Our opinion on the current state of THARISA(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 $54.2 million. The target is to reach 200,000 ounces of PGMs and 2 million tons of chrome ore production using 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 $130 million (about R2.3 billion) in finance from ABSA and Soc Gen.

In its results for the year to 30th September 2023, the company reported PGM production down 19.3% and revenue down 5.3%. Headline earnings per share (HEPS) fell 31.1%. The company said, "The decline in reef mined primarily emanates from access restrictions to the open pit due to limitations on mining activities in close proximity to the nearby community, adverse weather conditions experienced as well as the processing of suboptimal reef horizons which were supplemented by purchased ROM ore to maintain plant throughput."

In a production update on the 3 months to 31st December 2023, the company reported mill throughput for PGMs and chrome up 8.7% with chrome at a record 462.8 kilotons. The CEO, Phoevos Pouroulis, said, "We have made good operational improvements, with waste mining advances leading to a better mining and plant performance, resulting in record quarterly chrome production."

In a production report for the second quarter ending on 31st March 2024, the company reported PGM output unchanged and the basket price received slightly down. At the end of the quarter, the company had cash of $184.6 million and debt of $114 million. The CEO said, "Operationally we performed well, building on a record first quarter and on track to meet guidance."

In a trading statement for the six months to 31st March 2024, the company estimated that HEPS would fall by between 23.3% and 29%. Technically, the share trades an average of R228,000 per day, which makes it practical for private investors. It was in a strong upward trend until April 2022 but then turned down in line with commodity prices. Since March 2024 the share price has been rising in line with the improved prospects for PGMs. We recommended waiting at least for a break up through the downward trendline before investigating further. That break came on 26th March 2024 at 1405c and the share has since moved up to 1800c. The share remains a risky commodity counter dependent on the international prices of the commodities which it produces.