000 was in low-grade material.As I said, we finished with ZAR 1.75 billion cash in the bank and retained ZAR 650 million for our capital expenditure programs, stripping. And the rest, ZAR 1.1 billion was paid out to the Tshipi shareholders as dividend.The other thing which we were also fairly successful was in bringing closure to the ramp-up study. But we did not proceed with the decision to ramp up the mine largely because we had set ourselves target of doing about 50,000 BCM per day for a 3-month consistent basis just to make sure that the pit design, the equipment which we were using was capable of delivering 4.5 million tonnes, which is the ramp-up plan. And that was largely hindered because of the excessive rainfall. So that still remains the target. And as and when it is delivered on a 3-month rolling basis, at that time, the Board of Tshipi will consider the expansion, which makes a lot of sense considering some of the big manganese mines will be finished in the next 5 to 10 years. Then there is going to be a pickup in the steel production in the rest of the world and also with the talk about manganese being used in the electric vehicle space. So we feel that our ramp-up is perfectly positioned to leverage on those themes which will play out in the next few years.The other point, I think, which is quite critical is that we had very good success on the logistics side. Our Lüderitz channel is now delivering at our nameplate capacity of 60,000 tonnes per month. And that, again, will be very crucial in our ramp-up plan. We have set ourselves, as always, a target of about 3 million tonnes in high-grade material for this financial year 2022. And we hope to top it up with almost 10% to 20% of low-grade materials, between 3.3 million to 3.5 million tonnes is what we will try to achieve in this coming financial year.And our cost, again, will be what we have been targeting for the last few years, about $2.20 FOB and about $2.50 on a breakeven basis. The fact that we have used up a lot of the stockpile result in most of the low-grade material being sold in the second half of this coming financial year compared to the historical trend, where we have sold bulk of the low-grade material in the first half. And that has also largely to play with the theme that in the past, there has been less demand for low-grade material from the federalized smelters in China. But that theme has changed over the last few years, and we have seen consistently a lot of low-grade material being sold in the third quarter and fourth quarter, which is the winter season in China. So that is our business plan. Again, the logistics, we hope we will have between 2.1 million to 2.4 million tonnes on the rails through the MECA channel and about 720,000 tonnes through our Namibia port of Lüderitz and close to 500,000 tonnes through the road channel in South Africa.The other thing which we will try to obviously progress in this financial year is to extend the barrier pillar. As I've said in the past, barrier pillar strip ratio was 4.5, whereas the life of mine strip ratio is 12. So we are going to extend the Phase A or we will attempt to extend the Phase A barrier pillar. And if we are successful in progressing it in what I call Phase B, then that should give us close to 15 million tonnes of material at a slightly lower rate but at a substantially reduced strip ratio compared to a historical 12:1 life of mine.So that in a nutshell is what we are trying to achieve. As far as the Tshipi business is concerned, the Board of Jupiter will be meeting in the next month or so to look at the financials and see what sort of a dividend which we can declare. But what I can say is that we see no reason to deviate from our historical trend of paying close to 90% plus as payout ratio as dividend. So I would be very hopeful that the dividend which we would pay in the second half should be multiple of what we paid in the first half.And I think as we have announced in a past day or so, we are going to execute the Jupiter IPO. We have had confirmation from the powers to be that Jupiter can progress that and the owners of the firm and all sorts of regulatory approval lies with the shareholder and the company. So we will be progressing on that basis. Because we feel that Mount Mason in this climate has a lot of entrapped value and that can be released in the form of the listing, so that we hope to achieve in the next 6 to 8 weeks as for the timetable. And that will probably result in close to $0.015 per share as extra value, which was declared to the shareholders. And I'm very optimistic that with the entrepreneurial management and the entrepreneurial shareholder base out of Australia as and when the Mount Mason is progressed towards production, further value will be released. So those were, I think, at the time of the IPO, our targets, so still remain our targets to ensure that Jupiter delivers a very strong payout ratio, double-digit dividend yield. With the demerger, we will have another company with a separate team and a separate Board, Juno, which will progress the iron ore assets. And then we will hope to achieve the business plan for financial year 2022, as I've outlined, and try to pursue the barrier pillar extension, as I have flagged just now.So that in a nutshell is what our fourth quarter has been all about the strategy which we have devised for the next financial year. And with that, I'm open to questions.

[Operator]

[Operator Instructions] Our first question is from Mark Fichera from Foster Stockbroking.

[Mark Fichera, Executive Director & Head of Research]

Priyank, yes, just a question on the expansion study. You mentioned you closed the study and got the results and then looking to get that 3 months of continuity on the movement of material. Will you disclose sort of the key parameters, the outcome of the study at the Jupiter result? Or would you wait to get that consistency and then guide the market then that you're ready to start the expansion and then give some details on sort of the key parameters like costs and production. I was just wondering your plans for guiding the market there.

[Priyank Thapliyal, CEO & Executive Director]

Yes. Yes, Mark. I think at the time when we are in a position as a Board of Tshipi that we have consistently delivered the 50,000 BCM per day for a 3-month rolling basis. At that time, we will look at everything again. But I think as we have declared in the past, the capital, the logistics strategy will pretty much be consistent with what we have flagged to the market on previous occasions. But yes, when we have this mining issue sorted out, then we will come up with a proper announcement with all the right parameters.

[Mark Fichera, Executive Director & Head of Research]

Okay. And just a further question. On the impact of the rainfall, is that now all been resolved in terms of your mining and the pit issues you had as well as any issues you might have in the logistics side that obviously Transnet were affected by? Is that all now subsided? Or are there still some issues that will impact in this current quarter?

