Member Info for ragnarlothbrok

China’s UG2, ferro-chrome markets supported by positive near-term outlook
Market activity in China’s UG2 chrome ore and ferro-chrome markets slowed down ahead of the country’s Lunar New Year holiday, but the confidence in the near-term outlook continued to support the markets in the week to Tuesday February 2. Fastmarkets’ chrome ore South Africa UG2 concentrates index, basis 42%, cif China settled at $169 per tonne on Tuesday, up by $4 per tonne (2.4%) from $165 per tonne in the preceding week. Both buy and sell sides of the UG2 market reported few activities due to China approaching its Lunar New Year holiday (February 11-17).
“The market has quietened down prior to the Chinese New Year. No doubt producers want to push up prices but there are no buyers or liquidity,” a trader said.
But some smelters showed increasing purchasing appetite of high-grade ore following the fat profit margins that emerged from current ferro-chrome prices.

For 4 months the SP sat between 70 and 80p last year (July-Nov) despite the PGM basket climbing by $1,000/oz (July-December) then all over a sudden the SP was up 75% in 1.5 months. It got a bit ahead of itself maybe and was a signal for some profit taking. But the same thing is happening now...

...if you plot the THS share price against the basket you can see that the Feb PGM basket is up $700/oz over the December basket yet the SP started at 120p where it is now. And chrome, which I'm pretty sure very few people follow, is up 25% so far this year. This price increase has meant my expectation for H1 EBITDA has increased from $120m to $160m. The basket is at an unprecedented record high and production is also at a record yet the SP is still below the highest point of 160p.

There's a pretty good chance we will range trade around 120p until the Q2 production report in April but if prices stay where they are the net cash position will certainly draw some attention. I think we have a pretty good chance of being up 50% by mid year

Hey fenzz

Tharisa has no free float. The Family owns 40%, then Rance 15% and Fujian 10%. Thats 65% just from 3 holders. Then another 20% are owned by a bunch of funds like Fidelity, Blackrock etc. I'm taking this info from late 2019 but I haven't seen many changes since then. Very few loose shares and no liquidity. SLP used to be like this but most of the institutions have sold down and the shares are in the hands of less sticky private shareholders allowing greater churn. Those shares being released to us PIs allowed price discovery and the SP to go up.

And like you said, SLP has been pumped by ST and don't forget it has the highest rating on Stockopedia as well. And Liberum is putting out these bullish notes on SLP quite regularly which are available to the public on research tree. The latest one does a good coverage of rhodium and the SA mining industry but doesn’t even mention THS once!

THS has no research available to the public (that I've seen) despite being covered by a number of brokers. So as far as many are aware, its just a chrome producer ;-)

That's likely to be very old info. Liberum provides the only coverage of SLP. In the March note they had a dividend of 13c but in the note from a couple of days ago they are expecting a 4c special dividend and a 4c final dividend. I would expect this is the maximum to expect and would cost $11m each, probably paid in Q421 and then Q221. $22m will barely even touch the sides of the cash pile and at this rate cash will be $150m by December. They are going for large increase in the dividend starting from a low base... 1, 2 and then 4c certainly captures the attention

There was a time several years ago when the directors determined the level of cash required to be something like $25m and anything in excess of that to be paid out as a dividend. They have come up with various excuses over the years about why they need the cash and can't pay out a monstrous dividend. For a long time it was Echo (which is now complete), then it was because they worried the PGM price would tank and there would be a large price adjustment they would be liable for. So now they are keeping the cash for 'funding of capital expansion and process optimisation projects'. They spend < $10m a year on capex and the expansion projects aren't going to need capital until 2022 (earliest).

This behaviour has sometimes led me to wonder if the cash actually exists and there would be a Patisserie Valerie type scandal. Or that we would wake up one day to an RNS saying that the cash has mysteriously disappeared from the bank account like what happened to Ferrexpo a few years ago.

What they will pay is likely to be at a significant discount to what they can afford and we can expect. it always has been. You should moderate your expectations

I concur with Visitor, I use 10-15% for my forecasting. This is includes the refiner cost and also the spread, given I use quoted ask from the refiner to calculate market prices, rather than the bid which we get. This does change over time so I assume that there is % of market price element as well as fixed cost per tonne. The cost per 6E oz was $151 2019, and $230 in 2020 by my calcs. Ive upped this to $333 in 2021 which is 11%

Its lower than SLP I think because the SLP concentrate is more difficult to refine given the high proportion of heavily oxidised material they are processing from the dumps, while THS predominantly comes from ROM ore.

