Good morning, and welcome to the Tharisa plc Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted any time by the Q&A tab situated on the right-hand corner of your screen. Just simply type in your questions and press send.
The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Ilja Graulich. Good morning.
Good morning, and thank you very much. To those participants, thank you for joining us. We have booked this down for an hour to present our interim results for the financial year 2022. With me today are our COO, Michelle Taylor, and our CFO, Michael Jones. Without further ado, let me hand over to Michelle, and at the end, I will hand over questions and redirect them to the relevant parties. Michelle.
Thanks, Ilja. Good morning, ladies and gentlemen, and thank you for joining us this morning for our interim results presentation for the six months ended 31 March 2022. I think before I go into those, unfortunately, Phoevos, our CEO, is unable to join us this morning, but rest assured he's in good health, and I'm sure we'll be speaking to all of you in due course.
Firstly, let's have a look at our operational performance. As always, safety is key, and to that extent, we have reported an LTIFR of 0.72 per 200,000 man-hours worked. Importantly for us is that we've achieved 5.8 million fatality-free shifts as at the end of April. Operationally, we've continued to increase both in terms of PGM and chrome production.
In terms of our extension of our pure chrome production, we were able to finalize the construction of the Vulcan plant at the end of December 2021, and we started the commissioning. That commissioning is going well. We are very pleased with the results that we see coming through the Vulcan plant, and we expect to achieve nameplate capacity during Q3, with us reaching nameplate capacity certainly by the end of Q3, but I think it will be well before that.
From a financial point of view, EBITDA was reported at $111 million, and we have a positive net cash position of $26.9 million with cash on hand of $101 million. Pleasingly, an interim dividend of $0.03 per share.
As important as it is for us to deliver into strong, robust, operational and financial results, so too is it for us to deliver into our strategy. To that end, this last six months have been particularly satisfying for us and pleasing because it was the culmination of two key acquisitions that were undertaken.
Of course, while I'll touch on those acquisitions in a minute, while we were finalizing those acquisitions, we continued to invest in the Tharisa Minerals 20-year life-of-pit mine operation. Our Arxo Metals beneficiation, R&D programs, and technologies are developing at pace. It's appropriate at this moment to just mention a little bit more detail around Arxo Metals. There are a number of projects that we're working on there. The one that is line of sight for all of you, clearly, is the Vulcan plant.
Many of you have come to site and seen that in terms of the analysts, and we're really pleased with the technology that we've developed there and that we've been able to bring it into the commissioning phase. In terms of the value accretive transactions that we have been able to finalize during the six months, we announced a landmark BEE landmark transaction in terms of the acquisition of the 26% shareholding held by our BEE stakeholders in Tharisa Minerals.
That was settled in the form of an issue of shares for cash and is a very pleasing transaction for the group. I think our stakeholders and the BEE shareholders have been with us for a number of years.
They've been fantastic stakeholders, and we are pleased to continue a relationship with them in the form of shareholders at Tharisa plc level. What is of particular importance and really gives me a great kick to actually discuss with you this morning is the fact that we were obviously able to finalize the acquisition of a majority stake in a tier-one asset in Zimbabwe, that being the Karo Platinum project.
We've been talking to you about this project for a number of years and the fact that Tharisa had an option over the project. I think finalizing the acquisition of that asset is pleasing to the management team. As I said, it's key for us to deliver our strategy into the future, and we take that as seriously as we do our current operations.
Ilja, if we move on to the next slide. If we look at the key metrics and the key numbers for the six-month period, ROM production increased by some 14.6% to 2.83 million tons. PGM production increased as well.
That benefited from a higher feed grade of 1.74 g per ton and recoveries which were steady at around 77%, which resulted in production increasing by some 22% to 91,800 ounces. Similarly, chrome concentrate production increased as well. The benefit there was a consistent feed grade of 17.6% and a pleasing improvement in recoveries to some 66.7%, which resulted in an increase of 6.3% to 776,000 tons.
This translated into revenue of $334 million, which is up 6.5% on the comparable period last year. As I've already said to you, EBITDA was reported at $111 million, with profit before tax up some 18.8% at $124 million. Net profit after tax, also a pleasing increase of 34.2% at $101 million, with EPS up a significant 52.8% at $0.327. Of course, there's some accounting anomalies in this, albeit that we have a healthy increase year-on-year, and Michael will unpack this in a little bit more detail for you a little bit later on.
