THARISA, a Johannesburg- and London-listed chrome and platinum group metal (PGM) miner, reported flat second quarter production year-on-year, but there was a much-needed positive bump in pricing, especially for its PGM production.
The company also said there had been margin support following the 21-day lockdown announced by the South African government owing to a significant weakening of the rand against the dollar whilst the chrome price had also shown signs of revival.
Last month, Tharisa suspended full-year chrome and production guidance as a result of the lockdown which has been imposed nationwide in terms of the Disaster Management Act, in an effort to control the spread of the COVID-19 virus in South Africa.
“The impact of COVID-19 remains a significant and unquantifiable threat to South Africa’s economy,” said Phoevos Pouroulis, CEO of Tharisa in a production report today. The firm had complied with lockdown regulations, but was able to continue with limited mining as its chemical grade chrome concentrate was a key ingredient to essential industries.
Crucially, the firm’s 300,000 tons per month Voyager processing facility was continuing, as allowed in terms of government regulations, but Tharisa had suspended work on its Vulcan chrome recovery project. Tharisa said it had retained the support of its lenders during the lock-down period. Uncertainty exists in whether, the lockdown will be lifted when the stipulated period of shutdown ends on April 17.
Analysts were positive, however. “Along with stockpile financing from its lenders this means Tharisa can run at about 75% capacity removing the majority of the lockdown uncertainty,” said Peter Mallin-Jones and Tim Huff, analysts for Peel Hunt.
“It also means it will have cargoes to ship once rail and port restrictions are also lifted, meaning a quicker return to revenues,” they said.
Chrome concentrate recovery came in at 310,000 tons for the second quarter of Tharisa’s financial year which compares to 308,700 tons in the second quarter of the previous financial year. The was below a 350,000 ton estimate of BMO Capital Markets, although it was also partially caused by the unforeseen downtime in the initial days of the lockdown.
PGM production was 32,100 ounces which compares with 34,000 oz in the previous financial year.
Hearteningly, however, the market has improved, especially for PGMs. The dollar basket price for Tharisa’s PGM 6E production increased 29.6% quarter-on-quarter to $1,822/oz and a significantly higher 33.5% in rand terms, also on a first quarter versus second quarter average pricing basis.
Tharisa welcomed the “margin support” assisted by the decline in the diesel price which was a function of the COVID-19 demand shock and, before that, a price war between Saudi Arabian oil producers and their Russian counterparts.
BMO said Tharisa had fared reasonably well in the quarter, especially as it had navigated a degree of production during the lockdown ahead of its peer group. “Despite a number of current challenges in South Africa, Tharisa has made commendable progress during the lockdown,” the bank’s analyst Alexander Pearce said in a report.
“Thus, although many challenges remain, with ongoing support from lenders, and initiatives to improve liquidity in progress, Tharisa should be well placed to benefit from the eventual easing of restrictions in the country, in our view,” he said.
