Jupiter Mines Ltd

The conference is now being recorded.

Good afternoon, and I would like to welcome everyone to the Jupiter Mines Q1 call. Today, we have Jupiter Chief Executive Officer Priyank Kapil to provide a brief update on the first quarter of the 2022 financial year. After the update, we will open up to questions from the callers. Thank you, and please go ahead, Priyank.

Thanks, Erica. Good afternoon, everyone, and welcome to the first quarter 2022 Jupiter Mines conference call. Let me start off by saying that the first quarter of this financial year posed a couple of challenges. The major one being that both the Northern Cape, where the mine is located, and Hauteng, where the head office is located, went through the third wave of COVID, which was much more worse than the first and the second wave. And that had some impact on our operations. The wave in the Northern Cape is now tapering, but the wave in Hauteng is still going very strong. So that has some implications on the day-to-day running of the operations. The good thing is that as all of us know, Chippy's success relies on Transnet and most of the Transnet operations are located in the Eastern Cape and Eastern Cape has till now been immune to the third wave. So while the operations have had the impact on account of COVID, the logistics, the Transnet has pretty much been going as per normal. And that is reflected in the numbers. In terms of mining volumes, we mine about 4 million BCMs, but we had substantial hiccups on account of mining efficiencies, which led to a loss of around 1 million BCMs of mining production. So those losses were largely on account of mining efficiencies. The blasting was not done properly, which resulted in big boulders in the mine, which resulted in inefficiencies in terms of transporting it from the mine pit to the primary crushing, where we had to use the pecker to break it down into smaller products before it could be fed into the primary crusher. So that was largely the reason why we had these losses. What we have done since then is instituted three work streams. First work stream is to look at the mining efficiency where we are looking at the blasting technique, the inefficiency in terms of the trucks and the excavators, the maintenance philosophy, and Lately, we have seen a surge in absenteeism, people using COVID as one of the reasons for being absent. So the shift contingent has been smaller than what we have had historically. So we are looking into all those techniques, all those work streams to see like what we can do with the mining contractor to increase the efficiency. What we are also contemplating is looking at making new equipment on the site. More than the mining contractor has received funding approval to do so. So we are now factoring that into our medium term mining plan to see what sort of OPEX we can achieve with the new mining equipment and also how the efficiencies and all will improve. That said, the efficiency has improved since we have instituted this project, even with the old equipment. But with the new equipment, it will be much, much better. Three out of the five excavators can potentially be replaced with the capital which has been allocated to Moolman. So we are looking at that. And we are also looking at owner mining as one of the options. We believe that all these work streams should be finalized over the course of July, August, and at that time we should be in a position to take a decision on what we need to do on the mining front. So that is as far as the mining is concerned. On the production side, we produced about a million tons of material. 800,000 tons of that was on the high-grade product, and 250,000 was roughly the low-grade product. What we are also looking at is bringing the secondary crusher, what we've called, like, the GP500 plant in-house. That will result in some cost savings, which was always the plan. It was outsourced, and once everything was stabilized, we were planning to bring it in-house. So we are now at that stage, and we are looking into that just as an option of further cost reduction. In terms of logistics, we railed close to 860,000 tons to the port. Out of that, about 560,000 tons was on the rail and 300,000 tons was on the road. And in terms of sales, we shipped about 845,000 tons of product. Again, 630,000 tons was primarily the high-grade lump and fine, and the remaining was the low-grade product. So that's how the operations have basically phased out. Suffice to say that even at these low manganese prices, the operations have been cash positive, and that is depicted in the numbers. In terms of logistics, a couple of things that have happened. Now we have stabilized the 60,000 tons per month run rate through Ludrit, 720,000 tons over the course of the year, which against the previous option where we had to truck it, results in almost 65 to 70 million rands of cost savings. And what we are also looking at is the co-loading of these Ludrit vessels through the port of Koka against the previous option of through Port Elizabeth. And that should result in bigger shipment sizes and should lead in cost reduction on account of logistics. We are also looking at options of increasing the shipment size from other ports from 44,000 to 55,000 to 60,000 tons. And that, again, is one of the options for cost reduction. So all these options are basically being looked at, and as I said, we should have finality on these over the course of July and August. In terms of the market, I think it's fair to say that over the five or six years of operations on the FOB basis, the average price, which we have realized in the first quarter, has been the lowest. That said, on the CIF basis, the price is still pretty strong, so the major theme which has basically been faced by the manganese industry is the high freight cost, and that is largely on account of the competition the ships are facing from other commodities, which have basically been trading at very high and robust prices. In the past, our shipment cost to China would have been something like 60 to 70 cents per DMTU, and right now we have to pay close to $1.25 to $1.30 per DMTU. And I do not think this is going to change over the course of the next three to six months. The good thing is that we are seeing slight reduction on account of the trucking tons coming out of South Africa. but again, we have only seen that over the course of May, so we will be following and tracking what goes over the course of the next few months to see whether there has been a genuine downturn in terms of trucking tons out of South Africa. So I think that, in a nutshell, is what I would like to highlight as The major achievements are focused over the course of the first quarter and what we plan to do over the next three months. And with that, I'm more than happy to answer any questions.

