Member Info for ragnarlothbrok

I don't understand the comment about expected FY21 net cash. They closed H1 at $31m, so Peel Hunt is implying only $10m cash generation in the 2nd half.

We increase FY21E EBITDA by 71% to US$303mln and despite the heavy capex spend on the Vulcan project this year see the group closing FY21E with US$45mln net cash on hand.

https://www.proactiveinvestors.co.uk/companies/news/946683/high-pgm-prices-make-tharisa-plc-a-cash-machine-says-peel-hunt-946683.html

Hey TBTT, they know that reef inside out. The old presentations give a good idea of the geology. The reef they are mining is naturally lower in palladium than the northern limb. The expectation is that in future industry PGM supply growth will mostly come from the northern limb where there is more Pd, leading eventually to higher Pd splits and lower rhodium and PT. SLPs Volspruit is a good example of that, it has a very high Pd (and nickel) content compared to the western limb, but much lower rhodium and Pt

https://www.tharisa.com/pdf/investors/presentation/analyst-site-visit-07092016.pdf

The basket is ridiculous right now, the whole sector is looking so cheap. Even Impala, which is much bigger, more liquid, and with more diversified operations, is only trading around 4x EBTDA

Looking back on the trades this week my 2 top ups on Monday were the only volume of the day! And those 2 trades alone moved the dial by around 5%. There is no stock around on this, a bit of good news will light one under it. You just don't see this type of business trading at 1x revenue these days. Quiet times like this are the best time to accumulate, not getting caught on the spike when results in a few months will likely show another healthy increase in sales. They have already told us that trading results are ahead of last year after only 4 months...

One downside of which I am well aware (and there are others) is that revenue would need to double to make a profit. Another is that I have no idea how much cash they have. And another is that loan note which will need to repaid at some point, although expiring in October 2024 and held by what appears to be a supportive shareholder, its a millstone incurring high interest p.a. and you would expect that to be converted to equity in the absence of a meaty raise or some serious cash generation over the next three years.

But I love a good turnaround story and management are spinning a good yarn

I've been buying a few of these over the last few days. This type of business should go for at least 3x recurring revenue. It's currently about 1.5x. They managed to grow revenue and start to get costs under control over the last year despite Covid, which is very positive. We could see some pretty rapid growth from a very low base. With a £7m cap it could all go pear shaped pretty quickly. It will take some time to rinse off the stain of the Adept reputation but the Redcentric link gives added confidence and it could very easily double on a bit of revenue growth. It doesn't look like we will get much news on this until results in June so may have to sit tight and be patient but it seems they made a good start to 2021 so lets see what happens

The main thing for me is that H1 PGM production has come in at 75.1koz. In order to hit the guidance mid point that requires 85koz in H2. If they do get a second half with 80koz+ then that's great for 2022 but this suggests a higher likelihood of hitting the lower end of guidance, so its not surprising to see a bit knocked off the price today

In the long run releasing those shares will help by making the register more balanced. The improvement in spread and liquidity since this started has been profound. I was able to sell shares out of my non-ISA and buy into my ISA at a 1% spread without even doing the bed and ISA thing. It's allowed all manner of PIs, and probably some hedge funds, to hoover up those FIL shares at what is still a great entry price.

If they had 5% on 12th March that makes 13.5m shares. Since then I reckon about 20m shares traded, with half of those sells and say 2/3 FIL that would make about 2.5% or 7m left. They should be done by H1 results next month latest

Agree with TBTT there. Investors often focus on the headlines rather the digging in and crunching the numbers. The Q1 report met with limited reaction, volumes were high on the day but quickly faded in the days following. These news events are seen as liquidity opportunities for the funds selling down, so even if the results are good we might not see any action if the funds are still selling (which I suspect they still are)

We shouldn't ignore the production stats whatever the market reaction, you can glean a lot from the strip ratio, grades and recoveries. A key driver of the 200kozpa PGM production target is improved grades and recoveries. A PGM recovery above 80% would be a solid result. The stripping ratio of 11 last quarter was the lowest in a year so hopefully we see that start to trend down even further.

In a rising price environment it's easy to forget about costs... a lot has been invested in pit redesign/optimisation over the last 2-3 years which will be bearing fruit as we speak and most of the expansion plans require limited additional reef mining. The industry is running at 10-15% cost inflation. I think Tharisa will substantially outperform this number.

