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.
The dividend is a little higher than expected suggesting THS has taken in some of the recent comments. Having looked as my expected figures compared to the published numbers the PGM revenue was spot on, the agency and manufactured revenue was slightly better than expected (although this makes up less than 10% of the total revenue number). My expected chrome revenue was $21 m lower than the actual, about two-thirds of this was due to sea freight costs for chrome increased about $19/t in H2. The other main area was actual Cost of Sales about $12m higher than my expectation mainly due to higher inland freight costs to get chrome from mine to port and higher Salaries and wages (in hindsight i have probably not fully allowed for the extra staff employed at Karo. Cost of commodities were $20.27m for the full year but actually $24.99m in H1??? Otherwise there were no big surprises in the numbers for me.
The big omission for me was no 2023 Mineral Resource and Mineral Reserve Statement. As I have mentioned before the Karo project was based on 3.0 grams 6E pgm's per tonne of ROM based on 2017 Zimplats numbers (3.51g/tonne indicated/inferred) but the 2022 Karo Mineral Resource and Mineral Reserve Statement has a indicated/inferred number of 2.04 g/tonne and proven/probable average of 2.63g/tonne. Unless the 2023 Statement shows this number has increased to above 3.0g/tonne, then even without the drop in PGM prices, for me this just totally kills the Karo Project .The total attributable net assets acquired in Karo was $82.2m with considerable investment since and considerable spending ongoing. If Karo is totally cancelled and this written off then that is a massive hit on the THS balance sheet. So the 2023 Karo Mineral Statement is critical and the longer we have no news the more nervous we should get.
Regarding PGM prices, like others below I too believe then will gradually improve but where I differ is that it could take longer than suggested below. Having made massive capital investments with lots of employees and commitments on government mining rights , producers will be reluctant to cut back in the short/medium term and will endure some pain hoping that prices eventually turn and that another company rather than them will cut back until they have to follow (this is the very situation we are seeing with Karo).
It was good news on the Radox One battery investment, some form of storage was always going to be necessary to store solar electricity generated in daylight/quiet periods to be used at night/busy periods.
Interesting note from Tamesis today on THS - they put my long-term bullishness to shame, with target price of £3.
They do refer to PGM cost curve graph courtesy of SLP, which can be found in below SLP presentation on very last page:
https://www.sylvaniaplatinum.com/all-categories?task=download.send&id=703:fy2023-presentation&catid=93
Some quotes from Tamesis:
"Most cost curves imply that at least 50% of the industry is loss making and we expect further cuts in guidance with Anglo Platinum leading the way last week" [Sibanye are doing same, particularly in US]
"History tells us that for most commodities the bottom of the price range is at the 50% percentile of the cost curve. Global interest rates in 2024 are certain to come down in the face of the poor economic performance"
"Money will return to institutional investors where redemptions this year have caused indiscriminate selling particularly in the small mid cap sector. It is also likely to result in the buying of commodity ETFs again. We also suspect above ground inventories are depleted [...]"
"More controversially perhaps we sense a certain ennui creeping into ESG and particularly the enforcement of EV adoption. As we have seen with oil this year and thermal coal for a longer period – prices can go up despite its ultimate demise as a fuel"
"The valuation metrics suggest that worse is to come for Tharisa which we find hard to believe. The share price is trading on an PE multiple of 2.7x and 2.2x FY24 and 25 and an EV/EBITDA of 0.8x and 0.6x using a static net cash figure. These are based on essentially spot PGM and Chrome price so believe are conservative"
Obviously goes without saying been extremely difficult year and this is highlighted in share price and market cap of £183m. in perspective of this market cap, THS have Net Cash of $129.4m (£104m). So normalised THS is valued at £79m, for a company with a main mine of 13yr open pit, 60yr underground, and forward PE of 1 normalised for net cash (excl Karo capex though), it's a crazy valuation.
However I do think THS management and team as a whole have done good job in navigating this difficult period. The FYE presentation this morning was transparent and all my queries were answered (can't talk for others who may have submitted queries of course). And yes I do share other's concerns on Karo, but I got impression from Q&A they would continue to defer project in a weak PGM market and look to optimise too. However if market turns, they would look to expedite again.
On the Q&A, a few snippets:
1) On request for bit more clarity on production forward guidance, within 2yrs, THS do still think it's feasible to achieve Vision of 200k PGM oz and 2mt chrome. My own interpretation/ hope for PGMs is that they get back to 2022 rates (180k oz) by Sep 2024 - Sep 2025 FY and year after the fabled 200k oz mark. On chrome, they're already guiding at the 1.7- 1.8mt this FY, so year after this could be in the 2mt ballpark.
2) For UG mine extension, you're only looking at 1bn rand ($54m) capex over 24 months (of course scoping study only to date, THS continuing with more detailed feasibility studies).
