Good morning, ladies and gentlemen, welcome to the Tharisa plc investor presentation. Questions are encouraged. They can be submitted at any time via the Q&A tab that's just situated on the right-hand corner of your screen. Please 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. The company can review all questions submitted today and will publish our responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, as usual, we would just like to submit the following poll. If you could give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand you over to CEO Phoevos Pouroulis. Good morning, sir.
Good morning, and welcome everyone to this half-year results presentation for our financial year 2026. With me today in the room is our CFO Michael Jones and CFO Designate Jacques Breytenbach, who will be taking over from Michael from the 1st of August as Michael enters his retirement. Really starting off with our intent and purpose statement of redefining resources, innovating with purpose, and empowering futures, and we'll unpack those three pillars during the course of this morning.
This is our agenda for the day, running through predominantly the financial highlights for the half year, but really touching on what we're doing beyond just mining and looking into our Vision 2030 and our strategy around commercializing some of these innovative initiatives. I'd like to take a moment now to share a video that's been created by our team that spans across South Africa and Zimbabwe. Jake, over to you, if you could share that video. Thank you.
[Presentation]
Great. Thank you for your attention while we ran through that video. I'd like to touch on the non-financial highlights for the H1 of the year. Really we start off with safety, which is a core value of ours. It's not necessarily a priority. It's entrenched in everything we do, and we're extremely pleased with our safety record at the Tharisa Mine at .03 incidents per 200,000 man-hours worked. While we strive for zero harm, we do realize the impact that having core value of safety has on people's lives, and we strive to send everybody home safely every day. Very pleasing to note at Karo, zero LTI frequency rate during the construction period of the last 200,000 man-hours worked. A significant milestone at our mining operations at Tharisa Minerals, three years lost time injury-free.
When we equate that into volume and tonnage that was moved over that period equates to 125 million tons of waste and reef mine. Significant movement of ore, waste, and machinery during that period of time. Just to remind everyone, our half-year production results, we produced 753.3 thousand tons of chrome concentrate. Pretty much flat from the comparable period, but importantly, chrome prices increasing just over 12% to $284 per ton during the comparable period. PGM production was up again from the H1 of last year to 73.1 thousand ounces. Really the standout feature of this half-year is an 85% increase in our PGM basket price to just short of $2,600 per ounce.
In terms of progress and development, significant progress has been made at the Tharisa Mine, with the first blast at the Apollo portal earmarking our underground development, and those plans are ahead of schedule as at the end of April. Our portal development at the Apollo West mine is 134% of the plan, so ahead of schedule. Important to note is that project is fully funded, and has that funding for not only the west portal but also the east portal Orion development, as we transition over the next eight years to a fully underground mechanized board and pillar mine.
Also pleasing to note is the successful factory acceptance testing on the first megawatt-hour class scale of our Redox One iron chromium flow battery system. This really is the first step into proving the commercial viability of the technology, utilizing our own resources to create the electrolyte for long-duration energy storage solutions that the world requires. Just in terms of a capital markets update, we are establishing a level 1 ADR program, with JP Morgan appointed as the depository bank.
We're anticipating this listing to go live on the 8th of June. Karo Platinum really is the next development project that has been underway for a number of years now. Important to note is that we've invested significantly in this project, $241 million to date. You can see the progress. We'll unpack that a bit later during the presentation. Our mining contract has been mobilized, EPSA.
The equipment is arriving, and they have started with open pit waste stripping in preparation for building up run-of-mine stockpiles ahead of the concentrator and commissioning later next year. Also important to note is that we've continued with our exploration program, with 26 kilometers of underground drilling having been completed, and this really to increase our resource and confidence to unlock additional underground potential of at least 50 years on the Great Dyke.
Just to remind everyone, we are targeting 226,000 ounces of PGM production from our first 10 years of open pit mining at the Karo mine. To remind everyone again, our three pillars, which really underpin our focus areas, and that is really redefining resources, optimizing what we have, creating sustainable value, and rethinking the approach in terms of maximizing recovery of the metals that we mine. Innovating with purpose, creating solutions to unlock value through technology.
