Tharisa plc (THA) Earnings Call Transcript & Summary

Good morning, and welcome to the Tharisa PLC investor presentation. [Operator Instructions] The company may not be in a position to answer every question it received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Phoevos Pouroulis.

Good morning, everyone, and welcome to this half year 2024 interim results held virtually and we will get straight into it. So we ask the question why mining, why now and why Tharisa? I think we all acknowledge that if it's not mine, it's grown. If it's not grown, then it's mined. And these minerals that we mine are critical to the clean energy transition. It's a recognition that to achieve our decarbonization strategies, we need to extract these critical minerals in a sustainable and responsible manner. So mining is not an option, but the way in which we do it is, and I think that's part of our culture and our ethos. If we look at why now? We can clearly see that the demand for these minerals and metals will more than double by 2060 to meet these targets for climate change. There are limited and finite resources. And over and above that, there's been a lack of investment in existing operations and expansion capital, new operations. And we know firsthand that it takes approximately 12 years to develop a mine from discovery into first production. So the lead times along the decisions are strategic and the capital needs to be patient and to withstand the short-term volatility and be able to see through the cycles so as to bring these metals into production as demand is growing. So as Tharisa, we are mine builders and operators. We understand the journey of exploration through to development and into production. And importantly, the assets that we have under our portfolio are multigenerational and strategic. And while we do witness the volatility in commodity prices, we still have faith in underlying demand and fundamentals of the commodities that we mine. I think one of the characteristics of our business is that we use technology and innovation to unlock value. And this is one of our key values in our business, but also has been a huge enabler for us to unlock value. To that end, our co-product business model actually delivers into physical demand. We supply key strategic stakeholders that are material players within the global economy. Both our group's PGMs and Chrome are designated as critical minerals and have high economic importance and value. PGMs historically have done a wonderful job of cleaning tailpipe emissions from catalysts and now into electrolyzers and fuel cells. We see a great future in terms of the hydrogen economy. And let's not forget the hybrid drivetrain, which is becoming more of a go-to solution as the BEV penetration starts to weigh. Chrome is essential in terms of making stainless steel stainless. Importantly, both of these commodities that we mine are 95% recyclable. So when we look at the period under review and not much has changed actually over the last 18 months, when we look at the hindrance and the adversity that we face operating in Southern Africa and in particular in South Africa, electricity and transport constraints are a daily challenge and pleased to note that our teams navigate this exceptionally well, and the interruption is limited as it can be seen from our results. There are global geopolitical complexities. I think the world is in a much volatile state and it's been in it since, it was probably World War II and lots of uncertainty. This, coupled with inflation and high interest rate environment makes it challenging with a volatile commodity price environment. Particularly in South Africa, we have a high level of crime and corruption, which does impact the normal flow and normal course of business. We spend a lot of time protecting our assets and our business due to those two factors amongst the others. There is the impact of climate change. We've seen adverse weather patterns, which does impact operations whether it be logistics, freight, bottlenecks in the pipeline. And then we have fiscal and regulatory uncertainty. And this is not an African phenomenon. We've seen policy changes globally that do impact trade flows, whether it be duties imposed or restrictions on imports or exports. And then I think key is actually to develop mining projects. This is limited, and it is difficult to attract this long patient capital that's required to develop projects. On the flip side, the tailwinds in terms of our business, really, the Co-product business model has been, again, proven and tested and is resilient. And this really supported by a very strong bouyant Chrome market and underpinned by very strong stainless steel growth and demand in China and Indonesia. What's interesting to us is that these baskets of goods have been countercyclical for the most part and the one has balanced the other part. And we've seen that with a 40% drop in our PGM basket price and a 16-odd % increase in our Chrome price and the spot price is trading well above the 6-month period, which Michael will touch on later. In terms of the macro fundamentals, we've seen a strong momentum behind hybrid drivetrains. I mentioned that earlier, as we see rollback on BEV expansion, especially from the European automakers. We've seen big tariffs imposed on Chinese imports into the U.S. And this really bodes well for a market share that was historically lost to electric vehicles, which is now being clawed back in terms of these hybrid vehicles, which are electric drivetrains that have these all petrol generators or engines to either charge or drive the drivetrain. And this is really starting to gain momentum. And coupled with this, we see some green shoots and investments in the hydrogen economy. As mentioned, stainless steel outlook is extremely positive in China and trending at almost excess capacity and consumption. This supported by primary supply constraints, particularly in South Africa, we do have logistics constraints, and with the pressures of the PGM industry, we see tension