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The Rhodium content is very low. If you take a worst case scenario in 2019 (the last stable year) when Rh demand was 798,000Oz and automotive was 85% giving 678,000 Oz to automotive. Taking only light vehicles, heavy vehicles use much more Rh so this is why this is a worst case scenario. Gasoline light duty volumes (again to re-iterate, excludes heavy duty, Hybrids and all other automotive use) was 67m vehicles so the average Rh loading was 0.010 Oz or $303 at a Rh price of $30,000/Oz.
Very top level numbers. Clearly Rh loadings have recently increased but I have only used part of the market so the circa $300/vehicle is a reasonable guide.
If you do a search on the net for Rh substitution in catalytic converters you will come across a host of scientific papers that discuss the search for alternatives to Rh. The only conclusions that I can find from them are:
1) The search has been ongoing for decades.
2) No suitable alternatives has been found that is cost effective and meets the same performance criteria.
3) The search is ongoing but nothing is coming through in the next few years.
Add to the above, that even if an alternative was found it would be many years in full development testing by the automobile manufacturers.
If anybody can find anything else - I am always happy to learn.
Given extreme price of catalytic converter metals the race must be on to develop alternatives, but may take a while. On another note why is Impala up maybe 20 fold since 2018 while Tharisa is roughly the same price if I read the charts right? ie why does Tharisa appear so very undervalued?
Remember that each catalytic converter system (they often consist of more than one "box") will contain a mix of PGMs, of which rhodium will only be one smallish but crucial element. So your figures for total PGM content is about right, I believe; it's just the remainder of the PGM content will likely be platinum (for diesel) or palladium (for gasoline).
Rhodium is uniquely effective in treating NOx gases, and it is not easy to substitute or to thrift. JSB knows more than I do, but I believe that palladium can be used - to an extent - for the same purpose, but that it requires much higher loadings of Pd than Rh (I've read 5 to 10 times as much metal).
All in all, my best guess is that EVs will be adopted slower than many people assume, especially outside Europe. And that the number of vehicles on the world's roads will grow through the 2020s as the developing world urbanises and industrialises. And that emissions regulations worldwide will grow tighter and tighter as the years go by, necessitating ever higher loadings of PGMs. And that there will be very little new rhodium supply (this is a near certainty). So my base case is for several years of very high ($20,000/oz?) rhodium prices.
One of my fears about this stock is that technology is developed which eliminates the need for PGMs in emissions control systems. But I see no sign whatsoever of that happening. (If anybody knows better, please let me know!)
Thanks very much, these are the figures I got off the web:” The amounts and proportions of PGMs depends on the age and type of vehicle.
Cars, light-duty trucks, and motorcycles average total is 2-6 grams.
Larger-engine SUV's and trucks average total can range anywhere from 6-30 grams.”
Maybe the larger figures were older vehicles or are all wrong?
it funny reading stories from just two years ago saying the rhodium boom can continue and having risen from under $1000 in a year, the price could become $3000, well it has become ten times more, $30000, a true bubble, however even back at $3000 again rhodium will give us a decent profit. There ce can be substitution between platinum palladium and rhodium, as the price of one rises, However if these prices hold to end March the first quarter should be very exciting,
Your figures on the rhodium inside of a car are out by some margin. In a standard car catalyst converter there is around 0.45 grams of Rhodium which translates to around $500 at current price. It would be higher in a truck or a lorry. This is still a very significant cost to car manufacturers.
The Rhodium price may well be unsustainable at $30,000 but I don’t see it collapsing much further than $20,000 and there are a number of analysts predicting these levels in their forecasts.
The new Chinese 6 legislation has played a big part in this rally for rhodium and other PGMs as the 6 vehicles contain around 4 grams of PGMs, mostly Palladium and the previous vehicles had 3 grams of PGMs. The supply from SA has not been able to keep up with this demand.
The change over to fully electric vehicles is accelerating but it will take a number of years to phase out catalytic converters. Hybrid vehicle sales are booming as many see them as a stepping stone from fossil fuels to electric and growth global is expected to hit its peak around 2027. This will keep PGMs in high demand for a number of years.
At a stable Rh price of $20,000 per oz Tharisa would still be vastly undervalued. The SP was trading around 120p in August 2019 when Rh was at $5000 per oz. The market is yet to appreciate the recent moves but that has provided us with the opportunity to buy in before the share price rerates which I believe it will.