Empowering futures, looking at sustainability in terms of creating long-term employment, upliftment of communities for generations to come. At this point, I'd like to hand over to Michael Jones, who will run through the financial highlights for the half year.
Thank you, Phoevos. Good morning and welcome to interim results for the six months ending 31 March 2026. Our co-product business model of producing both platinum group metals and chrome concentrates not only differentiates us from our peers but has again proved the resilience of the Tharisa model. If we look back over this past period, the commodity prices, and we've always believed that there's a fundamental shortage in deficits in PGMs particular, have really supported our business model going forward, contributing significantly to cash flow generations. For the six-month period, we generated $96.4 million of operational cash flow. This has enabled us to continue investing in not only sustainability of operations, but also in our growth projects such as Karo Platinum.
Just to give an indication of the impact of the improved PGM basket price in particular, the peak funding required for the underground mining project was $173 million. On the back of these stronger prices, very pleasing, that has reduced the peak funding by some $45 million. However, we have secured, and I'm pleased to say, all the full underground mining finance required of $179 million in terms of facilities and asset-backed financing.
As mentioned, we do not invest only in the sustainability of operations but also in our growth projects. Over this past financial period, we invested $103.5 million in our future. Of that amount, $65.5 million was invested in sustaining CapEx, so that's really the open-cast fleet. We still have some eight years left of open-cast mining, as well as the plants that we have on site.
Underground CapEx, while we've budgeted just over $76 million for the full year, we only incurred $16.3 million in the first six months. There will be a rapid expansion as we go through the second six months, particularly as we invest in the underground mining fleet. We have continued to invest on a disciplined basis in Karo Platinum, and we match the cash flows available to certain selected projects such as Serengozi Dam and infrastructure for the power stations, power lines, and we invested $21.4 million over this particular period. I'm just going to touch on some of these highlights of these numbers and then have a look in more detail at the revenue and costs going forward. Very pleasing, revenue is up 28% at $359.4 million, and that's really on the back of the strongly improved PGM basket price. EBITDA, pleasing, 138.1% increase to $104.3 million.
Profit before tax, also strongly up at $69.9 million. Translating some earnings per share of $0.158 per share, that's up 532%. Very pleasing, the board approved an increased interim dividend payout of $0.025 cent per share. The control pay is $0.015, and that equates to a 15.9% payout. Just analyzing the revenue in more detail. Phoevos, thank you. As mentioned, increase of 28%. Phoevos has already mentioned the 85.3% increase in the average PGM basket price, so that averaged $2,099 per ounce. There's also an increase of 17.4% in overall PGM ounces sold. Notwithstanding the 12.3% increase in the average metallurgical-grade chrome price, that averaged $284, there was a slight decrease as we managed the working capital. Just a timing issue in terms of a decrease in overall tons of chrome concentrate sold.
If we look at the breakdown of the revenue, we look at this on an FCA basis. Typically, we sell chrome, metallurgical-grade chrome on a CIF basis, which includes insurance and freight, and that's a cost of transporting the goods from mine to final port destination in Asia and China. Stripping that out to make it ex-gate revenue, the PGMs contributing just under 60% to the overall revenue and chrome just over 40%. Just to touch on the pie charts on the right, which shows the revenue prill splits, I mean the revenue earnings. The pull split, for example, for rhodium, equates to about 10% of the production but contributes some 35% to overall revenue on the back of very strong rhodium prices. Gross profits, we continue to maintain very healthy gross profit margins. Very pleasing to maintain a 30.3% and a gross profit of $108.9 million.
This chart I really like because it gives us a snapshot of what happened over the last six months. If you have a look at the half-year starting with 2025, the EBITDA of $43.8 million. We've spoken about the impact of the increase in the PGM volumes, and as Phoevos mentioned, the star performer, the PGM price, is making a significant contribution to our increase in EBITDA. Chrome volumes, as mentioned, slightly down. There's some mining cost inflation.