hugely to mine production being curtailed and this has a direct impact on Chrome byproducts that it has produced. And then all of this really is sort of weaker PGM environment has seen capital investments suspended and new projects deferred in terms of future growth. We do benefit from a weaker South African rand as an offset to inflationary pressure. But all in all, I think we proved the resilience of our business model. I think, a milestone that we celebrated earlier 6 weeks ago or so, was us being listed on the JSE for 10 years. And while it's something that I suppose, happens in the normal course, it gave us an opportunity to reflect on the journey and we're extremely pleased with the progress of the maturity of our business and how we've developed into a sustainable profitable business over the last decade. So if I just touch on the vital numbers. Revenue almost $370 million, up 10.1% from the comparable period, the half last year, and this is really on the back of those strong Chrome prices and increased volume of production. This generating almost flat EBITDA of $79.6 million, slightly down 2%, generating an NPAT of $38.8 million. This down, some 29% from the prior period, and Michael will unpack this later. I think pleasingly as net cash from operating activities of $86.2 million. And this with a very big capital expenditure profile of $114.1 million, which includes our investment in Karo Platinum of some $63.1 million. We ended the period with cash and cash equivalents of $198.5 million and we generated earnings per share of USD 0.128. And we're very pleased to have announced earlier this year, our share repurchase program of some USD 5 million, which is equivalent to a $0.017 per share reinvestment in our business. This with our interim dividend declaration of USD 0.015 generates a combined net profit after tax distribution of some 24.5%. So again, managing that capital discipline, returning value to shareholders and taking on board the commentary and advice from our stakeholders in terms of supporting the value of our underlying share. In terms of the commodities, we've just come out of Platinum week in London. And for the first time in a while, we're seeing some positivity around the deficits, particularly around platinum, rhodium, ruthenium and iridium. Palladium is a bit of a mixed story with potential oversupply in years to come. But depending on the battery electric vehicle uptake and the uptake of hybrid vehicles, we may see a more balanced environment. But nonetheless, all analysts showing the declaring deficit in all of the major and minor metals for this year and going into the future, potentially expanding deficits for platinum. I think what's important is auto sales, internal combustion engine sales are looking positive and are increasing. This supported by increasing emission standards of Tier 4 and Euro 7, which as we know from history, means that there are more loadings in terms of the auto catalytic converters. Another point of interest is that hybrid solutions require more loading than conventional internal combustion engines, mainly because of the cold starting and stopping of those engines. And then we look to the future for multi-decade PGM demand for the hydrogen economy. And while we're seeing momentum behind it, it still hasn't gained traction that we believe it will. And certainly does provide a zero emissions solution to a decarbonization strategy. So these metals are critical. They are unique and they're essential, and in multi applications across a wide range of industries and we spent a lot of time talking about development in new applications. So PGMs are here to stay and demand will be brought out of these new applications. You can see our PGM basket price, dropped considerably over the last 3 quarters. We started to see some improvements if we compare our basket price today over $1,400 just shy of $100 above our 6-month average. Moving on to Chrome. Chrome is really unsubstitutable in its application in making stainless steel stainless. As most of you are aware, China, the largest stainless steel producer has no Chrome resources of their own. They are mostly dependent or 80% dependent on South Africa for its Chrome requirement. To this end, our mine Tharisa, supplies 10% of China and Indonesia's Chrome demand. The Indonesian fabrication is Chinese owned. So it is housed within the same grouping. So a real key critical supplier into this growing stainless steel market. What's important to note is that we monitor port inventories in China and really look at the balance of supply and demand. And to this end, we see current levels at around 2.3 million to 2.4 million tonnes, being only 5 weeks supply into the domestic program and stainless steel market in China. And these are relatively tight levels if you consider any disruption to logistics and other supply chain issues. And so we see a very balanced market and potentially a market growing into deficits. Today, the current spot price is well over $300, it's here around $315 per tonne. That well up on the average of $288 per tonne for the first 6 months. And really, this is driven by a number of factors. One, the heat pumps that are being installed, which are energy and low carbon friendly, then conventional heat storage and cooling systems as well as rebar stainless steel rebar, rust-proof rebar. These are big green shoots of demand and industrial demand that are supporting very strong stainless steel market driven by China, but also we're seeing India starting to consume larger amounts of stainless steel. So on the whole for the next decade, we still see very strong Chrome demand and with South Africa posting 80% of the world's resources, that will be perfectly located to take advantage of this increase in demand. Just touching on our strategy before I hand over to Michael, our ethos and our purpose statement is really to visualize through innovating the resources company of the future. And how do we do that? We look at the six pillars of expanding and optimizing our existing