JOHANNESBURG (miningweekly.com) – JSE-listed Merafe Resources expects to benefit from renewed positive ferrochrome demand trends, as well as from the fact that only four of seven South African ferrochrome producers are currently in production.
Reporting on its results for the six months ended June 30, the company, which generates income primarily from the Glencore–Merafe Chrome Venture, on Monday said global stainless steel production is likely to grow by 2.6% this year and by 3.1% in 2017, indicating higher demand prospects for ferrochrome.
The company reported a marginal increase in production to 196 000 t of ferrochrome in the first half of this year, compared with the 105 000 t produced in the first half of 2015.
Sales increased by 14% to 218 000 t in the period under review, compared with the 191 000 t sold in the first half of 2015. Revenue increased by 9% year-on-year to R2.41-billion, owing to the higher sales and a 29% weaker average rand/dollar exchange rate, which was partially offset by a 23% decrease in net cost, insurance and freight (CIF) ferrochrome prices.
Chrome ore revenue as a percentage of total revenue remained flat at 11% in the first half of this year. Average export CIF chrome ore prices also fell 23% year-on-year in the first half of this year.
Merafe’s profit fell to R57.3-million in the first half of this year, compared with the R124.3-million profit posted in the first half of last year, while headline earnings a share decreased to 2.3c in the six months under review, compared with 5c in the prior comparable period.
Cash from operating activities, however, increased to R372-million in the six months to June 30, compared with R249-milllion in the prior comparable period.
As at June 30, Merafe had a cash balance of R412.2-million. It had total debt owing to Absa and Standard Bank of R479.5-million as at June 30, down R80-million from December 31, 2015.
A further R70-million of debt had since been repaid, taking the debt balance to R409.5-million.