SMALL CAP IDEAS: Platinum and chrome miner Tharisa

In a sense the The price of the Tharisa share graph makes for a gloomy look.

Platinum and chromium production was hit by unprecedented rainfall last year at the company’s South African operations.

During the same period, initial concerns about supply constraints in the metal markets due to the Russian invasion of Ukraine were subsequently allayed.

Tharisa’s share price rose and then fell.

Stocks have been bouncing around at their current levels for the past six months – below the five-year high reached when the war in Ukraine began, yet two and a half times higher than the lows reached in the worst polls. of the covid devastation.

At current levels, the market values ​​Tharisa at just over £300m, well and good – the company has a track record of production at the eponymous Tharisa mine going back several years, and it doesn’t have many faults made.

What has been really lacking so far is growth. This year seems to be one in which Tharisa will change that.

As a cornerstone, this year’s production guidance for the Tharisa mine is set at between 175,000 and 185,000 ounces of platinum group metal and between 1.75 million tons and 1.85 million tons of chromium, not far off the 2022 figures.

There is also more than $200 million in the bank. But it’s Tharisa’s drive to develop new assets in new jurisdictions that really seems to transform the company.

Ranking first in this growth strategy is the Karo Platinum Mine in Zimbabwe, held via a 70 percent stake in a vehicle that owns 85 percent of the project. The remaining 15 percent is owned free of charge by the Zimbabwean government.

The project is well advanced and several ceremonies have already been held.

Ground was broken in December 2022 and construction is now moving forward, after a non-dilutive $38 million in bonds was raised on the new Victoria Falls stock exchange.

Tharisa hopes to extract platinum and other materials from the Karo mine in Zimbabwe

Tharisa has no hesitation in referring to Karo as a world-class asset, based on an estimate that the project contains nearly 10 million ounces of platinum group elements with an average quality of just over two grams per ton.

The main elements are platinum, palladium, rhodium and gold, with some added benefit from copper and nickel.

The plan is to develop a mine with a 20-year life, producing approximately 150,000 ounces of platinum group elements in concentrate per year.

This is pretty high-end stuff for a platinum project, and something you don’t see in many other parts of the world.

Indeed, Zimbabwe’s Great Dyke, in Mashonaland West, about 50 miles south of Harare, is perhaps second only to South Africa’s Bushveld region in terms of potential for platinum-group metals.

The only other area worthy of comparison is Norilsk in Russia, which is primarily a nickel-producing company, although PGM production is admittedly very significant.

Anyway, Karo is big, it has the correct geological address, and from Tharisa’s point of view, it has the correct geographical address as well.

This development takes the company from its original country of establishment, South Africa, but not too far, to a country where ties are strong and mutual benefits are well understood.

Mining is one of the few sectors that has kept Zimbabwe’s economy afloat over the past decade, and the new Mnangagwa government has been quick to recognize that.

At the groundbreaking ceremony in December, the Zimbabwean minister in attendance, Winston Chitando, spoke of the 1,000 permanent jobs likely to be created by the project, as well as the 7,000 jobs likely to be created by construction.

Karo’s green potential was also mentioned as much of the power will come from a new solar installation also in the works.

It will take a little more money to get Karo up and running, but the economics are convincing.

The net present value has been set at just over $770 million, with the after-tax internal rate of return likely to be just over 47 percent.

It’s not hard to understand why Tharisa is committed to Karo, nor hard to understand what success would mean.

Not only would a significant portion of production be added to the company’s annual output, but a significant marker will also be established.

This is a company that is willing and able to expand at all levels.

Karo’s first production is expected in 2024, but it wouldn’t be surprising if the stock started moving long before that.