Good afternoon, welcome to Jupiter Mines Q3 call. Today, we will provide a brief update on the third quarter of the 2023 financial year, and we will open up the call for questions from callers. I'll now hand over to our Independent Non-Executive Chair, Ian Murray. Thanks, Ian.
Thank you. Good afternoon, everybody, and welcome to our November 2022 Q3 report, the third quarter of our financial year and Brad's first full quarter as managing director. I will hand over to Brad to walk us through the activities of the quarter. Thank you, Brad.
Thanks, Ian, and thanks, everyone, for joining. As Ian has said, I'll give some overview comments with respect to the third quarter report that you hopefully have in front of you. It was distributed today. At the end of those comments, I'll take any questions if there are any. Starting with, zero harm is continuing its track record in that regard. No lost time injuries during the quarter, and they're on a good run rate in that regard. They've had 600 days and counting, lost time injury-free, which is fantastic. Their total recordable injury frequency rate, so measuring all injuries, including minor ones, also improved quarter-on-quarter. That's good to see. From an operational perspective, production was slightly down quarter-on-quarter.
That was because of drill rig availability in the mine, and the team made changes in that regard during the quarter, and we could see that by the end of the quarter, the run rate was where we needed it to be. That issue appears to be fixed, and we're looking to the fourth quarter, the quarter which we're currently in, as a stronger both production and shipping quarter in order to finish out our financial year. The sales quarter, so the tons that we shipped, were also lower than the previous quarter. There were two reasons for that. One is that the August quarter, so the preceding quarter, was a very high shipping quarter. You'll recall me saying that on our last call. We did expect that this quarter would be somewhat lower.
Having said that, you will also recall, if you follow the stock, that there was a Transnet strike that occurred during the second quarter. That actually occurred during the month of October. That strike was surrounding a pay negotiation that was resolved during the November quarter. The strike actually impacted both rail operations in South Africa and also port operations in South Africa. Effectively, Tshipi had no rail operations or shipping for about two weeks. There was another week of interruption where while Transnet was running, getting back up to full run rate speed again. That all impacted about three weeks of shipping during the quarter. Transnet has been operating as normal since that strike was concluded and they ramped back up again.
That was surrounding a wage negotiation that has now been resolved and resolved with a multi-year labor agreement in place. Hopefully, we shouldn't see anything like that in the near future. We are expecting, though, as I said in the quarterly, a good shipping quarter to finish out the year. And we are expecting based on what we're seeing and what we have scheduled for shipments for this fourth quarter, that we'll be able to achieve 3.4 million tons of shipped ore for this year. That's bang on the 5-year average. What's different about this quarter is that ordinarily we're also shipping low-grade ore.
When you think about the 3.3 million-3.4 million tons of ore that we're typically shipping in a given year, about 400,000-500,000 tons of that total is usually made up of low-grade ore. Low-grade ore in any market naturally sells at a discount to our high-grade ore product. This year, you'll be aware that we haven't actually been shipping and selling any low-grade ore at all. The 3.4 million tons that we're on track to achieve for the current financial year will actually represent a record for the mine because all of that is high-grade ore, whereas typically about 3 million of the total would be high-grade ore.
What that means is, although we've been in a moderated manganese price environment, and that is why we've chosen not to ship and sell any low-grade ore, we have been maximizing the margin, and the pricing from the material that we are shipping, which is great. That's actually a function of why, if you have a look at our comparative financials, notwithstanding manganese prices are a bit lower than some preceding periods that you might compare to our profitability, including for this quarter. Compared to the corresponding quarter last year, actually looks better than you might expect. In terms of prices, as I mentioned, manganese prices were relatively soft during the November quarter. Pleasingly, they have started to improve in the month of November, so at the end of the quarter and into December as well.
