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Hi Visitor-most of my chrome info is from www.ferroalloynet.com and then chrome ore analysis. Even if you are not a paid up member you can ready the first line or two of each article. Today they are reporting chrome ore stocks at Chinese ports has now fallen to 1.997 million tonnes on 12th Aug, a fall of 47,000 tonnes in a week.
As you point out having the 2 metals sectors helps to diversify the business and even though down the chrome situation will bounce back as Chinese producers get back to normal after the covid lockdowns while PGM.'s are showing resilience too. I suppose at these times of high inflation prices cannot just go back to the levels of last year or a few years ago as producers worldwide can no longer profitably produce as those levels. As you point our Western PGM buyers will try to avoid Norlisk palladium which is already in tight supply and the platinum oversupply looks like reducing as some of the big S African producers have suffered production setbacks.
With 1.5 months to go to the financial year end, the lower chrome price will probably reduce PAT by about $5 million but with the share price rise last week this still puts THS on about 2.8 p/e and an dividend yield of 5-6%.
Hi Mike - thanks for update on Chrome. Out of interest, where do you get up-to-date info on chrome prices? I always struggle. The beauty of THS in last couple of years has been when one commodity is struggling, the others have taken up the heavy lifting.
When Chrome was down in the dumps, Rhodium and Palladium allowed THS to build Vulcan from cashflow (originally it was going to be built with financing) and then Chrome picked up some of the recent slack in PGMs at near $300/tn. Now with Chrome weakening somewhat (although Chrome at $200/tn should still provide a large free cashflow and profit if Chrome AISC is circa $110/tn) Palladium has bounced back over $2,000, Rhodium appears stubborn (for now) over $14k and even Platinum has showed some strength.
I've been keeping close eye on biggest palladium miner Nornickel and even though they're not sanctioned, they've been struggling with logistics and "voluntary sanctions" (i.e. western firms don't want to risk any association with Russia) limiting equipment and spare parts coming in. Nornickels sales dropped in H1, they're pushing Projects back and H1 is before such voluntary sanctions would really bite (as they no doubt had inventories and stockpiles). So even though like others I may be worried by global recessions and weakening demand (in my opinion a lot of such worries already baked in to PGM and stock prices already), supply could also be an issue in any event, keeping a bit of a barrier under prices. Unless there's a liquidity Lehman moment, but then no one can predict that...
Unfortunately after one month of stand off between buyers and sellers in China, last week the S African chrome 40-42% concentrate price CIF China is down to $200-205/tonne, a drop of $40-45/tonne in 2 weeks and the lowest level for about 6 months.
That is a bigger fall than I expected but hopefully there is not further drops to come and chrome stock on Chinese ports have fallen to 2.044 million tonnes on 5th August.
"You cant make spectacular returns from big companies"
Someone gave me the heads up on TGA last year with a simple "have a look at this" I had some shares given free from when anglo split them off, after looking at it for days I was thinking it looks too big to be a 100% riser but that's what it did and more, now its on another leg up shooting up like an illiquid share but liquidity is great. I think THS looks really good value but I've sat about waiting for weeks before and it's just not moved. Kenmare is another I think looks great but in the same boat as this, FA movement, instutution killing rises.
Hi Sotolo, I agree with your sentiment on the Chinese economy but I think their government will reflate their economy while most western countries go the other way (I am expecting a 0.75% interest rate in the US tomorrow followed by 0.5% here in the UK next week).
I think that chrome will fall a little further but the latest weekly chrome stocks at Chinese ports were 2.157 million tonnes on 22nd July, down by 153,000 tonnes the week before so they are still tight. Yes, rhodium has slipped but is still higher than a weeks ago. I thought the Tharisa Twitter information yesterday was interesting that Amplats suggested that recession was already priced into PGM prices (the cynic might say-they would say that wouldn't they) inferring any further downward movement would be limited. I think that the chrome and PGM prices are very nervy at the moment like all commodities and shares and reacting to the latest soundbites. As you have suggested below and others have said recently we have to try and work-out the bigger longer term picture. This is made even more difficult when we have made big theoretical losses in recent weeks but I sincerely believe THS will build from this level. I never like to comment on how much we all put into each share, we all have our own risk tolerance influenced by good and bad experiences and our personal flaws and sometimes good judgement.
