Member Info for ragnarlothbrok

What a strange interview...Phoevus was rambling and the interviewer was in an awful hurry

If you're willing to put the time in to crunch the numbers THS really does stand out. On a DCF and net tangible asset value it trades at a significant discount to peers and historically. Chrome is a bit of a dirty word right now, especially with the tax, but it has better exposure to PGMs than either SLP and JLP.

The Tharisa mine is extremely underrated... I don't know of any large open cast mines for either PGMs or chrome, let alone both. It's a relatively new mine and they have invested a lot of cash in redesigning/optimising the pit, modernising the fleet and pre stripping over the last couple of years. It has an open pit life of over 10 years, with an underground extension for many years after that. There is a lot of optionality to grow production and reduce costs in the short term. And the cash from Tharisa could be used as a platform to expand into other areas.

The Pouroulis family have a strong background in mining in South Africa. They sold the Eland platinum mine in 2007 to Xstrata for $1bn (now part of Northam) just before the platinum price crashed. They have had some notable failures (Petra diamonds) but seem to be pretty shrewd operators

JLP is now trading at a significant premium to THS and SLP (but has almost no tangible assets)....

Mcap
JLP: £242m
THS: £238m
SLP: £210m

Net Asset Value
JLP: £94m
THS: £320m
SLP: £140m

Net tangible asset value
JLP: $21m
THS: $319m
SLP: $140m

NTA/share
JLP: $0.01
THS: $1.19
SLP: $0.51

Exciting stuff, making new 4 year highs. Not very often we see that unloved commodity out in front

The update is comparing to previous expectations. It's one of those confusing statements from a company when they refer to management expectations but no one knows what those expectations are or how it compares to market expectations. In the September Finncap broker note the expectation was for :

Sales £22m, EBITDA -£2.8 and net cash of £5m

Now the 2020 view is more like

Sales £24m, EBITDA -£2.5m, net cash ???? (currently £8m)

Hi mogli, I referred to revenue contribution, not prill splits. I couldn't disagree with you more.

A 10% increase in the rhodium price makes a much larger contribution to revenue than a 10% increase in the platinum price. Rhodium would contribute an additional $3.7m versus $1.1m for Pt. Rh is more than 3x the revenue of Pt so Pt would need to increase by more than 30% to make the same contribution as a 10% increase in the Rh price. Below is the calculation using current prices.

REVENUE
Platinum: 11.1m
Palladium 10.5m
Rhodium: 36.6m

10% PRICE INCREASE
Platinum: 1.1m
Palladium 1.0m
Rhodium: 3.7m

Seems Pt is getting a huge push from recent events and hitting a sweet spot in the supply demand balance... Anglo's converter plant failure, the recent recovery in auto demand, investment demand and the recent speculation around the Hydrogen economy being supported by PGMs seem to have all combined to a generate perception of an impending platinum supply deficit.

A close at current levels, of above $1027/oz would be a 4 year high dating back to September 2016. SLP currently generates only 20% of gross 3E PGM revenue from Pt (slightly higher than Pd) so it will be hard for a higher Pt price to contribute to a meaningful increase in revenue given the huge weighting of rhodium (63%).

But its all in the name isn't it TBTT?

Hi DG, I’m not surprised to see the cash balance fall. H1 EBITDA was -0.8m and the full year loss is expected to be -2.4m, meaning a 1.6m loss for the second half, in line with a 1.2m cash burn.

Working capital may play a small part, but they run a fairly neutral working capital position. At least half the receivables balance relates to major retailers on terms of around 30 days, but will be offset by other customers paying up front, reflected in the cash balance in advance of revenue. I have no doubt that the cash balance will fall into December, its standard for retailers to invest across the busy period. But then we see the working capital unwind into cash in the new year

There was indeed a post from Starsailor the other day with an interview with Cheryl, where she clearly explains the marketing and brand strategy. Link below, well worth another listen now that we know she had a trading update in her back pocket

https://www.podomatic.com/podcasts/wearewaxon/episodes/2020-11-29T06_20_26-08_00

Hi Visitor, some huge forecasts indeed. I don't know what consensus is but I noticed in the presentation that EV/2021 EBITDA consensus is 1.6x. If you work backwards from a current Mcap of $310m, $30m net debt = EV of $340m then this gives you EBITDA of around $210m... This is in the ballpark of my model. This is almost double the highest previous EBITDA in 2017.

