Wrap Text
Tharisa 2017 Reviewed condensed consolidated interim financial statements for the six months ended 31 March 2017
THARISA PLC
Incorporated in the Republic of Cyprus with limited liability
Registration number: HE223412
JSE share code: THA
LSE share code: THS
ISIN: CY0103562118
Tharisa 2017
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 MARCH 2017
CORPORATE INFORMATION
THARISA PLC TRANSFER SECRETARIES
Incorporated in the Republic of Cyprus with limited liability Computershare Investor Services Proprietary Limited
Registration number: HE223412 Registration number: 2004/003647/07
JSE share code: THA Rosebank Towers, 15 Biermann Avenue, Rosebank
LSE share code: THS Johannesburg 2196
ISIN: CY0103562118 (PO Box 61051, Marshalltown 2107)
South Africa
REGISTERED ADDRESS
Cymain Registrars Limited
Office 108 - 110 Registration number: HE174490
S. Pittokopitis Business Centre 26 Vyronos Avenue
17 Neophytou Nicolaides and Kilkis Streets 1096 Nicosia
8011 Paphos Cyprus
Cyprus
JSE SPONSOR
POSTAL ADDRESS
Investec Bank Limited
PO Box 62425 Registration number: 1969/004763/06
8064 Paphos 100 Grayston Drive
Cyprus Sandown, Sandton 2196
(PO Box 785700 Sandton 2146)
WEBSITE South Africa
www.tharisa.com
AUDITORS
DIRECTORS
KPMG Limited (Cyprus)
Loucas Christos Pouroulis (Executive Chairman) Registration number: HE132527
Phoevos Pouroulis (Chief Executive Officer) 14 Esperidon Street
Michael Gifford Jones (Chief Finance Officer) 1087 Nicosia
John David Salter (Lead Independent Non-executive Director) Cyprus
Antonios Djakouris (Independent Non-executive Director)
Omar Marwan Kamal (Independent Non-executive Director) JOINT BROKERS
Carol Bell (Independent Non-executive Director)
Joanna Ka Ki Cheng (Non-executive Director) Peel Hunt LLP
Moore House
JOINT COMPANY SECRETARIES 120 London Wall
EC 2Y 5ET
Lysandros Lysandrides England
26 Vyronos Avenue Contact: Matthew Armitt/Ross Allister
1096 Nicosia +44 207 7418 8900
Cyprus
BMO Capital Markets Limited
Sanet de Witt 95 Queen Victoria Street
The Crossing London
372 Main Road EC4V 4HG
Bryanston, Johannesburg 2021 England
South Africa Contact: Jeffrey Couch/Neil Haycock/Thomas Rider
Email: secretarial@tharisa.com +44 020 7236 1010
INVESTOR RELATIONS FINANCIAL PUBLIC RELATIONS
Sherilee Lakmidas Buchanan
The Crossing 100 Cheapside
372 Main Road London
Bryanston, Johannesburg 2021 EC2V 6DN
South Africa England
Email: ir@tharisa.com Contact: Bobby Morse/Anna Michniewicz
+44 020 7466 5000
MISSION
To maximise shareholder returns
through innovative exploitation of
mineral resources in a responsible
manner
INTRODUCTION
Tharisa is an integrated resource
group incorporating mining and the
processing, beneficiation, marketing,
sales and logistics of PGM and chrome
concentrates
VALUES
- The safety and health of our people is
a priority
- We take responsibility for the effect
that our operations may have on
the environment
- We are committed to the upliftment of
our local communities
- We conduct ourselves with integrity
and honesty
- We strive to achieve superior returns
for our shareholders
- We originate new opportunities and
will continue to challenge convention
through innovation
STRATEGIC INITIATIVES
- Implementation of optimisation
initiatives to maximise value extraction
- Growth through innovative research
and development
- To generate value by becoming a
globally significant low-cost producer of
strategic commodities
- Leveraging off the established
platform for expansion
into multi-commodities with
geographic diversity
- Capital discipline with an annual
dividend policy of 10% of NPAT and
capital allocation to low risk projects
HIGHLIGHTS H1 FY2017
REEF MINED Up 3.8% to 2.45 Mt (2016: 2.36 Mt)
PGM PRODUCTION (5PGE+Au) Up 15.2% to 69.1 koz (2016: 60.0 koz)
CHROME CONCENTRATE PRODUCTION Up 5.4% to 636.8 kt (2016: 604.4 kt)
Including production of 152.5 kt of higher
margin chemical and foundry grade
concentrates (2016: 105.8 kt)
REVENUE Up 103.6% to US$175.1m (2016: US$86.0m)
OPERATING PROFIT Up 559.4% to US$69.9m (2016: US$10.6m)
EBITDA Up 451.0% to US$81.0m (2016: US$14.7m)
PROFIT BEFORE TAX Up 1 417.8% to US$68.3m (2016: US$4.5m)
HEADLINE EARNINGS PER SHARE Up 1 500.0% to US$ 16 cents (2016: US$ 1 cent)
NET CASH GENERATED FROM OPERATIONS Up 142.9% to US$44.2m (2016: US$18.2m)
GROUP STATISTICS
Unit H1 FY2017 H1 FY2016 Change
Reef mined kt 2 449.1 2 358.6 3.8%
Stripping ratio m3 waste: m3 reef 8.4 6.8 23.5%
Reef milled kt 2 417.7 2 197.0 10.0%
PGM flotation feed kt 1 783.0 1 708.1 4.4%
PGM rougher feed grade g/t 1.54 1.68 (8.3%)
PGM ounces produced 5PGE+Au koz 69.1 60.0 15.2%
PGM recovery % 78.3 65.0 20.5%
Average PGM basket price US$/oz 760 686 10.8%
Average PGM basket price ZAR/oz 10 306 10 448 (1.4%)
Cr2O3 ROM grade % 17.5 18.4 (4.9%)
Chrome recovery % 63.4 62.8 1.0%
Chrome yield % 26.3 27.5 (4.4%)
Chrome concentrates produced kt 636.8 604.4 5.4%
Metallurgical grade kt 484.3 498.6 (2.9%)
Specialty grades kt 152.5 105.8 44.1%
Metallurgical grade chrome concentrate
contract price US$/t CIF China 278 106 162.3%
Metallurgical grade chrome concentrate
contract price ZAR/t CIF China 3 783 1 562 142.2%
Average exchange rate ZAR:US$ 13.6 15.0 (9.3%)
Group revenue US$ million 175.1 86.0 103.6%
Gross profit US$ million 82.4 21.1 290.5%
Net cash flows from operating activities US$ million 44.2 18.2 142.9%
Net profit for the period US$ million 51.1 3.1 1 548.4%
EBITDA US$ million 81.0 14.7 451.0%
Headline earnings per share US$ cents 16 1 1 500.0%
Gross profit margin % 47.0 24.6 91.1%
EBITDA margin % 46.3 17.1 170.8%
Net debt US$ million 7.0 30.9 (77.3%)
Capital expenditure* US$ million 8.5 6.4 32.8%
Debt to total equity ratio** % 13.0 24.2 (46.3%)
Net debt to total equity ratio** % 2.7 17.8 (84.8%)
* Includes deferred stripping of US$nil million (2016: US$3.1 million)
** Net of the debt service reserve account
INTERIM MANAGEMENT REPORT
DEAR SHAREHOLDER
Tharisa has demonstrated its potential of being a strong
cash generative business supported by a marked increase
in chrome concentrate prices underpinned by solid
operational performance. In the six months ended 31 March
2017, the Group, through its low cost co-production
business model, delivered stable operational and excellent
financial results.
The Group reported a profit before tax of US$68.3 million
for the interim period with net cash flows from operating
activities of US$44.2 million, an improvement of 142.9%,
resulting in a headline earnings per share of US$ 16 cents
(H1 FY2016: US$ 1 cent).
Production milestones included:
- reef mining exceeded the steady state required run rate
of 4.8 Mt on an annualised basis
- mill throughput performing at nameplate design capacity
of 400 ktpm
- improved PGM recoveries to 78.3%, an increase of
20.5%, and an increase in chrome recoveries of 1.0%
- increased specialty chrome production from 17.5% to
23.9% of total chrome concentrate production
The unprecedented increase in chrome concentrate prices,
delivered to China within the last 12 months, reaching highs
of US$390/t, was welcomed by a chrome industry that has
experienced suppressed prices since 2011. Prices soared
while liquidity from end-users, consumers and traders was
limited, impacting the ability to sell forward and even execute
on bulk sales at these levels. The average metallurgical grade
chrome concentrate price for the six-month period was
US$278/t, an increase of 162.3% relative to the comparable
period. Platinum prices continued to remain under pressure,
however, the basket price of PGMs was supported by higher
palladium and rhodium prices. The average PGM basket
price (on a 5PGE+Au basis) for the six-month period was
US$760/oz, an increase of 10.8% relative to the comparable period.
