Member Info for ragnarlothbrok

Hey TBTT, I've been watching the Gamestop saga with tremendous interest this last week. Its been in terminal decline forever and only last year bottomed out at $6. Yesterday I was about to put a short on it but it went up about 70% and its now at $150.

I must say as a value investor who spends a lot of time researching and analysing to find undervalued companies like THS, I find it painful to watch companies like this tripling and quadrupling. I'm trying to identify what the trigger will be to bring it all down but nothing yet

https://edition.cnn.com/2021/01/26/investing/premarket-stocks-trading/index.html

I use the BASF/JMAT market PGM price to calculate revenue, and then apply the historic difference to realised revenue, which I attribute to beneficiation charges and penalties and also the spread, reflecting the fact that the market prices are ask for BASF customers, while Tharisa gets the bid. This discount has historically been around 15%. I use a discount of 17% to the market basket in my forecast. I'm not sure if there is a fixed element to the charge without quarterly revenue data

Chrome revenue always seems to be less than the quoted chrome price x production. The average discount for 2019/2020 was 14%. I'm not sure what this relates to exactly, freight and selling are included in costs, but I've applied this to my forecast to the market chrome 40-42% chrome price. I think it may have something to do with the other reported revenue (around $20m) but I can't be sure. I don't add the premium, tracking the higher value grades' prices is a step too far for me so it just washes out in the discount

Revenue looks to be around $600m currently. PGM is 160koz@$2500 +chrome 1.5M@$135 = ~$600m

MCap is a fraction of revenue! The market is pricing in a huge reduction in revenue from lower prices

Hi TBTT, I calculate a THS full basket using a chrome/PGM prill split. Here's my calc:

A Chrome Price (net) = $135/t
B Chrome Production = 1.5Mt
C PGM 6E Basket (net) = $2,500/oz
D PGM Production = 160koz
E Chrome PGM equivalent production = AxB/C = 81koz
F Total PGM equivalent production = D + E = 240koz
G Chrome prill split = E/F = 34%
H PGM Prill split = D/F = 66%

THS Basket = G x A + H x C = $1,705/oz

It's definitely at a record now, even compared to when chrome had that crazy spike a few years ago. Full year revenue is approximated by F x C = $600m

Hi Timid, Yes I read that ferrochrome prices have spiked to 3 year highs. That's good news for Samancor and Merafe (up around 30% over the last week). This has had a follow on impact on chrome ore prices, with chrome ore prices at $150-160/t which is a healthy level for Tharisa at which they should be making decent enough profits. A rise to $200/t would be really good news and one I'm keeping my eye on

Morning TBTT, must have been an urgent need somewhere which has now dissipated. Hopefully we some consolidation around the $20,000/oz mark

Iridium on the move again, $3,600/oz JMAT $4,000/oz BASF. Up over a third this month

Can’t blame anyone for selling after a 50% increase in the SP in one month. And a lot of very large sells are appearing so it’s a good opportunity for rotation from larger legacy institutions, who have been patiently waiting for some liquidity to offload some shares, to new holders who have noticed the fundamental price outlook and Tharisa’s production growth. Will we continue to consolidate as the market watches to see if the current basket is sustainable? In the meantime, I think cash flow is accruing at about $5m per week…

YTD PGM basket up 19% from the December average of $2,650 to $3,160 / 6EPGM oz. Chrome up 23% from $123/t to $150/t, the highest it’s been since I started tracking in the middle of last year. Healthy!

Hi Timid

Its a toss up between SLP and THS. Here are some stats (assuming current price) comparing SLP and THS

Measure, SLP, THS
Annual Rh Production 9kozpa, 15kozpa
Revenue Rh (Gross, annualised), $200m, $320m
Revenue Rh (Net, annualised), $150m, $270m
Rh % of gross Revenue, 66%, 42%
MCap, £300m, £350m
EV, £325m, £240m

On pure exposure you would say SLP because it is not diluted by chrome revenue. But on value its Tharisa, even after deducting SLPs cash pile. Its has almost double the net revenue. Of course larger companies such as Northam, Sibanye, Amplats and Implats also have 5-10% rhodium prill splits if you prefer larger more liquid companies, but they are more expensive

Its not really possible to track chrome prices without paying an expensive subscription for something like Metal Bulletin. But you can see the price movements on this site

http://www.asianmetal.com/ChromeOrePrice/ChromeOre.html.