Moving on to the next slide. You know, as much as we've discussed about, briefly spoken to you really about our operational metrics, and we've spoken about some of the key financial numbers, and we're going to delve into those in some more detail. The key topic of the day is always ESG and carbon emissions. When we reflect and look at the Tharisa operations, what we are pleased with is that we are producing sustainable commodities into the future.
That we've bolded some of the key highlights for you and some of the key focus areas when you consider the commodities that Tharisa produces. With platinum and palladium and rhodium, these are essential to remove NOx and CO2 from vehicle emissions. Hydrogen economy continues to advance and see continued investment in the sector, and the hydrogen economy is extremely positive for platinum demand.
Last week, I was in London for Platinum Week and the investment in technology, the investment in hydrogen, the investment in reduction of carbon emissions and the benefit of what this means as it translate to the supply-demand fundamentals for PGMs is particularly reassuring and pleasing to see as we go into the future.
From a stainless steel point of view, chrome is that element that is the essential ingredient in terms of producing stainless steel. To that end, stainless steel is recyclable. It's required in terms of the hydrogen economy supply chain, and it supports hydrogen production, distribution, storage and use. From an R&D point of view, everything that we look at is about being an active participant in the decarbonization drive. Research and development, a key ethos in terms of the Tharisa group.
I think I've gone through that really quickly. Michael's gonna talk to us in a little bit more detail around the financial numbers and how these translated over the six-month period. You're gonna have some questions around cost because that is another topic of the day as we all try and understand what inflation looks like over the next six months. I think without further ado, Michael, why don't you take us through the financial numbers, please?
Thank you, Michelle, and good morning to all the participants on our results presentation this morning. Before delving into the financial numbers for the six months, I'd just like to touch on some of the operational highlights that inform these particular results. Mining volumes, as Michelle mentioned, increasing to 2.8 million tons, and this on the back of sustaining our stripping ratio of 11.9 x.
That's on a cube-for-cube basis and really enables us to have input flexibility and also takes into account our previously announced extension of the open pit by seven years. Reef milled 2.8 million tons and we continue to have a strong focus on feed grade improvements that flows through from the mining through to the processing.
I think particularly pleasing is the increase in the PGM rougher feed grade, which are up 22.5% to 1.75 g per ton. PGM outputs a record 91,800 ounces, also up 22.2%. The Vulcan plant is in the ramp-up phase, so expect to see increased production coming through on the chrome front.
If we just have a look on the back of that very strong operational performance, it's really informed our financial results for this financial interim period. It's really characterized by three themes. The first is the very favorable commodities market which we've been operating in.
The second one, unfortunately, is cost pressures, and most of these are associated with the cost of fuel. We've all seen what's happened to the price of fuel at dispensing, also price of Brent. The third one is the accounting anomalies really created by the acquisition of the controlling interest in Karo Mining Holdings.
Revenue for the year, up $334 million, and that's up 6.5%. If you have a look at it, PGM's contributing some 70% to our overall basket. That's on an FCA basis, that is, we split out the costs of sales and shipping. That's on the back of PGM sales volumes at 86,500 ounces and a PGM basket price down marginally 8.2% at $2,592 per ounce.
The chrome business contributing just under 25%. Chrome sales, 816,400 tons and a very strong metallurgical grade price performance, up 3.7% at $175 per ton. Just looking at the numbers a bit more. Rhodium has really been a spectacular performer and contributor. While it comprises less than 10% of our overall pool split, the contribution to the PGM revenue stands at 59%.
Our specialty grades, that's chemical and foundry grade chrome products, higher value add products, contributing some 22% of our overall revenue from chrome. Our gross profit, $122.6 million. Very pleasing, notwithstanding the price pressures and the cost pressures we faced, 36.7%. Just touching on some of the costs. This slide's quite a busy slide.
Let's focus on some of the numbers. The cubes mined up 17.3%, so the cost per cube mined up marginally at 1.2% at $8.7 per cube. Very pleasing, and that's benefiting from the economies of scale as we move the increased volumes. Tons milled up ma rginally 1.3% to 2.8 million tons.
