ASX listed Jupiter Mines Receives Cash Inflow from Tshipi, Is Higher Dividend Coming From the Miner?

Summary

• Jupiter Mines once again receives a strong cash inflow thanks to the dividend from the Tshipi é Ntle Manganese Mining Proprietary Limited.
• The Board of Tshipi é Ntle Manganese Mining Proprietary Limited declared a dividend of ZAR 330 million for the first half of FY2021.
• JMS received ~ $12.7 million in dividend along with another ~ $2 million from the marketing profits of the Tshipi business, which is leading to a question that would this be further passed to the existing shareholders of the Company?
• Tshipi has been a cash-generating operation for the Company, prompting it to distribute $127.33 million in dividend in FY2020; however, the current market scenario is unprecedented, which is the potential risk to the cash distribution; but
• The Company mentioned that its Board would consider dividend with half-year results in October 2020.

Jupiter Mines Limited (ASX:JMS) received a dividend of ZAR 156 million, translating to ~ $12.7 million (net of withholding tax) from its investment in the Tshipi manganese mines after the Board of Tshipi é Ntle Manganese Mining Proprietary Limited declared a dividend of ZAR 330 million for the first half of FY2021.

Moreover, the Company would receive ZAR 25 million, equivalent to ~ $2 million in marketing profits, the question is, would this be further passed on to the existing shareholders of the Company?

JMS suggested that despite the COVID-19 outbreak and various challenges faced on account of the same in terms of decreased production, and depressed manganese prices, the Tshipi business remained profitable while maintaining positive cash flow.

Tshipi Borwa Manganese Mine (100 per cent basis) operates the Borwa Mine in the southern portion of the Kalahari manganese field.

• During the first quarter of the financial year 2021, the Borwa Mine produced 694,769 tonnes of manganese while managing to sell 321,733 tonnes.
• The mine generated sales revenue of $52.3 million, leading to an EBITDA of $35.8 million.
• The NPAT for the period stood at $23.5 million at an average CIF price of USD 4.21/dmtu and an average cost of production of ZAR.10/dmtu on a free-on-board (or FOB) basis.
• The business generated net cash of $48.0 million from operating activities.

Tshipi Borwa Manganese Mine (100 per cent Basis) Production Profile (Source: Company’s Report)

Cash Flows and Dividend Distribution

In FY2020, the Company received cash of $83.61 million from investing activities, which was down by ~ 42.77 per cent; however, despite that, the Company distributed a dividend of $127.33 million, up ~ 29.99 per cent against the prior year.

• Furthermore, during the first quarter of the financial year 2021, the Company sold 215,790 dry metric tonnes at an average price of USD 4.28 per dmtu (CIF), generating a gross profit of $1.2 million, down ~ 62.5 per cent against the previous corresponding period.
• Likewise, the EBITDA declined by ~ 58.34 per cent for the period to stand at $1.0 million.
• The NPAT for the period declined by ~ 44.44 per cent to stand at $1.0 million.

JMS Marketing Profile (Source: Company’s Report)

However, despite a poor performance against the previous corresponding period in the first quarter, JMS suggested that its Board would consider dividend to its shareholders along with its half-year results.

Tshipi A Cash Flow Generating Operation?

For the second half of FY2020, Tshipi declared a dividend of ZAR 265 million, of which, Jupiter Mines received ZAR 125.62 million (net of withholding tax) along with a marketing profit of ~ $3.6 million.

Jupiter Mines suggested that the JV weathered the challenging market conditions and remained profitable in the second half of the financial year while ending the FY2020 with approximately ZAR 1.1 billion cash at bank (post tax and royalties).

The Company also suggested that large cash at the end of the period was to mitigate the market risk while ensuring that the mine development and capital expenditure for ongoing operation fall in place.

Considering the recent distribution by Tshipi, it seems that the Company generated enough cash from its Tshipi operations to deal with tough market while rewarding shareholders at the same time.

Jupiter distributed a record dividend in FY2020, which was ~ 30 per cent higher against pcp.

However, unlike before, present market conditions are unprecedented, and Jupiter mines has few development plans for Tshipi, which might require the Company to hold cash for weathering weak demand and unpredictable market & business scenario.

Market Reaction

Post plunging to the recent low of $0.190 (intraday low on 19 March 2020) from the level of $0.430 (intraday high on 1 August 2019) to mark a price depreciation of ~ 55.81 per cent; the stock demonstrated a strong recovery.

JMS moved in a secondary uptrend from the level of $0.190 to the recent high of $0.320 (intraday high on 10 August 2020), marking a price gain of ~ 68.42 per cent. At present, the stock is hovering around the same level with a slight correction.

The stock of the Company last traded at $0.270 (as on 7 September 2020, AEST 2:45 PM), unchanged as compared to its previous close on ASX.