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Jubilee Platinum – New Acquisitions Expand Jubilee’s Access to PGEs. Buy with 50p Target Price

The acquisition of majority interests in a number of companies associated with Chemstof was announced on the 12th of April and adds to the growing list of platinum related investments Jubilee has made during the past 18 months. A total of ZAR 65.5 million (£6 million) is payable by Jubilee, with ZAR 10 million payable in cash and the remaining amount in Jubilee shares. However the consideration is performance linked and requires the Chemstof Group to earn net profits in excess of ZAR56.46 million in the 12 months to 1st April 2012.  Such a structure means Jubilee’s investments have the potential to be self funding and thus no burden on existing shareholders.

The assets for which Jubilee is acquiring an interest in are 51% of the ordinary shares of Chemstof, 59% of the ordinary shares in Platcro Minerals CC and 65% of the ordinary shares in a newly formed company whose name is yet to be determined. Chemstof owns an operating 70,000 tonne per month capacity chrome ore beneficiation plant producing a chromite concentrate; Platcro Minerals CC holds the mining and prospecting rights to a number of near surface platinum containing chromitite reefs, and the new company will hold the yet to be constructed PGE processing plant and (existing) surface stockpile of PGE-rich chrome ore tailings (500,000 tonnes, estimated at containing 40,000 ounces of PGEs).

Jubilee will construct the PGE processing plant for the new company at an expected cost of ZAR50 million, to be largely funded out of project finance. The plant will produce platinum concentrate from the surface tailings of the Chemstof Group’s PGE-rich chrome ore tailings, and get delivered to Jubilee’s Middelburg plant 200 kilometres to the East for smelting.

Jubilee Platinum is moving quickly to secure access to PGE’s not only out of competitive necessity, but also in consideration of its ever diminishing exclusive rights to use the ConRoast technology which expire in 2020. The upgrade and expansion of Jubilee’s Middelburg facility is at the heart of its processing strategy and, alongside Tjate will provide the company with a self sufficient PGE business – unique at this end of the market. Buy with a 50p target price.

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