Member Info for Mike1959

Total Eren has built a 40 MWp PV solar farm in norther Greece. A balance of supply contract was signed in September 2020 and the farm started operating in November 2021. It is made up of 4 x10 MWp plants and cost Euro 32 million to build and is expected to generate 68 GWh of electricity/year, enough to supply over 18,000 people , equivalent to 57,800 tonnes Co2/year. It employed 30 local workers during construction and will employ 4 permanent workers for ongoing maintenance.
A 40 MWp solar farm started producing in early 2021 in Stensham, Worcestershire (next to the M5 service station of the same name) and took 150 workers at its peak to build in just 7 months. This covers 141 acres with a total investment of £25 million.
At the moment Tharisa has to convert the MoU into a firm contract that might take 6 months to negotiate but from then might take 12 to 24 months to build so possibly the solar farm could be operational latest 2023? Without some form of storage, Tharisa would still need to take electricity from Eskom during the night or during adverse weather and presumably the excess electricity would be sold back to Eskom by the owners of the solar farm.

The production figures are above my expectations.
I had hoped that production out of Vulcan and Salene would have started in December but will now be the next Quarter but that is no big thing as the production figures have more than made up for this. In particular the PGM production at 47,700 ozs is excellent and is 5,500 ozs above my expectation which at a current basket price of $2700 is worth $11.9 million more than I expected.
Yes, the news on cash is a little disappointing but had been perfectly explained by visitor and THS.
Overall the information in this production report is better than expected and increases my expected result for H1.

Hi Bunsenburner123, I reckon the PGM average basket price for Oct-Dec was $2430 and the average chrome price around $162/tonne which are very slightly lower than the previous quarter so these prices are nothing special.
Good news next Thursday on the Vulcan start-up, Salene Chrome start-up or Kalo could push the price up (and vice versa) but THS are pretty good with their production numbers so I expect the SP to be steady.
I agree with the sentiment below yesterday/today that the improving PGM basket price is good news, I would like to see the rhodium price increase and stay above $20,000.Any current chrome shipments to China will arrive after the end of the Chinese New Year to I hope we very shortly see a tick-up in the price above $170.
For me the real action will be when the H1/22 results are released and I am looking for control on some of the burgeoning costs , a view on where the PGM/chrome prices are going and news on the Karo project.

Happy New Year to all!
Production figures for October to December are released on 13th January so what are we all expecting?
Given the Omicron situation, summer rain seems slightly higher than usual and the Christmas break, I am expecting reef mined and PGM production to be up 7.2% year on year so around 1323 thousand tonnes for reef mined and 42,100 ozs PGM.
I am hoping that THE Vulcan commissioning went well and that a slow rate of production started in December so that chrome production out of Voyager/Genesis was 399 thousand tonnes plus say 5 thousand from Vulcan giving 404 thousand in total.
the icing on the cake would be that Salene Chrome has produced its forst 100 tonnesof saleable production.

Hi viable, the diversification could be in other metals, I know that iron/manganese and nicke1 lhave been mentioned in the past but I think the diversification is possibly more likely to be upstream benefication such as chrome products/chemicals and changes in the PGM concentrates. I remember someone mentioned in the past on this board that the commercial PGM contracts with Impala and Sibanye would end in October this year and give THS chance to look at some other options including their own induction furnace to convert some of the PGM concentrates with say 200 parts per million of PGM to a crude PGM matte with say 5000 parts per million of PGM. This would still have to be sold to a precious metal smelter/refiner but this might reduce the transport costs (THS is probably moving say 20,000+ tonnes of PGM concentrates/year plus it might speed up the current turn-round of up to 4 months and reduce overall costs and give opportunities to sell to other smelters in S Africa and even elsewhere export.

Hi raxfactor, thanks for your valiant number crunching. It is a useful way looking from an AISC's point of view. But looking at the numbers in the same way as the THS accounts i see that you have not allowed for the "other operating expenses"which were $44.8m in FY 2021 and allowing for this in your calculation would give ebitda $139.54- 44.8 other operating expenses x 0.75 (tax) x 0.74 (BEE) = $52.58M/271M shares =19.4 cents EPS. If the other operating expenses increase to say $50m in FY2022 then the EPS reduces to 18.3 cents so you are getting much closer to my figure.
Your IASC comparison between the two years also ignores PGM fair value adjustment/exchange rate movement/inflation/any reduced cost reduction per tonne from increasing production.
Thanks for your numbers which helps the debate!

