- PGMs prices have plummeted by an average of 50%
- Commissioning delayed by 12 months
- However, there was a recovery in chrome prices
Harare- Tharisa Private Limited Company, a prominent mining company listed on the London Stock Exchange (LSE) and Johannesburg Stock Exchange (JSE), has announced a deliberate decision to prolong the commissioning of the Karo Platinum Project by an additional 12 months due to weakening platinum group metal prices. The revised timeline aims to achieve project completion in June 2025.
The Karo Platinum Project, with an estimated cost of US$391 million, commenced construction in December 2022, with an initial commissioning target set for July 2024.
Once fully operational, the project is anticipated to yield an annual production of up to 194,000 ounces of precious group metals (PGMs). This significant output would position Karo as the third largest platinum mine in Zimbabwe, trailing behind Zimplats and Unki, and contribute to a 20% increase in the country's overall platinum production.
This decision to extend the commissioning comes in response to the decline in global prices of precious group metals. The weakening demand for these commodities is attributed to the stronger dollar, which has diminished their appeal in the market. Additionally, geopolitical tensions have further complicated the production and distribution processes of PGMs, adding to the challenges faced by the industry.
When planning the Karo project, Tharisa had projected that at average PGM 6E prices of US$2,140 per ounce and costs of US$1,096 per PGM ounce, Karo would make a return on capital invested of 30.1% and an internal rate of return of 26.1%. But in the year to September, Tharisa realised an average PGM basket price of US$1,893 per ounce, 26% lower than the average price of US$2,564 per ounce that it received during the same period in 2022.
In a statement accompanying the full-year report, Phoevos Pouroulis, CEO of Tharisa, commented: “The divergence in commodity prices could not have been more visible than the past quarter which saw us touching 52-week highs in the chrome market based on solid fundamentals, but these fundamentals were distinctly lacking in the PGM market, which saw prices drop more rapidly and lower than the market anticipated, resulting in broad based challenges for the PGM market on the supply side.
While current markets are volatile and unpredictable, we believe in the medium term outlook for PGMs underpinned by a supply side constrained economy, this supported by a robust chrome market driven by stable demand.”
Tharisa holds a 70% stake in Karo Mining, which indirectly owns 85% of the Karo Platinum project. The government of Zimbabwe retains the remaining 15% interest in the project on a free-carry basis. It means that the government holds a 15% interest in the project without being required to provide any funding or share the financial burden of its development and operations.
The project boasts initial probable reserves of 35.5 million tonnes, with a grade of 2.31 grams per tonne, containing approximately 2.5 million ounces of platinum, palladium, rhodium, and gold. It is designed as a Tier 1 open-pit operation, designed to be scalable, low-cost, and low-risk, and will be developed in phases. The development plan includes the sequential opening of four open pits, with the first pit having a strike length of 7.6 kilometres and an ultimate depth of 99 meters. This initial pit is expected to have a lifespan of six years, followed by the development of the remaining pits.
In addition to mining and refining operations, the project includes the establishment of a 300 MW solar photovoltaic (PV) power plant, which will contribute electricity to the national grid of Zimbabwe. As of June 30, 2023, the project employed a total of 540 people on site, with 99 being Karo employees and the rest being contractors.
Meanwhile, during the full year to 30 September 2023, chrome production, reef mined and decreased compared to prior year.
However, the average annual prices of metallurgical grade chrome concentrate experienced a significant increase of 26.2%, reaching US$263 per metric ton (FY2022: US$209 per metric ton).
The group's cash reserves also saw growth, rising to US$268.8 million as of June 30, 2023, compared to US$242.6 million in the previous year. However, the group's debt increased to US$142.2 million from US$101.1 million during the same period, resulting in a net cash position of US$126.6 million (June 30, 2023: US$141.5 million).
Looking ahead, the group has established production guidance for the fiscal year 2024 ranging from 145,000 to 155,000 ounces of PGMs (on a 6E basis) and 1.7 million to 1.8 million metric tons of chrome concentrate.
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