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Sotolo, we have to be careful of the terminology, some reports include mild and plug in hybrid vehicles as EV vehicles even though they have an internal combustion engine which requires a bigger amount of PGM's in the catalytic convertor due to the stop/start of the ICE. As a starting point ,14% of global car sales in 2022 were EV, and 2023 the estimate is around 18%.
Reports are infamous for being wrong and highly speculative. In July 2020 Deloittes Insight "Electric vehicles setting a course for 2030" said globally"EV's would secure approximately 32%of the total market share for new car sales". In Feb last year Goldman Sach Intelligence published an article with the headline Electric vehicles are forecast to be half of global car sales by 2035". In 2022 the International Energy Agency suggested demand for oil based fuels would peak in 2025 but that "existing policies would drive EV's share to just 21% in 2030.In particular they were concerned for the increasing popularity of sports utility vehicles which are more energy intensive/more PGM intensive and are nearly cancelling out the emissions reductions from record vehicle sales. Even with increasing EV sales it could be that over the next 6 years that PGM loadings in remaining ICE sales are increased to take account of bigger vehicles, greater hybridisation and possibly tougher vehicle emission standards . In Europe E10 petrol already contains 10% renewable ethanol and the German car industry is already suggesting this could be increased dramatically to preserve the German ICE dominance. In the Anglo American Integrated report 2022 published in April last year on page 59 the company suggests the the shortage of battery metals like lithium and graphite will limit global BEV share to 30-35% by 2030but no higher. The high BEV take-up in China that you mention is helped by their dominance of battery production which introduces a geopolitical angle. Furthermore despite this BEV take-up in China, remember that around 60% of Chinese electricity is produced from coal so the CO2 issue is just moved upstream.
Damn lies and statistics! We will see in 6 years.
While we discuss the exact numbers you are correct that BEV's will eventually reduce the demand for PGM's. But to balance the debate we should also debate the possible future hydrogen economy. Currently around 20,000 ozs/year of PGM's (platinum, iridium and ruthenium) are used into proton exchange membrane electrolysers and one suggestion is that this could increase 85 times by 2030 increasing the usage to 1.7 millon ozs/year, even with some fuel-cell advances reducing the required PGM content this could represent 1 million ozs/year. In this scenario prices of platinum, iridium and ruthenium could increase relative to the other PGM metals particularly palladium.
You may well be right but currently already quite a bit over 10% worldwide and rising which makes a big difference to PGM prices as we see, even if this rises to 20 or 30% likely to make a more considerable difference unless production falls to match. China is a huge dent in the ice market
So in 5 years time, this becomes true? “Electric vehicles will account for 62% to 86% of global sales by 2030, with China reaching an EV market share of at least 90% by then, according to an RMI report in September.”
how is that eve possible given the commodities required, never mind the logistics of building this?
"Hertz is selling 20,000 EVs so it can buy more gas guzzlers"
https://www.theverge.com/2024/1/11/24034462/hertz-ev-sell-one-third-fleet-ice-tesla-polestar-used
People are not buying electric vehicles, they are bursting into flames and the replacement battery's are extortionate, petrol and diesel cars will always be in demand,the electric car fad is on the way out quicker than a runway train. At present they only represent about 5% of the overall market and i think that's going to fall further.
“Electric vehicles will account for 62% to 86% of global sales by 2030, with China reaching an EV market share of at least 90% by then, according to an RMI report in September.” Says automotivdive etc. If true PGM prices will be shattered, lucky we have the chrome and helps explains our currently absurdly low share price
At the moment in this low PGM price environment, the Company appears to be planning to reduce costs at Karo by upping reef of mine production to 215,000/month or 2.58 million tonnes/year which would generate around 211,000 ozs 6E PGM and around 4,800 tonnes of contained cu/ni/co. But for me this still needs Karo PGM basket price above $1400/oz to breakeven and well above $1600/oz to make a "satisfactory" return. So at the current basket price of around $1200/oz they are not going to push the button to start full time production and will delay further. The problem with this is that we continue to spend cash on capex and workforce and the Zim authorities will not allow the project to be delayed indefinitely (remember the Karo lease was previously held by Zimplats and taken off them around 2017/18 because they failed to start meaningful production on the site). So this is a big play on where the Karo PGM basket price will be in the next 12-24 months.
Meanwhile the good news is that if the excellent Q1 production numbers were to continue for the remaining 9 months of the year then using the actual Q1 prices and the current prices for the remaining 9 months I calculate turnover will be $710m and NPAT exactly $100m which is actually slightly up on last year.
Sotolo, while I agree with you that electric cars are dramatically increasing in China, the number of non-BEV vehicles in the world actually increased in 2023 compared to 2022 but longer term we can expect the non-BEV market to steadily shrink although how much and how quickly is a massive debate.