Chrome is also around 15%. I don't know why there is a discount. I use the bulk price which is around $10/tonne higher than container which may partly explain it. And I use the midpoint of the 40-42%, while I think we may be closer to 40%. I ignore specialty grade premiums for simplicity

My revenue calculation is:
PGM = 160koz x 2,900 * .89 = $413m
Chrome = 1.5Mt x 145 * .85 = $179m
Trading/Other = $17m

Total revenue a little over $600m

Hey Visitor, I use spread bets for most overseas companies now (except US which is free and easy). One difference to Impala is metal exposure, THS is very highly leveraged to rhodium and chrome while Implats is much more evenly distributed. The potential closure of underground mines is becoming less a concern for me, the SA govt has shown it will push through to protect employment and the economy. But I would much prefer a mechanised open pit operation to U/G. By the time Tharisa hits underground mining I have no doubt it will be mostly mechanised.

My valuation of THS is around 2x that of SLP and I expect that gap to widen to 2.5x as THS builds its cash balance more quickly than SLP and approaches 200kozpa. Hopefully THS does something with Karo quicker than SLP does with its projects. I would go so far as to say SLP has been inept regarding its project development, at least on the communication level if nothing else.

I would have thought SA would be eager to get these license issues resolved to create employment and output. And SLP eager to develop. a palladium and nickel rich deposit. I wish they would just demerge the northem limb assets and allow a more energised and focused management team to develop them while the focus on sweating the SDOs

Hey Visitor, Yes back in! Bought as many as I could under £16, and then a few more this morning when I noticed it only opened up 3 or 4%. Gold stocks are never a long term hold for me but POLY under £16 with gold over $1,850/oz and the silver price doing great things I couldn't resist. I can see this back at 1,850p soon

Regarding value, the SA sector is just very unloved and always has been.. check out Implats for example. Its on a forward EV/EBITDA multiple of around 2x, which isn't that much higher than Tharisa. SA companies trade at a deep discount to the rest of the world, even Russia!

Hi Visitor, BEE owns 26% in the mining/processing company (Tharisa Minerals). As the Tharisa holding company owns over 50% the results of this company will be consolidated, meaning all financial statements are assuming 100%, with the 26% coming out anywhere that refers to outside equity interests. The 26% reduction to us as shareholders will come when its time for Tharisa Minerals to pay a dividend to its shareholders.

Tharisa Minerals is only a part of the business. You can see what the profits of Tharisa Minerals were in Note 17 on page 112 of the financial statements and in theory work out what the profit is for the non BEE owned bit of the business. I'm having trouble reconciling the outside interest here to the income statement on page 55 though

https://www.tharisa.com/pdf/investors/financial-results/2020/annual/afs.pdf

Hey TBTT, 40-42% chrome price on Friday was $160 bulk and $150 container

2020 silver production by company:
POLY 18.8moz
HOC 9.8moz
FRES 53moz

For pure silver exposure nothing beats Fresnillo but FRES is expensive and POLY is CHEAP. Not that our Reddit friends would care about that

You're not going to see any silver from Prognoz before 2023. Final investment decision due by the end of this year, construction will only commence in 2022

I can't really see investors liquidating gold ETF holdings in the short term. The gold price will be very sensitive to US bond prices, the struggle between expectations for inflation and interest rates is real! How much inflation will the US government really tolerate? They have a huge incentive to keep rates as low as possible for as long as possible so I'm going to say ALOT

The Hereaus reports are quality. I'll save this for some time bed time reading. I see Ru and Ir get their own sections. They say that currently there is only 15koz in the rhodium ETF, down from 24koz. That's not going to move the market!

Also should acknowledge that market wise ferrochrome prices have absolutely rocketed the last couple of weeks. If they stay at these levels Samancor will be forced to restart mothballed production or risk losing substantial market share. This is good for SLP 2022 production guidance. They have proven they can produce at over 80kozpa under the right conditions.

More disappointment on the projects. They still are yet to submit the Volspruit license applications and we'll be lucky to see a technical report this year

After reviewing a good 15-20 of these over the years they are good results but the market expects good results and these are a pretty much in line in my veiw. The SP has run from 80p to over 100p just this month. In the face of rising volatility that's a good performance. I don't expect much reaction given SLP are producing comprehensive reports regularly, enough for anyone to reasonably predict the next quarters results.