In mining commodities, just remind the audience, that is we purchase some run-of-mine stockpiles strategically to optimize the throughput through the plant and ensure we have full throughput. That's a mining commodity purchase of run-of-mine ore. Small processing cost adjustments. Inventories, just a favorable movement on inventories, six months to six months. That's an income statement movement coming through and translating to that very healthy $104.3 million EBITDA.
Unit cost, this is a very busy slide going through, but I'm just going to pick on some of the numbers. On the table on the left, the tonnes milled, flat at 2.7 million tonnes. That's effects with the plant capacity for a throughput. The on-mine cash cost per tonne milled, down marginally 8.8% at $51.80 per tonne. Just to note, in terms of computing that cost, that excludes deferred stripping.
Accountants capitalize the deferred stripping. In other words, we're stripping ahead of our requirements. That deferred stripping amount amounts to $33.5 million, and we get the benefit of that going forward as we access the reef that has been exposed. It does, however, include the cost of the purchased run-of-mine ore. The chrome inland logistics and freight costs, up marginally 6.8% at $86.50 per tonne.
Just to note that there was the impact of the Middle East conflict on the cost of fuel and therefore knocking on to the freight costs. Was subsequent to this reporting period, I am pleased to say that from a chrome pricing point of view, the chrome price has adjusted to compensate for that increase in overall freight costs. The one I think really key number on this slide is an all-in cost per platinum group ounce sold. If we look at our business model, we are a co-producer of both platinum group metals and chrome. If we offset the chrome revenue and we say we're a PGM producer, we're getting an all-in sustaining cost, excluding the Karo Platinum investments, of $268 per ounce.
This needs to be seen in the context of a current basket price of some $2,800 and a payable percentage of 80%, showing you the robustness and the resilience of our co-product business model. What's even more pleasing is if you then say we're an all-in cost producer of only platinum, so compared to some of our peers, we get a negative cost of $2,822.
Again, one of the key contributors to that is the very strong rhodium price, which while contributing some 10% to the prill split, contributes some 35% to our overall revenue. The only other number I'd like to highlight on this slide, and I think it's very relevant in the current market looking forward, is diesel and our all-in cost and the mine costs. It comprises 10.9%. The impact of the Middle East conflict going forward on diesel will therefore impact on those costs. Thanks, Phoevos.
As mentioned previously, we continue to invest in the sustainability of our operations as well as the expansion. We incurred a capital expenditure for the year of the six months for $103.5 million. As mentioned, the deferred stripping, which is where accountants have the fun, is $33.5 million. Total capital commitments at 31 March stood at $120.2 million, largely related to the underground mine development, with Karo Platinum having capital commitments of $27.7 million.
Looking to the full year, the budget is $165.9 million. Just to mention, that budget excludes the deferred stripping, and I'd expect that to be marginally lower than for the first six months, and also excludes the Karo Platinum as we fund that project based on availability of funding. We'll touch on that shortly. It does, however, include the $76.7 million that we mentioned earlier to be spent on the underground development.
Our balance sheet remains extremely healthy and is well-positioned to fund our ongoing investments in our respective projects. We are at an investment-heavy stage of our development. Cash and cash equivalents, $184.3 million. Total debt, $130.3 million, a net cash of $54 million on the balance sheet. Just to touch on it, of the total debt, $42.1 million is short-dated, revolving credits and such facilities going forward. The predominant portion, 80%, is dollar-based. Just some very healthy financial ratios. A current ratio of 2.3 times. As mentioned, a net cash positive position, so a negative debt-to-equity ratio of 6.1%. If we just move to the graph in the middle of the page, I think this really reflects our investments and our commitment to financial discipline. Net cash from operations is $96.4 million.
If we have a look at our sustaining CapEx, to us, the underground is part of our sustaining CapEx, while it is a separate project, because it expands a life of mine in excess of 60 years. We incurred $83.9 million, leaving us with a positive free cash flow remaining of $12.5 million. We look at our investment in the future, not only in Karo, but in the beneficiation projects being undertaken by the likes of Arxo Metals, incurring $21.4 million and giving us free cash flow of -$8.9 million overall. Our dividend policy is to declare a dividend of 15% of consolidated net profit after tax. That is an annual basis. Our practice has been to declare an interim dividend of 40% of the annualized half year.
