KARO HOLDINGS – ANALYST PRESENTATION 13 JUNE 2018
DISCLAIMER These Presentation Materials are for information purposes only and must not be used or relied upon for the purpose of making any investment decision or engaging in any investment activity. Whilst the information contained herein has been prepared in good faith, neither Tharisa plc (the “Company”) and its subsidiaries (together, the “Group”) nor any of the Group’s directors, officers, employees, agents or advisers make any representation or warranty in respect of the fairness, accuracy or completeness of the information or opinions contained in this presentation and no responsibility or liability will be accepted in connection with the same. The information contained herein is provided as at the date of this presentation and is subject to updating, completion, revision, verification and further amendment without notice. These Presentation Materials contain forward-looking statements and information in relation to the Group. By its very nature, such forward- looking statements and information require the Company to make assumptions that may not materialise or that may not be accurate. Such forward-looking information and statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information and statements. Nothing in this presentation should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance. 2
FCF PER SHARE* NET DEBT TO TOTAL EQUITY* INTERIM DIVIDEND* THARISA’S TRACK RECORD US$ 13 cents 7.0% US$ 2 cents DISCOVERING DELIVERING DEVELOPING 2018 2014 2016 2004 2009 2011 2012 2013 2017 2008 2006 LISTED ON JSE LISTED ON LSE RECORD MAIDEN CHALLENGER FIRST GENESIS VOYAGER PROSPECTING MINING PROSPECTING FINANCIAL AND INTERIM PLANT CHROME PLANT PLANT RIGHTS RIGHTS RIGHTS DIVIDEND OPERATIONAL DIVIDEND COMMISSIONED COMMISSIONED GRANTED CONCENTRATE COMMISSIONED APPLICATIONS GRANTED PAYMENT YEAR PRODUCTION SALENE FROM PILOT K3 OPERATION CHROME PLANT ZIMBABWE PGM RICH ALLOY SMELTER OPTIMISING FY2018 FY2018 REEF MINED PGM RECOVERIES CHROME RECOVERIES EBITDA 1.4 Mt 150 koz Mtpa US$ millions 115.6 5.0 83.2% 4.8 5.0 79.7% 108.2 69.9% 65.0% 4.2 3.9 65.8% 64.1% 62.7% 48.8% 59.4% 58.0% 43.0 29.0 16.5 FY2014 FY2015 FY2016 FY2017 FY2018** FY2014 FY2015 FY2016 FY2017 H1 FY2018 FY2014 FY2015 FY2016 FY2017 H1 FY2018 FY2014 FY2015 FY2016 FY2017 FY2018** 3 * H1 FY2018 ** annualised
THARISA’S SKILL SET Securing highly prospective resources Robust business Proven ability model with to take projects capabilities from across the value exploration into chain production Experienced management, History of low technical and cost operation operational team Cash generation + dividends + growth = capital discipline 4
ACQUISITION OVERVIEW • Tharisa acquired 26.8% of Karo Holdings for US$4.5 million, which will be funded Karo Holdings entered into an from available cash resources Investment Project Framework • Tharisa will provide an US$8 million debt facility to Karo Holdings for initial geological Agreement with the Republic of exploration and sampling work to determine a compliant mineral resource Zimbabwe in terms of which • Tharisa will manage the exploration programme and oversee the bankable feasibility Karo Holdings has undertaken study to establish: • Access to a highly prospective area covering 23 903 hectares on the Great Dyke of Zimbabwe released by Zimplats in support of the Zimbabwean government’s efforts • a platinum group metals to enable participation by other investors in the platinum mining industry (PGMs) mine • Area estimated to contain 96 Moz (4E basis) PGMs at a projected resource grade of • concentrators and smelters 3.2 g/t 4E* • a base metal refinery • Great Dyke PGM projects are low cost, open pittable and have significant palladium • a precious metals refinery and base metal content resulting in high margin poly‐metallic revenues • power generation capacity 5
