Jupiter Mines (ASX:JMS) Q1 2027 Earnings Call

0:00 Good morning and good afternoon to all investors and analysts, and welcome to all other participants who have joined the Jupiter Mines quarterly call today. As you'll be aware, I've taken over from Brad Rogers as the interim chief executive at Jupiter Mines. Brad will remain as managing director until the Jupiter AGM later next month, and thereafter he will continue to advise on strategic initiatives for a period of time. I personally have been involved with Jupiter since 2022, and joined the company on a full-time basis in 24. I do have a long-standing history in mining, ostensibly with De Beers, BHU Billiton and South32 and have been extensively involved in the manganese industry for over 16 years. QB Entry Mine, as you know, is the world's single largest manganese mine globally, one of the single largest globally rather, and consistently produces around 3.4 million tonnes of direct ship manganese ore annually.

0:58 For those of you who had the opportunity to review the quarterly report released this morning, we'll see that the first quarter of FY27 financial year has again proven to be a solid period of production and performance for TP, as well as Jupiter. However, I would like to take the opportunity to summarize some of the key outcomes and highlights contained in the report for the period ending 30 September 2026, after which we will provide the opportunity, as mentioned, for some questions and answers that you may require or have. On the safety side, CP recorded two minor lost time injuries due to injuries sustained during isolated storm events at the mine. These were minor lacerations that did, however, result in some medical attention and time off work being required.

1:44 However, the nature of these incidents did not materially impact the overall total recordable injury free rate, which is an industry standard measure of the total number of recordable injuries per million man hours worked. It remains stable at a low of 0.37. On the production front, for the first quarter, approximately 238,000 cubic metres or roughly 875,000 tonnes of graded ore was mined from the pit. Although this was about 9% below the prior quarter, it was above expectations and 19% higher than the previous corresponding period quarter. This enables operations to continue to build on the run of mine and product stockpiles, which are strategically important and kept to ensure both smooth and continuous processing, blending, and shipments of ore, and continued processing in the event of unforeseen disruptions at the mine, such as prolonged or extreme weather events.

2:39 This positions the mine strongly going into the next quarter. From that processing perspective, the mine produced 820,000 tons of predominantly high-grade ore for the quarter. which was a little lower than the previous quarter fall, but in line with the prior corresponding period, quarter one or FY26. It is important to highlight that quarterly production, however, and sales forecasts will vary on a quarter-to-quarter basis in line with operational planning. It takes into consideration key aspects such as mine and plant maintenance schedules, seasonal and weather expectations, and in-customer demand patterns, etc., and the oil processing was well ahead of the plan and enabled CP to continue to utilize and benefit from the additional available low-cost rail export capacity we had.

3:24 To this end, 880,000 tons of transported ports utilizing the oil processed as well as excess product stock at the mine. This is in line with the previous quarter and 2% higher than the prior corresponding period quarter. and again a well-developed plan where cheaply capitalized on available excess rail capacity not utilized by other industry participants. Approximately three-quarters of our ore was transported to and shipped from South African ports and one-quarter to our Luderitz export channel in Namibia. Again, no roading hauling was required for this quarter to any South African ports. To that end, 850,000 tons of high-grade oil was sold, which was 1.3% higher than the prior corresponding period, but 10% lower than the previous quarter, and again, well over expectations.

4:19 From an operating cost perspective, unit costs were slightly higher on a quarter-on-quarter basis at $2.51 per dry metric ton unit on a free-on-board basis. This, however, was driven largely by weakness in the U.S. dollar over the time. Over that period, the South African rand strengthened over 5%, from around 16.40 at the start of the quarter to below 16 rand per dollar during the quarter, but averaging 2% stronger at around 16.25 over the period. Other impacts on costs were generally inflationary in nature, and with direct mining costs per tonne being 1.7% lower than the prior corresponding period, in line with the FI26 unit costs we saw last financial year. TP remains well positioned from a cost perspective and is optimally designed with streamlined operations and processing as well as rapid rail loadout facilities.

