Tharisa plc (THA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I would like to welcome you to Tharisa's Third Quarter Earnings Call 2020. [Operator Instructions] The format of the call will be a presentation by the Tharisa management and IR team followed by a question-and-answer session. After the call, you will have the opportunity to ask questions. [Operator Instructions] So without further ado, I would like to pass the line to Ilja from Tharisa. Ilja, the floor is yours.

Tim, thanks very much, and good morning to everyone from the Tharisa side. I trust you've seen the results that we put out this morning. The presentation and various other information booklets are available on the website. We will now hand over to the Tharisa management team led by our CEO, Phoevos Pouroulis. With me, I also have our CFO, Michael Jones; and our COO, Michelle Taylor, who will be on standby to answer any questions right at the end. I'll hand over to Phoevos now to begin the presentation. Thank you.

Yes. Good morning all, and good afternoon and evening for those that are dialing in from various destinations. Thank you for taking the time this morning to listen to our results presentation. Just to be clear, it is our full year, end of year financial 2020 results. So the tagline that we've put forward is investing in sustainability. And for those of you that know us will know that the last 2 years have seen us investing heavily in the reconfiguration of our open pit, investing in yellow fleet, bolstering our capacity as well as, and most importantly, upskilling and training our employees to be able to yield the increased volumes from the Tharisa open pit mine, which, by all accounts, is looking like a super pit as we speak today. So without further ado, I would like to move on. There is a video which we will hold until the end of the presentation, which we're very proud of, which really, in a very succinct way, summarizes our core values at Tharisa. And this was put together by our staff and employees on the mine for the mine workers and really, in a comic fashion and with cartoon characters, really captures the essence of our values. But hopefully, we'll be able to share that with you at the end of our presentation. Again, safety is a core value of ours, and we're extremely proud of the levels of performance that we've managed to achieve and the milestones that we've achieved during this period. We have one of the lowest, if not the lowest, LTIFR rates within the industry at 0.09 per 200,000 man-hour worked. And in the context of COVID-19, this is a commendable achievement. We have also, in September of this year, achieved 5 million fatality free years -- sorry, 5 years fatality free as well as 4 million fatality-free shifts as at the end of June. Also of note is 365 days LTI free at both mining and the Genesis plant, and 5 years lost time injury free at our research and development and laboratory facilities. I think we pride ourselves on caring beyond the internal skills that are required at the Tharisa Mine. To that end, we've provided 58 engineering leaderships during this last year, 40 internships and graduate programs and 209 adult education training learners. And typically, these are adults that are looking to further their education, and they primarily come from our community. So not necessarily employees of Tharisa, however, part of our bigger ecosphere and stakeholder grouping. So we talk about the resources company for the future. So we are firmly and squarely committed to climate change intervention, and we subscribe to the Paris Accord. We have what we like to see ourselves as a corporate citizenship with responsibility. We subscribe to the Equator Principles, and we have a solid basis for accountability and transparency in terms of our governance structures. We have been engaging with our OEM suppliers and Board suppliers and stakeholders in an effort to look at reducing our carbon emissions by 2050, and we will roll out our plans and inform our stakeholder base in terms of what our objectives are and what those reductions in those emissions will be. As highlighted on the previous slide, we take a lot of pride in the fact that we upskill and develop our employees. We look at human resource development, learnerships, internships, bursaries. And this is all done through our cutting-edge training center. Some of you that have visited us will know that we have simulators akin to a flight simulator that trains our staff and retrains and uptrains them in terms of operating our yellow fleet, be it dump trucks, excavators, bulldozers. And some of these pieces of equipment like the CAT 6050 face shovel are in excess of ZAR 100 million each, close to $8 million each in terms of the capital cost. So critical to get the maximum performance out of those pieces of equipment. And looking beyond our employees at the broader community, we have local economic development plans. We have enterprise developments. We have environmental management and project services that are provided to and from the community for the broader Tharisa community. We have a very successful wellness program, the Thusanang Wellness Program, that's been running since 