That's off the back of improving Chinese sentiment and also some drawdown in stockpiles that has occurred. Actually, the Transnet strike helped some of that drawdown. If you're thinking about comparisons during the quarter of November, the average FOB Port Elizabeth 37% manganese price, i.e. the index that we sell off, what averaged about $10.11 US per dmtu. Today, that's sitting at about $3.33. The other thing that's happened during the quarter, which is material and helpful, is that shipping rates have reduced precipitously during the quarter. Shipping rates have been, for us and everyone who is bulk shipping, very elevated over the last 18 months or so. In the last couple of months, that has reduced quite materially.
You'll see in the quarter that the November quarterly average was $35 US a ton. The preceding quarter was $49 US a ton. If you multiply that out by our shipped volume that I just quoted for of about 3.4 million, you'll see that that's a $48 million annualized saving just quarter-on-quarter. That is very helpful indeed. $35 a ton average for the quarter, our shipping rates are actually a bit lower than that today. We regard those very high shipping rates as being a function of global disruption. I think that's a generally accepted view. Hopefully we won't see that very elevated shipping rates again, and we'll get that tailwind, which is quite material, as I just explained, from a cost perspective.
If you look at unit costs, quarter-on-quarter in the quarterly, you'll see that they were up slightly, by about 8%, or AUD 0.15 per dmtu. Most of that was due to the lower production volume that I referenced before, that has been addressed. About 60% of the AUD 0.09 of that AUD 0.15 per dmtu were relating to the lower production. That's obviously resolved by increasing that production again. We also had a accrual in the quarter for the Transnet labor increase that we actually haven't received yet, but we expect to. There was an element of that cost increase on a unit basis quarter-on-quarter that related to a prior period accrual that actually made up about 3 quarters of the AUD 0.03 in that AUD 0.15 step-up due to that Transnet driver.
The final element of that was due to moving into a new mining area on Cut 11, and seeing commensurately less barrier pillar mining during the quarter. That made up about USD 0.03 of these figures. Again, these figures that I'm referring to are against the $1.96 per dmtu cost that we had on a unit basis in the August quarter. On a financial basis, profit was lower than last quarter really because of volume and manganese prices. On the cost side, though, sitting behind that was shipping, which we should see increasingly. That move happened during the quarter and is a continuing trend. Also the price blend, again, selling 100% high-grade versus low-grade is something that's been a theme for this financial year.
All of that saw attributable cash for Jupiter, including our share of GP cash, increased by AUD 28.8 million to AUD 144.2 million at the end of the quarter. Wrapping all of that up in summary, production was slightly softer for the quarter, but that's now been addressed through the addition of new drill rigs and the runway to where it needs to be for our targeted production right now. Sales were softer during the quarter, but that was both forecasted because we had an outsized sales quarter in the August quarter. We also saw that we had an impact from the Transnet strike, which impacted 3 weeks, which equates to about that 16% quarter-on-quarter reduction in sales that we have seen there.
We had sufficient stockpiles to be able to support a whole level of sales on that. It wasn't production flowing on to sales, it was more the Transnet strike restricting our ability to hit a higher number there. Again, we're in a position to be able to have a solid end to the year such that we're targeting 3.4 million tons for this financial year based on a strong fourth quarter. And we've also seen prices, both manganese improving, since the quarter I'm just speaking about, up to about $3.33 today on improving sentiment from $3.11 on average during the quarter. And for shipping very helpfully, as I mentioned, shipping dropping $14 a ton, U.S. quarter-on-quarter, equating to actually, for AUD 48, that's actually $88 million.
If you're familiar with the financial scale of the business, that particular change is actually quite material. Shipping costs on average, if you've had a look at the presentation that was released from the Macquarie Conference a few weeks ago, you can see that shipping went up to about 35% of our total cost of production last financial year and has really been at that level or slightly higher for the first six months of this year. More typically, shipping should be somewhere between 15%-20% of our total cost of production. We're really headed right back to that direction, which is great. For the first six months of this financial year, shipping costs were still elevated, and in the last quarter, they've started coming down, and that trend has continued.
Combined with improving prices, combined with actually the mine doing a good job in the meantime with producing enough material so that we can hit our total sales expectation of around 3.4 million tons. All of that being comprised with high-grade ore, which is a record for the mine, is a very good place to be. Finally, you will have seen in the quarterly a note saying that we intend to provide more detail to you all and to the market in general in relation to our planned strategy for Jupiter. There's been some changes both at board level and from a management perspective in the last 9 months or so.