5:11 This enables TP to continue to produce consistently and efficiently throughout the year, which helps ensure operating costs remain well controlled. Where input costs are largely outside the management's control, including areas such as logistics and freight, TP management ensure that broad logistics optionality is maintained as far as practically possible, and that the most optimal logistic routes are favoured and utilised to derive the maximum value from these channels. Shipping management also continues to seek cost-efficience and beneficial opportunities in the logistics sector. On the macroeconomic front, manganese prices of around $3.57 free on board were realised for the first quarter, which was encouragingly 12% higher than the $3.18 achieved in the prior corresponding period quarter one.

6:00 However, this was 12% below the quarter 4 FY26 prices of $4.05. It's important to note that manganese prices are relatively cyclical in the year, with notably strong buying and increasing price trends during the first half of every calendar year and softer prices in the second half. Encouragingly, unlike the second halves of 2023 and 2024, manganese prices have not materially softened to around or below the US dollar 3 per DMTU level, but have subsequently held well, remaining above the $3 per DMTU level for 2025 and 2026. This does indicate that there is likely an industry-wide cost floor support being reached at these levels, and higher cost mines, particularly in South Africa, are unable to profitably operate below these levels. issue moves marginal supply from the C1 market and supports the price at these levels.

6:50 On a CIF basis at the ports in China, prices average about $4.44 for the quarter, which is up 15% from the prior corresponding period of FY26 quarter one of $3.86, but are below the $4.95 for the fourth quarter of the last financial year. It's important to see that current spots of price are around $4.28 and the current board prices are around $3.24. And these have remained stable at this level since early August. Historically, since 2023, notionally manganese price floors have climbed 16% from a low of $2.75 to what we're seeing about $3.18 today. We have seen some pressure in freight rates due to the oil price climb, and these have climbed from $33 in June to about $34.40 in September.

7:39 While the increase in freight rates have been shared between consumers and producers, the increase in freight rates has kept the manganese prices in a tight range. Freight rates are currently sitting around $37.40 per tonne in October, with the high oil price persisting. Financial utility continues to fare well, given its robust cost structure and position in the global manganese cost curve. EBITDA of around $22.6 million was generated for a quarter, and while this was lower than the previous quarter, it was due, for the most part, to lower manganese prices compared to sales volumes in the previous quarter of FY26, as well as increased freight rates that we've experienced. Total cash attributed to Jupiter, which is cash held by Cheapy and by Jupiter, decreased by $21 million between Q4 and Q1 to $53 million, following the payment of at least a 0.75 cent dividend, as well as cash consumed by World Capital Cheapy Mine.

8:36 So the total cash of Cheapy stood at just under 1 billion rand. So in all, this round off a really good operating quarter for the company and we look forward to moving into the second quarter on a similar footing and producing strongly as we have planned and have done in the last couple of years. So I'll leave it at that and I'll open the floor for questions if I may from anyone who may seek some clarity on the results we've presented today. Thank you. Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. We'll now pause a moment to allow for questioners to register.

9:22 Once again, if you wish to ask a question, please press star 1 on your telephone. We do have a question from Chris Nahora with Noel Rona Family Trust. Please go ahead.

9:35 Good morning. My name is Chris Norona. We are shareholders through our family trust. I'm calling you from Perth. I was wondering whether you'd be kind enough to elaborate. I understand the significant increase in mining throughput. Could you elaborate on any other value-added applications to the output For example, LMG batteries, which are being developed in the U.S. And let us have your thoughts on value-added pathways, which the management is thinking about.

