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Sotolo, the first one is the important one, the other two are just a guide to check against the South African chrome concentrate price (40-42% chrome content CIF Chinese port. Incidentally this was very slightly higher this week.
Sotolo, we have been here before!
The first one, which is what Tharisa produces (plus the higher quality).
The other 2 are just guides (South African High Carbon ferro chrome is produced from concentrate and the 3rd is lumpy chrome produced in Turkey).
Sam/Krusty, likewise looking forward to the Oct-Dec numbers on Friday.
the dominating factor is going to be the vessel appreciation since the end of September. After a big drop in vessel values at the end of September TMI told us in their RHS of 25th October that "Clarksons' benchmark values for 2nd hand Handysize and Supra/Ultramax vessels has returned to their end of June levels since{September} quarter-end". NAV at end of September was $433m, with increased TC's for the 42 to 44 vessels I have total TC's $54.2m less operational expenses $47m= gross operational profit $$7.2m less financing $2.9m, plus vessel appreciation $50m , group expenses-$4m=NAV increase of $50.3m or about 11.6% to about $483m.
NAV of $483m is about $1.46/share or £1.15/share which represents a 43% discount to NAV which I think would propel the price back to a 35% discount of 75p.Bank borrowings should also be good news with a plateauing off of new vessel sales.
However if that vessel appreciation is considerably lower then the NAV rise will be considerably lower. Unfortunately I do not know of an accurate vessel valuator available to us.
Here in the UK I suppose wewill have to see how the Zero Emissions Vehicle mandate which started this month goes. This requires all car manufacturers to sell minmum 22% ZEV's this year , increasing to minimum 28% nezt year and eventually 80% by 2030.othwise they are fined.
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.
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.
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.
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.
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.
...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
Ilja, good to see the Mineral Reserve Statement now published rather than having to wait until February or longer, and that the Karo 5PGE+Au is advised as 2.98 grams/tonne which is in line with the 3.0 used in the original projection. Also interesting that there is a significant increase in the proven/probable tonnes although the open pit volume and life is reduced and presumably the underground amount increased which will add to costs.
Similarly a minute reduction PGE/Cr content for the Tharisa mine but the open pit life has been reduced with an earlier transitioning to underground.
Hi, I agree that over the last few days the buys far outweigh the sells on TMIP but that only accounts for TMIP so we also need to take account of the share trades on TMI which tends to be less trades in total but average more share for each trade (the only trade so far today is a sell).
If you want something to make you smile then have a look at app.powerbi.com for the Baltic Exchange Handysize Index. On page 2 of 3 the graph is now showing spot TC's last week at $16,340/day as the average of 7 routes but with the Atlantic at $23,057/day while on page 3 the average spot TC for December so far is $15,518/day which is higher than any December since 2018 except for 2021.
Hi Riverboy, I don't think so, the situation in the Red Sea and possibly avoiding the Suez canal is actually positive for TC,s by keeping vessels busier for longer. Just the normal northern hemisphere lull.
Even then, for most vessels and Crew, Christmas day is just another working day!
Hi CI, I have learnt the hard way over the years and totally agree that cash is real but that current assets and current liabilities can be manipulated! Just a few weeks ago one shipping pundit commented that shipping businesses rarely go bankrupt because they are unprofitable but rather that they run out of money!
TMIP's problem at the moment is that operating profit is now on a knife-edge (but now improving) but that vessel values are a massive lottery, sometimes you win and sometimes you lose which just reflects that the shipping business is highly cyclical . Most of the assets are in vessels (they are not fixed assets but not quite current assets but nearer the latter than the former in my view?). With your previous role do you agree? The business values the vessels every 3 months using 2 independent valuations and the acid test is that vessel sales have only been 3.3% below their book values.
Like you I am nervous on where we are heading. The BHSI is up 36% YTD but today is down for the first time in a few weeks so I suspect this is the belated start of the Christmas/New Year slow down an approaching Chinese New Year. Traditionally the index is always tough AT this time of year and Q1.
As you say, GLA and seasons greetings!
I think it spread through the PGM producers today, on JSE Impala Platinum is us 13.20%, Anglo-American up 5.52%, Northam up 8.44% and Sibanye Stillwater up 12.88%.
Ilja, Thanks for your prompt reply and information which I totally accept, but it would have been good to gets news on this critical information yesterday. Similarly the 2022 report under "Material risks" mentioned " the ongoing deferral of overburden waste removal will materially impact the sustainable exposure of reef " and that the practical deployment of up to 10 million BCM/year waste stripping capacity might be needed requiring special waste removal projects which are "essential to sustain the levels of ROM production and support the Mineral Reserve estimate".