We've been busy in the background, working on both the development of the strategy, working with our various internal and external stakeholders, and also working on a number of the initiatives within that strategy. We're in a place where we think we'll be able to brief you more fully on our plans in that regard. There's a high level schematic that you'll see on the on the results we've produced, which is out of the presentation that we've also provided. The intention of that schematic is to indicate that the strategy is on the target, really comprehensively at continuing to defend and improve the fantastic operation we have at Tshipi, and we think that there are some good opportunities to do that, both at the mine, you know, we're looking at solar, for example.
We're always focused on mining in terms of cost and reliability, opportunities to organically improve our volumes there, and then off-mine, looking at logistics, which is a much larger component of our costs. You'll see me call out shipping. Not that that's necessarily too controllable, but the intention there is just to flag how valuable the material shipping costs are within our overall total cost of production. Then we're looking at some, if you like, inorganic opportunities, both diversification downstream and also, consolidation. It does start with the fantastic asset that we have at Tshipi, and this is an asset that you've seen through lower manganese price environments, has continued to produce very good cash flows, and we want to protect and nurture that asset.
We think we've got good opportunities to continue to improve efficiency, volume, and also add to the story, with Tshipi that's before us. I look forward to kind of providing you with more detail in that regard. I don't intend to get into too much more detail here because we want to be able to provide that information in the right way, and we see that that timing is going to be in the next quarter. Prior to the 1st of March, we'll come back to you with more detail. We're excited about that strategy. It is adding, we think, a compelling element of growth to what's already a really good operational story. With that, I'll just pause and see if there are any questions. Luke, back to you.
Thank you, Brad. To queue for a question, you may do so by pressing star one on your telephone keypad. Star one on your telephone keypad to queue for a question. Our first question comes through from Mark Fuschera. Go ahead, Mark.
Yeah, hi, Brad. Yeah, just a couple of questions from me. firstly, just with the, just the low-grade, all that obviously you've been stockpiling, not.
Yeah.
Not selling at the moment. Just wondering, do you sort of have a price in mind, manganese price must be for selling that product? You know, should it be, you know, with the benchmark, say, Port Elizabeth price, should that be significantly higher than it is now or close?
Yeah. There's been opportunity. Sorry, Mark, did you want me to answer that question first? Or did you have a follow-on question?
Yeah, if you could answer that first and I can tell the next question afterwards.
Thanks, Mark. We were selling some last year. You know, I don't think the price has to be. The price was quite low last year as well, but there were windows. There were windows this year as well, where we could actually sell some low-grade material at a relatively low margin. We were choosing to focus our capacity in a moderate manganese price environment on selling high grade. I think that's actually been a valuable strategy through this year, as I've mentioned. It's not like we couldn't just hold any this year. The low-grade market is discounted, as I said, to the high-grade market. Excuse me, it's also not as big in low manganese price environments as it would otherwise be. There's a depth of market issue.
Are you placing all the volume you want to at the price? It's not a question of not being able to sell any, it's a question of not wanting to. We wouldn't be getting good enough margin on the stuff. We are working on as part of the strategy, a strategy also for low-grade ore. We're producing it year in, year out. It does have a value, an adequate value in strong manganese price environments. It doesn't in the year that we've seen here, and we've chosen to focus more from a value perspective on high-grade ore. We've got some thoughts around how we might be able to get value out of low-grade ore through the cycle, and we can get into that more, as I said, next quarter.
You know, to answer your question more directly, we'd like to see, I'd say, manganese prices more around $4 per MTU for 30% material before we'd wanna start really looking at selling that. It's not like you can't sell any underneath that level, but the margins aren't exciting and we'd rather maybe limit the capacity on selling low grade.
Brad, it's probably worth just adding to that it's not just the manganese price, but also the shipping costs as well. It's looking at what the appropriate margin is to enter a product into the market, which is not just looking at the manganese price, but factoring in what's happening with the shipping costs as well.