Very pleasing that the board approved an increased dividend of ZAR 0.025, which equates to 15.9% of our consolidated net profit after tax. That is a very high-level overview of the financial results. I'd like to hand over to Phoevos. Thank you, Phoevos.
Thank you, Michael. Just touching on the markets, platinum group metals and chrome markets, I think to note current spot prices at the 18th of May for our PGM basket at the Tharisa Mine is $2,805 per ounce. That's really on the back of a very unique prill split, which contains 52.9% platinum, 15.9% palladium, 10.5% rhodium, very little gold, significant ruthenium at 16%, and 4.5% iridium. When we contrast that with Zimbabwe and the Karo Platinum price at $2,359 per ounce, as at the 18th of May, we see a more balanced platinum-palladium split, 43.5% platinum, 38.3% palladium, rhodium at 3.8%, and a fairly significant gold contribution at 8.6%, ruthenium at 3.8%, and iridium at 1.9%. Very balanced baskets across the two geographies and geographical locations.
I think what's key to note here is that we're just in the middle or nearing the end of platinum week, and while there are varying views, the general consensus is that prices will remain firm, demand stable, and in most cases, we're still forecasting deficits across all 5 E elements, rhodium, platinum, palladium, ruthenium, and iridium.
What's interesting is really the AI, digital data storage, E-glass demand drivers as future demands with proliferation of data centers and AI, high-speed processing technologies evolve and are deployed, and the application of platinum group metals in those technologies and the potential demand drivers there, which historically have not fully been appreciated, and a lot of discussion around those future-facing technologies. Still, we look at internal combustion engine as the main driver for platinum group metals, and the lower battery electric vehicle penetration is definitely supported of combustion engines for longer.
We're seeing those patterns, particularly in Europe and North America, reverting away from BEV to hybrid vehicles and internal combustion engine vehicles. Supportive on a fundamental basis, in terms of the automotive industry. Then we look at investment, and jewelry demand. Really, we saw a material uptick last year in China, as the disparity between gold and platinum was very apparent, a shift towards platinum investment and jewelry, as well as the futures exchange being launched towards the end of last year, providing ability for traders and users of the metal to hedge positions going forward. Certainly positive demand out of Asia and particularly China. When we look at chrome, it is a unique commodity. It is what makes stainless steel stainless. Current spot prices at $305 per metric ton, or for a six-month average of $284.
To Michael's point, increase in those revenues, I think compensating for some of the increased freight costs. Demand is strong and stable and really is driven by stainless steel application, uses, and demands. What we're seeing is new uses and new applications for stainless steel beyond the traditional means. A lot of those applications utilize ferritic stainless steels, which are the high chrome content stainless steels in construction, particularly rebar, as well as infrastructural type of applications. Very positive link between South Africa, which hosts more than 75% of the world's chrome resources and has grown significantly, as a key contributor to Chinese and Asian stainless steel supply. Stainless steel supply in 2025 was up at 64.2 million tons with China, between Indonesia and China, accounting for more than 60% of that output.
The nexus between South Africa and China is strong and we see an annual compounded growth rate of around 3.5%- 5% in terms of demand. When we equate that to tonnage requirement, that's an additional 1 million tons of chrome concentrate that's required on an annual basis to satisfy that growth rate. We talk about deficits in the PGM market. I think we're going to be talking about chrome deficits going into the future. We've touched on the market fundamentals really and what's underpinning the strong pricing environment, and it's really around a tightness in supply on both fronts. I think where we've really benefited from our co-production model is the almost countercyclical earnings base that chrome and PGMs have created. They both currently are trading at healthy levels.
We certainly believe there is potential for upside on the chrome front and perhaps on the PGM basket. When we look at the Tharisa Mine and we look at the vast nature of our resource, over 5,400 hectares and resources of 655 million tons, reserves of over 108 million tons, we look at the potential of a multigenerational mine. This is where we're very pleased with the development of our underground expansion at the Apollo Pit. This next picture really highlights the progress in terms of the three-portal development. Very large portals, 5-6 meters high, and equivalent 4-5 meters in width.
