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Freedom4Uall,probably better if I do not comment on the bulk of your last post but regarding verifying the 2023 $65m cash subscription by Tharisa in new KMH shares, I confirm this has gone into the net assets of KMH. At the end of Sept 2022 KMH had net assets of $4.898m increasing to $83.427m at the end of Sept 2023, an increase of $78.529m which is probably the $65m cash subscription plus a net profit of $13.528m (not quite sure where this has come from unless it is net gain in non-current assets/currency adjustments during the year less some operating costs such as labour?).
See note 16 on page 62 of the Sept 2023 Accounts.
I would suggest that anyone that has concerns regarding Karo or any other Tharisa business do so by sending an email to investor relations. I gather that there is anAGM shortly, where no doubt the management would be happy to answer any shareholder questions and concerns.
Thunderbuddy, you missing the point, developing a project and debtaing this is one thing , calling people corrupt in a public forum and getting numbers wrong and posting those, possibly causing market reaction, is a different matter
Are Tharisa threatening their shareholders with legal action? Seems like it!
Very disappointed with Ilja’s response, have been waiting for what he had to say.
The discussions on this board are valid regarding how our funds are spent. It has been pointed out as the disclosures are in the footnotes without explanation as to how the board have valued Karo Holdings. Ultimately, with the latest subscription, valuing Karo at 4x asset value - at a time when the PGM basket has collapsed (which the board have noted hence delay in construction).
It is also fair to point out that Medway Developments are the ultimate beneficiary of any overvaluation of the Karo business.
I remain a (large) shareholder as I believe Tharisa is vastly undervalued and that PGMs will turn up. I also supported the Karo investment and stick by that. I have been impressed with the Pouroulis family and their running of the business to date, however this is highly concerning and I demand that the Karo valuation be explained!
My main concern is the profitability calculations for Karo were done on the basis of a PGM bubble price of $2160 for Karo -historically very high-now virtually halved and the cash Pgm price of production at Karo exceeds $1000 per PGM ounce which seems very high.
What can be done to reduce this cost by a significant amount per PGM ounce to make Karo viable if there is no material recovery in the PGM basket price
Tharisa instead of all the legal jargon you could of just answered investors concerns.
After looking close here is what i conclude to be going on, Pouroulis /Medway run Thar, also own 40% of Thar shares as of FY22 (now 44%). Pouroulis had a separate project/ idea (Karo holdings) of which Pouroulis/ Medway owned 100%, the project required funds to materialise for example 400m, Option 1 Pouroulis pays entire 400m from own pocket keeping 100%. Option 2 use Pouroulis controlled Tharisa pocket to pay 400m cost to Poroulis 40% of 400m. In addition to this dynamic Pouroulis/ Medway "sells" majority stake of it's idea (Karo) to its 40% self (Thar), 66.3% of Karo for 4.5m and 13.7m Thar shares, those 13.7 m shares increased Medway/Pouroulis stake in Thar by 10%, 13.7m shares equating to roughly 4% of Thar share capital, Medway/Pouroulis now own 44% of Thar, regarding the 93m transfer for 8.7% from 66.3% to 75%. Pretransfer 44% of the 93m belongs to Pouroulis (41m) other 56% to general Thar holders, post transfer due to KH holding structure 25% of the 93m directly belongs to Medway (23.25m) and of the remaining 75% (69.75m) 44% belongs to Medway (30.6M). Pre transfer Medway owns of the 93m 40.9 post transfer 54. What is happening with this Thar money being transferred to K H via acquired additional shares, if going on mine build fine but can someone verify. Thar IR refer to Karo as "they" but as Medway/Pouroulis run and own 44% of Thar and KH is a Pouroulis idea majority sold to Thar 75%, 25% directly held by Pouroulis. Karo is not quote they but clearly us. My end conclusion based on the shareholding structure and general appearance of this is as so, Karo a Pouroulis idea requiring funds, Thar is the pocket to fund idea cost to Pouroulis 40/44%, other 56/60% cost to general Thar holders, benefit to Pouroulis in venture 44% of Tharisa's 75/80% stake in Karo plus Medway/Pouroulis direct 20% stake in Karo holding, so Pouroulis costs 40/44% Pouroulis benefit 55% cost to general Thar holders at 56-60% benefit 45%. This is in regard to Karo holdings and does not take into account Zimbabwean government 15% holding in Karo platinum. Seeing as Pouroulis is doing all the work I'd say that this dynamic is fair, opinions and outstanding concerns?
Dear LSE Community
I refer to posts over the past few days and would like to express my disappointment at some comments which are not in line with the stated policy and Member Chat Rules of the LSE (specifically rule 4 and 5c) and I have reported such to the LSE, particular those referring to Tharisa as being corrupt or insinuating that we are not aware of our regulatory obligations wrt to disclosing information. We have also notified our legal team of these comments.
