The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Yep it has been quality update and presentation was actually significantly updated since last one issued on website. They also incorporated most of my questions I submitted couple days ago into the presentation, albeit perhaps coincidence and they would have covered it anyway:
1) Open Pit LoM extended by 1yr to 2034/35 (14yrs left). We're already so undervalued so what's another year or here before THS moves to 40yr+ underground mining, but this is still great news.
2) Confirmation Vulcan Fine Chrome Project on target for completion by Sept 2021, meaning for next FY starting Oct-2021, 2MT p.a.
3) Salene Manganese + Iron is a producing cash generative asset which THS has option to acquire 70%. Currently producing 600kt Manganese & 600kt Iron Ore, but 2nd phase would double production of each.
4) PGM Smelting & Refining - THS appeared very confident on expanding the 1MW PGM pilot Smelter to cover smelting and refining of 200k PGMs annual production from FY 2023 onwards (Oct-2022), meaning they will receive full value of PGMs spot prices and claw back that 15% margin they hand over to refiners.
5) Karo Resources PGM Asset (26.8% THS owned, option to acquire further majority share) - 2 rounds of exploration have confirmed Zimplats data (as reminder Zimplats data was 96 Moz 4E resource (platinum, palladium, rhodium and gold) grading at 3.2g/t ), which will be incorporated into Pre-Feasibility Study to be released later in year.
Very comprehensive Q&A so I only touch on few of the points.
Just as reminder for all those with some spare time tomorrow, at 3pm GMT THS CEO Phoevos Pouroulis will be hosting a live interactive presentation via the Investor Meet platform:
https://www.investormeetcompany.com/tharisa-plc/register-investor
The last one I feel was very constructive and InvestorMeet allows you to submit questions beforehand or during the presentation. I've already submitted mine. I think presentation will most likely not be different to the latest one on website:
https://www.tharisa.com/ovr-presentations.php
I note THS Twitter says 1pm GMT, 3pm CAT, but the original RNS stated 3pm GMT and when I login to InvestorMeet it also states 3pm UK time, so i'm assuming 3pm GMT is correct.
A lot us here posting on THS have also been in SLP or still are. SLP was one of those life changing shares for me getting in 1st at 7-8p, but to spot value "for the here and now", it would be incorrect to solely look at the past to predict the future. SLP has now stagnated from a growth perspective - post Project Echo there is now no real way they can expand past the circa 70-75k oz of 4E PGMs (Volspruit paladium asset could be a good one, but don't believe SLP have the expertise). They can make lots of free cash at that level and pay dividends (although seem to think of any possible excuse not to!), but it's not clear how they can expand further, unless Samancor who they rely on decide to open up other sites, but even then they might not use SLP for new sites - it's slightly concerning the main II AAC (IMR) of SLP has been partially selling down, which from my last research was still owned by the 3 Kazakh oligarch owners of Samancor. But who knows who owns what when it comes to them.
THS on the other hand went through a huge restructure of moving from a contractor operated to owner operated model, with brand spanking new yellow fleet. This is and will to start to pay massive dividends (pun intended), on top of some very substantial growth prospects that SLP simply do not have:
THS mine life open pit to 2033, 40yrs underground thereafter v SLP 8yrs, possibly 10yrs
THS PGM production 160K 6E PGMS versus SLP 70-75k 4E PGMs (100k 6E PGMs)
THS Chrome 1.5MT, expanding to 2MT annualized by Oct 2021 and thereafter 200k 6E PGMs in 2022
THS has further expansion plans in SA (PGM Smelting + Refining) and Zimbabwe (Karo Resources 96 Moz 4E resource (platinum, palladium, rhodium and gold) grading at 3.2g/t)
Yes SLP does have lower AISC per oz and Capex, however through THS’ larger size and quantities, they are now making far more free cashflow than SLP. Last calendar Q4 2020 report already shows this with THS making $25m free cashflow in 1Q alone, when PGM basket was $2,400 and Chrome $136tn. Imagine now what the free cashflow would be at $4,000 and Chrome $180tn. This is far in excess of anything that SLP can generate based on their size. We will soon find, unless THS expedite growth opportunities through cash, that THS will quickly catch up with SLP’s cash position of $67m.