The on-mine cash cost per ton milled up 16.6% at $47.8. That increase of 16.6 really needs to be seen in the context of the increase in the volumes mined. As I mentioned, cubes mined up 17.3%. Just focus a bit on the graph on the right. Diesel, becoming a more significant cost, remembering that's our primary energy source for the haul fleet. Just under 16% of our overall costs.
Electricity utilities just under 6%, and then royalties on the back of the commodity prices and utilization of our tax losses, just under 12% of our online cash costs. If we were to analyze our cost on an all-in cost per 6E PGM ounce basis, that stands at $1,572 per ounce.
Really needs to be seen in the context of the overall basket price of $2,592 per ounce. Right. Sorry, I'm just having a few technology challenges there, and it's a little slower than I'd like it to come through. If you look at the absolute costs when we analyze the income statements, I think we have to take into account the mining volume increases, the mining output increases, and also the increase in the cost associated with the Vulcan plant.
There we've created 96 new permanent jobs. Salene Chrome and Karo, an additional 100 new jobs. All of those have an impact on the overall cost base. If I have a look at the inflationary pressures. The key driver is the oil price, and therefore our diesel prices, for example, up 53.8%.
Explosives associated with the chemical industry up 100%. Electricity tariff increase of 15%, and while it's a small component of our overall costs, we'd expect to see some further inflationary pressures coming through, as South Africa goes through its restructuring of Eskom. Sea freight, logistical problems there globally on sea freight, contribute a 100% increase.
However, if you have a look at our overall inland and sea freight costs, those increasing by some 40% as we've shifted more to road than from rail. If you look at those pricing pressures that we face, we're very pleased with the maintained gross profit margin and therefore the cost control in the business to the extent possible of 36.7%.
I'd like to spend a little bit of time unpacking this particular slide where we analyze the differences between earnings per share and headline earnings per share due to the quantum of the difference. The real difference is accounting for the benefit of the discounted farm-in and option that we negotiated and that we've now exercised in this financial reporting period.
Just to give some background, in 2018, Tharisa acquired a 26.8% equity accounted shareholding in Karo Mining Holdings. As part of its obligations, it funded an advance share funds to help the exploration program, which was successfully concluded. As part of this transaction, it's integral that we negotiated a discount to the value at the time of the exercise of this farm-in and option, and the benefits of that decision are now reflected in the accounts.
We have accounted for this transaction as a business combination, and that requires us to fair value the assets of what we are acquiring. The first instance here, we've got the initial investment that needed to be revalued. That gave a fair value gain of $33.5 million.
The gain in the acquisition, the bargain purchase for the additional just under 38% that we acquired, $15.1 million. Together some $48 million in total. If we then reconcile it, we have net profit attributed to ordinary shareholders, $88.9 million. We take off these differences and end up with headline earnings of some $42.1 million.
The net effect of these transactions is a favorable $0.16 per share movement, and that's reflected in an earnings per share, 32.7, and headline earnings per share of 15.5. Let's move on to the cash from the dividends. Cash flow, pre-working capital movements, some $121.2 million.
We then did have an increase in trade and other receivables of $45.2 million, an increase in inventories of $14.2 million, resulting in net cash flow from operations of $49.1 million. Additions to property, plant and equipment amounting to $51.1 million. As previously mentioned, the board approved an interim dividend of $0.03 per share.
Our dividend policy is to distribute a dividend of at least 15% of consolidated net profit after tax on annual basis. The practice has been and continues to be the declaration of an interim dividend. However, in calculating this particular dividend, we have then excluded the gain on acquisition of subsidiary being a non-cash flow item and that is likely to flow through towards the end of the financial year. We've excluded that 48-odd million adjustment on the fair value.
At 31 March, our cash and cash equivalents at $101.5 million. Our total debt was $74.3 million. Of that amount, short-term trade finance to the $34.3 million. That's really associated with pre and post-shipment financing on the chrome trading business.
In terms of currency denomination, $66.2 million of our total debt was dollar denominated. Another accounting issue that we're required to put through, flowing through from the acquisition of the controlling interest in Karo Mining Holdings, was that the Republic of Zimbabwe has an option to increase its shareholding in Karo Platinum by a further 11%.
