MIDAS SHARE TIPS: Clean up! By investing in Jubilee Metals, the mining waste firm that helps make car exhausts greener
Mining is a wasteful industry. Companies try to produce as much metal as they can from the earth and ore they dig out of the ground, but their processes are seldom 100 per cent efficient so plenty of stuff is left behind, generally in the form of large dams and piles of slurry.
These tailings, as they are known, can be toxic, unsightly and environmentally unsound. Frequently, they contain traces of metal too, rejected for one reason or another during the mining process.
Jubilee Metals turns this mining waste into valuable assets, rehabilitating tailing dams and producing top quality metals through the process. The shares are 15.2p and should increase significantly in value as chief executive Leon Coetzer expands and develops the business.
Green machine: Jubilee Metals turns mining waste into valuable assets, rehabilitating tailing dams and producing top quality metals through the process
Jubilee started out as a consultancy, offering large mining groups advice on how to become more efficient. But it soon realised that there were huge opportunities to be had from retrieving metal left behind through conventional mining techniques.
Coetzer first turned his attention to chrome mines in South Africa, where it became apparent that most processes rejected chrome below a certain purity and platinum group metals, including palladium and rhodium, used in catalytic converters that reduce car pollution.
Jubilee developed a way of extracting all these metals from tailings, while also ensuring that dams no longer endangered the environment and the land could be reused. Proving that the technology was safe and effective took time, but the work has been done and this year Jubilee is expected to produce 44,000 ounces of platinum group metals and 1.2million tons of chrome. That makes the company a top five producer of chrome, globally, even though it does not own a single mine.
There is plenty more potential to expand still further, as there are two major chrome mining areas in South Africa and Jubilee has focused on one to date – the Western Limb. Coetzer recently secured a contract on the Eastern Limb, however, and further deals are expected.
Having proven its ability to retrieve metal from chrome tailings, Jubilee began to look at copper, this time in Zambia. The company has now developed a way to extract pure copper cathode from tailings, some of which have been lying fallow for years. Trials have been under way for several months and the group’s processing plant is expected to move into full operation within weeks.
The company has already identified 300million tons of copper waste and expects to produce around 25,000 tons of top-grade copper annually in Zambia alone. Coetzer will start small, delivering 500 to 800 tons of copper per month over the summer, but production will ramp up swiftly thereafter.
There are by-products too, including cobalt, a key component of lithium batteries and used in airbags for cars as well.
When miners come on board, long-term contracts are signed, giving Jubilee the right to repurpose and reprocess customers’ tailings and sell the metal it extracts. Over time, there are multiple opportunities to grow. Independent research indicates that there are more than 8,000 inactive and closed tailings dams across the world, with a combined weight of almost 300billion tons.
Jubilee is focused on South Africa and Zambia for now, but Coetzer hopes to move into South America and Eastern Europe, where there are numerous discarded dams.
In the shorter term, analysts predict fast-paced growth, with sales of £160million for the year to this June, rising to £250million next year. Profits of £36million are forecast for this year, soaring to £68million in 2023.
The group is not a dividend payer now, as surplus cash is ploughed back into the business. But Coetzer and fellow board members are keen to start paying a dividend in later years.
Midas verdict: Jubilee Metals has discovered a way to turn waste into valuable, high-quality metals and reduce miners’ environmental footprint at the same time. The company has taken a while to prove its processes and gain miners’ confidence, but much of the hard graft has now been done, interest is rising fast and the future looks bright. At 15.2p, the shares are a buy.
Traded on: AIM Ticker: JLP Contact: jubileemetalsgroup.com or 020 7584 2155