Thank you. The question and answer session has now commenced. Guests are invited to ask questions by pressing star 1 on their telephone keypad now. You will hear a tone as you join the queue. Please listen for your name and I will introduce you through to the calls. That is star 1 on your phone keypad now. We have our first question from Stuart Dodd from Renaissance Asset Management. Please go ahead, Stuart.

Thank you. Hi, Priyank. Just wanted to ask the initiatives that you're looking at, the cost reduction initiatives, is there any capital associated with any of those?

Hi, Stuart. So I think I highlighted two or three things. The first was the GP500, the secondary crusher which we are trying to bring in-house. So the capital for that has already been incurred. So it is largely a function of what was outsourced is now being brought in-house, and that will provide some cost savings. So that was the first one. The second one was the co-loading of the vessels from Ludwigs with KUKA. Again, we have been doing that since March, April. So if we can do that on a sustainable basis, we know that the shifts will be bigger and that will lead to some cost reduction. So that is the second one. The third one which we are looking at is the mining where Mormons have conceptually been approved, I think, close to 500 million rands of capital to deploy for GP equipment. And what we are now looking at is with those bigger equipment, with our revised medium-term plan, like how everything is going to dovetail and what sort of efficiencies and enhancement will we achieve. And if we are able to achieve that on account of the bigger equipment, then that will no doubt lead to cost reductions. But we have to see what sort of proposal comes from Wollmans on account of that. So those are the three things. The fourth thing which we have also been able to do is switch from our own power generation to the FCOM grid, and that project was completed over the course of, I think, March, April, and that, again, has already been costed and the money has been spent. I think it was close to 50, 50 million rand, and we hope to achieve 30, 35 million rands of cost savings per annum. So that, in a nutshell, is like what we have spent and what we hope to save in terms of the OPEX going forward.

Thank you. Thank you.

Thank you, Stuart. We have our next question from Mark Beshera from Foster Stockbroking. Please go ahead, Mark.

Yeah, hi, Priya. Yeah, just a question. You mentioned about trucking volumes being reduced. I was just wondering, are you seeing this across all the mines in the belt, or are there any particular mines that are being impacted more so in terms of trucking volumes?

We have not, as far as Chippy is concerned, we have not seen any impact on our trucking tons. As I think I might have mentioned in the past, now the low grade volume, the low grade product is part of our business plan and not seen as a byproduct. So the trucking tons are quite critical and crucial for our overall business plan where we hope to ship 2.4 million tons on the rail and close to 720,000 tons through Lutris, and trucking is integral to that. As I said, we are seeing a slight dip in May, and that is largely to do from the smaller players, but we need to see a consistent pattern. What we have seen in terms of numbers is that in November of 2020, there was close to 730,000 tons shipped via truck, that month, and in May, that number is down to like 300,000 tons. But again, as I said, I want to see like three, four months of consistency before we can form a view on that.

Right. And just one further question. I guess on the, just regarding the Chippy expansion, I guess, given you contemplating these other initiatives, I guess that you want to make sure those initiatives are better down and therefore, I guess, in terms of any expansion plans, they'll be sort of on hold for another 12 months?

