RE: How would you value Tharisa?4 Sep 2023 20:14
Hi Moneyman, as you say the cash production cost was $1096/6E oz based on certain by-product prices which are lower today so that $1096/z will be higher today plus there will be the capex ex costs to pay off, on the Tharisa website today they have the Karo PGM basket as $1266.59/tonne.
Also that $1096/oz cash cost was based on production of around 190,000 ozs/year which is based on a 6E ROM of 3.0 grams/tonne, but the last Karo Mineral Resource and Mineral Reserve Statement has a 6E of only 2.31g/tonne which is 23% less, based on this figure the costs would increase exponentially about 23%. that $1096/oz also assumes a recovery of 78-82% which is achievable but could easily be 75-80%.Karo will have a massive stripping ratio of 21.6 m3 ,more than double the Tharisa number ,and Karo could go down to a maximum 130 metres (which is considerably deeper than Tharisa). If severe weather has a massive effect on the Tharisa numbers then think what it might do at Karo which is must deeper and has largely a contractor workforce compared to the own well trained labour force at Tharisa.
Affan , I can understand that the EV at Tharisa could be $450m but remember if things went fully wrong at Karo for various reasons then the $39million investment at FOIM in July next year could easily be $400-500m 12 months later and if the mine was closed/mothballed then Tharisa would be responsible for around around two thirds of this Leto Settlement the rest, the Zim government has a 15% free carry which means that Tharisa/Leto has 100% of the risks but only 85% of the potential profit) which could reduce that $450m EV to under $200m. This financial year Tharisa might have a PAT attributable to shareholders of say $98m but could easily right-off 2 or 3 times this amount if things go totally wrong at Karo. It is worth remembering that the Karo site was once controlled by Zimplats but under pressure from the Zim government they gave it up.
The Zimplats Ngezi mine next to Karo was originally Hartley Group which started aa an underground mine in 1997 having cost $289m to develop only to close 2 years later due to operational problems. Zimplats reopened the operation in 2001 as an open pit mine but in 2001 the open pit was closed and the mine went underground.
With lots of "ifs" and "maybes" including the PGM price recovering this does not happen and Karo is a complete success.
But is just goes to show that we are playing a massive high stakes game of poker! I do not want to be negative but we have to be aware of the risks. Look what happened at Salene Chrome, the investment is made and we are months away from a profitable operation when the Zim government moves the goal posts and the operation has to be mothballed.
The risks at SLP are severely less , the tailings are already there, the contents are known and their production costs even up to 10 years forward are pretty known so the only big unknown is the chrome and PGM price and SLP has a track history of this
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