Tharisa’s trading and production update shows ‘giant’ numbers

The Vulcan ultra-fine chrome plant will be ‘unique and exciting in terms of just pushing us down the cost curve, reducing our carbon footprint’: CEO Phoevos Pouroulis.
Image: Moneyweb

SIMON BROWN: I’m chatting now with Phoevos Pouroulis, CEO of Tharisa.  They had a trading update, a production update yesterday – giant numbers there – but also a day before commissioning of their chrome beneficiation plant happened.

Phoevos, I appreciate the early morning time. I want to delve into this chrome story. Is chrome extracted from the same ore bodies as your PGMs? You’re one of those fortunate miners – you went mining for PGM and there was some chrome as well.

PHOEVOS POUROULIS: Morning Simon, and great to be on your show again. Yeah. I think from the outset this is a greenfields project that we developed from exploration. We took a relatively unknown reef horizon in the Bushveld Complex known as the Middle Group Reef Horizon, which historically was only mined on two of the five seams for chrome, and we identified that there were actually elevated platinum-group metal elements within all five seams. What that did was it allowed us to create a very large-scale, low-cost mechanised open-pit infrastructure to co-produce and co-extract both platinum group metals and chrome concentrates. Typically when people refer to ‘middle group’ they always think of chrome, but in our case it’s a very rich and very profitable platinum group metal mine, with chrome as the bulk commodity. So by volume, it will always be the larger in quantum but, value-wise, PGMs obviously with the elevated basket price carry more weight.

Yes, it’s a unique project that really has shown its resilience through the cyclicality of the commodity cycle. So [we are] very privileged. You mentioned that Vulcan ultra-fine chrome plant – and really that’s just us pushing the boundaries of what’s recoverable. Historically ultra-fine chrome was never recovered through conventional processing, and through our in-house R&D team we developed a multi-stage process to extract this chrome. Instead of re-incurring the cost of mining or milling, we are taking our waste stream and recovering that fine chrome. It’s quite unique and exciting in terms of just pushing us down the cost curve, reducing our carbon footprint per tonne of chrome that we produce. So a great time.

SIMON BROWN: And In-house – you glossed over that. That’s an important point, an in-house technology, and it takes your recoveries from 62% to 82%-odd. As you say, that then takes you down the cost curve. Chrome is an important part of your business. It’s about a third of your revenue, about a quarter of profits; that of course is before the commissioning of this plant, which as I understand will be fully online by the end of this year.

PHOEVOS POUROULIS: That’s correct. So yes. It’s just improving those efficiencies, getting those recoveries up to 82%, as you say, so it’s a meaningful part of our business. You have to remember that South Africa has more than 70% of the world’s chrome resources, so we’re a key supplier into that, really. It’s driven by the stainless-steel market, which now it’s not only an Asia-centric story, it’s a global story. Post Covid we’ve seen North America and Europe bounce back in terms of stainless-steel production growth and consumption, so the outlook for [what] we call the late-cycle commodity, being stainless steel, is very positive if we look at the infrastructure refit in the US. Those old bridges, old airports that need to be rebuilt from scratch will use a lot of this stainless steel, mainly for its corrosion-resistance properties.

SIMON BROWN: That’s fair. Every time I think stainless steel, oddly enough the picture in my head is that bumper from the Greece movie in the early seventies with John Travolta. I’d forgotten, of course, it’s [about] the corrosion [resistance]. How has it traded? Is it a spot market, is it futures, is it contract?

PHOEVOS POUROULIS: Chrome in particular is on a bilateral contract basis, so there’s no exchange that it’s traded on; and ferrochrome, the intermediate product, similarly so. In terms of stainless steel there are published prices, and there are myriad grades, depending on whether you’re doing nautical stainless steels, Elon Musk’s rockets, or whether you’re going to surgical steel or construction ferritic stainless steel [with] more chrome content. It’s the chrome and nickel balance, really, that determines the quality of that stainless steel. It’s very diverse in its application.

SIMON BROWN: More than the bumper from Greece. As you mentioned, when in hospitals and so on you look around. The more I think about it, the more I’m seeing it everywhere I look.

Let’s quickly switch to your production update yesterday – a really, really strong production update. The PGM basket has been under pressure [but] we’ve seen a bounce in the last couple of days. You’re still optimistic over the next couple of years. My sense is once we start getting vehicle manufacturing back to normal – and that of course requires chip production back to normal – the PGM story remains robust.

PHOEVOS POUROULIS: Absolutely. This is a temporary supply setback. The fundamentals are still sound. If you look at the pent-up demand, auto demand, it’s real  and tangible; if you speak to all the automakers they’ll tell you the same. It’s merely this chip shortage that we’re all aware of that’s put a dent in that growth trajectory and in actually fulfilling that demand.

If we look at the global de-carbonisation imperative, it means that we need to put more PGMs into our internal combustion engines to meet increasing emission standards. Now the battery electric vehicle is always the counter to where the guys are saying the whole world’s going to be electrified by 2025. Parts of it, yes. Where you can do it, great. But there’s a limitation and practicality to that light industrial/heavy industrial.  The technologies are not quite there yet. They’re not deployed.

So we don’t see the end of the internal combustion engine at a point in time. I think there will be a mix, and rightfully so a mix. But I think as these emission standards improve, we’ll see more stringent application and that means more PGM loadings, which in effect gives us a good medium-term outlook.

When we put the overlay of the hydrogen economy, and the critical role that platinum and some of the minor metals play, we have a long life outlook, a positive outlook for PGMs. So all in all robust fundamentals.

SIMON BROWN: Yeah, robust fundamentals. I mean EVs are certainly coming but, as you say a hybrid, and in South Africa Eskom is going to say, hold my beer, that’s not going to work.

Phoevos Pouroulis, CEO of Tharisa, I appreciate your time this morning.



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