I would tend to agree a $4,000 oz 6E PGM basket may be unsustainable, but THS was undervalued when basket was $2,400 and the THS sp has not chased the PGM basket up. So a softening of the PGM basket should not scare anyone. The cash will soon do the talking. THS will release their next Q report on 12-Apr, Interims 27-May.
Back in the pre-listing 2014 THS statement, Rance Holding was listed aa a subsidiary of NWS Holdings Limited, listed on HK stock exchange https://www.nws.com.hk/EN/About-Us
Now whether Rance was sold since then post 2014, I couldn't say.
Wilsby - you need to knock off around 15% from the THS 6E Basket Price to take into account the Refiner's processing fees etc., but in turn THS is also now at a run rate of 160k PGM Oz p.a. So be more like:
1) PGMs: $3,900oz x 85% - AISC $1,000 * 160k 6E Oz = $370.4m.
2) Chrome: $170tn x 85% - AISC $100tn * 1.5Mt = $67m
3) EBITDA of $437m (before Capex, BEE Trust %, Interest & Tax if you want to get to free cashflow).
Pretty absurd valuation and whilst I don't expect PGMs to stay at $3,900 oz, even if THS' PGM basket was $1,000+ lower this is still grossly undervalued in my opinion. 1Q of these prices the free cashflow effectively pays for Vulcan Fine Chrome Project at $50m capex, which should be complete come Oct 2021 in time for next company FY and on way to 2MT Chrome.
THS twitter site is pretty active these days - regularly post the THS 6E basket breakdown + news articles. It's definitely worth a check now and again through the week. I'm not on twitter but easy to viewer it as normal on a browser
https://twitter.com/tharisa_sa
Hi Ragnar - it is bit leftfield, particularly when they're juggling Zimbabwe Karo Resources too, which is a monster PGM project if commercially viable and they did proceed 1st with open pit. After dividends, this is where I would like to see cashflow go, if the Pre-Feasibility study shows viable project(s).
I'm neutral on this leftfield news though - Tharisa is part of a Consortium/ JV, so until we know their % in the JV, they could end up just being a silent JV partner with exposure to nickel, which could be a good thing. If you look at pg.13 of THS presentation yesterday, they believe nickel, copper and cobalt have the best fundamentals in the industrial metals space, with chrome close behind.
Are you concerned by leftfield nature of it, or that the Consortium may overpay due to the buoyant nickel market? I've been looking for quality copper and nickel plays to diversify into myself, however will only go for producers. Perhaps THS will end up ticking the nickel box too?
799 - here's the powerpoint presentation you can download and the event itself was streamed live on Youtube - link below to that. Theo was on first.
Thanks Sarah for hosting event - very good presentation from Theo and Ilja (Head of IR & Comms) confirmed she would be happy to clarify any questions not answered (there were far too many to cover after the presentation, which showed lot of interest)
https://www.proactiveinvestors.co.uk/upload/SponsorFile/File/2021_02/1613658168_20210218-This-is-Tharisa-February-2021-Proactive-One2One-Virtual-Forum.pdf
https://www.youtube.com/watch?v=dm9Y5aihAJc
2 of 2 In Summary:
1) THS production exceeds PAFs: THS 230-240K PGMs Eq. Oz versus PAF 180 – 190K oz Gold
2) LoM and resources similar for their respective operations, however PAF on inspection is far more complex, requiring constant stream of new projects w/ operational risk that brings to maintain circa 180-190k oz
3) EBITDA & Margins: THS has a far bigger margin, $1,900 oz margin on PGMs versus PAF $720 oz Gold, even if PGMs soften from these heady heights. This difference is stark when comparing EBITDA of THS at $364m versus PAF $137m.
4) The difference in Cash positions is $70.3m (£51m) in THS’ favour. On top of that, difference in “Trade Balance” is $92.2m (£67.3m) in THS favour.