It's a short-dated option, 24 months from 31 March, and a period of exercise of up to 36 months at the fair market value of it is calculated now based on the NPV. From an accounting perspective, we are required to account for those other financial liability as it has the potential to dilute the business going forward, and that is accounted for as a non-current liability of $17.9 million.
It will be revalued on an annual basis as we get closer to the option exercise period. We continue to invest in Tharisa Minerals and the growth prospects and sustainability of the business. Budget CapEx for the current financial year sits in about $80 million. That excludes Karo Mining Holdings and Karo Platinum. As mentioned, we've expended $51.1 million on property, plant, and equipment in this financial year.
This accounting anomaly that we really have flowing through from having to revalue our assets is the effect we've had to add net identifiable assets of some $148.4 million onto the balance sheet. The primary one of these, which is reflected under mineral rights, is some $200 million attributable to the mining rights of Karo Platinum. On that note, I'd like to hand over to Michelle to conclude the presentation.
Thank you, Michael. Thank you for running through the financial numbers in the detail that you did. I think for us at Tharisa, we are building on a very strong and healthy foundation. The focus for us is always on safety and ESG. This remains a core aspect of our business and a core value, and it really takes a high degree of focus because the safety of our people is paramount to us, and ESG is about investing into the future. Technologies are enabler and our differentiator.
We're seeing it already. We're living it as we've seen regular optimization in terms of PGMs, increased production coming out of there, and we're now starting to benefit from the increase in terms of chrome production, which again, is a function of our technology and our research and development.
With that, our six strategic pillars will ensure sustainable growth into the future. The metals we mine will play a role in global energy transition. I discussed a little bit of that with you at the start of this conversation, and I'm sure we can spend many hours talking about this. The PGMs that we mine, the chrome concentrates that we produce, this all translates into a global energy transition for the world as we see it today.
We are delivering our forecasts in a responsible manner. We talk to our numbers. We live and breathe Tharisa on a daily basis, and I'm very pleased with what we've been able to deliver again for the six months ended 31 March 2022. Delivering on these pillars will ensure a stronger foundation as we go into the future.
I think we've already shown a resilience as we navigated the pandemic and the whole world navigated through the pandemic of COVID-19. We're going into uncertainty as it relates to geopolitical events, but what we do know is that we are a strong producer and a stable producer of both PGM and chrome concentrates.
What does the future look like in terms of what Karo and the Tharisa combination looks like? This is what really excites us. Looking forward into the future, we expect to have a life of mine for both operations of some 20 years. Our reef mine will be at 7 million tons per annum. PGM produced will double. It will be at 350,000 ounces. Chrome produced will be at a healthy 2 million tons per annum.
Our group value in terms of consensus out there is that Tharisa plus Karo NPV sits at $1.3 billion. When we look at Tharisa and we looked at optimization and innovation being our key growth drivers, as I've said, innovation is the core of what Tharisa does. We are always looking at how we can optimize, increase our production numbers, and obviously that translates into lower cost profiles.
We've got a number of key strategic projects that we're busy looking at in terms of our Arxo Metals. We've discussed a little bit of those and in the coming months, we're gonna be dealing with more detail around those projects that are enablers into the future.
In terms of major milestones in Tharisa, we're very pleased with the fact that we have the Tharisa mine with a stable, steady state MG reef open pit mine, which is long-lasting. It still extends for another 20 years, and beyond that, another 40 years in terms o f underground mining.
When we constructed and commissioned the Voyager plant, that was a large-scale PGM and chrome plant that we constructed and commissioned, got to steady state, optimized, and took it well beyond the steady state numbers that we were planning at the time. High-energy flotation increased our PGM recovery, and we benefited on the back of that, and we've seen increase in terms of our PGM production. The DC smelter that we're working on will beneficiate PGMs, and we're very pleased with the way that that technology is developing.
Of course, the Vulcan plant, I've discussed that with you already. That ultra fine chrome recovery will take us to 2 million tons of chrome concentrate. Michael touched on the chrome market, and I'm sure some of you will have some questions on that. We're seeing a very healthy market as it relates to chrome concentrate sales, with pricing at some $295 per ton.
We are well-positioned with the Karo asset and the fact that we now have the majority control of that asset to double our PGM production and take Tharisa into the next phase of growth into the future. With that, thank you for attending this presentation. I'm sure you're gonna have some questions that we're gonna talk to. Ilja, perhaps you can run through the Q&A, and we'll answer as best we can.
