TIDMJADE
RNS Number : 6350F
Jade Road Investments Limited
19 July 2021
19 July 2021
RNS
JADE ROAD INVESTMENTS LIMITED
(" Jade Road " or the " Company ")
Investment update:
Future Metal Holdings: Competent Persons Report (CPR)
SRK Consulting Report Published
Jade Road Investments Limited, the London-quoted, pan-Asian
diversified investment vehicle focused on providing shareholders
with attractive uncorrelated, risk-adjusted long-term returns, is
pleased to announce an investment update, and confirms that the
full SRK report dated March 2021 ("CPR") on Future Metal Holdings
("FMHL" or the "Quarry") has been published on
https://jaderoadinvestments.com/home and will be published on
https://futuremetalholdings.com in due course. Jade Road has an 85%
shareholding in Future Metal Holdings Limited.
Highlights:
-- The CPR confirms a JORC Code Compliant Mineral Resources of
the Zhuangpeng Mine of 35.95 million tonnes ("Mt") with an average
grade of 20.74% dolomite oxide ("MgO") (Measured); 81.40Mt with an
average grade of 20.48% MgO (Indicated); and 31.81Mt with an
average grade of 20.61% MgO (Inferred) (see resources table
below)
-- The Quarry has already obtained all necessary operational licences and permits
-- The CPR, incorporating the expanded ("3Mt") production rate,
estimates a net present value of the asset is RMB487.47 million
(c.USD75.5 million) by using the discounted cash flow method with a
9% discount rate. The assumptions are also set out below. The
internal rate of return is 28.55%. Jade Road applied a further 17%
discount to the independent valuation conducted by SRK and as of
31st of December 2020, the asset was valued at USD50.4m in the
portfolio
-- The Quarry is currently in production at a rate of 300kt pa
Summary of the Report:
Geologically, the dolomite quarry project ("Quarry") is located
approximately 40 kilometres ("km") east of Xi County, 90km
northwest of Linfen City, or 220km southwest of Taiyuan, the
capital city of Shanxi Province, P.R. China. The main ore mineral
is dolomite.
Mining and stripping operations are conducted under conventional
contract mining, and environmental risk is well managed under
Chinese national requirements. The estimated ore loss rate and
dilution rate are both 5%, respectively. As of 31 December 2020, at
a cut-off grade of 19% dolomite oxide ("MgO"), the JORC Code
Compliant Measured, Indicated and Inferred Mineral Resources of the
Zhuangpeng Mine were:
-- Measured:35.95 million tonnes ("Mt") with an average grade of 20.74% MgO;
-- Indicated: 81.40Mt with an average grade of 20.48% MgO; and
-- Inferred: 31.81Mt with an average grade of 20.61% MgO, respectively .
Based on the parameters mentioned above, as of 31 December 2020,
the Quarry has a Proved and Probable Reserves of 113Mt, out of
approximately 149Mt of dolomite as calculated by Measured,
Indicated and Inferred Resource.
SUMMARY OF RESERVES AND RESOURCES BY STATUS
Category Gross Net attributable (85% Operator
to Jade Road)
Ore/Mineral Tonnes Grade Contained Tonnes Grade Contained
Reserves (millions) MgO Metal (millions) MgO Metal
per asset (%) (%)
------------ ------ ---------- ------------ ------ ---------- -------------
Future Metal
Proved 34.89 19.70 n/a 29.59 19.70 n/a Holdings
------------ ------ ---------- ------------ ------ ---------- -------------
Future Metal
Probable 78.51 19.47 n/a 66.58 19.47 n/a Holdings
------------ ------ ---------- ------------ ------ ---------- -------------
Subtotal 113.40 19.54 n/a 96.16 19.54 n/a
------------ ------ ---------- ------------ ------ ---------- -------------
Mineral
Resource
per asset
------------ ------ ---------- ------------ ------ ---------- -------------
Future Metal
Measured 35.95 20.74 n/a 30.49 20.74 n/a Holdings
------------ ------ ---------- ------------ ------ ---------- -------------
Future Metal
Indicated 81.40 20.48 n/a 69.03 20.48 n/a Holdings
------------ ------ ---------- ------------ ------ ---------- -------------
Future Metal
Inferred 31.81 20.61 n/a 26.97 20.61 n/a Holdings
------------ ------ ---------- ------------ ------ ---------- -------------
Subtotal 149.2 20.57 n/a 126.49 20.57 n/a
------------ ------ ---------- ------------ ------ ---------- -------------
Source: SRK
The Quarry has already all necessary operational licenses and
permits, the most important being the Mining Licence and the Work
Safety Permit which are valid until March 2023 and August 2023,
respectively. In December 2020, the Quarry also obtained approval
of its onsite environmental facilities from the local Ministry of
Ecology and Environment.