THS is far more profitable than PAF with LoM just as sustainable, if not more with THS’ 40yrs underground mine after open pit to 2033. At very least it should be same market cap as PAF normalized for cash + trade balance positions: £422m + £51m + £67.3m = £540.3m, or share price of £2.01. But ultimately with a far larger EBITDA and better growth prospects, it should be larger market cap than PAF by sizeable margin.
Both companies in SA, subject to same BEE Trust positions, tax etc., so for comparison purposes haven’t “deep dived” those respective areas.
Separately SLP is now £328m, almost on parity with THS at £344m. I know many of us or our friends/ family remain invested in SLP but this is just madness. THS has x2 production, x5 LoM, better growth prospects (Vulcan increase Chrome to 2MT, push PGMs to circa 200k + Zimbabwe Karo Resources). It should be at least x2 SLP, even taking into account SLP’s large cash pile. In fact when you think THS should be at a premium to PAF as per above and should be x2 SLP, both comparisons do start to converge on £650m market cap for THS (£2.40+).
Then separately without comparing THS to other companies, when it currently trading at both PE of less than 2 and free cashflow ratio to market cap of less than 2, a doubling of sp only brings THS to x4 on both metrics, for a company with 12-13yrs open pit + 40yrs underground life + expansion projects.
When SLP release their Interims, I’ll do another THS v SLP similar to above.
1 of 2: In quiet periods of no news (although THS is speaking at Proactive Event tomorrow), I like to try my hand at "back of the packet" comparisons. So for today with Pan African Resources (PAF - SA gold miner) releasing their Interims, being in SA and similar size to THS, I thought I would compare them on the main metrics I look at:
THS
1) Market Cap: £344m
2) Production: 160k oz p.a. PGMs & 1.5Mt Chrome, which is 230 – 240k Oz “PGM Equivalent Ounces”
3) Margin:
a) PGMs: $2,900 ($3,400 basket x 85% to take account of refiner’s fees etc.) - $1,000 AISC = $1,900 oz
b) Chrome: $140 ($165tn chrome ore x 85%) - $100 AISC = $40tn
4) EBITDA: $364m, of which PGMs $304m (PGMs $1,900 x 160k oz) & Chrome $60m ($40tn x 1.5Mt)
5) LoM: Open Pit until 2033, thereafter Underground Mine 40yrs+
6) Capex: $50m p.a. of “Stay In Business” SIB Capex & for FYE Sep 2021 $50m for Vulcan Fine Chrome
7) Expansion:
a) Vulcan Fine Chrome Project ($50m), increase Chrome to 2Mt, which through economies of scale should reduce Chrome AISC as well as increasing production. So could add circa $40m EBITDA.
b) Zimbabwe Karo Resources (26% THS ownership but can be increased) 96 Moz 4E resource (platinum, palladium, rhodium and gold) grading at 3.2g/t. 32.4 km of drilling to average shallow depths of between 50 and 150m, to identify open pittable resources, awaiting Pre-feasibility study
8) Net Cash: US$5.1m (calendar Q4 2020)
9) Trade Balance (Receivables – Payables): $55.2m owed to THS (FYE Sept 2020)
PAF
1) Market Cap: £422m
2) Production: 190,000oz Gold
3) Margin: $1,820 - $1,100 AISC = $720 oz. On AISC, in last 6 months PAF AISC was $1,252. Their goal is $1,000 which I do not think they’ll achieve, but do think they will improve upon the $1,252.
4) EBITDA: $137m ($720 x 190k oz)
5) LoM: Barberton (65-70k oz, 20yrs) BTRP (20k oz, 2023 + potential 6yr extension), Elikhulu (60k oz, 2031), Evander (30k oz, 2-3yrs + potential extensions through new shafts)
6) Capex: to ensure “steady state around 180k oz”, PAF have revolving list of projects, shafts etc. and appear to spend ZAR 600m ($40m) per year on average.
