focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
Depending on the exchange, the ex-div date is one business day before the record date, so ex-div date is today on basis record date is tomorrow 09 October.
Interview mentions Vulcan Project re-started and should be complete within a year. So whilst FY 2021 guidance is already great at 155 - 165 koz PGMs (6E basis) and 1.45 Mt to 1.55 Mt of chrome concentrates, post Vulcan we should reach the long-term guidance that was stated in the last Annual Report: 200 koz of PGMs and 2.0 Mt of chrome concentrates.
On current production levels we're significantly undervalued, let alone FY 2021 guidance and then post-Vulcan world of 200 koz of PGMs and 2.0 Mt of chrome concentrates.
They haven't mentioned financing for Vulcan like they were few months back, so be interesting if they now plan to fund it organically from cashflow. The Annual Report will make very interesting reading. The Introductions and Overview in the THS Annual Report (Investment Case, Market Review etc.) are always very informative and would even still recommend a quick read of the 2019 Annual Report now.
Tharisa looks back on 'transformative year' thanks to 'keeping things going' despite Covid-19:
https://www.youtube.com/watch?v=iIsB0ltjS8o
Hope link works but if it doesn't, just type in Tharisa to youtube and should show up as 1st option.
Wow... opening line of RNS sums it up pretty well: "Exceptional production performance positions Tharisa for PGM price bonanza"! 40.5k oz achieved in quarter which beats expectations and achieved quarter basket price of $1,950.
FY2021 guidance also given:
"FY2021 production guidance 155 koz to 165 koz PGMs (6E basis) and 1.45 Mt to 1.55 Mt of chrome concentrates"
Perhaps we may even see a small dividend announced in Results in Nov, albeit not too bothered if we don't as they've restarted Vulcan project.
I've been tracking all the monthly average 6E PGM prices and believe the PGM basket price achieved by THS for Q4 should be circa $1,920 (will of course vary up or down depending on when sales occur), compared with Q3's $1,593. An increase of some 20%.
Now only 9 days up to and including 09 October to be invested and secure 6.6% dividend yield at this 95p share price (8 cents/ 6.25p per share). At some point we will also get: "Upgraded dividend guidance for the full year to be announced shortly" as stated in the Interims, so over the full FY who knows what cumulative div yield will be at this equivalent share price: 14% in total perhaps?
Normally ex-div shares of course dip slightly, but after 9-Oct, Q3 results should hit shortly thereafter, with what should be a stellar set of results with avg. gold price of $1,900 and production of circa 11k Oz, so we should have significant share price appreciation too on top of a bumper dividend yield, if Q3 delivers as per guidance.
With the low gold production in Q1 2020 and any initial COVID19 mitigation measures, i was expecting some increase to AISC. Perhaps when it's in b&w for some it was unexpected?
The guidance if I remember was always a largish spread of $900 - 1,000 AISC, so they've only missed upper range by $21 and sure with 2H 2020 on track to deliver 21k+ production, they will meet both production and AISC guidance.
Correction on my previous post - meant 7% interim div yield.
Net Debt is also down to only $8m end of June 2020 from previous $16m.
Announcement of 8% interim div yield at this share price to be paid early Nov, upgraded div guidance going forward and a bumper Q3 2020 due in Oct as they allude to production being in line with Q2 production of 11,419 oz, the response is quite bizarre.
I like the quiet and have been quietly accumulating since the 50s and now bought a lot in the low 70s. This board reminds me of SLP a few years back when there was only a few of us posting shouting at what a steal it was in the teens! Now SLP board is teeming - can't quite get over how quiet it is here!
As much as I like SLP and their huge cash position, their dividend policy has continued to disappoint (don't start me on the "potential" windfall metals dividend in calendar Q1 2021, just have a proper dividend based on % earnings/ FCF!). I hear you on the "free float"/ liquidity issue here, but I now don't know a single share this undervalued than THS on a fundamental basis. Even assuming chrome is "zero sum" at present, the value from the PGMs which is near double the production of SLP and triple-quadruple production life is huge (open pit until 2033, underground 40yrs+ thereafter).
