Member Info for Mike1959

I have spent a few hours in the shade taking this I and find this to be a fantastic and detailed report from Tamesis. I really does put some meat onto the bones and answers some of the questions we have all been asking this year.
As rylidan and viable have already commented it does show that Tharisa is cheap using almost all parameters .They estimate the average NPAT for 2022 to 2024 will be$134.3 million compared to $131.5 million in 2021, so barely growing but with potential after that as Karo kicks in. Their assumptions generally look eminently sensible, although for me, the big variable is the forward PGM basket, they have the Tharisa basket as averaging $2594/oz which is about 9% higher than the current spot price.
They have explained their $113m net cash at the end of September. Payables in H1 included $29.556 m to related parties which is compensation for the BEE Leto Settlement but this has been paid as 13.69m shares and not cash (I believe this was done in Q3?). then the report say that PGM payables will reduce by 25-30% in H2 and then steady out as Tharisa has already given advance notice to Impala Platinum. I am not sure if I am interpreting this correctly but I read this as Tharisa is terminating the PGM call-off contract? If this is the case then it is a big change as Impala has traditionally taken 80% of PGM concentrates and Sibanye Stillwater the rest. If true then what is Tharisa going to do will they sell elsewhere or is this the practical start of the PGM benefication that they have been working on for over 3 years. At the moment the PGM concentrates contain about 100 grams of PGM /tonne or about 0.01%. Converting into a rough matte in the Arxo DC furnace might increase the PGM content by more than 10 times resulting in a faster turn round and higher payability. The report even mentions that Tharisa is 60% of the way to processing PGM'S hydro-metallurgically to increase the payabilty even more and have intellectual property (possibly patents) on this. Hopefully Ilja is allowed to comment on this.

South African chrome 40-42% concentrate CIF Chinese port is $280-285/tonne for 11-15th July, down $5/tonne from last week. So the last 2 weekly movements have been down but in context it is still currently a high price.
Naturally the concern is where will it be in 1/3/6/12 months.
I think there will be a bit of a time lag to Tharisa as presumably they sell in advance for shipment 1 ot 2 months forward , so what they are despatching/shipping in July was probably sold around May (the PGM concentrates are the other way round-effectively they deliver to the 2 S African smelters on valuation and the assay and prices are agreed 3-5 months later).

Visitor, thanks for the link. I am struggling to register for this but I will keep trying and have a good look.
I must admit that I do like hard numbers to discuss even with faults rather than pure sentiment or just our gut feelings. As in all these reports they are only as good as the assumptions they use. I can already imagine the reply from Sotolo that we don't even know what PGM prices will do next year never mind trying to calculate the net present value for the next 10 years! But firm numbers are better than nothing as long as we understand the assumptions.
I agree that the net cash figure of $113m at the end of September looks top heavy and I would guestimate around $80m given the likely spending for Karo, that Q4 chrome production will be slightly up on Q3 and that trade receivables do not reduce because of the ongoing logistic problems.

Hi ElProf, yes I agree with your analogy! It is swings and roundabouts.
The stripping ratio in FY2020 was 12.1 m3:m3 and in FY 2021 11.6m3:m3. I accept that the terrain changes and that THS wants to maintain an optimal mining system.
In fact , according to the FY 2021 accounts the Life Of Mine stripping requirement is 9.8 m3:m3 which is keeping even more for a rainy day!

Hi Ilja, thanks for your reply. My comment about the stripping ratio were totally based on the comparison between Q2 and Q3. I have not commented against the comparison of LOM but it is reassuring that you seem to infer Q3 is an outlier and the long term is to go back to the LOM of 12.

