Inside Karo Mining Holdings US$ 50m VFEX bond launch
Who is Karo Mining Holdings (KMH)?
KMH is a developer in an upcoming Tier 1 platinum group metals (PGMs) development project situated on the Great Dyke in Zimbabwe. The project area was acquired from Government in 2018 and covers a land area of circa 24 000 hectares sitting just north of the Zimplats Ngezi operation.
KMH is majority owned (70 percent) by Tharisa plc, an integrated PGM and chrome producer listed on the main boards of the Johannesburg Stock Exchange (JSE) and London Stock Exchange (LSE). Tharisa operates a substantial mine in Rustenburg, South Africa that supplies circa 4 percent of the world’s chrome and in its latest financial year 2021 financials turned over circa US$600 million (1H22: US$334million).
What is the size of the KMH project in Zimbabwe?
The Karo platinum project in Zimbabwe contains a total resource of 96.4m oz of PGMs; in phase 1 of production. Karo is planning to produce around 190 000 ounces of PGMs per annum, an estimated 2 percent contribution to Zimbabwe’s gross domestic product.
The project will directly create 1 000 jobs and in steady-state production generate revenue in the region of US$380 million-US$400 million per annum. The project will be developed over the next 24 months at an estimated cost of US$391 million representing significant investment into the country.
What are PGMs?
Platinum group metals (PGMs) form a basket of metals that are jointly mined and known for their unique properties; the basket typically includes platinum, palladium, rhodium, iridium and ruthenium in various quantities.
Primary usages are for autocatalytic converters in combustion engines, also used in electronics, chemicals, glass and jewelry. Zimbabwe contains the second largest deposit of PGMs globally after the Bushveld Complex in South Africa. In phase 1, Karo is projected to become a top three producer of PGMS in Zimbabwe.
Why a listed bond?
The Karo project will require a total funding package of circa US$391m. This will be raised via a combination of equity from the parent Tharisa plc (US$35 million already invested to date), syndicated off-shore debt and a local debt component of US$50 million.
The US$50 million will be raised via a public listed bond on the Victoria Falls Stock Exchange (VFEX). The listing of the KMH bond on the VFEX will be the first publicly listed bond in the country in decades marking a critical step in the evolution of Zimbabwean capital markets and widening of investment product offerings.
The bond allows local institutional and retail investors access to a structured debt instrument denominated in United States Dollars, with principal and interest repayable in US dollars by a credible developer and natural exporter.
Local investors will have exposure to the rapidly growing PGM space and the advantage of a transparent secondary market in which the bond will be tradable. Karo will in turn benefit from the incentives offered by the VFEX, the Special economic zone (SEZ) and the critical component of local participation in the project.
What is the opportunity; mechanics of the bond?
The Karo bond is now open and available for subscription, the subscription window closes on November 30, 2022. The bond is denominated in US dollars and has a 3-year tenure (2025), with a semi-annual coupon of 9, percent per annum.
It is secured by a Corporate Guarantee from Tharisa plc, that is dual listed on LSE and JSE.
The minimum subscription size is US$2 500 and the bonds will be tradable on the VFEX.
The global bond market is roughly US$1 trillion and a significant source of capital for governments, companies and financial institutions, the journey to re-establish a credible bond market and culture in Zimbabwe is an exciting step in the development of the country.