Our opinion on the current state of THA

Tharisa (THA) is a mining company that mines and beneficiates platinum group metals (PGMs) and chrome. The company is listed in London and on the JSE. The Tharisa mine on the south-west limb of the Bushveld Igneous Complex (BIC) is an open pit operation with an estimated life of 17 years. The company owns a subsidiary, Arxo Metals, which beneficiates chrome to produce high-grade chrome concentrates. The company is planning to expand into the Great Dyke area of Zimbabwe. In our view, this is one of the best mining investments on the JSE with a cost of production which is well below current metals prices and some good options for expansion. The company has been involved in the Vulcan Plant which will improve chrome recovery to 82% from 65% and cost $54,2m. The target is to reach 200 000 ounces of PGM's (platinum group metals) and 2m tons of chrome ore production using a proprietary technology. The open pit operation is relatively low cost and does not have the problems associated with underground operations. The company is planning to build a 5MW furnace that will enable it to produce iron alloys which are rich in platinum group metals and would sell for a far better price. On 5th October 2021, the company announced the cold commissioning of its Vulcan chrome beneficiation plant which is expected to increase chrome recoveries by 20%. On 4th February 2022, the company announced that it had signed an agreement to implement a solar farm of more than 40 megawatts. On 27th March 2023 the company announced that it had raised $130m (about R2,3bn) in finance from ABSA and Soc Gen. In its results for the six months to 31st March 2023 the company reported revenue up 0,4% and headline earnings per share (HEPS) up 13,5%. The company said, "Chrome was the standout performer for the period, with prices rising 41.1% to average at US$247/t (31 March 2022: US$175/t), while the weakening exchange rate meant that when measured in Rand/tonne terms the price increased by 64.3% for the period under review. While the PGM prices retreated, the fundamentals for the commodity remain fundamentally strong, with Tharisa uniquely positioned to manage the industry input challenges given our low use of electricity, open pit nature of the operations, flexibility of the processing plants and multiple revenue streams extracted from the run of mine material". In a production report for the third quarter to 30th June 2023 the company reported PGM output up to 37000 ounces and chrome output slightly lower at 378,8 kilotons. The company said, "Cash on hand increased by US$36.8 million to US$242.6 million (31 March 2023: US$205.8 million), resulting in a net cash position of US$141.5 million (31 March 2023: US$101.1 million)". In a production report for the 4th quarter to 30th September 2023 the company reported, "Chrome production for the year at 1 580.1 kt (FY2022: 1 582.7 kt) with Q4 at 413.4 kt (Q3 FY2023 378.8 kt) - PGM production for the year at 144.7 koz (FY2022: 179.2) with Q4 at 30.7 koz (Q3 FY2023: 37.0 koz)". Technically, the share is well traded with over R500 000 worth of shares changing hands on average each day, which makes it very practical for private investors. It was in a strong upward trend until April 2022 but has since turned down in line with commodity prices. It remains a risky commodity share dependent on the international prices of the commodities which it produces.