Robust, cash-generative production from mining waste
Jubilee operates several chrome-Platinum Group Metal (PGM) operations in South Africa and is constructing a zinc-lead (vanadium) plant at Kabwe in Zambia after already commissioning the copper and cobalt circuits (the ‘Sable' refinery). The company has a growth pipeline identified and significant opportunities to find new projects in Africa (or globally); more specifically, Jubilee announced that it is looking to increase its copper (cobalt) production in Zambia aggressively to make full use of the Sable Refinery. Jubilee also owns the Tjate PGM project in South Africa, which is currently on hold. The company model is to treat its own waste materials and to supplement these with third party ores and wastes where possible. This year has been nothing if not eventful for Jubilee, but further progress and material catalysts are expected over the course of 2020. Jubilee has a high-margin business with cash on hand, and we see plenty of opportunities for Jubilee to capitalise on its robust business model through the global Covid-19 crisis and beyond. We initiate with a fair value of 11.2p/sh
Companies: Jubilee Platinum
Jubilee Metals (JLP) – Corporate – Large copper tailings project in Zambia – staged expansion for Sable
Market Cap £82m Share Price 3.8p
Jubilee announced yesterday that it had secured a JV with a private company - Star Tanganika – for the rights over a copper project at Ndola in Zambia. The purchase price was $5m ($0.6m in cash the rest in shares in Jubilee) which will be used to advance a further potential copper tailings project held by the owners of Tanganika. Jubilee will provide all of the operating and capital funding for the first phase project and will receive 75% of the project earnings until all capital is recovered dropping to 60% after that – Jubilee will also have first right of refusal over the copper-bearing concentrates produced on 3rd party offtake terms.
Gold – Robust pricing, improved returns and increased interest
The robust gold price, currently sitting comfortably above $1,700/oz, has been one of the bright spots of the current COVID crisis, although the roots of the price increase were seen well before from mid-2019 on geopolitical and trade concerns. Gold mining companies have been reaping the rewards of the higher price with forecast profits and cash expected to grow significantly. The increase in gold price has been reflected by share price appreciation for most of the gold-mining sector; gold miners, those companies developing gold projects and even gold explorers have all seen an uptick in share prices. Those companies in production should see considerably higher profits and we expect the level of dividends back to shareholders to rise.
The rate of M&A in the sector might also increase, as in previous high price periods, with some companies assuming that these prices can be sustained – however, they will have to be careful as a rash of M&A in previous cycles has shown that there may be a price to pay later on and the industry can ill afford a return to eye-wateringly large write-downs on the other side of this cycle. Gold miners will also have to behave prudently as there will, of course, be a temptation for higher throughput and production, regardless of grade, to generate more cash – a decreasing profit margin perhaps, but a lengthening mine life; as in everything there is a balance to be made to ensure sensible returns.
We are most heartened by a renewed interest in the previously (seemingly) ignored junior explorers which we think is a theme that will develop and continue.
Companies: AURA CMCL CNG GDP JLP ORR
Judges Scientific, a group involved in the buy and build of scientific instrument businesses, has provided a trading update ahead of its AGM today. Year-to-date organic order intake, as of mid-May, was down 18.5% compared to the same period in 2019, caused by the closure of universities, the cancellation of scientific conferences and travel restrictions impacting sales and installations. Although the precise impact to order intake has varied by global territory, from minus 4% to minus 25%, the order book, at the end of April 2020, stood at a respectable 11.9 weeks (down from the 13.2 week starting position), the weaker order intake countered by reduced deliveries.
Jubilee announced yesterday that it will move its fine chrome plant from the Dikolong Chrome Mine (DCM) in South Africa to either its Windsor or Inyoni plant. DCM is not currently operational and Jubilee could make better use of its capacity at one of its other plants. Jubilee is a world-leader in fine-chrome recovery and the relocation of its plant will be earnings enhancing at one of the other locations.
Companies: Jubilee Platinum Judges Scientific
Interims highlight the robust business model
Jubilee, which specialises in creating value from African mine tailings, today provides its interims for the half year ending December 2019. As previously announced this has been a transformational period for Jubilee – everything increased relative to the prior period, with revenues rising to £25.4m (+205%), attributable Group earnings to £9.8m (+778%), cash from operations to £4.9m (+574%) and an EPS of 0.35p (0.06p).
Growth came from Windsor (PGM and chrome production in South Africa), with several intra-period transactions that will enable the growth profile to continue at Inyoni (South Africa) and Kabwe (Zambia). Covid-19 has had an obvious impact (on prices received and on the operating environment – especially in South Africa where there is a 3-week shut-down) but we see a robust, cash-rich company, operating a high-margin business that is poised to restart production and capitalise on the progress made to date.
