Tharisa Minerals, whose stock soared by nearly 12% on the JSE yesterday after announcing a $5 million (R95m) share buy-back scheme, believes that its shares are undervalued as a consequence of low platinum group metals (PGM) prices.
In addition to its PGM operations, Tharisa also has a platinum project in Zimbabwe and believes its chrome mining operations have significantly shored up its value but remain muzzled by subdued PGM prices.
“The board believes that the company’s shares are trading at a significant discount, having been negatively impacted by the PGM commodity price environment while not reflecting the strong co-product contribution from its chrome sales,” said Tharisa yesterday.
The company is now proceeding with a scheme passed at its annual general meeting last month to undertake a “general repurchase of ordinary shares up to 10% of the 302 596 743 ordinary shares in issues” as at the date of the February AGM.
Shares in Tharisa closed 11.51% higher at R14.05 on the JSE yesterday.
Peel Hunt has already been picked “to manage and carry out on-market purchases of ordinary shares” on both the Johannesburg and London stock exchanges where the company is dually listed. The value of the share repurchases amounts to $5m, it said.
Equities analyst Alex Frey said Tharisa was a small mining company that was well managed and was on a growth trajectory. “This (Tharisa) is a smaller player in the mining sector and as a result gets ignored by a lot of the larger investors despite appearing to be well run and growing,” he said.
Michael Jones, the chief finance officer for Tharisa, said the company had maintained "strict capital discipline” throughout the commodity cycles. He believed now was the opportune time to allocate capital to a share repurchase programme for the benefit of shareholders.
“While the PGM commodity pricing environment is challenging, chrome prices have remained firm reinforcing the strength of our co-product business model. The Karo Platinum Project is a multi-generational resource and, while maintaining capital discipline, we continue on the road to delivering the necessary third-party financing to deliver the first phase into production,” explained Jones.
Tharisa’s share buy-back will run for the period between yesterday until the earliest of either February 21, 2025, such time as the maximum amount has been purchased and or on instruction from the company.
“The repurchase programme will include trading during prohibited periods with Peel Hunt having been granted the authority to enact purchases and make trading decisions concerning the timing of purchases under the repurchase programme independently," said Tharisa.
In determining the price at which the company’s ordinary shares are acquired by Tharisa in terms of this general authority, the maximum premium and/or discount at which such ordinary shares may be acquired shall not exceed 5% of the weighted average of the market price at which such ordinary shares are traded on the JSE.
The price quoted for the last independent trade of, or the highest current independent bid for any number of shares on the JSE where the repurchase is carried out shall also be used to determine the valuation of shares under the scheme.
The repurchased shares will be held in treasury for a period not exceeding two calendar years from the repurchase date. Tharisa had chrome production of 1.5 million tons in 2023 against the backdrop of average metallurgical grade chrome concentrate prices that went up by 25.8% to $263 per ton for the period.
The company’s PGM production of 144 000 ounces was lower compared with 179 000 ounces in 2022. Average PGM basket prices also retreated by 26.2% to an average of $1 893 per ounce.
Due to the continued weakening of PGM prices and macroeconomic factors, Tharisa had decided to delay the Karo Platinum Project commissioning by 12 months to June 2025. It will, however, accelerate the timeline for this if market conditions become more favourable.
Analysts said “the co-product nature of the Tharisa mine generates attractive and defensive margins in challenging PGM markets, while allowing for cash to be invested in its new mine in Zimbabwe”.
BUSINESS REPORT