[Priyank Thapliyal, CEO & Executive Director]

Well, we have been able to resolve those issues. The pit dewatering and the underground seepage, I mean, all that has been taken care of. So we are back into our main pit where we had planned to mine. And from that perspective, we have no issue as far as the day-to-day function of Tshipi is concerned. And I think for the time being, the same also applies for Transnet. But as I said, I mean historically, these last 3 or 4 months, the rainfall has been off the charts compared to what we have seen in the past. So yes, we have no mining issues. We have no logistic issues as of now.

[Operator]

Our next question is from [ Richard Logan ], who is a shareholder.

[Unknown Shareholder]

I just didn't quite catch on the coal. When would -- is the announcement for the dividend? When was that -- when can we expect that?

[Priyank Thapliyal, CEO & Executive Director]

So I think, again, if we look at our history, we have declared our second half dividend and paid it out towards, I think, the second half of May. And I see no reason to deviate from that.

[Operator]

Our next question is from Stuart Dodd from Renaissance Asset Management.

[Stuart Dodd, Portfolio Manager]

I just wanted to ask, with the Juno spinout, I understand that some shareholders can't take the script, so they will receive a cash consideration. So what I'd like to understand, if I can, is how much -- what will the total cost of the spinout be in terms of paying out those shareholders that need cash consideration, providing some cash in the underlying vehicle and then whatever fees and expenses you've incurred, what sort of cost will it be to the JMS entity?

[Priyank Thapliyal, CEO & Executive Director]

So Stuart, I think most of these things are in the prospectus. If I can recall, we agreed that we will put $5 million as Jupiter to see Juno to make sure that they can advance the studies before they can press the trigger on the construction. So that still remains the intent. I think the shareholders which you allude to, which have to be provided a cash alternative, again, from the collection, they are not more than 440,000 or 500,000 shares. So that times $0.25 will basically be sold by some broker and the cash draws and the shares will be given to those shareholders. And I think that probably is because of where those shareholders are based and whether they can own Juno shares, that is, I think, the background to that. And above and beyond that, I think if we are able to raise the $20 million, the total cost was something like $1.2 million, $1.3 million. So above and beyond that, there's nothing else which I can think of.

[Operator]

[Operator Instructions] We have Stuart Dodd again from Renaissance Asset Management.

[Stuart Dodd, Portfolio Manager]

Just -- Priyank, would you be able to give us a sense of the current market conditions?

[Priyank Thapliyal, CEO & Executive Director]

Yes. Stuart, I think the key theme which is still facing the market is stockpile in China. I think as we speak, the stockpile still stands close to like 6.7 million, 6.8 million tonnes. And historically, I think comfortable level has been around 4.5 million tonnes, so compared to a sensible level, levels are quite high. And while the market is turning in the rest of the world, most of the COVID, China has only been the market which has maintained, in fact, increased their steel production. So the manganese ore which was being sold in Europe and the rest of the world was all chasing China, and that's why the price went down and the stockpiles have gone up.And now in the Chinese winter, the electricity and all is taken away from the ferroalloy smelters for the heating of the homes. And also, we are seeing like some fall in the production of silico-manganese, ferro-manganese, which is the key market. So the ferroalloy smelters also have sufficient amount of stockpiles, and we did some buying in advance of the Chinese New Year.So what we see right now is a market where the manganese price, I think, is holding at $3.40 for the levels. I think it will probably take 4 to 6 months for the rest of the world to pick up. That is when I think stockpiles in China will start to go down with the rest of the world consuming the manganese and not everything being sold into China. And we hope that at that time, the manganese price will take up.But that said, with the cost of around $2.20, we are still making money, I mean, obviously, not as much as what we would have had in a balanced market. But given this market, we are making cash flow and accumulating cash.

[Operator]

There appear to be no more questions at this time. So I will hand the call back over to yourself, Priyank.

[Priyank Thapliyal, CEO & Executive Director]

Thanks, Erica. So again, once again, I would like to thank all the shareholders for their support over the past year. I think the only note on which I would like to finish is that we see no reason for Jupiter to change its strategy. We came to the market with a high payout ratio, double-digit dividend yield as a differentiator. And with the sort of asset we have, the cost base we have, the long life we have, I'm pretty hopeful that we will continue to deliver on that strategy. And as I said, once we have achieved that 50,000 BCM on a rolling basis, at that time, we will execute our expansion plans, which financially make a lot of sense from a CapEx, OpEx perspective. So we just need to get full comfort that operationally, we can execute it because with our strip ratio, 4.5 million tonnes, we are moving a lot of materials that we just need to have like as best comfort we can have. But once we've had that, we will chase our entrepreneurial expense and execute the project.And then the other thing which we would also try to progress is to see if we can expand upon the current barrier pillar, which is only confined to the current footprint but can be extended. And again, that material is at a substantially lower strip ratio than the life of the mine. So we will obviously pursue all these opportunities in this coming financial year, deliver on Juno spin-off, let it loose and let that management bear the mark Mason project and opportunistically see if there's anything else which we think makes a lot of sense for the shareholders. But fundamentally would still be that we want to ensure that we continue delivering the strong dividend to the shareholders.On that note, thank you once again for dialing in.

[Operator]

That now concludes the teleconference. On behalf of Express Virtual Meetings, we thank you for attending, and have a good night.

[Priyank Thapliyal, CEO & Executive Director]

Thank you. Thanks, Erica. Thank you.