The South African government has ordered Jupiter Mines to suspend mining at its 49.9 per cent-owned Tshipi manganese mine over alleged breaches.
Newly listed Jupiter (ASX:JMS) said in an ASX announcement on Monday that it had been served a “Section 54 Notice” that “cites breaches relating mainly to recent pit wall failure and to drilling and blasting patterns”.
OM Holdings (ASX:OMH) and black economic empowerment group Ntsimbintle Mining own the remaining 50.1 per cent interest in Tshipi.
While mining operations have been suspended, processing, logistics and shipping were continuing normally.
The news sent shares down 8.6 per cent to 32c on Monday morning. The stock listed at 40c in April.
The manganese producer earned itself the accolade of the biggest float in years after making its debut on the ASX in April on the back of a successful $240 million raising.
Manganese is the fourth-most-traded metal in the world. Click here to read more about ASX manganese stocks.
Jupiter says Tshipi is “comfortably ahead” of target for the financial year to July, having shipped 1.6 million tonnes against a target of 1.3 million tonnes.
Sales for August stand at 316,000 tonnes and Tshipi remains on track to meet its commitments of 324,000 tonnes for September.
October sales could be impacted
If the Section 54 Notice is not lifted this week, October sales will be impacted, chairman Brian Gilbertson told investors.
“The Tshipi management team is currently working to resolve these issues and will meet with the [South African authorities] later today to seek the lifting of the Section 54 Notice,” he said.
Foster Stockbroking research analyst Mark Fichera is of the view that the notice will be lifted in the near-term without a material impact to forecasts.
“The company’s figures means Tshipi should ship about 2.2Mt for the 7 months to September,” he said.
“This means Tshipi would then need to ship 1.1Mt in the remaining five months of FY19e to meet its 3.3Mt target. This is equivalent to a run rate of 0.22Mt per month, comfortably below the 0.32Mt shipped in August and September.
“Even if the company did not ship any product in October under a worst case hypothetical scenario, it would then need to ship only 0.28Mt per month in the remaining four months of FY19e, still below recent mining rates.”
In June chief Priyank Thapliyal said better-than-expected sales would see Jupiter more than likely pay shareholders a dividend rather than undertake a share buyback.
Jupiter and its partners in the Tshipi mine plan to pay 1.5 billion South African rand ($143.3 million) back to shareholders.
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The Tshipi board is expected to consider and declare its dividend over the next few weeks, with the Jupiter board considering the payment of its share to Jupiter shareholders soon after.
Stockhead is seeking further comment.