2011. And this provides counseling, training for employees and families of Tharisa and the community about their lifestyle, well-being and work environments. And we've also included now a financial well-being training and skilling of our employees because as our employees become wealthier and move up the [indiscernible] curve, so becomes the need to educate them around fiscal prudence. So moving on now to the production highlights for our financial year 2020. You will have recalled that we mined some 4.97 million tonnes of run of mine. That's an increase of 7.6% year-on-year, yielding production of 142,100 PGM ounces, up 1.7% year-on-year; and chrome concentrate production of 1.34 million tonnes, up 3.9%. Now we need to put this into the context of national shutdown and the various levels due to COVID-19. So an exceptional performance from our team in spite of reduced capacity, reduced production through the various levels of lockdown but really showing the resilience and resourcefulness of our employees. I think of key importance here through the reconfiguration of our open pit mine is our ability to strip ahead of the life-of-mine stripping ratio of 9.7 cube to cube, and we, on average, achieved 12.1 cube to cube for the financial year 2020. I think one of the standout features for this year was the 57.6% increase in the PGM basket price from the prior year, averaging out at $1,704 per ounce. And really on the back of very buoyant rhodium and palladium prices with support from platinum, iridium and the other platinum group metal constituents. The other side of the story, unfortunately, is that we saw chrome prices devalue by some 13.6% for metallurgical grade yielding an average price of $140 per tonne. Now one has to look at these prices in the context of the average exchange rate for the year, which was at 16.2 to the dollar, giving us additional support in rand terms and increasing margins. Just for information purposes, the current PGM basket price for our basket is sitting at $2,500 per ounce compared to the $1,700 for the financial year 2017. Moving on to the financial highlights. Revenue really on the back of those higher PGM prices and increased output sitting at some $406 million, up 18.4%. But more importantly, operating profit up 262% to $87.6 million, yielding an EBITDA of $113.4 million, up just short of 120% year-on-year; yielding a profit before tax of $75.8 million, a fivefold increase from the prior year. And importantly, our earnings per share up at USD 0.162, up from $0.04 the prior year, yielding an operating cash flow as well of $73 million. And I think we're very pleased and proud that we're able to reinstate our dividend. You may recall that we did pass on the interim dividend, but we were able to roll it up into a full year dividend of USD 0.035, slightly above our stated policy of paying out 15% NPAT to shareholders in the form of dividend and reaching a 17.1% payout of those dividends. I think a metric that we're very focused on and should give comfort to all stakeholders is our return on invested capital. And I think at 18.8%, I think it indicates that we are investing our shareholders' capital wisely and providing a return on that invested capital. And that informs our decisions and investments going forward. Just out of interest, we often -- well, we only quote our numbers in U.S. dollars, but we often forget the magnitude to our South African audience when we present in dollars. So just in terms of our EBITDA at ZAR 1.8 billion, operating profit is ZAR 1.4 billion, and this is based on the average exchange rates and a revenue of ZAR 6.5 billion, a meaningful business in the local context and in rand terms. So we take a snapshot of the year in review, and we look at the tailwinds, those metrics and factors that supported our business. So importantly, the ability to strip ahead of the life-of-mine ratio enabled us to access the correct reef blend at the appropriate time and increase our run-of-mine production from the open pit. Importantly, this allowed us to have stable recoveries in our processing plants and a slight improvement in grade. But I think, more importantly, the stability of feed rate going into our processing plants. I think importantly, we were able to increase production in spite of COVID. PGM is up 1.7%; chrome, up 3.9% year-on-year; and importantly, supported by the rally in PGM prices, yielding that $113.4 million of EBITDA. In terms of the headwinds, those factors, out of our control mostly, but also hindering our performance, chrome prices depreciated from 13.6%. We did have curtailment in our operations due to COVID-19 restrictions enforced on the national level and through the various stages of lockdown. The volatility in exchange rate, while it can be seen as a tailwind in terms of an average lower rate, the volatility certainly creates challenges in forecasting and predicting what the ultimate costs and/or exit prices of our commodities will be, so it creates some uncertainty. And then I think very topical at this point in time is the Cabinet-approved proposed tax on the export of chrome, and we'll unpack that later in the presentation. Just moving on to production performance