- Record production
- Annual revenue rises slightly to £142mn
- Annual pre-tax profit falls from £26.5mn to £12.3mn (0.47p)
- PE ratio of 12
Jubilee Metals (JLP: 5.8p), an Aim-traded mining company, delivered record production in the 12 months to 30 June 2023, but much lower profits due to weaker platinum group metals (PGMs) prices.
Revenue per PGM ounce dropped 14 per cent to £1,048 while net cost per ounce increased from £305 to £422, the effect of which was a £6.7mn drop in the segment’s operating profit to £18.8mn on 2 per cent higher production of 42,433 PGM ounces. The category accounted for 88 per cent of group revenue. Copper prices also dipped, down 12 per cent to £6,187 per tonne which, combined with higher net costs, led to a £4.4mn operating profit reversal.
The 53 per cent decline in group pre-tax profit also reflects a hike in finance costs from £1.4mn to £5.1mn. Capital expenditure of £43.9mn exceeded operating cash flow of £31mn, and house broker Canaccord Genuity predicts negative free cash flow of £9.9mn in the new financial year, too.
Importantly, Jubilee’s balance sheet is well funded, with current assets of £98mn, more than £20mn above current liabilities. Tangible net asset value of £125mn (4.56p) also includes property assets worth £88mn, but Canaccord says Jubilee will have to deliver on its production guidance and maintain costs to retain its solid balance sheet position.
Bearing this in mind, the directors are guiding shareholders to expect 11 per cent higher chrome concentrate production of 1.45mn tonnes, a doubling of copper output to 5,850 tonnes and flat PGM production of 42,000 ounces in the 2023-24 financial year. On this basis, analysts forecast a slightly higher annual cash profit of £25mn, half the level reported in the 2021-22 financial year.
Jubilee’s shares are modestly rated on a price/earnings ratio of 12. They are also priced 22 per cent below book value and on a 55 per cent discount to Canaccord’s target price of 13p. However, it’s best to adopt a watching brief until there is visibility on an earnings recovery. For that higher PGM prices or a ramp-up in production will be required. Hold.
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