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Tharisa ready to “implement next phase of growth” after year of record production

Snapshot

In its outlook for 2019, the firm said the focus was now “not only on continuous improvements in feed grade and recoveries but on expanding the business into new jurisdictions”

Platinum

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Price: 98.71999 GBX

LSE:THS
Market: LSE
Market Cap: £263.2 m
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Tharisa plc (LON:THS) says its business has matured and positioned “to implement the next phase of growth” following a year of record production.

In an outlook statement at the end of November, the mining firm said the focus was now “not only on continuous improvements in feed grade and recoveries but on expanding the business into new jurisdictions”.

READ: Tharisa financials reveal cash flow boost amid record production

“The management team is positive about the prospects for the year ahead and believes that with the various expansion plans, a strong focus on our mining division delivering quality ROM and managing the extensive yellow fleet to OEM standards, economies of scale will be demonstrated through reduced unit costs and increasing operating margins.”

The company is aiming to produce 160,000 ounces of platinum group metals (PGM) and 1.5mln tonnes of chrome concentrate for the 2019 financial year at its mine in South Africa, meanwhile, looking a little further ahead, it highlighted that the ‘Vision 2020’ strategy aims to deliver 200,000 ounces and 2mln tonnes.

“Year of record production”

The confident outlook was accompanied by record numbers in the firm’s full year results for 2018, in which it had seen “a year of record production achieved with increased plant throughput and metal recovery”.

Tharisa produced 152,200 ounces of PGM and 1.4mln tonnes of chrome concentrate in the twelve months ended 30 September 2018.

The miner also highlighted that its PGM basket benefitted from preferable pricing, compared to the otherwise lacklustre pure platinum price, because its concentrate favours palladium and rhodium.

Tharisa’s PGM basket price increased by US$137 per ounce, to US$923 per ounce, as the price of rhodium, ruthenium, iridium, and palladium remained strong. At the same time, the prices available for metallurgical chrome concentrates softened to below US$200 per tonne – compared to a 2017 high of US$390 - as a result of higher stockpiles in China.

Cash generation boost

Certain operational improvements helped Tharisa’s cash generation during the year to US$89.8mln up from US$75.7mln in the preceding year.

Revenue rose by 16.3% to US$406mln, from US$349.4mln in 2017, as PGM production increased by 6% and chrome concentrate increased by 8.8% - PGM’s generated around US$117mln of revenue, chrome contributed US$250mln and the group’s trading business brought in US$38.5mln.

A US$72.5mln operating profit for the year was also reported, compared to US$98.4mln in 2017, while it marked a US$51mln net profit versus US$89.8mln in the previous year.

Earnings per share for the year was down 13.6% to 19 American cents, and, the company confirmed it will pay a 4 cents per share dividend to shareholders, representing 20.5% of net profit after tax.

“Against the backdrop of increased production volumes and prevailing commodity markets and notwithstanding material increases in both fuel prices and freight rates, we still generated strong cash flows from operations,” Tharisa said.

“Our mining operations took a major step forward, as we became owner-operator of our mining fleet in the year under review”, it added.

The switch away from a contracted mining model to a company owned fleet had its inherent increase in costs for the year, and, also introduced certain fixed cost elements. Nonetheless, the company highlighted that it now has the capacity to deliver the necessary run-of-mine volumes to deliver its production targets for 2019.

With shares trading around 107.5p as of 4 January 2019, Tharisa carries a market cap of £280.9mln.

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