Quick Pitch: Jupiter Mines (JMS:AX)

Potential Takeover: 60% Upside (at A$0.20/share)

Mining companies are notoriously difficult to value. Even with insider insight, it’s hard to know what’s really in the ground, how much it will cost to extract, or where commodity prices are headed. But at the end of the day, something is worth what someone is willing to pay for it. The miner in this pitch just received a very clear signal of what that number might be. A full buyout may also be in the cards.

Jupiter Mines (JMS) owns 49.9% of Tshipi Borwa mine. The other 50.1% interest is held by a joint venture (JV) called Ntsimbintle Mining Proprietary. Tshipi Borwa mine is located in South Africa and produces ~6% of the global manganese supply (mostly used in steel production).

Several weeks ago, the JV (i.e. the owner of 50.1% interest in the mine) was sold to Exxaro Resources, South Africa’s top natural resources company (A$3.2bn market cap). The sale also included the 20% stake in Jupiter, which was owned by one of the JV partners.

The JV transaction valued Tshipi mine at the equivalent of A$0.315 per JMS share, or 110% premium to pre-announcement prices (A$0.15/share) and 60% above the current trading levels (A$0.20/share). The same price was also paid for the stake in Jupiter, as Tshipi is essentially Jupiter’s only asset.

The transaction is expected to close in early 2026.

The opportunity with Jupiter boils down to several points:

• Sale of JV implies JMS valuation of A$0.315/share.
• 20% stake in JMS was also acquired at A$0.315/share.
• Management teams on both sides seem to be open to further consolidation – a full takeover of Jupiter would be a logical next step.
• The day after the JV sale was announced, JMS directors began buying shares on the open market.
• The upside to A$0.315 is 60%, whereas downside to pre-announcement prices is much smaller at 25%.

Before we dig in, the chart below shows ownership structure with my notes in red.

 

Full buyout of JMS coming?

There are couple of reasons to think that the sale of JV will be followed by the full buyout of Jupiter Mines.

A full consolidation of both JMS and Tshipi would make strategic sense. Tshipi’s bylaws require a 75% special majority to approve key operational decisions, such as budgets, dividends, capital expenditures, and so on. So despite the substantial investment so far, Exxaro still lacks real control of the mine. And it’s fair to think that it won’t be content with this arrangement. Exxaro is a major domestic player that positions itself as a seasoned, pure-play natural resources operator with an exclusive focus on South Africa. It’s hard to see why it would want to remain tethered to an Australian microcap minority partner with no other assets.

JMS held a special investor call to discuss the JV transaction. During the call, management explicitly stated that it sees value in further consolidation (emphasis mine):

So the shareholders agreement sets out in a pretty thoughtful way how decisions are made. It has functioned very well between Ntsimbintle Mining and Jupiter up until now. We think it will function well going forward. We do think it would be more valuable to create, as I said earlier, consolidated control around these structures.

One analyst bluntly asked if a full takeover by Exxaro is in the cards. Management’s response loosely confirmed that it’s a potential next step:

[…] Everyone thinks that the value would be — more value would be released on top of what’s been announced today. If you can get consolidated ownership for Jupiter, we’re happy to be flexible in the way that, that is delivered. But to answer your question, that’s — those sorts of further steps forward for further discussion from today. Today, what we’re announcing is something that Exxaro has achieved that is relevant for Jupiter is an important first step. And Jupiter is focused on its strategy of driving further value through consolidation, and that can occur in many different ways. And I think that’s similar to what Exxaro said in answer to this question yesterday.

Exxaro on its own M&A call was also hinting at being open to the full takeover:

We look forward to working with Jupiter in the joint venture agreement going forward and looking at unlocking strategic value for both our organizations in whatever form that may take. So right now, I think the focus is in bedding down this transaction, and we take it one day at a time.

The next day after the Exxaro announcement, two Jupiter directors, including the chairman, bought around A$150k worth of shares at ~A$0.18/share (here, here and here). It’s not a massive amount, but given how little equity this management team owns, the purchases do stand out. The chairman, for instance, increased his stake in JMS by roughly 30%.

A buyout of Jupiter could be announced once the JV deal closes, or even earlier. The JV transaction is expected to complete in early 2026, pending regulatory approvals. No major hurdles are expected, as Exxaro has no existing manganese assets and operates solely within South Africa.