ACQUISITION RATIONALE • Improvements in the political landscape precipitated a move by Tharisa to explore geographic diversification opportunities in LARGE SCALE, A SCALABLE Zimbabwe, renowned for having the world’s largest PGM deposits LOW COST OPEN PIT outside of South Africa PRODUCTION OPERATION • Tharisa’s management team has a proven track record of developing mines from the prospecting stage through to steady- state production and this experience can be applied to the development of Karo Platinum PRODUCT • Low risk entry through Karo Holdings provides for a measured, STRONG CASH EXPANSION & staged approach to investment in Zimbabwe GENERATIVE FURTHER • Tharisa is acquiring its stake in Karo Holdings at a significant POTENTIAL GROWTH discount of more than 80% to fair value OPPORTUNITIES • The farm- in approach reduces Tharisa’s upfront exposure and creates optionality for an increased stake in the future 6
KARO CORPORATE STRUCTURE Tharisa plc* Leto Settlement 26.8% Karo Mining Holdings* 73.2% 100% Karo Zimbabwe Holdings 75% 75% 75% 50% Karo Refining Karo Power Generation Karo Coal Mines Karo Platinum 10% 10% 15% 15% 10% 50% 15% Zimbabwe Zimbabwe Zimbabwe Zimbabwe Employees and Employees and Employees and Communities Communities Communities Investment Co. Investment Co. Investment Co. Investment Co. 7 * Incorporated in Cyprus
KARO PLATINUM HIGHLIGHTS NEXT STEPS 1 • The special grant area has potential to host multiple open pit operations with an estimated 9 year open pit Regulatory approvals including an Environmental Impact Assessment life followed by a natural progression to underground mining for a further 40 years 2 • Conceptual designs are based on the phased US$8 million geological operation of 4 open pit mining operations that will exploration programme transition to underground operations • Projected steady state ROM of 14.4 Mtpa 3 • Bankable feasibility study Potential production of 1.4 Mozpa of PGMs (6E) 8
LOCATION OF KARO PLATINUM Snakes Head Hartley Platinum Mine Harare Resource of 28.2 Moz (4E) Karo Platinum 4E grade of 4.03 gpt Ngezi Mine Resource of 72.6 Moz (4E) 4E grade of 3.34 gpt Unki Mine Resource of 30.5 Moz (4E) 4E grade of 4.19 gpt Mimosa Mine Resource of 13.9 Moz (4E) 4E grade of 3.61 gpt 9 Source: https://www.researchgate.net/figure/Generalized-geology-of-the-Great-Dyke-and-locations-of-platinum-mines-and-prospects_fig1_235917128 and Company Data
KARO PLATINUM PHASED DEVELOPMENT APPROACH Indicative timetable Special Grant First open pit Third open pit awarded 2019 2021 2023 2018 2020 2022 Exploration and Second open pit Fourth open pit BFS 10
VALUE TO THARISA SHAREHOLDERS 100 89.1 90 80 Value uplift relates only to Tharisa’s effective 13.4% 70 interest in Karo Platinum 60 US$m 50 40 25.6 8.0 30 20 10 4.5 0 Initial purchase price* Minxcon valuation* Exploration spend Indicative valuation at resource* 11 * Based on Minxcon Fair & Reasonable
BEYOND KARO PLATINUM KARO REFINING KARO POWER GENERATION KARO COAL MINES • • • Potential construction of 4 x 300 Requirement of 250 MW of Karo Coal Mines will identify a ktpm concentrators secured power supply at steady prospective coal area with the • Smelter complex = 3 x 20 MW state for its own use intention to establish a • electric furnaces + converters Establishment of a 300 MW metallurgical coal facility • • Base metals refinery renewable solar energy power Metallurgical coal will be utilised • Precious metals refinery plant for Karo’s value addition initiatives, • • Production of sulphuric acid from Alignment with the Zimbabwean with the surplus being supplied to smelter off-gas Government National Integrated the local Zimbabwean ferroalloy • Toll treatment of third party Energy Resource Plan and steel industries concentrates 12
VALUATION PRINCIPLES Initial investment of US$4.5 million Recognised valuation methodology curve • Resources valuation discounted by 82% Exploration Evaluation Development Production Resources Reserves Valuation approach farm-in at project level • Valuation will be based on appropriate valuation methodology (SAMVAL) • Proposed matrix: Commissioning Feasibility - Up to inferred and indicated resource – study comparable company cost multiple less 60% discount Value Pre-feasibility study - Up to measured and indicated resource and reserve – comparable company Desktop study market multiples less 50% discount Discovery Confidence At feasibility level METHODS METHODS DCF Appraised value Multiples • Income less a discount of 30% Comparable transactions Real options 13
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