businesses on a sustainable basis, using innovation to unlock value, looking at diversification, whether it be application of our products, geographic or a broader commodity mix and ultimately becoming an investment of choice in our sector and leading into ultimate objective of enriching lives for all stakeholders. When we look at our geographic footprint, you can see we've grown. We are situated in multi-jurisdictions, our primary assets being multi-generational mineral assets enabled by technology and innovation in South Africa. In the Southwestern part of the Bushveld limb and on The Great Dyke in Zimbabwe. And we have this pit-to-port strategy, which enables us to be front-facing with our customers, particularly in our chrome product deliveries. We also have spent a lot of time on technology and beneficiation and will unpack that later on. And when we look at our key asset, which is the Tharisa mine and Tharisa Minerals, and we look at unlocking value through flexibility. Very pleased to report that our safety record is an industry-leading record at 0.05 incidents per 200,000 man hours worked. We still strive to achieve a zero harm environment. In the 6-month period under review, we mined 2.1 million tonnes, slightly down 0.8% from the prior period. But importantly, we milled at nameplate capacity at 2.8 million tonnes, slightly from the prior period. Our PGM production was down 7.7%, mainly due to the blend and the type of the ore that we mixed and processed being more oxidized and that resulted in us producing 71,100 ounces. I think pleasingly, focus here in light of the bouyant Chrome market is almost 10% increase in chrome production making 865,600 tonnes and a real focus there on our chrome production. We are importantly accelerating our underground studies in the West pit. And really, this is what we see as an expansion or sustainable investment in our business and to ensure the multigenerational access to these key reef horizons that we do mine. So we will be sharing more news on that front as we progress. Moving north out of the Great Dyke. Again, this is a key strategic assets, long-term perspective and view that we take, looking through this current cycle and current lower pricing environment and investing into the future. Again, a pleasing lost time injury frequency rate 0.11 over 200,000 man hours work. As you are aware, we've slowed down the construction and we matched it to smaller funding packages, but it continues steadily. And in parallel with that, we are conducting value engineering and running parallel processes to unlock more value through optimization and taking that culture ethos from the Tharisa mine that iteratively over a decade, we've invested and improved in processing technology to capture more value probably every cube that we mine. So when you look at the current impact of the market and the fiscal regime provisions that we're finalizing. These are both having an impact on the delivery of the timeline. So once we have certainty in terms of those fiscal provisions as well as more positive market conditions and funding concluded, we are then in a position to accelerate and continue to develop the project to add first ore and more. We've spent $110.5 million to date on the project, and that's since inception. And as you're aware, Tharisa has committed $70 million of its final equity contribution and the balance of the funding will come from third parties and be referenced to the project. So touching on our innovation and our culture and ethos of innovation. We have multiple initiatives. We have our beneficiation site where we produce PGM alloys on a commercial basis. And we have then coupled that with the unique patented PGM product process, which we'll be commercializing in later on this year. This is unique and novel and is very cost effective by comparison, and it gives us opportunity ultimately to refine our own metal and market our own PGMs, which currently we supply through concentrate agreements to existing refiners in South Africa. We have our development center, which is a laboratory, which is run in conjunction with the University, where we do lab scale and desktop test work before we move them into the beneficiation sites. Either the pyrometallurgical site, or the renewable energy center, which is really focused on storage solutions and utilizing renewable energies with technologies that we have identified and developed. One of which is Redox One, wholly owned subsidiary, which was officially launched at the Africa Energy Indaba in 2024. And to remind the audience, this is a long-duration energy storage system using redox flow technology, which is iron-chromium solution, which is produced from the concentrates that we mine and gives us very strong cost advantage. This is a great scale megawatt to gigawatt storage solution and really looks to storing renewable energy or peak shaving of energy solutions, so managing peak and non-peak energy flows and storing the energy. We are busy commercializing that with our demonstration units being installed and running on our own electrolyte, again, a patented process. We see huge potential and huge value for shareholders in this wholly owned subsidiary and a very accelerated timeline to delivery with demonstration scale units being deployed early next year across the globe and really proving the viability and the scalability of this technology. So with that, we talk about our strategy of Mine to Megawatt and utilizing the technologies and the minerals that we have to look at the circularity and the circular economy, creating that decarbonization from the metals that we mine. And we've touched on this and the various applications of those minerals and metals and we see this as a key focus area in terms of our ultimate objective of having an underlying access to critical resources and then unlocking value through the technologies and the products that we mine. Without further ado, I'd like to hand over to Michael to touch on the important part of the interim results, the financial update.

