Tharisa, a chrome and platinum group metals (PGMs) miner, has reported a maiden interim dividend despite a disappointing drop in profit as higher operating costs eroded a chunky rise in revenue.
Tharisa, which is listed in Johannesburg and London, posted a $0.02 per share dividend, its first as it implemented its policy of distributing 15% of annual post-tax profit to shareholders.
The group’s revenue rose 14% to $199m for the six months to end-March compared to the same period a year earlier, but post-tax profit fell 44% to $28m.
A number of one-time items pushed operating costs up as the company moved away from contractor mining to operating its own fleet of equipment and employing mining staff. Diesel prices were 22% higher and comprised 14% of mining costs.
"While revenue reflected an increase over the comparable period based on increased volumes sold and an increased PGM basket price, the lower chrome concentrate prices and costs associated with the transition to the owner-mining model, contributed to a decrease in the net profit before tax," the company said.
Tharisa increased PGM sales by 10% to 76,100 ounces in the interim period, while metallurgical grade chrome concentrate sales shot up by 53% to 553,000 tonnes. The price of that chrome, however, fell by 31% to $193 a tonne. The received PGM price for the period increased by nearly 13% to R11,606 an ounce.
Speciality grade chrome sales rose 22% to 173,000 tonnes. This chrome realises a substantial premium over metallurgical grade chrome.
A number of costs involved in the transition will not be repeated in the second half of the financial year and the benefits flowing from owner-mining are already starting to be felt, said Tharisa chief financial officer Michael Jones.
The expectation is that the high level of debt will fall within the next three years, but there is the chance the newly acquired Salene chrome project in Zimbabwe will attract spending in this time as exploration of the shallow chrome deposit leads to a scaled investment in a mine and processing plant, he said.
The Salene transaction, which was announced on Wednesday, is Tharisa’s first foray outside SA and its mine near Brits in North West province. Jones pointed out that Zimbabwe is highly prospective for both chrome and PGMs.
The exact price for the Salene transaction will depend on the outcome of an exploration programme on which Tharisa will spend $3m this year, he said.
Tharisa’s total debt is nearly $83m, with a debt to equity ratio of 25%, well above the 15% the company would be comfortable with. However, Tharisa has plans to reduce debt levels in the next few years, bringing that ratio into the 10% to 15% range, Jones said. Tharisa has cash of $60m.
Tharisa maintained its full-year production guidance of 150,000 ounces of PGMs and 1.4-million tonnes of chrome concentrates, which included 350,000 tonnes of specialty chrome.