I make Karo currently around $1200 at which price they are putting hundreds of millions into a mine to lose more money. I suppose the big question is as marginal PGM demand falls way as the world’s largest auto market got to a quarter of cars sold entirely electric last year and getting on for a third this year and rising fast, whether enough PGM mines can go bust as prices tumble to keep the remainder in reasonable business
The presentation in relating to Karo in November 2022 was based on a PGM basket price of $2160 which in relation to historic data seemed on the optimistic side to say the least.
The latest published Karo basket price is $1217 per the company website which if PGMs do not recover certainly makes the Karo project questionable .
I see the appeal of diversifying into other jurisdictions but only when there is a sound economic case and not at the cost of the shareholders
Excellent update today are far as company operations are concerned, we will have to wait and see what happens with pgms, with more unprofitable miners at the top end of the cost curve ceasing operations its a process of time for these actions to reflect on spot prices.
Agree Moneyman64
Many companies are a 'jam tomorrow' story where the jam never appears. In Tharisa's case when jam does appear it is whipped off the table, rolled over into an all or nothing accumulator bet and replaced with post dated 'Jam I.O.U.'
On what PGM basket case was the KARO investment predicated ? I'd have thought it was verging towards unprofitable at current prices.
Excellent PGM and production numbers which reinstates my belief that the production guidance numbers for the full year are realistic (providing we do not see the stripping ratio back above 14 later in the year) . Excellent chrome yield and recovery.
Net cash down $31.7m over the 3 months reflecting the ongoing investment in Karo.
Very. good chrome production figures and hope Tharisa are increasing /investigating ways to increase the profit margins here.PGM production subdued due to prices
Still very worried that most of the profits are being pumped into Karo which is totally dependent on a significant recovery of PGM prices-pity risk was not spread by investing in another type of metal product
Tharisa, the mining, metals, and innovation company dual-listed on the Johannesburg and London stock exchanges, announces its production results for Q1 FY2024 and cash balance as at quarter end.
Quarter highlights
‒ Lost Time Injury Frequency Rate (‘LTIFR’) of
‒ 0.09 per 200 000-man hours worked at Tharisa Minerals
‒ 0.13 per 200 000-man hours worked at Karo Platinum
‒ Increased mill throughput of 8.7% at 1 424.4 kt, with improvements in both grade and recovery for PGMs and chrome concentrate leads to
‒ PGM output increasing to 35.7 koz (Q4 FY2023: 30.7 koz)
‒ Record quarterly chrome output at 462.8 kt (Q4 FY2023: 413.4 kt)
‒ PGM basket price showed slight improvement of 1% to US$1 344/oz (6E basis) (Q4 FY2023: US$1 331/oz)
‒ Average metallurgical grade chrome concentrate prices held steady at US$291/t (Q4 FY2023: US$291/t)
‒ Group cash on hand at US$221.5 million (30 September 2023: US$268.8 million), and debt of US$126.6 million (30 September 2023: US$142.2 million), resulting in a net cash position of US$94.9 million (30 September 2023: US$126.6 million)
‒ Production guidance for FY2024 remains between 145 koz and 155 koz PGMs (6E basis) and 1.7 Mt to 1.8 Mt of chrome concentrates
https://www.overend.co.za/download/sens-rns-tharisa-q1-fy2024-production-report.pdf
Thank you Mike
Q1 number on Thursday.
Hi Sotolo, nothing sinister, Ilja was busy the second half of Dec with the annual numbers presentations and then factories tend to shut for a week or so and I assume Ilja has gone back to visit family in eastern Europe, well deserved, we all deserve a good festive period to recharge our batteries for the New Year.. Everything will be wakening up this week and I am sure he will post the numbers latest next week.
Regarding the PGM prices, like you I was disappointed to see the step backwards after the good rise in December but I think it will have a second and possibly 3rd attempt for the increases to find traction..Demand indicators are still uncertain but weakly positive. Chrome price is incredibly steady although the chrome stocks at Chineae ports at about 2.7m tonnes are the highest for about one year but I am still posative for chrome.
Production worldwide of non- BEV's are up this year on last year and PGM stocks outside of China have fallen so I expect the market to finally adjust to the new reality.
We should see the Q1 production numbers out Thursday/ Friday/ Monday and I just hope they are up on Q1 last year which were impacted by terrible rain.
It looks to me that Tharisa hasn’t posted the weekly PGM and chrome prices for over a month? Why? Just too grim or another reason? Also Mike why do you think the PGM price will recover - do you imagine supply will fall even faster than demand, as the auto industry electrifies
Thanks Visitor, I decided to check this out and found it in the Q+A section at the end. Generally underground mines are said to have 2 to 3 times the capex costs of open pit mines. As PP explained it ,the move to underground will start in the western pit area and will be 5 slightly inclining shafts for the initial development which are significantly cheaper than vertical mines. But he went on to explain that the western pits currently produce only about 20% of the total ROM so assuming the total ROM production is say 5m tonnes/year and the underground mines continue to produce 20% or 1m tonnes then $54m Capex over 2 years is equivalent to $27/tonne. In contrast the Eastern pit producing 80% or say 4m tonnes/year and the total yellow fleet capex will drop from from $40m/year now to $32m /year or $8/tonne.
