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We remain positive on metals miner despite elevated earnings risk
Thursday 18 May 2017 Author: Daniel Coatsworth

Tharisa (THS) 110p

Gain to date: 42%

Original entry point: Buy at 77.5p, 29 September 2016

Miner Tharisa (THS) tells Shares its full year earnings and cash flow expectations may have to be downgraded if the chrome price doesn’t recover from its recent sell-off. We view the commodity market correction as a short-term issue and not a reason to dump shares in Tharisa.

THARISA (LON) - Comparison Line Chart (Rebased to first)

The chrome price has been affected by a credit squeeze in China where authorities are trying to stop banks from lending too much money. That’s hurt commodities demand – hopefully only temporarily.

Tharisa remains positive and says it will focus on improving operational efficiency, feed grades and metal recovery rates. ‘Chrome has gone from highs of $390 per tonne late last year to the mid $100s level at the moment,’ says chief executive Phoevos Pouroulis. ‘Those levels aren’t sustainable.’

He adds: ‘The chrome market is always very volatile. We can withstand the cyclicality in prices thanks to being a very low cost operator.’

Broker Peel Hunt assumed chrome prices would fall this year to $170 per tonne. Its forecasts for Tharisa’s financial year ending September 2018 only use a $188 per tonne chrome price – not the $300+ level at which the metal recently traded.

Take advantage of recent share price weakness (down 23% since early May) and buy more at 110p. Peel Hunt has a 205p price target. (DC)

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