Michelle, Michael, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab just situated on the top right corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation along with the
The slides and the published Q&A can be accessed via Investor Dashboard. As you can see, we've received a number of questions throughout today's presentation, and thanks to all the investors for submitting those. Ilja, could I just ask you to read out those questions and give response where it's appropriate to do so, and then I'll pick up from you at the end.
Sure. Thank you. Michelle, onto you. You've spoken a lot about Vulcan. This is sort of the next steps with regards to the technology, and it's twofold. Firstly, can the Vulcan technology be used on other metals? T hen secondly, have we had any interest of people purchasing the technology for use on their own operations for the Vulcan technology?
Thanks, Ilja. Yes, we are looking at how we can extend the technologies in terms of the Vulcan plant and how we can use it in terms of other metals and the basic principles of that technology. Certainly something that we are looking at, and I'm sure we'll be sharing with you in due course.
In terms of other producers being interested in the technology, absolutely. There's no doubt it's something that we discuss with our peers, and they've been very interested to see the construction of the Vulcan plant going up. Some of our analysts visited it recently, and I think they were impressed to see the scale and the efficiency of that plant.
I'm certain and I can speak with some confidence that our peers will be looking at the technology and looking to see how they could use that in their operations. Yeah, thank you, Ilja.
Cool. Sticking with you and your favorite topic of chrome indeed, I think there's more questions coming through on the chrome market. Question here is, can you talk us through what you're seeing in the chrome market at present and how prices are developing?
Sure. You know, what we've reported for the six months is an average price on metallurgical grade concentrate of some $175 per ton. Now, at the end of 2021 December time period, sales were certainly at that $165-$175 level. As we progressed into 2022, we saw the sales price start to increase dramatically, and that really was on the back of lower inventories coming out of China and what the stock holding was.
We've rapidly, over the three-month period from January through to March, seen price improve and increase up to the $295 levels. Remembering that when we sell into our order book now, it's product that will be delivered, so if we're now on the 26th of May, we start to deliver that product into June.
That's why you'll see a lag in terms of pricing. Certainly for a number of weeks we've seen consistency around pricing being around the $295 level. Obviously we see a similar increase on the specialty grade concentrates, which Michael touched on earlier, and that enjoys another $50 premium on top of the $295 that we're seeing.
I think in terms of liquidity in China, we're seeing regular buying patterns coming in from our usual customers, so there isn't any concern yet. I think the biggest constraint that we will have will be logistics and its logistics as it relates to South Africa as well as China.
In South Africa, it's really a function of the floods that we've experienced recently in the KwaZulu-Natal, which has impacted inland logistics and certainly caused some delays in terms of normal sea vessel cargos going out. Of course, in China, we once experienced the COVID-19 pandemic and the lockdowns there, with lockdowns in Shanghai and Beijing and one or two other provinces.
Typically, we don't deliver into Shanghai. We do deliver into other ports like Xingang. Deliveries are still going on as usual, albeit that there are some bottlenecks in China that one would expect, you know, with the lockdowns that there are, there will be delays in terms of road logistics and so on.
For the moment, we are seeing regular deliveries into our customers. Do we expect some delays in the next six months? Yeah, I think we absolutely do, and that really is a function of what we're seeing happening in China in terms of lockdowns.
Sticking on the topic of chrome, I think you sort of hinted it, but maybe sort of delve further into it. Could you please provide some color on finished stocks? Is the rise a reflection of logistical constraints or the strategic reserve? I think it relates to what is our normal inventory cycle. Maybe talk the listeners through that.
Yeah, sure. Typically, we would have 6-8 weeks of inventory in South Africa. Remembering that when we account for the sales revenue, it comes through. It's only accounted for when the tons are physically shipped. There would be some inventory in port and there'll be some inventory at the mine just because of the nature of when one transports the material.
At the end of March, we saw the initial floods that affected the area that caused some delays and we saw shipments moving into the April months. I'm not concerned with that at all. We certainly were able to move that inventory as per normal.
In terms of inventories and where we are today, we still are within a normalized inventory level of around 6-8 weeks. Going forward, I think that there may well be some delays. Ilja, there was another question there as well regarding inventories.