My observations from this quarter:

- Can't think of many companies with EBITDA margin of 67% and almost no capex. Its lower than what I expected (I was hoping for 74%). Revenue was spot on but I was well off on costs
- However the implied tax rate was exceptionally low this quarter which means that at the NPAT and EPS level I'm pretty close
- Unit costs have not recovered from pre covid levels and are unusually high given the production levels. This is likely to reflect the huge amount of material they have moved this quarter. Plant feed was nearly 30kt higher than the previous record (Q220) but production 1koz lower
- They did very well to get that many ounces out in the quarter which is seasonally the lowest. That bodes well for full year guidance. They must be scraping the tailings and lower grade ROM particular hard

A couple of unusual typos in this edition:
- They are no longer reporting revenue from by products so revenue (4E) is actually now Revenue (6E) but is mislabelled.
- Note 1 also hasn't been updated. They really should decide on 4E or 6E and apply that consistently. Revenue is now 6E but prices 4E

Good to see Rh consolidating after a little freefalling there. Ruthenium up 15% this month. I got excited until I realised that Ru contributes only $2m revenue per quarter

Hey raxfactor, that is left field!! I also think we are heading into food shortages just purely for the reason of the more volatile weather patterns. Its true we demonise CO2 via the whole decarbonisation trend but we never hear anything about methane, which traps heat much more effectively than CO2 and for which we currently have no plan to reduce emissions.

TBTT... phew glad I didn't take the Gamestop short, fark me its opened up 116% up today. There will be a time to short this and make big money, but maybe not just yet. IG has stopped offering options and selling to open, with such a crowded trade the leg down is going to be meteoric. The other two basket case stocks I'm watching are Kodak and Blackberry. Both up 20% in the first ten minutes. IG looks to be struggling with volumes in general. Looks like I will knock off early today

Hey Visitor, good to hear from you. I really like POLY. Its got some quality assets and dependable production, not like FRES or HOC. Operationally its more comparable to North American companies like Kinross or Kirkland. I'm not in any gold stocks right now (except PAF) but I always keep an eye on them for a trade. Should be a good long when the fear lets up. Gold down 0.75% and POLY down 4% (?) but still making tonnes of cash

Sorry to all for clogging up the board with off plot posts...

Rambler has a good resource, infrastructure and is cheap at £30m. That's pretty much end of story for me. I've run some pretty detailed numbers and have put in a sizeable position and happy to buy more as there is a sign that the plan (which could very well be sky pie) is coming to fruition. Yesterdays result was slightly worse than I expected but its irrelevant now. I don't know how anyone can see any good news from that announcement but the most positive thing is that they respected their shareholders and got something out in a decent timeframe.

Some wind has definitely been knocked out of the Covid recovery plays the last 2 weeks. Doubts over the vaccine and delays to the programs mean we may miss another chunk of the important summer period. I have positions in a few boring, bombed out companies which stand a good chance of recovery with 50%+ SP gains over the next 6-9 months. I've been copping a beating on most of those these last few weeks. Industrial commodities seem pretty safe but its hard to split the sentiment from the fundamentals for some (eg nickel). I like the agricultural commodities, I hold some soybeans (random, but I stumbled across it in some research) and they're doing pretty well.

Tharisa is my largest holding. On most valuations metrics it trades at a substantial discount to the SA sector. Its the smallest and least liquid so it moves last. You might be right about no action until half year results in May

I've been in and out of FXPO many times, I did well buying in at around 60p some years ago as the SP recovered from their cash suddenly disappearing from their bank account overnight. But my gains have been steadily eroded by mostly unsuccessful attempts to trade it. It is generating huge amounts of cash and is debt free but historically trades at a tremendous discount to everything, reflecting its shaky governance, the risk of civil war, its patchy history etc. That Swiss withholding tax on the dividend bothers me as well. Its not a share I sleep well at night holding but the complex is a tremendous, unique asset

The iron ore price has lost its mojo recently, by the sound of it the Chinese have been steadily accumulating steel and there is a lot of it lying around so iron ore and FXPO price are looking a little bit toppy to me. I actually put a small short (tight stop) recently on Fortescue and am starting to get a little bearish on the iron ore market

Things degenerated a little on the Rambler board yesterday I noticed...