JSE-listed Merafe Resources’ attributable ferrochrome production from the Glencore-Merafe chrome venture for the six months ended June 30 decreased by 2.3% to 211 000 t, with production for the period equivalent to 88% use of the installed capacity.

Total production costs per tonne of ferrochrome increased by 4.8%, compared with December 31, last year, mainly as a result of a 5.4% increase in electricity in April, as well as an increase in reductant costs, which arose from a change in mix related to availability.

The venture’s operations, however, were not significantly impacted on by electricity supply constraints in the first half of this year.

Meanwhile, Merafe quoted figures provided by CRU that estimate global stainless steel production would reach about 50.8-million tonnes this year, demonstrating an increase of 4.9% on 2017.

Despite the growth in global stainless steel output, which will impact on demand for the ferrochrome the venture produces, Merafe expects to face some headwinds in terms of prices and exchange rate volatility, especially given the uncertainties driven by trade wars and the global economic environment.

“In accordance with our strategy, we remain committed to maximising return to our shareholders in the near term in the form of dividends and will continue to assess opportunities to deliver shareholder value,” the company noted.

Additionally, with Merafe’s revenue and operating income primarily generated from the Glencore-Merafe chrome venture, the ferrochrome firm’s total revenue increased by 5.5% to about R2.7-billion, compared with the R2.5-billion revenue earned for the six months to June 30, 2017.

Ferrochrome revenue increased by 2.6% to R2.3-billion, which, Merafe pointed out, was mainly due to higher sales volumes of 181 000 t, which were partly offset by the stronger average rand:dollar exchange rate and lower net cost, insurance and freight.

Chrome ore revenue increased by 27.1% to R378.5-million, mainly owing to higher realised chrome ore sales prices, which were partly offset by lower sales volumes of 132 000 t and a stronger average rand:dollar exchange rate.

The higher chrome ore realised prices were impacted on by lower local sales volumes period-on-period, the firm added.

Further, Merafe’s portion of the venture’s earnings before interest, taxes, depreciation and amortisation for the six months was about R814.4-million, and included Merafe’s attributable share of standing charges of R38.2-million and a foreign exchange gain of R102.6-million.

Profit for the six months amounted to R425.1-million.

Depreciation increased to R203.6-million for the six months, as a result of the accelerated depreciation arising from the scrapping of assets and the reassessment of residual values to zero in the second half of 2017.

Net financing costs, the firm pointed out, included R13.2-million related to the unwinding of discount on the provision for rehabilitation.

“The significant reduction in net financing costs is the result of the reduction in borrowings and higher finance income, which is a function of higher average bank balances,” the firm said.