Impressed by the presentation today. Looks like the company has a good growth ethos. Particularly like the Redox 1 investment in a new energy storage solution using their own materials. Could be a big opportunity in the future.
So 2c dividend as expected or for us just over a penny ha’penny. PGM expected production next year down near 20% on 2022 but chromium up 10% which is the right way round! The yield at these share prices is over 6% which ain’t bad unless you paid double for the shares ie 120p in which case you are getting 3% and considerably less than before. I agree with Phoevos that the PGM supply will be reduced as these reduced prices as becomes uneconomic for some mines, I am not so optimistic about the demand side and that new uses will make up for the dramatic fall in demand for catalytic converters in the next decade. We shall see. Lucky we are now mainly a chromium mine, unlucky that we are investing to become mainly PGM again.
Phoevos Pouroulis, CEO of Tharisa, commented:
“At Tharisa, we have consciously chosen to be developers of mines. Building mines is not easy, as it takes time, patience, capital and the conviction to invest through commodity and economic cycles. We believe that employing a strategy of mine development creates a solid foundation to successfully deliver on our strategy of growth and innovation by challenging convention from the outset.
In reviewing the past year, considering the challenges faced not only from the inflationary and operational increases in our cost structure, power supply constraints and the rail and port logistics failure, the co-product business model of the Tharisa Mine once again has reflected and shown continuous resilience.
The suppressed PGM basket price has far-reaching consequences to primary supply, with employment, expansion and investment all at risk. After a strategic review, we extended the Karo Platinum Project development timeline by 12 months to June 2025. We will keep this matter under review, and should conditions improve, we have the flexibility to accelerate development.
The structural damage to the PGM supply side will be felt for some time and will ultimately result in an upward shift in prices. While current markets are volatile and unpredictable, we believe in the medium-term outlook for PGMs underpinned by a supply-side constrained economy with new and growing applications of these precious metals.
The chrome market remains robust driven by stable demand fundamentals.
At Tharisa, our margins remain healthy due to our mechanised low-cost operations, with a continued disciplined capital allocation strategy, ensuring investment in our existing businesses, innovation and providing sustainable growth and returns to shareholders. Moreover, our investment in solar power and Redox One battery technology will improve the sustainability of our operations and enable us to deliver our decarbonisation objectives
Through continuous optimisation at the Tharisa Mine, investment in downstream beneficiation, and our commitment to developing the long-term Tier 1 Karo Platinum Project in Zimbabwe, our strategy to grow the Group is intact.”
Growing sustainability from a robust operational base driving financial performance
Key Highlights
• Safety:
o The health and safety of our stakeholders remains a core value to the Group and Tharisa continues to strive for zero harm at its operations
o LTIFR
0.13 per 200 000-man hours worked (Tharisa Minerals)
0.26 per 200 000-man hours worked (Karo Platinum)
• Operations:
o Annual PGM production at 144.7 koz (FY2022: 179.2 koz)
o Average PGM basket price of US$1 893/oz (FY2022: US$2 564/oz), down 26.2%
o Chrome production at 1 580.1 kt (FY2022: 1 582.7 kt)
o Average metallurgical grade chrome price of US$263/t (FY2022: US$209/t), up 25.8%
• Corporate actions:
o Increased shareholding in Karo Mining Holdings to 75.0%
o Tharisa will increase its shareholding in Karo Mining Holdings to 80.0% in FY2024 with balance of committed equity investments - effective 68.0% in the Karo Platinum Project
• Financials:
o Revenue decreased 5.3% to US$649.9 million (FY2022: US$686.0 million)
o EBITDA of US$136.8 million (FY2022: US$237.3 million)
o Profit before tax of US$114.3 million (FY2022: US$220.2 million)
o Earnings per share of US 27.4 cents (FY2022: US 53.8 cents)
o Free cash flow of US$78.8 million
o Final dividend of US 2 cents per share proposed, bringing total dividend to US 5 cents per share, 17.3% of NPAT
o Net cash position of US$129.4 million
• Mine to Megawatt
o Accelerated development of iron chromium redox flow long duration battery through wholly owned subsidiary, Redox One.
o 40MW Solar project environmental approvals in place and project completion scheduled for Q2 FY2025
• Guidance for FY2024:
o Production guidance for FY2024 is set between 145 koz and 155 koz PGMs (6E basis) and 1.7 Mt to 1.8 Mt of chrome concentrates.
Nickqj, on the Tharisa website under "investors" scroll down to "weekly PGM and chrome info". This is updated most monday's for the week before. I suggest you use SA Cr203 concentrate 40-42% currently showing as USD 282.50/tonne. This is the guide price for South African chrome concentrates with 40-42% chrome content CIF main Chinese ports.
Ah finally got a date for the finals, this Thursday
I like to follow metal prices, both precious and base. That is quite easy for most metals on "Daily Metal Prices" but I have not found a web site quoting a comparable figure for chromium. Can anyone help?