Yeah, it was, so could you please provide some color on finished stocks? Is the rise a reflection of logistical constraints or a strategic reserve?
No, it's not. Look, we will always produce chrome, so we are not holding back in terms of inventories and when we sell our product because the nature of it is that we need to produce, move the material, get it into port and ship it out.
One can't be building stockpiles of 100,000 tons and higher and maintain that and keep that going up. No, we aren't holding any strategic reserves. We continue to sell into the market, and I think the market is enabling us to sell continuously into a higher market, and that's what we will continue to do as the price moves up.
All right. Moving to Zimbabwe, can you provide an update on Salene Chrome?
Sure. Salene Chrome has been another exciting project for us, and it's something that we started with the construction last year. Salene Chrome was always strategic to us in terms of getting our feet onto the ground in Zimbabwe. Understanding how to construct, understanding what the local dynamics were, understanding how we move our material and we move capital equipment in.
I think Salene Chrome has been a great learning curve for us on the one hand. On the other hand, it's a project that I think is gonna be particularly financially rewarding. What we are already seeing, and we finalized the construction of the Salene Chrome plant. There are a couple of things that we're still doing in terms of construction, but fundamentally, it is complete. We're busy.
Hi, Ilja. I believe we've momentarily lost Michelle there.
Yeah.
If we could potentially go on to another question, maybe for Michael.
Sure. Absolutely. Michael, let's wait for the system to come back. Apologies for that. Michael, if you're able to talk to us on the system. There you are. Perfect. Thank you.
Yeah.
Sorry about that.
Michelle there that she was just talking to herself at that point of time, so apologies. It seems to be more.
Can you hear me now, Michael?
Yeah. We can hear you. We can hear you now.
Yeah. I was waxing lyrical about how excited I am about the Salene Chrome project, and more importantly, how excited I am about what the chrome prices are of that type of ore. I think probably what I was saying to you at the time was that we've been very pleased with the results that we're seeing in terms of the chrome that we produce in Zimbabwe. That is a healthy product.
It varies between 46%-48.5% in terms of the grade of that material. What that translates to in terms of commodity prices is that you're looking at prices in the region of $400 a ton. When we initially looked at the Salene Chrome project, I think, commodity prices for that type of material was probably in the region of $220.
Seeing it at $400 is a great outcome, and I'm looking forward to selling into that market. We're certainly confident that the commissioning will produce healthy results for us over Q3. I think that answers that question. Thanks, Ilja.
Yeah. Thank you so much. Let me move on. A lot of questions here around cost pressures, and I think we were anticipating those. I think it's an industry-wide issue. Michael, I don't know if you want to talk a little bit how you see costs developing. What are the likely rates to half on half with regards to cost pressures? I know we also received those questions earlier, so maybe provide as best possible answer that we can.
Okay. Thank you for that. It's a very interesting question. I mean, often debated in terms as to how we're going to go and manage with the costs. If we work on the premise that you've actually gone over the worst of the shock of increase in the oil prices, and that Brent doesn't go to 150+, and I have seen some talk about that. The worst of those cost pressures have actually impacted on the business as such.
As such, if we look forward on an annualized basis, you probably could cost inflation some 8% on the overall operating costs of the business itself. I'm very pleased to say if you complete the construction of Vulcan, there's been a strong impact on steel prices in particular.
Concrete prices are very pleasing that we're missing those particular cost pressures and that Vulcan came in on budget. If I just look not just on operational costs, I'll just raise the flag going forward. We do import a lot of yellow fleet manufactured around the world, and while at the moment we're still very satisfied with the orders we've placed for our products and the pricing, I do see some pricing pressures coming through there, and I'm not sure what that quantity is going to be as you start bringing the yellow fleet from around the world.
There's shortage of the yellow fleet in the first instances. Steel prices have gone up and shipping freight rates as such. That's really where we see our costs going forward. Labor, we do have an agreement of four years with our respective bargaining units.
That's a CPI linked increase, so no real cost pressures coming through from that side. Eskom, I'm expecting again to see some above inflation increases at the next. Rates are not able to keep the lights on, so we'll see some cost pressures coming through there. The other one that is a little more difficult is freight rates, which are very volatile at the moment.
