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Chrome ore star of Merafe’s half-year show

Merafe CEO Zanele Matlala presentation covered by Mining Weekly's Martin Creamer. Video: Nicholas Boyd.

15th August 2023

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Chrome ore has been headlined by ferrochrome and chrome producer Merafe Resources as the star of the show in the six months to June 30.

Production volumes of ferrochrome and chrome were lower in the six months to June 30 and production costs increased by double digits as power and logistics challenges persisted, Merafe CEO Zanele Matlala reported on Tuesday, August 15, when company FD Ditabe Chocho presented dividend-yielding R1-billion-profit half-year financial results. (Also watch attached Creamer Media video.)

But buoyed by logistics constraints in South Africa and port stocks remaining low in China, chrome ore prices increased significantly in the first half of this year.

China, which sources 80% of its chrome ore from South Africa, imported 3% more chrome ore in the period.

On the other hand, ferrochrome prices were weaker, owing to subdued demand and over supply.

Ferrochrome prices have been trending lower, with current Chinese prices just below $1/lb.

Ferrochrome is a main ingredient of stainless steel and only China showed growth in stainless steel production, amid a 2% decline in global production of the corrosion-resistant metal.

China continues to dominate stainless steel production, accounting for almost 60% of global stainless steel output, and 65% of global ferrochrome demand.

Only China registered ferrochrome demand growth, while globally, half-year uptake showed marginal decline.

Contributing to ferrochrome over-supply was a 6% increase in production by China and Kazakhstan.

In reporting an 11% increase in revenue to R4.8-billion, Chocho referred to the weakness of the rand for most of the half-year reporting period being one of the key contributors to Merafe’s financial performance.

Despite the 10% reduction in prices achieved, Chocho drew attention to ferrochrome revenue increasing by 5% to R3.8-billion on marginally lower ferrochrome sales volumes.

“Chrome ore was the star performer this time around,” he said during the online presentation of results covered by Mining Weekly, with the higher prices holding up during the reporting period and higher volumes sold resulting in a 49% revenue increase to R936-million.

Platinum group metals (PGMs) revenue of R35-million was negatively affected by feed and yield production issues as well as PGM prices being under pressure.

Sustaining capital expenditure increased by 56% to R222-million as a result of capital expenditure rolled over from the previous years and price increases. Expansionary capital expenditure of R5-million includes R0.3 million spent on the PGMs processing plant.

The main focus of the business of the Johannesburg Stock Exchange-listed Merafe is on the 20.5% participation of  wholly owned subsidiary, Merafe Ferrochrome and Mining, in the earnings before tax, depreciation and amortisation of the Glencore-Merafe venture, in which Glencore has a 79.5% participation.

Edited by Creamer Media Reporter

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