Jupiter Mines Ltd

The conference is now being recorded.

Good afternoon and I would like to welcome everyone to the Jupiter Mines fourth quarterly call. Today we have Jupiter Chief Executive Officer Priyank Patliel 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.

Thanks, Erica, and good evening, everyone. Welcome to the Jupiter Mines fourth quarter conference call. I think the key themes which Chippy has basically been challenged with in the fourth quarter have 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 teams. And then the other challenge which has also been faced by Chippy 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. The same thing went for December, 170 versus 44. And in February, we lost almost eight or nine days due to excessive rainfalls. So that has been the primary challenge. Transnet has also had severe issues. The railway line, which is about one and a half meters above the ground level, was all submerged. But that said, whereas Transnet and the other producers in the Kalahari declared force majeure chippy through their capable stockpile management and logistics planning were able to avoid that situation despite these challenges. The pitch 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 tons which we sold, about 2.6 was high-grade material and about 800,000 was low-grade material. And we finished the year with about 1.75 billion cash in the bank, of which we kept 650 million rand for our capital.

We have just lost the host for the call. Please just hold as I reconnect him. Thank you. Thank you, Priyank. You're back on the call. Please go ahead.

Thanks. 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 Chippy. We sold 3.4 million tons, made us, again, the biggest exporter out of Kalahari as a single mine. And about 2.6 million tons was in high-grade material and 800,000 was in low-grade material. As I said, we finished with $1.75 billion cash in the bank and retained $650 million for our capital expenditure programs, stripping, and the rest, $1.1 billion, was paid out to the GP shareholders as dividends. 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 the target of doing about 50,000 BCM per day for a three-month consistent basis just to make sure that the pit design, the equipment which we were using, was capable of delivering 4.5 million tons, 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 three-month rolling basis, at that time the Board of CHIPI will consider the expansion which makes a lot of sense considering some of the big manganese mines will be finished in the next five 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 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 load-rich channel is now delivering at our main plate capacity of 60,000 tons 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 tons in high-grade material for this financial year 2022, and we hope to top it up with almost 10 to 20 percent of low-grade materials, so between 3.3 to 3.5 million tons 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 break-even basis. The fact that we have used up a lot of the stockpile will 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. That is also likely to play with the theme that in the past there has been less demand for low-grade material from the federalized 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 to 2.4 million tons on the rail through the Mecca Channel and about 720,000 tons through our Namibia port of Ludritz and close to 500,000 tons 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, the barrier pillar and the strip ratio was 4.5, whereas the life of my 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 and what I call phase B, then that should give us close to 15 million tons of material at a slightly lower rate, but at the substantially reduced strip ratio compared to our historical 12 is to 1 life of mine. So that in a nutshell is what we are trying to achieve as far as the Chippy 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 you 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 not the company. So we will be progressing on that basis because we feel that Mount Mason in this climate has a lot of intract value and that can be released in the form of the listing. So that we hope to achieve in the next six to eight weeks as per the timetable, and that will probably result in close to one and a half cents per share as extra value which is declared to the shareholder. And I'm very optimistic that with the entrepreneur management and the entrepreneur 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. Those 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 port, 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 embedded pillar extension as I have slapped 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.

Thank you. Guests are now invited to ask questions by pressing star 1 on their telephone keypad now. You will hear a tone as you are joined to the queue. Please listen for your name and I will introduce you through to the call. That is star 1 on your telephone keypad now. Our first question is from Mark Fishera from Foster Stock Broking. Please go ahead, Mark.

Yeah, hi, Priya. Yeah, just a question on the expansion study. You mentioned you closed the study and got the results and then looking to get that three 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 will you wait till you 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.

Yes, Mark. I think at the time when we are in a position as a board of GP that we have consistently delivered the 60,000 BCM per day for a three-month rolling basis, at that time we will look at everything again But I think as we have declared in the past, the capital and 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.

Okay. And just a further question. 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?

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 functioning of CHP is concerned. And I think for the time being, the same also applies for Transnet. But as I said, I mean, historically, these last three or four months, the rainfall has been off the charts compared to what we have seen in the past. So yeah, we have no mining issues. We have no logistics issues as of now.

Okay, thanks.

Thank you, Mark. Our next question is from Richard Logan, who is a shareholder. Please go ahead, Richard.

Yeah, hi. I didn't quite catch on the call. When is the announcement for the dividend? When can we expect that?

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.

Thank you.

Thank you, Richard. Our next question is from Stuart Dodd from Renaissance Asset Management. Please go ahead, Stuart.

Thank you. Hi, Priya. I just want to ask, with the Juneau spin-out, 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 spin-out be in terms of paying out those shareholders that need a 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?

So, Stuart, I think most of these things are in the prospectus. If I can recall, we agreed that we would put $5 million as Jupiter to feed 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're not more than $440,000 or $500,000 shares. So that times $0.25 will basically be sold by some broker, and the cash 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 other than beyond that, I think if we are able to raise the $20 million, the total cost was something like $1.2, $1.3 million. So other than beyond that, there is nothing else which I can think of. Right.

Thank you.

Thank you, Stuart. If there are any further questions at this time, please press star 1 on your telephone keypad now. Thank you. We have Stuart Dodd again from Renaissance Asset Management. Please go ahead, Stuart.

Hi again. Just while we've got you pre-enquired, would you be able to give us a pricey of the current market conditions?

Yes, Stuart, I think the key theme which is still facing the market is the stockpile in China. I think as we speak, the stockpile seems kind of close to like 6.7, 6.8 million tons. And historically, I think the comfortable level has been around 4.5 million tons. So compared to a sensible level, levels are quite high. And while the market is turning in the rest of the world, For most of the COVID, China has only been the market which has maintained, in fact, increased their steel production. So the manganese oil, which was being sold in Europe and the rest of the world, was oil 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 Ferola smelters for the heating of the homes and all. So we are seeing like some fall in the production of silico manganese, ferro manganese, which is the key market. So the Ferola smelters also have sufficient amount of stockpiles and they 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 FOB levels. I think it will probably take four to six months for the rest of the world to pick up. That is when I think the 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 pick up. But that said, with a 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 even in this market we are making cash flow and accumulating cash.

Great, thank you.

Thank you Stuart. There appear to be no more questions at this time so I will hand the call back over to yourself Priyank.

Thanks, Erica. So again, once again, I would like to thank all the shareholders for the 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 the differentiator, and with the sort of assets 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 four and a half million tons, we are moving a lot of materials. So we just need to have like as best comfort we can have. But once we've had that, we'll chase our entrepreneurial expense and execute the project. And then the other thing which we will 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 the Juneau spin-off, let it lose, and let that management build the Mount Mason project. And opportunistically, if there's anything else which we think makes a lot of sense for the shareholders, but the fundamental thing will still be that We want to ensure that we continue delivering this strong dividend to the shareholders. On that note, thank you once again for dialing in.

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

Thank you. Thank you. Thank you.