Thank you, Phoevos, and good morning, and thank you for joining us this morning for our interim results presentation. I think if we look at this last 6 months, our financial results have really been characterized by the financial resilience of Tharisa, through it's Co-product business model. As a Co-product use both patented metals and chrome concentrates, and benefiting from our large open pit mine, we have generated net cash flow from operations of $86.2 million. This has allowed us to continue investing throughout the cycle and particularly in technology and downstream beneficiation investment, which is progressing well towards commercialization. We continue to maintain our capital discipline and with the share repurchase program of $5 million in place and in addition to that, we have declared interim dividend of $0.015 per share. If we start looking at our overall revenue, and again, it's a multi-commodity revenue stream. Our revenue for the 6 months, $369.1 million, up 10.1% year-on-year. With a look at our revenue on an FCA basis, which is effectively ex mine gate, Chrome, the single largest contributor at 63.2% of our revenue. And that's on the back of metallurgical grade chrome sales of 801,800 tonnes and an average metallurgical grade price of $288 per ton. If you look at the composition of that in more detail, metallurgical grades, approximately 84% of overall production, specialty grades, which is a higher value add fund and chemical grade products comprising some 16%. Not withstanding the PGM environment that we have been trading in, in terms of its pricing, PGMs are still a significant contributor to our overall revenue at 26%. Giving some of the numbers behind that, PGM sales of 70,600 ounces and the average PGM basket price was $1,344 per ounce, and that's down just over 39% on the comparable period. The major constitute components of our PGM revenue platinum at just over 38% and rhodium is still a significant contributor and while less than 10% of our overall total split contributing just under 32% to our PGM revenue. I think the next table really depicts, I think, what's happened over the last 6 months, quite clearly in terms of looking at the EBITDA waterfall. So we started off with our half year 2023 EBITDA and can quite clearly see the impact of the reduced PGM volumes and reduced PGM prices on the EBITDA. This has, however, been more than offset by increases in the Chrome volume production as well as the increase of some 17% hike in the chrome prices. We have continued throughout this period to purchase third-party run of mine or this is a strategic decision to ensure that we maintain optimal throughput through the mills. The other item perhaps is to touch on is the selling expenses, this had again a negative impact on our overall EBITDA, but the background to that is, in fact, that on a per unit basis, there was a reduction of some 1.4% per tonne sold associated with the chrome sales and is based on the increase in the volumes. Resulting in overall EBITDA of $79.6 million. I'd like to note some just analyzing our unit costs. There are some significant moves in the costs, our cube mined, up 19.2% to 8.7 million cubes. The cost per cube mined, a reduction of some 2.8% at $10.6 per cube. And that's really as we absorb the higher fixed cost components against the increased production volumes and not withstanding some of the inflationary pressures, particularly for example, on the explosive side. Reef tonnes mined compared to the prior period at 2.1 million tonnes for the 6-month period. And the cost per reef tonne mined increasing by 17% to $44.1 per tonne. If you look at some of the reasons for the increase in the cost per tonne mined, as I mentioned earlier, inflationary pressures on items like the explosives, longer haul distances to the waste rock dump and we recently appointed a mining contractor to remove additional waste, and that cost is included in that cost per reef tonne mine. So deferred stripping included in that cost, which is capitalized for future years' benefits, $31.5 million. And in the prior period, it was $8.7 million, and therefore, an increase in the overall cost per reef tonne mined. Tonnes milled very comparable to the prior period of 2.8 million tonnes. On mine cash cost per tonne milled increasing by 17.8% to $56.8 per tonne. And again, in addition to other factors mentioned, the strategic ore purchases have been included in the calculation of the cost per tonne milled. If one looks at the graph on the right, which analyzes on mine cash costs, we can see the impact of the ore purchases at some 29% of our overall costs. With pleasing chrome inland logistics and freight costs, down margin at 1.4% to $81.3 a tonne. The Tharisa mine does operate in a weaker currency environment with its revenues denominated in dollars and its cost base, largely rand driven, and we benefited from a weakening of the rand of some 6.3% average ZAR 18.8 to the dollar. We do account as a co-product produced and produced by Platinum group metals and chrome concentrates. However, to turn around and say, let's analyze it on a by-product basis, you will see the all in cost per platinum ounce sold increasing to $754.6 per ounce. Let's put that in context, that is the all-in sustaining cost that's after our capital spend and I'll touch on that later, $114 million. It's after the additional stripping and the underlined ore purchases, so is after all those capital costs. If we then move on just to gross profit, gross profit for the period recorded $81.4 million and still a very pleasing 22.1% gross profit margin notwithstanding the PGM environment in which we're operating or the inflationary pressures that the business faced. We continue to invest in the future of the company. We spent $114.1 million on capital spend in the 6-month period, including this $114 million is $63.1 million that was spent on Karo Platinum and the developer of that particular project and $31.5 million on deferred stripping. Just looking forward to the year as a whole, a budgeted capital spend of $79.1 million, excluding Karo Platinum and excluding the deferred stripping. Just touching on Karo Platinum itself, if you look at the plans for the coming 6 months, the budgetary spend is $38 million, and we are on track in terms of our budgetary spend for that project. And the Karo Platinum total capital project costs just to remind parties is $391 million and will also a provision an extra 10% because of the extended project development schedule. Our balance sheet remains strong. We have $198.5 million in cash and cash equivalents and again, notwithstanding a environment in which we're operating in, strong cash flow generation with cash flows from operations of $86.2 million and net cash of $86.3 million. I'd like to just draw your attention to the graph on the top right. We have really broken down our free cash flow to give some context to how we're funding our operations. So the net cash from operations, $86.2 million. Our investment in sustaining capital, those in our existing operations, some $51 million. So free cash flow from our sustaining operations, a positive $35.2 million for the 6-month period. We invested heavily in Karo Platinum, $63.1 million over this period, which gives us a negative free cash flow for the year of $27.9 million. Now if we take it in context, it is a world-class asset that we been busy developing. It has significant capital costs, and it will be funded from third-party debt going forward, in addition to our $70 million equity contribution that is still due for that particular project. Total debt $112.3 million, short-term portion, just under $50 million. At the end of our last financial year, we drew down on an $80 million term loan facility to the minerals level. We had agreed to an accelerated debt repayment profile. So at the end of this financial year,, so 40% of that term loan would, in fact, have been repaid and therefore, further strengthening our balance sheet and debt capacity. So 90% of our debt is U.S. dollar denominated. The rest is rand-denominated. And as I mentioned, our balance sheet is extremely robust and healthy. So touching on some of the ratios, the current ratio of 2:1. Net debt to EBITDA because of the net cash position is negative 1.1x, and net debt to equity negative 11%. So a very strong balance sheet, and we still have undrawn facilities of $80.6 million and trade finance facilities that we have not accessed in excess of $20 million. We are committed to giving returns to shareholders. Our policy is to distribute at least 15% of consolidated net profit after tax on an annual basis. Typically, at the half year point, we do the calculation and apply a factor about 40% for the full year to take into account potential changes over the next 6 months. And it's very pleasing that we are distributing a dividend of $0.015 per share. In addition to this, we have the share repurchase program of $5 million and if you did that on a per share basis, that's equivalent to $0.017 per share. The program itself is not quite achieved what we expected over this period. We've acquired just under 193,000 shares, and the factors behind that level, we're in a close period. And therefore, there was a limit on the ability to purchase or acquire shares and also driven by the increase in the share price and the formulated approach to what you are committed to repurchase. Following the end of that close period today, we expect to see much more active trading in that share repurchase program. I think a very pleasing number on this chart is a cumulative distributions to shareholders over the last 9 years in which we have been paying out dividends. Please note we pay consistently every single year in terms of the cycles and through the cycles and the figure amounts to $100.6 million. That gives a very brief overview of the financial results for the 6 months, and I'd like to hand back to Phoevos.

