STRONGER demand and elevated prices of chrome, boosted by rising exports to China, as well as increased global production of stainless steel helped Tharisa avert heavy blows from the plunge in platinum group metals (PGM) prices.
The low PGM prices are forcing larger operators to scale down production, curtail capital and shut down some shafts.
Tharisa has also had to delay its Zimbabwean Karo platinum production.
Nonetheless, the company has been receiving an uplift from chrome, whose prices have been inching up, on the back of stronger demand from China and global steel manufacturing.
“Continued real demand for chrome concentrates from China, necessary to maintain its stainless steel appetite, and the rich mineral endowment in South Africa continues to support the demand from South Africa,” Tharisa said yesterday.
It added that global volume demand for chrome in 2023 had been supported by a 4.6% increase in stainless steel production, with global chrome production increasing by 4% despite a rundown of port inventories in China, with spot metallurgical grade prices touching $305 (R5 602) per ton.
During the half year period to the end of March, Tharisa’s chrome production increased by nearly 10% to about 867 000 tons, realising an average metallurgical grade chrome price of $288 per ton compared to $247 per ton a year earlier, representing a nearly 17% increase.
The company’s PGM production, however, fell by 7.7% at slightly above 71 000 ounces at an average PGM basket price of $1 344 per ounce, which was 39.3% lower compared to the previous contrasting period.
After announcing a $5m share repurchase in March, revenues in Tharisa for the half year period rose 10.1% to $369.1m although earnings before interest, tax, depreciation and amortisation (Ebitda) were flat at $79.6m at an Ebitda margin of 21.6% against 24.2% for 2023.
With the company’s interim pre-tax profits falling from $72.4m last year to $53.2m in the half year under review, Tharisa’s headline earnings per share for the period resultantly plunged by 25% to 13.2 USD cents.
“Ebitda for the six month period decreased slightly by 2.0% as a result of inflationary pressures which were not fully off-set by increased production volumes,” Tharisa said.
“The cost of purchased run of mine (ROM) ore exceeds the mines cost of mining further impacting on the cost base.”
Moreover, during the half year period under review, logistical infrastructure challenges for inland transport of bulk commodities continued to affect the company and other industry operators in South Africa.
Tharisa is, however, “managing this extremely well with on time deliveries” to customers.
“Possible supply constraints from curtailed PGM production, producing chrome as a by-product support chrome prices going forward,” the company explained.
“Primary PGM producers are reporting significant reductions in profits as a consequence, and it is likely that the supply side will be further constrained in the near term.”
Tharisa CEO, Phoevos Pouroulis, said “the fundamentals of our co product model once again showed relevance as we absorbed a nearly 40% decrease in PGM prices, countered by a 16% increase in chrome concentrate prices, maintaining our Ebitda in line with last year’s comparable” numbers.
Describing the current environment as challenging for commodity markets, Pouroulis said Tharisa was maintaining its “capital allocation discipline including returning cash to shareholders through the payment of an interim dividend combined with a share repurchase programme” that exceeded the group’s stated policy.
Tharisa paid an interim dividend of 1.5 USD cents per share.
Shares in the company closed 5.14% higher at R18.40 yesterday.
BUSINESS REPORT