Tuesday saw Red Rock Resources (LSE:RRR) highlight the news that Jupiter Mines has made major inroads into the expansion of its Tshipi Borwa manganese mine in South Africa.
Red Rock, which owns 0.87% of Jupiter said that the business has completed a concept study for the expansion and will shortly begin a comprehensive feasibility study for the enlarged project. This will be based on a base case scenario production profile of 4.5 million tonnes – 50% more than the property’s current three million tonne production level. Total expenditure required for the expansion is estimated to be 1.025bn South African rand.
Although production profiles in excess of this were explored, Jupiter ultimately decided that the base case was ‘favourable from a timing perspective’. This is because a larger production profile would require more infrastructure, time, and capital as well as introducing more legal requirements.
‘Some of the major constraints to go beyond the base case scenario include potential mining constraints, the lack of water in the area and logistical constraints in the medium term,’ Jupiter added.
Subject to the completion of the feasibility study and commercial process, Jupiter expects Tshipi to reach stead state exports of 4.5 million tonnes in three years.
Red Rock’s chairman Andrew Bell said: ‘A potential 50% production increase over 3 years is one of a number of encouraging developments at Jupiter, which continues its drive to improved efficiencies and stringent cost control.
‘Jupiter has over the last 18 months exceeded its benchmark 70% dividend payout ratio, and the significant strengthening in the manganese price over the last two months testifies to the resilience of underlying demand. The company [Red Rock] expects a continued growth over time in the level of contributions received from its holding in Jupiter.’
Tshipi Borwa entered production in early 2013. Since then, the mine – one of the largest of its kind in the world with a 432Mt resource base - has more than doubled its production and export volumes to over three million tonnes of manganese ore annually. The project currently boasts a maximum capacity of 3.6 million tonnes per annum and a 100-year life of mine – both with the potential for expansion. As well as being one of the only manganese mines in the market, Tshipi also boasts some of the lowest operating costs in its space at a current average of $2.18 per dry metric tonne.
Jupiter offers Red Rock a reliable revenue stream owing to its progressive payout policy. Indeed, Red Rock received income from dividends and share sales totalling A$1.47m for Jupiter’s financial year to 28 February 2019.
Author: Daniel Flynn
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