They swing quite widely. That's what the impact of fuel price and sulfur is gonna go through on those. Those are the uncertainties. Touching on it again, price of oil and the impact of that, 'cause that runs through to explosives in all parts of our business. If that shockwave is over, we'll start seeing more normalized increases going forward, and similarly on the freight rates is the other uncertainty.
Michelle, I don't know if you want to add anything onto the freight rates. I'm getting some questions here with regards to global freight and logistics. I think you've spoken about it in your presentation, but do you have anything to add on the freight costs for the second half? T hen while I'm on it here, Michael, are there any working capital requirements or changes with regards to the second half coming through. Maybe Michelle first on freight and then Michael on working capital.
Thanks, Ilja. Look, I think if we break it down and we look at the six months, if I look at our total freight and logistics costs, I think as Michael's already said, we saw that total going to some $89 a ton. That's compared with the prior period of some $63. That's an increase of 40%. Now, that's obviously a blend of freight and road. In terms of freight itself, we've seen that increase by some 100% over the six-month period. What we have seen clearly is a significant increase in terms of pricing.
In the same way we've seen a 40% increase in terms of freight costs and land and road logistics, we've actually seen a much higher increase as it relates to revenue and as it relates to the sales price and what we expect to actually achieve over the next couple of months.
Costs are a concern. I have no doubt, and it's something that we obviously will manage closely and work with our team on and make sure that wherever we can, we can limit the creep on costs. At the same time, we are seeing changes in terms of the fundamentals on pricing, particularly as it relates to chrome.
PGM's a little bit more subdued, but again, I would expect to see the drivers that push costs will also be the drivers that will push pricing as we go into the future. Thanks, Ilja. Michael, do you wanna perhaps touch on the working capital?
Sure. If we look at the working capital cycle, we've had some questions on stock. I think those have actually been answered in terms of the stock. The team, Arxo Logistics and the people responsible for shipping, I have to say, have done a remarkable job on moving goods. They expanded through Maputo for the first time, moving the chrome, taking into consideration the constraints in Durban and some in Richards Bay.
We've been able to move the stock very well. Do not see any impact on the stock line. Receivables are probably higher than I would have expected. They are, but that really has to do with the timing of shipments more than anything else. I'd expect that to drop a little bit, but to normalize again, going forward. Accounts payable, that's a normal cycle.
We pride ourselves on our accounts payable days. We try to maintain those at about 50 days on average, so that's normalized and should be staying where we are on the payable side. Subject, of course, to normal inflationary pressures we've been talking about on those costs coming through. In summary, I think a little bit of a release from the debt side going forward, but otherwise, probably a fairly normalized working capital cycle.
Thank you. Moving commodities a little bit. I know, Michelle, you spoke a little bit about the PGM market, but we do have a question here: can you provide your view of the PGM market given easing lockdowns in the face of geopolitical tensions in Europe and Asia? If you can provide some color on the PGM market, that would be appreciated.
Thanks, Ilja. I think, look, it is a tale of two stories. On the one hand, while we see the easing of lockdowns and we see the positivity in terms of production profiles in South Africa increasing, and the PGM producers being able to have stable production and increasing it where they can, we certainly have seen the geopolitical events in terms of Russia and Ukraine, and I'm certainly not an expert on that.
I'm not gonna comment on that other than to say that there is an impact. There's no doubt with Russia being a key producer of palladium and PGMs for that matter, that there will be an impact as the consequences and the unintended consequences of this war roll out. I think the beneficiaries of what happens in Europe is probably the South African producers.
With that being said, at the moment, I'm certainly not going to be bullish in terms of where pricing could go other than to say I do see it increasing and I do see it being steady and stable into the future. We're not gonna be forecasting, you know, crazy price increases, but at the same time we see stable, consistent growth. We see investment into technologies that uses the PGMs, and so I would expect to see a healthy outlook for PGMs into the future.
Thank you. We got a little bit of time left, so let me try and squeeze some questions in. Two very operationally focused questions. One, can you outline your four-year wage agreements, when that started and how long that still has to run? T hen secondly, you spoke about in your production report a few weeks ago, secondary mill issues. Have those been resolved?
Sure. We concluded the four-year wage agreement. I think we're in the second year of that agreement, so we've got another year to run. I think it's actually a three-year wage agreement, not a four. We've got another year to run going into the fourth year. Our relationships with our unions are good.
