The Pouroulis family is growing its platinum empire with a deal to bring its South African mining experience to Zimbabwe to exploit one of the highly sought-after and undeveloped areas on the world’s second-biggest known platinum deposit.
In the second deal between two Pouroulis family-owned entities, Tharisa, a London-and Johannesburg-listed chrome and platinum mining company operating near Brits, has for $4.5m bought a 26.8% stake in Karo and its resources of four platinum group metals estimated at 96-million ounces.
We currently forecast Tharisa to generate free cash flow of $18m and $48m for financial years 2018 and 2019, therefore the acquisition is easily affordable, in our viewAlexander Pearce
BMO Capital Markets analyst
Karo has secured about 87% of the land and resources Impala Platinum subsidiary Zimplats returned to the Zimbabwean government recently in that country’s efforts to attract more investment by opening the 550km-long Great Dyke mineral belt to other companies.
Tharisa would extend a loan of $8m to fund an exploration programme, which it hoped to complement with drilling and geological data from Zimplats and its work on the tenement, and to start a bankable feasibility study that it wanted to complete in 18 months, said Tharisa CEO Phoevos Pouroulis.
Analysts lauded the transaction. "We currently forecast Tharisa to generate free cash flow of $18m and $48m for financial years 2018 and 2019, therefore the acquisition is easily affordable, in our view," said BMO Capital Markets analyst Alexander Pearce.
The Tharisa transaction with Karo follows a transaction between Tharisa and a Pouroulis family company to buy for $90 a 90% stake in Salene Chrome Zimbabwe, which owns an unexplored chrome property.
Tharisa will spend $3m exploring the property.
"Combined with the recent investment in the Salene Chrome Zimbabwe project and upgrade of the Tharisa mine … the company now has a number of attractive growth opportunities available to it," Pearce said, referring to the plan in SA to grow platinum group metals production to 200,000oz a year and chrome output to 2-million tonnes by 2020 in a fully funded R760m project.
Pouroulis said the plan was to invest in the two platinum group metals subsidiaries in Karo, taking majority stakes in the platinum mine and refining business. Karo also has two subsidiaries wanting to invest in renewable energy and metallurgical coal in Zimbabwe.
Karo intends producing up to 1.4-million ounces a year of six platinum group metals, with space in its smelting and refining plants for another 600,000oz to accommodate other platinum miners that cannot produce a final metal in accordance with the Zimbabwean government’s wishes. The government will own a 50% stake in Karo Platinum, the mining business, and 10% of Karo Refining, with another 15% set aside in the processing business for communities and employees.
Tharisa is busy with a project in SA to develop a smelter to process its platinum group metals concentrate into a high-value matte. This project could be the basis of its processing business in Zimbabwe, where it envisions building three 20MW furnaces.