10:24 Chris, thank you very much for that question. And indeed, as you may have seen in some of our releases, we have essentially been looking at a battery project for a couple of years, particularly around manganese sulfate. We have identified this as a potential value add to the business, albeit the volumes of ore that would be required for batteries is around 100,000 tons versus the 3.4 that we sell. but what we are seeing at the moment is a fairly limited drive in the manganese space for batteries and I think the automakers are again facing sort of unusual challenges between what types of batteries they use and how quickly the EV industry grows. So what we've done is we've developed a manganese sulfate pilot plant that has successfully treated our ore to produce manganese sulfate but we have continued to monitor the industry in terms of its growth and development and as we will note when there is a large uptick or a sort of increased demand for manganese sulfate we will continue to progress that project but we are unfortunately not seeing that in the industry at the moment where there seems to be a fairly muted demand for EVs going forward at the moment.

11:44 Chris, if I can add to that for you, on our website there is a page on EV batteries. As Matt said, we've done a lot of study work. We know that effectively our byproduct, the low-grade material that gets stockpiled and not sold to go into the steel business, that product is perfect for EV batteries or for the manganese sulfate. We've done all the test work. We know we can do it. But we're not going to spend our shareholder dollars on doing further work. We're looking for partners in the industry who will come in and use their balance sheets. We've got the product. We've got the know-how. But we don't want to spend our shareholder dollars in chasing that. We will rather partner with people in the industry. And up to now, the industry is getting sufficient product.

12:32 The volumes are very small relative to what goes into the steel mills. But we are ready to move should we find the right partner.

12:40 Okay, thank you. As a follow-up, I know we are talking in broad strategic terms, but would you be kind enough to elaborate on any either organic or inorganic opportunities to scale up production, either through internal mechanisms or through joint ventures, and your thoughts on valuations? because that's an interesting path to sort of look at in terms of cheapy and we have put space as part of our strategy that we would like to continue to grow organically and through potential acquisitions of operations or businesses in the future. Cheapy mine, as you're aware, is a fairly large resource and it's got over sort of what they say 100 years of life at current production levels. So we have a fairly substantial resource that we can work on.

13:40 One of the challenges we do face in the organic growth in a mine like Tupi is equipment is designed for around 4 million tons of ore. So we can easily grow another half million tons without much capital cost or expenditure to do so. And that's something that I think the mine continues to look at and monitors, especially from an industry perspective. The challenge is obviously the logistics side down to port, where there is a limited rail export capacity and any use of surplus ore would have to go by truck, unless, as we've pointed out, there is opportunistic rail that we can get for that. So we certainly are looking at ways of incrementally increasing our production at the mine, which is easy to do from an operations perspective. We're just working with the forces that we have to deal with in terms of logistics due to ports. Again, in South Africa, the Tupi mine is located next to a large South Bay 2 mine called Mamatuan, which is of equal sort of scale and size. And in fact, we share a recently sort of interesting agreement a couple of years ago to mine the barrier pillar between those two mines.

14:47 And that has been strategically very successful in that it has provided additional ore, which otherwise would be sterilized in terms of our Minerals Act, and has enabled a cheaper access to lower stripping ore. Those are the sort of initiatives that I think we are trying to focus on organically in the mine to develop value and we will continue to work with companies like South HQ and Mamatuan to leverage those value opportunities. From an M&A and organic growth perspective, as you're aware, we've just recently completed the transaction with Exaro, acquiring incidentally our previous shareholder's or partner's share, and we will continue to work with Exaro on those strategic initiatives and potential acquisitions, particularly in the Kalahari where we are very interested in growing.

15:32 So that is something I think we'll be focusing on as opportunities as and when they come up to be identified. Brad, I'm not sure if you've got any further comments on that one from a strategic point of view.