Hi Ilja, thank you for your prompt reply and information.
I agree that PGM production is on guidance, I had estimated that the normalised rougher feed would not have slipped from 1.74 in Q2 to 1.65g/t in Q3 and had hoped that the PGM recovery would be back above 76% as in the 9 months ending 30th June 2022 and 30th June 2021.
Again I agree on the primary (pre-Vulcan) chrome and that it is down to Vulcan recoveries but understandably you have downplayed the delays.As the Production Report says Vulcan "recoveries of 80% expected to be reached by year end" which is not necessarily Q4 so that the Vulcan 80% recoveries on a quarterly basis look like they will not fully be achieved until Q1/23.
In terms of the strip ratio going from 12.7 in Q2 to 14.2 m3:m3 in Q3 this represents an added cost to the Company hence my terminology. In Q3 the Company has to move 14.2 cubic metres of rock/earth to recover 1 cubic metre of reef. That 14.2 cubic metres has then got to be back filled into the hole it came from. So this is an additional cost to the Company although you are correct it is presented in the figures as a positive change of +11.8%. But it is still an additional cost.
The stock of reef mined and reef milled is fine.
I accept logistics are a nightmare (it is worth mentioning the good news from last week that Transnet have reached an agreement with CFM the Mozambique rail operator that should see about 6 extra trains of chrome every week going to Maputo port which is equivalent to 800,000 tonnes year which will reduce the current amount you have to move by road back to trains) . Likewise I see that demand remains strong and that you are not holding back production.
I hope you can understand why I am disappointed in the overall figures.
On behalf of all small PI's we appreciate the great job that you do to keep us informed!

Sotolo- I am disappointed with the numbers! PGM production is down 5% on my expected figure and chrome is down a whopping 9% on my expected figure. We know that S Africa had terrible rain in April but I thought I had allowed for that and this does not even get a mention by THS. The reef mined was down 4.4% Q on Q which will be weather related and there was still 2 months of stock to keep the mills going. But the Q on Q 11.8% deterioration in the stripping ratio is a concern (mentioned in May by Ragnarlothbrok) so hopefully it will return back to nearer the norm. And despite the positive slant from the Company on Vulcan the chrome production is lower than expected suggesting that Vulcan is taking longer than expected to get up and running (Q3 chrome recovery was 70.2% compared to 67.8% in Q2 and now THS say it will be September before this is up to the expected 80% maximum figure).
While PGM production guidance for the full financial year is unchanged the guidance for chrome is reduced by 10%( say 150,000 tonnes at say $280/tonne is $42 million off the total revenue).
With the ongoing logistical problems I believe that invoiced despatches will be even lower than production although at the moment this appears to be only slightly reflected in the cash balance and positive net cash position. The Company will be paying for all of the Karo investment until some partial external funding is in place.

Hi Sotolo, … but you can look too far forward....we are all going to die and the world is eventually going to end. At the end of the day we all need some perspective.
The Q3 numbers do matter at they are a guidance for Q4 and then a guidance for 2023 and on and on and where the business is heading and the credibility of the company and its management.
Based on the current expected EPS for this year the PE is now below 2.5 and still I think below 4 for next year building in my expected PGM prices for next year.
Since the THS shares first started in 2016 the 200 day moving average has remained above 100p all the time except for the first 13 months of the Covid outbreak.
Chrome is still holding up well.. Total Chinese chrome consumption in the first half of this year was 8.53 million tonnes up 20.48% on the same period last year and chrome stocks in Chinese ports have been steadily falling since late April ( reported on 1st July as 2.198 million tonnes, down 122,000 tonnes from the week before).
Yes, i agree the forward picture does not look too rosey but as I say, let us have some perspective on the PGM price.

Q3 (April to June) Production report is out Tuesday.
I am looking for PGM production to be about 44,500 ozs and chrome 430,000 tonnes (hopefully Vulcan is now running at over 80% capacity) with the PGM basket $2676/oz (Karo $2113) and chrome $282/tonne.
Fingers crossed!

