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New low-cost producer thriving in turbulent mining climate

RISING ABOVE THE REST The challenging economic environment Tharisa faced over the past year has highlighted its low-cost competitive advantage relative to its platinum-group metal and chrome peers

RISING ABOVE THE REST The challenging economic environment Tharisa faced over the past year has highlighted its low-cost competitive advantage relative to its platinum-group metal and chrome peers

7th October 2016

By: Tracy Hancock

Creamer Media Contributing Editor

  

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Integrated resources group Tharisa tells Mining Weekly it is confident about its outlook and being able to pay its maiden dividend after the financial year-end, with its Tharisa mine, in South Africa’s Bushveld Complex, reaching steady state production and generating cash flow.

Tharisa’s dual revenue streams from platinum-group metals (PGMs) and chrome concentrates, as well as the mechanised nature of its openpit operation in the North West, ensure that Tharisa is able to withstand the cyclicality and volatility of commodities markets.

The Tharisa mine on the south-western limb of the Bushveld Complex has been in production since November 2009 and hosts one of the world’s largest chrome resources of 829-million tonnes. The mine, located near Rustenburg, in the North West province, comprises a 20-year openpit operation and a projected 40-year underground life-of-mine extension.

The company states that the challenging economic environment it faced over the past year has highlighted its low-cost competitive advantage relative to its PGM and chrome peers.

Tharisa CEO Phoevos Pouroulis noted in the company’s interim results for the six months ended March 31 that the weak rand had somewhat shielded the company from weak chrome prices.

Despite a 32% drop in metallurgical-grade chrome prices, the company remained profitable, which is attributable to its low-cost openpit operations and dual revenue stream from both PGMs and chrome concentrates.

Subsequent to the second-quarter results, chrome prices have recovered to levels above $185 per dry metric tonne cost, insurance and freight to China, which is more than a 100% increase from the lowest price in the first quarter of 2016.

Further, Tharisa says its secondary London main board listing has been well received, evidenced by its share price appreciation.

“We are on track in terms of paying a dividend and advancing our strategy of becoming a high-quality midtier mining company.

“We have derisked the Tharisa mine from exploration through to development and full production, over the past ten years with all major capital expenditure (capex) being spent. Having recently achieved steady-state production on an annualised basis, we believe that we will unlock further value through additional optimisation initiatives and will continue to sustain our low-cost position,” the company tells Mining Weekly in an email interview.

The general mining environment has been under immense pressure in the current commodities cycle, with many mining companies’ balance sheets being financially stretched. However, Tharisa advances that its financial performance proves that the new operator can function profitably and effectively manage the operational risk that comes with the mining industry.

“With the stringent management of our costs and improved efficiencies, Tharisa continues to be positioned in the lowest-cost quartile for both PGM and chrome concentrate producers.”

The company points out that, as a new operator, it is void of legacy issues and also benefits from being an openpit and not underground mining operation.

The biggest challenges faced by the South African mining sector are related to labour and political uncertainty, Tharisa says.

It has a relatively small employee base of about 2 000, which includes mining contractors, and has a three-year agreement with the main union representing its mineworkers – the National Union of Mineworkers. The agreement is due to be renegotiated in the 2018 financial year.

The availability of electricity is another challenge faced by the mining industry, although to a lesser extent, highlights the company.

However, having two independent processing plants enables Tharisa to effectively manage its production during periods when electricity supply is reduced.

“Importantly, the openpit mining operations are mechanised and rely on diesel as a source of energy.”

Tharisa produces both PGMs and metallurgical-, foundry- and chemical-grade chrome concentrates from its openpit mine. The Genesis and Voyager plants have a combined design capacity of 400 000 t/m run-of-mine ore.

During the 2016 financial year, the Voyager spiral plant was reconfigured to produce up to 25% specialty-grade chrome concentrates, which are higher value-add products and diversify Tharisa’s geographical customer base away from the stainless steel market.

“The project was successfully implemented and target production levels were achieved. The primary spirals were also replaced during the course of the year with an improved spiral design, improving recoveries further.

“The project, which took about six months to complete, was funded in the normal [fashion] through sustaining capex with the reconfiguration undertaken in-house. “Tharisa has a full engineering and project management capability and the spiral design was researched by Tharisa and the project managed by its engineering team.”

Tharisa explains that the reconfiguration of the spirals boosted specialty chrome concentrates from an average of 10% to 25% of chrome production, while increasing the PGM content in the rougher grade being fed into the integrated milling and flotation circuit.

“To recover additional PGMs, high-energy flotation mechanisms were also installed in the Voyager PGM flotation circuit,” the company explains, adding that PGM recoveries have been improving steadily and are exceeding targeted levels.

Edited by Creamer Media Reporter

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