7) Expansion: Egoli (circa 70k oz p.a. LoM 9-14yrs), financing of ZAR 1.2bn ($83m) to fund construction over 2.5yrs (this will plug some of gap of short mine life above, not lead to direct increase of 70k oz)
8) Net Debt: US$65.2m (on top of this, taking on further debt for Egoli expansion above).
9) Trade Balance (Receivables – Payables): -$37m owed by PAF (Interims End Dec 2020). Includes liabilities PAF don’t include in Net Debt.
THS are presenting as part of Pro-active's One2One Virtual Investor Events this Thurs 18-Feb from 18:00hrs:
https://www.proactiveinvestors.co.uk/register/event_details/318
I just registered now myself
Hi Jdevereaux - I think it can get quite technical from accountancy perspective, incl. perhaps past credits/ deductions and other factors etc. (e.g. capex paid 100% by THS Group, but not 26% BEE trust under Tharisa Minerals Proprietary Limited and therefore will offset/ reduce the profit + income of the 26% proportion accordingly, ) and inter-company transfers/ reconciliations as THS Group (Arxo or another segment) will sell on behalf of other THS companies.
For example, the 2018 Accounts Profit was $51m, of which $2.5m was "non-controlling" (4.9%). In 2019 Net Profit After Tax (NPAT) was $8.4m, "non-controlling" portion was a loss of $-2.2m. And 2020 as we know NPAT was $55m, "non-controlling" $11.7m (21%). I think the 21% figure is probably closer to "steady state" actuals in years of limited reconciliations/ deductions etc. May be one to ask them on the next Investor Call or other forum.
You wait an age for 1 Iridium Article to come, then they all come at once:
"Tight supply and hydrogen hopes drive iridium up 160%"
"Climate War" Accelerates ESG Craze Sparking Surge In Iridium Spot Prices"
https://www.reuters.com/article/us-precious-iridium/tight-supply-and-hydrogen-hopes-drive-iridium-up-160-idUSKBN2AC1DG
https://www.zerohedge.com/commodities/climate-war-spark-esg-craze-iridium-spot-prices-soar
"Iridium has become the latest precious metal to undergo a spectacular price rally, after supply shortages and expectations it will be used to produce hydrogen to power a greener economy lifted its value by 160% in two months. The difficulty of raising output means prices could rise further, analysts said"
Jdevereaux - I can't connect all the dots, but Ragnar provided some info last week. Using FY Sept 2020 Accounts:
1) THS Group Revenue is $406m (pdf pg. 59 among others). Of this:
2) Tharisa Minerals Proprietary Limited (26% owned by BEE Trust) Revenue is $298m (pdf pg. 112), so it's important to note not all of THS Revenue & Profit falls under the 74%-26% income split. The 26% for BEE Trust is also calculated from Net Profit after Tax and taking into account adjustments/ fluctuations (e.g. Forex).
3) Tharisa Minerals Proprietary Limited has a net profit after tax of $16.7m, of which $4.3m is attributable to Non-controlling interest (BEE). I'm rounding, but if you take exact figures from Accounts, you'll see the latter figure is 26% of $16.7m.
4) If we go back to THS Group Revenue (pdf pg. 59), I'm not quite sure how the $4.3m on pg.112 connects directly to the "non-controlling interest" income of $3.4m in terms of direct calculations, however there is a note on page 120 that does confirm the $3.4m non-controlling interest is the Income paid to BEE Trust:
"Non-controlling interests
Non-controlling interests comprise amounts attributable to Black Economic Empowerment shareholders in South Africa for their respective shareholding in the ordinary shares of Tharisa Minerals Proprietary Limited together with associated foreign exchange translations. The noncontrolling interest share of total comprehensive income amounts to US$3.4 million (2019: US$7.4 million loss)."
I know it makes up only 4.3% of THS PGM basket, however it's rare there's any stories on Iridium:
https://cyprus-mail.com/2021/02/13/iridium-a-precious-metal-sees-price-nearly-triple-in-1-month/
There's no mention of Iridium in the JM report and only 1 mention in the Auctus David Davis Report:
"Heraeus recently made a breakthrough in the production of green hydrogen by electrolysis, using new platinum and a much-reduced iridium containing cathode, which has resulted in making the production green hydrogen cost effective and more efficient."