Thanks, Michael. So, when we look at our guidance for the full year, we still remain on track to achieve our stated guidance of 145,000 to 155,000 PGM ounces. This will require a slight improvement in the second half, which is in process and then plan. In terms of chrome concentrates, we maintain our guidance of 1.7 million to 1.8 million tonnes and on track to achieve those volumes. So when we look at the value proposition in our investment case, Firstly, we have to recognize the co-production of these critical metals being PGM and Chrome concentrates and the sustainable demand and supply of these commodities being challenged in some respects, but with multigenerational shallower assets, we're able to supply into the future. When Karo comes online, we will double our PGM output and be one of the top 5, 6 producers of PGMs in Southern Africa, which certainly will give us a good market presence and market share. I think the fact that we have mechanized mines, we have multi-pit tabular orebodies gives us operational flexibility. And we've seen this over time where we were able to shift and move from one area to another or adapt our strip ratios and mining methodologies to suit the environment and adapt accordingly. I think a key to any strategy is the diversification and beneficiation towards the energy transition. And I think we've proven that through the innovative approaches that we've taken, whether it be Redox One, providing a critical solution that the planet needs to store vast renewable energy that is being generated in unpredictable periods of time subject to nature, be it irradiation or wind so that can stored on grid scale basis, and I think that really presents a huge opportunity into the future as well as our downstream opportunities in both Chrome and PGMs, which we've touched on lightly. I think also our integrated marketing and sales and logistics platform provide the ability for us to deliver access and engage with end users, and it's something that we believe is scalable over time as we grow our business. And I end in the sort of nonsequential manner on capital discipline. And I think this is really important because we are owners of this business, and we respect the fact that we need to invest in our existing businesses, we need to provide growth as well as return value to shareholders. And I think we've proven over the last decade that we have done that responsibly and in a measured fashion. So when we summarize this, we see Tharisa as an end-to-end critical metals and energy solution provider, innovating the resources of the company in the future. And that's really what drives us. And when we look back and reflect, we've been in operations for 15 years. We've been cash generative for 10 years, and profitable for 9 years and we've returned just over $100 million to shareholders in that 9-year period, and we've invested approximately $695 million in whole business. With that, I would like to thank you all for your attention. And handover to moderator for the Q&A session. Thank you.