As I've said, Mark, the critical number for me is 1.5 million BCM on a consistent basis. We need to see that for three months. We have not seen that. And this efficiency exercise, this new equipment exercise, is largely to ensure that the ongoing operations do not face the hiccups which I have mentioned in this conference call. So once we have ticked that box and if the same equipment can then enhance our productivity to meet the 1.5 million BCM, then the trigger for the expansion will have been executed. Until then, we are not going to pull the trigger on the expansion.

Okay, thanks.

Thank you, Mark. Again, if there are any questions, please press star 1 on your telephone keypad now. We have our next question from Mick Worrell from 708 Capital. Please go ahead, Mick.

G'day, Prang. Noting the recent share register movements from your BAE partner, and their previous desire to get listed, either on the JSC or maybe another exchange, is there any way to list the shipping vehicle itself on the ASX, and would that be a value-unlocking tool for the benefit of all shareholders?

Hi, Nick. I think at the time of the listing, one of the key things which we mentioned when we went and met the prominent shareholders was that Our desire is that Jupiter not only holds half the Chippy and half the marketing rights, but if at all possible, it should be the vehicle which lifts like all of Chippy, so 100% of the product marketing and 100% of the equity under Jupiter. And that has always been the intention, but it has to be done on commercial terms which work for both parties, You're absolutely right. Our B partner has tried, I think, two or three times to lift on the JSC, and for all sorts of assorted reasons, they have failed. And Jupiter stands ready to see if a good commercial deal can be done for our shareholders, which provides them the benefit of taking the full ownership of the assets. What we, I think, all need to appreciate is that Jupiter is a clean vehicle. It's Australian listed. It provides the liquidity, and depending on every shareholder's perspective, they can get in and get out, enjoy the dividends, but they have much more flexibility and full control on their shareholding, unlike our BEE partners, and that requires a proper compensation commercially for our shareholders. So yes, the desire is there on both sides, just that we have not been able to agree the proper commercial terms, which compensates our shareholders for that additional risk.

Yeah, in saying that, you're talking about buying out the VE partner. I mean, in terms of Jupiter shares, potentially.

Okay, gotcha. They have tried to lift three times on the JSC and they have failed, and I don't think anything has changed for that result to change. I mean, miracles do happen, but I have no doubt.

Okay. I noted their commentary previously that they said it makes sense at some stage to combine the two halves together. So it's just a question of how and when. Yeah. Thank you. Okay, thank you.

Thank you, Mick. Our next question is from Richard Logan, who's a private investor. Please go ahead, Richard.

Yeah, g'day. I missed the start of the call, so sorry if you've already answered this, but it looks like sales are nearly double over the first quarter from last year. The marketing fee income is nearly double. The EBITDA is nearly double, but the net profit is exactly the same. What's going on there? Why is everything nearly double? much higher income, but profit is the same as first quarter 2021. Hi.

I think the first quarter of 2021, there was a severe hit in production on account of COVID. That's why those numbers are much, much lower than what they are this year. The numbers were much higher because there was some foreign exchange gains and all where the U.S. dollar was. substantially different to what we had assumed in our business plan and also much different to what it is right now. It was purely an account of effects in some accounting issues, but in terms of the cost of production, the costs were slightly higher because we had to pay for some of our contractors when the operations were put on a lockdown, although for a short period of time. Yeah, okay, so, yeah, was there a much higher tax or something because your EBITDA was... No, tax we only pay like every six months, so the tax is largely captured in the second quarter and the final quarter.

Because it's just like looking at your... EBITDA for this quarter was $1.7 million and the previous year was $1 million, so it's quite a lot, but the profit after tax was the same, so it's like...

I'm not sure which numbers you're looking at, but maybe you can pick it offline with Melissa.

Yeah, it's page two on the quarterly report that came out today.

I think maybe the best thing is to pick it up offline with Melissa. I've given you the gist, but she can share the details with you.

Okay, thanks. Thank you. Thank you, Richard. If there are any more questions, please press star one on your telephone keypad now. There seem to be no more questions at this time, so we will conclude the question and answer session. Thank you, and back over to you, Priyank.

Well, thanks, Erica. Once again, thank you to all the shareholders for their support, and I'll speak to you guys next quarter. Thank you so much.

That now concludes the Jupiter Minds quarterly call. On behalf of Express Virtual Meetings, we would like to thank you for attending, and have a good afternoon.