Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Nothing to do with time zones, regulatory regimes, and we did go x divi as today, 29/2 is the first day the shares trade without dividend rights
Freedom4uall, thanks for the info.
The S African 40-42% chrome concentrate price CIF Chines port is still $285 to 290/ tonne although with little consumption during the Chinese New Year and vessels still arriving the latest stock at Chine ports has increased from 2.77 m tonnes to just over 3 m tonnes so we need this to decrease in the next fee weeks.
Reading Anglo American's recent FY page 21 RE PGM, Anglo noted that due to current PGM prices several producers restructured existing mines or mothballed future plans, Anglo also halted work on a 3rd concentrator and halted expansion opportunities related to PGM operations, given this Tharisa should remain conservative and does anybody know the chrome prices?
Actually, we went ex divi on JSE today, but tomorrow on LSE. Didn't quite understand that, as we're in the same time zone?
Pleasure, pls also bear in mind we went x div in both mkts today, so 2c is sort of understandeable
Thank you Tharisa
Moneyman, we were in a closed period till last Wednesday AGM, plus share buy backs from a regulatory point can be tricky given the three jurisdictiosn we operate in, but the board and executive look at this opportunity regularly, togetehr with our brokers
Stemis, the board given the family holding, owns some 42% of the stock, I doubt anyone is less happier about the SP than the founders and major shareholder
Thanks Stemis -but surely the Bod should be buying to help give confidence to other investors or they happy to let the shareprice drift 5% per day?
The Bod appear to have little or no confidence in Tharisa -if they did they would be buying shares on the open market
The board have substantial shareholdings - c. 10m in total I believe
Not only that, but the promoters apparently have history of similar dealings in the past, including being investigated for fraud charges. Admittedly acquitted in the end, but investors lost a lot of money back then as well, there is a very interesting read on this: https://theexchange.africa/regional-markets/pouroulis-tharisa-platinum-investment-zimbabwe/
I wish I did more diligence on this, especially when Karo investment was first announced, but now sitting on a large paper loss, which might be time to realise while it is not too late...
I am glad I got out when I did as this has slipped further this week.
The Bod appear to have little or no confidence in Tharisa -if they did they would be buying shares on the open market at this price which they apparently consider ridiculously low -hence people keep selling and the shareprice keeps falling.
Add to this Karo and the upcoming SA General Election ( with the EFF gaining ground) there is very little to help the shareprice
Stemis, the other big change to these 2022 Karo numbers is the LOM and mining cut. The 2022 numbers show the Phase 1 or open pit Life Of Mine as 17 years+. But the 2023 Mineral Resource and Mineral Statement reduced the ROM by 12.5 m tonnes from 35.5m tonnes to 23.0 m tonnes compared to just the year before, a massive reduction of 35% (see page 93 in the Tharisa PLC 2023 Integrated annual report).
The main reason seems to be that the previous Mineral Reserves were based on a targeted mining cut of around 5m containing around 2.42g/tonne PGM 6E and in 2023 this has changed to a narrower cut of about 2.5-3m targeting 2.98g/tonne PGM 6E. So while the physical reserve is still there , to hit the original target of 3.0 g/tonne and lower PGM prices the business is having to forgo some PGM's to try and remain viable.
At the anticipated full production of 2.46 m tonners/year this reduces the LOM from 17 years to 10-11 years (allowing for some lower production in the first and final year). While Tharisa has highlighted the reduced LOM at Tharisa we have not overtly mentioned the reduced Phase 1/open pit LOM reduction at Karo (possibly as the mine has not yet even started and the number might change yet again and possibly some embarrassment as the scale of the current big reduction).If the 10-11 years LOM continues, then the Phase 2 underground capex would probably have to start say 4 years before that, so the capex on Phase 2 could be required sooner than expected.
The near-by Zimplats Ngezi mine started as an open pit mine in 2001 , opened the first of 3 underground shafts in 20023 and the open pit was closed in 2008.
Thanks to all contributors for continuing observations.
Thanks Stemis, the latest Karo PGM basket price on the Tharisa website is $1193/oz (or around $1210/oz since the start of this year) and the latest production forecast is around 200k oz. At of June last year Karo employed 540 people (90 direct, the balance contractors). Being in a Special Enterprise Zone I have assumed their are no royalties but for the first 5 year the Zim government gets the 15% free carry and then after that the 15% free carry plus 15% corporation tax.
Here's the last detailed update on Karos
https://www.tharisa.com/pdf/investors/presentation/2022/20221012-tharisa-kmh-marketing-presentation-october-2022-final.pdf
At the time the cash cost was US$1 096/PGM oz (exc royalties & tax). Forecast production 194k oz pa. Company has a 5 year tax holiday from operations. Average PGM basket price in quarter ended 31 December 2023 was $1,344
Sibanye concludes it's pgm restructuring programme with Anglo American also in the process of doing likewise, hopefully these actions will in time reflect in higher pgm prices.
https://www.miningweekly.com/article/sibanye-concludes-restructuring-negotiations-at-its-south-african-pgms-operations-2024-02-23
Thanks Stemis, much appreciated. On paper buying the right to mine an inferred 96m ozs at $4.8/oz looks incredibly cheap but based on the current PGM basket this is still loss making. As the Company says below they are looking at the "higher long term analyst price forecasts that were used in valuing the project". which I agree is the right thing to do and I do agree that prices will trend higher (although prices trending up due to inflationary increases is rather neutral in real terms as costs increase too). But the big question is how fast do prices increases and to what level? If it happens within 6 or 12 months then great although even this has a cost and will probably delay the FOIM next year ,but if it takes say 3 years for the current Karo PGM basket price to recover from around $1200/oz at the moment to say $1500/oz which might be considered the break even all in cash/capex cost then we still have to finance Karo for 3 years and then at $1500/oz by my admittedly basic numbers it is still only breaking even so no gains for us shareholders. By my numbers, even a basket price of say $1700/oz after taking out the payments to Medway/Zim government would generate a net profit attributable to Tharisa shareholders of roughly only $30m/year which is a relatively low gain for the current risks involved. These are just my numbers and I am open to numbers from others or Tharisa.
