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Sotolo, with 9.5 months of the 2023 FY already locked in (and assuming PGM basket $1400/oz and $280//tonne for the remaining 2.5 months 2.5 months I calculate the Tharisa AISC for PGM as just $528/tonne, but don't forget this is based on a 2023FY average chrome price of $257/tonne. If the chrome price had only averaged say $200/tonne then the PGM AISC would have been $1203/tonne. In 2023 chrome will now account for around 68% of revenue and at current prices that percentage will be higher next year. As others have said, Tharisa is currently predominately a chrome producer, As long as the chrome price does not collapse then Tharisa is still profitable at current PGM prices.
As for the PGM AISC's for the big 4 is is worth saying that their PGM basket prices are still lower (although now closer) to ours and that PGM's generally account for a much bigger percentage of their revenue than Tharisa, for example in 2022 89% of Anglo American Platinum's revenue came from PGM'S and only 1% from chrome. Also the big 4 have multiple mines, so some will be below their average AISC and others above their average AISC, for example at Anglo their mine with the highest cash PGM cash cost in 2022 was Amandelbult at $1127/oz compared to the overall average of $937/oz, at Northam their costliest mine is Eland so it is these expensive mines that will feel the pressure of falling PGM prices. For the PGM miners after several years of abnormally high profits with emphasis to produce as much as possible, with profits dramatically reduced, the emphasis will now have changed to greater cost control such as reduced overtime and capex which will reduce marginal production over time, it may take over 12 months but it will gradually happen. These AISC's will probably face 5%+ cost inflation this year which fortunately has been more than cushioned by the weaker ZAR/stronger, this could change.
...sorry start again!
Sotolo, Anglo-American Platinum costs according to 2022 accounts (for S Arican/Zim mines combined cash $937/o,, AISC $1200/oz
Impala 2023 guidance cash ZAR 16800-17800 say $961/oz ,AISC around $1220/oz
DYOR!
Sibanye Stillwater 2022 AISC 1180/oz.
Northam Platinum h2/2022 cash 1112/oz, AISC $1216/oz, AISC plus expansionary capex $1476/oz.
****, excellent observation.
i suppose the big question is that are we going to invest that $140m wisely, if $160m is invested into karo (plus capex on tharisa) before the end of 2023 and incoming cashflow is say $25m in july-sept and say $20m in oct-dec then that net cash number will be down to around $25m or even lower. fingers crossed.
....q3 production numbers are disappointing and particularly as PP suggested this will continue into the last quarter so the FY numbers look like being at the bottom end of the last advised range which was already revised down.
Reassuring information on PGM/chrome prices.
I would have liked to see more information on Karo.
I am interested if Tamesis now use the latest PGM prices (which give a better picture of where Karo is) or insist on using the old numbers in fear of upsetting THS.
The AISC for the big 4 PGM producers remains below the current PGM price level so they will remain profitable unless inflation dramatically increases/Eskom problems worsen/ZAR strengthens against USD but it will seriously affect expansion plans for most.
Increase of $36.8m cash is excellent news, this suggests the big $160m capex spend on Karo mentioned by PP will be between July-Dec so i still expect nearer zero to $80 m net cash by the end of the FY in Sept. The excellent cashflow is partly a factor of changing one of the PGM smelters at the back end of last year and the effect of this should become less apparent by the end of this year plus PGM prices are weakening.
The
Sotolo, Tharisa produces Cr203 which is the concentrated ore containing 40-42% chrome content (so 58-60% others which are metallics and non-metallics)and as reported the average weekly price CIF Chinese port is $287.10/tonne.. This concentrate /ore is then metallurgically converted to ferro chrome which has a considerably higher metallic content (considerably lower non-metallics). In the weekly Tharisa twitter price you have to use the scale on the right hand side of the graph so the current S African High Carbon Ferro Chrome 50% is $0.975/lb = $2149.49/tonne of CONTAINED CHROME or x 50%= $1074.75/tonne, so you can see the ferro chrome price is considerably greater than the current chrome concentrate price. The current Chinese domestic price for high carbon ferro chrome 50% is shown as RMB 8550/tonne which at RMB 7.23/$ converts to $1182.57/tonne. So the price in China is about $108/tonne higher than the same price in S Africa.
