THARISA has secured the $300m bond needed to complete its Karo Platinum project in Zimbabwe, removing uncertainty over how it would fund the remaining cost of the $545m mine.
The five-year senior secured bond carries an annual coupon of 11% and was priced at 98% of its face value. Most of the proceeds will be used to complete Karo, where first ore to the mill is expected in the fourth quarter of 2027.
“While the 11% bond is not cheap, it is likely a better outcome than alternative funding options such as streams or meaningful equity issuance, which could have had a far greater long-term impact on project economics and shareholder value,” said Arnold van Graan, an analyst for Nedbank Securities in a note to clients.
The premium was driven by Zimbabwe rather than Tharisa’s risk, said another analyst. The bond also has a five-year term, giving Tharisa scope to refinance the debt later.
Tharisa acknowledged that Karo’s location and the fact that it was still under construction had affected the pricing. “As an inaugural issuance under this structure, the pricing reflects both the jurisdiction in which the project sits and the fact that Karo is still in construction,” CEO Phoevos Pouroulis said.
“We regard that as a starting point rather than a destination.”
Pouroulis said Tharisa expected its cost of capital to improve as Karo was commissioned and the group built a track record with bond investors.
The bond issue follows uncertainty over how Tharisa would fund the balance of Karo’s development. By the end of June, the company had already put $241m of its own equity into the project. It had $198.8m in cash and net cash of $10.7m.
Berenberg, the German investment bank and brokerage, said the bond had reduced the financial risk around Karo by covering what it expects to be the project’s remaining initial capital needs.
It said the funding, along with Tharisa’s recent 25-year mining lease and five-year offtake agreement with Valterra Platinum, put the company on track to become a multi-mine operator by the end of 2027. Berenberg also noted that Karo’s first production was now expected earlier than it had forecast.
The offering was oversubscribed, with more than 150 investors engaging with Tharisa. It drew institutional demand from Europe, the UK, Middle East, North America and Asia.
Karo is expected to transform the scale of Tharisa’s PGM business. Phase one is designed to produce 226,000 ounces of PGMs a year once fully ramped up, taking group production to just under 400,000 oz annually.
The company last month secured a 25-year special mining lease for Karo and later signed a five-year offtake agreement with Valterra Platinum for concentrate from the mine.
