Merafe mainly derives its revenues and operating income from the Glencore-Merafe Chrome Venture, which produces ferrochrome at a total installed capacity of 2.3 million tons per year. Photo: Supplied
Merafe Resources said on Friday that its share of production from its joint venture with Glencore only marginally grew in 2024 despite a dip in output for the quarter to end December at a time analysts say projected expansion of the stainless-steel industry will drive growth of the ferrochrome market in the outlook.
Despite the upbeat outlook for ferrochrome, South African producers of the commodity have been facing operational and production hurdles.
Merafe Resources CEO, Zanele Matlala, said last year that the company and its South African joint venture partner, Glencore, were looking at ways to mitigate power supply, energy costs and logistical constraints impacting mining companies in the country.
Merafe mainly derives its revenues and operating income from the Glencore-Merafe Chrome Venture, which produces ferrochrome at a total installed capacity of 2.3 million tons per year. Although it shares, about 20.5% of the earnings before interest, taxation, depreciation and amortisation (Ebitda) from the South African ferrochrome joint venture project, production from the operation slumped in the fourth quarter and only marginally grew throughout 2024.
“Merafe's attributable ferrochrome production from the Glencore Merafe Chrome Venture for the fourth quarter ended December 31, 2024 was 70kt, resulting in a marginal increase of approximately 0.3% in production for the year ended December 31, 2024 when compared to the prior comparative period,” said the company in a production trading update.
In the fourth quarter to December, Merafe’s attributable production amounted to 70 000 tonnes from 75 000 tonnes in the previous year’s corresponding period. Over the 2024 full year, Merafe’s share of output grew to 301 000 tonnes, it said.
In the half year period to the end of June, headline earnings per share in Merafe Resources slumped from 42 cents to 28.2 cents after Ebitda for the period fell by 27% to R1.1 billion.
Interim revenues were slower by 0.4% at R4.744bn although the company’s net asset value rose by 3% to R5.4bn, while net cash flows from operating activities were up by 7% to R852 million.
The company’s dividend for the period was stagnant at 20 cents, with shares in Merafe Resources trading 4.23% stronger at R1.48 in afternoon trade on the JSE yesterday. The company has been stronger on the JSE by more than 10% in the past 90 days and six months.
Matlala had said that “given the forecast inflationary pressures, our margins are at risk of being squeezed” in the second half period to December 2024.
Merafe and Glencore are, nonetheless, planning to produce ferrochrome at all of their venture’s smelters “given the conclusion of the Negotiated Pricing Agreement” with Eskom.
The company’s stock closed Friday’s trade session on the JSE nearly 2% firmer at R1.54, extending its 10%, 11.59% and 9.22% strengthening in the year to date, 30 day and half yearly periods, respectively.
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