Our opinion on the current state of THARISA(THA)

Tharisa (THA) stands out in the mining sector, focusing on the extraction and beneficiation of platinum group metals (PGMs) and chrome. The company's primary operations are anchored in the Tharisa mine, strategically located on the Bushveld Igneous Complex's south-west limb. This open pit mine boasts an impressive life expectancy of 17 years, highlighting the company's sustainable resource management. Tharisa's commitment to innovation and efficiency is further demonstrated through its subsidiary, Arxo Metals, which specializes in producing high-grade chrome concentrates.

Looking beyond its established operations, Tharisa is eyeing expansion into Zimbabwe's Great Dyke area, presenting promising growth avenues. This ambition underscores the company's position as one of the JSE's premier mining investments, boasting production costs significantly lower than current metal prices, alongside notable expansion potential.

The company's investment in the Vulcan Plant marks a pivotal development in enhancing chrome recovery rates from 65% to 82%, at a cost of $54.2 million. This initiative is aimed at boosting production to 200,000 ounces of PGMs and 2 million tons of chrome ore annually through proprietary technology. The operational efficiency of Tharisa's open pit mining operation, free from the challenges of underground mining, positions it advantageously in the industry.

In a strategic move to add value to its product range, Tharisa plans to construct a 5MW furnace to produce platinum-rich iron alloys, targeting higher market prices. Recent milestones include the cold commissioning of the Vulcan chrome beneficiation plant on 5th October 2021, expected to enhance chrome recovery by 20%, and the signing of an agreement on 4th February 2022 for the implementation of a solar farm exceeding 40 megawatts. Furthermore, on 27th March 2023, Tharisa secured $130 million in financing, bolstering its financial position and project implementation capabilities.

However, the year to 30th September 2023 presented challenges, with a decrease in PGM production by 19.3% and a 5.3% dip in revenue. Factors such as mining restrictions near community areas, adverse weather conditions, and the processing of lower-grade ore adversely affected performance. Despite these hurdles, operational improvements in the following quarters led to record chrome production, demonstrating the company's resilience and adaptive strategies.

As of the second quarter ending 31st March 2024, PGM output remained stable, with a slight dip in the basket price received. The company's robust cash position and manageable debt level reflect its solid financial health and operational efficiency.

From a trading perspective, Tharisa is highly active, with daily share transactions exceeding R1.1 million, making it accessible to private investors. Although the share experienced a downward trend in line with commodity prices until April 2022, recent improvements in PGM prospects have led to a price recovery. The share price broke through the downward trendline on 26th March 2024 at 1405c, climbing to 1575c, indicating positive momentum. Despite its potential, Tharisa's performance remains closely tied to international commodity prices, presenting inherent risks associated with the volatile nature of commodity markets.