UNTIL Northam Platinum unveiled plans last month to grow production by 50%, its smaller counterpart, Tharisa, was something of a rarity in the platinum group metals (PGM) industry. Tharisa’s Karo Platinum project in Zimbabwe is set to double the group’s PGM production to just under 400,000 ounces a year.
Yet, unlike Northam, Tharisa has struggled to attract investor enthusiasm. Its shares are up a fifth over the past year, against a 27% gain for Northam and a 44% rise for Valterra Platinum, the industry leader, which is said to be weighing either a joint venture with Northam or an outright buyout.
The gap seems to owe more to Tharisa’s balance sheet than the merits of Karo itself. Investors have been uncertain how the company would fund the project, even though Tharisa held a cash balance of $198.8m and net cash of $10.7m as of June 30 and has already pumped $241m of its own equity into the build.
That still leaves a $300m funding shortfall to close before first production, expected in 2027, with sales to follow in 2028.
Filling that gap had required two things to fall into place first: regulatory sign-off in Zimbabwe and a buyer for Karo’s concentrate. Without these boxes checked, finance was impossible to raise.
Both arrived in August. The Zimbabwean government, which owns 15% of Karo Platinum, awarded the project a 25-year special mining lease (SML) — “a key catalyst for the shares”, says Berenberg Bank analyst Richard Hatch. It was also a long time coming. Tharisa CEO Phoevos Pouroulis had hoped to have the SML in hand by January, but governments move at their own pace and the negotiations were complex. (Critical minutiae remain undisclosed, among them conditions about the remittance of dollars and special provisions regarding corporate tax and the duty-free import of capital goods.)
Days after the awarding of the SML, Tharisa announced a five-year offtake agreement with Valterra for the PGM concentrate Karo will produce — an agreement it described as “customary” for the industry but one that nonetheless removed a key uncertainty for lenders.
With the mining right secured and the offtake agreed, the funding question could finally be answered. This month Tharisa announced a $300m bond priced at an annual coupon of 11% – expensive, some say, but more to do with Zimbabwe than Tharisa itself.
Still, as a funding option, the bond is better than a rights issue, though it is not the bank syndication Tharisa had previously flagged. “It’s a bigger pool of capital and gives us a longer tenure,” says Ilja Graulich, head of investor relations at Tharisa. “But the key point is we are in a position of strength. Karo will very quickly become a cash-generating asset.”
Analysts at UK investment bank Peel Hunt agree, describing Karo as “a step change” that could add $250m to Tharisa’s ebitda — a leap forward from its trailing five-year average of $180m.
What the bond does for Tharisa and its CEO is to bring to an end years of dogged pursuit. In 2021, the PGM average basket price rose above $3,000/oz before it plunged to about $1,300/oz in 2024 — in other words, a full cycle, as that basket price has now just about doubled from its 2024 trough.
That means it’s a good time to be talking expansion — and, analysts say, buying Tharisa shares. “At current valuation levels we believe the market is attributing minimal or no value to Karo during its build-out phase, creating a compelling asymmetric opportunity for investors with a medium-term horizon,” says Vunani Securities analyst Keenen du Toit.
A less obvious benefit of the bond is that a portion of it has been allocated to expanding Tharisa’s mine in North West, also called Tharisa, which produces chrome as well.
The open pit there still has eight years of life left, but the company has decided to bring forward its underground development, a $547m capex commitment spread over 10 years that caused shareholder conniptions when unveiled a year ago. Yet it was capital that had to be spent eventually, and there are sound operational reasons for accelerating it now. Last summer’s heavy rains hit open-pit production hard enough for Tharisa to be forced to cut its annual metal forecast — the kind of event investors detest.
One important sidelight of Karo Platinum is the rare praise its development has drawn from the PGM peer group. Johan Theron, head of corporate affairs at Impala Platinum, says Pouroulis has probably opened up more investment in Zimbabwe, which was until now largely the preserve of Valterra and Implats itself.
“I think what Phoevos’s success has done is to put a new light on the fact that there are challenges, but Zimbabwe is also pragmatic,” says Theron. “I think that will put a lot of energy and focus onto the other projects, and I wouldn’t be surprised if over the next five years we see progress on a handful of them.”
A version of this article first appeared in the FM.