[Operator Instructions] As you can see, we have received a number of questions throughout today's presentation. And Ilja, if I could ask you to please read out the questions and give responses were appropriate to do so, and I'll pick up from you at the end.

Certainly. The first question is addressed the macro questions and Phoevos, addressed to you, that our outlook on commodity prices and demand trends for the second half of 2024. And let me highlight another question here around, can you take us through the Chrome market where stock levels are above ground and where the stainless steel cycle is and why prices remain stronger for longer? I know you addressed it briefly initially, but maybe some more detail on our outlook for both those commodities.

Sure. Thanks, Ilja. I think let's touch on the PGMs first. So we've seen a nice move in platinum prices, some 14% over the last 4 weeks, trading above the $1,000 mark. We see continued support for pricing of platinum, rhodium, iridium, ruthenium at the current levels. Palladium has been on a downward trajectory and traded below the $1,000 mark. We believe there is some upside potential for palladium in the short term, that's really in terms of the million ounces short position that's in the market that needs to be covered. So I think we'll see support for palladium in the next 6 months. So we see stable, more stable PGM basket pricing with the potential for some appreciation in the next 6 months. And beyond that, we certainly are more optimistic, particularly around platinum going into the future. Stainless steel is a very interesting demand driver for the consumption of ferrochrome and in turn, chrome concentrate. And what we've seen is that stainless steel production in China is at high levels. Demand is there. And as I mentioned earlier, it's driven primarily by a number of sectors. So you have the traditional late cycle domestic white goods as we refer to them, which really is a byproduct of urbanization and growth in China, whether it's your washing machines or microwaves, air conditioners. What we've seen now is a boost to steady sort of production of heat pumps which are energy efficient generated -- units and in many places being legislated to be installed. So that's been a big driver of stainless steel. The other big driver, which is not really spoken by is Ferritic rebar, which is a typically rebar was either galvanized or a carbon steel product. But because of the rust resistance of rebar, we're starting to see it being utilized in major construction and the development industries and India has moved quite dramatically towards stainless steel rebar. So we're seeing demand that was not there historically. Secondly, we're starting to see stainless steels replacing other steels and other metals like aluminum in the near aspects as well as galvanized steel. So the outlook for the next decade is extremely positive in terms of these new markets that have been opened up primarily because of China's dominance and the capacity and growth and cost-effective production of, let's call it, the more ferretic stainless steels which are higher chrome content as well as the [indiscernible] which of the nickel-bearing stainless steels. If we look at the port stocks, as mentioned, at around 2.3 million, 2.4 million tonnes and declining gradually. This is only a 5 weeks supply into China. These are chrome ore stocks we're talking about. There is a second inventory that is not publicly available, and there is ferrochrome stocks, which are extremely low in China. So that bodes well for a very tight market and for prices above the $300 level. As mentioned, current spot prices to $315. So if I were to give an outlook for the next 6 months, I would see prices in the order of $300 per tonne being maintained really on the back of this demand, inventories and supply side not being able to meet increased demands. So I hope that answers the questions, Ilja.

Following up on that, there's a question here with regards to given the relatively weak PGM market, is there any appetite to look at discounted PGM acquisitions? Again for you, Phoevos?

Yes. So certainly, the big news is the BHP-Anglo deal, which has really been the topic of discussion that really occupying a lot of debate around platinum week. So yes, I do think there is an opportunity for consolidation in the PGM industry. And we believe this will be net positive because if we will rationalize certain operations that are loss-making today and are potentially supported by bigger balance sheets and potentially rightsize the supply side of the equation to support higher prices for longer into the future. So we don't rule out consolidation, and we think there will be more of this happening in the future.

Just turning to Karo now. I think there's two questions. One relates more to where do we stand on raising the external debt required for Karo and what progress we've made there. And then with -- in line with that, you're investing a quarter of revenues in Zimbabwe, how certain are you of that investment will deliver satisfactory returns. Given the Zim macro issues and potential major risks for the project. So I think a Karo summary on where we stand maybe.

Perhaps I can start on the funding side. Thank you for that question. If we have a look at the Karo funding, we continue to be progressing with a project finance funding. It is an ECRC backed funding package in the order of $160 million. There are in the data room going through, and we have data, the models, environment and so far, that's progressing well, albeit a little slow than we would have liked. One of the challenges there is ECRC is a government backed organization, and they have a certain process to need to go through to get those approvals. So busy working through that. There's no issues to date for us on that, we're confident of closing that particular fundraising. That does leave a shortfall in overall funding. We are exploring and are actively exploring a gold and base metal screen over some of the production going forward. Again, we have approached a number of parties, who are awaiting term sheets from them. There are a good number of parties in the data at the moment going through that particular process. So we are confident there's been some good interest, not withstand jurisdiction, which limit some parties participating in Zimbabwe of getting a favorable outcome on that particular funding stream. And there is another African DFI that has expressed interest in participating in a mass level funding as well. So that is progressing well, albeit a lot slower than I think we would have liked in terms of closing out that funding.

