JOHANNESBURG (miningweekly.com) – Chrome and ferrochrome company Merafe Resources has reported a profit of R1 049-million for the six months ended June 30, 2023 on higher realised chrome ore prices and a weaker rand:dollar exchange rate, offset by lower ferrochrome prices and sales volumes, as well as higher costs of ferrochrome production.
An interim cash dividend of 20c a share has been declared.
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 taxes, depreciation and amortisation (Ebitda) of the Glencore-Merafe venture, in which Glencore has a 79.5% participation.
Ferrochrome production of 185 000 t was 9% down on the corresponding six months of last year.
Revenue increased by 11% to R4 764-million and net cash is up 26% at R1 604-million.
Merafe expects the second half of 2023 to be softer on a weaker market outlook.
Downward pressure on chrome ore prices, which have started coming down, is expected to translate to lower ferrochrome prices. Given the forecast inflationary pressures, the company’s margins are described as being at risk of squeeze.
Producing ferrochrome only at the Lion smelter is planned over the three-month high electricity demand winter season, a period of elevated power prices.
This will assist with managing costs and lowering inventory levels as sales units are expected to be drawn down from inventory, Merafe stated in a release to Mining Weekly.
A cautious approach is being adopted over the remaining six months of the year, when the company will continue to focus on efficient operations, cash preservation, cost control and efficient capital allocation.
The company reports that economic uncertainty characterised by rising inflation, interest rates and trade tensions is making it difficult for businesses to make long-term plans, which also leads to volatility in the markets.
With the global market increasingly focused on sustainability, businesses are described as being under pressure to reduce their environmental impact. The Glencore-Merafe venture has incorporated sustainability initiatives into strategic plans, in which green energy initiatives are key.
“Technological innovation has a major impact on the global market, as new technologies are being developed that are changing the way we do business. For our business, the key benefits of innovation are efficiencies and the safety of our employees,” the company stated.
Local power shortage, energy costs and logistics challenges are being mitigated in the best ways possible, it added.