Tharisa slows Karo Platinum as PGM prices trough

Phoevos Pouroulis, CEO, Tharisa

THARISA has slowed the development of its $391m Karo Platinum project in Zimbabwe owing to depressed prices for platinum group metals (PGMs).

Commenting in the group’s six month results to end-March, CEO Phoevos Pouroulis also said a delay in a tax agreement with the government of Zimbabwe, where the project is located, was weighing on the project’s financing timeline.

“A measured decision was taken to slow the project timeline, continuing with smaller work packages, aligned with funding availability,” he said. “The Karo Platinum Project has progressed well despite the slowdown and smaller work packages have been completed
on time and budget.”

PGM prices have started to recover since the beginning of the year but remain well below levels of a year ago. Tharisa reported a 39% decline in the average PGM price year-on-year.

However, the chrome price has remain resilient. The average metallurgical grade chrome price of $288/t for the six months represented a 16.9% gain. Global chrome production increased by 4% despite a rundown of port inventories in China, Pouroulis said.

In terms of production, Tharisa reported chrome of 865,000 tons, a 10% increase year-on-year  As the company is buying third party ore to feed its mill while it catches up on a backlog in waste stripping, it results in lower PGM recoveries. As a result, PGM production fell 7.7% at 71,100 ounces.

Financiallly, the higher chrome output and pricing couldn’t offset the precipitous decline in PGM prices. Unit costs also increased, up 17.8% partly informed third party ore purchases which accounted for about 29% of overall costs.

The outcome was that Tharisa reported a 29% year-on-year decline in taxed profit which came in at $38.8m for the six months. Headline share earnings of 13.2 cents/share represented a 25% year-on-year decline.

Negative free cash flow of $27.9m but Michael Jones, Tharisa CFO said the balance sheet remained “extremely strong”. Net cash fell to $86.3m from $112.7m at the year-end in December.

Despite this, Tharisa declared a 1.5 US cents per share interim dividend – nonetheless half the comparable payout last year.

Pouroulis said that coupled with the firm’s share $5m buy-back programme – which is expected to pick up pace in the current six month period – the firm remained committed to returns, despite the difficult operating conditions.

“The PGM price is ignoring the schism between supply and demand, which, in our view is only a matter of time before it corrects and a more balanced picture for PGM uses emerges,” he said.

PGM production guidance has been maintained at 145,000 to 155,000 oz for the year although weighted towards the second half, which Pouroulis said was in hand. Chrome production is expected to be 1.7 to 1.8 million tons as previously guided.