 

Why is Exxaro waiting?

The first pushback I got on this setup was this: if Exxaro wanted to fully buy out JMS, why is it not doing so simultaneously with the JV buyout? To be honest, I don’t have a clear-cut answer to this and can offer only my guesses (which seem to make sense) about the deliberations that might be happening behind the scenes.

#1: Step by step approach. Exxaro may simply want to secure majority ownership of Tshipi first. It likely doesn’t want to engage bankers or structuring a buyout of a publicly listed vehicle prematurely, only to make it contingent on the JV transaction closing first. It may just want to clear all approvals, avoid potential delays, lock in the majority stake, and then move forward—step by step, or “one day at a time,” as management put it during the call.

#2: Playing it very safe with the regulatory review. While I do not think regulatory approvals present material risks here (covered in more detail in the next section), Exxaro might try a safer route with a smaller transaction first. After the current JV and related asset sales, Exxaro is expected to control around 13%–18% of South Africa’s manganese production. A full buyout of Jupiter would push that closer to ~25%.

#3: Cautious balance sheet management. Another possibility is that Exxaro wants to understand the full cost of the current transaction before making its next move. On top of JV (i.e. 50.1% of Tshipi) acquisition, Exxaro is also simultaneously buying interest in two other manganese mines from one the JV partners: a 51% interest in Mokala and 9% in Hotazel.

Both Hotazel and Mokala have major shareholders with pre-emptive and tag-along rights. Pre-emptive rights allow them to acquire the offered stakes themselves, effectively blocking Exxaro. Tag-along rights, on the other hand, provide an option to sell its own stake to Exxaro as part of the deal. The ownership structure of the ongoing JV transaction is outlined below. Hotazel’s shareholder must decide by June 12 (today), and Mokala’s by June 24. If the tag-along rights aren’t exercised, the likelihood of Exxaro making a bid for JMS (possibly even sooner than early 2026) increases.

Depending on how these rights are exercised, the cash outlay for Exxaro could vary significantly.

 

Regulatory pushback is unlikely

While Exxaro is expected to control substantial part of South Africa’s manganese production after all transactions are finalized, I do not think this would be a cause for regulatory pushback.

• Manganese is a globally traded commodity, not a domestic supply-constrained market. So traditional antitrust concerns shouldn’t really applicable in the first place.
• Mining markets tend to be concentrated. For example, South Africa’s platinum sector is dominated by Valterra Platinum, which controls over 50% of local production and around 38% of global supply.
• The ongoing transactions, and the potential takeover of JMS, would result in the buyout of several foreign shareholders, consolidating more ownership of the strategic resource within South African hands. So regulators might actually welcome this dynamic.
• Exxaro has publicly emphasized its “deep” knowledge of South Africa’s regulatory and mining landscape, so management likely has a strong read on the path to approval.
• The buyer’s chairman appears to be well-connected politically. He’s the former CEO of the government-owned IDC (Industrial Development Corporation), which backs strategic sectors like mining, and has chaired multiple major state-owned enterprises including Telkom and South African Airways.
• The JV’s chairman also brings a political background, having served as a member of parliament and on the boards of several large SOEs.

 

Some background on JMS, Tshipi and manganese industry

Jupiter Mines (JMS) acquired its 49.9% interest in the Tshipi mine in 2010. Production began in 2012.

JMS is not only a shareholder but also acts as the exclusive marketing agent for 49.9% share of the ore mined by Tshipi. In return, JMS receives a 3% commission fee, paid directly by Tshipi. From the IPO prospectus:

Jupiter through Jupiter S.A. earns a marketing fee commission based on the total value sold by Jupiter S.A. The 3% marketing fee is calculated off Tshipi’s freeon- board revenue and is considered a strong and stable revenue stream by Jupiter.

According to the prospectus, JMS services 10–15 primary customers, mostly based in Asia, along with a limited group of smaller buyers. While the company provides limited detail on individual contracts, Exxaro recently noted that Tshipi’s offtake agreements are largely long-term in nature, with a stable customer base concentrated in China and India. Pricing is mostly spot-based, with adjustments for shipment timing and forward manganese pricing.

The marketing fee earned by JMS is modest (A$8m per year) relative to dividends received for the stake in Tshipi.

