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Tharisa financials reveal cash flow boost amid record production

Financial results for 2018 reflect the changes in the PGM and chrome markets, and in Tharisa's approach to production
Tharisa celebrated a record year of production

Tharisa plc (LON:THS) today released financial results for a year marked for its record production but also transition away from toll mining with a contractor to a company-owned fleet operation.

“FY2018 was a year of record production achieved with increased plant throughput and metal recovery,” the company said in a statement.

Tharisa produced 152,200 ounces of platinum group metals and 1.4mln tonnes of chrome concentrate in the twelve months ended 30 September 2018.

READ: Tharisa Plc beats expectations for production and recovery

The miner highlighted that its platinum group metals basket benefitted from preferable pricing, compared to the otherwise lacklustre pure platinum price, because its concentrate favours palladium and rhodium.

Tharisa’s PGM basket price increased by US$137 per ounce, to US$923 per ounce, as the price of rhodium, ruthenium, iridium, and palladium remained strong. At the same time, the prices available for metallurgical chrome concentrates softened to below US$200 per tonne – compared to a 2017 high of US$390 - as a result of higher stockpiles in China.

Certain operational improvements boosted Tharisa’s cash generation, to US$89.8mln up from US$75.7mln in the preceding year.

Revenue rose by 16.3% to US$406mln, from US$349.4mln in 2017, as PGM production increased by 6% and chrome concentrate increased by 8.8% - PGM’s generated around US$117mln of revenue, chrome contributed US$250mln and the group’s trading business brought in US$38.5mln.

“Against the backdrop of increased production volumes and prevailing commodity markets and notwithstanding material increases in both fuel prices and freight rates, we still generated strong cash flows from operations,” it added.

“Our mining operations took a major step forward, as we became owner-operator of our mining fleet in the year under review.”

The switch away from a contracted mining model to a company owned fleet had its inherent increase in costs for the year, and, also introduced certain fixed cost elements. Nonetheless, the company highlighted that it now has the capacity to deliver the necessary run-of-mine volumes to deliver its production targets for 2019.

Tharisa reported a US$72.5mln operating profit for the year, compared to US$98.4mln in 2017, while it marked a US$51mln net profit versus US$89.8mln in the previous year.

Earnings per share for the year was down 13.6% to 19 American cents, and, the company confirmed it will pay a 4 cents per share dividend to shareholders, representing 20.5% of net profit after tax.

New mining model is set up for growth

“The maturation of the business beyond the development stage has positioned the group to implement the next phase of growth,” the company said in its outlook statement.

“The focus is not only on continuous improvements in feed grade and recoveries but on expanding the business into new jurisdictions.

“The management team is positive about the prospects for the year ahead and believes that with the various expansion plans, a strong focus on our mining division delivering quality ROM and managing the extensive yellow fleet to OEM standards, economies of scale will be demonstrated through reduced unit costs and increasing operating margins.”

Tharisa aims to produce 160,000 ounces of PGM and 1.5mln tonnes of chrome concentrate for in the 2019 financial year, meanwhile, looking a little further ahead, it highlighted that the ‘Vision 2020’ strategy aims to deliver 200,000 ounces and 2mln tonnes.

The company ended the year with US$66.8mln of cash, US$86.2mln of due receivables and US$23mln worth of product inventory. Total debt stood at US$77.4mln, following the leveraged purchases for the mining fleet.

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