Half-year operational statistics for South Africa-based Tharisa (THS) were fairly ordinary. Some 3.8 per cent more rock was mined in the period, which despite lower rougher feed grades of platinum group metals (PGM) resulted in a 15 per cent leap in PGM ounces produced. Still, with platinum prices essentially flat in rand terms, the enormous year-on-year jump in revenue and profitability was largely down to sales of metallurgical-grade chrome concentrate, average contract prices for which ballooned by 142 per cent.
We previously flagged the effect of surging Chinese demand on chrome in the six months to March, which pushed average chrome concentrate prices to $278 (£215) per tonne. That's all the better for Tharisa, which jacked up production of premium speciality-grade chrome concentrates by 44 per cent, a run rate that could provide a safety net amid weakening stainless steel production and Chinese stockpiling.
Maintenance of premium products would also help operating cash flows, which are likely to be chewed up by the recent decision to move to an owner mining model through the purchase of contractor MCC's equipment and assets for $22.3m. Factoring in that outlay and lower chrome prices analysts at broker Peel Hunt expect adjusted pre-tax profits of $193.1m and 53.9¢ in the 12 months to September 2017, up from $22.5m and 5.3¢ in 2016.
THARISA (THS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 115p | MARKET VALUE: | £294m | |
| TOUCH: | 112-117p | 12-MONTH HIGH: | 165p | LOW: 35p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 110¢ | NET DEBT: | 3% | |
| Half-year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2016 | 86.0 | 4.5 | 1.0 | nil |
| 2017 | 175 | 68.3 | 16.0 | nil |
| % change | +104 | +1429 | +1500 | - |
Ex-div: na Payment: na £1=$1.29 | ||||