Tharisa's continued focus on optimisation yielded positive
production results with a 15.2% increase in production
of PGM contained metal on a 5PGE+Au basis of 69.1 koz
and a 5.4% increase in chrome concentrate production of
636.8 kt. Of the chrome concentrate production, specialty
grade production increased by 44.1% to 152.5 kt.
Safety remains a top priority and Tharisa continues to
strive for zero harm at its operations. Tharisa achieved
a Lost Time Injury Frequency Rate (LTIFR) of 0.17 per
200 000 man hours worked at 31 March 2017. This is among
the lowest LTIFRs in the PGM and chrome industries in
South Africa. Tharisa continues to implement appropriate
risk management processes, strategies, systems and training
to promote a safe working environment for all.
Tharisa continues to strengthen its competitive position,
benefiting from the shallow open pit and large-scale
co-production of PGMs and chrome concentrates.
OPERATIONAL OVERVIEW
MINING
31 March 31 March
Unit 2017 2016 Change
Reef mined kt 2 449.1 2 358.6 3.8%
Reef milled kt 2 417.7 2 197.0 10.0%
The Tharisa Mine is unique in that it mines multiple
mineralised layers with different, but defined, PGM and
chrome contents. The mine is a large-scale open pit with a
life of mine of up to 18 years and the potential to extend the
mine by a further 40 years by mining underground.
During the six months under review, 2.4 Mt of ore at an
average grade of 1.54 g/t PGMs on a 5PGE+Au basis and
17.5% chrome was mined. Nameplate processing capacity
is 4.8 Mtpa of ROM with planned annual production for
FY2017 of 147.4 koz of PGMs and 1.33 Mt of chrome
concentrates. Tharisa has achieved the required mining run
rate for five consecutive quarters.
The focus on opening up access to the full mining strike
length and the benefits of maintaining the correct multi-reef
layer profile are being realised and this contributed to
providing stable feed grades for processing.
Over the last 18 months, Tharisa has been insourcing a
number of mining functions and increased its supervision
and specialist skills in anticipation of gearing up towards an
owner mining operational model. The change in operating
model is the logical progression given the long life of the
open pit mine.
Tharisa has commenced the transition to an owner mining
operational model. Subsequent to the reporting period,
Tharisa has reached agreement with its current contractor,
MCC Contracts Proprietary Limited (MCC), to purchase
the requisite fleet from MCC and to employ the employees
currently in service at the Tharisa Mine.
The transition will allow Tharisa to take direct control
over its mining operations, eliminating the contractor's
risk premiums and profit margins. By controlling the reef
grades, Tharisa can deliver improved quality ore to the
processing plants, thereby optimising the feed and recovery
within the plants. Over the longer term this should allow
for the reduction in mining costs and improve the recovery
and production of PGMs and chrome concentrates. Tharisa
expects the transition in operating model to be completed
within FY2017.
PROCESSING
Tharisa has two processing plants, the Genesis and Voyager
standalone concentrator plants, which have a combined
nameplate capacity of 400 ktpm ROM. The Genesis Plant
incorporates the Challenger Plant on the feed circuit for
the extraction of specialty grade chrome concentrates
principally from natural fines.
During the six-month period, 2.4 Mt of reef was processed
through the two plants producing 69.1 koz of contained
PGMs on a 5PGE+Au basis and 636.8 kt of chrome
concentrates. Of the 636.8 kt of chrome concentrates
produced, 152.5 kt or 23.9% of total chrome concentrate
production was specialty grade chrome concentrates, up
from 17.5% for the comparable period.
Plant throughput achieved the combined nameplate
capacity of the plants.
Overall PGM recovery was at 78.3%, an improvement of
20.5% on the H1 FY2016 PGM recovery of 65.0%, and
demonstrates the benefits of stability in the plant feed
grades and the increase in competent ores being processed
with a lower feed of "weathered" ore. The target recovery
is 80.0%.
The average chrome recovery across all plants was 63.4%,
a 1.0% improvement from the 62.8% recovery recorded for
H1 FY2016 and bringing chrome recoveries within reach of
the 65.0% target.
There are a number of optimisation initiatives currently
being implemented while others are being evaluated with a
focus on improving chrome recoveries and increasing PGM
recoveries even further. The primary spiral replacement
programme at the Genesis Plant will be completed within
FY2017 and should improve stability and recovery within
this plant. The PGM flotation upgrade within the Genesis
Plant is under way with high-energy flotation mechanisms
combined with additional cleaner capacity being installed.
The benefits of these two initiatives should be seen
in FY2018.
COMMODITY MARKETS AND SALES
31 March 31 March
Unit 2017 2016 Change
PGM basket
price US$/oz 760 686 10.8%
PGM basket
price ZAR/oz 10 306 10 448 (1.4%)
42%
metallurgical
grade chrome
concentrate
contract
price – CIF US$/t 278 106 162.3%
42%
metallurgical
grade chrome
concentrate
contract price
– CIF ZAR/t 3 783 1 562 142.2%
Both PGM and chrome concentrate commodity prices
have improved compared to the first six months of the
last financial year. The average US$ PGM contained metal
basket price increased by 10.8% and metallurgical grade
chrome concentrate prices significantly improved by
162.3%, from the low point in the market seen last year
of US$81/t. The ZAR strengthened by 9.3% relative to
the US$ during the period, impacting on ZAR commodity
pricing received by Tharisa Minerals.
The platinum price has remained flat over the period
while palladium remains above the US$750/oz mark and
rhodium has continued to increase, reaching levels just
above US$1 000/oz. The increase in the PGM basket price
is attributed to the increased palladium and rhodium prices.
The metallurgical grade chrome concentrate market is
showing signs of weakness in price and liquidity, which
was to be expected following the rapid increase in prices.
The South African producers' supply discipline has resulted
in excess stocks building up through-out the pipeline with
the Chinese users having slowed production and sourcing
materials from existing stocks and alternate sources.
The demand for chrome concentrate is driven by the
increasing demand for stainless steel, which fundamentally
remains robust. In 2016, global stainless steel production
increased by 10.2% year on year and China achieved a
record melt shop production of 24.9 Mt (15.7% increase
year on year), according to the International Stainless Steel
Forum. The increase in Chinese supply of stainless steel is
largely attributed to increased domestic demand.
Chinese port stocks continued to be restocked from
critically low levels seen in August 2016 and reached levels
of approximately 2.0 Mt in April 2017. With domestic
Chinese requirements of approximately 1.0 Mtpm, this
equates to eight weeks' supply.
The fundamentals of the global stainless steel market
remain sound with continued growth expected in 2017,
further supporting demand for chrome units in the form of
ferrochrome and chrome ores.
PGM production continued to be sold to Impala Refining
Services under the off-take agreement and a total
of 69.3 koz was sold during the period. The Tharisa Mine's
PGM prill split is significant in terms of platinum content at
54.6%, with palladium and rhodium contributions of 16.3%
and 9.7%, respectively.
Tharisa prill split by 31 March 31 March
mass % 2017 2016
Platinum 54.6 56.1
Palladium 16.3 15.7
Rhodium 9.7 9.5
Gold 0.2 0.2
Ruthenium 14.3 13.9
Iridium 4.9 4.4
Chrome concentrate sales for the period totalled 502.4 kt
an increase of 4.3% compared to H1 FY2016 (2016: 481.7 kt).
However, inventory levels increased during the period
by 19.4% as at end March 2017.
LOGISTICS
31 March 31 March
Unit 2017 2016 Change
Average
transport costs
per tonne
of chrome
concentrate –
CIF main ports
China basis US$/t 50.0 40.0 25.0%
The chrome concentrate destined for main ports in
China is shipped either in bulk from the Richards Bay Dry
Bulk Terminal or via containers from Johannesburg and
transported by road to Durban from where it is shipped.
The economies of scale and in-house expertise have
ensured that Tharisa's transport costs, a major cost to the
Group, remained competitive.
China remains the main market for metallurgical grade
chrome concentrate and 360.2 kt of chrome concentrate
produced by the Tharisa Mine was sold to China on a CIF
main ports basis. The majority was shipped in bulk with a
negligible quantity being shipped in containers. Specialty
grade chrome concentrate sales were 142.2 kt for the
period.
Negotiations over a planned public private partnership
with Transnet for an on-site railway siding at the Tharisa
Mine continue.