Of course if you do know any others, let me know! ; )
Not sure what "BNN Bloomberg" is, but other news sources including Bloomberg are saying the exact opposite - ECOWAS have not agreed to lift sanctions until a civilian transitional president is in place:
https://www.aljazeera.com/news/2020/09/west-africa-bloc-fails-reach-agreement-mali-military-200915192030980.html
https://www.bloomberg.com/news/articles/2020-09-15/west-african-leaders-agree-to-lift-mali-sanctions-after-talks?utm_source=google&utm_medium=bd&cmpId=google
On plus side news articles do appear to insinuate ECOWAS have agreed the 18 months transition. It is now up to Mali junta to concede and accept a civilian president. We may have to wait another week when ECOWAS reconvenes as to whether sanctions will be lifted or not. At least ECOWAS have confirmed they will lift sanctions IF the Mali Junta agree a civilian will be the transitional president...
In short-term there are 2 large headwinds: SC reducing holding and Mali political situation, which we should find out about more today with ECOWAS meeting. If they reject the Junta's position (18 months with a civilian OR military leader) the borders could continue to be closed and operationally could start to impact all miners in Mali.
Does anyone know if the border closures have any exemptions for fuel and food?
I think military agreeing to 18 months instead of 3yrs is a good thing and not too far off from ECOWAS' 12 months. However I can't see ECOWAS accepting the fact a military leader could be the transitional president, that will be the dealbreaker and the fact the Mali "experts" helping draw up the transition were chosen by the Junta and political parties are crying foul. So this could have further to go and impact Mali miners on a "sentiment" basis but operationally too if the border closures continue. It should not impact gold dore exports as these are airfreighted out, I'm more worried about bulk supplies trucked in to Mali.
If the Mali Junta agree a military leader can not be transitional president, that should break any deadlock and I reckon ECOWAS would accept 18 months instead of 12 months. Fingers crossed but it may take a while and could get a bit choppy.
There is a natural "choke point" in Mali where most of the UN, ECOWAS, French and British forces are stationed. I honestly can't see how the jihadists in the north could use this to reclaim more territory unless they overran and killed substantial number of these 30,000+ troops. It's not going to happen. You also have the US base in Niger providing drone support to the French army which do bulk of the fighting against the jihadists.
In terms of the south, yes the foreign troops will have no involvement in that whatsoever. Only way to resolve that is through diplomacy. The National Guard simply don't have support to stage a long-term undemocratic military coup, so likelihood is it will be resolved sooner rather than later, as long as their key demands are met, no doubt main one being immunity from future prosecution!
If you think the risk is at your 10p level, good luck with that.
Even though I'm invested, I do think short-term the sell-off is fair enough. You can't argue that this increases uncertainty in the short-term in terms of Mali's stability.
Long-term I'm confident with the largest deployed UN forces anywhere in world in Mali, ECOWAS and African Union pressure (which holds far more sway than the "colonial" French who are not seen in a good light generally by Malians, perhaps unfairly with French efforts against jihadists but of course there's lot of history there) there should be a peaceful resolution and hopefully elections. Re-instating Keita would not be sensible in long-term for international community to demand. The risk/ concern though is the potential political vacuum from now until possible elections are held. And this does have to be "priced in", including whether election will happen at all.
But long-term could be great entry point if you believe the likelihood is for a peaceful resolution and no impact to HUM operations.
Indeed there are some 30,000+ UN, ECOWAS, French and British troops in central Mali - they will not be able to shut off borders for key items like fuel and supplies - it would be extremely counter-productive for ECOWAS in particular. Both Resolute and HUM have made no mention of any such impact to operations. ECOWAS would be shooting themselves in the foot. But short-term it's a very good way to start negotiations with Mali National Guard and for elections to be held ASAP as they claim they want.
As much as UN, ECOWAS, African Union and French are moaning about this, if Keita had held new elections in the 30 contested seats, this would have placated the opposition protestors and I doubt the National Guard could have just rolled in and taken him with no police or army to be seen.
After the strong condemnation last night by international community on the coup, they can save face and rather than demand that Keita is re-instated, due to low voter turnout (as result of COVID19) and 30 contested seats, UN and ECOWAS supports new elections being held on XX date etc etc
HUM's de-risking on COVID19 (airstrip, substantial build-up in spares, materials, chemicals, reagents etc. ) in essence also de-risked this scenario too. I'm not sure if other larger miners have their own airstrips too or if to transport their dore safely from south to Bamako International Airport, they'll be looking to rent the airstrip from HUM.
