Jubilee’s copper production in Zambia was impacted by power constraints (JSE: JBL)

At least there’s a plan going forwards for power at Roan

Jubilee Metals has released an operating update for the six months to December 2024. After Gemfields reminded the market of the perils of Africa (and in this case Zambia as well) based on the reintroduction of an export tax on emeralds, there must have been some nervousness for investors around the Jubilee story as well. Copper may be different to emeralds, but it’s the same governmental exposure.

For now at least, the problems are based on electricity rather than taxes. Copper units produced reached 1,454 tonnes for the six months, way below the revised target of 1,800 tonnes and also down from 1,683 tonnes in the comparable period. This led to a build up in run-of-mine and in-process stock, which they can hopefully catch up on at some point.

An additional power agreement with a new provider should achieve steady supply at Roan, but the agreement is pending regulatory approval. This makes it hard to guess when that could come online. Here’s the problem though: Roan is now under care and maintenance due to the unstable power supply, so this agreement is key to restarting the facility.

As for the Sable refinery, it was thankfully unaffected as it is located in close proximity to the power producer. Production at Munkoyo was also unaffected by power constraints. Still, the uncertainty around Roan means that Jubilee isn’t giving guidance for copper production at this stage.

Moving on to South Africa, the successful commissioning of two further chrome processing units increased production by 35.7%. They are on track for guidance there. The same is true for PGMs.

Jubilee’s share price is down an ugly 46% in the past 6 months. It closed 8.6% higher on this update on a day of strong volumes, so that’s encouraging at least. The worry is the uncertainty of timing around this power agreement for Roan.

Life Healthcare sells the exciting LMI business (JSE: LHC)

At least they have exposure to it possibly being a knockout success in years to come

Generally speaking, value unlocks are great for shareholders when companies either (1) sell a part of the business that the market didn’t like anyway, or (2) sell any part of the business for well above the value that the market was putting on that business. In any other case, selling part of the group just means turning an investment into cash, which doesn’t create value for shareholders in and of itself.

Life Healthcare has been unique in the South African healthcare sector context due to its exposure to Life Molecular Imaging (LMI). This is by far the most exciting part of the group, especially as traditional hospitals aren’t known for being great sources of return on capital. This fact, along with a selling price for LMI that seems to be in line with where the market saw things anyway, is presumably why the Life Healthcare share price barely reacted positively to the news of a sale of LMI. It closed 3.5% higher on the day after initially spiking much higher.

The enterprise value for the deal is $350 million, or R6.475 billion on a cash free and debt free basis (a common structure). Operating profits for the year to September 2024 were $31.6 million. If we use operating profit as a proxy for EBITDA, that’s an EV/EBITDA multiple of 11x. That’s high, but not unheard of for businesses with strong growth prospects. It may well be an EBIT multiple, as companies aren’t consistent in defining operating profit as either before or after depreciation.

The buyer is Lantheus Holdings, who was also the counterparty to the RM2 sub-license agreement reached in June 2024. As part of this deal, the net economic benefit of that agreement will be delivered to Life prior to completion of the deal. Interestingly, it was during the due diligence for the sub-license agreement that Lantheus decided to make an unsolicited offer for LMI.

There are certain things that need to be settled from the proceeds, like LMI management incentives and Life Healthcare’s obligations under a profit sharing arrangement. The net proceeds are therefore expected to be $200 million or R3.7 billion. Life intends to pay a special distribution to shareholders within 12 months of the deal closing. For context, Life’s market cap is R23.8 billion.

Some upside optionality is retained through earnouts and a right to the LMI products in Africa, although it’s not clear how valuable that right really is. As for the earnouts, that’s far more measurable. The first batch runs from 2027 to 2029 and those payments are based on 23% of NeuraCeq net sales in the USA that exceed $225 million. The payments are capped at a total of $225 million for the three year period (it’s confusing that the aggregate payment cap and the annual earnout threshold are similar numbers). There are also potential earnouts in 2034 of $125 million based on Neuraceq global sales and $50 million based on pipeline products.

LMI represented 7.2% of Life’s revenue for the year ended September 2024, so it is a material part of the business. The value of the transaction (R6.475 billion) represents ever so slightly more than 30% of Life’s market cap at the time of the calculation, so this is a Category 1 deal that will require a circular to be issued and shareholders to vote. There are of course a number of conditions precedent as well.

Northam Platinum’s production from own operations has moved higher (JSE: NPH)

They can’t control the price, but they can control production

Adding to a busy day of PGM and chrome updates, Northam Platinum came in with some good news around production volumes. From own operations, they saw a 3.7% increase in refined metal production of PGMs for the six months to December 2024. On the chrome side, production was up 7.5% for the same period.

Interestingly, equivalent refined PGM from third parties fell by a nasty 28.1%. They attribute this to general PGM sector dynamics.

Full-year production guidance is unchanged.

Schroder European Real Estate’s property valuations are under pressure again (JSE: SCD)

Perhaps we haven’t seen the bottom in Europe just yet

After it looked as though property valuations were finally on the up in Europe, the latest numbers from Schroder European Real Estate suggest otherwise. Only the industrial portfolio went the right way (up 2.2%), while the office portfolio fell 2.4% and the “alternative portfolio” decreased by 2.4%, in that case driven by a mixed-use data centre. There is only one remaining retail asset in the portfolio and it fell by 3.2%.

Overall, the direct property portfolio decreased by 0.9%. I couldn’t help but shake my head at Schroder calling this a “marginal decrease” – a drop of 0.9% is material in a market like Europe, especially when it was saved entirely by the industrial portfolio.

Tharisa has a tough start to the year (JSE: THA)

PGM and chrome volumes are down

Tharisa has released a production update for the three months to December 2024, which represents the first quarter of the financial year. Production needed to be strong, as PGM prices remained subdued vs. the preceding quarter and chrome prices came off sharply by 13.7%.

Sadly, production has fallen. The quarter-on-quarter decrease in PGMs is 19.4% and in chrome is 12.3%. That’s no good at all, contributing to a drop in group net cash from $108.9 million to $89.0 million in the past three months.

The reasons? Management references drilling equipment availability and a need to mine sub-optimal areas as a result, with lower grades and recoveries. The focus in the second quarter is of course on addressing this issue.

On pricing, the PGM market continues to struggle and chrome needs to recover, with Tharisa sharing a belief that current chrome prices are unsustainable and will need to increase to reflect the levels of stainless steel demand.

Full-year production guidance is between 140 and 160 koz of PGMs. They produced 29.9 koz in this quarter, so they are behind the run-rate there. As for chrome, guidance is between 1.65 Mt and 1.8 Mt of concentrates. They managed 374.4 Mt in this quarter, so they seem to be particularly behind there.

Tharisa’s share price closed only 2.7% lower on the day. Although it is down more than 22% in the past 6 months, it is actually flat over 12 months.

Director dealings:

• The company secretary of Redefine Properties (JSE: RDF) bought shares worth R170k.