FINANCIAL OVERVIEW
There were a number of key financial highlights for the
interim period:
Firstly, the all in sustaining cost(1) per Pt ounce was negative
at (US$1 123) (i.e. this assumes that the Group is a pure
platinum producer thereby off-setting the credits from
the chrome concentrate sales and receipts from the other
platinum group basket metals) compared to the comparable
period cost of US$402/Pt oz and similarly if one assumed
the Group to be a pure metallurgical grade chrome
concentrate producer the all in sustaining cost delivered
on a CIF main ports China basis per tonne was US$88/t
compared to the comparable period of US$85/t. This
positions the Group firmly in the lowest cost production
quartile for both PGM and chrome producers.
(1)Calculated as the sum of the operating costs, administrative
expenses and capital expenditure less the "by-product" credits.
Secondly, the Group generated positive net cash flows from
operating activities of US$44.2 million compared to the
comparable period of US$18.2 million.
Thirdly, there was a significant reduction in interest-bearing
debt with interest bearing debt as at 31 March 2017 totalling
US$38.4 million, resulting in a debt to total equity ratio of
14.8%. By off-setting the balance in the debt service reserve
account of US$4.8 million, the debt to total equity ratio is
reduced to 13.0%.
This performance was achieved in a period of a global
recovery in commodity prices with the Group benefiting
particularly from the recovery in chrome concentrate prices.
There was, however, a strengthening of the ZAR, being the
cost base currency for the Group's mining operations in
South Africa, with the ZAR strengthening from ZAR15.0 to
ZAR13.6 against the US$, an average strengthening of 9.3%,
impacting on the overall cost base of the Group.
Subsequent to the reporting period, South Africa's foreign
debt was downgraded to sub-investment grade impacting
on its currency and reversing the strengthening trend
(although the downgrade was considered to be priced into
the currency). Interest rates are also expected to increase
going forward. The Group's commodities are priced in US$
and the cost base is mainly in ZAR and therefore the Group
is positioned as a Rand hedge stock.
Group revenue totalled US$175.1 million of which
US$40.0 million was derived from the sale of PGM
concentrates and US$135.1 million was derived from
the sale of chrome concentrates. This is an increase of
103.6% relative to the comparable period revenue of
US$86.0 million. The strong recovery in commodity prices
and particularly the chrome concentrate price, which
increased from an average of US$106/t (on a CIF main ports
China basis) to US$278/t for metallurgical grade chrome
concentrate, was on the back of demand fundamentals for
stainless steel and a restocking of port stocks in China.
There has been no non-recurring or exceptional income
sources during the interim period.
Against the increased revenue, the gross profit increased
from US$21.1 million to US$82.4 million with the gross
profit percentage increasing from 24.6% to 47.0%.
The allocation of shared costs of production for segmental
reporting purposes was revised for the current period
taking into account the relative contribution to revenue on
an ex-works basis and, in accordance with the accounting
policy of the Group and IFRS, the allocation was amended
to 75% for the chrome segment and 25% for the PGM
segment. The comparable period shared costs were
allocated on an equal basis.
The increase in the gross profit was notwithstanding
an increase of 25% in the average transport costs for
transporting the metallurgical grade chrome concentrate
from the mine to main ports in China. This on the back of
suppressed freight prices during H1 2016.
The major constituents of the on-mine cash cost of sales are
depicted in the graph below:
Mining 50.3%
Utilities 6.0%
Reagents 2.5%
Steel balls 4.5%
Labour 9.6%
Diesel 12.1%
Overheads and other 15.0%
The mining is currently outsourced to a mining
contractor. The diesel cost, however, should be considered
part of the overall mining cost. The mining contractor
labour cost is included in "mining" as Tharisa pays on a per
cube mined basis.
The mining cost per reef tonne mined for the period was
US$19.5 (2016: US$15.7). This may be attributed in part to
the increased stripping ratio of 8.4 (on a m3: m3 basis), which
is more in line with the life of the open pit stripping ratio
of 9.7, compared to the comparable period stripping ratio
of 6.8, and the strengthening of the ZAR over the period.
After accounting for administrative expenses of
US$12.5 million (2016: US$10.7 million) the Group
achieved an operating profit of US$69.9 million
(2016: US$10.6 million). There was a significant increase in the
equity settled share-based payment expense included
in the administrative expenses which increased from
US$1.0 million to US$2.2 million following the recovery
in the share price of Tharisa. This share-based payment
expense relates to the long-term incentive plan and share
appreciation right scheme for employees of the Group and
is limited to 5% of issued share capital as per the rules of
the scheme.
The Group's cost base is mainly in ZAR (other than
for selling and freight expenses) and where the Group
benefited from a weakening ZAR in the comparable period,
the ZAR strengthened in the current period thereby
negating the benefits of operating in an "emerging market"
weak currency environment. The ZAR strengthened
from ZAR15.0 to ZAR13.6 against the US$, an average
strengthening of 9.3%.
EBITDA amounted to US$81.0 million (2016: US$14.7 million).
The consolidated cost per tonne milled excluding selling
expenses was US$34.0 (2016: US$28.7). The increase
in cost per tonne milled may be attributed in part to the
increased mining cost and the impact of the strengthening
of the ZAR on the cost base.
As a consequence of the strengthening ZAR, finance
income, which includes foreign currency movements on
working capital amounts, increased to US$4.0 million.
Finance costs principally relate to the senior debt facility
secured by Tharisa Minerals for the construction of the
Voyager Plant and the expansion of the mining footprint.
Project completion as defined in the contractual terms
of the senior debt facility was achieved on 14 November
2016 and the interest rate was reduced by 150 basis points
to JIBAR plus 340 basis points.
The tax charge amounted to US$17.3 million, an effective
tax rate of 25.3%, of which US$1.9 million was cash tax
paid. The Group has fully utilised its tax losses. As at the
period-end the Group had unredeemed capex for tax
purposes of US$99.3 million. The net deferred tax liability
totalled US$18.2 million.
Profit for the period amounted to US$51.0 million
(2016: US$3.1 million).
Foreign currency translation differences for foreign
operations, arising where Tharisa has funded the underlying
subsidiaries with US$ denominated funding and the
reporting currency of the underlying subsidiary is not in
US$, amounted to a favourable US$5.4 million
(2016: charge of US$9.0 million) following the strengthening of
the ZAR.
Basic and diluted earnings per share for the period were
US$0.16 (2016: US$0.01).
No dividends are proposed for the interim period as it is the
policy of Tharisa to declare and pay an annual dividend of at
least 10% of consolidated net profit after tax.
Following shareholder approval and the obtaining of the
necessary Cypriot court approvals and lodgement of the
requisite documentation with the Cyprus Registrar of
Companies, the share premium of Tharisa was reduced
by an amount of US$179.6 million which was credited
to revenue reserves. This allows Tharisa to return an
amount of US$2.6 million or US$ 1 cent per share to
shareholders. The amount due to shareholders will be paid
during the third quarter of FY2017.
Interest-bearing debt as at 31 March 2017 totalled
US$38.4 million, resulting in a debt to total equity ratio of
14.8%. Following the achievement of project completion,
the senior debt providers agreed that the Group reduce
the amount held in the debt service reserve account to be
equal to one quarter's debt repayment with the amount
being released applied as a mandatory prepayment.
Off-setting the balance in the debt service reserve account
of US$4.8 million, reduces the debt to total equity ratio to
13.0%. The long-term targeted debt to total equity ratio
is 15.0%.
The Group complied with the senior debt facility financial
covenants as at 31 March 2017.
Inventories on hand at 31 March 2017 increased to
US$36.4 million with finished goods, principally chrome
concentrates, contributing US$25.6 million of this amount.
There has been an improvement in the working capital
position with the current ratio improving to 2.0 times.
During the interim period, the Group generated net cash
from operations of US$44.2 million (2016: US$18.2 million).
Additions to plant and equipment totalled US$8.5 million
(2016: US$6.4 million). The depreciation charge was
US$8.4 million (US$4.6 million).
Cash on hand amounted to US$26.6 million. In addition,
the Group holds US$4.8 million in a debt service
reserve account.
SUBSEQUENT EVENTS
Subsequent to the reporting period, with effect from
17 April 2017, as an integral part of the transition to an
owner mining model, Tharisa purchased four interburden
and reef rock drills and drilling equipment from a
drilling sub-contractor for a purchase consideration of
ZAR24.4 million. The 53 on-site employees of the drilling
sub-contractor were transferred to Tharisa.