Tharisa, since joining this community has always been transparent in the information we provide, particular on clarifications, as often this info is in the public domain and we know quicker than most where to find this, while providing insight into our business, within the framework of the regulatory rules we live by.
To insinuate that we did something untoward in the Karo transaction is simply offsides, with all the relevant information available in the public documents, if not in the AR, in the IFRS AFS that we also publish on our website, which often shows more detail than the AR.
While some bloggers have acknowledged the error in their calculations, the damage of spreading incorrect information is harmful and can be construed as market manipulation.
Tharisa’s strategy has been clear since we listed and Karo is a vital cog in that execution, but the Company has never and will not jeopardise the business for the sake of growth or diversification. We have been open and transparent in the Karo transaction
I enjoy the blogging as it creates an information flow and market interest and I will continue to participate in the interaction. As a Company, we will not tolerate insults, misinformation, defamatory comments or character insults, in any form.
IDG
Hxul, glad that you have come to this conclusion so that we all agree agree on the logic as explained by Stemis. I do agree with you that the value is getting greater with each incremental purchase of newly issued shares.
As you say currently 75% of KMH is currently owned by Tharisa and the remaining 25% by The Leto Settlement Trust or Medway Development under another name although this will change to 80%:20% some time this year (although there is still something strange about the number of KMH shares).
Despite this cash injection in June/July the net assets in KMH were still only valued at $83.427 m at the end of Sept 2023,
Freedom4Uall, to try and answer your second question, the Tharisa Report " Unlocking the Stock" in June 2022 showed the biggest shareholder in Tharisa as Medway Developments with 41.2% or 123.3 million shares. The Leto Settlement Trust Ltd was registered in Guernsey in 1989 and run by Artemis Trustees Ltd also registered in Guernsey. The Leto Settlement appears to control most of the Pouroulis family investments and is the beneficial shareholder of Medway Development Ltd registered in Cyprus in 1989.If you check on line now for Tharisa's biggest shareholders it is now Adonis Pouroulis (elder brother of Phoevos). with 123.5m shares or 40.75% with Phoevos owning 8.1 m or 2.67%.
The Pouroulis controlled Karo Holdings, registered in Cyprus ,did submit an interest to the Zim government in 2014 to develop what is now Karo if the lease was taken off Zimplats as they were not developing it. With the overthrow of Mugabe in November 2017 the new president , Emmerson Mnangwa was keen to attract foreign investment and the lease was taken off Zimplats in return for extending the lease on their operating mine. The Pouroulis family acted very quickly and by March 2018 , KH (fully owned by The Leto Settlement), though its 85% subsidiary Karo Platinum was awarded a Special Grant and later the mining lease to what is now Karo. Just 3 months later in June 2018 The Leto Settlement sold 26.8% of the issued shares in KH to Tharisa, a related party, for $4.5m.
The VFEX Bond application lists PP as chairman of KMH benefitting/owning/controlling 1.86% of KMH shares and his brother AP listed an non-executive director benefitting/owning/controlling 58.53% of the KMH shares.
Though whatever KMH ends up being worth, Medway Developments who have stood about with two arms the one length currently own 25% of it.
If it was right for Tharisa to build a mine in Zimbabwe then Tharisa should have built a mine Zimbabwe. From a Tharisa point of view I don't see why there was a need for the intermediate company. Things probably look different from a Medway Developments point of view.
When I deduce from the fact $37.7 was paid for 2.68% that the company is valued at $1,400m - this is WRONG!
If $37.7 was needed then at the time Tharisa were a 72.32% shareholder of KMH and Medway 27.68%
So they should have contributed $27.26m (Tharisa) and $10.43m ( Medway ). So in the absence of a contribution Medway sacrificed 2.68% for their $10.43m. This puts a valuation of $393.37m on KMH, $458m on the mine.
I apologize.
Hi Freedom4UAll,
I'm not interested in THS at this point. I used to own THS and had noticed it cratered. I wondered why. Was it an opportunity or did the wheels come off the cart.
Anytime I have posted comments I have provided links / references to my sources of information so I shouldn't have to do this again - but I'll do it one last time.
When Tharisa first took an interest in Karo Mine Holdings (KMH) they paid $4.5m for a 26.8% interest ( KMH valued at $16.8m) : https://www.lse.co.uk/rns/THS/acquisition-of-a-268-interest-in-karo-holdings-8ucwqjaiifpnij9.html
They then spent $27m for an additional 39.5% taking them to 66.3% ( KMH valued at $16.8m) : https://www.lse.co.uk/rns/THS/exercise-of-farm-in-option-karo-pgm-project-pv8xtiaqa5v4fgk.html
More recently they have been burying sums paid in annual report footnotes ..