15:44 Yeah, thanks, Matt. I think Chris, Matt has covered the organic opportunity quite well. How we look at that opportunity, as Matt said, there's an opportunity given our long mine life, given that it's an open pit, given that the rate constraining step is our crushing opportunity. facility, which has a nameplate of 4 million tonnes per annum, we could step up that production. And actually, you know, we may well amortise our unit cost in doing so. The consideration there, though, is that because Tippie is such a significant producer in the world of manganese already, that in a balanced market, if we were to increase our production, we may see a negative trade-off in the manganese price. and so our work there as Jupiter and in concert with our partners and the team at Chippy has been not just scoping out what level we could go to and what that would look like but also thinking what market would we like to do that step up in production to and the best time to do that would be when other mines, other manganese mines in the world are Coming to end of mine life or running off grade and some of that is going to happen elsewhere in the world of manganese away from chippy in the next five years or so.

17:04 And so when there are more manganese units needed, chippy is... able to step up to that level and that will be the best time to maximize margin from that increase in production when we do that. From an M&A perspective, we have an M&A strategy that's on our website. There are opportunities that we have been pursuing for all of Matt's and my time in the business. Obviously, they are confidential in nature. but there's also opportunities in consolidation at Tippie itself. So there's opportunities that we have long been looking at beyond Tippie but we've also been of the view and continue to be of the view and it's a shared view with Exaro that the best value to be had from Tippie itself is through someone having consolidated ownership and therefore maximising the value rather than operating through the minority control joint venture structure that we have. Obviously all of these matters are confidential and so we can't provide too much more than that other than to say the strategy that we have been focused on and continue to progress and that's my responsibility here with Matt in his interim CEO role. I'm remaining on board to focus on strategic outcomes and covered those matters and we have an aligned strategy if you have a look at Exaro's view which is positive as we are on the outlook for manganese but is also founded on consolidation in the Kalahari and that applies across the Kalahari but it certainly

18:38 also applies to both of our views of the ownership of the Chippy Mine. I hope that's helpful.

18:45 Okay, thank you very much.

18:48 Pleasure, thank you. Thank you. Your next question comes from Hayley with ACE. Please go ahead. Good morning Madam Brad. Do you guys have any updates on the discussions at the SHPE level in regards to potentially going to owner minor at SHPE? I know the Exaro guys have been talking about that. They're an owner minor themselves. My understanding is the contract at SHPE turns over or expires around June or July next year. and if you were supportive of that position, how much of the existing, I guess, billion rand sitting within Chippy would be required for the fleet?

19:30 Yeah, we're not considering that high. I can answer that one pretty quickly. There is, you know... and, you know, the mine has operated for all of the time of Jupiter's investment in it on a contract miner model. You're right to say that the existing contract term is coming to its end and in the ordinary course of considering that maximising value and minimising risk, the team at Chippy have been considering options to continue. Those options are contract miner in nature and so I know Zahra's had questions on that point. Any decision to change from contract miner to owner miner would require the agreement of Jupiter through the joint venture agreement there and that is not something that is currently being considered by the party so we're not yet making that change.

20:24 Thanks Brad. To confirm, is that Jupiter's position or is that the combined position of Jupiter plus Xero?

20:30 It's Jupiter's and the combined position. We're both on the board of Chippy. That's a matter that's being discussed by shareholders of the board and we are not considering moving to owner-miner. Understood. And you've previously said there's about 3 million tonnes of low-grade stockpiles sitting at shipping, about 31% to 32%. Is that still the case? Matt, that isn't the idea. Sorry, that's, yeah, I've just added 3 million tonnes, about 2.5 million tonnes of stockpile at the moment, yes, and that's 30% grade material. Right, thank you. Thank you. There are no further questions at this time. I'll now hand back to Ian for closing remarks.

21:15 Thanks Mel. Thanks for that update Matt. I'd like to thank Brad for his service over the last three years and as he goes into his last month as managing director and then as Matt had said, Brad stays on as a consultant for us for a few months which is great. I look forward to seeing all of you or hearing you all at our AGM on the 26th of November. Please attend. Matt will be there in person and we'll have the normal presentation to shareholders in that forum. So thank you very much for attending our quarterly update. Keep well. Thank you very much.