In addition, Tharisa has subsequent to the reporting period,
subject to the fulfilment of certain conditions precedent
which includes, inter alia, regulatory approvals as well as
MCC shareholder approval, entered into a binding term
sheet with MCC in terms of which, inter alia, Tharisa
will purchase certain equipment, strategic components,
site infrastructure and spares from MCC for a purchase
consideration of ZAR303.3 million. The 153 "yellow fleet"
machines being purchased includes excavators, off highway
dump trucks, articulated dump trucks and support vehicles,
being substantially all of the equipment at the Tharisa Mine,
as well as 17 additional machines from another MCC site.
In addition, Tharisa will accept assignment in respect of leased
equipment comprising drill rigs, excavators and off highway
dump trucks and will continue to lease these 14 machines.
The settlement amount for the leased equipment as at
1 June 2017 is approximately ZAR100.2 million.
Approximately 900 on-site employees of MCC will be
transferred to Tharisa under section 197 of the Labour
Relations Act.
The purchase consideration for the transaction will be
settled through a cash payment of ZAR250.0 million,
the cession of the lease obligations of approximately
ZAR100.2 million, the deduction of certain liabilities
relating to the transfer of the employees such as the leave
pay provision and the deduction of costs that have been
incorporated into the mining rate to date, such as future
equipment de-mobilisation costs. The balance owing will be
paid in cash in six equal monthly instalments.
The purchase consideration will be funded by bridge
financing currently being arranged, OEM supplier financing,
traditional banking and available cash resources.
The successful conclusion of the agreement with MCC
will result in Tharisa achieving its objective of becoming an
owner miner at the Tharisa Mine, a logical progression in its
development with the long life of the open pit. The change
in the operating model is expected to have both cost and
operational benefits as well as providing financial flexibility,
thereby cementing Tharisa's low cost high margin position.
Tharisa has developed a long-term capital replacement
strategy, which will form part of the sustaining capital
programme in the ordinary course of business.
PRINCIPAL BUSINESS RISKS
Material risks to the Group are those that substantially
affect the Group's ability to create and sustain value in the
short, medium and long term. Material risks determine
how the Group devises and implements its strategy since
each risk has the potential to impact the Group's ability
to achieve its strategic objectives. Each risk also carries
with it challenges and opportunities. The Group's strategy
takes into account known risks, but risks may exist of
which the Group is currently unaware. An overview of the
material risks which could affect the Group's operational
and financial performance was included in the Group's
2016 annual report which is available on the Group's
website. The following risks have been identified as having
the potential to impact the Group over the next six months.
Regulatory compliance
In April 2016, the South African Government released
a draft amendment to the Mining Charter for public
comment. There is no assurance that the Mining Charter
will be adopted in its draft form or be revised again to, inter
alia, set new, higher or different Historically Disadvantaged
South Africans (HDSA) or Black Economic Empowerment
ownership targets, or that the definition of persons who
constitute HDSAs will not be changed or substituted.
If there is any future increase in HDSA ownership targets
or any change or substitution in the definition of HDSAs,
the Group may have to amend the ownership structure
of Tharisa Minerals in order to comply with the new
requirements. The Mining Charter was scheduled to be
gazetted at the end of March 2017, however, it has been
delayed, with no further information available on the
estimated timetable and level of review.
The Group is required to comply with a range of Health
and Safety Laws and Regulations in connection with its
mining, processing and on mine logistics activities. Regular
inspections are conducted by the Department of Mineral
Resources to ensure compliance. Any perceived violation of
the Regulations could lead to a temporary shutdown of all
or a portion of the Group's mining operations.
Political instability in South Africa
The political uncertainty and subsequent downgrades of
the South African credit ratings to sub-investment grade
have resulted in increased volatility in the exchange rate.
The downgrades are expected to lead to longer term
interest rate increases and inflationary pressures.
Tharisa is a Rand hedge company with sales being made
in US$ and the majority of the cost base being ZAR
denominated. To mitigate the longer term interest rate
and inflationary pressure, Tharisa will continue to focus
on maintaining its targeted debt level policy and manage
its costs.
Labour unrest in South Africa
While labour relations are currently stable, the risk of
potential unrest remains, particularly with the current
political climate which may contribute to heightened labour
and community unrest regionally.
In 2015, the Group concluded a collective agreement
with the National Union of Mineworkers, the majority
trade union at the Tharisa Mine, which determined wage
increases over the next three years until June 2018.
MCC, the primary mining contractor, which negotiates
wages through the South African Forum of Civil
Engineering Contractors, is in the second of a three-year
wage agreement, which determines pay increases until
September 2018. MCC's employees at the Tharisa Mine
are represented by the Association of Mineworkers and
Construction Union (AMCU).
Owner mining model
Subsequent to the reporting period, the Group has
announced its to transition to an owner miner model and
that it has reached agreement with its mining contractor to
purchase certain fleet (owned by the mining contractor) as
well as transfer the on-site employees to the Group. Such
transition may have an impact on mining as the employees
are being transferred and certain of the equipment needs
to be mobilised to the site and demobilised from the site. In
addition, additional fleet is planned to be acquired and the
availability and mobilisation of the equipment may impact
on the mining production.
The Group will also be required to finance the fleet purchase
which will impact on the gearing levels of the Group.
Tharisa, in the normal course of managing its mining
operations, has developed engineering and geological
skills that are integral to in-house mining. The fleet on
site currently mines at the required mine call rate and the
employees are already skilled in the operating procedures
of the Tharisa Mine. In addition, there is both an in-pit stock
pile and ROM stock pile ahead of the plants to mitigate
against any short-term mining disruptions.
Unscheduled breakdowns
The Group's performance is reliant on the consistent
production of PGM and chrome concentrates from the
Tharisa Mine. Any unscheduled breakdown leading to a
prolonged reduction in production may have a material
impact on the Group's financial performance and results
of operations.
Currency risk
The Group's reporting currency is US$. The Group's
operations are predominantly based in South Africa with a
ZAR cost base while the majority of the revenue stream is
in US$ exposing the Group to the volatility and movements
in the currencies. Fluctuations in the US$ and ZAR, which
may be more volatile following the recent credit rating
downgrade of South Africa to sub-investment grade, may
have a significant impact on the performance of the Group.
Commodity prices
The Group's revenues, profitability and future rate of
growth depend on the prevailing market prices of PGMs
and chrome. A sustained downward movement in the
market price for PGMs and/or chrome may negatively affect
the Group's profitability and cash flows.
Financing and liquidity
The activities of the Group exposes it to a variety of
financial risks including market, commodity prices, credit,
foreign exchange and interest rate risks. The Group
closely monitors and manages these risks. Cash forecasts
are regularly updated and reviewed including sensitivity
scenarios with reference to the above risks.
BOARD APPOINTMENT
Brian Cheng, a non-executive director, retired by rotation
at the Annual General Meeting and did not make himself
available for re-election. The Board thanks Brian for the
invaluable contribution he has made to the Group.
Tharisa welcomed Brian Cheng's alternate director, Joanna
Ka Ki Cheng, as a non-executive director with effect from
1 February 2017.
OUTLOOK
Tharisa expects continued strong operational performance
for the remainder of the year with a focus on improving the
ROM chrome feed grades and continued improvement in
recoveries for both PGM and chrome concentrates. Tharisa
remains on track to achieve production of 147.4 koz of PGMs
(on a 5PGE+Au basis) and 1.3 Mt of chrome concentrates
of which 0.3 Mt are specialty grade chrome concentrates
for FY2017.
These interim results reinforce the Group's sustainable
competitive advantage of being a profitable co-producer
of PGM and chrome concentrates from a large-scale, long
life open pit operation. Having de-risked the business
operationally and being firmly positioned in the lowest cost
quartile has allowed the Group to maximise the benefit
from buoyant commodity prices. The current volatility
within the chrome market is placing downward pressure on
prices, however, Tharisa is competitively positioned to be
profitable throughout the cycle.
The planned transition to an owner mining model presents a
unique beneficial opportunity to Tharisa with its large-scale
open pit operation having an open pit life of 18 years.
Tharisa would like to thank its team and directors for their
continued support in achieving these interim results.
Apart from the IFRS reviewed condensed consolidated financial statements prepared for submission to the JSE, the Group
also needs to prepare reviewed condensed consolidated financial statements for Cyprus regulatory purposes which are in
accordance with IFRS as adopted by the EU. A number of new and revised IFRS standards and interpretations have not
yet been adopted by the EU while the Group may elect to early adopt such interpretations and standards in terms of IFRS.
There are no numerical differences in this regard.