This really allows us to develop at scale and achieve the volumes that we desire to feed our plant over the next three years as we get to steady state of 255,000 tons per month at the west mine, and then we transition at the east pit, which continues operations. We have a sort of hybrid mine underground and open pit. By 2033, 2034, we'll be achieving over 6 million tons from our underground development on the MG2 and MG4. Moving further north to the Great Dyke, we're blessed with a significant resource base there, over 23,900 hectares, a resource of 178 million tons that we've defined, with 12 million ounces of resources there, unlocking reserves of 24.8 million tons, 2.3 million ounces of PGMs, which is really scratching the surface, and delineates the open-pit life of mine of at least 10 years.
In the current PGM pricing environment, there's potential for us to extend the pit shells, and lengthen that life to perhaps 12 years and beyond, depending on the economics. As mentioned, we have concluded our underground drilling, which has the potential to unlock at least 50 more years of underground development. Great progress has been made in terms of the development with the appointment of EPSA, a tier one Spanish mining contractor that has seamlessly integrated into the Zimbabwean operating model and has started with the reef stripping and preparing the open pit for bulk mining. All the metallurgical test work on the base metals and precious metals has been completed. Earthworks complete. Bulk water and power have been secured, which are critical infrastructure components. We are approximately 15 months away from first ore and mill from financial close, and we'll unpack that development with Michael as we progress.
Here you can see the open pit mining contractor, the large-scale Liebherr 9350, and 777 dump trucks from Caterpillar moving some of the waste stripping. We talk a lot about innovating with purpose, but what does that really mean? We encapsulate this in our wholly owned subsidiary called Arxo Metals. This is an integrated research hub where we look at applications and uses for the metals that we mine. We have four distinct locations. Arxo Metals Renewable Energy Center, the Challenger Plant, which is responsible for producing chemical and foundry-grade chrome concentrates. Arxo Metals Beneficiation Site, that's our Pyromet facility. AMTDC, that's our facility at the university where we do our research lab-scale desktop studies. NCP, where we are busy constructing our refinery of the chlor-alkali process.
We have two verticals, a PGM smelting and refining objective, whereby we use a DC smelter to smelt and produce an alloy, then use a chlor-alkali process to produce metal to 3N5 purity for onward sale. We're busy commercializing that stream. In terms of our chrome beneficiation, we have two verticals there. Obviously, Redox One, which we'll unpack shortly, as well as the special alloys, which have multiple uses, but really looking at bypassing the ferrochrome stage and producing raw stainless steel.
Not to forget to mention our Vulcan and Vulcan X processes, which are optimally designed for ultra-fine chrome recovery, and those are being deployed at scale at the Tharisa Mine and through collaboration and joint ventures, potentially to other sites on the Bushveld Complex. Just a recap on Redox One. These are long-duration grid-scale energy storage systems.
They can last up to 20 years and provide uninterrupted power for baseload storage. What's key here, the difference between a lithium-ion battery and a flow battery, is that the storage and the energy are decoupled. The duration that you require is a function of how much electrolyte you install. This becomes a baseload solution up to 24 hours storage, and then deployment of energy is defined by the number of stacks that you install. I think the key highlight is that we've done the factory acceptance testing on the megawatt class scale iron chrome flow batteries, and we're deploying that to customers, of which Tharisa Mine is the first customer, which we are coupling with some solar infrastructure that we've installed already. The second unit will be going into Europe.
I think we shouldn't forget our competency in terms of our marketing and sales as well as logistics. Key components capturing value through the chain, the ability to deliver our products to end users in a cost-effective, timely manner, as well as be front-facing in terms of our ability to price our commodities with end users, particularly in the stainless steel and ferrochrome markets. We look to that competency growing in terms of PGMs as we migrate to produce PGM metal.
The impact that we create through our investments is significant. We employ, including contractors, close to 4,800 people, and the multiplier effect and the ability to impact lives through education, through investment and upliftment is material, and it's something that we hold very true to our hearts in terms of our core value of upliftment and securing sustainable jobs for generations to come. We talk about multi-generational mines.