Its showing a 17% increase over the last 30 days

You can also get intermittent updates from here:
https://www.ferroalloynet.com/chromeore/analysis.html

and here
https://www.metalbulletin.com/non-ferrous/ores-and-alloys/bulk-ores-and-alloys/chrome.html

It will give you enough of an idea to see whats happening in the market

The average rhodium price for Q1 was $14,600/oz. The average price for Q2 so far is $21,600/oz

An additional $7,000/oz on quarterly Rh production of 3,700oz is $22m in gross revenue, or say $17m in net revenue per quarter... That's an additional $68m in EBITDA/pre tax free cash flow per annum from rhodium price rises over the last few weeks

The valuation implies this will not continue, but if THS can just get one or two quarters of this cash flow in, that changes the game. My forecasts look so crazy I can no longer share them, they're just too outrageous :-O

Interesting to see them unwind, I remember when they were building a position around 17p. If they are getting out you can add them to the list of funds that have exited over the years, Marlbourough, Majedie, M&G recovery, JP Morgan, some forced sellers and big losers as investors abandoned them in droves after the Woodford collapse

Narrowest I've ever seen, £50k at 129.45/130. Actually like a normal stock! There was a time when you couldn't pick up 2,500 at a 7% spread

What does it all mean?

Hi gotreal, Here's a link to the JLP financial statements. If you can show me where the tangible assets are hidden I would be much obliged

https://jubileemetalsgroup.com/wp-content/uploads/2020/11/Jubilee-AR2020.pdf

I must apologise my SLP numbers incorrectly included the exploration assets capitalised expenditure. My bad

Hi gotreal and TBTT,

I’ll chime in here. Why not eh? One reason why I wouldn’t invest in Jubilee is that it doesn’t have any tangible assets. Here are some asset stats from the most recent reporting date

Company name, Net Assets, Net Tangible Assets, Price/NTA per share
JLP, $94m, $21m, 17.6x
SLP, $140m, $140m, 3.0x
THS, $321m, $319m, 1.5x

Out of a total of $130m in total assets there is only $20m of actual plant and equipment. Mineral companies are notorious for being capital intensive, how did Jubilee get so efficient?

When you compare the price per net tangible asset per share of each company THS is 1.5x, SLP 3.0x and Jubilee 17.6x. For every dollar you’re only getting 6c of actual assets, compared to 66c for THS. That’s pretty unusual in the mining world

I personally choose to not invest in any Zambian operations (or Tanzanian for that matter). Vedanta, First Quantum and Glencore have all had disputes with the government over the last 2 years with the government threatening to revoke mining licenses. Not really for me, South Africa is risky enough

I have a habit of posting without reading previous messages. TBTT has got it right as usual

SLP only report 3E, while THS reports 6E. They are mining the same reef (Samancor, Tharisa and Sibanye are neighbours) so it stands that SLP also produces a similar amount of iridium

Iridium is 4% of total production. So for 160koz this would be 6,400ozpa. At a price of $3,400/oz this gives around $22m in gross revenue. Quite small, and we hear reports that the refining cost of iridium is high which probably reflects the fact that it takes the longest of all the PGM basket. So net revenue may only be around 60% of that. But if we see a rhodium style rise in iridium (ie multiples) then it could get really interesting

Checking the rhodium price each day is my crack addiction... JMAT $21,900/oz and BASF $22,150/oz

There has been recent news that the struggle of auto companies to find semi conductors is leading to some manufacturing reductions by brands such as Audi, but this doesn't seem to be impacting rhodium demand. Its starting to feel like some panic buying...it would be healthy to stop and have a rest to consolidate instead of looking like BTC or Tesla but hey ho

Right on the money TBTT.. maybe more to come

18-Jan-21 16:43:30 127.74 300,000 Sell* 127.00 129.00 383.22k O

Hi 799boy

I am also pretty maxed out but at one point I was holding 45% SLP. It was sometimes stressful but being very overweight in SLP for the last 4 years has driven some tremendous returns. My strategy is to gradually build concentrated positions in companies with under rated free cash potential over a number of years. I think Tharisa will catch up to SLP and I have been taking advantage of the SLP liquidity to unwind some of my position and shift into Tharisa. I'll continue to accumulate Tharisa as the cash flow is derisked, primarily by prices being maintained and production targets being met. The under performance and potential recovery in the chrome market is also something I'm keeping my eye on when you consider the recent movements in the other bulks and the impending global recovery. Prices are up 20% in the last month to over $150/t. At their peak chrome almost hit $400/t.

One huge difference between SLP/THS and JLP is the quality of management. Colin Bird is a bull market warrior, when times are good his hot air fuels what investors want to hear. Good for a dabble maybe but not the type of company I would build an overweight multi year position. That announcement by JLP this week is case in point. The directors made it seem like a favour to shareholders that they sold their shares to bring in institutional investors. I mean how does that help minority shareholders really? Compare that to SLP buying back Terry's shares when he retired at a fair price at the time which was the right thing to do for everyone. I can't really see SLP or THS going for that kind of bluff and for that reason I pass on JLP

Hey TBTT, I think there's a seller too, or clearing the overhang from that spike in trades a week or 2 ago

The more time that passes the more FOMO builds about that $50m+ free cash flow per QUARTER. I expect THS to pop like SLP any moment now