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  • Tharisa is latest PGM miner aiming to tap buoyant gold

    Mon June 03 2024


    THARISA is the latest platinum group metal (PGM) miner planning to tap the buoyant gold market. The JSE-listed firm is hoping a gold streaming deal will plug a hole in funding its Karo Platinum project in Zimbabwe.

    Tharisa CEO Phoevos Pouroulis, speaking at the results presentation for the six months to end-March, said Karo is now forecast to cost $440m to complete, roughly $50m more than planned, after Tharisa slowed its development in October amid sliding PGM prices.

    While the basket price of the three main PGM metals — platinum, palladium and rhodium — is 9% higher than last year, it is still 60% lower than when Tharisa approved Karo in 2022. Understandably, funders are wary of committing in this environment.

    Upfront sales of metal by-products are a convenient way of generating income without loading up the balance sheet. In February, Sibanye-Stillwater said it was hoping to sell gold credits from its PGM production to cut net debt. The gold price is thriving, up 13% this year, and is forecast by Citibank to test $3,000 an ounce this year.

    For a $308m company, Karo is a big bite for Tharisa, but it has made progress. About $110m has been invested while another $70m of ring-fenced equity contribution is still to flow. In addition to a possible gold streaming agreement, most of the project’s balance will be funded by a $160m export credit finance deal and funding from an Africa-based direct foreign investor. Depending on the size of the stream, this may leave a small gap, which Pouroulis said he has plans to tackle.

    The final cost also depends on whether Tharisa has to delay the project any longer. Another unknown is when Zimbabwe will approve fiscal terms for Karo. Pouroulis said an agreement will arrive, but it may take time. In the meantime, Tharisa is “matching up to the capital available”.

    Barring any other capital raise, Tharisa has enough funding to see it through to March or April 2025. “We do have runway in terms of time,” said Pouroulis. As of end-March, the firm had interim net cash of $86.3m, against $126m at end-calendar 2023.

    Current estimates are for first revenue from Karo to flow in 2026. “As the company continues to finalise their funding package with the ECIC [Export Credit Insurance Corp of South Africa] as well as find a solution for the funding gap of $100m, we see it more than likely that the project will be pushed back,” say analysts at Tamesis Partners, a London-based investment bank. “We believe financing will get easier as the commodity market improves and if so it will be a testament to management’s strategic nous and tenacity.”

    Helpfully, Tharisa mines chrome, which has been on the up amid strong Chinese production, even as stainless steel producers destock. The average metallurgical-grade chrome price of $288 per ton for the six months to end-March was 16.9% higher. But this couldn’t offset the decline in PGM prices. Unit costs also increased, up 17.8%. In the end, Tharisa needs both PGMs and chrome to fire.

    “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,” Pouroulis said.

    “Tharisa is very geared to the PGM prices,” says René Hochreiter, an analyst for Noah Capital.

    “At spot, which is what investors are fixated on at the moment, Tharisa is expensive. However, if we put our 2024 PGM prices into our rankings, Tharisa is near the top and cheap compared to its peers,” says Hochreiter. “It has the lowest p:e in the sector.”