Tharisa says it may revise the capital cost of its $250 million Karo Platinum Project in Zimbabwe as the chrome and platinum group metals (PGM) producer faces inflationary pressures.
Michelle Taylor, the company’s chief executive officer, remarked on the company’s interim results announcement, that from a costing standpoint, the capital cost, would need to be looked at in more detail.
Tharisa announced in March that it has taken ownership of Karo Mining Holdings, which controls the project. The Karo Platinum Project is expected to produce 150,000 ounces of PGM concentrate per year, substantially tripling Tharisa’s PGM footprint when completed roughly 24 months after construction begins.
“Inflationary increases are there and so we are evaluating what that capital cost looks like and what the increases may be and we will. We will communicate in far more detail by the end of the third quarter. We will also detail the funding which we are currently working on,” said Taylor.
Inflation was a factor in Tharisa’s operational performance for the period ended March. PGM and chrome production were a fifth and about 6% higher respectively, but overall on-mine cash costs per ton milled of $48 represented an increase of 16.6% year-on-year.
The mining industry has begun to recover from the impact of COVID-19, which has also lowered output, but it has also been hurt by rising inflation at the start of the year, which was triggered by Russia’s invasion of Ukraine.
This has been worse than projected, fueling high commodity prices that have led to inflation in energy costs, logistics, and consumables.
Tharisa says the culprits were diesel, the cost of which were 49% higher, explosives (+110%) and electricity (+15%). In addition, shipping capacity constraints drove average sea freight rates up about 102%.
The company said that assuming the worst of the cost pressures, especially the hike in diesel, were now behind the company, the annualized cost increase this year would be about 8%.
Tharisa believes that PGM prices stay strong, and that chromium pricing has improved dramatically, which will help the firm in the second part of the year.
Tharisa reported headline interim share earnings of 15.5 cents/share – a 29.2% year-on-year decline owing to the way the company accounted for its increased stake in Karo.