Tharisa Plc is expecting platinum group metals (PGM) prices to firm up over the next two years after raising revenues for the full year period to the end of September by 11% to $721.4 million (R13 billion).

The company mines PGM and chrome in South Africa, and is also developing the Karo platinum mine in Zimbabwe. With prices of PGM suppressed over the past few years, Tharisa is taking a positive outlook for the next two years where it expects prices for the precious commodity to improve.

“Tharisa remains firmly of the opinion that the PGM prices over the next 12 to 24 months will be higher, fuelled by the continued evidence that the internal combustion engine will remain relevant for a much longer time to come, and our firm view that hybrid drive trains are an integral part of the transportation mix,” said Tharisa yesterday.

With revenue for the company firming up to $721.4m in the year to September, Tharisa said it operated resiliently against the backdrop of a 28.1% decline in PGM prices during the period under review. It benefited though, from “robust chrome sales volumes” with prices for the commodity recording an uptick of 13.6%.

However, operating expenses for the company trended up by 15.9% to $66.6m, with the largest cost component related to employee related expenses of $33.7m and contributing 50.7% to total expenses.

This left Tharisa with earnings before interest, tax, depreciation and amortisation (Ebitda) of $177.6m, representing a 29.8% jump on the prior year. This increase has been attributed to “the strengthening of chrome prices” inspite of the decrease in the PGM basket price.

“The increase in Ebitda may also be attributable to cost increases being below revenue growth followed by a 114.9% decrease in foreign currency losses,” said Tharisa.

Its finance costs for the year to September spiked by 67.6% to $11.9m. This emanated from a draw down of the company’s $80m term loan.

Tharisa had excess inventory in the PGM pipeline during the period under review as PGM prices continued to be constrained by the latency of pipeline destocking. Furthermore, the physical platinum market was entering a longer period of supply deficit, which should be a catalyst for higher platinum prices in the near term.

“This, coupled with the hydrogen economy, we will see strong demand for PGM metals due to their unique chemical properties,” said the company.

With South Africa holding the largest chromite reserves in the world and annual production making up two-thirds of the world’s total production, Tharisa stands to benefit from its production of the commodity. It said China imports about 90% of South Africa’s exports.

As Indonesia remains an essential player in the downstream, Tharisa supplies some of Indonesia’s most modern and largest ferrochrome smelters.

Positively, chrome prices were strong in the period under review on the back of the fundamentals of the chrome market, with real growth in stainless steel driven by demand from China and beyond.

The company’s production of chrome touched a high of 1.7 million tons compared to 1.5 million tons a year earlier.

BUSINESS REPORT