In a note on London-listed Tharisa, UK investment bank Peel Hunt says the key takeaway from Tharisa’s results was its $260-million Karo capital expenditure (capex) guidance for full-year 2023.
“At roughly two-thirds of the total spend, this highlights a busy year ahead,” it notes.
Peel Hunt points out that the accelerated nature of the work at Karo means heavy outflows over the next 12 months, as kit items are ordered and paid for, civils works are required to prepare the plant site and link up water and power supplier, and the mines need opening up and preparing.
The Karo capex budget, including a significant contingency and an allowance for further inflation, totals $391-million. This is less than the total debt facilities that the broader Tharisa group is contemplating to fund the development.
Despite this heavy spend, Peel Hunt sees closing net debt of just $74-million by the end of the period, which it says highlights how cash generative Tharisa’s operations are.
Despite lower mine side costs in full-year 2022, adjustments to Peel Hunt’s expected platinum group metals realisations means it has revised earnings before interest, taxes, depreciation and amortisation down 3% following the publication of the full-year 2022 results.
Peel hunt points out that securing debt facilities should ease investor concern over the Karo project, given management’s aim to secure funds in excess of the total built cost.
The investment bank estimates Tharisa will likely finish the build with net debt of just $47-million.
It predicts that this will deliver dividends during the build and rapid repayment post-build.