Jupiter Mines Limited (ASX: JMS) had released its investor's presentation on 19th February 2019 and displayed an increase in global steel production by approximately 4.5% from 1.73 billion tonnes to 1.81 billion tonnes in 2018. The company also revealed an increase of approximately 6.5% in China steel production from 871 million tonnes to 928 million tonnes. Jupiter mine taps the manganese market, as manganese is used as a raw material in steel production and known for its nature of increasing strength and flexibility of steel. As per the company, every tonne of steel requires 10-15kg of manganese alloy and is irreplaceable as a raw material.
As per the company, manganese could potentially replace the traditional cobalt and nickel, used as a raw material for electric storage battery and the increased revolution of the electrification of the vehicles can mark a surge in demand for manganese. Manganese is cheaper and more abundant than both cobalt and nickel and is not tainted with ethical issues associated with cobalt mining. As per the company, research has shown that manganese-based cathode could potentially store more energy than cobalt or nickel.
Supply and Demand dynamics for Manganese:
As per the company, the Chinese manganese ore supply has fallen significantly since 2016 due to environmental restrictions as well as depletion of the resources. The company says that some of the major mines will be depleted in the medium term and thus can lead to a choppiness in the supply chain of the steel raw material. The logistics and port capacities mainly constrain the abundant source of manganese present in South Africa. The development in port and logistic capability of the country would be able to offset the depletion of some major mines and is something that the investors would be watching closely.
The surge in the production of steel and soaring global demand for steel is likely to build a demand for manganese, as it is an irreplaceable raw material in steel production. An ongoing measure taken by various major economies to curb the harmful emission and shift toward the zero-emission economy in an account of Paris climate accord is building demand for rapid electrification in the transportation industry, which in turn is creating demand for electric vehicle and electricity storage batteries. The rise in the demand of EV-batteries would also bring the demand for manganese as most of the primary player such as Tesla, etc. in the segment is rapidly looking for an alternative source for cobalt, due to ethical issues associated with the cobalt mining.
Jupiter Mines owns a 49.9% interest in Tshipi Borwa Manganese mine located in Kalahari Manganese field and is currently holding a market right of 49.9% of Tshipi production. The strong position of Tshipi brings huge benefits to the company.
The investment Proposition:
As per the presentation, the company adopts a policy of high payout ratio and is currently focusing on various growth strategies such as consideration of Tshipi expansion and increasing its stake in Tshipi.
In the financial year 2011, the company commits A$100 million for Tshipi mine development, and by 2017 it paid A$ 71 million to the shareholders and A$82 million by the end of 2018 marking a yield of 14%. The company is a debt free company as per the presentation and have approx. A$607 million as market capitalisation with attributable cash of A$ 18 million.
The company has declared 2.5 cents final unfranked dividend payout with 21 May 2019 as the payment date.
The shares of the company closed the trading session at A$0.310 on 20th February, up by 1.64% from its previous close.
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