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MIDAS STOCK TIPS: Clean the house by investing in Jubilee Metals

MIDAS SHARING TIPS: Clean up! By investing in Jubilee Metals, the mining waste management company that helps make car exhaust more environmentally friendly

Mining is a wasteful industry. Companies try to produce as much metal as possible from the earth and ore they mine from the ground, but their processes are rarely 100% efficient, so a lot is left over, usually in the form of large dams and heaps of slurry. .

These residues, as they are called, can be toxic, unsightly and harmful to the environment. Often they also contain traces of metal, rejected for one reason or another during the extraction process.

Jubilee Metals turns this mining waste into valuable assets, rehabilitating tailings dams and producing premium metals throughout the process. The shares are 15.2 pence and are expected to rise significantly in value as chief executive Leon Coetzer expands and develops the business.

Green Machine: Jubilee Metals turns mining waste into valuable assets, rehabilitating check dams and producing premium metals throughout the process

Jubilee started out as a consultancy, offering large mining groups advice on how to become more efficient. But he soon realized there were huge opportunities to be had by recovering the metal left over from conventional mining techniques.

Coetzer first turned his attention to the chrome mines in South Africa, where it became apparent that most processes were rejecting chromium below a certain purity and platinum group metals including palladium and rhodium, used in catalytic converters that reduce automotive pollution.

Jubilee has developed a way to extract all of these metals from the tailings, while ensuring that the dams no longer endanger the environment and that the land can be reused. Proving the technology was safe and effective took time, but the work was done and this year Jubilee is expected to produce 44,000 ounces of platinum group metals and 1.2 million tonnes of chromium. This makes the company one of the top five chrome producers globally, even though it does not own a single mine.

There is much more potential to expand even further as there are two major chrome mining areas in South Africa and Jubilee has focused on just one to date – the Western Limb. However, Coetzer was recently awarded a contract on the eastern member and more deals are expected.

Having proven its ability to recover the metal from chrome tailings, Jubilee began to look at copper, this time in Zambia. The company has now developed a way to extract the pure copper cathode from the tailings, some of which have lain fallow for years. Trials have been underway for several months and the group’s treatment plant should be fully operational within a few weeks.

The company has already identified 300 million tonnes of copper scrap and expects to produce around 25,000 tonnes of premium copper annually in Zambia alone. Coetzer will start small, delivering 500 to 800 tons of copper per month during the summer, but production will increase rapidly thereafter.

There are also by-products, including cobalt, a key component of lithium batteries and also used in car airbags.

When the miners come on board, long-term contracts are signed, giving Jubilee the right to reuse and reprocess customer tailings and sell the metal it mines. Over time, opportunities for growth multiply. Independent research indicates that there are over 8,000 inactive and closed tailings dams around the world, with a combined weight of nearly 300 billion tonnes.

Jubilee is currently focused on South Africa and Zambia, but Coetzer hopes to move into South America and Eastern Europe, where there are many abandoned dams.

In the shorter term, analysts predict rapid growth, with sales of £160m for the year to June rising to £250m next year. Profits of £36m are forecast for this year, rising to £68m in 2023.

The group is not a dividend payer now, as excess cash is plowed back into the business. But Coetzer and his fellow board members want to start paying a dividend in the coming years.

Midas verdict: Jubilee Metals has discovered a way to turn scrap into high-quality precious metals and at the same time reduce the environmental footprint of miners. The company has taken some time to prove its processes and earn the trust of miners, but much of the heavy lifting has now been done, interest is growing rapidly and the future looks bright. At 15.2p, the shares are a buy.

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