JOHANNESBURG (miningweekly.com) – Amid generally depressed commodity prices and a subsequent dip in demand, JSE-listed commodities trader Metmar swung to a loss of R48-million for the six months ended August 31, from a R4.8-million operating profit in the first six months of the previous financial year.

Margins were further pressured by a 7% increase in operating expenses to R85.9-million on the back of a plethora of price drivers, including handling and logistics costs of R3.5-million and provision for bad debts of R2.2-million.

While the net tangible asset value per share decreased to R186.28, Metmar narrowed its loss a share from 2.2c in the first half of the previous financial year to 1.4c a share in the six months under review.

The company’s headline loss a share narrowed to 11c apiece from 1.7c a share for the prior comparable period.

The group’s net trading margin – which is calculated as gross margin less marketing fees, contract bank charges, contract interest costs, bank commissions, storage and logistics costs, handling fees and realised foreign exchange differences – decreased from 7.5% in 2012 to 6.3% for the period under review.

This came despite the sale of the company’s West African Group division, which generated R148.3-million, of which R53.7-million was cash received by the company and R94.6-million related to a reduction in bank overdraft.

Net cash utilised in operating activities decreased from R70.2-million to R37.8-million, following a decrease in the net working capital and increase in utilisation of trade finance facilities to fund stock purchases in preparation for the sintered manganese toll project at Kalagadi Manganese.

STRATEGIC PROJECTS

Earlier this year, Metmar entered into a tolling agreement with Kalagadi to toll convert manganese fines and coke breeze into upgraded manganese sinter.

The company reported on Tuesday that the sinter plant was complete and was in the process of hot commissioning.

“To date, only some 2 000 t of upgraded sinter has been produced, owing to   commissioning delays. Subject to the completion of commissioning, Sinter production levels are, however, expected to improve during the fourth quarter of this financial year,” commented CEO David Ellwood.

Meanwhile, good progress had been made on the company’s core investments, including the completion of the mineral terminal in Mozambique, the conclusion of the Kalagadi tolling agreement, and the submission of a mining right application and small-scale mining permits in respect of Sefateng chrome mine.

“The company continues to review its investment portfolio on an ongoing basis, and is engaged in discussions with interested buyers for certain of the noncurrent assets held-for-sale,” said Ellwood.

OUTLOOK

Looking ahead, the Metmar CEO said that, as a result of subdued economic conditions, demand for commodities was expected to remain under pressure for the foreseeable future.

“We have, however, been working on a number of projects that are expected to start contributing to the group’s revenues and returns in the near future.  These include new orders for a wide spectrum of commodities and trading of sintered manganese toll treated at Kalagadi,” he noted.