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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.
Thanks Tharisa -await with interest
The Karo question was answered at the AGM, I will transcripe and post, give me a few hours
Mike,
Thanks for the correction ref the 75%. That makes it even more extreme with the core of THS therefore being valued at c£45M.
Best wishes,
Prof
ElProf ,THS now own 75% not 70% of KMH.
Ilja, I agree it is totally up to Medway if they want to participate or not in additional new KMH shares for cash they do not have to explain . As Stemis has explained earlier, based on the share increase from 70 to 75% values KMH at $325 m , if you take the very last additional new share tranche of $37.7m on 31.07.23 increasing THS shareholding from 72.33% to 75% this values KMH at $351.7m. The crux of the discussion is how is the new share price set and by whom? It would help if this was transparent. Do we know what the cash injection will be when the 75% is increases to 80% later this year? As you can see the $325m or $351.7m is a big premium to the $210m value for KMH you mention below based on all capex flows, those capex flows only have a value when Karo is operational and at the moment are possible impairments . As ElProf mentions ,Mr Market values Tharisa which includes the 75% of KMH at around $215 m market cap, if the directors believe this is grossly undervalued then why are they not jumping in to buy, aside of transfers the last director share transaction was a sale in Jan 2023 and the last director purchase was in August 2022.Also as KMH only own 85% of Karo Mining this inflates these prices even more.
The company’s share valuation is perplexing and should be addressed by the Bod -Is it Karo ,the uncertainty of the upcoming election in SA ,PGM prices or is the company seen as a PGM producer with little consideration given to chrome production -still think a few million of share buy backs would help and maybe a couple of more cents in dividend
Hi Ilja,
Given THS own 70% of Karo then with Karo's valuation at c. $210M that puts THS' share at c$150M.
THS currently has a market cap of £170M which with a GBP to USD rate of 1.26 is c$215M. That would suggest that all of the rest of THS is valued at $65M or £51.5M.
Assuming my maths and logic are not wrong then is it that: 1. Karo is significantly overvalued at $210, 2. The core of THS is of really limited value, 3. The market is fundamentally wrong?
I know it is a bit of an unfair question but that is what is going on in my head. Are you able to venture any thoughts please?
Best wishes,
Prof
Thunderbuddy, your inference is incorrect, making assumptions about what Medway wishes to do with their holding and why and why not they are participating in the capex, the same statements you made in the mail to me, and you had time to register as I mailed you back the details immediately on Thursday at lunchtime, which were in the AR which was released before Xmas.
Average valuation for Karo (100% basis on all the capex flows) is around $210m
The recent rights offer undertaken by Karo Mining Holdings raised $65 million. The Company’s shareholding in Karo Mining Holdings was 70%. Tharisa followed rights, and maintain shareholding required ~$45m. Medway did not follow and Tharisa took up the renounced rights moving up to 75%
Is there anyone attending (either physically or virtually) the AGM on Wednesday? I applied too late and missed the deadline …
Could we get a report back on the board’s comments in relation to the recent Karo new share subscriptions in the AR footnotes please? Specifically why the board thought the Karo valuation (at c. $350m) was reasonable for a currently non-profitable not-yet-developed venture, when Medway Developments obviously didn’t think it was worth that much hence they didn’t participate in the subscription.
There will be much concern if they avoid addressing this point. Currently it appears the minority shareholders of Karo Holdings are the beneficiary of overvalued subscriptions using our (Tharisa) cash.
It's actually Tharisa. He may not appreciate you calling him Theresa.
Amplats results for last year out today. Headline earnings down 71% YOY. The group cash operating costs in 2023 were R17,859 or about $943/ PGM oz. Have announced possible job cuts to cut the cash operating costs to R 16,500-17,500 or $871 to $923/PGM oz. and all-in sustaining costs to $1050/oz. Production guidance is unchanged at 2.1 to 2.3 million ozs for 2024-2026.
Implats results out around 29th Feb.
I also don't have a problem with Karo. I'm also very happy with the input from Theresa around the times of RNS release. It is very rare to get that, and I very much appreciate it.
Will be looking to top up when funds come in, assuming we haven't climbed up quite a bit. Very undervalued on the assets owned IMO.
GLA
At the moment it's pretty much all about chrome. Production in Q1 was pretty good and price looks stable so I'm not expecting any surprises. Personally I don't have a problem with Karo.
We will see what comes out of the AGM next Wednesday but I believe the Tharisa mine is still performing extremely well, it is just the Karo concerns that is pulling this down. The JSE Tharisa price today is down 10% to ZAR 12.60 which currently converts to 53p.
I sold my shares. Karo is a bad investment that the market never liked from day one. I presume that people are selling out as results are due soon and it will be dire.
Can see it both from the company point of view and the posters point of view -but not good to accuse the company of not being open without understanding all the facts.
On the JLP board there is a certain poster who accuses the company of not being truthful with investors on a daily basis and name calls anyone who is remotely positive on the company’s prospects -yet the company seems never to even challenge him
Given an (ex) shareholder with a fairly high social media following got out & announced it at a similar time it’s very possible their sale + followers doing likewise was responsible for the increase in volume of sales.
Whilst I’m all for IR interacting on public forums to update shareholders, it would be beneficial if this was done in a positive manner with the intent of assuaging Such fears & not in a negative manner that could be construed as an attempt to shut down free debate and allowing complete transparency.
What nonsense - when there are statements on bulletin boards erroneously stating corruption and getting valuations / accounting wrong by multiples of 4/5, I would expect a company to protect its interests and that of its shareholders.
Discussions on the viability of Karo is fair game, with Mike and others posing some key concerns, but not the former issues. It clearly caused many PIs to sell as they attested to themselves on LSE and ADVFN.
IR is key for any company - people constantly and rightly moan about most AIM companies not performing any IR or PR. I personally think it has performed and continues to perform a valuable service in offering clarifications when posters inadvertently or maliciously post incorrect details, or simply respond to clarifications. I for one hope THS/ Ilja continues their ad-hoc posts. I'm sure it did not help that the THS team likely were at Indaba Mining Conference when the whole sorry affair occurred on here.
When aim businesses start to threaten investors on free bulletin boards, it smacks of desperation. Tomorrow I shall be selling my THS shares first thing at a loss. I’m not impressed.
FAO Tharisa.
As a shareholder I'd rather you completely focus your attention on the business and ignore defamatory or other factually incorrect posts on internet forums.
As I'm sure your legal team will agree It is notoriously difficult to claim and be compensated for defamation. Essentially you'll need to prove the posts in question caused the business damage. The bar is very high.
Corrected his calculation and erro but teh damage was done and can be construed as manipulation as the post was put out without checking the fcats, which lead to a massive swing in vol/SP on the day, but he still accuses the Company of corruption (I see this post has been deleted but I have a hard copy of it)
We are not paying another group Company, we are provding equity capital (130m into Karo, in return for new shares in Karo, while the other party has chosen not to provide capital, and they are thus being diluted as clealry stated in our reuslts presentation of 14/12 (Current equity stake increased to 75%, on flow of balance of Tharisa equity commitment will increase to 80% , we have always said we will provide 130m in equity and the rst of the funding Karo is responsble for and ring-fenced, hence ECIC etc