MIDAS SHARE TIPS: Very precious metals

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Phoevos Pouroulis has mining in his blood. 

His father is Cypriot-born miner Loucas Pouroulis, who has been in the industry for more than 50 years. Now aged 78, Pouroulis has been responsible for a string of mining ventures, including Eland Platinum – sold for $1billion (£750 million) in 2007.

Pouroulis also founded London-listed Petra Diamonds, now chaired by his elder son Adonis, and in 2006 established Tharisa, a chrome and platinum group run by Phoevos.

Tharisa listed on the London market in 2016, the shares are 121p and should increase materially over the next few years. 

HIGH VALUE: Tharisa mines metals used in jewellery and even a chrome-plated car, pictured

HIGH VALUE: Tharisa mines metals used in jewellery and even a chrome-plated car, pictured

Pouroulis junior has decades of experience to draw on, he is highly focused and determined to turn Tharisa into a stock market success story.

Recent progress has been encouraging. 

The firm operates a huge open pit mine 60 miles north-west of Johannesburg, in a region of South Africa renowned as a centre of chrome and platinum deposits. 

Platinum producers have often viewed chrome as an irritating by-product. 

Tharisa has taken a different view – establishing operations so it can make money from mining chrome as well as platinum, palladium and rhodium.

The approach has allowed the firm to raise turnover, drive down production costs and generate plenty of cash for dividends. 

Having a range of commodities makes Tharisa less dependent on any one product too. Last year, for example, chrome prices were volatile, platinum was flat until the very end of the year and palladium and rhodium performed extremely well.

The outlook for all four metals is good. 

Platinum is most often associated with jewellery but, along with palladium and rhodium, the metal is mainly used in catalytic converters

Platinum is most often associated with jewellery but, along with palladium and rhodium, the metal is mainly used in catalytic converters

Platinum is most often associated with jewellery but, along with palladium and rhodium, the metal is mainly used in catalytic converters

Chrome is an essential component of stainless steel, used in everything from kitchen gadgets to medical equipment and heavy goods vehicles. 

China is the world’s largest consumer and demand is expected to rise steadily as the country develops. 

The need for chrome is likely to increase elsewhere as well and prices have begun 2018 on a positive note.

Platinum is most often associated with jewellery but, along with palladium and rhodium, the metal is mainly used in catalytic converters. 

These are increasingly important in the automotive industry, as governments clamp down on harmful emissions, and prices have been strong as the new year moves into gear. 

Tharisa cannot influence commodity prices but it can drive up production, increase efficiency and reduce costs, all of which are central planks of Pouroulis’s strategy.

In the year to September 2017, the company produced 1.3 million tons of chrome concentrate and almost 144,000 ounces of platinum, palladium and rhodium, three of the platinum group metals (PGM). 

This year, chrome production is expected to rise to at least 1.4 million tons, with PGM production rising to 150,000 ounces.

Last week, Pouroulis released production figures for the three months to December 31, showing the company is well on the way to achieving its targets, delivering 366,000 tons of chrome concentrate, 88,000 tons of speciality chrome concentrate and 39,000 ounces of PGM over the period.

The group prides itself on research and development too, investing in sophisticated technology and equipment to increase the amount and quality of metal recovered from its mine. 

Higher recoveries drive productivity and Tharisa is one of the best in the business with ambitions to become even better. 

Many of its daily operations are automated too and mining is all above ground so access to the ore is much easier and the work is significantly more appealing than traditional underground mining.

Last year, Tharisa added new skills and assets to the business. Before, it used contractors for drilling and transportation. Now these have been brought in-house, giving Pouroulis greater control and ultimately expected to boost productivity as well.

Today, the company is responsible for every step of the process from extracting ore from the pit, processing it, signing agreements with buyers and transporting the metal. 

Unusually among smaller mining groups, this approach gives Tharisa a competitive advantage and reduces risk along the way. 

Tharisa has a stated vision to produce two million tons of chrome and 200,000 ounces of PGM by 2020 and may well expand into other commodities, either buying businesses or greenfield sites.

There will, however, be a ruthless focus on financial discipline. The dividend rose from 1 cent (0.75p) in 2016 to 5 cents (3.75p) last year and the company said it now intends to pay out 15 per cent of post-tax profits in dividends. 

As the Pouroulis family owns 44 per cent of the business, they are incentivised to stick to that pledge and rising dividends are expected for 2018 and beyond.

Midas verdict: Tharisa is a well-managed company run by a scion of the South African mining industry. At 121p, the shares should deliver long-term growth and decent dividends too. Buy.

MIDAS UPDATE: Palm oil firm’s plantations reap a lucrative financial harvest 

MP Evans is a plucky company with a history stretching back 150 years and robust prospects for future growth.

Midas first recommended it in 2011, when the shares were 420p and palm oil prices were above $1,000 (£750) a ton. Today palm oil is below $700 a ton but MP Evans shares are 784p.

Recent years have been eventful. 

Chief executive Tristan Price has fended off a hostile bid from Malaysian plantation giant Kuala Lumpur Kepong, sold non-core assets and boosted production. 

Between 2010 and 2016, MP Evans’ harvest doubled to 400,000 tons, as the company acquired more land and existing plantations matured. 

More is expected over the next decade, with production scheduled to reach 800,000 tons by 2020 and more than a million tons by 2025.

As production increases, costs fall. 

Today, MP Evans receives around $600 per ton of crude palm oil (taking into account local levies, transport and insurance) while the cost of production is below $400 a ton. 

That provides ample opportunity to expand the business by adding on acreage, while also increasing the dividend.

The firm paid out 20p in 2016, including a 5p special payment. In February last year there was a 10p special, and the board has committed to a 2017 dividend of at least 15p with steady increases expected over the next decade.

Palms take about seven years to reach maturity and produce fruit for the next 18. Ensuring plantations are well run requires experience and expertise and MP Evans is one of the most accomplished players in its field.

Palm oil production has long aroused controversy but Price is proud of MP Evans’ respect for the environment and local communities. 

The company never plants on forested land and has developed award-winning schemes with smallholders.

Palm oil prices fluctuate from year to year but the long-term outlook is positive. 

Production is cheaper than other vegetable oils, yields are higher and global demand is growing by about five million tons a year, boosted by population growth and rising incomes in developing markets. 

Core profits of $27.2 million (£20.2 million) are expected for the year just ended, a 42 per cent increase on 2016. Further strong growth – to $39.5 million – is forecast for the current year too.

Midas verdict: MP Evans shares have done well over the past six years, particularly given the falling palm oil price. The group has an extremely loyal shareholder base, which helped see off KLK’s unwelcome attentions in 2016. Price and his team have repaid that loyalty and should continue to do so. Existing shareholders should stick with the business. New investors might also pick up stock at the current 784p price. 





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