JSE-listed Bauba is optimistic about prospects for the 2019 financial year, despite the possibility of a weaker chrome market.

Commenting on the chrome producer’s results for the 2018 financial year, ended June 30, CEO Nick van der Hoven explained that the ramp-up of underground production to 30 000 t/m of LG6 chrome ore at the Moeijelijk mine, before the end of the first half of the 2019 financial year, is the reason for the company’s optimism.

The commissioning of the mine’s new wash plant also contributes to the company’s optimism.

Once operational, the wash plant will diversify Bauba’s revenue stream away from the Chinese metallurgical market into less volatile chemical and foundry grade chrome ore concentrate markets, thereby enhancing profit margins, Van der Hoven explained.

In the 2018 financial year, the company’s performance was negatively impacted on, primarily by a weaker chrome market and zero opencast production during May and June due to a delay by the Department of Water and Sanitation in granting an application for an amended water use licence.

However, Bauba increased its revenue by 14.1% higher year-on-year, at R234.2-million, owing to increased production which was partially offset by a lower average realised selling price. Profit before tax was 27.9% lower at R104.8-million and headline earnings per share were 31.4% lower at 10.09c.

About R75.1-million of operating cash flow was invested in property, plant and equipment, as well as intangible assets for the future profitability of Moeijelijk.

Investment in fixed assets, together with about 37 200 t of inventory on hand at the end of the 2018 financial year, will help generate improved future performance through increased sales in a favourable market, Van der Hoven stated.

The 2019 financial year, however, saw a weak start to the chrome market, with record inventory levels in Chinese ports, owing, in part, to higher imports from South African producers and lower consumption in June, which is a consequence of environmental inspections, he lamented.

Additionally, he noted that market confidence was negatively impacted on by the US-China trade war.