I expect revenue for 2021 of
- PGM $350m ($2,200/oz)
- Chrome $170m. ($120/t)

There is hugely diminishing exposure to movements in the chrome price and massively leveraged exposure to rhodium. 13.5koz at $16,000 is over $200m in gross rhodium revenue, 40% of total revenue. The current valuation is assuming a significant decline in the basket price, and specifically rhodium. The multiple has been squeezed and the discount rate increased to take into account the reliance on rhodium. But this means the longer the rhodium price stays where it is the more the pressure will build for an upwards revaluation

Adjusting for capex and everything else free cash flow should be in excess of $100m. And once you adjust for the unwind of the $30m excess working capital at year end it will be closer to $150m. One off windfall gain maybe but that's a huge cash balance by the end of the year

There's a recording available, Ill have listen

https://www.tharisa.com/ovr-annual-results.php

Thanks for sharing TBTT. Anything else of interest on the call? I had other calls and wasn't able to join

The idea of toll ferrochrome smelting makes the most sense if there is some capacity in Samancor and Glencore (as there is). I wonder if the government tried to squeeze some co operation out of them first. The model seems to work well with PGMs.

I think it is exactly the situation with Samancor shutting mines and smelters because of low ferrochrome prices that the government wants to avoid. But if Samancor needs to shut a couple of mines because they can't mine chrome economically then it makes sense for them to buy from other producers who can produce much more cheaply.

But that still leaves a huge amount of chrome ore without a home. The UG2 chrome producers could band together and JV a smelter, if they could get power security, but between them they probably have 3-4Mt of chrome which would require several very large smelters.

There's no escaping it that the majority of chrome ore produced will be exported to China

I went through the annual report last night and stumbled on this.. intention to construct a smelter and refining complex?!!! This is news to me

"The Group’s approach to research and development is founded on its core value of innovation. The Group strives to push through established boundaries and limitations within existing processing and product development, optimizing processes and challenging convention. The development of this downstream beneficiation of the Group’s PGMs is part of its philosophy of capturing value and margin down the supply chain and ultimately being in control of metal flows through direct sales. On fulfilment of the current PGM offtake obligation, the intention would be to construct a larger smelter and refining complex to refine the Group’s PGMs to final concentrate or refined metal, subject to final viability"

Good to see they have a five year plan which goes beyond just selling mattresses. Its so important for a brand to differentiate itself.

In other news I see competitors dropping like flies...Debenhams the next to fall this morning.

And mortgage approvals are at a record level. No doubt its a short term blip but its likely to persist into middle of next year and it comes just at the right time to support demand during a brand building strategy

https://tradingeconomics.com/united-kingdom/mortgage-approvals

I get consensus from this site. You may need to create an account but its free. But it seems very out of date. I know there are some broker notes out there but I've never seen one

https://www.marketscreener.com/quote/stock/THARISA-39435574/financials/

Last year they only announced with the AGM results in January

https://www.investegate.co.uk/tharisa-plc--ths-/rns/result-of-agm-and-dividend-conversion-rates/202001300700043208B/

It seems like we are all getting some pretty crazy numbers for 2021. Consensus EBITDA is $158m but its hardly had an update for months and I don't think it reflects the recent PGM price increases. We should see some new broker forecasts coming out shortly which should be very interesting

Morning TBTT, Great results as expected. A little disappointed they didn't hit a net cash position but look at that receivables amount.. should be unwinding pretty soon. Prospects are good, 2021 should be an even better year, nice increase in production, and to date the 2020 PGM basket is up over 50% on 2020. And maybe they will finally finish Vulcan

Sep/Oct minute volumes/user up 56% v pre pandemic, but 24% fall in rate/minute. Seems the market is very competitive and LOOP has had to lower its rates to bring in new customers.

The pipeline is huge.. but that is all jam tomorrow until they show some conversion statistics

I wonder how the recent sellers have gotten wind of this news. Another big disappointment from LOOP...Revenue expected to be not less than £50m, versus expectations of £55m, and EBITDA £15m (v £17m) That makes margins 1% lower as well. My expectations were way off, looks like the Covid bump really was just that. Can see this falling 20% on the open