These are 100-year plus resources. That measured, disciplined approach of project execution is key to ensure that we make the right decisions for long-term stakeholder value. In terms of our Vision 2030, the objective here is to deliver on our expansion and growth opportunities, which is the Tharisa underground, the Karo commissioning of phase one open pit, but also commercializing our Arxo Metals technologies. This really is borne out again through our three pillars. Let's look at the investment case because that's really why we're here. We have an experienced management team with a strong track record. We have tier one assets that position us in the top 10 PGM producers and top 4 chrome producers by 2029.
Karo doubles our PGM output and really gives us a second, a large cash-generating unit, the focus here is really to get that project up and running in the shortest possible time. Our fully integrated model using logistics, marketing, as well as innovation, has really proven its resilience and the ability to unlock value throughout the cycle. That really is illustrated here when we look at our investment case and you look at where we're positioned on the cost curve. Based on the costs, the all-in sustaining cost that Michael mentioned, it puts the Tharisa Mine on a PGM basket price at the lowest end of the cost quartile. We forecast Karo also to be in the lower end of that cost quartile at around ZAR 14,000 per PGM ounce.
This is a rand-based graph based on peer analysis. It really shows you where we are cemented in that lowest cost quartile. When we look at ourselves in comparison to our PGM peers, the FTSE 250, and All-Share, you can see we trade at a significant discount on an EV to EBITDA multiple basis in 2026 and looking forward. These are based on FactSet consensus pricing and then on a price-to-earnings ratio as well. Significant upside. We believe there's deep value in our investment case. With that, I'd like to hand over to Ilan Sacks to run us through the Q&A. Thank you all for your time and attention this morning.
Perfect. Guys, if I may just jump back in there very briefly and thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. Just while the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboards. Guys, we have received a number of questions throughout your presentation this morning, and thank you to all of those on the call for taking the time to submit their questions.
Ilja, at this stage, so I'll hand over to you to chair the Q&A with the team, and I'll pick up from you at the end. Thank you.
Fantastic. Thanks very much. Let me start with the diesel question, and this one doesn't relate so much in terms of pricing, but there is a question here with regards to the Gulf conflict. Are you forecasting shortages in diesel or other oil-based products you rely on? If you could delineate your answer between South Africa and Zimbabwe, please. I suppose that's for you, Phoevos.
Thanks, Ilan. As the war broke out, our number one risk was security of supply. We have one of the tier one oil traders as our key supplier at the Tharisa Mine. We engaged with them on an early basis to ensure security of supply. They gave us assurances. Their sources are not limited to the Strait of Hormuz but are more globally diversified. Beyond that, we went out and looked for secondary and tertiary supply. We secured additional flow of diesel into the site as well as securing additional bunkering and storage of fuel. We're comfortable that we've mitigated, as far as possible, the supply-side risk. The focus now is looking at consumption and minimizing consumption.
I have mentioned before that we've been trialing fuel additives that have shown a positive reduction, not only in fuel savings but also in carbon emissions, as well as looking at our traffic management, haulage distances, payload management, making sure that our trucks are loaded appropriately. We're targeting around a 10% saving per cubic meter of rock moved and mined. Not insignificant, and that, the team is focused on.
Moving further north to Zimbabwe, there are multiple importers and suppliers into the country. We have not seen or witnessed any concern around supply-side issues. Again, the very same parties that we deal with in South Africa have well-established supply routes into country, and the same conversations and discussions have been had with multiple suppliers and supply routes coming into the country. Bearing in mind that we're slowly mining at the moment, our diesel consumption is limited.
As we build up and we build our fuel depot on-site, this becomes a key factor to consider, and bunkering and fuel storage capacity becomes pretty significant. When we look at our mining fleet for the underground, obviously less onerous on waste because we're on reef development. We are looking at hybrid and electric drivetrains for some of our equipment to mitigate or minimize some of that fuel consumption. That's more forward-looking.