now. We've touched on our mining improvements. I think really, on the back of large investments in fleet and technology, we run multiple systems throughout our mining fleet to monitor, track and ensure that we maximize utilization and efficiency and effectiveness of our equipment, but all of this is made possible by our skilled labor force. I think the table on the right-hand side shows the trajectory of where we're going in -- and where we've been in terms of our mining output and an increased forecast for financial year 2021 to meet our targets. So importantly, we have also managed to build up a run-of-mine stockpile ahead of the processing plants, the 2 crushing circuits at the Genesis and the Voyager plant. This allows us flexibility and ability to manage any disruption due to weather or any other disruption to our mining operations, so enabling us to continue milling and processing at this point in time, just over 3 weeks' worth the feedstock, and the intention is to build that up to a further couple of weeks' inventory ahead of the crushers. In terms of PGM and chrome production, we're very pleased with the fact that we're able to increase our PGM output in spite of the curtailments at 142,100 ounces. And importantly, Michael will unpack our prill split later and reveal the importance of the rhodium content and the palladium content in our prill split. I think what's given us comfort and we're able to maintain the momentum is that our fourth quarter of 2019 -- of 2020, apologies, yielded an output of 40,500 ounces. And on an annualized basis, that gives us our guidance of 160,000 ounces for full year 2021. Recoveries and feed grade remain the focus for us for the financial year 2021 and will enable us to achieve, at the very least, that midpoint of our guidance. Chrome, on the other hand, also performed well, bearing in line that the 1.35-odd million tonnes of chrome excludes the K3 processing plants, which we operate and market those chrome tonnes. But importantly, 321,600 tonnes of that 1.35 million tonnes of chrome was specialty grade. Just to remind everybody, those are the foundry and chemical grades, which command the premium over the metallurgical grades that are used primarily in the stainless steel industry. Again, fourth quarter production saw us ramping up to 370,000 tonnes, again, excluding K3, on an annualized basis, hitting the guidance of 1.5 million tonnes quite easily. So at the K3 plant, there were material disruptions due to COVID-19 and that resulted in us producing just shy of 170,000 tonnes of chrome. Typically, if we look at last year, that number was in the order of 225,000 to 230,000 tonnes, and that is a normalized environment. Pleased to note that operations have resumed to normal, and throughput is as per design nameplate capacity. I think what's exciting for us is that we've been able to restart the construction of the Vulcan ultrafine chrome recovery plant with an estimated completion towards the end of this financial year-end. At this point in time, I'd like to just touch on the markets very briefly. I know you're all up to speed with rhodium, palladium and the PGM group baskets. But I think this slide really captures, in essence, the reason why we're seeing rhodium currently trading at $16,000 an ounce. And it's really on the fact of increasing emission standards for noxious gases, the NOx levels, and the fact that South Africa provides more than 80% of the world's primary supply. And it just seemed to be declining over the next 5 years in terms of underground or platinum group mining out of South Africa as its main source of rhodium. And secondly, the fact that in the mid-2000s, there was thrifting in the autocats of rhodium with about a 10% reduction in the rhodium loading, which means that the recycling that we're seeing of [indiscernible] has lower rhodium level. So the combination of the 2 sees rhodium supply declining between 4% over the next 6 years and an increasing deficit. So we've been speaking about deficits in palladium for some time. But rhodium, the most precious of the precious metal, is seeing a growing deficit on the back of these 2 primary drivers, coupled with the fact that we've seen converted capacity coming offline, pipeline inventories being stuck without reaching the end market really supporting a very buoyant and strong rhodium price. But I think the key message here is that this is a medium-term demand/supply imbalance. Moving on to palladium and platinum. Demand squarely driven or primarily driven by the autocat industry, and the shift from diesel passenger drivetrain to palladium -- to petroleum drivetrains has really driven the demand for palladium in the last 6 years, and we've seen a widening deficit, albeit narrowing through COVID-19. But what has surprised us all is the rebound in Chinese order sales growth, which has seen demand increase to pre-COVID-19 levels and, in some cases, surpass that. This is really on the backdrop of emission standards increasing in China to China fixed, North America and Europe putting more stringent carbon emissions and noxious emission standards in their drivetrain, so an increase in loadings, increase in requirement of