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Salene Chrome was commissioning, with production due to commence in Q3 FY2022 when a Government Export ban on Chrome concentrates resulted in the the Plant being placed on "Care & Maintenance" pending a review of the ban and the Business Case.
With Chrome prices at their highest since this Export ban was introduced, I assume Tharisa are keen to address this ban with the Zimbabwe Government, because it must have hit our potential revenues and Share price massively over this last couple of years.
I can't believe this has not been discussed more on this Board. Why was the ban on exports introduced? How long is it expected to last? What is the future for Salene Chrome?
It's about time Tharisa gave a comprehensive update on Salene Chrome.
Hi Manyaana, I have mentioned Salene before but no information was forthcoming and in the current lull Ilja is not allowed to comment until the H1 accounts are out on 24/05. As you say, the Zim government introduced an export ban to encourage the added value to stay in the country but it probably just allows the domestic ferrochrome producers to buy at lower prices if they do not have to compete with the Chinese export market (intriguingly there is a small amount of Zim chrome concentrates sold in China so I am not sure how it gets out). There was discussion of a similar export ban in S Africa but they have gone in a different direction.
If I remember rightly, Salene was a relatively small scale operation based on 80,000 tonnes/year high grade chrome concentrates with a relatively small LOM of 7-10 year, but 80,000 tonnes at say $400/tonne would give a revenue of $32m/year which would probably generate a profit after tax of say $8m/year. Instead it is currently mothballed but still held in the Tharisa accounts for a rainy day. In their analysis 2 days ago, Tamesis gave Salene a risked value of $48m.
Likewise I would like to hear more on the smaller open pit possibly starting to transition to an underground mine as early as 2025 or 2026 and what this will do to overall chrome production and costs at Tharisa over the next 3 to 8 years.
The platinum price has gone above the palladium price this week, it will be interesting if it stays that way.
Not long until an indication of results for the period ended 31/3/2024.
Be interesting to see
1-Turnover figures -how this has been impacted by “speciality grade “ chrome
2-the amount paid on “bought in” materials for processing which materially adversely effected the gross profit percentage in the previous period.
3-the amount of capital spent on Karo
Moneyman, I agree and we will find out on 23rd May.
1. I am expecting H1 turnover of $342m (PGM 78/chrome 239/agency 23/manufacturing 1.7). I am expecting those "speciality " chrome grades to be steady.
2. We already know that in H1 the Company milled 709,300 tonnes more than mined (over 25% of the milled total) which assuming no stock adjustments is roughly the "bought in" materials for processing that you mention (this is included in the "cost of commodities" in the overall Cost of Sales), likewise in H2/2023 the same number was 544,600 tonnes. So the H1 Cost of Sales will include the cost of this bought in material. I am assuming total costs of $286m (Cost of Sales $257m , other operating expenses $29m, other net costs zero) .This gives PBT $56m, total PAT $43m , PAT attributable to shareholders $41m.EPS 13.6 cents, HI dividend 2.25 to 2.5c. It would be good to know what others expect!
3. Karo capex should be steady until the ring fenced financing is in place which will probably delay the project another year into 2026.
Thanks Mike-my broad calculations came out with a PAT figure circa $45 million -in the same ball park as yours .
Compared to the six months ended 31/3/22 there appears to be a significant increase in “speciality” grade chrome -136.kt compared to 75.4 kt
Likewise Moneyman thanks for your numbers. Reassuring that you have a similar number.
For "speciality" chrome the 75.4k that you mention for Oct 2022 to March 2023 is somewhat of an outlier. For Oct 2021 to March 2022 it was 176.4k, for April to Sept 2022 173.1k and for April -Sept 2023 147.8k. So for Oct 2023 to March 2024
I am expecting 160k. Speciality chrome sells for a $30 to 40/tonne premium compared to metallurgical chrome so an extra 10,000 tonnes of speciality chrome rather than metallurgical chrome would increase turnover by $300,000 to 400,000.