WHI View: We continue to see a robust investment case for Jubilee. The company has a growth pipeline identified and significant opportunities to find new projects in Africa or globally. The ‘Jubilee Way' combines an experienced, technical management team with innovative processing techniques to generate cash from (mainly) the waste material produced as part of the mining cycle. The company model is to treat its own waste materials and to supplement with third party ores and wastes where possible. It has three chrome/PGM operations in South Africa and a copper-zinc-lead-vanadium project in Zambia (copper circuit already commissioned). This is a high-margin business and we see plenty of opportunities for Jubilee to capitalise on its robust business model when the current global crisis is over.
Jubilee, which specialises in creating value from African mine tailings, today provides its interims for the half year ending December 2019. As previously announced this has been a transformational period for Jubilee, during which everything increased relative to the prior period: revenues to £25.4m (+205%), attributable Group earnings to £9.8m (+778%), cash from operations to £4.9m (+574%) and EPS to 0.35p (0.06p). Growth came from Windsor (PGM and chrome production in SA), with several intra-period transactions that will enable the growth profile to continue, at Inyoni (SA) and Kabwe (Zambia). Covid-19 has had an obvious impact (on prices received and on operating) but we see a robust, cashrich company, operating a high-margin business that is poised to restart production and capitalise on the progress made to date.
Jubilee Metals (JLP) – Corporate – H2 Update - Continued transformational improvements
Market Cap £90m Share Price 4.5p
Today Jubilee, the chrome and Platinum Group Metals (PGM) producer in South Africa with its Kabwe base metal refinery currently under construction in Zambia, provides an update on its H2 numbers for the six month period ending December 31st 2019. Revenues increased 74% (£25.0m from £14.4m in H1 2019) with operational earnings also increasing to £8.3m in H2 (from £5.6m). In H2 the company also brought the Kabwe copper (cobalt) plant into production from third party material with a view to also producing zinc in Q2 2020.
Verditek (VDTK) – Corporate – Continued trials, new sales appointment
Market Cap £4.9m Share Price 2.25p
We note this morning's RNS from VDTK, which outlines a wide range of trials, development agreements and potential outlets for their strong but light solar product. The RNS amply illustrates the potential broad reach of VDTK's product, taking in industrial, retail, telecoms and transportation products among others. With the company anticipating crystallising these opportunities in FY2020E, with commercialisation to follow, potential drivers remain safety, practicality and cost.
Companies: Jubilee Platinum Verditek
Jubilee Metals (JLP) – Corporate – H2 Update - Continued transformational improvements | Verditek (VDTK) – Corporate – Continued trials, new sales appointment
European Metals Holdings (EMH LN) – Licence extension granted at Cinovec | Jubilee Metals Group (JLP LN) – Interim operations update highlights acquisition of Sable Zinc | Hudbay Minerals (HBM CN) – Setback for Rosemont | KEFI Minerals* (KEFI LN) – Convertible note restructuring and operation update | Oriole Resources (ORR LN) – Madina Bafe drilling | Thor Mining* (THR LN) – Thor confirms it has sufficient funds to meet commitments over next six months
Companies: EMH JLP HBM KEFI ORR THR
Beowulf Mining (BEM LN) – Beowulf report 55% of capital now held in the form of Swedish Depository Receipts | Goldstone Resources (GRL LN) – Reassessment of historic drill core at Akrokeri | Jubilee Metals Group (JLP LN) – Kabwe construction underway. Hernic project produces 2,101PGM ounces in May | SolGold* (SOLG LN) – Epithermal gold mineralisation identified at Cisne Loja | W Resources (WRES LN) – Further drilling results from Tarouca
Companies: ALS BEM GRL JLP SOLG WRES
Berkeley Mineral Resources (BMR LN) – SUSPENDED – Construction of primary leach plant at Kabwe well underway with Jubilee | Jubilee Metals Group (JLP LN) 2.6p, mkt cap £34m
Bacanora Lithium (BCN LN) 89p, Mkt Cap £119.4m – Update and indicative timetable on the Sonora lithium project | Cora Gold (CORA LN) 15.25p, Mkt Cap £8.4m – Additional drilling results from Sanankoro | Georgian Mining* (GEO LN) – STRONG BUY – Long intersections of higher-grade polymetallic gold in
drilling at Kvemo Bolnisi | Mkango Resources* (MKA LN) 8.1p, Mkt Cap £8.8bn – Commencing major drilling programme at the Songwe Hill Rare Earths project | Shanta Gold (SHG LN) 6.25p, Mkt Cap £48.6m – Singida resource update
Companies: JLP BCN CORA GEO MKA SHG
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Companies: Hurricane Energy
U.S. futures and European stocks dropped on Friday as investors mulled a reported conflict among policy makers over a stimulus package for the single-currency region, as well as political upheaval in France.