The magazine, Money Week, had an article last April saying THS was a really good buy at 97p. Just recently it ran another article saying the same adding that THS is "ridiculously cheap" at 60p. I am inclined to think both articles are correct. I have been watching and waiting for the SP to stop falling. I notice that Jubilee Metals, JLP, which sells PGM and copper has also been falling.
"Anglo American AAL.L is preparing to freeze spending on growth and widen job cuts in South Africa, going far beyond its initial savings target and paving the way to mothballing some higher-cost platinum mines"
The solution to low commodity prices is low commodity prices.
Anglo American AAL.L is preparing to freeze spending on growth and widen job cuts in South Africa, going far beyond its initial savings target and paving the way to mothballing some higher-cost platinum mines, sources familiar with the matter said.
Totally agree Rylidan-net profit after tax in any one given year should not be the only factor determining dividends -cash flow,accumulated profits and cash balances should be taken into account
I know exactly what the current policy is, and the guidance is excellent in knowing that profits are shared with shareholders.
However, a slight modification to the policy where the minimum percentage returned is banded, and a greater percentage of profit is returned at lower profit levels would be good. For a shareholder it would flatten the dividend profile, while still leaving plenty of funds for expansion. If the minimum returned was 30% at expected MPAT then the dividend would be maintained.
This would help stop the yoyo effect we get. Great for the traders, not so good for investors.
The directors would then have less profit to work with when prices are low, which is exactly the time when you want to limit growth, and the likely result would be the Karo time line would be extended.
Of course the directors still have this flexibility with the current policy and may still decide to maintain the dividend.
Also, Tharisa make it very clear that the dividend will be rapidly moving, depending on the price of PGM and chromium, and always be a little bit above 15% of the profit from them. When you buy this Share, one should be aware that the dividend moves wildly, it comes to the same in the end, just higher dividends in good years lower in bad and with mining good and bad can be very different
I tend to agree that maintaining a certain level of dividend, when there is a lot of cash in the bank is important to shareholders. Its not all about profit after tax in any given year. Smoothing dividends for investors is important, well it is for investors! That said, I also like asset growth. The diversification into Chrome was excellent, and anyone buying now basically gets that investment for free as the shareprice is back to where we were a couple of years ago.
Well let us see but I would guess the usual 17% or so which is about 1.5 to come in next divi but hope you are right and we get double,
They are delaying Karo for at least a year-at current PGM prices Karo appears to be throwing good money after paid -a slightly higher dividend is totally immaterial in the over all picture and shows goodwill towards shareholders -more valuable than a few dollars in interest
A couple of extra million in dividend is a rounding error in relation Karo costs and the $125 million in the bank
They need the cash for Karo, not efficient to give us more and then borrow for Karo at maybe 10%?
I would point out the 15% NPAT is the minimum dividend -a final dividend of 2c would represent a payout of circa 18% -bearing in mind the cash balance of circa $125 million to round this down would seem unnecessary.-.5 of a cent is $1.5 million.
I would also add unlike other Pgm producers no special dividends were paid in the boom year and part of the large cash balance must be due to this-so a final dividend of 3 or even 4 c could be justified.-even 4c is only a 25% payout which does not seem too high
Thanks so yeah 15% of 27.5 cents or thereabouts for the year.
With regards the PGM price going forward no one know but the cure for low commodity prices is low commodity prices (assuming there is still a demand). All THS need to do is still be standing in position to capitalise on the upturn.
Long term graph here goes back to 1993 lowest Platinum price $350 Aug99 drawing a line from there to 750 in Apr20 I'd say strong support not much lower than where we are today...
GLA
It is interesting that the last normal year prior to Covid (year ended 30/92019) the average PGM basket price was $1016 which than spiked due to Covid and perhaps the Ukraine war.So unless there is an upturn in demand or downturn in supply the current PGM basket price circa $1300 appears to be about right .I know according to the WPIC there is supposed to be a large platinium deficit and some predict an upturn in PGM prices next year but so far this has not been reflected in the platinium price.The Karo cash production price is over $1000 per PgM price which does not reflect well with the above basket prices
The dividend is directly related to the NPAT, which, let's be frank, is largely riven by commodity prices, we do not cut the dividend, we have a dividend policy, which we have exceeded every year since we paid dividends
Time to be prudent -not a penny more on Karo until a significant upturn in the longterm PGM prices-use funds to make SA mine more cost efficient -what has happened to the long ago production targets of 2 mt of chrome and 200000 ounces of PGMs annual output that were targeted long ago-there must be better ways for the company to spend its funds than on the development of Karo-the continuing cut in dividend payments is very disappointing-Karo was always a very risky investment based on sustained high PGM prices-the cash costs of over $1000Per ounze were too high