STATEMENT BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY
OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS ACCORDING TO THE CYPRUS SECURITIES AND
EXCHANGE COMMISSION LEGISLATION
In accordance with sections 10(3)(c) and 10(7) of Law No. 190(I)/2007, as amended, providing for the transparency
requirements of issuers whose securities are admitted to trading on a regulated market (the Transparency Law), we, the
members of the Board of Directors of Tharisa plc, responsible for the preparation of the condensed consolidated interim
financial statements of Tharisa plc for the period ended 31 March 2017, hereby declare that to the best of our knowledge:
a) the condensed consolidated interim financial statements for the period ended 31 March 2017:
- have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting and as
stipulated for under section 10(4) of the Transparency Law, and
– give a true and fair view of the assets and liabilities, the financial position and profit or losses of Tharisa plc and its
undertakings, as included in the condensed consolidated interim financial statements as a whole; and
b) the adoption of a going concern basis for the preparation of the financial statements continues to be appropriate based
on the foregoing and having reviewed the forecast financial position of the Group; and
c) the interim management report provides a fair review of the information required by section 10(6) of the Transparency Law.
Loucas Pouroulis Executive Chairman
Phoevos Pouroulis Chief Executive Officer
Michael Jones Chief Finance Officer
David Salter Lead Independent Non-executive Director
Antonios Djakouris Independent Non-executive Director
Omar Kamal Independent Non-executive Director
Carol Bell Independent Non-executive Director
Joanna Ka Ki Cheng Non-executive Director
Paphos
15 May 2017
SUMMARISED PRODUCTION DATA
Quarter Quarter Quarter Half year Half year Financial year
ended ended ended ended ended ended
31 March 31 December 31 March 31 March 31 March 30 September
Unit 2017 2016 2016 2017 2016 2016
Reef mined kt 1 219.2 1 229.9 1 234.2 2 449.1 2 358.6 4 837.2
m³ waste: m³
Stripping ratio reef 7.5 9.0 7.1 8.4 6.8 7.3
Reef milled kt 1 211.3 1 206.4 1 199.6 2 417.7 2 197.0 4 656.3
PGM flotation feed
tonnes kt 897.9 885.1 942.3 1 783.0 1 708.1 3 575.6
PGM rougher feed
grade g/t 1.56 1.52 1.74 1.54 1.68 1.65
5PGE +Au
PGMs produced koz 34.3 34.8 36.0 69.1 60.0 132.6
PGM recovery % 76.2 80.5 68.5 78.3 65.0 69.9
Average PGM
contained metal
basket price US$/oz 783 740 685 760 686 736
Average PGM
contained metal
basket price ZAR/oz 10 355 10 287 10 849 10 306 10 448 10 881
Cr2O3 ROM grade % 17.5 17.5 18.3 17.5 18.4 18.0
Chrome recovery % 62.5 64.3 63.9 63.4 62.8 62.7
Chrome yield % 26.0 26.7 27.7 26.3 27.5 26.7
Chrome
concentrates
produced kt 314.6 322.2 332.3 636.8 604.4 1 243.7
Metallurgical grade kt 239.2 245.1 259.9 484.3 498.6 974.3
Specialty grades kt 75.4 77.1 72.4 152.5 105.8 269.4
Metallurgical
grade chrome
concentrate US$/t CIF
contract price China 338 250 81 278 106 120
Metallurgical
grade chrome
concentrate ZAR/t CIF
contract price China 4 430 3 488 1 262 3 783 1 562 1 751
Average exchange
rate ZAR:US$ 13.2 13.9 15.8 13.6 15.0 14.8
INDEPENDENT AUDITORS' REVIEW REPORT
ON INTERIM FINANCIAL STATEMENTS TO THE
SHAREHOLDERS OF THARISA PLC
TO THE SHAREHOLDERS OF THARISA PLC
We have reviewed the condensed consolidated financial
statements of Tharisa plc, on pages 16 to 33 contained
in the accompanying interim report, which comprise the
condensed consolidated statement of financial position as at
31 March 2017 and the condensed consolidated statements
of profit or loss and other comprehensive income, changes
in equity and cash flows for the six months then ended, and
selected explanatory notes.
BOARD OF DIRECTORS' RESPONSIBILITY FOR
THE INTERIM FINANCIAL STATEMENTS
The Board of Directors are responsible for the preparation
and presentation of these interim financial statements in
accordance with the International Accounting Standard,
(IAS) 34 Interim Financial Reporting, and for such internal
control as the directors determine is necessary to enable
the preparation of interim financial statements that are free
from material misstatement, whether due to fraud or error.
AUDITORS' RESPONSIBILITY
Our responsibility is to express a conclusion on these
interim financial statements. We conducted our review
in accordance with International Standard on Review
Engagements (ISRE) 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the
Entity. ISRE 2410 requires us to conclude whether anything
has come to our attention that causes us to believe that
the interim financial statements are not prepared in all
material respects in accordance with the applicable financial
reporting framework. This standard also requires us to
comply with relevant ethical requirements.
A review of interim financial statements in accordance with
ISRE 2410 is a limited assurance engagement. We perform
procedures, primarily consisting of making inquiries of
management and others within the entity, as appropriate,
and applying analytical procedures, and evaluate the
evidence obtained.
The procedures performed in a review are substantially less
than and differ in nature from those performed in an audit
conducted in accordance with International Standards on
Auditing. Accordingly, we do not express an audit opinion
on these financial statements.
CONCLUSION
Based on our review, nothing has come to our attention
that causes us to believe that the accompanying condensed
consolidated interim financial statements of Tharisa plc for
the six months ended 31 March 2017 are not prepared,
in all material respects, in accordance with IAS 34 Interim
Financial Reporting.
Michael M. Antoniades FCA
Certified Public Accountants and Registered Auditor
For and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidion Street
1087 Nicosia
Cyprus
15 May 2017
CONDENSED CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
for the six months ended 31 March 2017
Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
Notes US$'000 US$'000 US$'000
Revenue 4 175 119 85 997 219 653
Cost of sales 4 (92 755) (64 863) (165 177)
Gross profit 4 82 364 21 134 54 476
Other income 83 182 438
Administrative expenses 5 (12 530) (10 709) (22 775)
Results from operating activities 69 917 10 607 32 139
Finance income 4 042 410 770
Finance costs (5 090) (5 738) (11 815)
Changes in fair value of financial assets at fair value
through profit or loss (540) 3 503
Changes in fair value of financial liabilities at fair
value through profit or loss – (813) 368
Net finance costs (1 588) (6 138) (10 174)
Profit before tax 68 329 4 469 21 965
Tax 6 (17 316) (1 371) (6 172)
Profit for the period/year 51 013 3 098 15 793
Other comprehensive income
Items that may be classified subsequently to profit
or loss:
Foreign currency translation differences for foreign
operations, net of tax 5 422 (9 034) 4 212
Other comprehensive income, net of tax 5 422 (9 034) 4 212
Total comprehensive income/(expense)
for the period/year 56 435 (5 936) 20 005
Profit for the period/year attributable to:
Owners of the Company 41 925 2 900 13 809
Non-controlling interest 9 088 198 1 984
51 013 3 098 15 793
Total comprehensive income for the period/year
attributable to:
Owners of the Company 46 188 (3 882) 17 103
Non-controlling interest 10 247 (2 054) 2 902
56 435 (5 936) 20 005
Earnings per share
Basic and diluted earnings per share (US$ cents) 7 16 1 5
The notes on pages 23 to 33 are an integral part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
as at 31 March 2017
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
Notes US$'000 US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 8 225 992 204 126 220 534
Goodwill 876 843 883
Long-term deposits 9 4 796 9 754 9 846
Other financial assets 3 696 2 282 2 585
Deferred tax assets 10 2 127 664 1 397
Total non-current assets 237 487 217 669 235 245
Current assets
Inventories 11 36 353 15 408 15 767
Trade and other receivables 52 581 25 546 51 184
Other financial assets 590 46 1 176
Current taxation 61 203 134
Cash and cash equivalents 26 620 11 119 15 826
Total current assets 116 205 52 322 84 087
Total assets 353 692 269 991 319 332
Equity and liabilities
Share capital 12 257 256 257
Share premium 12 277 005 452 512 456 181
Other reserve 47 245 47 245 47 245
Foreign currency translation reserve (69 148) (83 487) (73 411)
Revenue reserve 28 077 (202 791) (193 521)
Equity attributable to owners of the Company 283 436 213 735 236 751
Non-controlling interests (24 645) (39 848) (34 892)
Total equity 258 791 173 887 201 859
Non-current liabilities
Provisions 6 327 3 633 4 607
Borrowings 13 10 495 28 543 24 008
Deferred tax liabilities 10 20 280 168 5 275
Total non-current liabilities 37 102 32 344 33 890
Current liabilities
Borrowings 13 23 080 18 554 38 408
Other financial liabilities – 534 –
Current taxation 505 91 54
Trade and other payables 34 214 44 581 45 121
Total current liabilities 57 799 63 760 83 583
Total liabilities 94 901 96 104 117 473
Total equity and liabilities 353 692 269 991 319 332
The condensed consolidated financial statements were authorised for issue by the Board of Directors on 15 May 2017.