The licence covers an area of 2.3 square kilometres and allows a
mining capacity of 0.3 million tonnes per year ("Mtpa"). The
designed capacity, which the Directors understand is feasible upon
expansion, is 3Mtpa. The expected mine life is 40 years with a
two-year construction period for the expansion design.
The net present value of the asset is RMB487.47 million
(c.USD75.5 million) by using the discounted cash flow method with a
9% discount rate (the assumptions are set out below). The internal
rate of return is 28.55%.
Risks regarding geology and resource, mining, processing,
environment and capital and operating costs are considered by SRK
to be relatively low since the Quarry is already in production
stage. Finally, the Directors believe that enhancing the product
market and sales would be the key to achieve better economic
goals.
Jade Road applied a further 17% discount to the independent
valuation conducted by SRK and as of 31(st) of December 2020, the
Company valued the asset on its Balance Sheet at USD50.4m.
Economic Assumptions for the expanded plant, as of 31 December
2020
Item Unit Amount
Ore Reserve
Proved + Probable Ore Reserves (JORC
Code 2012) Mt 113.40
------------ -------
Production Plan
Dolomite Production Rate Mtpa 3.0
------------ -------
Qualified* Dolomite Yield % 80
------------ -------
Unqualified** Dolomite Yield % 20
------------ -------
Saleable Wall Rock Yield % 92
------------ -------
Construction Period Proposed year 2
------------ -------
Life of Mine year 38
------------ -------
Calculation period year 40
------------ -------
Economy
Construction Expenditure M'RMB 286.50
------------ -------
Working Capital M'RMB 46.64
------------ -------
Sustained Capital (Project Investment
Base) % 2.5
------------ -------
Stripping Cash Operating Cost RMB /t 7.69
------------ -------
Mining and Crushing Cash Operating Cost RMB/t 12.37
------------ -------
Dolomite Load and Haul Cost on Site RMB/t 1.00
------------ -------
Wall Rock Load and Haul Cost on Site RMB/t 1.50
------------ -------
Depreciation and Amortization M'RMB/year 19.56
------------ -------
G&A M'RMB/year 33.01
------------ -------
Financial Expenses M'RMB/year 1.96
------------ -------
Sales Expenses (Sales Revenue Base) % 1.00
------------ -------
Price of Qualified Dolomite (including
VAT) RMB/t 75.00
------------ -------
Price of Unqualified Dolomite (including
VAT) RMB/t 20.00
------------ -------
Price of Saleable Wall Rock (including
VAT) RMB/t 20.00
------------ -------
Resource Tax (sales revenue based) % 5.00
------------ -------
Value-added Tax (VAT) % 13.00
------------ -------
City Maintenance and Development Tax
(payable VAT based) % 7.00
------------ -------
Educational-surtax and Local Educational-surtax
(payable VAT based) % 5.00
------------ -------
Corporate Tax Rate (grass profit based) % 25.00
------------ -------
Discount Rate % 9
------------ -------
Exchange rate as of 14(th) July: 1RMB-0.15$USD
*Qualified Dolomite: Carbonate mineral sold as raw material for
magnesium smelting.
** Unqualified Dolomite: Carbonate mineral unsuitable for
smelting and sold as building stone.
