By: Creamer media

The company said in a circular published on August 12 that the transaction, if implemented, would strategically reposition Jubilee within the copper sector, which it said had significantly greater investor recognition and valuation multiples supported by a well-defined peer group.

It said that, by contrast, its current chrome-dominant processing and PGM tailings recovery operations were in a segment with limited peer group evaluation benefits and were strongly influenced by demand dynamics from China.

According to the board, proceeds from the sale would substantially exceed Jubilee’s short-term capital requirements to establish itself as a substantial and scalable copper producer. The company said this would position it in an industry with superior valuation metrics.

The board also said the transaction was non-dilutive and would create an opportunity to accelerate a sustainable share buyback programme or implement a dividend policy supported by a more stable copper-focused asset base.

Jubilee said the transaction valued the chrome and PGM operations at about $146-million on an enterprise value basis, representing a 6x multiple on its 2024 financial year earnings before interest, taxes, depreciation and amortisation.

The consideration to be received would be up to $90-million, of which $87-million would be due and payable without performance conditions. The remaining $3-million would be subject to certain metal price and exchange rate criteria.

The buyer would also assume about $56.8-million of loans and trade finance, which Jubilee said would substantially reduce gearing and financing costs. The company said this would enable it to better manage its capital structure and financing strategy to support its continuing operations in Zambia.

The board said it believed the disposal represented a compelling opportunity to realise value from its chrome and PGM operations and redirect it into its Zambian copper business.

It said there had been no formal competing bids for the assets and that transactions of this nature in the chrome and PGM industry, involving the acquisition of processing assets without large underlying resources, were extremely limited, with no material transactions recorded in the past five years.

The company said Zambia presented a highly attractive platform for growth, supported by strong copper market dynamics, expanding resource potential and significant economic upside.

The matter will be put to a shareholder vote at Jubilee’s AGM on August 28. The company said that if a majority approved the transaction, completion was expected in the latter part of the year.

The board said it had, so far, received letters of support from institutional shareholders representing about 30.42% of its issued share capital, indicating their intention to vote in favour of the transaction.