TIDMTHS
RNS Number : 4828R
Tharisa PLC
22 September 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)
Tharisa acquisition of mining equipment and the transfer of
employees from MCC Contracts (Pty) Ltd effective 1 October 2017
Tharisa announces that the agreement relating to the acquisition
by Tharisa Minerals (Pty) Ltd (Tharisa Minerals) of the mining
equipment from MCC Contracts (Pty) Ltd (MCC Contracts), as
announced on 11 May 2017, is unconditional and the transaction will
be effective from 1 October 2017. MCC Contracts is the current
mining contractor for Tharisa Minerals.
As previously announced, Tharisa Minerals will purchase from MCC
Contracts certain existing mining equipment, strategic components,
site infrastructure and spare parts, as well as transfer employees
currently on site and deployed at its Tharisa Mine in South
Africa.
As part of the transition, Tharisa Minerals will also take
cession and assignment of certain leases currently entered into by
MCC Contracts. In addition, to optimise the fleet and, in
particular, to insource the drilling which was partly subcontracted
by MCC Contracts, additional mining fleet will be acquired by
Tharisa Minerals.
Tharisa Minerals' large scale open pit operation has an open pit
life of 18 years and a further 40 years of underground mine
extension. With the long life of the open pit, the transition to an
owner mining model is a logical progression in its development by
derisking operations.
The contractor mining model was appropriate while the Tharisa
Mine was in development, reducing the upfront capital spend on a
fleet and enabling Tharisa Minerals to understand its orebody
fully. It also allowed the company to determine the optimal fleet
requirements for mining its specific ore body.
By taking direct control of its mining operations, Tharisa
Minerals will be better placed to control reef grades, thereby,
delivering improved quality ore to the processing plants and
optimising the feed and recovery within the plants. As a result of
the transition and the benefits of optimisation programmes, Tharisa
expects to produce 150 koz of PGM concentrate and 1.4 Mt of chrome
concentrates in FY2018.*
Fleet purchase and capital spend
The purchase consideration for the fleet, including components,
spare parts, buckets, blades and tooling, totals ZAR303.0 million
(US$22.9 million). In addition, planned near term fleet
optimisation equipment purchases of ZAR110 million (US$8.3 million)
are committed. This includes purchases of drill rigs, excavators
and additional mining fleet. Once the fleet and optimisation
equipment purchases are completed, the primary mining fleet will
comprise 19 drill rigs, 11 excavators and 46 trucks capable of
moving 17 Mm(3) per annum.
The estimated fleet replacement cost is approximately US$145
million. With an average remaining life of the fleet is 40%, the
fleet replacement programme will be guided by original equipment
manufacturers' (OEM) specifications. The planned programme, which
includes the purchase of components, is currently budgeted at
ZAR120 million (US$9 million) from Tharisa Minerals' sustaining
capital spend in FY2018.
Tharisa Minerals is also taking cession and assignment of
certain equipment leases. The net present value of these lease
obligations total ZAR73.4 million (US$5.5 million).
Funding
The purchase price for the MCC Contracts fleet, which will be
offset by certain employee-related provisions and accrued
de-establishment costs which total ZAR22.2 million (US$1.7
million), and the fleet optimisation programme will be funded
primarily from a bridge loan facility of ZAR250.0 million (US$18.9
million) and OEM financing facilities. The average interest rate
for the purchase of the fleet and the fleet optimisation programme
is 9.0%.
In addition, Tharisa Minerals has negotiated the necessary
financing arrangements for the fleet replacement programme.
In the normal course, sustaining capex has been funded by
operating cash flows and it is Tharisa Minerals' intention that
sustaining capital will continue to be funded in this way. Where
there is significant capital required on a replacement item,
Tharisa Minerals may fund this through OEM financing
facilities.
It is the Group's policy to have a consolidated total debt to
total equity ratio of 15% and as at 31 March 2017, the ratio was
13%. Premised on the purchase of the MCC Contracts fleet, the
cession and assignment of certain leases and the fleet optimisation
programme being funded by debt, the pro forma debt to equity ratio
would have been approximately 26%.
Mining costs
The current contractor mining cost is inclusive of, inter alia,
capital replacement costs as well as the financing costs. The cost
reflected in the financial statements pertaining to mining costs
per unit mined is therefore inclusive of the operating costs,
capital replacement and finance costs, as well as the working
capital requirements. Following the transition to owner mining the
costs will be allocated to the respective categories, being
operating costs and finance costs with the capital expenditure
reflected separately.
To illustrate the impact on overall mining costs for comparative
purposes only, the budgeted operating costs aggregated with the
finance lease charges as well as the charge for depreciation in
respect of the capital expenditure has been calculated. Those costs
on a unit mined basis i.e. on a per cubic metre mined basis
reflects a normal cost escalation relative to the prior reporting
period. It should, however, be noted that the current mining plan
provides for an increase in the stripping ratio from 8.4 m(3) as at
31 March 2017 to above the life of mine open pit average of 9.7
m(3): m(3), thereby increasing the volume of cubic metres mined
with minimal change in the amount of reef tonnes mined.
Transfer of employees
With effect from 1 October 2017 Tharisa Minerals will directly
employ approximately 900 employees, who are already deployed at the
Tharisa Mine. Representative unions, the Association of
Construction and Mineworkers Union (AMCU) and the National Union of
Mineworkers (NUM), were consulted throughout the process. Tharisa's
total staff complement post the transition will be approximately 1
700.
*Forward looking statements have not been reviewed or reported
on by the Company's auditors
Paphos, Cyprus
22 September 2017
JSE Sponsor
Investec Bank Limited
Investor Relations contact:
Tharisa plc
Sherilee Lakmidas
+27 11 996 3538
+27 79 276 2529
slakmidas@tharisa.com
Broker contacts:
Peel Hunt LLP (Joint Broker)
Ross Allister/ Chris Burrows
+44 207 7418 8900
BMO Capital Markets Limited (Joint Broker)
Jeffrey Couch/Neil Haycock/Thomas Rider
+44 020 7236 1010
Financial PR contacts:
Buchanan
+44(0) 20 7466 5000
tharisa@buchanan.uk.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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