Jupiter Mines Limited

All participants are in listen-only mode. Now for the presentation, followed by a question and answer session. If you wish to ask a question, you will need to press the star key or the number one on your telephone to ask. I would now like to hand the call to Mr. Brad Rogers, Managing Director and Chief Executive Officer.

Please go ahead.

Well, thanks, Carly, and thanks, everyone, for joining. As usual, I've got Ian Murray, our Chairman, on the line, as well as Melissa North, our CFO. As usual, I'll just give a few opening remarks and then we'll throw the line open for any questions that might be up there. So I'll be providing the key comments summarised from the September quarter that was released to the market this morning. And for those that have had a chance to read that quarterly, you will have seen that the September quarter was not particularly strong quarter operationally. We had sales of 1.04 million tonnes in the quarter, which was actually 3% down on the June quarter, which was a very strong quarter, capitalising on high manganese prices in that quarter. But the September quarter figure I just mentioned was 12% up on the prior comparative period, the same quarter last year. From a production perspective, volumes were even higher than that, That represented, in the month of August, a record achievement out of the production circle, which was obviously pleasing as we were pulling through our strategy and took out the capacity of Chippy to potentially do more on a sustainable basis. That represented a run rate from the sales system of over 4. So strong sales, even stronger production. The strong production, and the production being higher than that sales level I just mentioned, was intentional and targeted towards building finished product stockpiles, which will stand us in good stead ahead of potential weather disruptions, which at SIFI occur between about November, about now, and January. some wet weather events at the mine that may flood the pit, then we'll be prepared with finished product stockpiles to continue the desired run rate notwithstanding any wet weather interruption. I will say though with evading magnitude prices, and I'll talk about that in a moment, we should expect volumes for the current December quarter to go lower and the very strong sales and production figures that I've just I talked before about how sales work at TIPI. One of the reasons why sales were still elevated during the September quarter, notwithstanding stock manganese prices reduced through the quarter, was that those sales were volumes that had been priced in the June quarter. So as we come through September quarter, manganese prices are reducing, which we expect to see somewhat lower volumes when we're talking about the December quarterly post-calendar year end. Mining was strong in the quarter as well, 4.1 million PCMs, representing a strong mining performance, and that was 27% up on the last quarter. So from a health production mining perspective, all very strong figures, and that was pleasing for the quarter. The G6 was down slightly from 10% volume-wise down on last quarter, and that was reflecting lower volume, given the manganese price environment. Obviously, road haulage is the most expensive way of getting our ore from mine report. FOB costs of production at 233 US per BNPU was 7% down on last quarter, and broadly in line with where I've sort of been guiding where we're expecting for these costs to come in. given inflation and also given exchange rates. The Lebanese market for the quarter was softer than last quarter, reasonably significantly smaller. Average spot risk prices were US$4.24 per DMTU compared to $5.50 per DMTU from June quarter. By the end of the September quarter, so 30 September, The price has reduced further to $3.74. Prices have stabilised through September and October. Today the price is $3.71. So relatively low level, but it has stabilised at those sorts of levels through September and October. The FOB price today is $2.97. So the prices have just been quoted were CIS prices. And the FOV price, to give you a feel, has varied between about $2.90 and about $3.05, pretty much for September, October. So relatively low levels. The kind of average FOV price in the last five or six years is around $3.80. So the price has stabilized at a much lower level than that. But it has stabilized and has kind of continued to shut down when it was on October. through the course of August. So that's good, but reflecting in price that we saw through August and the reason why it's much lower than average today really is a function of Chinese demand, which has softened, and sentiment around Chinese production and the profitability of steel mills and those sorts of factors. has driven steel-making material prices to pretty majorly lower. There has also been, through July, August, September even, an increased level of manganese ore exports, mostly from South Africa, and some of the volume from South Africa. but supply has exacerbated that. Lower manganese prices prevailing, as we just discussed, through August, September, October, there has been a correction on the supply side. So you have manganese ore sales through October, November, and I guess just the next few months being at lower levels than we've observed through July, August, September. that will take a while to flow through to China. And so we see the supply side correction below these prices, as you'd expect, already coming through. As you can see in our quarterly that were observed through the 17th quarter to be what's possible, and that's generative, that's what the Manganese lines are. And so naturally those lines in that situation pull back on their own production, and that helps to support and stabilise the Manganese, Shipping rates were lower through the quarter, and that's good, that helps, and you'll see in the quarterly shipping rates today are around US$27 a tonne for our shipping, and that compares to US$30.60, which was the average through the June quarter. Looking further out, looking at next calendar year, we included in in steel production with a demand of 1.2% comparing to a contraction of 0.9% this year and so most people are expecting that factor on the demand side as well as moderating the legal supply to start to import, improving these prices over the coming months and as we move into 2021. From a financial perspective, as made out in the quarterly, as you'll imagine, our financials were mainly driven by the May 25 score around quarter, so earnings and cash were both positive, both lower in their generation than in the June quarter. From a cash perspective, students' cash increased to 97 million Australian dollars. There were some accounts receivable unwound, unwinding that, but Casus evil is still relatively elevated and that's not surprising given the high volumes of all ships through the second quarter and so that accuses evil on why it should be a factor in the coming quarter or quarters as well. That increase in cash that should be to $97 million occurred notwithstanding, as I mentioned before, there was a inventory build during the quarter when we produced more manganese ore during the second quarter that we sold and so that was a good outcome that we saw an increase in the cash balance and that occurred notwithstanding low manganese prices and notwithstanding a bit of an inventory build as well. We did this cashless down to $0.9 million quarter on quarter but that was entirely because of the So in summary, strong quarter for Chippy operationally in some areas, very strong. And again, Chippy demonstrates itself extremely well in a weak manganese price environment and has been around for a long time and has performed well through the cycle and it's performed well again in the September quarter across the areas that I mentioned, let's say, poor manganese price backdrop. quarter has stabilised and we are expecting based on the observed metrics that I mentioned a moment ago, a stronger steel band according to World Steel but also we can see moderating manganese ore supply that manganese prices have commensurately stabilised with the increase in support over the forward pit. We're obviously focused on the execution of our own corporate strategy and we are planning to provide an update on where we're at in relation to the strategy to shareholder support. So those are the key points I wanted to draw out of the recording. Again, feel free to go through the greater detail in your own time, but Carly, I'll see if there are any questions on the line now, please.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to come out. If you wish to answer your question, please press star 3. If you're on a speakerphone, please pick up the handset to ask your question.

