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Strong chrome market, price supports free cash generation for Tharisa

Tharisa CEO Phoevos Pouroulis

Tharisa CEO Phoevos Pouroulis

12th July 2023

By: Marleny Arnoldi

Deputy Editor Online

     

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Chrome and platinum group metals (PGMs) miner Tharisa has increased its PGMs output to 37 000 oz of platinum, palladium, rhodium, iridium, osmium and ruthenium (6E) in the third quarter of its current financial year, compared with the 34 200 oz of 6E produced in the second quarter.

The company, which is listed on the JSE and the LSE and operates the Tharisa mine, in South Africa’s North West province, says it has maintained processing capacity, yield and recoveries.

Chrome output, however, was marginally lower at 378 800 t in the quarter under review, compared with 404 800 t of chrome produced in the preceding quarter. Tharisa also reports steady grades, yield and recoveries from its chrome operations.

The company’s cash on hand increased by almost $37-million in the quarter to $242.6-million, resulting in a net cash position of $141-million as at June 30.

This strong balance sheet will help support the growth of the company further and provide returns to shareholders.

Meanwhile, Tharisa says it is on track with building the Karo Platinum project, in Zimbabwe, having poured first concrete and started pilot mining in the quarter under review.

For the remainder of the financial year, Tharisa will receive major deliveries of long-lead items, as well as start powerline construction.

CEO Phoevos Pouroulis comments that the company’s unique co-product model again highlighted how the company can benefit from favourable chrome pricing while dealing with PGM pricing pressures.

An average metallurgical grade chrome concentrate price of $290/t in the quarter helped to support strong cash generation, against an average PGMs contained metal basket price of $1 695/oz in the quarter under review.

“Domestic headwinds coupled with macro events and commodity price uncertainty have pressured the business and led to a material disconnect between equity valuations and intrinsic valuation underpinned by cash generation.

“However, as we have shown in more complex historical times, the nature of Tharisa, with modern, low-cost structures, leaves us well positioned to weather the environment and continue to provide returns to shareholders while actively and sustainably growing the business,” Pouroulis states.

MARKET VIEW

Pouroulis explains that the pressure experienced in the PGMs market manifested itself in some “unusual and often aggressive” selling patterns, with renewed fears of a macroeconomic slowdown, driven by China and the US, which compounded price pressures.

This despite car sales being set to surpass production last year, which should underpin demand for all PGMs.

However, pipeline destocking meant that this increased demand was satisfied by pipeline inventories.

“We maintain that, while prices are trading near 52-week lows, in the medium to long term, prices should rise, driven by supply complexities in the major producing regions, with current pricing pressures leading to increased challenges faced by some higher-cost producers,” Pouroulis notes.

While most commentators have pulled back price forecasts in line with recent events, the long-term outlook for even the most conservative forecasts are indicating higher averages for PGMs than current spot prices.

Meanwhile, the chrome market showed its ongoing resilience as solid demand meant prices averaged well above those achieved in the previous quarters.

While port stocks, which were sitting at multi-year lows, have increased, the supply pipeline remains tight, particularly as inland logistics in South Africa remain challenging.

Additionally, there have been no major primary output increases in the local market owing to the lack of available resources and power constraints for smaller producers unable to access standby power.

The chrome market looks set to continue its strong performance for the remainder of the calendar year, particularly as new furnace commissioning continues to draw on material demand.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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