My expectation for cash generation for the quarter is $54m, for a net cash position of $60m. Thats with a generous allowance for working capital build. Saying that, we could see a surprise on cash, there was a $51m increase in working capital at September 2020. By my calcs I don't think this had unwound in the December net debt number

I sold out of this in the 20s thinking it was done. Well wasn't I wrong. What an incredible journey for those long term holders and management of Wey. Well done all!

Amachado yes if you wait the consideration of 47.5p per share will be paid into your bank account. But you may sell now for around 45.5p, so if you wait you will get that extra 2p

A little article on the chairman of Tharisa for those that enjoy a bit of history...

https://www.pressreader.com/south-africa/finweek-english-edition/20071018/281779919761618

His previous large venture, Eland Platinum, was sold to Xstrata for the princely sum of $1bn at the peak of the platinum cycle, not long after buying the asset from Anglo and doing an IPO, generating a significant return in a short period of time. This asset was eventually sold by Glencore to Northam a couple of years ago for a fraction of its purchased value

Hi Tommyurray,

The tax is fraught with issues and doubts. From the lack of industry consultation to the fact that it is only protecting the 6,500 ferrochrome jobs in SA and then the problems with electricity supply severely inhibiting any expansion of ferrochrome smelting, it seems like an incredibly poorly thought out idea.

Of course SA, being the dominant supplier, wants a bigger slice of the pie. But I can't see SA remaining a competitive ferrochrome producer with interrupted power and prices going up 15% per year

And the likely impact of the tax to exporters is minimal... Tharisa will just add X% and pass this to the government. But will China retaliate given the tax is directly solely at them? Australian iron ore is is a good comparison. Along with Brazil, they control the seaborne market which almost all goes China so its sacred. Australia and China have been having disputes for some time so China is helpless regarding iron ore but they will retaliate on anything else, copper concentrate, barley, beef

And of course they have talked about this before, for many years, but nothing never happened so it seems that no one is overly worried

jjhbev I don't know what the numbers are. I had just provided some as an illustrative example. I'm pretty sure that the offtake is margin dilutive for Impala over time (similar to THS Sibanye third party chrome processing), but when prices are high its more attractive

Catsick thanks for sharing that Kell article. I hadn't seen an estimate of the cost before... I have been eagerly anticipating news of the impending Sedibelo IPO where we should get some useful info on success of the Kell process. I don't think we've ever been given much detail on the tech behind Tharisa's pilot plant, but my understanding is that it has been developed in house.

All interesting stuff!

jjhbev, while its easy to see the leakage of revenue one must also recognise the associated cost of downstream processing. Its a power intensive business, and SA power supply is incredibly unreliable. Prices are also always rising, this year they rise by 15% with further rises to come. So if THS loses $100m in revenue, after cost, capital, tax etc Implats receives much less than that.

Using some illustrative numbers, if its costs $150m to build (my rough guess) THS gains $100m in revenue per year but costs to operate the new facility are $75m (also a guess), pre tax profit is $25m. That gives a 6 year pre tax pay back period, or roughly 15% pre tax return. Which isn't bad, but puts the headline revenue loss more into perspective.

When you've got the risk of building complex new facility, unpredictable South African political meddling, the changing demand landscape for PGMs and Eskom price increases/load shedding it means that the equation for a large, long term capital investment becomes quite uncertain

Hey Visitor, good to hear from you too. I wasn't able to see the presentation but will have a look at the recording tomorrow

There seems to be a lot of projects as you say which justifies the low payout ratio. A decent yield and future growth pipeline really is the sweet spot.

Vulcan is huge in particular, the costs are extremely low and this will make a substantial impact on cash flow at any chrome price. 400kt at $180/t is $72m, almost all straight through to EBITDA

I don't recall ever hearing anything about Salene Manganese previously, would love to know what kind of cash flow it generates. I don't know anything about Manganese as a commodity... 600kt iron ore is a decent chunk of revenue though

Karo is a beast, I would like to understand what the financing strategy is. Its several billion dollars and massively ambitious given the uncertainty around internal combustion

I'm a little torn over the potential investment in smelting capacity. On the one hand at current prices the payback on the investment should be around 3-4 years but on the other hand SA has excess production capacity already. I've always thought It might make sense for the producers without smelting capacity (like SLP, Royal Bafokeng) to form a JV and reduce the capital outlay. At the least it could be a useful negotiating strategy with Implats to try and reduce costs