We've got a good wage agreement. I think everybody stands by it. There are no issues or concerns as far as that is concerned. I know that there's a lot of talk around strike action in South Africa. I think from a Tharisa point of view, I can say to you that we have good relationships with our employees and our unions. I'm certainly not anticipating any issues as far as that's concerned.
In terms of the secondary mill issues that we had at the end of Q2, those were resolved, and we're pleased with the way that they've been resolved, and we can certainly see improvement and increase coming through into our production as we've gone into. We're already in the middle of Q3. So again, very comfortable with where we are in terms of the way the secondary mill issues have been addressed, and that we've got normalized production in terms of that plant.
All right. Let me let you guys breathe a little bit. There's a question here on the high stripping ratio and if that's gonna be reduced in the future. Let me just maybe answer that myself. We had a life of mine stripping ratio of roughly 9.6 pre the extension of the open pit that we announced last year, of an additional seven years.
With that additional seven years, the stripping ratio, the new life of mine stripping ratio is in the region of roughly 11.5-11.8. Cubes on cubes. So the strip ratio that you see in the results is the actual strip ratio. You would have seen, unlike previous years, we don't have an asset that Michael has created on the strip ratio.
The strip ratio you're seeing now is what we should be stripping on into the future. Just Michelle, maybe a little bit more flavor on Karo, some timeline. You spoke about the combination of the two companies. When do you see that combination reaching full production? I guess it's related to the Karo timeline.
I suppose the answer is as soon as possible. I think to give you a bit of a clearer idea, you know, we've recently appointed Bernard Pryor, the Managing Director of Karo, which is a great step in terms of what we're doing next, with Karo and as we develop, the project and we actually take it into production or construction first and then production.
In terms of timelines, I think we're gonna be able to give the market a lot more clarity, certainly by the end of Q3. We are busy relooking and looking at detail around the project timetable. My expectation would be that it's gonna take between 18 and 24 months in terms of delivering that project.
Obviously, there's some factors that may be outside of our control, but I think in the normal course, that's what we would expect to deliver. From a costing point of view and capital costs, we're looking at those numbers in some detail because, of course, as we've discussed a lot on this call and on a number of other calls, the cost creep is certainly there.
Inflation cost increases are there. We are evaluating what that capital cost looks like and what the increases may be, and we will be communicating with you in far more detail, as I said, by the end of Q3.
Beginning of July, we'll be talking to you around the detail of where we see the timeline, what the key milestones are over the next 24 months, what that capital cost looks like, and also the detail of the funding of that which Michael is working on. All of that is progressing well. I think the pleasing thing for me is we have actually been able to place the orders for the long lead items. That's underway. It's really about making sure that we haven't missed anything in terms of the detail, and we're confident on delivering that project as soon as possible.
Michelle, thank you. That's great. If I could just come in and say thank you for addressing those questions from investors. Of course, the company will review those questions listed today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Michelle, could I just ask you for a few closing comments?
Sure. Thank you so much. Thank you to everybody for taking the time to attend this Investor Meet presentation. We've certainly enjoyed talking to you about our results that we are particularly pleased with in the six months, given that we've come out of a pandemic. Albeit that COVID is still around, we've been able to show that we are resilient through a pandemic that nobody expected, and we're now going into an uncertainty of what the economy looks like worldwide.
Having said that, those are the factors that are probably outside of our control. What is in control is our operations. What we've been able to do consistently over a number of years is produce chrome and PGMs. We've been able to increase that production, continuously focus on the increased production, which then translates into a lower cost per unit.
Really, that's where we're going. Going into the future, it's Vulcan coming online, chrome recovery is increasing, unit costs decreasing, both for chrome concentrates and PGMs. There'll be inflation. That's a fact of life. But at the same time, a fact of life as well is the fact that we are living in an environment with good commodity pricing. With that, I'll leave you and look forward to talking to you in the coming months as we continue to develop our project.
Michelle, Michael, Ilja, thank you very much for updating investors today. Could I please ask investors not to close the session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.
This will only take a few moments to complete and I'm sure be greatly valued by the company. On behalf of the management team at Tharisa plc, we'd like to thank you for attending today's presentation, and good morning to you all.
Thank you.