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[TOP STORY] Tharisa reports on a good year, but with some challenges

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SIMON BROWN: I’m chatting now with Phoevos Pouroulis, Tharisa’s CEO, on results for the year [to] end September. Revenue up 15%, earnings per share up 44%. Phoevos, a really good year, but some challenges. The most notable, I imagine, is Eskom. How are you managing [or] handling load shedding?

PHOEVOS POUROULIS: Thanks Simon. Always good to be with you and your listeners. Being an open-pit mine, the majority of our energy consumption is diesel, fortunately and unfortunately. It is a double-edged sword. So we rely on Eskom for around 25 megawatts to 30 megawatts for our processing plants. About three years ago we installed 10 megawatts of standby generation, which allows us to withstand what domestic users sort of refer to as Level 4, Level 5 load shedding in the sort of industrial sphere. We call it curtailment. It’s a negotiated cutback.

So in effect we haven’t had any disruption due to Eskom outages. There have been some spikes and dips which do cause issues, but they haven’t affected our production and you can see that by the record performance that we’ve posted in terms of productivity.

SIMON BROWN: Yes, absolutely. A very, very strong year in terms of production. Guidance for the year ahead is sort of in the range where you came in, but you make a point in the results that recycling is going to be the significant driver of [platinum group metals (PGMs)] supply and demand because there’s not a heck of a lot of new [supply] coming on. We’ll touch on Zimbabwe in a moment, but it really is up to the recyclers.

PHOEVOS POUROULIS: Yes. Because of the sort of pent-up demand in auto cells, what’s happening is second-hand or used cars are not being recycled or sold, as it were, [or] trashed as soon as they would normally [be]. So there’s also a bottleneck in autocats [auto catalytic converters] coming into the market for PGM recycling. You are seeing pinch points on both primary supply with mining – particularly in South Africa – being complicated, getting more expensive with all these inflationary pressures, getting deeper underground. The average PGM mine is more than one-and-a-half kilometres underground, and that has its own challenges. There’s a long list of those.

So we are seeing, particularly around platinum, which is really a South Africa-centric supply source, recycling is important – bearing in mind that there will be challenges on that side as well.

SIMON BROWN: One hundred percent. And one of the key things, the PGM basket price is down in the year, more in dollars than in rand. The rand helped some of it, but it’s still at, frankly, massively profitable levels.

PHOEVOS POUROULIS: Absolutely. If we look at what’s driving that, it really is deficits still persisting in palladium and rhodium. I think it’s universally accepted that platinum within 18 months is going to be in the same situation for the very reasons that I mentioned earlier.

So we are starting to see that platinum price eventually move through that $1 000/oz barrier, and we think that it should appreciate considerably from this point when we look at demand-supply fundamentals.

SIMON BROWN: I mentioned Zimbabwe – the Great Dyke [in the Mashonaland West District]. I was doing some digging over the weekend. That’s the second-largest PGM deposit in the world. Of course, Bushveld is the largest, the Bushveld Complex [in SA]. You’ve got the acquisition there [in Karo Mining Holdings]. You now have the majority stake, [with] production looking for mid-2024. [The] capital requirements in that regard? There are still some, but my sense is you’ve got them well funded with cash flows.

PHOEVOS POUROULIS: Part of the funding is equity that comes from Tharisa, around a third of it, and then the balance is your typical project finance debt, sort of debt-financed packages. So it’s all well on track. We are excited. It’s a short timeline to productivity – as you say around 21 months. Capital around $390 million in total, and that includes quite a bit of infrastructure. Remember, this is a greenfields project so we are bringing water, we are bringing in power, roadways and things. So it’s very exciting for us.

It sees us doubling our PGM output within short order. So very exciting.

If we look at our peers, well-established producers on the Great Dyke, which are the majors, their lowest-cost PGM ounces come from the Great Dyke. So there’s a precedent, a mining legacy on the Great Dyke of successful operations.

SIMON BROWN: Is this also relatively shallow?

PHOEVOS POUROULIS: Yes, we are starting with an open pit. We have a 17-year open-pit phase-one life, which gives us that 190 000 ounces a year. And then it’s a huge land package. So when we look at phase two, three, and even four, we’d be looking at going underground, or [a] portal development shaft. So these are options available to us as we successfully develop the first phase.

SIMON BROWN: How long to ramp up to that 190 000oz, because your guidance for this year, for the next year is 175 000oz to 185 000oz. So it’s literally doubling your output.

PHOEVOS POUROULIS: Correct. So we see first ore in the mill in July 2024, [and] give ourselves six months to de-bottleneck the processing plant. I think on an annualised basis in calendar year 2025 we should start seeing us getting to that run rate.

SIMON BROWN: Okay. A last question [on] chrome. Of course, the Vulcan plant is relatively new in your life. You made the point that you are supplying about 10% to 12% of China’s annual demand in chrome. Is that demand holding up? There are all sorts of challenges coming out of China, most notably zero-Covid policies.

PHOEVOS POUROULIS: Absolutely. There are many mixed messages, and I suppose the one that hits the headlines is the zero-Covid policy. Demand has been robust. We’ve seen the price being supported. It’s currently $220/tonne at current exchange rates. It’s exceptionally high [at] converted rand prices for our chrome.

Most importantly, through the multi-modal export channels we have, we’re able to get our product out of the country and to our customers.

I think what gives us confidence is that port stocks in China are still extremely low. They’re not at these peaks that we’ve seen previously. It means that it’s almost a just-in-time model, so they physically need the delivery of these chrome units and we haven’t seen restocking of any significance in this last year or so.

The chrome price is up some 35% year on year, and it’s boosted our record revenue and profit. Where PGM has dropped, chrome has picked up on the other side. So we are really pleased with our financial results for the year.

SIMON BROWN: That is Tharisa CEO, Phoevos Pouroulis. Phoevos, I always appreciate the time. Really a good set of numbers there.

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