Production Schedule
Item Unit Ramp-up Stage Production Stage
2021 2022 2023 2024-2038 2039-2042 2043-2045
---------- ------- ---------- ---------- ---------- ----------
Mined ore kt 300 300 2,100 3,000 3,000 3,000
------ ---------- ------- ---------- ---------- ---------- ----------
Stripping
rock kt 7,300 9,700 7,900 7,000 6,500 3,230
------ ---------- ------- ---------- ---------- ---------- ----------
Stripping m3/
ratio m3 24.33 32.33 3.76 2.33 2.17 1.08
------ ---------- ------- ---------- ---------- ---------- ----------
Ore and waste
rock in total kt 7,600 10,000 10,000 10,000 9,500 6,230
------ ---------- ------- ---------- ---------- ---------- ----------
Rock for
sale kt 550 9,260 7,540 6,690 6,210 3,080
------ ---------- ------- ---------- ---------- ---------- ----------
Qualified
dolomite
for sale kt 240 240 1,680 2,400 2,400 2,400
------ ---------- ------- ---------- ---------- ---------- ----------
Unqualified
dolomite
for sale kt 60 60 420 600 600 600
------ ---------- ------- ---------- ---------- ---------- ----------
Item Unit Production Stage
------ -------------------------------------------------------------------
2046-2053 2054 2055-2056 2057-2058 2059 2060
------ ---------- ------- ---------- ---------- ---------- ----------
Mined ore kt 3,000 3,000 3,000 3,000 3,000 3,000
------ ---------- ------- ---------- ---------- ---------- ----------
Stripping
rock kt 1,500 1,200 1,000 700 400 200
------ ---------- ------- ---------- ---------- ---------- ----------
Stripping m3/
ratio m3 0.5 0.4 0.33 0.23 0.13 0.07
------ ---------- ------- ---------- ---------- ---------- ----------
Ore and waste
rock in total kt 4,500 4,200 4,000 3,700 3,400 3,200
------ ---------- ------- ---------- ---------- ---------- ----------
Rock for
sale kt 1,430 1,150 960 670 380 190
------ ---------- ------- ---------- ---------- ---------- ----------
Qualified
dolomite
for sale kt 2,400 2,400 2,400 2,400 2,400 2,400
------ ---------- ------- ---------- ---------- ---------- ----------
Unqualified
dolomite
for sale kt 600 600 600 600 600 5,400
------ ---------- ------- ---------- ---------- ---------- ----------
Future Metal Holdings Update:
During Q1 2020, the Quarry recommenced activities with the
construction of a steel structure to enclose its stockpile site as
well as the process of land hardening to comply with the local
environmental requirements. The construction of both the land
hardening and the enclosed structure was completed around the end
of Q2 2020. Due to the two construction projects, production was
suspended between April and May 2020. In line with the wide-ranging
industrial activities in China, the Quarry resumed operations in
June 2020.
In 2020, the Directors understand intense efforts were exerted
to maximise the value of the project. In order to expand the
Quarry's sales channels, the local team engaged a new contractor in
2021 to help expand the local networks and to facilitate the
process of product selling to downstream customers.
With the appointment of the new contractor, it is intended that
the Quarry's products will reach customers with a further
geographical radius. Currently, all the mined dolomite is sold to
mixing plants in the local region for construction purposes. The
Directors also understand that the management team of the Quarry is
in contact with external parties regarding a potential business
collaboration of a highway construction project using dolomite and
wall rock. Jade Road will continue to keep investors informed of
project updates in this area. The Directors of Jade Road will also
continue to focus on enhancing the asset's efficiency of operations
and actively seeking potential or partial exits where possible.
John Croft, Executive Chairman of Jade Road, commented:
'We are very pleased to share the full SRK Report on Future
Metal Holdings, one of Jade Road's main assets. The notable
improvement in the Asset between 2019 and 2020 is mainly attributed
to the effort made to substantially improve the Quarry from the
completion of its external structure in 2019 to the different
licences secured to comply with the latest environmental
regulations in 2020. Furthermore, the production schedule shows a
strong commitment to develop the different resources on site and
the local Management Team is in constant interaction with external
parties for potential business collaborations. Our objective
remains to maximise the value of the asset whilst also positioning
it for a possible monetisation event, which would ultimately
benefit the Shareholders of Jade Road'.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Jade Road Investment Limited +44 (0) 778 531 5588
John Croft
---------------------
Lionsgate Communications - Communications
Adviser +44 (0) 779 189 2509
---------------------
Jonathan Charles
---------------------
Hybridan LLP - Corporate Broker +44 (0)203 764 2341
---------------------
Claire Noyce
---------------------
WH Ireland Limited - Nominated Adviser +44 (0) 20 7220 1666
---------------------
James Joyce
---------------------
James Sinclair Ford
---------------------
About Jade Road Investments Limited
Jade Road Investments Limited (Jade Road) is quoted on the AIM
Market of the London Stock Exchange and is committed to providing
shareholders with attractive uncorrelated, risk-adjusted long-term
returns from a combination of realising sustainable capital growth
and delivering dividend income.
The Company is focused on providing growth capital and financing
to emerging and established Small and Medium Enterprises (SME)
sector throughout Asia, well diversified by national geographies,
instruments and asset classes. This vital segment of the economy is
underserved by the traditional banking industry for regulatory and
structural reasons.
The Company's investment manager, Harmony Capital, seeks to
capitalise on its team's established investment expertise and broad
networks across Asia. Through rigorous diligence and disciplined
risk management, Harmony Capital is dedicated to delivering
attractive income and capital growth for shareholders with
significant downside protection through selectively investing in
assets and proactively managing them.
Harmony Capital is predominately sourcing private opportunities
and continues to create a strong pipeline of attractive
income-generating assets from potential investments in growth
sectors across Asia, including healthcare, fintech, hospitality, IT
and property.
For further information, please visit the Company's website at
https://jaderoadinvestments.com and follow the Company on Twitter
(@JadeRoadInvest).
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