Edit: Net Cash 2H 2020
ngnlnv - very true. If gold was to stay elevated at $2,000+ for a long period of time, the majority of countries rich in gold would no doubt instigate a "windfall tax". This doesn't need to be resource nationalists or even due to regime change. Look at UK governments and windfall taxes on north sea oil. The easiest way for Mali to raise more revenue from gold would be to increase the royalty tax, but this isn't yet on the table.
By time something like that was implemented, we would have had a number of quarters of $1,900+ gold and be Net Cash in 1H 2020, followed by zero debt 1H 2021. So whilst I wouldn't be surprised if further down the line all gold rich countries do this, it would likely be a good thing for HUM as it would mean gold prices remaining elevated.
Those more likely to move first and instigate a type of "windfall tax" I would guess are SA and Tanz.
Can you provide a link to this claim of "resource nationalists" and that is one of the protestors claims for change?
Because there i was thinking they were protesting against weak economy, corruption in 30 seats in election result and lack of progress against 6yr fight against jihadists.
Out of country of 20million, a couple thousand came out to protest. Hardly the stuff of regime change. No matter the protests, Keita is following through with reforms requested by ECOWAS and the main opposition leader has already stated he wants change but OK for Keita to stay on. Keita needs to agree to hold elections again for the 30 contested seats, otherwise these low level protests will continue.
Vulcan Fine Chrome Project (expansion to main SA operations): on hold due to COVID19 and awaiting financing options. $52.8m Capex, however once complete will allow increase of chrome from current 1.45 Mt to 1.55 Mt capacity, to 2Mt. This and other final optimisations will also allow PGM capacity to increase from 155 - 165k to 200K 6E PGM Oz.
https://www.miningreview.com/platinum-group-metals/tharisa-minerals-vision-2020-on-the-cusp-of-realisation/ (good article but written in Jan 2020 before Vulcan was delayed)
Karo Mining (THS have 26.8% interest) - Zimbabwe:
1. June 2019 THS paid $4.5 million for a 26.8% stake in this huge Zimbabwe Great Dyke asset – est. to be able to deliver 1.36 million ounces of PGMs p.a. by 2024 (monster project). THS have option to acquire 100% of $4.2bn project, however haven't found full details on terms of this.
2. 96 Moz 4E resource (platinum, palladium, rhodium and gold) grading at 3.2g/t declared by Zimpats in 2017, Tharisa (as part of its US$4 million capital commitment to Karo Platinum) is under way with a prefeasibility study, which is expected to be released in mid-2020. This was prior to COVID19, so hopefully we could still see it back end of calendar year 2020.
3. Area of land was released by Zimplats in 2018 in support of the governments’ efforts to enable participation by other investors in the country’s platinum mining industry.
4. Tharisa has completed Phase 1 of its exploration programme, which entailed 32.4 km of drilling to the south-west, west and east boundaries of the licence area to average depths of between 50 and 150 m, targeting areas of outcrop of the reef to identify open pittable resources.
Salene Chrome (90% THS) - Zimbabwe:
1. Initially produce 5,000 tpm, or 60 000 tpa of lumpy chrome (production started Q2 2020), with the potential to increase production to between 10 000 and 15 000 tpm (which equates to about 10% of Tharisa’s existing chrome production from South Africa).
2. Potential to build a chrome recovery plant, which would be used to improve lumpy chrome grades from 40-41% to about 48% including the fines.
https://www.miningreview.com/platinum-group-metals/tharisa-developing-a-future-in-zimbabwe-through-two-project-acquisitions/
There's always the chance the Pouroulis family sell THS to a major just like they did with Eland Platinum to Xstrata Plc in 2007 for the equivalent of $1.1 billion. Karo is a monster project and far too large for THS, but I could see them taking up the option for 100% and then selling to a major or farm-in JV (a major new to Zim to deliver on the Government's original reason to force Zimplats to relinquish the prime real estate for new entrants).
Production (FY 2021 onwards):
- PGMs: 155 - 165k PGM oz, rising to 200k Oz annualised on completion of all “Vision 2020” (admittedly with delay).
- Chrome: 1.45 Mt to 1.55 Mt, rising to 2Mt of chrome concentrates (excl. Zimbabwe Salene Chrome (90% THS) which has commenced Ops and will add eq. of another 10%).