The Stoxx 600 Index fell after Bloomberg News reported the European Central Bank is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy. The euro fluctuated following French President Emmanuel Macron's decision to name a new prime minister after asking his government to resign. Rolls-Royce Holdings Plc slumped after the British jet-engine maker said its exploring options to raise funds to strengthen its balance sheet.
The dollar was slightly down, posting its first weekly drop in a month, while American cash equity and bond markets were shut for Independence Day. President Donald Trump will attend an early July 4 celebration at Mount Rushmore with thousands of guests who won't be required to wear masks, while his U.K. counterpart Boris Johnson urged Britons to act responsibly as pubs prepare to re-open and the government lifts quarantine rules on travel for 60 countries.
The friction at the ECB highlights the risk to markets should promised stimulus measures fall short. Investors continue to weigh policy support and upbeat economic data against relentless new outbreaks of the virus. U.S payrolls figures Thursday fuelled optimism of a V-shaped recovery in the world's biggest economy, even as Florida reported that infections and hospitalizations jumped the most yet, and Houston had a surge in intensive-care patients. Emerging-market stocks posted the biggest weekly gain in a month.
Elsewhere, crude oil dipped but remained on track for a weekly gain.
Companies: TGL JSE IAE ADME BP/ DGOC ENOG NTQ NTOG PMO RBD ROSE RDSA UKOG TRIN
Over the last 18 months, Powerhouse has cemented its relationship with Peel Environmental, which is targeting the development of at least 30 distributed modular generation (DMG) plants across the UK. Each of these will potentially generate £0.5m in annual licence fees for Powerhouse. This roll-out is conditional on shareholders approving the proposed acquisition of former development partner Waste2Tricity (W2T) at the general meeting on 14 July
Companies: Powerhouse Energy Group
Acquisitions and creditors update
Companies: Premier Oil
Considering the environment, this sale is positive and marks the completion of the $15bn divestment programme started after the acquisition of the shale assets from BHP in 2018. Overall, BP’s strategy in downstream is to bring stable earnings, to offset volatility in upstream. In this regard, expanding renewables activities would seem appropriate to BP. While, BP has no competitive advantage in this field, exposure to renewables will allow the oil majors to keep their oil & gas activities.
Companies: BP Plc
Enteq Upstream PLC (LON:NTQ) has released full-year (FY) results for the year-end March 2020 with commentary on the ongoing trading environment. The company reported revenues of around US$10.9mln, underlying adjusted EBITDA (earnings before tax interest depreciation and amortisation) of US$3.1mln,
Companies: Enteq Upstream
Rockfire Resources, the gold and copper exploration junior with projects in northern Queensland has recently commenced a major £0.8m drilling programme on Plateau, its most advanced project. Drilling is likely to be followed by a resource update in late 2020 and a scoping study in Q1 2021. We believe that the updated resource estimate could be commercially significant. This reflects the promising drilling results post July 2019’s resource assessment and the potential for the drilling programme to expand the resource base given the analogous Mt Wright mine geology 47 km to the NE. The new drilling programme will include diamond drilling for the first time which will enable deeper higher-grade targets to be targeted. The drilling programme has been underpinned by the recently announced £1m raise. We believe the scope for positive news flow in the coming months is excellent while the gold market backdrop should be supportive for gold exploration as well as production plays over the balance of 2020.
Companies: Rockfire Resources
The market should be in no doubt that Pure Gold will deliver first gold before the end of the year before ramping up to 66koz in 2021 through to 125koz in 2025 (the company is already looking at ways it can accelerate the ramp up). All critical path items are on track with long lead equipment on order, all license applications expected to be approved by Q2, and mine sequencing being planned. Management are already planning on how they might ramp up quicker, improving flexibility in the system with a new decline and tweaking metallurgical recoveries. Perhaps most importantly they are growing their knowledge of the geology with the team putting together a drill programme to start next year once in production. This will target extensions to the 1Moz, 9g/t reserve (will be the 17th highest grade mine in the world when in production) down dip, at satellite deposits and, most excitingly, at Zone 8 where there is already a 0.5Mt resource grading 21g/t.