metal and tighter emission standards. We forecast or we believe in the forecast that the deficit, even though it's narrowed over this period, will continue to widen in the near future. Now palladium is not an SA-centric story, but SA is a key supplier into that market. And with any disruptions to the supply chain, will have a compound effect in terms of that deficit. I think we all know that South Africa is the host of more than 80% of world's platinum and is the major dominant supplier. And so any -- again, any disruption to supply will see a narrowing of the surplus, and depending on who is commenting, we believe, we're either in balance or partially oversupplied. But in general, the future looks very positive, and we've seen a slight uptick in the platinum price in the last few weeks. So driven mainly by automotive industry through tighter emission standards, jewelry has always been the sponge in the elastic demand depending on the price levels. And we've seen investments increasing substantially, be it in ETFs, bars or coins, which has also driven ounces out of the conventional mainstream increasing demand for platinum. But I think what excites us and, in particular, in terms of the [ uncertainty of ] the economy and where we see ourselves playing a role in the future is the hydrogen economy. And you'll see from the very small slide below that this potentially provides a zero-emission solution to decarbonizing the plane. And I think we're in the right place at the right time to feed into that demand cycle but also to enjoy the benefits of the technologies that come out of this hydrogen economy in renewable energy, utilizing the great commodities that we produce. Moving on to chrome. Chrome is irreplaceable and is the essential item or ingredient that makes stainless steel stainless. South Africa hosts 72% of the global chrome resources. In spite of COVID-19 and the shutdown of various parts of the Chinese economy, we have all been surprised to the upside to see the Chinese stainless steel growth this year will show a positive trend. The numbers are anywhere between 2% and 3% and, going into 2021 calendar year, resuming back at that 5% compound annual growth rate. So if we just break it down into the constituent chrome units that are required to meet this growing demand on a 55 million-tonne stainless steel industry, it basically means that you will require an additional 700,000 tonnes of ferrochrome to be fed into stainless steel, which is approximately at 2.2 tonnes -- per tonne, another 1.8 million tonnes of chrome concentrate. So the growth, the demand is there for the chrome units, and we've illustrated there that, that increase in output is equivalent to another Tharisa Mine coming on stream to meet that demand. So we are firm believers in the medium- to long-term fundamentals around the strong demand for chrome units into global stainless steel growth and, importantly, consumption. We shared some of the statistics there with you. South Africa still remains the key supplier for Chinese ore imports at around 80% and even up to 85%. And China, not having resources of their own, is dependent on imports of chrome units for the very large and growing ferrochrome and stainless steel industry. So the hot topic at the moment is the Cabinet-approved chrome -- proposal for a chrome tax. As many of you know, we are one of the 9 important members of the grouping called Chrome SA. This grouping comprises Anglo Platinum, Assore, Bauba Resources, Impala Platinum, Northam Platinum, Sail, Sibanye-Stillwater, Siyanda Resources and Tharisa. So 5 UG2 byproduct chrome producers and 4 primary producers. So this is an independent grouping put together to represent the interests of all stakeholders in the value chain of primary and secondary ore producers. There's a lot of media and a lot of publicity, so I don't want to spend a lot of time. But just to repeat that we think that the chrome tax is not the right medicine for the situation at hand, which is a struggling ferrochrome industry in South Africa on the back of a fivefold increase in electricity prices in South Africa over the last decade. If anything, the chrome tax will introduce additional risks and create unintended consequences, which may result in job losses, mine closures. And importantly, we will lose up to 30% of that 80% market share that we currently enjoy. Territories like Oman, India, Turkey, Kazakhstan, Pakistan are waiting with bated breath for this tax to be introduced so they can restart their marginal mines and take market share, bearing in mind that those ores are high-quality grade than ours. And on a dollar-for-dollar basis, the end users will always choose higher quality at the same price than a lower quality. So I think our request to government is to pause, hold. Let's have an inclusive, cooperative discussion with the whole value chain, and we believe there are solutions that exclude the tax, which can support local ferrochrome capacity and production. So happy to take any questions later, but it is all documented on Chrome SA website. And without further ado, I'd like to hand over to Michael Jones, our CFO, to take us through the financial performance for 2020.

