On the surface, Zambia-focused copper producer Jubilee Metals’ share price performance looks puzzling. The stock is down about 30% year to date, despite what should be a supportive backdrop, including a copper price trading near record highs.
Its own copper production has admittedly fallen short of expectations, but Jubilee is at least already producing metal, unlike many copper juniors that remain years away from first output.
And then there’s the cash still to come.
Jubilee completed the sale of its South African chrome and platinum group metals operations at the end of December, with $25m of upfront cash received in total. Up to a further $65m remains payable, with the bulk expected to be received over the next four years through deferred payments.
More recently, Jubilee announced that it had received two binding offers for its Large Waste Project (LWP) in Zambia — a massive copper tailings project that it bought just over a year ago for $18m.
FD Jonathan Morley-Kirk says the decision to sell now is “an opportunity to realise value at a substantial premium to the original acquisition cost”.
What’s more, developing the project would have needed “significant” new capital — likely more than $90m — “as well as considerable management resources”, he says. The project wasn’t close to its Roan concentrator or Sable refinery either, negating Jubilee’s existing processing infrastructure.
Output targets in question
While the sale of its tailings project plus the South African proceeds will bring in close to $100m in cash over the next few years, it’s still unclear how Jubilee plans to grow its copper output.
One asset manager the FM spoke to on condition of anonymity says the LWP was originally a key pillar in Jubilee getting to 25,000t of copper per year.
Asked whether 25,000t is still the goal, Morley-Kirk says the company’s strategy “has evolved towards growing copper production through a combination of third-party feed processing at Roan and the development of Jubilee-controlled mining assets feeding into our integrated mine-to-metals operations”.
He has promised to give updated production guidance once the plans are “sufficiently advanced”.
As for its cash position, the prospective inflow is equivalent to roughly R1.6bn, compared with Jubilee’s market capitalisation of about R1.9bn.
Of course, R1.6bn of future payments is not the same as R1.6bn sitting in the bank today. But even after allowing for the deferred timing, the valuation suggests that the market is assigning relatively little value to Jubilee’s underlying Zambian copper business, where much of that capital is ultimately expected to be redeployed.
Following the proposed LWP disposal, Jubilee’s Zambian business will comprise its Roan concentrator, Sable refinery and Molefe mine. Roan processes largely third-party feed, producing oxide concentrate for refining at Sable and sulphide concentrate for sale. Molefe provides Jubilee with its own mined ore, while additional exploration ground nearby could provide future feed.
Asked whether Jubilee will have enough cash to fully develop Molefe, its main mining asset, Morley-Kirk says: “We believe so.”
He adds: “Our development programme extends beyond Molefe to more than 20,000ha of new licence areas; funding requirements will therefore be refined as exploration progresses. We also retain flexibility to pursue joint ventures with larger mining companies where appropriate.”
So why is the market so ill-tempered towards the stock?
One possible explanation is that investors are nervous about Jubilee’s exposure to copper oxides and, consequently, sulphuric acid.
Held up in Hormuz
Copper oxide mineralisation is typically found nearer the surface, where the original sulphide minerals have been altered through weathering and oxidation. This is commonly processed through sulphuric acid leaching. Sulphide ore, by contrast, is generally crushed and ground before the copper minerals are concentrated through flotation, then smelted and refined.
Globally, about 80% of primary copper is produced from sulphide ores, while roughly 20% comes from oxidised and other leachable ores.
The distinction matters because sulphuric acid has become both expensive and increasingly difficult to source. The Middle East supplied more than 45% of global seaborne sulphur trade last year, with most of its export terminals located inside the Strait of Hormuz.
Not every copper producer is equally exposed; large integrated miners with their own smelters can produce sulphuric acid as a byproduct, substantially reducing their dependence on the merchant market. But Jubilee does not have the same degree of insulation.
In an investor call in April, Morley-Kirk acknowledged the risk. “Sulphuric acid is a worry. It’s not a big worry at the moment, but it is a worry,” he said.
An industry source tells the FM that sulphuric acid prices in Zambia have risen by about 200% since March, while availability has tightened materially, creating significant cost pressure for acid-intensive operations. Higher diesel prices are adding further pressure. In June, Jubilee said acid consumption accounts for about 20% of monthly expenses at Roan and transport for another 16%. Both may ultimately prove temporary, but for now they remain clear risks.
Asked about the share price, Morley-Kirk says the fall “has understandably affected investor confidence” and believes a strong copper price won’t by itself change sentiment.
“We need to demonstrate through consistent operational and financial delivery that the business has changed and that the value proposition is compelling,” he says, adding that the foundations for a rerating in the share price are being put in place.
