Jubilee (LON:JLP ) have today announced a fundraising of £750,000 at 1.5p to support the conclusion of the detailed design and engineering study programme to allow the construction of the surface PGM and chrome beneficiation processing plants at both Hernic Ferro Chrome Proprietary Limited (Hernic) and ASA Metals (ASA).
Hernic, who are majority owned by Mitsubishi, recently concluded heads of agreement with Jubilee to process their tailings ahead of a number of competitors.
When the deal with Hernic is finalised the company will have access to in excess of 4mln tons of surface tailings.
Management is targeting production on 40,000 ounces of platinum a year which is expected to generate operational cash flow of $14mln a year assuming a platinum price of $1,250. This would make them one of the top ten core platinum producers in the world.
Normally this is where the market starts to panic about equity fundraisings to finance such a deal, however with the mining rights for Tjate expected in the “very near term” the company could see a £4.3mln injection from the sale of their non-core Quartzhill farm property to Anglo American Platinum.
The rest of the funds required are expected to be raised through debt for which the company is already in talks.
If we factor in the cash flow generative smelting operations and the power processing plant it would appear the company have made good progress on a tight budget over the last few years, yet this doesn’t appear to be reflected in the current share price.
With a market cap of just £10mln it is our opinion the company has significant upside potential from the current levels if things go to plan over the coming year.
*The views expressed are the views of Shard Capital and should not be construed as investment advice, as we have not assessed your individual suitability for personal investment advice."