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Good post TBTT - I agree that the Seeking Alpha post is way off the mark. I think it reflects an absolute worst case scenario for PGM's. Share Prophets tipped THS on Friday - not that I like them but it shows that THS are starting to appear on the radar.
I thought I would run some numbers on the worst case scenario once Vulcan is finalised and the run rate is 160k Oz and 2MT of Cr Conc. I don't know how much the unit costs will reduce so I have been very conservative.
I have used the basket price numbers from Oct '19 to Mar '20 which equated at $1612/Oz and Chrome was $138/T. The average PGM prices excluding Gold were:
Pt = $911.
Pd = $2065.
Rh = $8015.
Ir = $1,488.
Ru = $250.
I can't really think of an event that could take us back to those prices.
THS EPS for the year would be circa 24p. A P/E of 6 = 144p.
Where the SP sits today is factoring is Armageddon for PGM and Chrome over the next few years. All sensible commentaries paint the opposite picture.
Now imagine where we will be if Armageddon doesn't happen !
Another factor to boost the SP as well is that the AIM top 100 list is reconfigured this month.
THS was not previously on it but should be this time which will garner interest from the funds that hold smaller businesses.
£206m is the current entry point, although I have no idea if enough other AIM businesses have grown to such an extent to keep THS off the list.
Agree Ragnor - there is a serious disconnect in a number of mining companies against the short and long term outlooks for the metals.
I think the Fed will leave it as long as they can before hitting the dampeners and for me that is next year and also at a much slower rate than the market is expecting. Inflation will shoot up in the next 6 months but then decline quite rapidly. At about the same time though I think Governments will start to realise that that the miners cannot mine fast enough to hit the Green targets set for 2030 which will significantly support prices.
PGM's sit on the USA's top 30 critical minerals list so stockpiling is inevitable. And with the control China has on the rare earths market we may see increased PGM loadings as a necessary stop gap.
Either way there are so many more upsides to a company like THS than there are downsides.
Investing in shares that we are expecting to re-rate can be very frustrating. The SP of THS whilst nowhere near what we would expect is actually not doing too bad . We often compare it to SLP which over the last 3 months is up 9% and THS is up 10%. 10% in a quarter is not bad. of course we are hoping for more.
Buys are generally very strong but so has been the selling of institutional holders over the last few months. Volume needs to increase now that the large sellers are gone or almost gone.
We are now trading on the lowest P/E ratio since 2015. Since 2017 the yearly highs have ranged from 7.9 to 27.2. But the P/E ratio is only one valuation, another used for miners is EV/EBITDA. EV/EBITDA has been the worst performance indicator since the beginning of the year against other well used valuation metrics.
THS is still recorded against it's 2020 figures - unfortunately it still does not show up on many key screens used to pick shares - this will change after the interims if they are where we hope they will be, but again it will take time.
THS is covered by 5 brokers - one has it as a hold, 2 as a buy and 2 as a strong buy. They must be reasonably confident on the PGM prices including Rhodium - but a word of warning - if you think that these brokers know what is going to happen to Rhodium - think again. There are people on this board that have many times the knowledge of the PGM market than most brokers of small companies have.
Miners still don't fit into the ESG criteria, so miners are rebranding. The Metals and Mining sector is changing. Mining companies are re-branding as the champions of the ESG revolution, they are now precious metals companies or material solutions companies - again branding takes time.
Also note that the market is not great at the moment - it can't seem to figure out if inflation is good or bad. That point makes me smile. Shock horror that inflation is rising after the world economy was pretty much shutdown this time last year. Inflation is good for commodity prices, it's just bad if you have large debts. THS have net cash.
My point is that THS is unbelievable value that the interims will show in black and white. THE PGM prices are strong - I can't seem to go a day without reading about the increased deficits - Platinum was yesterdays with the deficits almost tripling from where analysts thought they would be a few months ago.
We have an interesting few weeks ahead when the interims show what we already know.
Looks like that page has been moved but the old one has not been deleted - link to the new one.
https://www.tharisa.com/ovr-sens.php
I have re-hashed my model taking into account THS's actual revenue % realised over the last few years.
It looks like the below:
PGM Rev: $163m.
Chrome Rev: $93m.
Agency Rev: $15m.
Fair Value Adjustment: $20m.
Total Rev: $292m.
Cost of Sales: $151m.
Gross Profit: $141m.
Admin: $17m.
Other costs: $6m.
PBT: $118m.
PAT: $85m.
Profit Attributable to THS: $67m.
EPS: 17.7p
Potential upside are that my FV adjustment is slightly low and I have put Forex in as "0" whereas we could see a gain.
Potential risks are that I have not increased my shipping costs to a sufficiently high level and I have not adjusted the Royalty % since I don't know if it will go higher based upon the higher revenues and profits.
All in all between us I think we are predicting an EPS of somewhere between 17p and 23p. Anything in that range is an excellent 6 monthly result.
Bear in mind that the start to this quarter puts us on a better run rate than the first 6 months.
These were annoying me so I have gone through the last 3 years accounts to see if I can work it out based upon the accounts and note 22 (2020 accounts).
I have managed to get it every year to within $1m. Unfortunately it does not help us !!
Mike was very much on track with the increase in price and the 4 months delay for payment. The difference though (and Note 22 confirms this) is that the adjustment is not based upon the previous quarters average price. All of the adjustments use the basket price in the table in Note 22 as the reference point.