I know that Northam also has spare smelting capacity and is looking for more concentrate, I wonder if they would ever consider a combination with Tharisa... Its the perfect size for them. I'm actually surprised there hasn't been any consolidation in the SA PGM industry since Sibanye went on its spree

Hey all, I expect a dividend of 4.83p in H1. This is based on a H1 basket of $2,968 /6Eoz and chrome at $141/t. This is the end of result of countless hours of modelling SLP and THS earnings over the last 5 years. I'm sure Visitor could verify my numbers, we are normally pretty close, at least to the EBITDA level.

One thing I really like is that THS has an actual policy. So the above numbers are quoted assuming a 17.5% payout ratio which leaves a huge buffer. SLP management should take note of this, its an actual policy rather than just paying whatever they feel like and calling it a policy.

In the extremes, one of two things will happen to make the yield more normal: the basket will fall leading to lower earnings expectations, or the SP will rise. I expect a mixture of both to happen, as that yield and payout ratio combination is simply unsustainable.

Hi JonnyGee. Not sure where that info came from but the 7-10 years life relates to the tailings dumps which SLP has the rights to, not the Samancor mines. The mines themselves have pretty extended life, the seam is huge, but given its Samancor we don't have clarity on their future intentions. Therein lies the risk. The dumps run out and then SLP has to rely on current arisings. But Samancor is one of the largest suppliers of seaborne chrome and ferrochrome. There's no way they wont be mining chrome in 10 years.

The dumps make up a large portion of the material processed. I cant remember how much but its more than 50%. So after the dumps run out SLP could be looking at significantly reduced production. Then again, in 7 years time there might be an Echo 2 or3 meaning that those dumps can be economically processed again and again. I think in the most recent presentation they mentioned that they may have found a way to extend the dumps' life already. Given advances in tech and the impact on recovery the life of the dumps could indeed extend beyond the finite stated life

There wasn't much chrome news this month due to Chinese holidays but looks like chrome prices up another $10/t in Feb across the board

Fri, 26 Feb 2021 08:02:00 GMT
South African chrome ore 40-42% concentrate price is 170-175(bulk), 160-165(container).South African chrome ore 42-44% concentrate price is 215-220(bulk), 205-210(container). South African chrome .

Fri, 05 Feb 2021 03:16:00 GMT
www.ferroalloynet.com: South African chrome ore 40-42% concentrate price is 160-165(bulk), 150-155(container).South African chrome ore 42-44% concentrate price is 205-210(bulk), 195-200(container)...

Juicy margins at these prices, who cares about copper and nickel when you have rhodium and chrome

Outstanding week for the basket. BASF showing Rh up to $23,650/oz and iridium up $500 today to $4,750/oz. A 10%+ daily movement is very rare in commodities markets, I wonder if that is some kind of mistake, pure panic or speculative fever starting to kick in..
Pt also back up to $1,300/oz. Never seen Pt bounce back so quickly from a ST correction

Hi Visitor, I'm concerned because I don't understand the strategic rationale of the proposal. Is it intended to be an opportunistic, passive investment or something more operational?

This really alarmed me.. Tharisa bidding for some nickel refinery assets in Greece?! wtf

One of the former NEDs of Tharisa, Ioannis Drapaniotis, worked for Larco for 20 years but I cant find any other connection. I read that the business could require investment of over €100m just to get it up and running, in addition to the acquisition price.

I noticed in the presentation the aspiration to "become a global and diversified business" but ferronickel in Greece when nickel prices are at multi year highs seems like a recipe for disaster

https://www.miningweekly.com/article/greece-gets-six-non-binding-bids-for-nickel-smelting-plant-2021-02-02

Hey Shareminator , those were the days eh? I never got in SLP in single digits but pretty close.

The longer the chrome tax takes the less likely it will be to happen. It could just be a warning to China to remind them that SA controls the market and to stop underpricing or there wont be enough to go around. If it doesn't break some trade laws China will just retaliate. It just seems to be one of those fairly inept things an incompetent and corrupt government like SA has done many times in the past. All for 6,500 jobs! And I see power prices went up another 15% this week to reiterate the dire situation the industry is in. Baffling!