Thank you, Phoevos, and good morning to all our guests who have joined us online. It is really a pleasure this morning to presenting our results for the past financial year. They're very favorable set of results, and it's really been built on the back of a continuing investment in the sustainability of our operations. As a coproduct producer, we've benefit from the increase in the PGM basket prices. And also, with our cost base being largely rand-based, we have also benefited from a weakening of the rand over this period. And notwithstanding the decrease in the chrome concentrate price, the chrome segment has still contributed a very healthy 25% to gross profit margin. This very strong financial performance has contributed healthy cash flow generations, and we're able to continue to return some cash to our shareholders. It has also enabled us to continue to invest in our existing operations in terms of our existing fleet and so forth as well as our growth projects such as the Vulcan project and the Zimbabwe exploration project as well as the safety and health of our employees. This has all been assisted and helped by a robust balance sheet with a low level of gearing. During the latter half of the financial year, we needed to focus on the liquidity management in the business as we managed our way through the coronavirus pandemic. Thank you. I'd just like to highlight some of the key financial metrics, and then I'll unpack this in some more detail. So revenue, $406 million, that's up 18.4%, translating to a very healthy EBITDA of $113.4 million; profit before tax of $75.8 million; and earnings per share up 305% at $0.162 per share. The earnings dividend per share, as previously mentioned by Phoevos, $0.035. If you look at the return on invested capital, that sits at 18.8%, and you need to see this in the light of a weighted average cost of capital of some 11.8%, thereby generating a real return on the stewardship of the assets. Analyzing revenue in some more detail now. And for this purpose, I've really taken out the inland logistics and freight costs out of the chrome because that is part of the CIF basis of sales and to really analyze the true source of our revenue. PGMs currently comprise 65% of our revenue, and the chrome is just under 30% of that revenue. If you look at all, I think the real star performance over this last financial year was rhodium. Rhodium comprises 9.6% of our prill split but made up in excess of 51% of our PGM revenue basket. And this is at a price -- average price for the year of some $8,300 per ounce, the current price sitting just upwards of $16,000. Chrome, as Phoevos mentioned, the specialty grade, just under 24% of our total revenue is coming from that particular market, and in metallurgical, the bulk at 76%. Our gross profits for the year, $130.4 million, and a gross profit margin improving from 17.6% to 32.1%. There are a number of factors that have contributed to this increase in the gross profit margin, the first being increased sales volumes, and that's in both PGMs and chrome concentrates as well as increase in the PGM basket price. And of course, we benefited from a cost basis of the weaker rand-U.S. dollar exchange rate, which weakened some 12.5%. Just analyzing after costs now. The mining cost comprising 33.5%. Our cash cost of sales in diesel, which would be included in that, of course, 12.1%. If we then move to the table on the left, and I know it's quite a detailed table, but the cubes mined increased 47.7% year-on-year. So we stripped above the life-of-mine stripping ratio. Life-of-mine stripping ratio, 9.8. We achieved 12.1. Now as a consequence of that, we capitalized some $22.7 million of the deferred stripping cost to capital assets, and I'll touch on that a little later. Reef tonnes mined, up 7.4%. And then our cost per reef tonne mined, up 6.5% at $26.3 per tonne, recognizing that we also absorbed into that the increased costs across the cubes mined. Consolidated cash cost per tonne milled, down 8.1% at $38.5 per tonne. From a chrome marketing perspective, the chrome inland and freight cost, a very important cost as part of the cost components as we typically sell on a CIF main ports China basis, and that's reducing some 6.3% to $59.2 per tonne. So just going