Companies: Pure Gold Mining
AFC Energy is a global leader in the fuel cell sector. It has a proven fuel cell technology which it is commercialising through its H-Power™ product, an off-grid electric vehicle charging system which is run on hydrogen and produces no emissions. The company's core fuel cell technology is a liquid alkaline fuel cell called HydroX-Cell(L)™. The company is also developing a solid alkaline fuel cell called HydroX-Cell(S)™ , the critical component of which is a is a solid electrolyte which upon validation will be marketed under the AlkaMem™ trademark. We expect the AlkaMem™ product to have multiple electro-chemical applications outside of fuel cells. The purpose of this note is to compare AFC Energy's products, markets and business strategy against its listed peers Ceres Power and ITM Power. The note also assesses the state and outlook of the hydrogen market in addition to the proton exchange membrane market, which is relevant for AFC Energy's AlkaMem™ product. As a reminder, we believe AFC Energy has a fair value of 27p/sh.
Companies: AFC AFC AFC
In this note, we analyze the indebtedness of 35 international E&Ps publicly listed in the UK, Canada, Norway, Sweden and the USA. For each company, we look at (1) cash position, (2) level and nature of debt (including covenants), (3) debt service and principal repayment framework and (4) Brent price required from April to YE20 to meet all the obligations and keep cash positions intact. We also estimate YE20 cash if Brent were to average US$20/bbl from April to YE20. While the oil demand and oil price collapse are of unprecedented historical proportions and the opportunities to cut costs much more limited than in 2014, most companies (with a few exceptions) entered the crisis in much better position than six years ago, with stronger balance sheets and often already extended debt maturities. In addition, this time around, many E&Ps have already been deleveraging for 1-2 years and are not caught in the middle of large developments that cannot be halted. The previous crisis also showed that debt providers could relax debt covenants for a certain period as long as interest and principal repayment obligations were met. This implies that as long as operations are not interrupted and counterparties keep paying their bills (Kurdistan), the storm can be weathered by most for a few quarters.
With (1) Brent price of about US$50/bbl in 1Q20, (2) reduced capex programmes, (3) material hedging programmes covering a large proportion of FY20 production at higher prices and (4) limited principal repayments in 2020, we find that most companies can meet all their costs and obligations in 2020 at Brent prices below US$40/bbl and often below US$35/bbl) from April until YE20 and keep their cash intact, allowing them to remain solvent at much lower prices for some time. In particular, Maha Energy and SDX Energy are cash neutral at about US$20/bbl. When factoring the divestment of Uganda, Tullow needs only US$9/bbl to maintain its YE20 cash equal to YE19. Canacol Energy, Diversified Gas and Oil, Independent Oil & Gas, Orca Exploration, Serica Energy and Wentworth Resources are gas stories not really exposed to oil prices and Africa Oil has hedged 95% of its FY20 production at over US$65/bbl.
Companies: AKERBP AOI CNE CNE DGOC EGY ENOG ENQ GENL GKP GPRK GTE HUR IOG JSE KOS LUPE MAHAA OKEA ORC.B PEN PHAR PMO PTAL PXT RRE SDX SEPL TETY TGL TLW TXP WRL
InfraStrata's acquisition of the iconic Harland & Wolff (H&W) shipyards in Northern Ireland has been transformational for the group, and with a carefully planned growth strategy, there is a clear route to cash breakeven in the short term. Over the medium to long term, these facilities could support a c£400m revenue business. With the company trading at a c30% discount to its H1/20A book value and c65% to its Adj NAV, we initiate with a Buy recommendation.
Recent test results have confirmed the ‘tremendous’ potential of Touchstone’s Cascadura discovery, onshore Trinidad. The results point to a larger discovery than previously expected, with higher well deliverability. This drives a significant increase to our valuation, raising our risked-NAV and price target by 33% to 68p/sh. A return to exploration beckons, with the Chinook well approaching and further drilling at Cascadura and Royston planned over the next 12 months. Beyond that, a further 20 drilling locations have already been identified on the Ortoire block. While Touchstone trades at a higher multiple of NAV than peers, that is for good reason as this equity story is set to run and run.
Companies: Touchstone Exploration
Empire Metals* (EEE LN) - Munni Munni platinum group metals project acquisition work program | Erris Resources (ERIS LN) – Resumption of Loch Tay exploration | Goldstone Resources (GRL LN) – Reduced loss in 2019 | KEFI Minerals * (KEFI LN) – Tulu Kapi project finance on track for Oct/20 closure and full construction start in Q1/21 | Power Metals Resources* (POW LN) – Interim results | Vast Resources* (VAST LN) – Carlibaba licence granted
Companies: EEE ERIS GRL KEFI POW VAST
Davenport owns three perpetual mining licenses and two exploration licences covering 659km2 in the South Harz potash basin in central Germany. Davenport's experienced European-based management is now focussed on developing Europe's largest potash inventory of 5.3 billion tonnes at 10.8% K2O.
Companies: Davenport Resources Ltd