Hi Sotolo, I assume the long-term prices in the PP presentation (PGM basket $1630-1666/oz and Chrome $145-150/tonne) are just concensus figures from several sources based on the past and are not from me or presumably not from THS. I would suggest that THS will be much more bullish on both (otherwise why invest in Karo). As for me, my reply to you on 16th June below was that I do not see he PGM basket falling more than 10% in the next 12 months from around $2400/oz so my current bold prediction for the PGM basket NOT to fall below $2160/oz and I think the picture for chrome is even better and will not fall below $250/tonne. On that basis the 2023 EPS could be 25-30 cents or very roughly half of the EPS for the current year. I stress these are purely my own figures and we have a long way to go, DYOR. Prices could even be be higher next year if the expecting recession is avoided. I see that Glencore is up today after JP Morgan indicated China should bounce back over 7% quarter on quarter in the second half of this year.

Hi Freedom4Uall- good questions!
The current financial year finishes at the end of September and so is pretty much 75% locked in, if prices remain as they are at the moment then I expect EPS to be 53 cents which is substantially better that the figure you have of 40 which I assume is from a brokers calculation over 6 months ago. This makes the current P/E below 3.
Going forward the big questions are 1) where are PGM and chrome prices going .
2) when are costs going
3)will the Karo project deliver as planned.4) What is the future for the internal petrol/diesel cares needing catalytic converters and will the potential massive demand for green hydrogen take off as hoped.
For 1) it depends on where you think we are in the economic cycle and would a recession reduce prices dramatically lower -see the valid comments below from Sotolo.
For 2) I still expect costs to increase over 10% next year although slightly higher volumes will slightly offset this.
For 3) Karo is a massive project for us and potentially triples our PGM exposure with no chrome. Will the project deliver on time, any delays will increase costs and delay returns and inflation in Zimbabwe is currently running over 100%/year.
For 2023 if PGM remains above $2300/oz and chrome remains around $285/tonne then I guestimate an EPS around 34 cents but if the PGM basket falls to say $2000/oz and Chrome to say $200/tonne then EPS could be nearer zero.
2024 is even more of a crystal ball job when Karo production should be underway but might not be contributing to EPS for a few more years but with great potential.
For 4) we all have our views.

oufc-thanks for the link. I like the Warren Buffet analogy! Most of this is old information and marketing. On page 8 the concensus long terms prices are interesting -for the PGM basket for 2023-2034 $1630-1666/oz, currently we have just gone below $2400/oz and for chrome $145-150/tonne, today the S African 40-42% concentrate price CIF China has dropped to $285-290/tonne, the first drop for several months.
Interestingly on page 8 the now admits that 75% of chrome is now moved to port by truck rather than train.
Still no new information on Karo but I suppose it is early days yet.

Sotolo- it is always good to have expected numbers about the current period and the medium term, which is the solid basis to start on.
I totally agree with you that the biggest thing affecting us next year will be PGM and chrome prices certainly more so than higher costs which iI believe are considerably more predictable. After PGM/chrome prices I would say the biggest thing affecting us next year is the performance on Karo (will it be on time and budget) before price inflation.
I agree that PGM prices could fall further and I am old enough to see some of the big swings of the last 20 years but then it is all down to what we believe might happen. I do not see the PGM basket falling by say more than 10% in the next 12 months (which is still a big drop) so perhaps I am not as pessimistic as you are although I do believe that world stock markets could have a torrid second half of the year until higher interest rates settle down (hopefully we a slowing down rather than having a full blown recession). But also I see the fundamentals for chrome as being even better. Demand in China/Indonesia is still growing and most major exporting countries are producing less.
So I am always willing to discuss the forward picture as well as the near term facts. Ultimately if you are extremely negative on the THS prospects you could always sell out and move on.

viable- yes it is a real rollercoaster, i think you have been on board since around of this year but we have seen this before in the last 2-3 years and the share price did dip below 100p in September last year. Hopefully you will ride it out with the rest of us.
Visitor- in the big scheme of things our numbers are in the same ball-park so it is good to compare.
Nimrod22- thanks for the info, I am suggesting the forecast P/E for this financial year is now below 3!

