Exposure to rhodium positions Tharisa for price bonanza
Despite the unprecedented headwinds of COVID-19 throughout the year, all of the Tharisa owned operations were able to operate far beyond expectation, achieving near pre-COVID guidance despite the significant impact on the sector. The open pit nature of the operations, and its ever improving mining fleet efficiency provided flexibility to successfully navigate the turbulent environment and provide sustainable and increased production of PGMs and chrome.
MINING
Reef tonnes mined for the quarter totalled 1 405.7 kt up 8.9% compared to 1 291.3 kt in the previous quarter, resulting in milling of 1 401.8 kt, up 14.9% compared to the third quarter. For the year, 4 971.1 kt were mined, which is a 7.4% increase, with milling 4.1% higher at 5 036.1 kt for the year.
This performance is particularly impressive given that these volumes were attained whilst increasing its stripping ratio to 13.0 m3:m3, well ahead of the LOM requirements of 9.8 m3:m3, as the company aims to increase further access over the reef systems we mine at Tharisa.
This opening of the pit, which has seen bench lengths increase, has also meant Tharisa has had improved flexibility in the reef mix we feed into its plants, with over 360 kt of ROM stockpile ahead of the plant.
PROCESSING
Both processing plants again performed above nameplate capacity, with steady feed grades of 1.54 g/t for the rougher feed grade on the PGMs and 18.0% ROM grade on the chrome resulting in PGM recovery rates of 77.1% and 62.3% on the chrome.
Total PGM production for the year (ending September) was up just under 2% at 142.1 koz, with the fourth quarter delivering 40.5 koz of the total.
Chrome concentrate production was 370.8 kt for the quarter of which 277.6 kt was metallurgical grade and 93.2 kt was specialty grade. This resulted in an annual output of 1 344.8 kt of chrome, of which 321.6 kt was specialty grade.
Production at the K3 Plant was interrupted for a longer period due to the COVID-19 restrictions on underground mining, resulting in annual production of 169.8 kt.
Tharisa has also approved the project restart of the construction of the Vulcan Plant with anticipated completion in 12 months using internal cash flows and available facilities to finance the construction.
MARKET UPDATE
Record PGM prices coupled with the Company’s agility to sell its chrome inventory ensured maximum revenue generation for the quarter.
The PGM market saw record prices for some of the group elements. The overall basket price received by Tharisa reached record highs, notably on the back of palladium and rhodium price increases for the quarter under review.
The average basket price for the quarter was US$1 951/oz and for the year US$1 704/oz. A weaker exchange rates caused by COVID-19 and global macro forces, saw the PGM basket price rally to ZAR32 978/oz for the quarter and ZAR27 691/oz for the year.
As previously reported, the force majeure imposed by the PGM offtakers was lifted and normal inventory cycles have resumed.
The chrome market had a weak start to the year, however, prices spiked during the peak of COVID-19 in South Africa, as buyers competed for material. Published prices were reported at US$165/t at the start of the quarter, before retracting to US$135/t.
The average sales price achieved for the year was US$140/t, 13.6% lower than for the previous year. In port chrome ore inventories in China have reduced by 600 kt from 4.3 Mt at the start of the previous quarter to approximately 3.6 Mt with current spot pricing at US$138 -140/t.
Outlook
Tharisa’s co-product model utilising mechanised and low labour-intensive mining in an open pit environment proved effective during this difficult period. The company’s increased mine development over the past year, positions the mine to continue its strong operating performance into this coming year, with its cost base unlikely to be impacted by above inflationary increases.
COVID-19 remains a risk to the company and its forecasts and guidance are premised on the current level of economic activity being permitted by various governments.
Tharisa’s FY2021 production guidance is 155 koz to 165 koz PGMs (6E basis) and 1.45 Mt to 1.55 Mt of chrome concentrates.
Commenting on the production results, Tharisa CEO Phoevos Pouroulis, said: “Growing the business and increasing production not just on a quarter on quarter, but a year on year basis despite the challenges of COVID-19, is a tribute to the extraordinary resilience and resourcefulness of all of our employees at Tharisa.
With exposure to PGMs, particular our favourable prill split towards palladium and rhodium, the latter of which we produced over 13 500 ounces for the year with the metal trading at record spot prices in excess of US$ 13 000/oz, ensures Tharisa has an excellent financial and operating platform to progress the business through its next phase of growth. The rapid development of the hydrogen economy and the move to even cleaner emission standards will benefit the PGM market and Tharisa for some years to come.
Our flagship Tharisa Mine delivered significant operational improvements following the investment in our assets, the ongoing optimisation of the pit, and the flexibility of our processing and distribution capacity.
Our cost control, together with a robust balance sheet, ensures Tharisa is set to build on this performance as we restart construction of our Vulcan plant and continue to assess complementary opportunities to further de-risk our business. Our focus will be on continuously improving the quality of mining, increasing the productivity of our mining fleet and the efficiency of our processing capacity, to deliver further returns for our stakeholders.”
