Steel Making Materials

Tshipi’s focus on cost reductions during the prior year combined with the price improvement during 2016 has seen record cash flows generated.

For more information on Jupiter, please visit: www.jupitermines.com
For more information on Tshipi, please visit: www.tshipi.co.za

steel-making-icons

Manganese Price

Manganese price increased fivefold during 2016, but has since declined.

High Sales Volume

Tshipi sold 2.3 million tonnes of manganeseore in its financial year.

Shareholder Distribution

Tshipi distributed ZAR1billion to its shareholders.

Share Buy Back

Jupiter completed a US$55 million equal offer share buy-back in March 2017,at US$0.40 per share.

Investment Strategy

In 2007, Pallinghurst identified the raw materials needed for steelmaking as having attractive investment fundamentals. Steel is an important driver of the global economy and has shown consistent growth through a number of economic cycles, in particular when developing economies expand rapidly.

Manganese is a key component in steelmaking, removing impurities and increasing the strength and impact resistance of steel. Global manganese resources are concentrated within South Africa, with approximately 80% of the world’s known economically mineable manganese deposits located in the Kalahari Manganese Field (“KMF”) in the Northern Cape Province.

Investment History

Investment In Tshipi

In 2008, Pallinghurst assembled a consortium of Pallinghurst Co-Investors, including the Group, to acquire a 49.9% interest in Tshipi é Ntle Manganese Mining (Pty) Limited (“Tshipi”)*, an early stage manganese exploration opportunity within the KMF. The property is situated adjacent to Samancor’s Mamatwan manganese mine that has been in operation since 1964, and its deposit is an extension of the same ore body.

POSCO Acquisition

In 2010, South Korea’s POSCO, one of the world’s largest steel producers, acquired a stake in Tshipi from the existing Pallinghurst Co-Investors. This transaction introduced to Tshipi the skills and expertise of a leading manganese end-user. In 2011, Jupiter Mines Limited (“Jupiter”), then an ASX-listed company in which the Group already held an investment, acquired the Pallinghurst Co-Investors’ 49.9% interest in Tshipi. Jupiter delisted from the ASX on 10 January 2014.

Tshipi Borwa Commission

In 2011, following the granting of the necessary administrative approvals and licenses, the decision was taken to construct Tshipi Borwa, an open-pit manganese mine. Rapid commissioning of the mine and related infrastructure enabled Tshipi Borwa to mine, rail and export its first manganese ore by the end of 2012.

Load Out Station

Tshipi’s state of the art rapid load out station was commissioned during 2014, enabling the loading of bulk trains in less than four hours and skiptainers in less than two hours, much faster than most of its competitors. This rapid loading ability positions Tshipi Borwa well to be supplied with additional trains when there is spare capacity on the network. Tshipi’s eight kilometre rail siding is also the largest in the KMF, capable of accommodating over 200 wagons.

* The balance of 50.1% of Tshipi’s shares is held by Ntsimbintle Mining (Pty) Limited (“Ntsimbintle”), a broad-based BEE consortium (consisting of Safika Resources, Nkojane Economic Prospecting and a number of national and local economic development and community organisations and social trusts), and OM Holdings Limited (“OMH”), an Australian Securities Exchange (“ASX”) listed integrated manganese mining and trading house. The Pallinghurst Co-Investors provided exploration funding, proving a 189 million tonne manganese deposit at an estimated average grade of 37%.

Although the year began with the manganese industry in difficulty, with the manganese price at a multi-year low and many producers reducing or closing their operations, a subsequent fivefold increase in price turned 2016 into a good year for the industry. The production discipline shown by the industry underpinned the price rise, also aided by economic stimulus from the Chinese Government and the general improvement in the overall commodities sector.

Tshipi capitalised on the improved market conditions, selling 2.3 million tonnes of manganese ore with record profits expected for its financial year ending
28 February 2017. A significant milestone was reached in November 2016 with over 300,000 tonnes exported, with Tshipi becoming the first producer to export manganese ore using all of South Africa’s
manganese terminals, reflecting Tshipi’s ability to produce and export its budgeted three million tonnes per annum.

Tshipi’s focus on cost reductions during the prior year combined with the price improvement during 2016 has seen record cash flows generated. Notwithstanding a steep drop in the manganese price in the first quarter of 2017, Tshipi was able to distribute ZAR1 billion to its shareholders; approximately half of the capital invested to date. In turn, this allowed Jupiter to complete its own U$55 million share buy-back in March 2017, of which PRL received US$10 million.

From The Directors

Community Development

Environment, safety and corporate social responsibility.

Education

Health

Safety

Tshipi is committed to contributing positively to the development of the community in which it operates. In conjunction with the Joe Morolong Municipality, Tshipi provided a local waste management company with vehicles and office space, mentorship and training, and a contract for providing waste removal services to the mine. Tshipi continues to support and develop the skills of local community members and offers bursaries, internships and adult learning courses.

Tshipi has also provided funding for a water infrastructure project that provides the local community with a sustainable water supply; enabled the construction of a health care clinic and the enhancement of local services within the Joe Morolong Municipality. Tshipi also continues to provide free health screening and medical surveillance to employees and actively promotes sustainable mining by replanting trees, the creation of an onsite nursery and the establishment of a wildlife conservation area.

Tshipi Borwa is a shallow, open-cut mine, which typically is the safest form of mining operation. Tshipi adds to this structural advantage through placing strong emphasis on worker safety programmes and procedures. No fatalities have ever occurred at Tshipi Borwa and this positive safety record continued with only three reportable lost time injuries during 2016; a notable achievement over a twelve- month period.

Jupiter’s Central Yilgarn Iron Ore Assets

jupiter-logoIn November 2016, Jupiter announced its intention to return US$55 million to its shareholders, aided by its 49.9% share of Tshipi’s ZAR1 billion distribution. In January 2017, Jupiter made an equal offer buy-back of 6% of its shares in issue, at US$0.40 per share, representing a price in excess of five times the price at which its shares last traded on the ASX in January 2014. The Group participated in the Jupiter share buy-back, receiving approximately US$10 million in March 2017.

Outlook

Whilst the manganese price has seen a sharp fall in the first quarter of 2017, Tshipi’s position remains robust as a significant and low-cost producer. Jupiter has resolved to pursue all strategic options for its interest in Tshipi, which includes, if market conditions allow, an increase in manganese production to its three million tonnes per annum capacity.