Tharisa declares 33% lower dividend despite improved headline earnings

Tharisa, the South Africa-based platinum and chrome mining company, paid a 33% lower dividend to 3 US cents (4.5 US cents) in the year to September 30, after production fell, but headline earnings improved marginally.

Reef mined increased 17.4% to 5.4Mt from 4.6Mt. PGM production fell by 4.7% to 138.3koz (thousand ounces) from 145.1koz in the previous year. Chrome concentrate production fell 8.2% to 1.56Mt compared with 1.7Mt in the previous year.

The share price nudged up 0.7% to R21.65 on the JSE Monday afternoon - a year before the share price traded at R16.40.

Revenue declined by 16.4% to $602.9 million. Operating profit was up 5% to $125.6m from $119.6m in the previous year. Earnings before interest tax depreciation and amortisation was up 5.5% to $187.3m. Headline earnings a share fell 2.1% to 27.5 US cents from 28.1 US cents.

Tharisa is a significant player in the global chrome industry, supplying some 10% of China and Indonesia's annual demand. The company is also prominent in the specialty chrome market, with roughly 15% of the average annual chrome output delivered into these markets.

The group is developing the Karo Platinum Project, a tier-one PGM project on Zimbabwe's Great Dyke. Investments in downstream beneficiation, including proven chrome and PGM alloy production, will add significant downstream value when commercialised.

"Karo Platinum has advanced significantly, with exploration, mine planning and infrastructure development largely complete. The project is derisked, part funded and positioned to commence production with high confidence in geology and cost controls," the directors said.

PGM revenue increased by 24.2% year-on-year as a result of an 18.6% increase in PGM basket prices with PGM production relatively consistent at 138.3 koz. The group's production is mainly from Tharisa Mine near Rustenburg in South Africa.

Average PGM basket prices were at $1 615/oz versus $1 362/oz in the previous year. Average annual metallurgical grade chrome concentrate prices contracted by 11% to $266/t.Total capital expenditure amounted to $113.6m ($195m).

Of the capital spent, $36.2m pertained to mining fleet, $22.9m related to other mining assets, additions to the deferred stripping asset amounted to $9.8m, $12.6m was spent on the underground mining development and capital spent for the Karo Platinum Project amounted to $32.1m.

Cash and cash equivalents totalled $175.1m at September 30 ($223.7m in the previous year.

Production guidance for the upcoming year was set between 145 koz and 165 koz PGMs and 1.50 Mt to 1.65 Mt of chrome concentrates.

"South Africa's chrome and PGM industries are well positioned to benefit from structural global demand for stainless steel, renewable technologies and green-economy metals. Maintaining competitiveness will, however, rely on addressing systemic infrastructure issues, embracing technological advancements and ensuring that the industry meets rising stakeholder expectations around responsible mining," Tharisa's directors said.

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