All, I have just watched England lose 0-4 at home which is a bit of a damp squid and then I check this out.
At the end of the day (literally) I value the opinion of Sotolo/IC152/Visitor and everyone else. I have learn over the years that none of us are perfect and that it is always good to listen to the opinion of others but sometimes some more than others and certainly calculations help that can be commented on by others.
Sotolo- you are correct that I did not expect the 6% + drop today and a dropis an absolute drop and IC152 I cannot disagree with your sentiment.
I prefer to have hard numbers to crunch and then add in the market sentiment.. At the end of the day the actual numbers will not lie even if they take linger than we expected to peek through.
That is why I like that Visitor has backed up his views. Visitor -your profit before tax estimate for this financial year based on the current prices is $255 million, I have $243 million (I see that you are working on a PGM discount of about 14% but I have commented before that the actual figure is nearer 19%- the industry average is about 15% BEFORE any fair value adjustment, but this is based on a typical 200-400 parts per million PGM content per 1000 kg of PGM concentrates but the typical average for Tharisa iPGM concentrates s only 100-120 parts per million (Karo will be similar before any smelting) and rhodium the most valuable element has the highest melting point and being the most expensive element is also the most expensive to isolate and treat. I wish that everyone would take on board that THS has a high value basket but that this means it is abnormally expensive to process particularly given the typical PGM content. Don't forget their will be a PGM fair value hit which at the moment I estimate will be - $5.4 million for the year. Then I think everyone does not realise that the chrome concentrates are probably sold 1-2 months in advance of invoicing . Finally in the medium term I think that the additional running costs/interest costs of progressing with Karo will be $6-10 million in H2 which cannot be capexed as depreciation.
Given the vagaries in these numbers and what our prices will do between now end the end of September, and freight logistics will delay some shipments (even if it is produced and despatched from the mine- a 40,000 tonne chrome shipment will not be included unless shipped so even if 95% + gets to port and the vessel is waiting for the last truck then it does nor count as an invoiced sale included in sales/turnover so at a time of internal and external logistical problems the emphasis is on invoiced sales/shipments rather than sheer production).
So Visitor and I might be 5% + apart but we are on the same page and it is always good to crunch numbers at a time of stress.
If you think my numbers are garbage then we can discuss and see what we both agree and disagree on.

….the S African bulk chrome price CIF Chinese ports for 6-10th June was $290-300/tonne, largely unchanged in 2 months. Chinese chrome stocks at ports on 2nd June were 2.37 million tonnes, down 19,000 tonnes on the week before. Chinese high carbon ferrochrome total production for Jan-April was a record high.
Even at current prices I still expect the PE for this current year to be under 4 based on the current share price..
With the current cycle of interest rates depressing the economic picture plus the shortage of semiconductors hitting PGM demand I am not surprised at the current price level. Lower PGM prices are now a double whammy with Karo built into the picture But you have to take a look at where prices might be in 6 months when most expected interest rate increases will have have happened or are built in.
I believe that positive drip feeding on the progress of Karo plus expected positive news on Q3 production plus the underlining value will prevent us falling as much as some other investments.

viable, you obviously have decades of experience, I have just checked and Richards Bay deep port opened in 1976-46 years ago!
Internal transport appears to be getting worse and the increasing demand for coal is just adding to the congestion for Transnet .Using road transport is three or 4 times more expensive than rail although at the current chrome price Tharisa can afford to pay it. Today the South African chrome price for 40-42% CIF Chinese port is still $290-298/tonne bulk. As at 27th May the chrome stock at Chinese ports was 2.427 million tonnes, just 17,000 tonnes up from a week before.
From the H2 financial statement it looks like the total cost of getting chrome to China was $80/tonne (internal rail/road to port $42/tonne and sea freight $38/tonne). I think this cost will be 25% higher in Q3 based on increasing congestion, higher fuel prices and continuing high demand for 30,000-65,000 tonne Handysize/Supramax/Ultramax vessels (for the latter with you S African interest you might want to check out Grindrod Shipping, GND on the JSE or GRIN on the NASDAQ, but a similar business is TMIP on the FTSE or a useful indicator is the Handysize Baltic index).
I think the THS share price is holding up pretty well in difficult market conditions. There are a number of questions that hopefully THS will provide information on this Quarter and if PGM/chrome prices stay where they are I am confident the share will be higher.
Enjoy your 4 day weekend!