Phoevos Pouroulis Michael Jones
Director Director
The notes on pages 23 to 33 are an integral part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the six months ended 31 March 2017
Share capital Share premium
Note US$'000 US$'000
Balance at 30 September 2016 257 456 181
Total comprehensive income for the period
Profit for the period – –
Other comprehensive income
Foreign currency translation differences – –
Total comprehensive income for the period – –
Transactions with owners of the Company
Contributions by and distributions to owners
Reduction of share premium 12 – (179 176)
Equity-settled share-based payments – –
Contributions by owners of the Company – (179 176)
Total transactions with owners of the Company – (179 176)
Balance at 31 March 2017 (Reviewed) 257 277 005
Balance at 30 September 2015 256 452 512
Total comprehensive income for the period
Profit for the period – –
Other comprehensive income
Foreign currency translation differences – –
Total comprehensive income for the period – –
Transactions with owners of the Company
Contributions by and distributions to owners
Equity-settled share-based payments – –
Contributions by owners of the Company – –
Total transactions with owners of the Company – –
Balance at 31 March 2016 (Reviewed) 256 452 512
The notes on pages 23 to 33 are an integral part of these financial statements.
ATTRIBUTABLE TO OWNERS OF THE COMPANY
Foreign currency Non-controlling
Other reserve translation reserve Revenue reserve Total interest Total equity
nn US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
47 245 (73 411) (193 521) 236 751 (34 892) 201 859
– – 41 925 41 925 9 088 51 013
– 4 263 – 4 263 1 159 5 422
– 4 263 41 925 46 188 10 247 56 435
– – 176 606 (2 570) – (2 570)
– – 3 067 3 067 – 3 067
– – 179 673 497 – 497
– – 179 673 497 – 497
47 245 (69 148) 28 077 283 436 (24 645) 258 791
47 245 (76 705) (206 566) 216 742 (37 794) 178 948
– – 2 900 2 900 198 3 098
– (6 782) – (6 782) (2 252) (9 034)
– (6 782) 2 900 (3 882) (2 054) (5 936)
– – 875 875 – 875
– – 875 875 – 875
– – 875 875 – 875
47 245 (83 487) (202 791) 213 735 (39 848) 173 887
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the six months ended 31 March 2017
Share capital Share premium
US$'000 US$'000
Balance at 30 September 2015 256 452 512
Total comprehensive income for the year
Profit for the year – –
Other comprehensive income
Foreign currency translation differences – –
Total comprehensive income for the year – –
Transactions with owners of the Company
Contributions by and distributions to owners
Equity-settled share-based payments – –
Issue of ordinary shares 1 3 669
Contributions by owners of the Company 1 3 669
Total transactions with owners of the Company 1 3 669
Balance at 30 September 2016 (Audited) 257 456 181
Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, during
the two years after the end of the year of assessment to which the profits refer, will be deemed to have distributed this amount as dividend. Special
contribution for defence at 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter will be payable on such deemed dividend to the extent
that the shareholders (individuals and companies) at the end of the period of two years from the end of the year of assessment to which the profits refer
are Cyprus tax residents. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year
at any time. This special contribution for defence is paid by the Company for the account of the shareholders. These provisions do not apply for ultimate
beneficial owners that are non-Cyprus tax resident individuals.
The notes on pages 23 to 33 are an integral part of these financial statements.
ATTRIBUTABLE TO OWNERS OF THE COMPANY
Foreign currency Non- controlling
Other reserve translation reserve Revenue reserve Total interest Total equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
47 245 (76 705) (206 566) 216 742 (37 794) 178 948
– – 13 809 13 809 1 984 15 793
– 3 294 – 3 294 918 4 212
– 3 294 13 809 17 103 2 902 20 005
– – (1 045) (1 045) – (1 045)
– – 281 3 951 – 3 951
– – (764) 2 906 – 2 906
– – (764) 2 906 – 2 906
47 245 (73 411) (193 521) 236 751 (34 892) 201 859
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
for the six months ended 31 March 2017
Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
Notes US$'000 US$'000 US$'000
Cash flows from operating activities
Profit for the period/year 51 013 3 098 15 793
Adjustments for:
Depreciation of property, plant and equipment 8 8 366 4 599 10 167
Loss on disposal of property, plant and equipment – 67 584
Impairment losses on goodwill 28 25 51
Impairment losses on inventory 36 183 15
Impairment losses on other financial assets – – 12
Changes in fair value of financial assets at fair value
through profit or loss 540 (3) (503)
Changes in fair value of financial liabilities at fair
value through profit or loss – 813 (368)
Interest income (598) (410) (770)
Interest expense 4 355 5 172 10 287
Tax 6 17 315 1 371 6 172
Equity-settled share-based payments 2 196 1 049 2 542
83 251 15 964 43 982
Changes in:
Inventories (22 178) (6 845) (4 634)
Trade and other receivables (211) 12 433 (12 657)
Trade and other payables (16 167) (2 946) (4 100)
Provisions 1 377 (250) 71
Cash from operations 46 072 18 356 22 662
Income tax paid (1 852) (126) (472)
Net cash flows from operating activities 44 220 18 230 22 190
Cash flows from investing activities
Interest received 540 384 892
Additions to property, plant and equipment 8 (8 458) (6 375) (12 307)
Proceeds from disposal of property, plant and
equipment – 107 124
Additions to other financial assets (911) (744) (700)
Net cash flows used in investing
activities (8 829) (6 628) (11 991)
Cash flows from financing activities
Refund of long-term deposits 5 437 575 1 369
Changes in non-current trade and other payables – 769 –
(Repayments of )/proceeds from bank credit and
other facility borrowings (15 790) (15 490) 1 648
Net proceeds from loan advances – 1 698 2 310
Repayment of secured bank borrowings and loan
to third party (10 961) (9 694) (19 166)
Interest paid (3 574) (1 507) (4 371)
Net cash flows used in financing
activities (24 888) (23 649) (18 210)
Net increase/(decrease) in cash and
cash equivalents 10 503 (12 047) (8 011)
Cash and cash equivalents at the beginning of the
period/year 15 826 24 265 24 265
Effect of exchange rate fluctuations on cash held 291 (1 099) (428)
Cash and cash equivalents at the end of
the period/year 26 620 11 119 15 826
The notes on pages 23 to 33 are an integral part of these financial statements.
NOTES TO THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
for the six months ended 31 March 2017
1. REPORTING ENTITY
Tharisa plc (the Company) is a company domiciled in Cyprus. These condensed consolidated interim financial statements
for the six months ended 31 March 2017 comprise the Company and its subsidiaries (together referred to as the
Group). The Group is primarily involved in platinum group metals (PGM) and chrome mining, processing, trading and the
associated logistics. The Company is listed on the main board of the Johannesburg Stock Exchange and has a secondary
standard listing on the main board of the London Stock Exchange.
2. BASIS OF PREPARATION
Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), International Accounting Standard 34 Interim Financial Reporting, the Listings
Requirements of the Johannesburg Stock Exchange and the Cyprus Companies Law, Cap. 113. Selected explanatory
notes are included to explain events and transactions that are significant to obtain an understanding of the changes
in the financial position and performance of the Group since the last consolidated financial statements as at and for
the year ended 30 September 2016. These condensed consolidated interim financial statements do not include all
the information required for full consolidated financial statements prepared in accordance with IFRS. The condensed
consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements
for the year ended 30 September 2016, which have been prepared in accordance with IFRS.
These condensed consolidated interim financial statements were approved by the Board of Directors on 15 May 2017.
Use of estimates and judgements
Preparing the condensed consolidated interim financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
income and expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, significant judgements made by management in
applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied
to the consolidated financial statements as at and for the year ended 30 September 2016.
Functional and presentation currency
The condensed consolidated interim financial statements are presented in United States Dollars (US$) which is the
Company's functional currency and amounts are rounded to the nearest thousand.
Going concern
After making enquiries which include reviews of current cash resources, forecasts and budgets, timing of cash flows,
borrowing facilities and sensitivity analyses and considering the associated uncertainties to the Group's operations, the
Directors have a reasonable expectation that the Group has adequate financial resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements.
New and revised International Financial Reporting Standards and Interpretations
As from 1 October 2016, the Group adopted all changes to IFRS, which are relevant to its operations. The adoption did
not have a material effect on the accounting policies of the Group.