Your next question is from Adam and Corey.

Hey, guys. It's Rob and James. How are you?

Cool. And, you know, the production and sales rate can be maintained. You know, there's a couple of orders now where you can shoot sales at over one million pounds. Can that be maintained moving forward? And, likewise, the production can be maintained moving forward as well.

So, you'll know that in the strategy that we've announced to market, we have, as part of the growth part of our strategy, a piece of work aimed at determining what is the right level of output from TV and what's the right time if we're to increase that level of production to move to that higher level. is underway and the idea with that would be to step up to a level at a targeted period of time and stay there. That's not what we're doing right now. We've gone through June quarter with high manganese prices and moving to a spring quarter where we're in part for the sales perspective delivering obvious prices that were executed towards the far end of the June quarter and also in July. That kind of explains why sales were elevated from the beginning So that's 4 million tons of random run rate for the moment. From a production perspective, that was high in the quarter in part to deliver against those higher sales volumes in parts of the year ahead of the next season. So given where many of these prices are, given that we're ongoing with that piece of work I mentioned before, you shouldn't expect the ECU to deliver around 4 million tonnes per annum at the moment. That's not the intention, but what the performance does do is obviously demonstrate our ability over a reasonably long period of time to achieve it within the existing flow sheet and crushing circuit. The rate limiting step on that volume is the crushing circuit. I'd also say that we are vocal allocation of just under 1.8 million tonnes and road haulage is the most expensive way of getting our ore to port. Obviously, you've seen through the financial data that we're standing lower manganese prices than the road haul tonnes through this quarter, but it's definitely less attractive to do that when manganese prices are low. and that's exacerbated if we're doing it with low growth and so we're getting lower prices again for low growth so not a huge incentive to keep running at that sort of rate with these underneath prices prevailing and so for all of those reasons, a lot long answer to your question Adam, I think we'd be looking to pull back somewhere between that average level and where we've been in June and September, but it gives us the ability to prove ourselves on a technical basis, maybe these parts of the approval are under-catalyzed, but also the flood sheets stand up to a higher level of volume.