Shows it will be critical for "green hydrogen" economy, as will platinum. Worth noting the rough annual production of each PGM per annum:
Palladium: 10 million oz
Platinum: 8 million oz
Rhodium: 757,000 oz p.a.
Iridium: 250,000 oz p.a.
Isn't/ won't take much for Iridium to fly if there is suddenly a new source of industrial demand - even more precious than Rhodium!
TBTT - we've always disagreed on Bunker Hill, I wouldn't call it a disaster. I still believe and said at the time Bunker Hill technically is a great brownfield project, which predominantly was always 1st and foremost a zinc and silver play. It has unbeatable zinc and silver grades (9.1 million tons with 5.08% Zn (some zones 20%), 2.35% Pb and 40 g/t Ag (1.29 ounces per ton)), as it was mainly a lead mine back in the day, with the high grade zinc sections largely ignored if the lead content was low. The capex was low for size of project ($90m capex for 8yrs LoM to begin, 547,500 tonnes p.a. process capacity), you had an infrastructure in place and the vast majority of local community wanted it to proceed. On environment front, they had liability exemption for all historic issues not just from DEA, but DoJ too. The environment side of things is an issue, but it's actually a far bigger issue with no mine, with huge amount of waste seeping into lakes. A mine could have indirectly helped paying taxes to fund clean-up, as well as the direct money they have to pay to DEA.
Now Bunker Hill have completely changed Board + Management, things seem to be going in right direction. So shows you what can happen when you have a clear out.
However what I didn't like was how HUM provided circa $2m to Bunker Hill (another entity provided another $2m too) and a few weeks later Bunker Hill announced it had no money! In my mind no proper financial due diligence to check Bunker Hills books could have been performed, otherwise obviously a check of their trade payables, current liabilities would have shown they were insolvent. In my mind this is a failing of the HUM Finance Director and Accounts Department, unless they were lied to by Bunker Hill in terms of financials shown to them, in which case they should have taken court action. So as there was no court action, I can only assume HUM Finance did not perform detailed enough checks, so heads should have rolled yes.
Thanks for all the info yesterday Tones. It's disappointing to me that the $17m Yanfolila Capex + Exploration has been classed/ confirmed as "development" and not "sustaining", which is what other gold miners I have issues with do. It is clearly costs to sustain the existing Yanfolila mine, however the RNS did state "development" so at least it's known, even if I disagree with its classification. This adds another circa $150 oz to AISC, on top of the US$1,250 - 1,350/oz guidance, so in my mind the true AISC 2021 guidance is $1,400 - $1,550 per oz.
After re-reading the RNS, I'm also not too impressed they changed the AISC metric from gold produced to gold sold (gold sold is a lagging indicator so you should not be linking production costs in the Q to gold sales), as if it was based on gold produced the AISC would have been $1,650 for Q4 2020. The grade is the key issue at only 2g/t in Q4 and for now without release of the revised rolling mine plan, all this coupled together with the other issues for me personally now provides too much uncertainty with not enough potential "reward" over next 6 months.
In terms of the DB debate, you have to include the entire board. The grades were dropping consistently from Q1 2020 to Q4 2020. There were many warning signs which a seasoned, "grizzled" COO/ CEO with actual on-site mining experience would likely have noticed long before, with more gumption to get out to the mine, butt heads and put in place a turn-around plan much earlier. There are many NEDs with technical experience on the HUM board, but if they're just sitting pretty in UK, not adding value there is really no point. Replace them with an onsite expat COO. Or have a CEO with operating experience.
In terms of what could change sentiment in short-medium term, rising gold price of course, confirmation of a fully licensed and financed Kouroussa would do the trick (and here from RNS irrespective of such approval they do appear to be doing lot of good work in this segment). Perhaps a revised Rolling Yanfolila Mine Plan providing more assurance to the guidance would also provide some positive sentiment, but until we see few Qs of actual results and g/t improvements, i'm not too sure.