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WARREN DICK: Good day, I’m Warren Dick the editor of Mineweb.com. Today Tharisa Plc announced production results for the year ended 30 September 2016 which saw increases across all of the commodities the company produces. Platinum group metals (PMG) production increased by 12.4% to 132.6000 ounces while chrome concentrates increased by 10.8% to 1.243 million tonnes. Joining me on the podcast today is Tharisa Plc’s CEO Phoevos Pouroulis. Good to have you with us Phoevos.
PHOEVOS POUROULIS: Good morning Warren and thank you for having me again on your show.
WARREN DICK: You must be very satisfied with the production results for the year ended September. I think you were in line with guidance or above for the platinum group metals and the chrome concentrates, so just give us your reaction to those numbers.
PHOEVOS POUROULIS: Yes, Warren, thank you, we’re very pleased and I think it’s been a concerted effort operationally just to bring stability to operations with mining exceeding its core rate in the fourth quarter and year-on-year improving some 5.8% enabling us to achieve the PGM concentrate production and chrome concentrate production that you mentioned earlier. But I think what’s more encouraging is that our recoveries for PGMs have achieved an 80.6% level for the fourth quarter which is well above the 70% targeted level, and really as testament to the optimisation initiatives and tweaking that has been ongoing during this financial year.
WARREN DICK: So those recoveries were something you spoke about at the interim results, being able to increase that as a way of obviously improving the financial performance of the company. When we get to 80% you’ve obviously exceeded expectations. Are you still anticipating an improvement there?
PHOEVOS POUROULIS: In terms of the optimisation for the forthcoming financial year, there is some tweaking on the smaller of the two processing plants, namely the Genesis plant whereby we’ll be implementing some of the initiatives that were done on the larger plant and so we should see some incremental improvement. But I think it’s important to note that our guidance that we’ve given for 2017 is based on a 70% recovery across both plants, so there is some upside potential based on the percent of fresh versus oxidized ore that we do feed in the plant being them as the main contributor.
WARREN DICK: You mentioned in the results call that you were paying particular attention to the grades that you are feeding into the plant there. Can you just give us a bit of guidance as to how you’re doing that in terms of, as I understand it, it’s especially with the chrome because obviously that ties into the recoveries as to how much of the material you can recover. Can you give us a bit more detail as to what you’re doing there to try and engineer that recovery rate higher?
PHOEVOS POUROULIS: Absolutely. So over the last couple of years, we’ve beefed up our mining team and we have our own geological planning, mine survey, mine supervision and what we’re doing is we’re bolstering that now with additional input, geological supervisors which will be focused on grade control and predominantly looking at dilution as minimising dilution and hopefully improving the feed grades and you rightfully say with the higher feed grade the recovery improves.
WARREN DICK: Ok, great. I just wanted to turn your attention to the chrome concentrates. You’d mentioned there’s been quite a big rebound in the price and just to unpack this for investors, of that 1.243 million tonnes of chrome concentrate that the mine produced, being this dual commodity mine that you’ve got there with the PGMs on one side and the chrome on the other. Within the chrome you’ve got two types of chrome, you call the metallurgical grade chrome which accounts for roughly 974,000 tonnes and then the specialty grades which is also, as I understand it quite a recent development where you mined 269,000 tonnes there. Just give us, just explain the difference to us in those two grades and obviously make some alusion to the price that you receive for those products.
PHOEVOS POUROULIS: Certainly…metallurgical grade is destined for the stainless steel industry and it really is what makes stainless steel stainless and our South African ore is destined for China predominantly. So we are a supplier into that Chinese stainless steel market being the end juice for that product. We saw very low prices at the beginning of this calendar year on the back of a whole host of Chinese economic concerns slowdown in terms of manufacturing. We’ve seen a dramatic increase in pricing whereby in the fourth quarter we achieved $157 to a tonne, $156 to a tonne and prices exceeding $200 a tonne for November delivery and really it’s on the back of the fact that Chinese port stocks are at critically low levels, below one million tonnes which is less than six weeks supply for their own consumption, bearing in mind that South Africa supplies around 80% of Chinese chrome ore requirements.
So if you look at the lead time from the mines or a mine in South Africa to China, there’s between six to eight weeks lead time. So that’s been one of the main drivers for prices rebounding, but over and above that, the fundamentals are robust with stainless steel growing in China at around 5% on a compounded annual growth rate, but what’s changed over the last year is that European and North American stainless steel has also reverted back to positive territory.
In short there seems to be a larger demand for chrome units in the form of ferrochrome or chrome ore and we’ve evidenced this through European benchmark prices going up some 10% quarter-on-quarter and Chinese ferrochrome prices going up almost 18% month-on-month. So generally, a strong demand case for chrome units.
In terms of the specialty grade, that is a unique market and its broken into two distinct industries, one being the chemical industry, which is a global industry with facilities all round the world and predominantly they produce the chemical grade chromium products which are used in tanning of leathers predominantly, rustproof paints chromed oxide paints and salts, various salts that are utilised in chrome plating as well as tanning as mentioned.
The foundry grade is a more, even more specialised and is utilised within the foundries, a novel stand application and it’s used to line castings for foundries globally. So those two industries command a premium typically over the metallurgical grade prices and on average we work on the assumption that there’s approximately a $30 per tonne premium between the two markets.
WARREN DICK: Ok, and just to get that right, so the ore that you’re sending into your plant is the same, you’re just treating it in a different way to get met as opposed to specialty grades?
PHOEVOS POUROULIS: Correct.
WARREN DICK: Ok, I guess the last question Phoevos, obviously is we’ve been keeping track of the company in its ramp up now. Perhaps with some assistance with the production guidance for the year ahead, you can tell us now, as I understand it, Tharisa’s now exited production and you’re in steady state at this point, so production levels should move in line with what you’ve delivered this year if I’m not mistaken?
PHOEVOS POUROULIS: That’s correct Warren. Yes we are in steady state and the guidance we’ve given is consistent with what’s contained in our CPR for financial year 2017 with 147.4000 PGM ounces and 1.3 million tonnes of chrome concentrate of which 300,000 tonnes will be specialty grade chrome concentrate.
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