Tharisa Share Price (THS)

The UG2 chrome ore market rose for yet another week on Friday May 29, supported by Chinese buyers’ attempts to restock, and ferro-chrome prices stabilized in firm market conditions. Fastmarkets’ chrome ore South Africa UG2 concentrates index basis 42%, cif China climbed up for a fourth week in a row to $169 per tonne on Friday, up by $5 per tonne or 3% from $164 per tonne a week earlier. The index is now up $22 per tonne from $147 per tonne at the start of May.

Several deals were reported above the latest index level, showing the bullish run of the chrome ore market continues for the time being. “Some ferro-chrome producers, especially those in the south [of China], were running out of ore stocks, and they had to purchase even though the prices went higher this week,” a smelter said, adding that portside prices were in excess of 31.50-32 yuan ($4.41-4.48) per dry metric ton unit (dmtu).

On the supply side, South African producers lament ongoing logistical issues that continue to slow down the transport of cargo to ports. The border crossing with Mozambique is still highly congested and trucks can cross over only after long delays. For this reason, Maputo port has reportedly lower than average cargo to handle.

While producers within South Africa are expected to ramp up operations from June 1, the logistical hurdle is thought to continue to hinder the flow of material out of mines. Some participants believe the transportation issues will support prices further in the near term, others were skeptical of additional price hikes.

“Some ferro-chrome producers have already turned down the offers that were higher than $170 per tonne because they have sufficient stocks for the next months or so,” a trader said. “And even though we are seeing depleting stock levels of chrome ore, there is still a lot at ports.”

Fastmarkets’ assessment of chrome ore inventories at the main Chinese ports of Tianjin, Qinzhou, Lianyungang and Shanghai dropped to 3.56-3.81 million tonnes on Monday June 1, down by 2.9% from 3.65-3.94 million tonnes a week earlier

I'm looking at this simplistically. Refer to slide 18, profitability. In 2017/2018 EBITDA was over $100m and the Sp averaged £1. The SP followed 2019 EBITDA of $60m and tanked when results were released in early 2020 and so far has averaged 60p.

$44m EBITDA was banked in H1, after what I would describe as a fairly substandard operational performance. This year I think we can do $75m ish (consensus is $77m). The prospect of $100m of EBITDA in the following years is a strong possibility (consensus for 2021 well over $100m)

Backed by a MCap of only $200m and relatively modest net debt, the valuation to get back to 90p is pretty undemanding if you are willing to take a punt on the chrome price, which seems to have a lot of support right now.

https://www.tharisa.com/pdf/investors/financial-results/2020/interims/presentation.pdf

https://www.mining-journal.com/covid-19/news/1387518/tharisa-ceo-praises-sas-pandemic-response

Chrome prices have been consistently moving up over the last month as we enter a period of perceived market tightness. While the Tharisa open pit has been mining at full capacity from the start of this month, a number of smelters and mines in SA are operating at reduced capacity or not at all. Our larger competitors - Samancor, Assore, Glencore-Merafe, Impala, Sibanye and Amplats - have all suffered from supply cuts for various reasons over the last couple of months.

PGM prices also appear reasonably firm, albeit very volatile.

All good news for Tharisa. Chrome is one of the most unloved markets right now with limited price setting transparency and high concentration of supply which is experiencing severe disruption. No reason why a further recovery in chrome prices won't take place seeing the SP back to £1 in a few months.

https://www.proactiveinvestors.co.uk/companies/news/920164/tharisa-plc-back-at-full-capacity-and-reports-72-increase-in-first-half-profits-920164.html