Thank you. Let me combine two questions here for you, Phoevos. The one is, what is the latest situation on logistics? Are you only using road transport, and which ports are you using? The second part of the question is, it relates more to how we're making up for export volumes against the rail maintenance shutdown on the north and northeast corridors. Given that we've used very little rail, it shouldn't affect us, but please outline the logistics generally.
Key, again, in terms of managing the flow of our material and the costs, is actually an increase in rail year-over-year. This half year, we moved around 22% of our cargoes via rail. Very little last year. There's a concerted effort to secure rail, to secure slots, and to move our cargoes for multiple reasons. Road is still predominantly the main export channel or mechanism. We exported 60% of our cargoes through Maputo, 40% predominantly through Richards Bay, and much smaller volumes through Durban. Weighted towards Mozambique, and we're looking at that blend as well in terms of export channels. Least cost routing is the focus here.
Yeah. Let's stick with chrome. There's a question here. "South African ferrochrome is on the brink of a return. A significant number of ore will be out of the market, tightening supply to China. At which levels are you expecting this to support ore prices?" I guess it's just a market-related question, where we see the market.
Yeah. By our calculations, if both Samancor and Glencore resume ferrochrome production, their pipeline or inventories ahead of their furnaces, we estimate to be between 800,000 tonnes to 1 million tonnes. Yes, that will pull ore out of the market on a pretty structural basis because you'll need to maintain that pipeline inventory. It will be supportive of current prices and potentially a tightening of supply into Chinese port inventories, which have maintained a higher level, which was anticipated with the slowdown and shutdown of a lot of ferrochrome capacity over the last 12-18 months in South Africa. Net supportive of chrome prices going forward.
Fantastic. Just one last one on the chrome. Just something came through. I suppose it ties in with rail, with the private railing possible on Transnet's network that was allowed last week. What opportunities might this open up for Tharisa and possibly when?
Yeah. We have seen, as I mentioned, increase in availability through some of these public-private partnerships on the siding side, and we believe this will unlock future potential. In terms of rail capacity and rolling stock, it does take time. Certainly focused on looking at multiple access points to utilizing rail, which have now become more options and more available to us. Yeah, we should start seeing that rail-road ratio increasing over time. Ideally, we'd like it to revert back to the 80/20 that we had pre-COVID, 80% rail, 20% road, for multiple reasons. Efficiency, effectiveness, and cost.
Okay. Let's move north of the border, and there's two questions, and I'll let you answer them separately as I read them out. The first one is, "Progress on the Zimbabwean Government sign-off, please.
Yeah. We've made great progress. I was in Zim a couple of weeks ago meeting with a high-level government delegation. We've aligned on the final outstanding matters. We have execution-ready agreements to be signed and to go through the process. It is a pretty protracted process because we are dealing with three different government ministries.
But the positive feedback that I can provide our shareholders and investors is that we have agreement and alignment with the government who are our partners in the project with the 15% interest. It's a procedural process now in terms of signing, gazetting those agreements, and there are a number of statutory instruments that need to be implemented in terms of the fiscal incentives and agreements that we've negotiated with the government. Very pleased with the progress we've made.
We are now going through the process of executing and implementing that agreement.
Okay. If possible, could you talk to some of the terms that you're looking for? Most importantly, are there any forex conditions attached to any documents that we sign with the Zimbabwean government?
We will have a full disclosure at the time of signing. Just in general, the key considerations were around fiscal stability and ensuring that, at the very least, while we have debt packages included or utilized to complete the project, we have stability around forex, free flow of capital. In terms of the special mining lease, those are well documented and known. 15% corporate tax importation, duty-free of capital goods, and so forth and so on. What's been key is getting that security around forex conversions and so forth. I think it's slightly premature to go into the specifics, but safe to say that has been really the key negotiating point with government, to provide that protection and security for our investment going forward. Michael, anything you'd like to add?
I think from a government point of view, I think we are making good progress. We are addressing what the lenders would require in terms of the ability to remit and pay in dollars. It's that fiscal stability provisions that are absolutely key to securing that funding package. Good progress is being made, and hopefully can make announcements in the near term. It will take a long time. Not a long time, it will take time. It is a regulatory process we need to follow.
