Tharisa reports big drop in profit as it invests for future
Lower revenue and greater cost of sales cut into the net interim profit of chrome and platinum group metals (PGMs) miner Tharisa, while it looks to invest as it aims to cash in on the energy transition.
The company, valued at R6.2bn on the JSE, reported in its results for the six months to end-March that gross profit (revenue minus the cost of sales) fell 23.7% to $93.6m and net profit slumped 46.2% to $54.7m.
Listed on the JSE and in London, Tharisa operates a single mine in SA near Brits in the North West and owns Karo Mining and Salene Chrome, which are development-stage, lowcost open-pit PGMs and chrome assets in Zimbabwe.
“Our investment in our assets, our strong production profile, our ability to get our product to market and the time and investment in research & development are vital to create a sustainable business in the long term,” said CEO Phoevos Pouroulis, adding that the commodities the mining industry is producing are vital for the move from fossil fuels to greener energy sources.
Platinum, iridium and ruthenium, which Tharisa produces, are used in electrolysis to split water into hydrogen and oxygen, while PGMs also go into producing the fuel cells of electric-vehicle engines.
In the latest interim results, the chrome side of the business, which is the largest by gross profit, benefited from greater demand from Tharisa’s top market, China, while the PGMs saw a slowdown in demand, in particular from the vehicle market. This was partly the result of high inflation and interest-rate hikes reducing demand as customers held onto their cars for longer and were hesitant to buy new ones.
But in the latest results, higher chrome prices — partly because of the weaker rand — helped offset lower PGM spot prices, but Pouroulis believes in the fundamental demand for PGMs in the long term.
“If we start seeing the settling of that interest-rate hike strategy, I think we’ll start to see automotive sales picking up from next year, but certainly China is the main driver at the moment,” Pouroulis told Business Day in an interview. “It has a compounding effect because people don’t sell their cars, so the recycling also comes down, so it adds indirectly to tightening of market supply.”
In March, Tharisa announced it raised a $130m debt facility from Société Générale and Absa Bank to pursue growth objectives while maintaining a sustainable dividend policy.
The company is developing the Karo platinum project in Zimbabwe at an estimated cost of $390m. The low-cost, openpit PGM project is due to come on stream in July 2024, with the initial production of 194,000oz expected.
In other financials, the gross profit of the PGM segment fell 61.4% to $33.4m and the gross profit margin 16.9 percentage points to 27.4%, while chrome lifted more than two-thirds to $58.2m and the gross profit margin 1.8 percentage points to 30.9%.
Operating profit, generated from a company’s core operations, subsided 29% to $63.5m. Chrome was the biggest segment by gross profit, accounting for 62.2%, followed by PGM (35.7%).
The dividend remained 3 US cents per share.
To offset the effects of loadshedding, Tharisa has obtained environmental approval to build a 40MW solar plant at its Tharisa mine, which it hopes will be up and running at the end of 2024.
Tharisa’s share price closed up 2.29% at R20.51 on Friday.