Thank you for giving that cover, and maybe just with the goals that you mentioned, in the quarter or the additional in addition to the low-grade one?

Yeah, we normally don't run, haven't been running a kind of excess of high-grade stockpiles, and obviously through June we were looking to maximise the amount of high-grade we could ship out of them, so it really was just this quarter. So if you look at the kind of amount of high-grade that was produced in excess of the sales that sort of gives you a bit of a guide to really just, again, focus on having a good communication capacity in the soft through November, February. Obviously, if magnetic passes hopefully improve and we see a little less weather than we might, then it also gives us a few opportunities to perform on the other side.

Thanks, Randall. Perfect. Thanks, Anna.

So our next question comes from Ron Holt from Argonauts.

Hi, Merlin.

A few questions. Please, the first one is just on the distribution. Could you give us a bit of a timetable on the distribution? Would that be okay?

Yeah, so thanks, Ron. You know that there are two times where she can consider a dividend per year. We're on a Australian financial reporting timetable both Shippy and Jupiter now and so the next time that a dividend from Shippy would be considered would be after the 31 December period ends and it's I'd say March when you should be thinking about that probably late March in line with the interim financials when that would be decided. The payment of a dividend from Jupiter is obviously a two-step process. There's a dividend to trade from Chippy, the board of Chippy, and then the board of Jupiter reviews a dividend off the back end. And as a reminder, Jupiter's dividend policy is that we'll pay a minimum of 70% of any dividend that we receive from Chippy or any other asset in which we're invested. after 31 December but obviously allowed to that for completion of financial considerations event so the next one would be commuted in March.

Okay, good points.

And could there be updates on the talks with Mr Bile and consolidation and what else is happening in Kalahari now?

Yeah, so growing Jupiter both in terms of production of energy but also in a growth within Kalahari is part of our strategy and there are numerous options that we can work on. Obviously it comes down to opportunity and executability and a lot of factors across the various opportunities in the field aren't completely controllable by Jupiter. The second thing I'm going to make is obviously those discussions across any opportunity are commercially competent, so I'll provide in the strategy update just prior to our AGM as much additional colour on all elements of the strategy if I can, but I think I should expect that it'll be until there's something that's now a little relatively vital detail given the confidentiality, but we are working through all elements of our strategy on the ongoing basis.

So, we've seen some money in the U.S. and U.S. communities today. How's your strategy going with the U.S. communities and U.S. angle there as well?

Yeah, thanks a lot.