So the second part of the question was how confident are we in the investment. So I think just returning to our original strategic outlook. We believe that PGMs will be in demand for decades to come and when we look at the supply side challenges and constraints of deep level mining in South Africa, which is the major supplier of platinum, iridum, ruthenium which are the three metals that are identified for the PEM electrolyzer and the hydrogen -- green hydrogen economy, we see through the current volatility and into future demand where we believe supply will be constrained. And bearing in mind these mining metals are not sitting in above ground stocks that can be in recycled. So to access them, you need to mine the platinum bearing reef to get to the mining metals. So we have conviction in the underlying demand fundamentals. Timing is albeit appear not to be ideal. Things are slowing down, but not stopping the project and ultimately giving us some flexibility of when to accelerate or potentially to slow down further but it is a contrarian view, and we are investing out of the cycle. And we've seen mining companies buy at the peak and sell at the bottom, which is not the best return in our opinion of capital. So yes, while its contrarian and it is countercyclical and counterintuitive, we do have conviction that when markets turn and when there's a realization that supply is under huge pressure, we should be in a position to deliver into a much more buoyant and stable demand for these underlying PGMs, these critical metals. So yes, we do take a long-term strategic view and look through a quarter or 6 months outlook.

Okay. Michael, a two-stage question regarding share buybacks and dividends. Why is it appealing for you to buy back shares despite the low share liquidity? And I think on the back of that, there's a follow-up question here saying that the dividend cut is obviously disappointing. I would try to understand that going forward, any share buyback sums will be deducted from funds available for dividends and counter towards the minimum 15% NPAT?

Okay. Thank you for those questions. In terms of the share repurchase program, while there would appear to be loan to share liquidity, the minute the share price starts moving, there is a share liquidity trade that is available in the market, and we have seen active trade and improvements in the trade of both the London Stock Exchange and the Johannesburg Stock Exchange. I think the management or the executive firmly believe that the share is significantly undervalued at these prices and therefore, a repurchase of the shares will be value accretive to all shareholders, but those receiving the payment consideration and those benefiting through the purchase of those shares and holding of those shares for future treasury. So I think that should address the share liquidity issue, and we'll continue to trade. I think we'd like to see a more active share repurchase program, as I mentioned before, coming out of the close period. I would expect that the restrictions and constraints that we apply would outshine the market a little bit more. In terms of the dividend policy itself, our dividend policy distribute at least 15% of consolidated net profit after tax. And that dividend policy is the policy that we are maintaining, unless you tell the market otherwise. We will not be offsetting the share repurchase program against those dividend payments. So it is not perceived as one. There are two separate corporate actions that we would undertake.

And just to remind everyone, you did mention it before, this is an interim dividend, and it's not historically a full calculation on the interim impact, and it's historically made whole at the year-end.

Correct. Thank you.

Phoevos something for you, maybe a bit closer to home. In December, we spoke at length about the export opportunities for our chrome via Mozambique. Can you update market on how that's going. There's some comments here around whether there's some problems that we are experiencing there. And then again, with elections next week, some of our competitors have had some community unhappiness around our complexes and how our community relations going? And do we see them as a risk where we are.

Yes. So I'm pleased to report that our commodities have been flowing consistently and regularly through the multiport strategy that we have, which is Richards Bay, Durban and Maputo, approximately 35% of our exports are channel through Maputo. And in fact, it's an exceptionally well run and an efficient port, and the border system has improved immensely through an automated system. So we're pleased with the current operations and the ability for us to move our product, bear in mind that 80% to 85% of that product is moved by the road and about the balance is by rail. And we're looking to increase the rail component through discussions with Transnet and so forth. In terms of the elections, yes, there's been a lot of activism, a lot of lobbying and sort of the usual activities around our host communities, municipalities, over the last 6 months, I would say. We have managed, navigated engaged with these parties and as I've mentioned earlier, we've been very clear that we're protecting our business and our assets and our people, most importantly, against these call infringe activists and extremists. But pleased to say we haven't had any disruption to our operations and or material threats. To that. And I think it really bodes -- I think it speaks that community liaisons and teams have been doing over the last decade in building a trust relationship. And bearing in mind that our host community of beneficiaries of this mine, there is a community trust, which is a shareholder in the Tharisa PLC. So they benefit from these dividends and from all the funds as well as the corporate social initiatives that we undertake. And these are continuous regular engagements talking to our philosophy and ethos of upliftment of education development skills programs for our community as well as health awareness campaigns. So we have a lifelong commitment to our doorstep communities and we employ approximately 30% to 35% of our labor force. So there's a real invested interest, semi-skilled workforce for stability. So at this stage, no issues.

