The palladium price has been on a tear of late, even briefly surpassing even gold as the world’s most valuable metal by ounce.
The price has since dropped away slightly, but even so this strength gives the lie to the idea that the days of generating real upside from platinum group metals are over.
To be sure, the platinum price has been weak for a long time now, but companies like Jubilee Metals Group PLC (LON:JLP) which have a high component of palladium production are enjoying a significant earnings uplift.
“Around 40% of what we make is palladium,” says Jubilee’s chief executive Leon Coetzer. “It’s a massive component of our earnings.”
Jubilee has in recent years created a nice line for itself in extracting platinum group metals from old waste dumps in South Africa. In particular, feed is provided by the Hernic and DCM mines, where the primary product is chrome and the processing of PGMs has often had a secondary priority.
Jubilee extracts the PGMs from the waste dumps using an in-house expertise that has been many long years in the making, and which is now paying off big time. All told, in the most recent quarter for which figures are available, Jubilee was able to generate revenues of almost £3.5mln from the extraction of palladium, platinum and chrome from dumps at Hernic alone.
With DCM thrown in, and with the new PlatCro operations about to start providing a handsome contribution from all three metals too, the earnings profile of the company is about to undergo a radical transformation.
But what of the vanadium?
This is at an earlier stage and represents something of a departure for the company, in that it lies outside of South Africa.
Jubilee has made the Kabwe project in Zambia its first port of call on what looks likely to be an ongoing process of international expansion, as the company’s expertise in waste processing and in particular in dealing with finely ground ore spreads further afield.
At Kabwe Jubilee has managed to acquire a highly attractive zinc operation on very reasonable terms, and it also has a significant vanadium component thrown in.
“Kabwe looks pretty big,” says Coetzer.
“It has zinc, lead and vanadium. Even if it was purely a zinc project it would be reasonable in terms of its economics. Add lead and the return goes up dramatically. But if you add in the vanadium it blows out the lights.”
The vanadium grades are significant at between 0.6% and 1.1% on surface, and helped along by vanadium’s status as the best performing metal of recent months, the project certainly looks set for development.
There is existing plant nearby, owned by a well-known major company, and if Jubilee can get its hands on that, then construction could be cut from the currently envisaged 14 months to a matter of just three or four months.
What’s more, using the existing plant would boost output capacity significantly.
So, there’s much to play for as Jubilee Metals Group enters the new year. The cash flow is rising exponentially by the day, new projects are coming on stream and Coetzer and his chairman Colin Bird are on the lookout for more deals.
“Our next big goal is now let’s engage the likes of Anglo American and Vedanta with our expertise,” says Coetzer. “We’ll tell them that their waste is a first class asset that’s just been forgotten.”