The main factors controlling the ferrochrome price are the raw material price, transport, energy import taxes/vat and local demand/supply factors. The reason the ferrochrome price has fallen by a bigger percentage that the chrome concentrate price is reflecting that energy prices have fallen since the start of the year..
So Tharisa produces chrome concentrates and sells worldwide mainly to ferrochrome producers who in turn resell to stainless steel producers. .
Bangrak, net cash at the end of March was $106.8m, but with the big cash spend on Karo in the second half of this year I expect the net cash to drop to say $90m at the end of June and say zero at the end of the FY. For FY 2023 earnings I expect $108m. Current market capitalisation is about $269m.
But I like your way of looking at this and as Moneyman agrees it still looks cheap. We are still looking at a PE of 3.1 for 2024 based on current PGM basket and chrome price.
The Q3 figures are out on Thursday, I am expecting PGM 40,000 oz at $1625/oz and chrome 394,000 tonnes at $294/tonnes?????
Sam, unfortunately I called it wrong and the BHSI has continued to fall particularly with the negative economic numbers in China.
By early next week I think we will see a new YTD low for the index , below the 421 we saw in April.
Sotolo, best of luck to you although as others have pointed out you do appear to be inconsistent, only 2 days ago you advised " I see rh halving or more as the price overshoots".
For me I still see the fundamental supply side deficit for rhodium still in place this year and over the next few years and I
would suggest the rhodium price has already overshot on the downward side. The market has been spooked by weakening demand , fast increasing interest rates that penalise holders of stock and the greater than expected acceleration in Chinese BEV's that you have highlighted.. Without a terminal futures market the spot rhodium market can be quiet and illiquid particularly in the northern hemisphere summer months when buyers are thinking of beaches. Possibly Russia or one of the bigger S African miners has offloaded a big volume and temporarily glutted the market. I still see global ICE sales increasing this year (despite increasing BEV's) and loading increasing for 3-4 years and then the secular loss to BEV's start to bite from 2025 onwards. By then I hope the secular increase in green hydrogen will take over (PP has even hinted at some exciting developments on energy storage at Tharisa, hopefully we will know more soon) and I think it is this that has totally insulated iridium from the falling prices seen with the other PGM prices.
....yes, thanks very much Ilja.
Your rhodium price of $4420.20 is still higher than todays price of $4,000 quoted both by Johnson Matthey and Sibanye Stillwater. Presumably your price is averaged over a few days alternatively the last physical rhodium sale to the 2 smelters.
Interestingly while the rhodium price has collapsed the iridium price has been rock solid and now looks higher than the rhodium price.
....yes, interesting article but the BEV numbers look way too optimistic to me, he is assuming 50% BEV growth this year (and then growing by 1.6% year thereafter) but the figure will be nearer 25-30% this year. Still it does set the trend for the future.
DYOR.
Sotolo, this site is dedicated to THS so I think the "minutiae of THS output and costs" is really important but let us move onto some macroeconomic factors as you suggest.
I agree with you the the Chinese economic rebound after removing Covid restrictions has been extremely disappointing with 3 consecutive months of reducing economic activity in April-June and that this is holding back world growth. But as I mentioned a few days ago, Chinese chrome imports in Jan-May 2023 are 17.94% up on the same period last year suggesting that stainless steel production is going well and that South African chrome is critical.
You are correct that the question of how fast BEV's will replace ICE's is an existential question for the whole PGM industry. Your information that China is dominant in BEV's account for about 60% of global production and that China has over half of the BEV's on the road worldwide. Global BEV production has grown from 3.2m in 2020 to around 6m in 2021 to nearly 11m in 2022 and expected to be around 14m this year. As you point out , BEV's account for 24% of new car sales in China compared to 12% worldwide in 2022 and around 16% worldwide this year but this strong figure is high in China, Europe and USA but less than 2% in India, Japan, Indonesia and Brazil.
