In uncertain times like these, production beats exploration in the mining industry - hands down.
But, for a junior or mid-cap company like Tharisa PLC (LSE:THS, JSE:THA, OTC:TIHRF) the optimum position is to have a significant growth pipeline as well.
To fund that growth, though, you need capital. Which is why Tharisa has today announced it’s put in place US$130mln of additional debt finance.
How is it that Tharisa is in a position to issue listed bonds, as it did on the VFEX at the end of last year, and to raise bank debt from respectable types like Société Générale and Absa?
Well, first off, it’s got a big new project – Karo, in Zimbabwe – and although the details surrounding the new debt aren’t exactly precise, it seems clear that it’s tied in in some way to off-take from Karo.
But Tharisa offers more than an attractive new project, which looks good on spreadsheets.
It’s also got a track record of production, at its Tharisa Mine in South Africa.
During the quarter ended 31 December 2022, the first quarter of Tharisa’s financial year, the company produced 42,700 ounces of platinum and 383,100 tonnes of chrome. This was actually down on the previous year’s numbers, but nevertheless still generated sizeable cashflow for the company.
That cashflow contributed to strong financial numbers at the calendar year end: US$101mln in net cash, a number which includes within it US$112.8mln of debt.
Overall cash is comfortably north of US$210mln.
Add to that an US$80mln term loan and a US$50mln revolving credit facility, and you’re beginning to get to a position where the full financing requirement for Karo looks achievable.
Tharisa previously stated that to get the first phase of Karo underway, capital costs would likely come in at US$391mln.
Although Tharisa itself isn’t quite yet across that whole sum, the company seems set to generate plenty more cash in the coming quarters, and construction accordingly got underway last December.
Tharisa doesn’t own all of Karo – it owns 70% of a company that owns 85% of the project, with the Zimbabwean government enjoying a free-carry on the remaining project-level 15%.
And on that score, it’s worth noting that the government has been highly supportive. Mines Minister Chitando attending the commencement of construction ceremony, along with local chiefs. The project looks set to generate significant jobs and revenue for Zimbabwe, even as it takes Tharisa on to the next level as a mid-tier platinum group metals producer.