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Tharisa acquires 26.8% shareholding in Karo Mining

Published by , Assistant Editor
Global Mining Review,

London-listed chrome producer Tharisa has acquired a 26.8% shareholding in Karo Mining Holdings Ltd (Karo Holdings) for a total cash consideration of US$4.5 million from the Leto Settlement (Leto).

Karo Holdings entered into an Investment Project Framework Agreement with the Republic of Zimbabwe on 22 March 2018 in terms of which Karo Holdings has undertaken to establish a platinum group metals (PGMs) mine, concentrators, smelters, a base metal and precious metals refinery, as well as power generation capacity for the operations with surplus energy capacity made available to the Zimbabwe power grid. The investment highlights include the following:

  • The acquisition provides Tharisa access to an area covering 23 903 ha on the Great Dyke of Zimbabwe, containing an estimated PGM resource of some 96 million oz (on a 4E basis).
  • Great Dyke PGM projects are low cost, open pittable and have significant palladium and base metal content resulting in high margin poly-metallic revenues.
  • Low cost entry for Tharisa of US$4.5 million with the right to increase its project ownership by way of further project level investments at discounted values through a farm-in option at various economic milestones.
  • Tharisa has the right but not the obligation to fund further development at the project level allowing Tharisa a measured approach to developing the projects in line with its financial and strategic objectives, thereby creating further low cost diversified PGM and chrome operations.

Tharisa continues to deliver on its diversification and growth strategy through the implementation of Vision 2020 and strategic 2 *Derived from the Mineral Resources and Ore Reserves Summary on pages 70-73, Zimplats Holdings Ltd Integrated Annual Report 2017 2.

Acquisition rationale

The Tharisa Board and management are committed to pursuing growth and diversification through selective acquisitions which meet Tharisa’s investment criteria. Key rationale for the acquisition and benefits for Tharisa shareholders include:

Tharisa was not previously involved in Zimbabwe due to political uncertainty in the country. Recent improvements in the political landscape have precipitated a decision by Tharisa to explore geographic diversification opportunities in Zimbabwe, renowned for having the world’s largest PGM deposits outside of South Africa.

The resource is large scale with 96 million oz of 4E resource. There is optionality to de-risk the investment by starting on a smaller scale and increasing production over time - The mine is open pittable and Great Dyke PGM projects are typically low-cost.

Tharisa’s management team has a proven track record of developing mines from the prospecting stage through to steady-state production and this experience can be applied to the development of Karo Platinum.

Tharisa is acquiring its stake in Karo Holdings at a significant discount to fair value. - The farm-in approach reduces Tharisa’s upfront exposure and creates optionality for an increased stake in the future.

Tharisa CFO Michael Jones commented: “Tharisa has established itself as a robust innovative Group with a proven track record of taking mines from prospecting to production and with strong cash generation and dividend payments. The Tharisa Group believes that coupled with its organic growth plans under Vision 2020 and the illuvial chrome prospects available through Salene Chrome, this acquisition has the potential to set Tharisa apart from its peers while delivering on its strategy of becoming a globally significant low-cost producer of strategic commodities.”

The acquisition is unconditional and became effective on 12 June 2018.

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