Hi raxfactor, thanks for your valiant number crunching. It is a useful way looking from an AISC's point of view. But looking at the numbers in the same way as the THS accounts i see that you have not allowed for the "other operating expenses"which were $44.8m in FY 2021 and allowing for this in your calculation would give ebitda $139.54- 44.8 other operating expenses x 0.75 (tax) x 0.74 (BEE) = $52.58M/271M shares =19.4 cents EPS. If the other operating expenses increase to say $50m in FY2022 then the EPS reduces to 18.3 cents so you are getting much closer to my figure.
Your IASC comparison between the two years also ignores PGM fair value adjustment/exchange rate movement/inflation/any reduced cost reduction per tonne from increasing production.
Thanks for your numbers which helps the debate!

Hi raxfactor, thanks for your input and confirmation you are nearer feyzz's figures than mine. It is good to get a cross selection.
I agree the chip shortage will eventually ease but it will be 12 months or more until we are "back to normal". Similarly on the freight rates, more vessels will help but again this takes time.
Out of interest where is the main difference from my figures, is it higher revenue or lower cost of sales?

Hi viable, I thought you where in S Africa but from your last response you are UK based?

Hi Feynzz, I agree about your stock offset from the end of fy21 to end of fy2022 and would normally balance out but that only happens if production is steady, as I commented below , with production growing in 2022 the "lost" revenue in 2022 should be higher than the "lost" revenue in 2021.
I agree that there are early signs that freight costs are steadying off and fallen in the shortterm but I do not expect rates to fall next year but you might be right. While I have increased my freight services by 23% for2022 compared to 2021 most of this is due to the higher volumes and I have assumed a 6% inflationary increase.
the Stockopedia figures are very dependant on the PGM and chrome concentrate prices the analyst assumed several months ago when they did their projection and they might be right and they might be wrong. Don't forget THS's own in house broker, Peel Hunt, was predicting an EPS just one month ago, when they had the actual production figures, in the high 50's and we know the actual figure was lower. My prediction is based on PGM basket of $2400 and chrome concentrates at $160, I am not saying these are right or wrong, just that they are my starting point for some serious debate. At the moment my personal opinion is that the PGM average price for FY2022 will be similar to $2400 but that the chrome concentrate price will be a bit higher and average $170-190/tonne.
My figures are just for debate and to stimulate some serious discussion.

Hi Feynzz,
you know that production does not necessarily mean revenue. They can be a slight lag between production and getting it out of the door and invoiced particularly when production is growing and there are logistical issues. For example PGM production FY 2021 was 157,800 oz but sales were only 151,500 oz or 4% lower. Another factor was that in 2021 PGM revenue recognised at a point in time was $375.036 m but then there was a $15.35m reduction for "quality adjustments" presumably reduced weights/moisture /overestimated PGM content when initially invoiced (see p.63 in the accounts). Also the auditors, Ernst + Young like other auditors are taking a tougher view to revenue "Sales revenue is recognised on individual sales when control transfers to the customer" (see p 62 in the accounts) so for example hundreds of tonnes of chrome concentrates might have been despatched from the mine and sitting at the port waiting for shipmen or actually on a vessel half way to China but if the terms are CIF Chinese port then THS cannot include this as revenue because control has not transferred to the customer. So my 165,000 oz of PGM revenue is based on 170,000 oz of production and my 1.75m tonnes of cr revenue is based on 1.8m tonnes of production.
I agree that the weaker USD ZAR exchange will reduce local costs when transferred to USD but I think there is a partial currency hedge in this so that foreign currency losses appear in the accounts (in 2021 when the ZAR strengthened against the USD and so increasing costs there was a net foreign exchange gain of $15.477m).
Yes , I remember the comment that the variable cost of production from the extra chrome out of Vulcan will be about $10/t and help to reduce variable costs but this is only part of the costs, don't forget the freight rate to port and sea freight costs have increased, Eskom is increasing electricity prices by 15% in January and depreciation kicking in for Vulcan could add $26/t ($53 million over say 10 years/say 200,000 tonnes/year).
Breaking down the cost of sales, I calculate the mining proportion will increase by 14% over the 2021 level (reef mined looks like increasing by 8% volume this year plus 6% inflation). I calculate the processing will increase by 21% (the above percentage increase in mining costs above plus the additional costs of manning/running Vulcan plus depreciation. Finally for 2022 I have state royalties at $14.2m,selling costs increasing by 15% to $80.2m and freight services increasing by 23% to$42.3m.
For other operating/admin expenses I have allowed a 10% increase for higher volume plus 6% for inflation so the 2021 total increases from $44.822m in 2021 to $50.7m in 2022.
Basically I agree that the variable processing cost for chrome will fall with the higher volume but that costs in other areas are rising to offset this.
as I say by all means check my numbers out!

