[miningmx.com] — SHARES in Jubilee Platinum soared on Friday, following an announcement that the group was conducting talks with a possible suitor.
“Jubilee announces that it has received an approach and held preliminary discussions regarding the making of a possible offer for the company,’ read a company statement. “At this stage there is no certainty that an offer will be made or as to the terms of any offer.’
Jubilee shares, which have meandered between R2.85 and R4.05 during the past 12 months, jumped at the news and were trading at R3.70 around 15:30, up 31.67% since close of trading on Thursday.
Speculating on possible buyers of Jubilee, RBC Capital mining analyst Leon Esterhuizen said one has to start with both Northam Platinum and Sylvania Resources, which both have existing ventures with the company.
“It’s a very unusual announcement in the sense that it doesn’t refer to a bid that’s on the table, but only that a bid may come,’ said Esterhuizen, explaining why Northam, Sylvania or another listed bidder would be under any compulsion to issue a cautionary notice.
Jubilee has an agreement to treat the high chrome platinum group metal-bearing material from Northam and Sylvania once its new ConRoast 5MW DC arc furnace was commissioned – scheduled for the fourth quarter of this year.
It also has an agreement with Northam to evaluate the construction of a second 5MW DC arc furnace to smelt concentrate emanating from Booysendal.
The ConRoast smelters and technology are among the key assets of Jubilee, which was granted an exclusive commercial licence by Mintek through the acquisition of Braemore Platinum. The technology uses a DC arc smelting process able to treat high chrome-bearing platinum concentrates produced from UG2 ore, which can cause serious problems with conventional smelters.
Esterhuizen mentioned Lonmin as another potential suitor, largely because of the regular problems it experiences with its own smelters.
Apart from owning the smelters and intellectual property, Jubilee also has a ferroalloys processing plant in Middelburg, with another ferroalloys furnace to be commissioned shortly. The group also bought a controlling stake earlier this year in a power producer for its ConRoast operations, as well as a 51% interest in Chemstof – a producer of chrome concentrates.
Among its other assets count the Tjate exploration project, a drilling programme in Madagascar as well as some nickel assets in Australia.
“Jubilee has in my opinion traded at a discount exactly because it’s such a complex and difficult company to put a value to,’ said Esterhuizen.
Jubilee has for some time been trading at a sizable discount to analyst valuations. In a research report issued in April, Finncapp had a target price of 59p for the group’s shares traded on AIM, compared to the trading price of 26.5p at the time and 26.13p it traded at prior to Friday’s announcement.
RBC also has an “outperform’ rating of the share.