back to the chart on the right. You'll see that the next big cost there is really labor at 21.6% of our overall cash cost basis. We are a co-product producer of both platinum group metals and chrome concentrates. But just to give some context of where we would be on the cost curve if we looked at ourselves as a producer of platinum-ounces only, the order and cost per platinum ounce reducing from some $716 to $578, and that is also including the additional deferred stripping that I've just mentioned. The group generated cash flows from operations of $72 million. Importantly, though, in the movements in working capital, there's an increase in the trade and other receivables [ $50.6 million ], which, of course, will become cash shortly after the reporting period. The increase in those receivables is on the back of the increase in the PGM basket price and really strong sales volumes in the latter -- of chrome during the latter part of the financial year. The CapEx spend for the year, which I'll unpack later, is $70.6 million. We have remained committed to capital discipline. In that regard, the Board has proposed for approval a dividend of $0.035 per share. That equates to 17.1% of our net profit after tax. That needs to be measured against our commitment to distribute a minimum of 15% of our annual net profit after tax. And having a look at the dividend, we have taken into account the capital commitments in this coming financial year. Just touching on the balance sheet itself and look at the total debt. Total debt, $70.4 million. Of that amount, our trade finance amounts to $17.2 million. The trade finance is principally associated with the export of the chrome concentrates and a short-term in nature with a maximum period of some 90 days. The debt-to-equity ratio stands at a very healthy 21.9%. And after deducting the cash and cash equivalents of $49.3 million gives us a net debt to total equity ratio of 6.6%. We continue to focus on the working capital management, and the current ratio stands at 1.8x. The 2 graphs on the bottom left of the slide really analyze the debt position further and gives some more detail on the breakdown of it. But I'd just like to highlight the debt currency split draft, that excludes trade finance, where our rand-based debt sits at just over 60% as a percentage and the USD debt sitting at 39% of our total debt. During this past year, we continue to invest in the sustainability of operations, and the total capital spend amounts to $70.6 million. Giving some breakdown and color to that: $24.7 million was spent on the mining fleet; $22.7 million, as mentioned, on deferred stripping, we'll get the benefits of that going forward; $11.4 million, related to other mining assets; and $11.8 million on expansion capital and projects that we undertook over and above sustaining CapEx. This needs to be measured against a depreciation charge of $27.9 million. Looking at the current financial year and giving some guidance on where the CapEx numbers we'll be going to, recognize we continue to invest in the sustainability of our businesses. We have budgeted $54.4 million, and it excludes any stripping or deferred stripping. In addition to that, the Vulcan fine chrome recovery plant at $46.4 million, giving a total budgeted capital spend for this current financial year of $100.8 million. The Vulcan project, the funding for that is going to be coming from our existing operational cash flows, supported by our facilities that we have with our lenders and those that we current -- renegotiate renewing with our lenders. Just giving a little more breakdown on the planned CapEx and earnings perspective. The spend for this current financial of $27.4 million against the prior period's $24.7 million, that's for the mining fleet, marginally up; and processing also marginally up at $14.7 million compared to $11.4 million. And then again, a big constituency of the optimization and Vulcan project at $46.4 million. We continue to purchase certain land for rock waste dumps, $8.8 million; and a normal course constructed tailings storage, which, for accounting purposes, sits as a capitalized asset at $2.1 million. That's a brief overview of the financial highlights, and I'd like to hand back Phoevos to present on the outlook.