Life of Ops: 13yrs open pit (2033/34), 40yrs underground
Net Debt position (Interims 31 March 2020): $25.8m (cash $40.3m, debt $66.1m)
Trade Balance: $65.3m Trade Receivables owed to THS, compared to $39.8m Trade Payables, so positive balance in THS favour of $25.5m.
Margin/ Cashflow before Capex & Tax (assuming current market prices unchanged):
- PGM Sale Price: 6E PGM Basket Price = $1,869 minus 13% offtake agreement fee/deductions = $1,626oz
- Chrome Sale Price: at $138tn minus 27% refiners/ offtake deductions etc = $101tn
AISC: circa $909 Oz for PGM, $76tn for Chrome (based on ZAR 17). Through economies of scale AISC would reduce with increases in production, but increase if ZAR strengthens.
EBITDA/ Free cashflow (FCF before Capex, Interest & Tax):
PGM: 155 – 200k PGM Oz x ($1,626 sale price minus $909 AISC) = $111m – $143m
Chrome: 1.45 – 2Mt x ($101tn minus $76tn AISC) = $36m - $50m
Arxo: THS logistics/ sales/ marketing company usually adds another $2m profit.
TOTAL = $149m - $195m p.a.
This is before Capex, Interest & Tax, however on the latter, THS have $98.9m of “unredeemed capex” to offset against profit meaning tax will be negligible. “Stay in Business” (SIB) Capex harder to predict until Accounts hopefully give some guidance. FY2020 THS has spent a significant $64.4m ($21.9m planned for H2) upgrading fleet and optimising across the board. Land purchase, cont. fleet replacements could still be ongoing through 2021. But for now I’ll assume on avg. $30m SIB Capex + Interest p.a.
So above would be $119m - $165m, of which THS receives 74%, so final $88m - $122m.
With the near infinite mine life (13yrs open pit + 40yrs underground), dividend stock and huge expansion potential of their assets in Zim, a ratio of 8x FCF should be more than fair, providing $704m - $923m, £541m - £710m market cap (top est. reduced by $52.8m to take into account Vulcan Capex). The lower end would mean a valuation of over £2. If they can follow through on “Vision 2020” capacity, top end being £2.66 per share.
The 6E PGM breakdown was included in the FY 2020 Interim Results Presentation released 20 May 2020, pg. 13 of 30, which is 1st time I’ve spotted it and just for everyone’s info:
Platinum 55.1% ($965)
Palladium 16.9% ($2,190)
Rhodium 9.5% ($9,000)
Gold 0.2% ($2,000)
Iridium 4.3% ($1,645)
Ruthenium 14% ($270)
BASF: https://apps.catalysts.basf.com/apps/eibprices/mp/
Johnson Matthey: http://www.platinum.matthey.com/prices/price-tables
Above produces current 6E PGM basket market price of $1,869 per oz (over 15% increase on Interims 1H 2020 basket price of $1,612). However using the Accounts 2019 and Interims 1H 2020 to compare “market prices” versus THS realised “sales prices” (THS PGM revenue/ total Oz produced), there is usually a 11-13% discount/ differential. This is understandable as THS have offtake agreements with Impala & Sibanye for the concentrate. So at current market price, price to THS is circa $1,626. Their “AISC” in Interims was circa $1,030 based on ZAR at 15. With ZAR at 17, it would be more like AISC of $909 per Oz.
THS’ production forecast is circa 135k p.a. for FYE Sept 2020, however prior to COVID19, THS guidance after all the already completed “Vision 2020” optimisations was 155 - 165k PGM oz + 1.45 Mt to 1.55 Mt of chrome concentrates. Once final Vision 2020 upgrades/ extensions completed (e.g. Vulcan Fine Chrome Project for Capex of $52.8m), guidance will be 200K 6E PGMs Oz p.a. and 2.0 MT of Chrome Concentrates on an annualized basis.
In terms of Chrome, again using same methodology and analyzing the last Interims, the reported price of chrome of $138tn for THS appears to yield a chrome sale price of $101tn, so there’s a 27% discount/ differential between reported “market” chrome ore price and THS sale price. Not an exact science as the Accounts only include production figures not sales figures, but the two over a 6 month or year period should not be dissimilar, so close enough. The “AISC” in Interims was also around $87tn based on ZAR of 15. At ZAR of 17, this reduces to $76tn.