JMS itself has been a strong dividend payer so far. It has distributed A$0.21/share over the past seven years, which exceeds its current market cap. Those figures included boom years of 2018-2019, so past dividends don’t necessarily reflect the future outlook.

Tshipi is a Tier 1 asset: the largest manganese mine in South Africa and the fourth-largest globally. It sits in the Kalahari Manganese Field, home to 75% of the world’s known manganese resources. South Africa currently produces around ~40% of the world’s manganese.

With a 25-year mine life and second-quartile cost structure, Tshipi is one of the most stable and competitive producers in the market. Production volumes and costs have remained consistent over time (see chart below):

Manganese is primarily used in steel production, accounting for roughly 90% of global demand. It strengthens steel by making it more durable and wear-resistant, typically comprising between 0.2% and 2% of the final alloy. The remaining demand comes from sectors like EV batteries, fertilizers, and specialty chemicals. Many countries, including U.S., EU, Canada, Australia, etc. have designated manganese as a critical metal.

The spike in CY2018 was driven by major supply disruptions at a large Chinese producer. However, in the second half of CY2019 the market had shifted into oversupply, and prices normalized, further helped by the COVID induced demand drop. More recently, prices have been relatively stable, still reflecting a broadly oversupplied market, thanks to improved mining technology and a slowdown in steel demand.

Erling Sorensen from Aligned Capital has noted that at current prices, 50% of the producers are unprofitable, “and hence the price is unlikely to remain at these levels for sustained periods”. Tshipi, as one of the lowest cost miners, has avoided this problem so far.

Exxaro also expects manganese prices to slowly start inflecting this year (see charts below), driven by the recovery of steel production. From the presentation:

In the conf. call, Exxaro framed the current price environment as an opportunity. It was noted that while manganese is in a cyclical downturn, the acquisition still makes sense based on long-term fundamentals, particularly given the cost position of the assets being acquired.

But should you derive EBITDA number, as we pointed out for the past 3 years, it results in a multiple of about 8x. Now also during that period, just take into account that the — for instance, the Mokala Mine was ramping up. And also during that 3-year period, there was — the manganese prices were in a down cycle environment. So that is just a color on how we will account for the asset.

[…]

if you look at the manganese spot prices, as I said earlier, and our long-term pricing. And I think when you do an acquisition, you really have to believe in the long-term fundamentals and you have to believe in a certain long-term pricing. At our long-term pricing in this modeling of $4.20 FOB, we definitely believe that this is an attractive acquisition, also acquiring it at a time when the manganese prices are possibly at one of their lowest ends. We have not priced in any price increase. It’s mainly because — so it’s not — we are not — this transaction is not dependent on any price recovery because the assets we are acquiring are within, as I said, the first half of the cost curve, which really means that we are able to provide benefit and to provide good margins through the cycles.

 

Stuff I wasn’t able to fit elsewhere

• One particularly interesting and amusing moment from Exxaro’s call came when one analyst asked if a full takeover of JMS was on the table. It’s unclear whether the CEO misheard the question or simply misspoke, but one could jokingly call it a Freudian slip. You can hear it in this webcast recording (20:20–21:10). I’m also dropping the quote below:

EXX’s IR: The first question comes from William from Bloomberg. He wants to know whether or not we will be considering buying a stake in Tshipi Borwa and whether we’ve had any discussions around that?

CEO: Thank you very much. Tshipi Borwa is the mine that is owned currently by Ntsimbintle Holdings and OM Holdings. And therefore, that mine will now become on completion of this transaction will be 100% owned by Exxaro.

Finance director: No, sorry, Ben, to correct. We will be owned 50.1% directly and 10% indirectly. So we’ll be partnering with the Australian-listed Jupiter Mines on Tshipi Borwa.

• Another signal pointing toward a potential full takeover is Exxaro’s decision to acquire a 20% stake in Jupiter. Strategically, this wasn’t necessary, as the stake doesn’t affect Tshipi’s ownership or control dynamics. The fact that the buyer proceeded anyway suggests a clear interest in Jupiter and further affirms the underlying value of both Jupiter and the mine. That said, a reasonable pushback is that the move may not have been Exxaro’s initiative at all. It’s possible that the JV partner (the owner of 20% stake in JMS) was simply looking for a clean exit from Tshipi and negotiated the inclusion of the JMS stake as part of a bundled deal.