A 58% increase in average platinum group metal (PGM) prices helped Tharisa to one of its best ever financial years despite the impact of Covid-19 lockdowns.
The London- and Johannesburg-listed chrome and PGM producer reported earnings per share of 16.2 US cents, four times the level of its 2019 financial year.
The bottom line for shareholders was an increase in the dividend of 3.5 c/share equating to a 17.1% payout ratio, above the stated annual dividend policy of 15% of taxed profit.
Improved returns of this ilk suggest Tharisa management’s confidence in the firm’s current financial year with PGM pricing expected to remain robust.
In May, Tharisa suspended the interim dividend owing to uncertainties created by Covid-19 which saw the firm idle its mine in South Africa’s North West province for three weeks and suspend construction on its capital projects.
In addition to overcoming the pressures and complexities of operating through the Covid-19 pandemic, Tharisa’s year in review – ended September – represents its emergence from a pit redesign and investment in a fleet upgrade.
The company has been held back the pandemic in other respects, however. The proposed expansion of its Vulcan mill, which will increase chrome concentrate by a quarter, will come online this year and only have positive consequences in 2022.
A drilling campaign for PGMs in Zimbabwe has also been delayed by a year. Tharisa was exploring Zimbabwe’s platinum fields several years ago, but is now joined by a number of rival explorers seeking to capitalise on buoyant PGM market prospects.
Pricing for metallurgical grade chrome used in the stainless steel industry fell in the year, however, down some 13.5%.
Tharisa was bullish, though, on prospect for the chrome market. Its product had application beyond the stainless steel market which was expected to show demand growth of 5% on a compound annual growth rate basis.
The major concern, however, is the South African government’s announcement in October that it was considering a levy on South African chrome exports.
“This proposed tax will not provide lasting or coherent support to the ferrochrome industry, and the only sustainable and viable aid to this downstream industry is subsidised electricity pricing,” said Phoevos Pouroulis, CEO of Tharisa in comments to the firm’s year-end results announcement.
“As Tharisa, and other members of ChromeSA, we are opposed to any export tax or intervention that may prejudice our business and as such we have a duty of care to protect and defend our position and indeed our stakeholders’ interests,” he said.
Tharisa has guided to 2021 chrome concentrate production of 1.45 to 1.55 million tons (Mt) and 155,000 to 165,000 ounces of PGMs (6E basis).
This compares to 2020 production of 1.34Mt, a year-on-year increase of 3.9% and 142,100 oz PGMs (6E) which was 1.7% higher than in the 2019 financial year.
Other key financial metrics:
Earnings before interest, tax, depreciation and amortisation +119.8% to $113.1m.
Operating profit up 262.0% to $87.6m ($24.2m)
Earnings per share up 305.0% to 16.2 US cents (4c)
Net cash flows from operating activities up 4.4% at $73m ($69.9m)
