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Tharisa sticks to dividend guns as mine reconfiguration lowers output, profit

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Tharisa sticks to dividend guns as mine reconfiguration lowers output, profit

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Tharisa Minerals CEO Phoevos Pouroulis.

15th May 2019

By: Martin Creamer
Creamer Media Editor

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JOHANNESBURG (miningweekly.com) – Platinum group metals (PGMs) and chrome mining company Tharisa Minerals has not allowed lower half-year production, profit and cash flow to get in the way of declaring an interim dividend.

The Johannesburg- and London-listed company declared a $0.005-a-share payout on earnings a share of $0.4c, in accordance with its policy of distributing at least 15% of earnings to shareholders.

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“The board feels quite strongly about sticking to our guns, as you say,” Tharisa CEO Phoevos Pouroulis commented to Mining Weekly Online in a telephone interview, following the company’s announcement of a 72.6% fall in half-year pre-tax profit to $10.2-million. During the six months under review, 2.2-million tonnes of ore were mined, with an average head grade of 1.49 g/t PGMs and 18.2% chrome.

“We did signal to the market that we were going to have lower output on the back of the reconfiguration of our openpit and the optimisation of our fleet, to meet our Vision 2020 target,” said Pouroulis.

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The company’s Vision 2020 projects are targeting 200 000 oz/y of PGMs and two-million tonnes of chrome concentrates a year in 2020, which will require 5.6-million tonnes of run-of-mine material a year.

“We’ve spent the last six months putting those reforms in place in the pit, lengthening the benches and putting in the north-to-south haul roads on either side of the openpit. We’re set up and we’re seeing improved second-quarter production going into the third and fourth quarter of this financial year to meet our guidance,” he added.

The company is guiding production of 150 000 oz of PGMs and 1.4-million tonnes of chrome in the 12 months to the end of September.

“All the pieces are in place,” said Pouroulis.

Of the $23.4-million capital expenditure (capex) in the six months to March 31, $20.7-million was spent on the mining fleet.

While some was replacement capex, certain equipment provides in-built growth: “For example, we purchased a new Cat 6050 mining shovel. That doesn’t sound like much until you realise that in rand terms, it’s just about R100-million worth on its own, and that its almost an additional piece of equipment,” said Tharisa CFO Michael Jones.

“It increases our overall capacity to move the waste and get the mining strip ratio up. It’s currently sitting at 7.1. We need to get it back up to the 9.5 level,” he added.

Going forward for the second six months, the company is again looking to spending above its normal sustaining level. It is looking to spend another $14-million on the mining fleet, with processing plant and more diesel generator expenditure taking the total to about $15.6-million. Already with 4.5 MW of diesel power capacity to provide energy security, Tharisa also has various studies under way into solar power.

The openpit reconfiguration is scheduled to be completed by the end of September, with between 600 000 m3 and 700 000 m3 scheduled to be moved in the second half to provide the optimal pit design.

Interestingly, PGM prill split in the period favoured high-priced palladium and rhodium, with ruthenium, iridium and gold flat and platinum slightly down.

The typical prill split is 9.5% to 10% rhodium, 16.5% to 17.4%  palladium and 55% to 56% platinum.

Higher unit mining costs per cubic metre of $9.6/m3 on the back of a lower production are expected to improve in the second half as volumes increase.

The diesel price, which represents 14.3% of the company’s on-mine cash costs, rose by 18.1% in rand terms and electricity by 13.7%.

One of Tharisa’s strengths is that its business model is robust in the large-scale, co-production of PGMs, some base metals and chrome. This ensured that despite its lower half-year volumes, it was still able to post a profit and generate free cash flow.

In addition, within chrome, it is not totally exposed to stainless steel. It has specialty chrome concentrates that take up 24.1% of the chrome concentrate production and which are sold into the chemicals and foundries markets globally. These attract a price premium above the metallurgical chrome grade concentrate price, which decreased in the period to an average $163/t from $193/t in the corresponding period of last year.

Moreover, Tharisa has managed to break into the Indonesian stainless steel market, which makes it less China-centric.

Major steps are now being taken to replicate this model in Zimbabwe, where Tharisa-linked Karo Power Generation is taking steps to establish a 300 MW renewable energy power plant.

Overall, Tharisa is in mining, processing, beneficiation, marketing, sales and logistics.

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