The following Standards, Amendments to Standards and Interpretations have been issued but are not yet effective
for annual periods beginning on 1 October 2016. The Board of Directors is currently evaluating the impact of these
on the Group.
- IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018)
- IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019)
- Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective for annual periods beginning
on or after 1 January 2017)
- Amendments to IAS 7: Disclosure Initiatives (effective for annual periods beginning on or after 1 January 2017)
- IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018)
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied by the Group in these condensed consolidated interim financial statements are in terms
of IFRS and are the same as those applied by the Group in its audited consolidated financial statements as at and for
the year ended 30 September 2016.
4. OPERATING SEGMENTS
Segmental performance is measured based on segment revenue, cost of sales and gross profit or loss, as included in
the internal management reports that are reviewed by the Group's management.
PGM Chrome Total
Six months ended 31 March 2017 (Reviewed) US$'000 US$'000 US$'000
Revenue 40 053 135 066 175 119
Cost of sales
Cost of sales excluding selling costs 20 837 48 280 69 117
Selling costs 180 23 458 23 638
21 017 71 738 92 755
Gross profit 19 036 63 328 82 364
Six months ended 31 March 2016 (Reviewed)
Revenue 35 904 50 093 85 997
Cost of sales
Cost of sales excluding selling costs 23 663 24 712 48 375
Selling costs 98 16 390 16 488
23 761 41 102 64 863
Gross profit 12 143 8 991 21 134
Year ended 30 September 2016 (Audited)
Revenue 81 514 138 139 219 653
Cost of sales
Cost of sales excluding selling costs 57 135 64 710 121 845
Selling costs 218 43 114 43 332
57 353 107 824 165 177
Gross profit 24 161 30 315 54 476
The shared costs relating to the manufacturing of the PGM and the chrome concentrates are allocated to the relevant
operating segments based on the relative sales value per product on an ex-works basis. During the period ended
31 March 2017, the relative sales value of chrome concentrates increased compared to the relative sales value of
PGM concentrate and consequently the allocation basis of shared costs was amended to 75% (chrome concentrates)
and 25% (PGM concentrate) respectively. The allocated percentage for PGM concentrate and chrome concentrates
accounted for in the comparative period was 50% for each segment.
Geographical information
The following table sets out information about the geographical location of the Group's revenue from external customers.
The geographical location analysis of revenue from external customers is based on the country of establishment of
each customer.
Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
China 57 986 9 673 37 392
South Africa 73 612 46 410 110 698
Singapore 3 215 4 540 13 670
Hong Kong 37 601 22 605 55 045
South Korea – 1 532 1 523
Other countries 2 705 1 237 1 325
175 119 85 997 219 653
Revenue represents the sales value of goods supplied to customers, net of value–added tax.
5. ADMINISTRATIVE EXPENSES
Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Directors and staff costs
Non-executive directors 254 245 499
Executive directors 788 561 1 267
Key management 552 417 930
Employees 4 361 3 798 8 029
5 955 5 021 10 725
Audit – external audit services 142 169 384
Consulting 884 1 122 1 737
Corporate and social investment 50 66 108
Depreciation 256 157 320
Discount facility and related fees 257 205 457
Equity-settled share-based payment expense 2 196 1 049 2 542
Fees for professional services of the listing – 328 942
Health and safety 122 101 236
Impairment losses 28 – 63
Insurance 458 335 781
Legal and professional 127 133 186
Loss on disposal of property, plant and equipment – – 584
Rent and utilities 282 370 697
Security 485 411 930
Telecommunications and IT related costs 308 278 645
Training 151 254 465
Travelling and accommodation 195 165 285
Sundry expenses 634 545 688
12 530 10 709 22 775
6. TAX
Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Corporate income tax for the year
Cyprus 992 45 309
South Africa 1 381 16 128
Special contribution for defence in Cyprus 3 1 4
Deferred tax
Originating and reversal of temporary differences 14 940 1 309 5 731
Tax charge 17 316 1 371 6 172
Tax is recognised on management's best estimate of the weighted average annual income tax rate expected for the
full financial year applied to the pre-tax income of the interim period. The corporation tax rate is 12.5% in Cyprus and
28.0% in South Africa.
Under certain conditions interest income may be subject to defence contribution at the rate of 30.0% in Cyprus. Such
interest income is treated as non-taxable in the computation of corporation taxable income. In certain instances,
dividends received from abroad may be subject to defence contribution at the rate of 17.0%.
The Group's consolidated effective tax rate for the six months ended 31 March 2017 was 25.3% (31 March 2016: 30.7%;
30 September 2016: 28.1%).
7. EARNINGS PER SHARE
Basic and diluted earnings per share
The calculation of basic and diluted earnings per share has been based on the following profit attributable to the
ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding.
Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
Profit attributable to ordinary shareholders (US$'000) 41 925 2 900 13 809
Weighted average number of ordinary shares ('000) 256 178 255 892 256 178
Basic and diluted earnings per share (US$ cents) 16 1 5
LTIP and SARS awards were excluded from the diluted weighted average number of ordinary shares calculation
because their effect would have been anti-dilutive.
Headline and diluted headline earnings per share
The calculation of headline and diluted headline earnings per share has been based on the following headline earnings
attributable to the ordinary shareholders and the weighted average number of ordinary shares outstanding.
Six months ended Year ended
31 March 2017 31 March 2016 30 September2016
Reviewed Reviewed Audited
Headline earnings attributable to ordinary shareholders
(US$'000) 41 953 2 925 14 281
Weighted average number of ordinary shares ('000) 256 178 255 892 256 178
Headline and diluted headline earnings per share (US$
cents) 16 1 6
Reconciliation of profit to headline earnings
Six months ended Year ended
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Net Net Net
Profit attributable to ordinary shareholders 41 925 2 900 13 809
Adjustments:
Impairment losses on goodwill 28 25 51
Loss on disposal of property, plant and equipment – – 421
Headline earnings 41 953 2 925 14 281
8. PROPERTY, PLANT AND EQUIPMENT
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Cost 281 409 236 578 266 368
Accumulated depreciation (55 417) (32 452) (45 834)
Net book value 225 992 204 126 220 534
Reconciliation of net book value
Opening net book value 220 534 214 518 214 518
Additions 8 458 6 375 12 307
Disposals – (174) (708)
Depreciation (8 366) (4 599) (10 167)
Exchange adjustment on translation 5 366 (11 994) 4 584
Closing net book value 225 992 204 126 220 534
There were no additions (31 March 2016: US$3.1 million; 30 September 2016: US$2.4 million) to the deferred stripping
asset during the period ended 31 March 2017.
The estimated economically recoverable proved and probable mineral reserve was reassessed at 30 September
2016 which gave rise to a change in accounting estimate. The remaining reserve that management had previously
assessed was 106.4 Mt and at 30 September 2016 was assessed to be 98.9 Mt. As a result, the expected useful life
of the plant decreased. The effect of the change on the actual depreciation expense, included in cost of sales, is an
additional US$1.2 million.
Capital commitments
At 31 March 2017, the Group's capital commitments for contracts to purchase property, plant and equipment amounted
to US$3.2 million (31 March 2016: US$2.4 million; 30 September 2016: US$1.8 million).
Securities
At 31 March 2017, an amount of US$205.6 million (31 March 2016: US$185.1 million; 30 September 2016:
US$200.8 million) of the carrying amount of the Group's tangible property, plant and equipment was pledged as
security against secured bank borrowings.
9. LONG–TERM DEPOSITS
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Long-term deposits 4 796 9 754 9 846
The long-term deposits represent restricted cash which is designated as a "debt service reserve account" as required
by the terms of the Common Terms Agreement for the senior debt facility of Tharisa Minerals Proprietary Limited.
Effective 31 March 2017, the Common Terms Agreement was amended by reducing the amount of restricted cash
required as a debt service reserve account. The released funds were utilised as a mandatory prepayment on the
outstanding capital, reducing the repayment term of the senior debt facility (refer to note 13).
10.DEFERRED TAX
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Deferred tax assets 2 127 664 1 397
Deferred tax liabilities (20 280) (168) (5 275)
Net deferred tax (liability)/asset (18 153) 496 (3 878)
Deferred tax assets and deferred tax liabilities are not offset unless the Group has a legally enforceable right to offset
such assets and liabilities.
The recoverability of deferred tax assets was assessed in respect of each individual legal entity. The estimates used to
assess the recoverability of recognised deferred tax assets include a forecast of the future taxable income and future
cash flow projections based on a three-year period. The Group did not have tax losses and temporary differences for
which deferred tax was not recognised.