They then spent $28.2m for an additional 3.7% taking them to 70% ( KMH valued at $762m) : https://www.tharisa.com/pdf/investors/annual-reports/2022/annual-report-2022.pdf - PAGE 166 note 20
They then spent $65m for an additional 5% taking them to 75% ( KMH valued at $1300m) : https://tharisa.com/pdf/investors/annual-reports/2023/tharisa-ir-2023.pdf - PAGE 165 note 15
IN THE ABOVE LINE ABOVE there were 3 sub transactions the last of which was where $37.7m (of the $65m) acquired 2.68%. This puts a valuation of $1400m on KMH. As KMH owns 85% of mine this puts a valuation if $1,647m on the ACTUAL mine - Karo Platinum) : https://www.karomining.com/group-structure.php
Sorry but your suggestion that monies contributed in a capital raise towards a recipient don't count for valuation purposes if the donator has an interest in the recipient is nonsense. See my post of 7 Feb 2024 13:25. You are missing several points. If joint partner A puts money in when capital is required and joint partner B does not - then joint partner B should be diluted APPROPRIATELY not using some fantasy valuation. Also I'm sure the money is GONE / was ear marked for something.
Hxul you keep repeating this 1.4b valuation placed on Karo, the 93m spent to acquire 8.7% of a company Thar already owns 66% of therefore more than 61m of that still belongs to Thar , less than 31m belongs to other holder in KH, so is it not the case that Thar spent less than 31m to acquire 8.7% valuing Karo at less than 362m ? The second question if you can answer, how much of Thar do Medway/ Associated own and is it correct that Medway own the rest of KH (25%) ?
Agree -Tharisa have been totally stitched up on Karo -all the risks and only a cut (which could be cut further ) of any rewards -it was very short sighted to commit shareholders funds to this project based on an highly inflated PGM prices -why didn’t they pay some decent dividends to shareholders/buy Bach shares instead of destroying the shareprice by this foolish high risk venture- cash PGM production costs circa $1000 per ounce is very expensive for open pit operation
It will be interesting to see how things play out over the next few years but I think I will watch from the sidelines. I fear that THS is going to rattle about at the bottom of the barrel for a while.
It is absolutely the case that having been blessed by favourable commodity tailwinds in recent years shareholders should be luxuriating in the rewards of their 'patient capital'. Unfortunately they are not. Further their 'patient capital' has been decimated.
Things seem to have started falling apart when with the quote "Capital will need to be more patient, or willing to explore new regions" Phoevos announced the plans for Karo on 31/03/2022. On that day THS opened at 145.5p.
NO HINDSIGHT WAS REQUIRED to see that the scale of the investment into Karo ($391m to first ore in mine) for a company the size of Tharisa was ALWAYS going to be a gamble. Phoevos seems to have confused cycle tailwinds and bubble commodity prices with the notion that he was gifted.
Unfortunately at present it looks like Karo project is struggling. Eventually in the fullness of time PGM prices will recover. However this is unlikely to happen in a timescale that will save THS from being put under considerable pressure in the interim. The immediate options are a) take a bad idea and develop it further whilst keeping ones fingers crossed or b) damage limitation both of which probably mean that a lot of 'patient capital' is written off. The trick would have been not to get into the current situation in the first place and frankly that would have been a very simple trick.
P.S. I have not seen an explanation as why when capital needs to be raised for Karo ($93.7m in the last 20 months that we know about) it falls to one joint partner (Tharisa) to provide the funds while the other joint partner (Medway Developments) is not appropriately diluted (as explained in my post of 7 Feb 2024 13:25). This appears to be due to an ABSURD present day valuation placed on Karo ( most recently $1.406 bn when on 19-05-2023 $37.7m acquired 2.68% of Karo - see https://tharisa.com/pdf/investors/annual-reports/2023/tharisa-ir-2023.pdf - PAGE 165 note 15 ).
P.P.S I'm past caring but I wonder what is the thinking behind this additional footnote re Karo Platinum in the 2023 annual report (page 28) "the Zimbabwean Government holds an option to increase its shareholding by a funded 11.0% from the current 15.0% to 26.0% after 24 months but before 36 months from 30 March 2022. As at 30 September 2023, the option was valued at US$11.0 thousand." If exercised this would take the Tharisa's share of the mine down to 55.5% (Karo Holdings would then own 74% and Tharisa currently own 75% of that).
Bye for now. Hope things work out for those involved.
.......if you are losing money on every oz.