We are going to have the same problem at Karo, 2 years ago the original open pit LOM was 20 years and later reduced to 17 years, based on the latest mineral resource and mineral reserve statement the proven/probable open pit ROM has reduced to 23.0m tonnes and 2.46 m tonnes/year production this reduces the LOM to less than 10 years (more reserves might be found but similarly Tharisa are hinting at significantly increasing production above 2.46m tonnes/year to reduce unit costs).So Karo might have to start transitioning to underground less than 6 years after starting open pit production.
Morning Mike - no worries. To clarify the $40m is separate capex cost to replace yellow fleet, but that is required anyway for open pit. But $54m just for UG mine capex was lot less than I expected too. Of course this was verbal unaudited confirmation in the InvestorMeet only, but it didn't sound like an "off the cuff" statement and likely close to the reality, albeit would have to take in to account inflation going forward and not sure if that number included the usual THS contingency
Visitor, thanks for the information, I did not see the last InvestorMeet and you are right that it is less expensive than I had imagined
Mike et al - happy new year and as ever, thank you for your detailed analysis.
On the THS underground mine development capex, it may not be as much as you would originally expect, considering THS runs the mine with a high spec yellow fleet already. In the last InvestorMeet THS stated the UG mine development capex would be 1bn Rand ($54m capex) over 24 months. Circa $40m replace yellow fleet required for open pit in any event.
Mike1959 - thank you for your informative and helpful observations!
...to fall below the official projection. The Q1 production figures will give us more idea on this when they are out later this month. Over the last two years the Tharisa costs have been reduced by the serious weakening of the ZAR against USD, while I expect this to continue this year I expect it will be at a much slower relative rate. Looking slightly longer, in the recent financial accounts, Tharisa has reduced the expected life of open mine at Tharisa by 3 years and could start transitioning to shallow below ground mining as early as 2025/2026 which will need further serious CAPEX and could affect overall production.
On top of this there are the question of where the PGM/chrome prices are heading.
So you are right that Karo is a big gamble, PP and his father have a successful history of building up mining businesses.
Like everything in life this relies on hard work and a little big of luck. On balance, I am still invested here.
Hi hxul, for years, Tharisa has had low valuation metrics and I agree that Karo accounts for a big chunk of this but it is not the only reason.The Karo project had a CAPEX of about $391m although Tharisa has said this could go up by up to 10% ,due to the probable 12 month delay in FOIM to June 2025, so I am now working on around $430m. But don't forget that about one third of this has already been spent in previous years ($46m in 2023) which leaves about $250-270m still to be spent and most of this will be spent in this new calendar year. This explains why Tharisa is sitting on a big cash balance rather than paying off debt as they know the vast majority of this will be spent later this year (although Karo could be delayed for a second 12 months).
Tharisa is fully committed to Karo having increased the share in 2023 from 70 to 75% at a cost of $65m and increasing that to 80% this year. With the recent increase in Pt/Pd/Au the Karo PGM basket price is now around $1300-1340/oz, at this level my rough calculation is that the project is breakeven without taking account of the financing costs and debt repayments. If you take account of the financing/debt then for me the breakeven Karo basket price is nearer $1450-1500/oz and if we expect a return on investment of say 10% then for me the Karo basket price needs to be nearer $1800/oz. We have to remember that the tax free profit period for Karo will only last 5 years and that the first 15% of net profits will to to the Zim government as they own 15% of the business based on a free carry so they have no costs at all. In saying that, Tharisa has recently suggested possible efficiency savings in recovery above 80% and the the plant working above namneplate capacity to that the PGM production could be increased to nearer 200,000 oz/year rather than the 190,000-194,000 second project level.
One of the big factors at the moment is that Tharisa is currently having to pay 8.5-10.5% interest on debt which is the "patient capital" that you mention and is forcing them to try and finance the outstanding Karo CAPEX out of their own funds rather than borrow more, alternatively delay the project longer hoping that interest rates reduce or PGM prices increase. In contrast the bigger international PGM miners can borrow at significantly lower interest rates, in late November , Sibanye Stillwater announced they would raise $500m in the form of a convertible bond and expected the coupon to be 4.5-5% (in contrast we are paying 9.5% on our Zim bond in USD).
Regarding your question of other explanations, much has been said over the years on this and includes the relative small size of Tharisa compared with some of the big mining companies , and also geopolitical risk (see what happened to Salene Chrome). Even in the short term there are production questions about the Tharisa mine which is the goose laying the golden egg. I expect chrome production this year to be at the bottom end of the official projection and the PGM t