The rough (simplified) calculation is then:
(Average basket price for the period - the basket price used in the table in Note 22) x 3.
3 being the 4 month period that Mike refers to for time delays.
It's very accurate - unfortunately we don't know the numbers in Note 22 until the year end. We can probably go back through THS's presentations to try to find their pricing predictions for this year, failing that I will be able to calculate it from the half year results.
If I have missed something please shout up.
Hi Ragnor,
Your EBITDA is very similar to my $126m, yours is $137m.
Your NPAT is almost the same $87m v $88m.
I have then taken off the profit attributable to THS i.e. 78.8% to bring it down to $68m.
I still have a few adjustments to make hence my number will be slightly lower excluding Fair Value.
Thanks Mike,
We are pretty close on revenues - exactly the same on PGM less fair value.
My total revenue is $286m and yours is is $283m, so we are close on the easy number.
I agree on the cost increases - I have allowed for a Q1 Cost of Sales increase of $14m and other costs of $4m. I am guessing by your numbers that you have allowed for more than this particularly on your CoS number.
Fair Value - I'm still in the dark on this as to what it will be.
SLP's numbers through me recently on the scale of the adjustment.
SLP's difference between their 4E from Q3 to Q2 after smelting/penalties and contractual payments was $852 which would explain their $15m FV adjustment, but when I look at another period where the difference was $495 the FV adjustment was only $4m.
From the THS accounts and our conversations we have had I have the FV as the difference in basket Oz's due to the final assays against the change in basket price within that time frame (simplistic but good enough for basic calcs). I'm not sure that this is explaining the numbers when comparing to SLP.
I can see the FV number being anywhere from $25m to $75m, so I am hoping that your number is correct at which point I can hopefully just ask for your number in the future !!
H1's - I have an NP to THS at circa $65m excluding FOREX and fair value adjustments.
Thanks Larus - i hope that is the case.
Certainly looks positive - everything is getting hammered today and yet THS is holding steady - a very good sign.
It's amazing how well the price is holding up against FIL's large sustained selling.
One thing is for sure, when it does end, boy are we off.
Or even this year Ragnor - a steady increase and up 18% already this year.
Agree TopTiger,
SLP is having another run after good results and the ST article this week. He has already mentioned THS so it is on his radar and after the end of May results will definitely be more on his radar.
Still have the Fidelity sell to contend with but they have been selling since late last year and the SP has done pretty well since then even with that.
By September I hope to be looking at the 150's firmly in the rear view mirror.
Thanks Visitor.
Just checked back through my notes - shouldn't go from memory really !
This was the link to the announcement I had:
https://www.reuters.com/article/us-zimbabwe-mining-idUSKBN1KE2IV
The $4.2Bn could indeed be referring to the value.
However, with a mine, refinery, power station etc to be built then I would not be surprised at over $1.5Bn of costs.
I would assume that there is a refinery close by taking into account some of the other PGM mines have been established for a number of years so maybe a smaller open pit operation without a refinery to begin with would reduce the initial costs quite significantly.
All speculation of course but worth some limited research.
Thanks for posting TBTT - confirms what we already know - progress continues on track and on budget.
Salene Chrome - I think we are going to see some rather large upgrades coming through in the coming months. THS would not be interested in the distraction of Salene for 80,000 T of Cr Conc per year. The original estimates were in the order of 100,000T per month for a $90m investment spread over six parts. This is the sort of money that THS can now fund from their own cashflow.
Equally I agree with the posts below that it is going to be small to begin with to get the company used to operating in Zimbabwe. Back in 2018 Phoevos met with the Zimbabwe President so the familiy connections are excellent !! it will also give THS a chance to experiment with other metals.
This could also be the pre-cursor to Karo moving onto the next stage. If I remember correctly the next phase of the exploration is due by Aug / Sept this year. Personally i would prefer Karo to be sold to a major or at least for a major to take the lions share. Potentially it could list as a separate company. The upside is huge at 1.2M Oz per year but so is the CAPEX at over $4Bn, which most likely can be spread over various development stages but it's still a big number.
Hi TBTT,
Those numbers come from THS's own presentation and the source is BMO, BASF.
The numbers tend to be different across all of the main research groups, catalyst manufacturers and miners. Implats for example shows a supply deficit in 2025 of 200,000 Oz of Rh.
The Auctus report doesn't break out Rh but forecasts an overall PGM deficit of 5M Oz by 2027.
Whichever way you look it points to large deficits to support prices.
There is that Expart, but also SLP are ahead of the curve on cash so they win on a cash adjusted P/E and so many other ratios because of that.
It depends what you look for, some like the certainty that SLP have - and that cash is a major advantage.
THS are now generating lot's of cash but so far it's not reported and I guess until it's reported it's not real.
I always think with SLP and THS it's not a question of which one to own. They are both excellent so own both.
Quite correct Barnaberible, it is not comparing Apples with Apples on 4E & 6E.
SLP basket price though is a 4E whereas THS is a 6E.
I guess it only matters if comparing the two companies against each other, which I don't really do. I look at them both from an EPS perspective and with the different timing of results see if what one reports might feed into the others next reporting - if that makes sense.
I use a 6E basket price for both in my models - at the end of the day the real interest is the total revenue.
Indeed TBTT - they have a note about it caused by Oxidation in the feed source.
Their Chrome supply was a bit all over the place due to post Xmas start-ups resulting in them using their lower grade tails to supplement.
I really like SLP but having control of your own feed is such an advantage for THS.