Hi Visitor, no problem as I put it out there for inspection so by all means pull it apart.
I have total revenue as $587.3m (pgm 165,000 oz x $2400 basket as 79% payable=312.8m;cr 1.75m tonnes x 160 less 35 transport to port=218.7m,agency say 45.0m,manufacturing say 2.4m, Salene 8.4m).
less cost of sales 453.4m less cost of sales Salene 7.6m= gross profit $126.3m.
plus other income 0.8, no foreign exchange adjustment, less other operating/admin expenses 50.7, less other operating/admin expenses Salene 0.8= results from operating activities $75.6m
plus finance income 1.8,less finance costs 2.0,less share of loss of adjustment 0.3= Profit Before Tax $75.1m, tax @ 28%=Profit After Tax $54.1m
attributable to owners of the company x 77% =$41.7m
say 272 million shares= EPS 15.3 cents
current share price 115p @ 1.33= 153 cents= forward P/E 10.0

So as you can see I am allowing for the increased volumes in the revenue and also in the cost of sales and other /admin operating expenses and assumed inflationary cost increases of around 6% in 2022.

I agree there will be less cashflow going into capex but at current metal prices profit will be down and so the total 2022 FCF will be lower than 2021. Besides we probably will lose some of the existing cash in the bank and some of the lower 2022 FCF to finance the expected further investment in Karo which will probably not generate any cash flow for 2-4 years.
Let me know what you think.

Hi viable,
yes this is a one third drop in warehouse stocks at Chinese ports which at first sounds supportive of prices but I think it reflects a very temporary slow down in demand in China reducing imports rather than an increase in demand eating into stocks and this is reflected is slightly reduced chrome concentrate prices in recent months. Since the second half of October energy prices/shortage have started to hit high intensive energy production in China ( a combination of higher costs to import coal/gas/oil just as domestic hydro electricity generation has been hit by lower summer rainfall), in some areas high intensive energy users like stainless steel producers are only allowed to produce 2 or 3 days out of 7. This is temporary and will probably end when the Chinese winter eases in Feb and chrome concentrate prices will hopefully start to creep back up above $160/tonne.
The elephant in the room is that even though cr prices have increased to $160-180/tonne this year from about $145/tonne last year this increase does not even cover the increased internal freight(rail/lorry) to port or sea freight costs to China which have increased about 50% over the last 12 months, on top of that are gas/electricity costs which have literally doubled/tripled this year alone.
THS has had a truly fabulous 2021 partly due to higher production but mainly due to higher PGM prices but the cost of sales and admin costs have also dramatically increased. Much has been said about THS being undervalued but the stock markets are forward looking . I would ask all to guestimate the 2022 EPS based on current prices (PGM basket below $2400/oz and cr $160/tonne CIF but with expected cost increases in 2022 I believe the figure will be below 16 cents (less than half the figure in 2021) , giving a P/E of about 10 at the current share price but a cut in dividend if recent and future profits are absorbed into financing Karo which might not contribute to the bottom line for 3-4 years.
We are relying on higher prices to maintain our performance.

Hi viable ,the Nedbank report your refer to says Salene chrome will start Q1/Y 22 but don't forget that Tharisa's financial year is October 2021 to September 2022 so Q1/FY22 is actually October to December 2022.
Anyhow the overall effect on THS will be relatively small.,THS has calculated a Net Present Value of $6.9million over 7 years of life of open mine based on a discount rate of 11.8% and Chinese CIF chrome price of $252/t less freight/insurance of about $35/t (a higher quality than in S Africa) and production averaging 80,000 tonnes/year.
Even allowing for a reduced more realistic discount this will probably give an average profit of $1 to 2 million/year which contibutes to THS but is hardly life changing. Production will be gradually ramped up so I expect FY 2022 production to be nearer 50,000 tonnes and with other start up costs it will probably not be profitable in the first year. also as Zim has banned exports of chrome concentrates they will have to sell to domestic ferro chrome producers who will pay less than the main market in China,
Rather it is a toe in the water to check how realistic things can be done in Zim particularly with the massive Karo project round the corner which would be lifechanging but likely take up all of THS's net profit for the next 2-4 years just for the first phase unless they find partners or borrow in the market.

