You beat me to it mccarthycraig. That should get the share price moving north again.
"The rationale is compelling… As well as the potential to boost revenue and earnings considerably, the deal provides multiple wins for JLP, in our view. The previous situation was that Inyoni processed the incoming tailings feed supplied by Hernic, with the first step being chrome separation before the tailings resumed their flow to JLP’s PGM recovery plant.
Despite incurring the operating cost for chrome separation, JLP did not receive any chrome revenue as all chrome concentrate was returned to Hernic Ferrochrome for its own use or sale to market. This agreement rectifies that issue at no additional risk for JLP.
► … and it gives JLP control. JLP has taken control of the re-mining of tailings at Inyoni. Given that the PGM recovery step involves grinding and multi-stage floatation, the ability to control and maintain consistent feed rates is paramount for efficient operation. We think stable feed
control could not only lead JLP to improve metallurgical recovery on the PGM front, but also provide the opportunity to utilise spare capacity at Inyoni and increase throughput. Naturally, a higher feed rate will increase chrome production as well as increasing
downstream PGM production. Thus, the impact on PGMs is two-fold due to higherthroughput and potentially higher recovery.
► The likely impact is considerable. Whilst we are not in the position to fully update our model at this stage, it is possible to highlight the indicative impact of securing the chrome rights. Inyoni processed about 40ktpm of feed in H1 2019. The mass removal at the chrome separation stage is significant (up to 25% of the feed is turned into chrome concentrate). For arguments sake, assume it’s 22% and at a 40ktpm feed rate, this implies chrome concentrate production of 8.8ktpm. Current UG2 chrome prices are c.$150/t cif China, implying that JLP
would currently receive about $90/t ex-works. Putting this together translates to $9.5m in annual chrome revenue not previously received by JLP. The important point is that this new revenue source essentially flows right down through the project P&L to the bottom line. This
is because JLP already incurs the chrome operating cost as part of the PGM operations. There are some additional costs associated with the control of chrome, but these are minimal and related only to JLP now having to fetch material whereas it was previously delivered by
Hernic. We estimate something in the region of a couple of dollars per tonne for these additional costs, but vastly off-set by the new revenue stream. Also, note that this excludes any contribution from fine chrome which JLP plans to implement at Inyoni."