11.INVENTORIES
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Finished products 25 594 8 586 6 116
Ore stockpile 5 177 3 341 4 729
Consumables 5 582 3 481 4 922
36 353 15 408 15 767
Inventories are stated at the lower of cost or net realisable value. The Group impaired US$0.1 million
(31 March 2016: US$0.2 million; 30 September 2016: US$0.1 million) relating to certain consumables and spares as the operational use
became doubtful with no anticipated recoverable amount or value in use. There were no write-downs to net realisable
value during the period (31 March 2016 and 30 September 2016: no write-downs). Inventories are subject to a general
notarial bond in favour of the lenders of the senior debt facility.
12.SHARE CAPITAL AND RESERVES
Share capital
The Company did not issue any ordinary shares during the six months ended 31 March 2017 and 31 March 2016.
Allotments during the year ended 30 September 2016 were in respect of the award of 1 089 685 ordinary shares
granted in terms of the Share Award Scheme.
Share premium
The share premium represents the excess of the issue price of the ordinary shares over their nominal value, to the
extent that it is registered at the Registrar of Companies in Cyprus, less share issue costs and any registered transfers
to the revenue reserve.
During the period ended 31 March 2017, the share premium account was reduced by US$179.2 million with a
corresponding increase in the revenue reserve to reduce the accumulated losses to US$nil. The required Court
Order was obtained on 8 March 2017 and filed at the Registrar of Companies on 9 March 2017. The distribution of
US$2.6 million (US$ 1 cent per share) (31 March 2016 and 30 September 2016: no distribution) was approved by way
of a Special Resolution on 1 February 2017 which further reduced the share premium. The Special Resolution was
ratified by the abovementioned Court Order on 8 March 2017.
During the year ended 30 September 2016, the increase in the share premium account related to the issue and
allotment of ordinary shares granted in terms of the Share Award Schemes.
13.BORROWINGS
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Non–current
Secured bank borrowings 10 495 27 214 22 103
Finance leases – 551 246
Deferred supplier – 778 1 659
10 495 28 543 24 008
Current
Secured bank borrowings 14 852 13 595 14 443
Finance leases 611 1 369 677
Bank credit and other facilities 6 709 1 808 23 012
Guardrisk loan 908 – 169
Loan payable to related party – 1 782 107
23 080 18 554 38 408
Secured bank borrowings
The secured bank borrowings relate to financing of ZAR1 billion obtained from a consortium of banks in South Africa
during the year ended 30 September 2012. The financing was obtained by Tharisa Minerals Proprietary Limited, a
subsidiary of the Group, and was for a period of seven years repayable in twenty two equal quarterly instalments with
the first repayment date at 31 December 2013.
Repayments are subject to a cash sweep which will reduce the repayment period to a minimum of five years. Tharisa
Minerals Proprietary Limited is required to maintain funds in a debt service reserve account (refer to note 9). Effective
31 March 2017, the financing terms were amended to reduce the required amount of the debt service reserve balance.
The released funds from the debt service reserve balance were utilised as a mandatory prepayment on the outstanding
capital, reducing the repayment term of the senior debt facility. At 31 March 2017, the estimated remaining term is
equal to seven quarterly instalments.
The financing bears interest at 3 month JIBAR plus 4.9% pa until achievement of project completion on 14 November
2016 whereafter the interest rate reduced to JIBAR plus 3.4% pa.
As at 31 March 2017 and 30 September 2016, Tharisa Minerals Proprietary Limited complied with all covenant ratios.
The senior debt providers condoned the breach of the debt service cover ratio as at 31 March 2016.
Deferred supplier
During the period ended 31 March 2017, an agreement was reached with the deferred supplier to repay the outstanding
balance in full.
Guardrisk loan
The loan payable at 30 September 2016 was settled in full during the period ended 31 March 2017. Tharisa Minerals
Proprietary Limited obtained a loan for the amount of ZAR18 million repayable in twelve monthly instalments
commencing on 1 December 2016. The loan bears interest at a rate of 10.63% pa. The final instalment is due on
1 November 2017.
Loan payable to related party
The loan payable to the Langa Trust was settled in full during the period ended 31 March 2017.
14.FINANCIAL INSTRUMENTS
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Financial assets – carrying amount
Loans and receivables 45 271 21 859 46 104
Long-term deposits 4 796 9 754 9 846
Cash and cash equivalents 26 620 11 119 15 826
Investments at fair value through profit or loss* 42 46 43
Financial instruments at fair value through profit or
loss** 4 244 2 282 3 718
80 973 45 060 75 537
Financial liabilities – carrying amount
Borrowings 33 575 47 097 62 416
Trade payables 23 231 39 261 35 513
Discount facility** – 534 –
Income received in advance 1 657 935 3 102
Other payables 4 897 4 418 4 703
63 360 92 245 105 734
* Level 1 of the fair value hierarchy – quoted prices in active markets for the same instrument
** Level 2 of the fair value hierarchy – significant inputs are based on observable market data for similar financial instruments
The Board of Directors considers that the fair values of financial assets and liabilities approximate their carrying
values at each reporting date.
15.RELATED PARTY TRANSACTIONS
31 March 2017 31 March 2016 30 September 2016
Reviewed Reviewed Audited
US$'000 US$'000 US$'000
Key management compensation
Non-executive directors' remuneration 254 245 499
Executive directors' remuneration 788 561 1 267
Other key management remuneration 552 417 930
1 594 1 223 2 696
16.CONTINGENT LIABILITIES
There is no litigation, current or pending, which is considered likely to have a material adverse effect on the Group.
17.EVENTS AFTER THE REPORTING PERIOD
The Board of Directors are not aware of any matter or circumstance arising since the end of the period that will impact
these condensed consolidated interim financial results.
The Group announced on 4 April 2017 its intention to acquire a requisite portion of the existing mining fleet at the
Tharisa Mine from subcontractor MCC Contracts Proprietary Limited (MCC).
Tharisa Minerals Proprietary Limited (Tharisa Minerals) has subsequent to the reporting period, subject to the
fulfilment of certain conditions precedent which includes, inter alia, regulatory approvals as well as MCC shareholder
approval, entered into a binding term sheet with MCC in terms of which, inter alia, Tharisa Minerals will purchase
certain equipment, strategic components and spares from MCC for a purchase consideration of ZAR303.3 million.
The 153 "yellow fleet" machines being purchased include excavators, off-highway dump trucks, articulated dump trucks
and support vehicles, being substantially all of the equipment at the Tharisa Mine, as well as 17 additional machines from
another MCC site. In addition, Tharisa Minerals will accept assignment in respect of leased equipment comprising drill
rigs, excavators and off-highway dump trucks and will continue to lease these 14 machines. The settlement amount for
the leased equipment as at 1 June 2017 is approximately ZAR100.2 million.
The on-site employees of MCC will be transferred to Tharisa Minerals.
The purchase consideration for the transaction will be settled through a cash payment of ZAR250.0 million, the cession
of the lease obligations of approximately ZAR100.2 million, the deduction of certain liabilities relating to the transfer
of the employees such as the leave pay provision and the deduction of costs that have been incorporated into the
mining rate to date, such as future equipment demobilisation costs. The balance owing will be paid in cash in six equal
monthly instalments.
The purchase consideration will be funded by bridge financing currently being arranged, OEM supplier financing,
traditional banking and available cash resources.
Subsequent to the reporting period, as an integral part of the transition to an owner mining model, Tharisa Minerals
purchased certain rock drills and drilling equipment from a sub-contractor of MCC for a purchase consideration of
ZAR24.4 million. The on-site employees of the sub-contractor were transferred to Tharisa Minerals.
18.REDUCTION OF SHARE PREMIUM
A distribution of US$2.6 million (US$ 1 cent per share) (31 March 2016 and 30 September 2016: no distribution) was
declared on 1 February 2017 as a reduction of share premium.
LEGAL DISCLAIMER
Some of the information in these materials may contain projections or forward-looking statements regarding future
events, the future financial performance of the Group, its intentions, beliefs or current expectations and those of its
officers, directors and employees concerning, among other things, the Group's results of operations, financial condition,
liquidity, prospects, growth, strategies and business. You can identify forward-looking statements by terms such as "expect",
"believe", "anticipate", "estimate", "intend", "will", "could", "may" or "might" or the negative of such terms or other similar
expressions. These statements are only predictions and actual results may differ materially. Unless otherwise required by
applicable law, regulation or accounting standard, the Group does not intend to update these statements to reflect events
and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could
cause the actual results to differ materially from those contained in projections or forward-looking statements of the Group,
including, among others, general economic conditions, the competitive environment, risks associated with operating in
South Africa and market change in the industries the Group operates in, as well as many other risks specifically related to
the Group and its operations.
www.tharisa.com
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