Sure. Okay. Thanks. And my second question just relates to the strategy. I know you don't wanna go into detail, and you will do that in that first quarter next year. But just thinking about it, should we expect Jupiter to just announce the strategy in terms of options and plans that we'll be examining? Or can we expect, you know, some initiatives that are underway that you'll detail, you know, to address some of those strategic options, i.e., you know, you've already taken some steps so to speak to implement them.
Yeah. Thanks, Mark, good question. Yeah, it's the latter. We're not coming out with theories and thoughts. What we've been doing this year is actually working on the strategy, working with stakeholders, prioritizing what's most valuable and executable and working on some of those. You can expect a strategy that's intended to be executed and board approved rather than options. With real detail around that, including what potential and what's about to be executed in the near term.
Great. Thanks.
Thank you, Mark. We don't have any further questions, Jupiter. We'll give the audience one more opportunity to do so by pressing star one on telephone keypad. Final opportunity to ask the question. Please press star one on your telephone keypad now. Another question from Mark. Please go ahead, Mark.
Yeah, just one more from me. Just on the, on the shipping costs. Obviously, Brad, your cost there has come down in that November quarter to $6 a ton. Can you give an indication of what they are currently? As they move further down, are they in their twenties, for example?
I'd say around AUD 30, Mark. It's obviously dependent on COVID and everything, but the trend has continued more down towards AUD 30 and I'd say slightly under. The long term average prior to COVID, I'd say, was more around AUD 25 a ton and perhaps even lower. We're not down at those levels yet, but we have continued that trend and that we've seen quite a sharp advancement. At the beginning of the November quarter, shipping rates were still quite high. As we move through the quarter, we've just seen we've had some of that benefit, but really that's gonna be shown more prominently in the fourth quarter EPS.
Great. Okay, that's all from me. Thanks.
Thank you.
Thank you, Mark. Our final question comes through from Stuart Foster. Please go ahead, Stuart.
Thanks. Thanks, Brad. Brad, I just wanted to clarify, can you just explain the currency movement of the South African Rand? What's the impact that's having on you?
Yeah. If you're looking at the quarterly rate, it's really, we sell in US dollars and our costs are in rand. If you're thinking about the results through from Tshipi, they are reporting from a functional currency perspective in rand, Stuart. It's a multifaceted answer, I guess, where Tshipi's reporting in rand, where we are converting back to Aussie dollars from a Jupiter perspective. Tshipi also from a sales perspective, is executing or its marketers like us are executing on its behalf in US dollars, and then that figure is being translated into rand. In some cases, like in the summary table in our quarterly, it's been being translated back into rand.
Right.
You'll see a note, for example, which might be what you're talking about there in the quarterly, which has a single FOB sale at $2.76, which looks very low. That sale was actually executed at $3.01 US dollars, translated by Tshipi into ZAR, and then translated later at a unfavorable rate back into US dollars. It's the simplest way to think about it being sort of in Tshipi and where the value is currently, they report in ZAR, their costs are in ZAR, and their sales are in US dollars and translated back into ZAR.
Right. Okay. Okay. Thanks, Brad.
Thank you.
Thank you.
Thank you, Stuart, and thank you for your questions. If we have no further questions, I'll hand it over to Brad and Ian to close it off.
Okay. Well, thank you. Look, thanks everyone for joining. I look forward to talking to you next quarter, both in relation to this quarterly update and also more so in relation to strategy. Thanks for the update on that. Thank you all for joining. I hope everyone has a great Christmas and look forward to speaking with you next year. Ian, anything you'd like to add at the end?
Just Christmas wishes, holiday wishes to everybody. Have a great break and let's chat in the new year. It's gonna be a busy 2023 for Jupiter Mines, and be ready for it. Thanks, everyone.
Thank you.
Thank you. Thank you, Brad, and thank you, Ian. Thank you all for joining. That concludes our Q3 Jupiter Mines call. All participants may disconnect.