In the short-medium term it would be great to hear that the tweaks to the Vulcan plant are now installed and operational and continued updates on the Karo project (capex spend/ external investment/start date) and latest on the PGM beneficiation and solar farm. I just hope that the Karo assets valued rather quickly in the H1 accounts due to their recent purchase are not reduced down in the FY accounts.
Another posative to take is that with the strong USD, the local costs in Rand will convert to less USD in the accounts and offset some of the inflationary increases (although partly offset by a currency loss). I am looking forward to the FY/2022 accounts in November.
Mike, you seem right on every score
Chromium continues to fall and likely will a lot further - look how the Chinese slowdown has affected other metals including steel and look at FT today, the biggest asset on the world is looking very rickety - Chinese property
Rh seems to have had its bear bounce. As you said last week the PGM basket increase this week is based on recent information but the longer term trend is still uncertain.
Finally you concluded that THS is a real bargain at under 2.5 P/E for this full year and with the 200 day moving average price firmly above 100p but not to be foolhardy and invest more than 10% which many of us have. Is it time to use the bounce above £1 to reduce our holdings. On the plus side for ths it has a strong balance sheet to weather the coming storm, on the minus speeding electrification in the biggest car markets, but the thing to remember is THS profits are increasingly, and now mainly chromium, and that will recover, and ths should still be here but could be a dicey few years. However I can’t think where I would prefer my money. So I have near 25% here, I joust sold my SLp to put here, but as Prof, johnpwh point out should we?
John,
Thanks, great analysis of why we do it!
Best wishes,
Prof
Prof.
Hate to tell you, but we are all the same.
I suppose the logic goes as follows:
You cant make spectacular returns from big companies
The more you spread your money, the more you get average returns. Concentration on one small promising share is the only way to make a fortune......
We all fall for it!
....I understand your rationale and have been there with you!
Mike,
I admire your resolve in sticking to a % target of funds invested in a single company.
I have been burnt a number of times by having ridiculous concentration in a 'dead cert'.
The broad deal I made with myself was no more than 25% of my portfolio in any fund and no more than 5% in any individual stock. I have never come close the 25% rule but have regularly exceeded the 5%. Recently I was putting more and more in an AIM stock and eventually limited myself at 15% out of respect for the principle of my rule even though I was convinced it was going to climb and climb. It didn't and bombed. I was saved only by my semi adherence to the rule of diversification.
Best wishes to you oh wise and disciplined one,
Prof
….yes, the S African chrome concentrate 40-42% price CIF Chinese port has fallen $15-20/tonne this week. A $20/tonne reduction is equivalent to about -$8.8 m revenue reduction at my anticipated Q4 production while a PGM basket increase of say $100/oz is equivalent to about +$4.2 m revenue increase at my anticipated Q4 production.
I feel the PGM basket increase this week is based on recent information but the longer term trend is still uncertain.
Again I feel that THS is a real bargain at under 2.5 P/E for this full year and with the 200 day moving average price firmly above 100p but it already represents 10% of my invested funds and I strictly refuse to go above that no matter my personal sentiment.
I agree that the market still views THS as predominantly a PGM business (and so the share price largely follows the PGM prices up and down)and still has to fully appreciate that chrome will contribute over half of the revenue this year and that these two separate commodities do help to diversify the business.
Sotolo,
Haven't topped up here either. Like CEY I am happy with THS as a company but worry about the macro headwinds. August is always a funny month but my fear is that Sep sees some serious selling as everyone returns from holiday and get nervous about a recession. THS/SLP/ JLP/ CEY , I am happy with all four companies for the long run but am unsure for the next 6months. Best wishes, Prof
Yes looking good tho Chromium down a little further but market see THS as mainly PGM even if a bit out of date. Anyway lovely to see rh rising but as asked earlier is it a bounce or for real
….LBMA currently showing gold $1736 with platinum up $12 from yesterday and palladium up $117/oz from yesterday.
Yes Prof, is it for real or a bounce? Hoping the former I topped up yesterday , and also some cey as gold touched $1680 so is due a bounce to near $1800 but again will it be just that … probably
Rhodium now showing up at 15400 on Johnson Matthey.