Red Rock Resources 'encouraged' by latest update from Jupiter Mines

Natural resource development company Red Rock Resources was upbeat on Tuesday, after its investee company Jupiter Mines updated the market on its Tshipi expansion concept study.

The AIM-traded firm owns 0.87% of the Sydney-listed Jupiter Mines, which owns 49.9% of the Tshipi Borwa manganese mine in South Africa.

Jupiter confirmed overnight that the concept study into the expansion of Tshipi Borwa had been completed, and said a comprehensive feasibility study would begin “shortly”.

The feasibility study would be based on a production profile of 4.5 million tonnes, which was a 50% increase on the current three million tonne production level.

Production profiles in excess of the base case scenario were explored as part of the concept study, however the infrastructure required was said to be “significantly less complex”, would involve a shorter timeframe to implement, had a lower capital requirement, would have less reliance on road transport, with legal requirements said to be “significantly more favourable” from a timing perspective for the base case scenario.

Jupiter said some of the major constraints to go beyond the base case scenario included potential mining constraints, the lack of water in the area and logistical constraints in the medium term.

Infrastructural optionality would be considered for substantial production upside beyond the base case scenario, it explained, to be leveraged upon in the future should the constraints and market dynamics change.

Total capital expenditure required for the expansion was estimated to be ZAR 1.025bn £54.83m), which would provide for some of the infrastructure required for the production optionality.

Subject to the completion of the feasibility study and commercial process, expected to take about one year, Tshipi would expect to reach steady state exports of 4.5 million tonnes in three years, with an increase in manganese ore exports in the second and third year, via a stepped approach.

“A potential 50% production increase over three years is one of a number of encouraging developments at Jupiter, which continues its drive to improve efficiencies and stringent cost control,” said Red Rock Resources chairman Andrew Bell.

“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 expects continued growth over time in the level of contributions received from its holding in Jupiter.”

At 0800 GMT, shares in Red Rock Resources were down 1.18% at 0.42p.