Thank you, Michael. So we've been speaking a lot over the years about our commitment to research and development and investment. Just to put this into context, to date, as a group, including all our mining assets and investments, we have invested just over $500 million into what we know as Tharisa today. But I think importantly, of that $81 million has been through R&D and commercialization, and we'll unpack those various projects that we've undertaken and successfully developed and are developing. So what has been the driving force? Our culture of innovation and our ethos of doing things differently and extracting maximum value out of every cube of rock that we mine has seen us targeting PGM and chrome beneficiation, improving recoveries and looking at niche and specialized products for us to capture additional margin and also be suppliers of niche products into specific markets. We're looking at the energy market attentively. We're looking at renewable energy. We're looking at hydrogen solutions. We're looking at storage of those various renewable energy sources as well through our research and development initiatives and cooperation with various institutions, not only in South Africa, but globally, too. So if you look at the original areas of research, we looked historically at ferrochrome as the natural progression in terms of converting our ore into alloy for feedstock into stainless steel. We undertook numerous feasibility studies in China, in South Africa, and unfortunately, those did not yield compelling financial returns. On the contrary, we've undertaken PGM studies, and to that end, we have invested in downstream PGM beneficiation. However, we still look at niche applications of our chrome product in all of the various industries and sectors that we have been discussing, which also include energy. So just having a look at the road from research and development to commercialization. And I think there is a perception that R&D is this big black hole without an end in sight to turning that invested capital into a return. So to that end, we invested in a 1-megawatt PGM smelter, which is currently successfully operating. And we are busy developing the downstream beneficiation of that alloy into final platinum group metal. So a success story on that front. In terms of PGM optimization, you will know that we mine the middle group reef horizon, which historically has only been mined for PGMs and, to a lesser degree, has been scavenged for PGMs on the tail end. The recoveries that we receive from our PGM projects are in line with primary platinum group metals in the order of 80% and above and very pleasing. However, we continuously look at improving that recovery, and that falls under this banner. But successfully, we've taken our recoveries from the original studies that were done through various institutions with an expected 55% recovery, well over 80%. So very pleased with that initiative. In terms of the Challenger plant, we don't really speak about the Challenger plant. But this plant was specifically designed to extract maximum foundry and chemical grade out of our Genesis plant. It's a stand-alone plant, and it channels and funnels a specific size fraction of chrome for the production of high-grade chemical and foundry. And this has been operational for a number of years and has been a great success story and has enabled us to increase the percentage of our specialty-grade production from a typical chrome miner at 6% to 10% to close to 30% in some years. So a great success story there. In line with the Challenger plant, we commissioned the fourth stage crusher in this last financial year, and this process was specifically designed to increase the throughput into the Genesis plant and the Challenger plant to increase the production of those high-grade foundry and chemical products, which do command a premium and diversify us, to some degree, from stainless steel and the ferroalloy industry as they are globally diversified markets and have different industry dynamics in steel and stainless steel. And then I think where we're most excited, we spent almost 4 years developing in-house a process technology called Vulcan process to recover fine and ultrafine chrome that currently, we and the rest of the industry, are depositing on the tailings storage facility. This process, once installed and commissioned, will see us increasing our chrome production from tailings by some 25%, taking our total potential chrome capacity and production to 2 million tonnes a year. So in closing, we are firmly of the view that Tharisa provides a great value proposition. Not only do we see ourselves as a leading low-risk, low-cost, open-cost producer with an excellent safety record, but we also invest in the sustainability of our assets to ensure the longevity, not only of our operations, but of our people and our margins, importantly. Tharisa provides exposure to increasing demands in particular with regards to palladium and rhodium as well as a growing stainless steel market. I think over the last 5 years, we've illustrated, without doubt, that we are committed to returning value to shareholders in the form of our dividend policy and capital discipline in returning value to shareholders. We have built up a healthy balance sheet, which supports our existing operations, our expansion programs and our strategic growth plans. Importantly, the management team is invested in this business. We have discovered, we've developed and we've delivered, and now we are squarely set to diversify our business. And importantly, deliver into our 2021 guidance, which sees the midpoint of us achieving 160,000 PGM ounces and 1.5 million tonnes of chrome. And on a comparative basis, you can see that there's a huge value upside and a huge value proposition with us trading on an EBITDA multiple on a forward-looking 2021 analyst consensus at 1.6x and on a price to NAV at 0.5. And you can look at our PGM peers at where they stand. So in closing, and moving now into the Q&A section, I'll just touch on the 6 pillars of our growth strategy over the next few years. Importantly, we want to expand and roll out our business sustainability, and I think this last year is a point in case and proof of us doing that. To further optimize our existing operations, we're looking at continuing our investment in innovative thinking to research and development and innovative projects. We want to become a globally significant and diversified business, resulting in us becoming the investment of choice in our chosen sector. But importantly, we responsibly want to enrich the lives of all our stakeholders. And this leaves me with the final comment, and you will see our [Foreign Language], our reason for existence is our tagline, which says, "Enriching lives through innovating the resources company of the future." Ilja, I'm not sure if we are able to play the video. If not, let's move on to Q&A. Thank you all for your attendance. I'll hand over to Ilja now to take control of the session.

