The stock market crash might be continuing, but grabbing a slice of Tharisa Mining (LSE: THS) is a great step in these times, I feel. Gold’s surge to fresh multi-year peaks around $1,750 per ounce grabbed the headlines in this shortened week. But in truth, much of the precious metals suite is surging, their safe-haven qualities coming to the fore as investor panic clicks through the gears.
Fevered buying has helped push the Tharisa share price to its most expensive in a month. Why? This particular digger is a producer of platinum group metals (or PGMs) in South Africa’s famous Bushveld region. Platinum’s looking good for another run through $800 per ounce for the first time in a month. Meanwhile palladium rocketed back towards February’s all-time peaks above $2,700, buying activity here being supported by recent supply problems.
Auto demand remains strong
Don’t just think of Tharisa as a great buy as stock markets crash due to solid investment demand for PGMs, though. These metals’ critical role in the automotive industry — they are used to clean up auto emissions in exhaust systems — underpins strong industrial demand for them too. That’s particularly so with environmental legislation becoming more and more strict.
The boffins at UBS certainly expect off-take from carmakers to remain robust. They expect auto sales to nosedive in 2020 due to the coronavirus crisis and the subsequent erosion in economic conditions. Still, they expect physical palladium demand from such customers to drop just 3% year-on-year. This is because the broker expects “a further increase in PGM content in autocatalysts this year.”
Temporary troubles
Buying into a single mining company, rather than the metals themselves, undoubtedly carries higher risks. Indeed, Tharisa is one of many South Africa-focused diggers to have slowed operations in recent weeks. It follows instructions by the government for 21 days from late March to constrain the spread of Covid-19.
The AIM company this month paid heed to the “significant and unquantifiable threat to South Africa’s economy” that the corovavirus outbreak has caused. But of course, this is a once-in-a-lifetime occurrence. Other more common risks that the likes of Tharisa face include power outages, labour strikes, disappointing payloads and the like.
A great buy as stock markets crash
I would argue that these troubles are reflected in the earth mover’s rock-bottom price, however. At a current price of 49p per share, it trades on a forward price-to-earnings (P/E) ratio around 4 times.
Besides, Tharisa continues to make good progress on the production front. It mined 1.13m tonnes in the three months to March, down just 1% quarter-on-quarter. A decent result given recent Covid-19-related disruption. And PGM recovery improved 1.5% over the period to 83.7%.
Tharisa also looks pretty attractive from an income perspective. Right now, the mining ace also carries an inflation-busting 4.5% yield for the fiscal year ending September 2020. The business might have fallen sharply amid the broader stock market crash. But I think it has the tools to keep trekking higher in the weeks and months ahead.