Hi Feynzz,
i have been going crazy trying to find out why i am so wrong on my FY NPAT attributable to shareholders of £133m when it looks more likely to be about $103m. I have realised that i should not have taken out the state royalties in the cost of sales for H2 like i had.
Can anyone explain how the THS state royalty is calculatd, originally i thought it was a percentage of EBIT/turnover x a percentage (less some capital allowances) but now i wonder if it is just based on turnover. Also why in H1 was the state royalties in cost of sales $17.399m but the provision for mining royalty in trade and other payables $26.641m, is this a timing issue?
Anyway, hopefully we will find out on Thursday!

Hi Feynzz, the recent new that the FY 2021 EPS is likely to be around 38cents is somewhat disappointing which will put the FY NPAT attributable to THS shareholders at around $103 million so my previous estimate of $133m and your figure of $140m now look far too optimistic.
it will be interesting to see the actual figures around 2/12 for the reasons for this, possibly the costs are considerably greater than expected, possibly the PGM fair adjustment is more negative in H2 or that there are some big write-offs (possibly a combination).
it will still be a great result!

Feynzz,
I have just realised I did you a disservice back on 8th October below when I believed the FY NPAT attributable to THS shareholders would be $112m compared to your $140m.
I have just realised that I have made a mistake in my calculation of Cost of Sales (the state royalties were $17.399m in the H1 accounts but I had prorated a bigger figure for H2 but digging deeper I think the state royalties in H2 will be about zero) so now my expected FY NPAT attributable to THS shareholders is $133 m so I am now much closer to your $140m.

The Evening Standard is today reporting Eskom has extended daily electricity blackouts in most parts of S Africa from over 2 hours to over 7 hours (spread over 3 periods a day) and this will continue until Friday.
The load shedding is blamed on a "major incident" that effected hydro power supply from the Cahora Bassa Lake in Zambia and breakdowns at old coal-fired power stations accounting for over 30%of Eskoms capacity.
Hopefully this will not affect THS too much as they have back-up diesel generators.

Sotolo,
you are correct about the lag between the PGM mining and selling which is about 3-4 months (i assume 3 months in my calculations) but you have it the wrong way round, the price setting is 3-4 months after the mining.
Feynzz,
you are correct that the Q2 PGM's despatches price fixed say 3 months later at the Q3 average price would have given a Fair Value gain, say 35,800 ozs would have been provisionally valued by the auditors in the H1 accounts at the end of Q2 (March) PGM basket price which was roughly $3000/oz but actually price fixed at the Q3 actual average of say $3800/oz, I work on a revenue after costs of 79% (some think it is nearer 85%) which would give a FV value of $14.1m (35,800x {3800-3300}x 79%).
But again as you correctly point out there was a big PGM price drop in Q4, Although Tharisa are probably despatching PGM containing concentrates every week to their 2 refiners, effectively will have provisionally invoiced the Q4 PGM despatches of say 45,000 ozs at the Q4 average basket price of around $3,000/oz but at the end of Q4 the auditors will have revalued these at the end of Q4 basket price of around $2490/oz giving a FV loss of -$18.1m (45000 x {2490-3000} x 79%). So I believe the FV adjustment will be a loss of around -$4m (I admit I was wrong when I say -$20m below) which is reduction of $39m from the H1 FV gain of $35.359m.
As you say, we will know more once we have the actual production figures on Tuesday and it is good for all of us to share our estimates and thoughts.


you

Feynzz, I am working on higher numbers in Q4, 45k PGM and 427k tonnes chrome concentrates but my FY NPAT attributable to THS shareholders is $112 m compared to your $140m.
I think the main difference is probably that I have calculated a fair value loss adjustment in Q4 PGM's of -$20m (and negative for the FY , the first loss is several years) due to the big drop in the PGM basket from the end of Q3 to the end of Q4. Also I think some on the inflationary cost increases will be higher than expected (for example sea freight costs have more than doubled in the last 12 months).

Feynzz- i agree.
Another recommendation for THS on Motley Fool today.

On the chrome tax debate-on 3rd August Zimbabwe has immediately banned exports of raw chrome ore and from July 2022 will ban exports of chrome concentrates to protect its own ferro-chrome industry. This will force Salene and the Karo to sell within Zimbabwe unless their Special Zone status is somehow exempt. This must influence the announcement on Karo, which as Visitor comments is expected next month.