Back to the actual mining process and 2-pronged question for you, Phoevos. Can you talk about the division that we have 2 million tonnes of chrome and 200,000 ounces of PGMs, what the timeline would that would be? And the Vulcan recoveries, do you still see them increasing the chrome recoveries on an overall basis to the stated?

Yes. So just -- we lost you there, but I got the questions. So in terms of the chrome recovery -- In terms of the Chrome recoveries, we are seeing improvements in the Vulcan process and are forecasting continued improvement to the 72% level going into the end of this financial year and then increasing that to get closer to the 2 million tonnes. And in terms of the chrome, I'd like to say that by the end of next calendar year, I think on a run rate level we should be achieving near to that level, which would be sort of circa 500,000 tonnes a quarter, and the plans and processes are in place for that. In terms of the PGMs, I think it's fair to see that we prioritize Chrome over the PGM recoveries and that is a conscious decision, obviously, to improve our production levels, but also to capture the extra margin. So we have the question yesterday from one of the analysts, Is it one? Or the other? Or can you achieve both? So, if you recall historically, when we processed 100% of our own mine material, we did achieve above 80% recovery of PGMs. And really, the big determining factor there is the unweathered ore or fresh ore as we call it, unoxidized ore that is processed as well as the consistency of that ore. And those two factors allow us in the current configuration to process and recover above 80% PGMs. So depending on the ore mix, PGMs are issue or on guided rate, I should say, to follow 6 months after achieving the chrome recoveries. And the reason why I say that is because the blend ratios will stabilize going into calendar year 2026.

One question for Michael. The one relates to Chrome sales. And then can you comment on chrome sales? During H1 F '24, which were higher than production? And how do we think about sales going forward? And while you answer that, I will pull up the capital slide because we do have a question here around capital expenditure that's more than doubled, the significant spending on Karo. I know we talk about it in the slide. I'll pull it up and maybe you can take the question through with the slide up.

Thank you. I think if we look at the question on the Chrome sales, we were always sold into our production to what we will sell in terms of the overall markets and looking at the size of the Chrome resources. So it's not in our nature to stock chrome as such it is sold as produced. If it has been high, and I just checked that number now than the previous period, that is simply a timing issue of stock different transit annual production over the prior period that then have been moved in the current period. So going forward, I would very much expect it as we produce and increase our production, there is an increase in the actual sales volumes. I trust that answers that particular question. And the question for CapEx, Ilja?

Question for CapEx is that the CapEx was obviously higher than what we had shown for the year, and that relates to, obviously, some of the CapEx spend on Karo, but also some of the deferred stripping, so maybe take the listeners through various stages of CapEx and how much we'll be spending for the second half of the year, Just to clarify the situation.

Okay. Thank you. So correct. There's always a timing mismatch between the first 6 months, second 6 months in terms of either sustaining projects under construction, or the purchase of large pieces of -- fleet and kit. So it's not an equal allocation of spend between first and second half of the year. So if we look at the year as a whole, we intend to spend $79.1 million. That is our budget, excluding Karo Platinum and excluding the deferred stripping. Karo Platinum we'll be adding on approximately $38 million for that. That is in terms of the current planned spend and the commitments and packages we have in place for the rest of this financial year. We have a contractor, its sole purpose at the moment is moving additional waste and that will expose the reefs towards the end of the next financial year. And therefore, we expect to see a continuation of the deferred stripping at the current rate. So for the second 6 months of this year, I would expect deferred stripping to amount approximately the same as the current spend of some $30 million for the second 6 months. We get the benefit of that at the end of the next financial year when we access those reef horizons and then maintain throughput of production. And in effect, we'll also start producing reliance to our purchase of third-party run of mine ore as well as we access those reefs.

There's no more questions here. Just a comment here, somebody agreeing with our capital allocation policy talking about cutting back the dividend to buy shares while they are undervalued is completely logical and wise. So some support for our capital allocation program. And as we spoke and the dividend, while it is in real terms lower than last year, it is a 15% net profit after tax on an annual basis that we do that. So with that in mind, there is no further questions here, so, Phoevos, if you would like to end off and then we'll end the session.

Yes. Thank you, Ilja, and thank you, everyone, for attending. It's been a pleasing set of results over the past 6 months. The team have shown agility and adaptability in the rather adverse conditions in South Africa, lots of moving parts, lots of challenges, and I really want to commend them for a stable set of results. I think looking forward, which is important and then something that we always focus on is we see improvements on all fronts in terms of costs, in terms of output and efficiencies. So looking into the next year ahead, we should start seeing our margins improving, profitability increasing and hopefully supported by a more buoyant PGM basket price. So with that, I'd like to thank you all for your time and wish you all today.

Phoevos, Michael, thank you for updating investors today. I will ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team to better understand your views and expectations. This may only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of Tharisa plc, I would like to thank you for attending today's presentation, and good morning to you all.