It will be a fabulous first quarter, but if the rhodium bubble bursts, so it takes a very big tumble, and platinum and palladium fall alongside gold and silver, profits later in the year may not be quite so amazing and start a decline. The big question is how long is this rhodium bubble sustainable. The rhodium cost alone per car is $2000 to $30000, then there is the platinum and palladium. Pure electric sales are soaring as mileages increase and battery prices fall. They will become even more competitive as conventional car prices increase so much from metal costs. Then Rhodium sales will decline, so for me the question is how far in advance of this Tharisa’s shares will take account of this coming fall. In fact the absurdly low PE seems to suggest that they are already taking account of quite a large fall, but the fall is likely to be even greater than that priced in…eventually. To put it another way how long will the price rise as people are prepared to pay us ever more for something they know will later fall. Hopefully a while and we will reach Tigers £2 on first quarter results IF rhodium can hold on that long, and platinum and palladium not tumble. Imho
With regards to Rhodium, the average price in Q1 so far has been $21,800 compared to an average in Q4 of $15,100 so $6,700 more and likely to be higher if prices maintain over $25,000 in March. To put the difference in perspective, the Q1 Rhodium revenue alone (at the av $21800) will generate $25.1 million more than Q4 2020 which was already a record Q for Rhodium. That’s before calculating the increased prices in the rest of the basket in Q1 compared to the previous Q.
The update in April is going to make for very interesting reading.
I bought in too and have added, however you are right, the big question is IF rhodium stabilised at $20k
Been watching THS for a few weeks and finally bought in this week. I’m scratching my head at the share price and thinking ‘what’s the catch?’. The current rhodium revenue alone is astronomical without the rest of the PGM basket or the chrome. I’m guessing that the market sees this as a sort term spike but if it stabilised for a long period of time at $20,000 then the SP should be multiples.
There are still many in the investment community that doubt that the increased commodity demand is real. This may be true of a very small number of metals such as gold but for many the demand is genuine.
Year 2020. 11-12% increase in sales of electronics. Enough said.
I misread Ru (i.e. ruthenium) for Rh (i.e. rhodium) in my notes, so it shouldn't be 14% but 9.5% rhodium content in Tharisa's prill split. Sorry, my chronic dyslexia strikes again. Long ago I even got the cane for it ("persistent poor orthography!") from my history master at school. Even now as I write this I can smell the stale whisky on his breath.
Which makes the correct calculation $29,200 / oz (today's price) x 160,000 PGM oz guidance x 0.095 rhodium content = $443.8m rhodium revenue. Against a mcap of c. $500m.
So not quite so bonkers as my earlier post. Only as crazy as a box of frogs.
Tiger I make it 15000 Oz at $30000 = $450,000, take off tax and expenses and reckon £300m k + but still a very large amount given our market cap, but still crazy given market cap of £360m. Even if rhodium quarters still a good PE,tho amazing to see how Tharisa jumps from a very low to very high PE and back again year by year.
Looking at the rhodium price we could be in for a mega interim/special dividend when the results for the 6 months ending 31st March 2021 are announced.
There has also been a rise in chrome prices and the price of the other PGMs in our basket to consider.
There is a post on ADVFN stating that rhodium is now $1m a kilo. This surprised me, so I checked this - and it's almost true. I make it that rhodium (at today's spot price) is $938,780 per kilo.
Put another way, if today's rhodium spot price held for an entire year, Tharisa would make $29,200 x 160,000 PGM ounces (guidance) x 0.14 rhodium prill split = $654,080,000 revenue from rhodium alone. Which is bonkers, considering Tharisa's mcap is only £362m = @ $500m, and the vast majority of that record rhodium revenue would drop straight to Tharisa's bottom line.
So the market is either pricing in that the rhodium price will shortly crash by 80% or more, or it is simply not paying attention. My money's on the latter.
Rhodium flat at its all-time high of $29,200 / oz today (JMAT). Iridium making a new all-time high at $5,100 / oz, and ruthenium also up at $365 / oz. Palladium stable around $2,200 / oz, and platinum under some pressure from the falling gold price - see kitco.com for latest. As for the sixth E in 6E, gold, that's dropping, but luckily it is only a tiny proportion of THS's basket - far smaller than that of most other PGM miners.
Here is an article on the proposed EU Europe 7 emission standards which are currently being negotiated. (The current price boom in PGMs is in part due to the tightened emission standards in the current regulations - Europe 6).
A few notes:
1. Remember that hybrid EVs actually contain higher PGM loadings than conventional ICE vehciles. (It's all that stop-starting of the conventional motor). Their mass adoption is actually a positive.
2. Large hydrogen fuel cell powered vehicles (such as trucks or buses) contain about 10 times as much platinum as their diesel engined equivalents, so the EU's promotion of them is also very much a plus.
3. I'd bet that the proposed timeline gets stretched out - apart from anything else, there simply aren't enough charging points for EVs. And how do all the people who live in flats or who park on the street charge their vehicles every night?
4. Note the moaning from the car manufacturers about the increased costs these new emissions standards will force on them. That's money headed Tharisa's way!
I totally agree, some commodity prices are down i.e. gold but the ones contributing the most to the revenue are up big time.
To be fair, a lot of the other metals have been playing "catch-up" in prices as well. Chrome was $130 or so, now $180 (see page 6 of latest corporate presentation for THS's most recent price); iridium was $,1500 and now its $5,000; platinum is strongly up as well, etc.
So it's not only rhodium which is driving the explosion in revenues here...
Rhodium made up 50% of revenue for 2020, price at the time was $12788/oz.
Rhodium for production 2020 was 13500oz.
Current Rhodium price $28000/oz
So Revenue should be way more than 2020.