Biggest IPO in decade Jupiter Mines joins ASX ranks

Jupiter Mines ASX JMS Tshipi Borwa manganese mine
Jupiter Mines' Tshipi Borwa manganese mine.

Flagged as the biggest initial public offering in 10 years, Jupiter Mines (ASX: JMS) has been known in investor circles for its intent to launch on the ASX – giving the public a chance to capture a slice of South Africa’s largest manganese operation when its stock begins trading this morning.

After four years off the board, the company was readmitted to the official list on Monday after raising A$240 million via the issue of 600 million shares at A$0.40 each giving the company an indicative market capitalisation of almost A$800 million.

Investors have flagged the debut as the biggest metals and mining IPO since BHP Billiton (ASX: BHP) launched its spin-off South32 (ASX: S32) in May 2015. At the time, South32 joined ASX ranks at A$2.13 a share with an A$11.3 billion market capitalisation.

Tshipi Borwa manganese mine

Jupiter’s IPO allows investors to grab a cut of its 49.9%-owned Tshipi Borwa manganese mine in a known manganese jurisdiction in South Africa.

South Africa’s Kalahari manganese field hosts about 77% of the world’s known manganese resources, with Tshipi badged as one the five largest manganese exporting mines globally.

According to Jupiter, the open pit Tshipi mine is one of the world’s longest life and lowest cost manganese producers.

The mine’s initial life is projected to 2047 based on ore reserves of 86.4 million tonnes and resources of 459.5mt.

Mining at Tshipi started in 2012 with manganese sales tipping 3.34mt for the 12 months ending February 2018 – up more than 47% on the prior 2017 financial year.

In addition to higher sales in the 2018 financial year, the mineral commanded a higher price of US$4.74 per dry metric tonne in 2018, compared to US$4.31/dmt in 2017.

“The results for financial year 2018 when manganese prices averaged around US$4.74/dmt demonstrate the cash generation potential of Tshipi,” Jupiter chief executive officer Priyank Thapliyal said.

Mr Thapliyal said “significantly higher cash flow” was currently being generated – with manganese from Tshipi presently shipped at US$7.23/dmt.

Ownership and revenue

Jupiter’s Tshipi joint venture partners include Ntsimbintle Mining Pty Ltd (74%) and OM Holdings (26%). The partners operate the mine via South African joint venture entity Tshipi é Ntle Manganese Mining.

Jupiter prides itself on running a “lean and mean” operation at Tshipi, with costs kept to a minimum and “tightly controlled”.

In the half year ending August 2017, Jupiter received a net after tax profit of A$32.7 million.

The joint venture entity generated a net after tax profit of A$202 million in the 2018 financial year, with 49.9% of that directed to Jupiter. However, a final audit of Jupiter’s net after tax profit is ongoing.

Looking ahead

Mr Thapliyal said the company’s operating and sales strategy for financial year 2019 will be similar to the 2018 period.

The mine is expected to continue at an average run rate of 3.3mtpa with the manganese price anticipated to continue hovering around the US$7.00/dmt mark.

“Should the markets hold, this raises the prospect of a substantial half year 2019 distribution to Tshipi shareholders and, in turn, Jupiter shareholders under the company’s dividend policy as stated in the replacement prospectus,” he said.

Manganese market

Manganese is an irreplaceable alloy element in steel-making. When manganese is added to raw steel, the metal’s strength and flexibility is enhanced.

After producers cut back manganese output to alleviate a glut between 2014 and 2016, the global manganese market has begun to rebalance.

With steady growth in the past two years, the steel sector is projected to continue this trajectory – affording a consistent demand source for manganese.

The mineral is also used in several lithium-ion battery formulations, with this sector tipped to surge in coming years.

Manganese is also consumed in the chemicals industry for use in pigments, animal feed and fertilisers.

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