In early June, Jubilee Metals received an unsolicited, conditional offer to acquire its SA chrome and PGM operations. At first glance, the logic behind accepting seemed straightforward: management wants to pivot away from SA’s volatile PGM and chrome markets, with all their operating headaches, and instead double down on copper in Zambia. Copper is hot, with long-term fundamentals tied to electrification and grid investment, after all.
Management also argued a focused copper story should command a higher valuation and, in turn, unlock shareholder value.
Not everyone is buying the story, though. Since the announcement, the market has punished the share price, sending it down by nearly a third. That tells us something important – investors aren’t convinced.
Is Jubilee Metals selling the house when the market is strong…
The worry is Jubilee Metals might be selling just as PGMs regain their shine, and chrome still represents the lion’s share of group revenue – over 80% in the first half of FY25.
The company is, in other words, selling the “house” when the market is strong. Furthermore, some argue the asking price is too low given the cyclical rebound now underway.
Let me explain…
Jubilee Metals recently put hard numbers on the proposed sale of its SA chrome and PGM operations, calling a general meeting for 28 August where shareholders will vote on the deal.
The buyer, One Chrome, has offered a total consideration of up to $90 million, with $87 million payable upfront and a further $3 million dependent on metal prices and exchange rates.
Crucially, One Chrome will also take on around $56.8 million in loans and trade finance tied to these operations, which immediately strengthens Jubilee’s balance sheet.
On paper, the deal values the assets at about $146 million, or 6X trailing FY24 EBITDA. But one could argue that FY24 was a particularly depressed year for earnings across the sector.
If you run the numbers off forward earnings, the multiple drops closer to 4.5X, which really starts to look like a bargain for the buyer. That’s why I suspect the market hasn’t rewarded the deal as investors feel Jubilee is leaving too much value on the table.
But there is logic to the Jubilee Metals sale…
The nuance here is Jubilee Metals is less a PGM play than a chrome story, and chrome prices have softened even as PGMs rebounded.
For some investors, that makes the disposal logical – it removes exposure to earnings volatility in commodities that lack the long-term “strategic glamour” of copper. Indeed, about 30% of shareholders have already given written support for the deal, giving management a strong starting block.
But the rest, myself included, need convincing. If Jubilee can credibly demonstrate how redeploying proceeds into Zambia will transform it into a cash-generative, copper-focused growth company, then this will look like a clever piece of capital allocation. If not, then they will have sold productive assets at the wrong price and weakened the base.
In other words, this is a high-risk, high-reward bet. The strategy itself makes sense – the pricing does not. For that reason, I believe management should push for a little more value before agreeing, and I will be voting no at the AGM on 28 August.
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