Jupiter’s manganese subsidiary delivers A$58m Ebitda in the first quarter

28th June 2022 By: Marleny Arnoldi - Creamer Media Online Writer

ASX-listed Jupiter Mines’ 49.9%-owned subsidiary Tshipi é Ntle Manganese Mining has reported production of 883 000 t from the Tshipi Borwa manganese mine, in South Africa’s Northern Cape province, for the first quarter of its 2023 financial year.

The subsidiary reports that just shy of A$59-million of earnings before interest, taxes, depreciation and amortisation (Ebitda) has been generated from the 755 000 t of manganese sold in the three months to May 31.

Ebitda in the reporting quarter compares with Ebitda of A$26-million posted for the quarter ended May 31, 2021, despite lower production and sales in the quarter under review.

Production totalled 1.04-million tonnes in the May 2021 quarter, while sales totalled 846 214 t.

Net profit after tax for the quarter under review was A$38.5-million, compared with net profit after tax of A$16.2-million in the prior comparable quarter.

Tshipi only shipped 755 600 t of ore in the quarter, which is about 62 000 t behind plan, owing to low-grade volumes not being moved amid poor market conditions.

It also did not help that the Durban and Bloemfontein rail channels were suspended during the reporting quarter, while Saldanha Bay and Gqeberha’s rail corridors also experienced disruption, and consequently impacted on port operations.

Jupiter explains that the issues with rail transport in South Africa remain as a result of cable theft, power outages, flooding and derailments impacting on the manganese rail channels and resulting in a loss of about 75 000 t on rail for the quarter.

Meanwhile, Jupiter is finalising the recruitment of a new CEO and expects to make an announcement prior to the company’s annual general meeting in July.

MARKET VIEW
Global crude steel production during the reporting quarter increased compared with the preceding quarter; however, for most regions, with the exception of India, production was lower than in the same quarter in the 2022 financial year.

Jupiter says weakened downstream demand from industrial and construction sectors, particularly in the largest producer China, has led to a large oversupply and build-up of inventories at steel mills.

Demand was significantly impacted on by lockdown measures and associated restrictions in the last few months as resurgences in Covid-19 were experienced in main metropolitan areas of China.

Manganese alloy prices, in most major alloy-producing regions, rose at the beginning of the reporting quarter. An increase in raw material and associated production costs, coupled with supply concerns following the political unrest between Russia and Ukraine, led to a surge in prices.

However, prices corrected themselves throughout the quarter as supply concerns abated in markets outside China.

Meanwhile, pressure from the downstream steel sector in China, coupled with higher production costs, has squeezed the margins of manganese alloy producers during the reporting quarter and has intensified since.

Factories have been encouraged to decrease production in efforts to stabilise the industry as downstream demand has yet to recover.

Manganese ore prices for both seaborne and portside material jumped at the start of the quarter under review.

The increased restocking activities coincided with a shortage of high-grade oxide material.

Semi-carbonate prices leveraged off the increase in high-grade oxide prices but further increases were hampered by sufficient supply.

However, seaborne prices started falling back in April and May as consumers felt the pressure from the subdued downstream steel sector.

Portside prices diverged from seaborne prices towards the end of the reporting quarter as the Chinese economy felt the impacts of renewed lockdown measures and traders were left with no choice but to increase portside prices – as seaborne materials denominated in dollars became progressively more expensive with the depreciation of the yuan.

The manganese market remains finely balanced. Since lockdown restrictions were eased in major metropolitan areas in China at the beginning of June, there have been some signs of confidence in the market, however, there still needs to be a consistent recovery in downstream steel demand which will further promote the manganese ore industry, Jupiter notes.

Outside of China, crude steel production in other major producing areas showed signs of improvement since earlier in the quarter; however, the large dependency on China hampered production in other regions.

Fiscal policy and stimulus measures have been and continue to be implemented to promote economic recovery and this is expected to have a positive impact on steel demand, Jupiter states.