PGM/chrome miner reports increased Q2 production

With a relaxed national lockdown in place, Tharisa plc mining activities recommenced in full from the beginning of May 2020. The miner has recorded nine positive cases of COVID-19, with one death and three recoveries. The company established on-site occupational health clinic, isolation and quarantine facilities with strict employee safety protocols in place.

Co-product model utilising mechanised and low labour intensive mining in an open pit environment, has allowed the Company to maintain production at reduced levels during lockdown and significantly increase output during May and June.

“Operating results for the quarter have been exceptionally strong with both May 2020 and June 2020 achieving consecutive record ROM output levels. These efforts, together with a very credible performance from the processing team has ensured the quarter on quarter production levels for both PGMs and chrome concentrates have shown increases at a time when we were not operating at full capacity,” Tharisa CEO Phoevos Pouroulis commented on the production results.

“Together with good unit cost control, favourable PGM prices and higher pricing for chrome concentrate, the company remains strongly cash generative and financially solid. Tharisa remains confident of replicating this strong performance in Q4.”

Mining

Reef tonnes mined for the quarter totalled 1 291.3 kt, comparable to the 1 131.1 kt mined in Q2 2020, an increase of 14.2%. The mine achieved record output when measured in run of mine (‘ROM’) tonnages for both May 2020 and June 2020, with June 2020 just missing the half a million tonne mark at 498.7 kt.

The strip ratio continues to trend ahead of the life of mine requirements at 12.0 m3:m3 for the quarter, confirming that Tharisa has the capacity to move the volume needed to achieve the higher output levels that we have set ourselves under our Vision 2020 strategy.

At end June, the Company had 242.6 kt of ROM stockpile available, inclusive of third party purchases.

Mining was interrupted during the quarter by the South African government imposed national lockdown on 25 March 2020, with full capacity only available as of 10 May 2020.

Processing

Tharisa placed the Genesis Plant on care and maintenance as per the regulations imposed under Level 5 and 4 restrictions. The Genesis Plant, which is focused on chrome and speciality chrome products, recommenced production only in early May 2020 with the relaxation to Level 3 restrictions.

The larger capacity Voyager Plant was on care and maintenance from 26 March to 4 April 2020 following which it has been operational throughout the quarter. Both plants are now fully operational.

Tonnes milled increased by 4.6% to 1 220.2 kt versus 1 166.9 kt.

As a direct result of the interrupted processing capacity, despite a higher rougher feed grade for PGMs up 10.9% to 1.52 g/t from 1.37 g/t, recoveries were lower at 78.7 % versus the 83.7% in Q2 2020 mainly due to processing of oxidised above ground ROM inventories. Notwithstanding the reduced recoveries,PGM production increased to 35.0 koz versus 32.1 koz.

Chrome concentrate production was 321.4 kt for the quarter, comprising 250.9 kt of metallurgical grade and 70.5 kt of specialty grade, an increase of 3.6% quarter on quarter. Feed grade and recoveries were steady quarter on quarter.

There was no third party chrome production at the K3 Plant as a result of the plant remaining on care and maintenance. The plant has begun the groundwork for recommencement in July 2020.

As a result of the continued lockdown restrictions, Tharisa’s Vulcan Project remains suspended.

Market update

The period under review saw a solid price performance for the PGM basket, totalling US$1 593/oz and while down compared to the previous quarter’s record pricing, the weaker ZAR did translate to an increased local basket price of ZAR29 266/oz as compared to the price of US$1 822/oz (ZAR27 690/oz) for the previous quarter. The combination of the dramatic slowdown of the global economy and the reduced output from the major South Africa PGM producers has translated into a continued positive outlook for PGM pricing.

PGM sales and deliveries have returned to pre COVID-19 levels.

The average metallurgical chrome price increased by 10.9% to US$143/t from US$129/t. Market prices are trading around US$160/t. Published port stocks in China have continued to trend lower at approximately 3.5 Mt down from a high of 4.3 Mt in the first quarter of 2020.

Tharisa has sold its output for the quarter notwithstanding that rail and port logistics remain constrained.

While the ZAR has shown signs of strengthening in the past week, the average exchange rate for the quarter was significantly lower at ZAR:US$ 18.00 compared to ZAR:US$ 15.30 in the previous quarter.

Outlook

Tharisa suspended its guidance for the year on 24 March 2020. Assuming no curtailment of operations as a result of the pandemic, revised FY2020 production guidance is 130 koz to 135 koz PGMs (6E basis) and 1.25 Mt to 1.30 Mt of chrome concentrates.

Our co-product model utilising mechanised and low labour intensive mining in an open pit environment, remains well suited to deal with the impact and volatility of COVID-19.