- Tharisa's operational improvements and new equipment should support a stronger H2 despite Q2 challenges.
- Karo Resources' development remains on time and budget, positioning Tharisa to become a multi-jurisdiction PGM producer.
- Zimbabwe's significant PGM potential and recent mining industry reforms have attracted international interest and benefit from Karo Resources' development.
Harare- Tharisa, the South African chrome and platinum group metals (PGM) miner, recently announced its operational and market updates for the second quarter of its financial year. The company's CEO, Phoevos Pouroulis, noted that the company had generated healthy free cash flow in the quarter despite severe weather conditions that impacted its open pit mining operations. While chrome production was up, the ore mix saw PGM output in January and February fall below expectations for the quarter. However, the company's operational improvement implemented during the quarter delivered results, and additional flexibility brought by new equipment and an additional waste contractor will improve the second half of its financial year.
Tharisa's Vision 2025 strategy of reaching optimal and sustainable production from the Tharisa mine remains intact, and the company will benefit from the significant progress made at Karo, its second tier-one mine. Karo's development remains on time and budget for the first ore to the mill in H2 2024, positioning Tharisa to evolve into a multi-asset/multi-jurisdiction PGM producer. The development of Karo Resources is a significant milestone for Zimbabwe's mining industry, as the country seeks to diversify its economy and reduce its dependence on agriculture.
Zimbabwe's PGM industry has significant potential, with the country holding the world's second-largest PGM reserves after South Africa. However, the country's PGM sector has suffered from underinvestment, lack of infrastructure, and government policies that deterred investment. The government's recent efforts to reform the mining industry and attract investment have attracted interest from international mining companies, including Tharisa.
Karo Resources is a joint venture between Tharisa and the Zimbabwean government, with Tharisa holding a 26.8% stake in the project. The project aims to develop a world-class PGM mine in the Mhondoro-Ngezi platinum belt, which is estimated to hold over 96 million ounces of PGMs. The project's development will create employment opportunities, strengthen the country's economy, and position Zimbabwe as a significant PGM producer.
The PGM market has faced challenges in the second quarter due to softening demand and destocking, which took some shine off the strong pricing seen in FY2022. Rhodium and palladium prices remain the most affected, with rhodium suffering from a small, tight, illiquid market influenced by a single seller. However, the outlook for the PGM basket remains strong as tight supply and strong demand will ensure prices strengthen, with platinum the standout metal as the continued shift into a supply deficit becomes evident.
Chrome prices remained robust following a strong first quarter, with spot at around US$285/t at the time of writing. Stockpiles in China continue to hover at historically low levels while demand for the product from South Africa remains strong. However, supply is hampered by load shedding and inland logistics challenges affecting the industry. The long-term fundamentals for the metal remain firmly intact, particularly due to the supply concentration and the operational challenges some competing industry players have cited publicly, which will have an impact on the already tight supply-demand fundamentals.
Tharisa's operational update shows that the company faced adverse weather conditions that impacted its in-pit flexibility, affecting volume and reef mix. The company's stripping ratio improved as waste was moved in areas recovering from in-pit flooding. Total reef tonnes milled for the quarter were supplemented by stockpiles and strategic ROM ore purchases. Quarterly PGM production was lower than expected due to the oxidized UG ROM ore that was also milled and affected PGM recovery. Quarterly chrome production was higher than expected, and the yield from the Vulcan plant improved.
Karo Mining Holdings is proceeding with extensive earthworks, and civils contracts have been awarded for the pouring of the foundations for all plants and infrastructure. Contracts for high voltage power lines and all main transformers have also been awarded, and long-lead items for the project are being ordered as per schedule. Trial mining is set to commence, with 30 kt of ore to provide further information on drilling, blasting, grade control, and processing. The project has 150 employees and contractors on site in Zimbabwe, with the majority of Zimbabwe management positions filled.
Tharisa's cash balance was US$205.8 million at the end of the quarter, and debt was US$99.0 million, resulting in a net cash position of US$106.8 million. Due to lower-than-expected production in Q2:2023, production guidance is reduced by 10% from the previous range of between 175 koz and 185 koz PGMs (6E basis) and 1.75 Mt to 1.85 Mt of chrome concentrates.
In conclusion, Tharisa's operational and market updates show the challenges faced by the PGM industry due to softening demand and destocking. However, the market outlook remains strong, particularly for platinum, as the shift into a supply deficit becomes evident. Karo Resources' development remains on time and budget, positioning Tharisa to evolve into a multi-asset/multi-jurisdiction PGM producer. Zimbabwe's PGM sector has significant potential, and the government's recent efforts to reform the mining industry and attract investment have attracted interest from international mining companies. Karo Resources' development will create employment opportunities, strengthen the country's economy, and position Zimbabwe as a significant PGM producer.
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