We've seen that. And our strategy, as people have read our strategy study summary, which is on our website, in the US and part of that is because of the availability of the sort of grant funding that we've seen announced by others. There are other factors as to why we think North America is an ideal location for that processing infrastructure. You can incidentally qualify for that same type of funding if you locate the facility countries that have a free trade agreement with the US, so South Korea, for example. So that's why if you were in our study in front of the US bracket, some of those factors are still moving around. So that is part of our study work. We'll provide an update on that part of our strategy work as well. We have been working on refining the flow sheet and we've been pretty pleased with the improvements we've made in that regard. So we should be able to provide a bit of data on the financial and risk improvements that will result from the flow sheet refinement. We're building a small little out of scale pilot plant and that should be used to be able to share material with customers. The key thing for me in this phase of the work on that area of our strategy is that by the end of this pre-proofability stage we want to have essentially non-binding off-takes in place standing behind the volume of output that we're looking to scale to if we execute this strategy. And that is an area where we're confident that volume will be there, we'll be able to get to that stage. But from the customer side, it's still going. So we're still talking to customers. But that whole EV battery demand space, frankly, I think it's moving a bit sideways at the moment. So we're continuing the work. We're very happy with how things are going from a technical perspective with the customer. But I think everyone who's in this battery mineral space has seen the customer demands taking a bit longer than they would like to form up, so ultimately they're confident that that demand will be there and that Manganese has a strong value proposition within that space. and firmed up before we move into any sort of disability feasibility studies. So what we're doing is continuing those discussions, continuing to refine the flow sheet, finishing the pilot plan so that we can have those discussions for the next phase of work. The other areas, funding, grant funding, you know, location, selection, et cetera, I regard as just kind of lower risk and more uncertain than the demand at the moment. There's grant funding available in the US, there's grant funding available elsewhere in the world as well. So it's an area where I think if you've got the right business model, you've got the right customers, and you've got some certainty around audience, then you'll be able to get the funding and grant funding will be part of that. And so North America is still the base base and getting the sort of grant funding that others have announced would be part of that work as well. But I think the most important priority at the moment is to really be firmed up and confident that we'll be off-risk in relation to customer demand volumes for academics and for moving into the DSS phase of work.

Once again, if you wish to ask a question, please press R1 on your telephone and wait for your name to be announced. Your next question comes from Mark.

Yeah, hi, Brad. a couple of questions from me. Firstly, just on the cost side, in recent years, costs have been on that FAB cost around that $2 to $2.20 range, sometimes even lower. I just wanted to clarify now that you mentioned about the impact of inflation, and that $2.33 that you're talking about, is that sort of a level you should be thinking of, say, for Yeah, you're right Mark.

We've had this, for the last few years, average in that range that you said, $2 to $2.20, sometimes it's gone as low as $1.05. I think the level that we're at for the September quarter is around where we've been saying it's going to be a couple of ticks higher, I've been saying $2.25 to $2.30. What is behind that and what's behind the costs of the last few years as well is that the famous tailwind from foreign exchange where incurring costs mostly in rand but reporting them in US dollars and the rand are not a long term depreciating trend more recently has reversed headwind from the exchange rate, more complicated conditions in South Africa, post-election, etc., all of that has factored into that trend of the RAND, US sovereign exchange rate, helping, and has in fact kind of hindered for the moment. That has lost some cost inflation to the extent that it's always been there. Cost inflation in South Africa runs at 6 or 7% and has done during that period of time. And some elements of bulk oil miners have been higher than that sometimes. Underlying it, you do have cost inflation. Some of that's been masked by foreign exchange. Shippey has done a good job, if you take out Forex, I think, of managing efficiency gains such that they're well positioned and are cost effective relative to other producers, and that is still the case today. If you look at, you know, our new physical tip of the number of reproducers in the Kalahari art park, those that are going for a higher cost at the moment than chip years, tip is the same. So long answer to your question, yes, around the level right now is kind of what you should do. That's still positioned to be well, even in a poor, agonised, quiet environment, and well in terms of our reproducers.

Right, excellent. And the other question was just related, it was mention of a run-off demurrage charge. I was just wondering if you had any idea of the quantum event and why that occurred?

Yeah, well, I think that affected not just Chippy, but other producers as well. It was from memory, I think it was, I don't know, But ultimately, she doesn't have other federal producing exporters and that's a general issue with the port area that impacted Sydney as well as other producers and the impact was around 10 million rand. Right, okay.

That's it for me, thanks. Thanks, Mark.

There are no further questions at this time. I'll now hand over to Mr Rogers for closing remarks.

Okay, thanks, Ali, and thanks, everyone, for joining in for our questions. We look forward to talking to you next time.