As we have said before this is a massive play on where the PGM price will be in future years . I see the AGM statement says this $4.8/oz " compares favourably to comparable transactions" but what transactions, perhaps 12-24 months ago, the Big 4 PGM producers are now cutting back even though they have lower cash costs and operating mines. At some point the reality of current PGM prices and longer term PGM forecasts have to merge into some form of reality. Great if the Company gets this call right but if not....
I can understand that Tharisa management has commitments to many Karo stakeholders and needs to be seen as being decisive and so is sticking with the same mantra but this needs to be pragmatic .
The Tharisa mine is a fantastic business but with Karo I fear for the future.
The most important point on Karo is if it can be somehow operated at a profit if the PGM basket does not recover materially in the medium term-the purchase price per PGM is not the important factor here.
Also have the BoD given any consideration to addressing the very low shareprice and if they consider it to be to low and have full confidence why are they not purchasing shares on the open market
$457.8 m/ 96m oz = $4.8 / oz
Ilja, thanks for your reply as promised.
For good order can you please explain the maths for 96 million PGM 6 E ozs equating to USD 4.8/oz.
Tharisa’s investment in the Karo Platinum Project
The total investment by the Company in acquiring its current 75% shareholding in Karo Mining Holdings is US$135.3 million, imputing an entry valuation of US$180.4 million. Karo Mining Holdings has an indirect shareholding of 85% in Karo Platinum and therefore the entry valuation for Karo Platinum is US$212.3 million. Karo Platinum is a multi- generational asset and the valuation is for phase one of the project only. In valuing a long-life asset, the longer-term sustainable commodity prices are used and not the spot commodity prices, and it was at the higher longer term analyst price forecasts that were used in valuing the project.
The recent rights offer undertaken by Karo Mining Holdings raised US$65.0 million. The Company’s shareholding in Karo Mining Holdings was 70%. To follow its rights and maintain its shareholding required the Company to invest US$45.5 million. The minority shareholder did not follow its rights and renounced its rights to the Company. The Company followed these rights and, in so doing, increased its shareholding in Karo Mining Holdings by a further 5% to 75%, at a cost of US$19.5 million. Applying the rights offer subscription for the additional 5% shareholding imputes a value of US$390.0 million to Karo Mining Holdings and thus US$457.8 million for Karo Platinum.
There are 96 million inferred PGM ounces (on a 6E basis) deriving a value of US$4.8/oz, which compares favourably to comparable transactions.
https://www.overend.co.za/download/sens-rns-results-of-agm-and-dividend-conversion-rates-22feb24-final-updated.pdf
Hi Stemis, the valuation of KMH to date is just is just part of the equation.
We know that Tharisa will increase our shareholding from 75 to 80% this year, but we do not know the cost, the increase from 70 to 75% cost $65m last year but I expect the increase from 70 to 75% this year to cost $70 to 80m, possibly more, we will have to wait and see.
Up to Sept 2023 Tharisa had spent the equivalent of over $130m on KMH (in 2018 $4.5m to Medway for 26.8% of the business plus injecting $8m for initial exploration then in 2022 at further $27m worth of THS shares to Medway increasing our shareholding to 66.3% then later in 2022 rights issues for $8.1m + $9.9m and in 2023 rights issues for $27.3m + 37.7m) But the Sept 2023 accounts show the KMH net assets as only $83.427m and of that $53.899m was attributable to Medway taking acquisition adjustments into account (so only $29.528m of net assets attributable to THS having spent over$130M).
It has been inferred that our shareholding will stay at 80% and ECIC external $160m ring fenced funding will be raised but we do not know if THS will have to act as guarantor to this ring fenced funding (if so then it is not really ring fenced to Karo) or IF the ECIC funds are not approved will THS change their mind and commit to the $160m additional investment.
At Sept 2023 THS has a Net Asset Value of $615.874 m attributable to shareholders this will certainly increase over the next year or so but by then we possibly might have invested $200-300m on KMH and if PGM prices do not recover then THS could end up righting off a big chunk of that investment. Have a look at the massive recent impairments taken by Sibanye Stillwater/Amplats and shortly Implats on their PGM assets. We already have some experience of this on a tiny scale having bought 90% of Salene Chrome in Zimbabwe from the Leto Settlement Trust in 2018 and eventually increasing to 100% in 2021 only for it to be mothballed after the Zim government imposed taxes on chrome concentrate exports.
Finally it is critical that related parties, such as Tharisa, KMH, Chariot trade at arms length and that the deals between them are fully transparent and understood by all stakeholders.
I really don't understand why people are getting so obsessed with the valuation of KMH for the purpose of the rights issue. Because Tharisa own the majority of it, it doesn't much matter what valuation they use. Even if they'd used a valuation of just $100m on KMH (pretty much the value of the capex invested so far), the $65m they invested would have only got them 81.8%*. So that's an extra 6.8% of something valued at $100m i.e. $6.8m. Hardly material in the scheme of things.
* Value pre fund raising 70% x $100m = $70m
Vale post fund raising 81.8% x $165m = $135m
Difference $65m (the amount they invested)
Likewise, thank you Ilja.
Can someone start with another subject.