Hi Ragnar, I know what you mean by using the spot price. At least a stopped clock is right twice a day!
Likewise I think the Vulcan hot commissioning has been slower than I would have liked. The Company says that Vulcan was 65% operational by the end of H1BUT THE h1 chrome recovery figure of 66.7% suggests that Vulcan averaged about 31% throughput over the 6 months. I think we might struggle to hit 1.75 million tonnes of chrome production in FY/2022. To hit it we would have to produce 973,300 tonnes in H2. To make matters worse, the freight logistics is slowing down freight shipments and we are even having to ship part through Maputo, Mozambique as well as Richards Bay/Durban and use road freight as well as rail. It takes 1600 road trips of 25 tonnes each to fill a 40,000 tonne bulk carrier load. In H1 invoiced chrome sales were only 92% of production so with similar problems I am expecting H2 revenue to be based on 910,000 tonnes of despatched sales.
Like you, on a full annual basis of Vulcan and 60,000 tonnes from Salene we should hit 2 million tonnes in FY2023.
For the financials my concern is still with Karo The project is based on starting in about 2 years with CAPEX of about $250 m, operating cost/working capital of $25m and PGM prices at the end of March. On this basis my rough guestimate is that the project has an impressive pay-back of about 5 years. But the PGM price is already down over 10%, the COO is already suggesting the $250m CAPEX might be increased this Quarter (inflation in Zimbabwe is currently running at over 100%/year).
Any CAPEX for Karo in H2/2022 should reflect in an equivalent asset increase but interest and running costs could be $10 m , pulling down the FY/2022 result and it could be over $20m next year.
So at the moment, Chrome is contributing over 60% of our profit but further falls in PGM prices , higher costs and delayed start-up and ramp up at Karo could prove expensive if the payback is extended to over 6 years. Tharisa has promised more information on this in this Quarter.

ragnar, I did not see the discussion but I have seen the FY2022 interim results presentation on the THS website.
For H1 this is showing the stripping ratio as 11.9 (so we have to mine 11.9 cubic metres of rock/waste to get 1 cubic metre of reef). In the past the stripping ratio was 2021 11.6; 2020 12.1; 2019 ; 8.3 ;2018 7.9. So you are right that in 2022 we have to mine 12.9 metres in total to get 1 metre of reef compared to 8.9 in 2018 which is an increase of nearly 45% in volume. But to give THS credit they have told us about 3 years ago that they optimised the mining pattern , sometimes you have to mine in a certain direction; the reef angle/direction can change slightly, you may want to optimise a certain part of the reef which has a higher PGM content? Also a cubic meter of reef will be heavier than a cubic metre of rock/waste which means although the volumes are up nearly 45% the weighs should be slightly lower.
You are right to consider this as it is a massive cost consideration but I think THS is always upfront on the number and it is always transparent in the accounts.. The stripping ratio this year and last year was actually better than in FY2020.
A similar concern is that as the mine gets older and presumably the mining moves further away from the 3 processing plants then it will have to be transported further which will cost more in labour/machinery/fuel.

Ragnar, the last chrome stocks at Chinese ports was on 20th May showing 2.41 million tonnes which was down 201,000 tonnes on the week before. But the stocks in some southern Chinese ports are particularly tight.
The price today on ferroalloynet.com is still showing as $290-298/tonne bulk, the same as last week.
As you point out , PGM and chrome volumes should be up in 2023 but who knows where prices will be so estimating the 2023 result is a real lottery and costs are not going to come down.