But the big picture for PGM's is where will these figures be in say 2030, the suggestion ranges from 20% to 90%. Due to the problems of prices, infrastructure and supply of lithium I expect the figure to be under 40%.
Despite the increase in global BEV sales from 12% last year to 16% this year , global ICE sales this year are still expected to be about 72m which is the same as last year but with higher PGM loadings so that PGM usage will increase this year despite more BEV's. I must admit that the May research from Johnson Matthey suggesting that platinum demand in 2023 would be 20% higher than last year seemed incredibly optimistic to me. The speed of the future switch from ICE to BEV is critical to the future of all PGM producers , if you think that switch will be faster than the conventional wisdom then investing in THS is possibly not for you.
then on the reverse side there is the potential from the growing hydrogen economy.
Always willing to have sensible , rational discussion and debate!
Sotolo, the share price is so low now because it is reflecting the current PGM basket which reflects the big drop this week.
I calculate todays PGM basket price as $1402 for Karo and $1312 for Karo, these should match the prices that Ilja puts on the twitter site on Monday. Using $1402 for the PGM basket and the current chrome price of $285 I make the 2024 PAT as exactly $100 million which allows for the inflationary increase in costs and financing for Karo that you mention. That is a PE of around 3.1 although admittedly it was around 2 less than 2 weeks ago.
For 2024 if the chrome price averages $285 and the PGM basket averages just $510/oz than the business would still breakeven. With chrome where it is now , even if the current PGM basket was to drop a further 100% then the business would still make a profit. So you are wrong below when you say "pgm break even is very close if not here". Admittedly 2025 onwards would be tougher with the running costs of Karo.
Moneyman is spot on, eventually the supply of PGM's will start to drop and push prices upwards again, Tharisa can live with the current price levels and still make money.
As I have mentioned before, eventually I hope that the updated Karo mineral statement will confirm the original Zimplats results which would increase the PGM yield by about 10% and hopefully the Karo development does not use all of the 15% contingency (probably about $50m) allowed in the latest project capital cost.
Sotolo, I try to be tolerant particularly on discussion of forward prices which will always be subjective as none of us know the precise answer. In my humble opinion I do find you overly negative but accept your opinion but what I do not like is that you are not willing to accept facts and throw out incorrect information without justification.
You say "...we are already in the realm of losses on PGM basket around $1400 on Tharisa and $1300 on Karo". But Tharisa is still profitable at PGM $1300 and chrome $285 although I agree that Karo is around or possibly just below the current AISC level.
You say "the worse thing is chrome is falling too" Let us has some perspective. The chrome price today is $285-290, the same as last week and a few weeks ago the price was $305. The current price is still fantastic. the last chrome port stocks in China were 2.03m tonnes , down 210k from the week before. You mention a "China slowdown" but Chinese imports of chrome in Jan-May this year are +17.94% on the same period last year.
If you want to discuss the chrome ore/concentrate price then discuss that product not Chromium 99 which more reflects the high energy cost of converting chrome ore/concentrate rather than the chrome price itself.
I agree we are in the big debt period for Karo but as others have said this in hypothetical until Karo starts selling. In the meantime the management will have difficult decisions to make, we are too far into the project to stop but as you suggest it could be slowed down or paused or adjusted.
Yes, the last 2 year trend has been for PGM prices to significantly fall, but only after a significant increase before that, the same cycle will happen again although there will be a time lag before the lower PGM prices force the higher priced producers to reduce production.
....sadly the chrome price is down slightly to $285-290 this week although spot sea freight rates are around $5/tonne lower this week or down about 30^ since the end of last December.
With the PGM fall today it makes the Tharisa basket around $1475 and the Karo PGM basket around $1335 which is around my Aisc level ( as others have said, all hypothetical until we are producing and selling.