If we delay say another 12 months then we continue to incur costs for hundreds of men, and financing currently around 10% without any guarantees the PGM prices will significantly improve while having the Zim authorities on our backs for not having started production. Remember what happened to Zimplats and Salene Chrome.
Stemis, likewise a valid point on the valuation of Karo Mining Holdings but don't forget the next 5% cash subscription in new shares later this year will probably cost around 20% more than the previous 5% so the price is continuing to go up.
You mention the revised production timeline which is first ore in mill June 2025 subject to having the ring fenced funding in place. But so far the ring fenced funding of $160m is not in place. The biggest chunk in the total $430m capex spend is the main concentrator costing over $130m (a pilot concentrator is probably in place for early mining tests and metallurgical optimisation). So without the $160m funding in place it is probable that the main meaning that the concentrator has been set on hold meaning that the FOIM for June 2025 is probably going to be delayed again (we could run a few hundred tonnes through the pilot concentrator by June 2025 but not the commercial volumes needed. Anyway, why produce PGM'
Valid points, Mike, but somewhat different to the disagreement over valuation of Karo Holdings that we have been discussing. However THS said " Funding solutions ring fenced to Karo Platinum are being pursued in line with the revised production timeline". So I guess we'll know more when those are concluded...
Stemis, I do pretty much agree with your numbers but as Freedom4all and and others (including me) have said it is very confusing. But we know the latest capex costs for Karo will be around $430m, Tharisa have already put in $98.6m to date, VMEX bond $36.8m , we are told the ECIC external funding will be $160m , this leaves a gap of $134.6m. So that $134.6m gap will be filled by Tharisa putting in another say $31.4m (we have been told we will not put in more than $130m which leaves around $103m that looks like coming our of Karo Mining which effectively means most of this $65m when Tharisa t increased our share from 70 to75% and presumably a chunk of the $75m or so when Tharisa increases from 75 to 80% later this year. So Tharisa in putting in $130m directly and about $103m indirectly as our equity investment in Karo.
One question is are we paying the correct price for this increasing stake in Karo and it looks like a bigger Tharisa investment by stealth.
But as you have said before we do not know if PGM prices will increase or not. If the Karo PGM basket price recovers to $1700/oz+ then great. But at the moment I would be concerned that purely on commercial reasons the ECIC $160m funds are not approved, if not what does Tharisa do then , do we spend even more ourselves or moth-ball Karo and take a substantial write off on the investment to date ($130m directly plus $103m) which is substantially greater than our current market capitalisation or enterprise value.
Thanks all for input, HXUL does raise interesting points, if we say that Thar paid 93m (subscribing to additional shares, not buying out other holders at ridiculous premiums), to acquire 8.7% of a company they previously owned 66% of, wouldn't this mean 61.4m went to Thar in the sense that it would be in K H accounts owned by Tharisa and 31m would effectively belong to whomever else, im not speaking exact numbers it's the concept that im wondering about. If im correct Thar in essence paid 31m for 8.6% of KH giving KH a valuation of 362m. There are unanswered questions, exactly where are the funds going? Tharisa is transferring funds to subsidiary, the question is how is the subsidiary using those funds, such as mine build out or is this as HUXL indicates possibly some kind of money syphoning scheme. Are the funds going to KH as i expect or is some minority holder being bought out at a ridiculous premium?
I don't know what you want Ilja to say. It's quite plain that the injection of $65m into Karo Holdings to increase their holding from 70 to 75% values Karo at $325m. I agree, if they had bought the 5% off Leto for $65m it would value Karo at $1.3bn...but they didn't, they put the money into Karo and that's a different calculation. I don't think it's Ilja's job to teach PI's how do valuation...lol.
Thanks Mike
Under the new ZEV legislation starting in January UK car sellers selling over 2,500 cars/year have to sell a minimum 22% ZEV cars otherwise they are fined £15,000 per car. the 22% gradually increases to 80% by 2030. Car producers are allowed to trade surplus ZEV credits so the likes of Tesla/Polestar can sell 78% of their credits to other producers at a price to be negotiated. So that 16% ZEV's in 2023 should be nearer 22% this year and steadily going up.
Ilja is the IR department and I am sure that Tharisa want to carefully consider and professionally write their response before replying to us.
Regarding your question Moneyman64, the reef of mine in the last quarterly figures was still pretty low so they continue to buy in substantial ore for processing ,but with the new waste contractors in place and the new realignment of the mining pattern particularly the dramatic improvement in stripping ration for the remainder of the above ground ROM I am expecting the ROM will start to improve and by the end of the year be back to the levels we saw 18-24 months ago.
@ 09:03 - Sentiments echoed. Limited knowledge here although I do know a bit about GreatDyke. THS's products are globally essential but recovery is some time off. Vasbyt.