Thanks very much, Phoevos. Tim, I know you guys are managing the Q&As over there, if you would like to go ahead and get the audience to ask the first question. Thank you.

[Operator Instructions] So we have a question from Richard Hatch at Berenberg.

Can you hear me okay?

Yes.

Yes. Cool. Congrats on a very strong set of numbers. Just got 2 questions. The first one, Michael, that land purchases of $8.8 million, I know you sort of talked briefly on it, but would you mind just giving us a little bit more color on that and whether we should expect to see any more of that flow through into future years? And then secondly, perhaps could you just give us a bit more of an update on what's going on in Zimbabwe, what your conversations are there in terms of -- with government and just what's going on with the various projects?

Okay. I think I'll just do the easy one and hand the more interesting one across to Phoevos to deal with. On the land purchases, there's 2 aspects of it really that we're looking at. The first part of it is the expansion for the waste rock dumps that we need to do. And then we are also looking to acquire certain of the land around the mine. From a community perspective, it makes some sense for us to purchase that and also some relocation of the community to enable us to extend our mining footprint. So the bulk of that should really be a once-off purchase. There's always going -- there's small parcels going forward, but probably $8.8 million is a foolish number for now if we look at the 2022 numbers.

Moving on to Zimbabwe. So where we are at the moment on the Karo project, we are -- as Tharisa managing the second phase of the drilling program, which should be completed by the end of the first quarter with analyses to supplement the resource and the reserve statement. Thereafter, followed by a feasibility study of some sorts of -- prefeasibility study to be exact. And hopefully, a route to a first phase project on the Great Dyke. As we know, the Great Dyke provides a great opportunity for low-cost shallow PGM ounces. And in light of the medium- to longer-term prospects around PGMs, it's certainly a priority for us in terms of potential expansion. So the advents of COVID have delayed the second-phase exploration and studies that were being undertaken pre the lockdown. And I think the focus really remained on ensuring the viability and sustainability of our producing assets and of the bulk of our labor force being in SA. So we're very excited still about the prospects that the Great Dyke and Zimbabwe will provide. We have received special economic zone approvals, which do allow us certain privileges. But I think where we stand at this point in time is we'll be looking to give the market an update post Q1 going into Q -- sorry, Q1 calendar year 2021 in Q2 2021 calendar year but still remain very, very committed. You will recall on the salene chrome option, there was a trial mining campaign that was undertaken, which was successful and showed the potential to mine lumpy chrome in Zimbabwe adjacent to the PGM [indiscernible] Great Dyke. Where we are is, Tharisa at the moment, we're assessing the option to exercise that option but also looking at a more comprehensive business plan, which would include a gravimetric spiral plant as well as a lumpy circuit. Again, we'll provide details and an update when -- and if we make a call on that optionality.

Cool. And just on the chrome export tax. I mean what are the next steps with regards to that in terms of catalysts that we should be looking out for just in terms of news flow and such like?

Yes. So it's a good question, and it's something we're all asking ourselves because there has been a lack of information and a lack of understanding of the process around the implementation of such an intervention. So we believe that there will be opportunity for engagement for debate and discussion, and we hope that government listens to both sides of the equation and takes into account all factors in the shape, size and form and introduction of the tax, if and when it will happen. Of -- not direct sources but discussing through various conversations, these types of money bills, which need to be passed through treasury, typically can take up to 1 year. So I don't necessarily see a very quick turnaround in terms of this tax being implemented. But then again, we were surprised when we did hear Cabinets come out with this decision when we were of the view that we were still in discussions and negotiations with the regulator and/or participants in the value chain.