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Jupiter Mines churns out cash from Tshipi, with shareholders getting a fair share

What does Jupiter Mines Ltd do?

Jupiter Mines LTD (ASX:JMS) jointly owns the single biggest mine in South Africa.

It’s a manganese mine called Tshipi, and it’s been in production for some years.

The Tshipi mine shipped its first ore in 2012, and has gone on to break production record after production record, such that in the last three years Jupiter has been able to hand back a whopping A$300mln to shareholders. A further R600mln was dished out in September 2019.

The cash should keep on coming too. For one thing, Tshipi has a 100 year mine life, so there’ll be no stopping it on that score.

What’s the outlook?

In January 2020 Jupiter said a concept study into the expansion of Tshipi has been completed and will be followed by a comprehensive feasibility study.

The feasibility study will be based on a base case production profile of 4.5mln tonnes, a 50% increase on the current 3mln tonne production level based solely on 52% probable ore reserves and 48% on proved ore reserves.

It estimated that this would require an estimated capital expenditure of 1.025bn rand and would take three years, with an increase in manganese ore exports in the second and third year via a "stepped approach".

Production for 2020 was on track to hit the target of 3.5mln tonnes, Jupiter said in November, around 40-50% higher than was envisaged in the original feasibility study. Costs are lower than predicted too, resulting in some chunky cashflow and, what’s more notable, a very sizeable dividend.

Historically, the company has been trading on a yield of around 20%, and that looks set to continue.

What the CEO says

“Whichever way you slice and dice it Tshipi’s been a great success,” says Priyank Thapliyal, Jupiter’s chief executive.

“The operation is very simple. We drill and blast, shovel the ore into a truck and take it to Port Elizabeth. There’s no blending, there’s no beneficiation.”

He adds: “Manganese is a play on steel. Every tonne of steel requires manganese, it can’t be substituted. And the amount of manganese that’s legally required in Chinese rebar has just been raised.”

Meanwhile, major sources of manganese production from South32 are likely to cease operating within the next ten years, giving a strong underpinning to the mid-to-long-term price.

And in support, the company boasted US$133mln at the end of the three months to August 2019.

Strong institutional support

When Thapliyal was seeking institutional investment, the fund managers were only too keen to get on board. At the time of listing, around A$215mln of the market capitalisation was accounted for by institutional investors, with just A$25mln available as free float.

That strong institutional endorsement is backed up by the support of some mining heavy hitters on the board too. Brian Gilbertson, famously the ex-chief executive of BHP Billiton, as it then was, is chairman.

Another director is Yeongjin Heo, the head of POSCO Australia, which holds a significant stake in Jupiter. And Andrew Bell, of Red Rock Resources PLC (LON:RRR) and Power Metal Resources PLC (LON:POW), also holds a seat on the board.

It’s an experienced team, running a company on a lean basis, with the focus on generating returns for shareholders.