Interesting. Thank you. I suppose on the back of agreeing on this, there is a question here, why is the Karo financing taking so long, especially in today's healthy PGM basket price? I suppose the two are tied with regards to getting the fiscal stability.
Sure.
Of course.
They absolutely are tied. I think that to secure that project financing that we do require, is that we do need to have signed and obtained that fiscal agreement with government. It's a parallel process that we have been working on. I think we're all very well aware of why it's a tier one asset from a PGM source. Anyone who wants to expand into PGM really needs to be going into Zimbabwe if they wish to grow their PGM base. We're all aware of the historical fiscal jurisdiction risks that have occurred in Zimbabwe over the years. Yes, it is changing from a financial environment point of view, but it does limit your flexibility in terms of who is willing to take that jurisdiction risk supported by Tharisa.
We are well advanced with the DFI in closing out on a shorter-term or shorter-dated funding package to allow us to progress. Having said that, Tharisa as a whole is fully committed to the particular project and bringing it to account. We continue to invest on a disciplined capital approach, so we identify key projects, and we've identified some additional projects now that we will continue to fund. In a very disciplined capital approach methodology while we secure that funding. To all accounts, I believe that at the time that we announce the fiscal stability agreements, we should also be able to announce progress on that funding.
Thank you. If we were just changing tack a little bit, the question here is, I know we've got a carbon reduction plan in place, but the question relates here to what's happening to the proposed solar installation at the Tharisa Mine.
Yeah. It's been paused by a lack of grid connectivity in the region or capacity, I should say. We're in discussions with Eskom to resolve that issue. The project has been submitted to the regulator for approval and it's been stalled at that level. There are current rounds of discussions and debates. We're not the only one in the North West region that has faced a similar bottleneck in terms of grid accessibility, in terms of wheeling the power into the grid and then off-taking it at the Tharisa Mine. It's stalled the project, unfortunately, beyond our control. The teams have been working with Eskom to find a solution to get access to the grid and upgrade the infrastructure to allow additional power to go in. We'll keep the markets appraised as to the progress on that front.
We believe we are making some progress.
Thank you. Back to the capital markets update, I suppose, with relation to our proposed ADR program. Given your valuation, are you considering a main market listing or even decamping to the U.S. in its entirety?
Yeah, I think it's a great question, and we do have the opportunity to migrate to a main premium listing on the LSE, and it's under consideration as we speak. You would have seen our ADR 1 program going live in the U.S. That remains an attractive jurisdiction and we're looking at optionality over time with promoting our equity story in the U.S. on the back of huge interest around critical minerals and strategic minerals, of which all of our commodities fall into both categories. We have noticed heightened interest from the U.S. and European strategic investors. Yes, it is, in terms of our optionality and accessibility to a broader investor community, and ideally to get to indexation levels so that we can get funds tracking our equity.
Thank you.
Perfect, guys. If I may just jump back in there. Thank you very much indeed for being so generous with your time and addressing all of those questions that came in from investors this morning. Of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. Phoevos, perhaps before, really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and to the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great.
Absolutely. Thanks again for your time. I think it's been a really good half-year period and we're looking to the second half to improving in terms of our PGM and chrome output, albeit with some headwinds in terms of inflationary cost pressures on the back of increased diesel prices. We believe we have a number of mitigation measures in place. I'd really like to take this opportunity to thank Michael Jones, our CFO, who's been with us for more than 15 years and has really set the capital discipline and the foundation of our finance department and the reporting standards that you've all witnessed and experienced, and just wish him well in his retirement. In the same token, welcome Jacques to the team. I think he's joining at a very exciting time and we look forward to working together with Jacques.
Michael, thank you, and thank you everyone for your attention this morning.
Perfect, Phoevos. That's great. Thank you all once again for updating investors this morning. Could I please ask investors not to close this session, as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Tharisa plc, we would like to thank you for attending today's presentation. That now concludes today's session. Good morning to you all.