Member Info for SteMiS

EPS of 9.8p - 10.6p for the 6 months. Despite a 50% rise in the share price since early March, it's still on a P/E of 3.6 - 3.9. Adjusting for net cash of 18.5p/share, that would be a P/E of 2.7 - 2.9.

Do people even look at the numbers? Q2 is normally a lower quarter for production numbers. Chrome production of 402.7kt is almost the same as 2023 - 404.8kt. However, in the first half of 2024 as a total, chrome production was significantly higher than the same period last year; 865.6kt v 787.9kt. Company has re-iterated guidance for full year of 1,700-1,800kt, which compares to 1,580kt last year. So NO drop in chrome production.

Clearly if they could spend $10m on share buybacks, they could have spent the extra $6m they saved from cutting the final dividend.

I understand what Tharisa have said about funding, but of they can't raise all the ring funded debt, or need to put in further capital to access it, then I don't think they'd rule out using some of their cash.

Just another thing to bear in mind is that we are looking at consolidated accounts. Whether they use their cash to fund the capex or raise debt in KMH, the net cash position of Tharisa will be the same. The only difference will be a note in the accounts to say (some of) the consolidated borrowing is non recourse to the holding company.

On the other hand they cut the final dividend by 2c, saving themselves $6m presumably due to funding of Karo. So not sure spending $10m on buying back their shares would be particularly consistent...

Market also going to be concerned about how they fund Bilboe. Don't really have any cash reserves and, with share price as it is, a fund raising seems out of the question. Turning out to be a bit of a white elephant for which CMCL saw significant share dilution. Big issues for management.

The Bod appear to have little or no confidence in Tharisa -if they did they would be buying shares on the open market

The board have substantial shareholdings - c. 10m in total I believe

Here's the last detailed update on Karos

https://www.tharisa.com/pdf/investors/presentation/2022/20221012-tharisa-kmh-marketing-presentation-october-2022-final.pdf

At the time the cash cost was US$1 096/PGM oz (exc royalties & tax). Forecast production 194k oz pa. Company has a 5 year tax holiday from operations. Average PGM basket price in quarter ended 31 December 2023 was $1,344

$457.8 m/ 96m oz = $4.8 / oz

I really don't understand why people are getting so obsessed with the valuation of KMH for the purpose of the rights issue. Because Tharisa own the majority of it, it doesn't much matter what valuation they use. Even if they'd used a valuation of just $100m on KMH (pretty much the value of the capex invested so far), the $65m they invested would have only got them 81.8%*. So that's an extra 6.8% of something valued at $100m i.e. $6.8m. Hardly material in the scheme of things.

* Value pre fund raising 70% x $100m = $70m

Vale post fund raising 81.8% x $165m = $135m

Difference $65m (the amount they invested)

At the moment it's pretty much all about chrome. Production in Q1 was pretty good and price looks stable so I'm not expecting any surprises. Personally I don't have a problem with Karo.

Valid points, Mike, but somewhat different to the disagreement over valuation of Karo Holdings that we have been discussing. However THS said " Funding solutions ring fenced to Karo Platinum are being pursued in line with the revised production timeline". So I guess we'll know more when those are concluded...

I don't know what you want Ilja to say. It's quite plain that the injection of $65m into Karo Holdings to increase their holding from 70 to 75% values Karo at $325m. I agree, if they had bought the 5% off Leto for $65m it would value Karo at $1.3bn...but they didn't, they put the money into Karo and that's a different calculation. I don't think it's Ilja's job to teach PI's how do valuation...lol.

Https://platinuminvestment.com/files/855484/WPIC_Platinum_Essentials_December_2023.pdf

Hxulcolrdoh

I think you're missing the point. Because THS own the majority of Karo Holdings (KH), it doesn't much matter what valuation they place on the shares.

Suppose KH was valued at $325m pre fund raise. THS owns 70% so it's stake is worth £227.5m. THS injects £65m for another 5% so KH is now worth $390m. THS now owns 75% so it's stake is worth $292.5m (amazingly $65m more; the amount it injected).

However let's suppose KH was only worth $125m pre fund raise. THS owns 70% so it's stake is worth £87.5m. THS injects £65m for 5% so KH is now worth $190m. THS now owns 75% so it's stake is worth $142.5m ($55m more; but only $10m less than it injected).

Hxulcolrdoh,

Whether you agree with Tharisa developing Karo is another matter. I suspect the board is taking a long term view than just satisfying the desires of private investors to crystallise a short term profit on their shares. Whether they will be proved right I suspect neither you nor I can know with any certainty. However, if you truly believe that PGM mines have no value, then there's plenty of shares out there that you could short if that's your fancy.

My point was actually about the subscription for shares which is essentially the funding of the capital expenditure that is being expended on Karo. It's simply misleading not to recognise that the majority of the money being put into Karo Holdings is simply going from one pocket of Tharisa to another. They effectively still 'own' 75% of the cash they put into Karo Holdings.

The gist of the argument, if I'm not mistaken, is that THS have paid $65m for 5% of the shares in Karo Holdings, valuing Karo Holdings at an incredible $1.3bn. Whilst this is true, what hasn't been taken account of is that THS didn't buy the shares off the minority holder (Leto settlement) but subscribed for new shares in Karo Holding. The result is that 75% of the $65m still effectively 'belongs' (in the sense of being part of their beneficial holding) to THS. Only 25% i.e. $16m of value has been provided to Leto to reduce their holding from 30% to 25% (so from their point of view, it's valued their holding in Karo Holdings at $320m). Indeed if THS do increase their holding to 80%, that $16m 'effectively' becomes $13m.

Now one can argue that the $16m should be lower, but there may be strategic (or indeed contractual) reasons why they might have agreed that figure (I don't know). However, in the scheme of things, the difference really isn't that material.

"I would say 2% increase in cost of debt would be £4m not £44m"

You are correct, of course, my error. But my point is really about lack of visibility.

Yes, a yield of 10%+ is certainly good value, if it's mainained, but the lack of visibility of what underpins cashflow has put me off buying. Company received £72m from it's portfolio (i.e it's subsidiaries) in 2022/3 and £47m in H1 2023/4. Not clear however if those are underpinned by positive cashflows in them (compared to say, running down cash balances) or from which subsidiaries they came. Total consolidated debt is now £440m, so a 2% increase in borrowing costs would be £88m. I like a yield as much as anyone but I prefer it from companies with low debt and strong cashflow...

"The lack of debt is a positive"

SEIT does have debt; £100m at holding company level and about £340m in the subsidiaries. If they prepared consolidated accounts the balance sheet would show debt of about £440m, which is 44% of NAV.

But how can anyone know if the dividend is safe? The company do not publish a consolidated profit or cashflow or even analyse from which subsidiaries the holding company receives it's cash. All we know is that the holding company withdrew £85m from it's subsidiaries last year (and £47m in the first half). No basis to know whether that's sustainable or not.