THARISA, a chrome and platinum group metals (PGM) miner, set the groundwork for a strong 2021 financial year registering better second quarter production compared to the second quarter of its previous financial year.
The second quarter, normally the weakest three months of Tharisa’s financial year, was true to form: the company produced lower production on a quarter-on-quarter basis owing to high seasonal rainfall, and a mill motor failure affecting PGM output.
However, pricing of its metals has made all the difference whilst on a year-on-year basis, second quarter chrome concentrate production was 15.5% higher at 358,400 tons. At 85,600 tons, speciality grade chrome production was also higher. Crucially, Tharisa also produced more PGMs: up 11.5% year-on-year on a 6E basis to 35,800 tons.
All PGM markets remain in a structural deficit which is sending prices for some metals, such as rhodium, to record levels. The average PGM contained metal basket price for the three months was $3,290 per ounce – 80% higher year-on-year.
Coupled with an improvement in the chrome price – up a fifth to $155/t – Tharisa saw its net cash balance increase to $31.4m from a slim $5m positive balance at the close of the first quarter. The company had cash of $73.1m and debt of $41.7m on March 31.
Phoevos Pouroulis, CEO of Tharisa, said the performance was heartening ahead of a period of capital intensity. Tharisa has earmarked this year for the completion of its Vulcan processing facilities which will lift metal production to 200,000 PGM oz and two million tons (Mt) of chrome concentrate.
About a third of the $54m (currently R787m) capital cost has been spent to date, said Ilja Graulich, spokesman for Tharisa.
All things being equal, Tharisa’s cash balance is set to improve further. Based on spot prices, the company is currently booking a PGM concentrate price of $4,011/oz – around 22% higher than the second quarter average – largely owing to rhodium which is trading at $27,823/oz compared to $1,239/oz for platinum and $2,630/oz for palladium.
“With the mill repaired and recoveries stepping up, Tharisa is now really able to capitalise on the even higher PGM pricing, something that if sustained could nearly double our FY21 EBITDA estimate,” said Peel Hunt in a morning note.
“With the much higher commodity prices, Tharisa was able to convert production into cashflow, shown in our increased net cash balance, this while we are entering the major capital phase for the Vulcan plant which remains on track for construction to be completed this financial year,” said Pouroulis in a statement.
The company has reiterated production guidance for 2021 at between 155,000 and 165,000 oz for PGMs (6E basis) and 1.45 Mt to 1.55 Mt in chrome concentrates.
Shares in the company edged down 1.3% in early Johannesburg Stock Exchange trade, but on a 12-month basis, Tharisa is trading 183% higher.