Higher ferrochrome prices improve Merafe Resources results
Merafe achieved a profit of R925 million for the six months ended 30 June 2022, as a result of higher realised ferrochrome prices and a weaker ZAR:US$ exchange rate. Ferrochrome prices have since declined and cost pressures from inflation, higher reductant costs, chrome ore costs and electricity tariffs continue to mount.
Merafe’s revenue and operating income are primarily generated from the Glencore-Merafe Chrome Venture which is one of the global market leaders in ferrochrome production, with a total installed capacity of 2.3 million tonnes of ferrochrome per annum. Merafe shares in 20.5% of the earnings before interest, taxation, depreciation and amortisation (“EBITDA”) from the Venture.
Merafe’s share of revenue from the Venture, which includes a management fee, increased by 15% from the prior period to R4 291 million (June 2021: R3 746 million).
Ferrochrome revenue increased by 12% from the prior period to R3 614 million (June 2021: R3 229 million) primarily as a result of a 26% increase in average net cost, insurance and freight (CIF) pricesand a 6% weakening of the average ZAR:US$ exchange rate over the period.
Ferrochrome sales volumes decreased by 14% to 180kt (June 2021: 210kt). Chrome ore revenue increased by 22% from the prior period to R630 million (June 2021: R517 million), driven by a
39% average sales price increase for the period as well as the weaker ZAR:US$ exchange rate. There was a 17% decrease in chrome ore sales volumes to 172kt (June 2021: 208kt).
Platinum Group Metals (“PGMs”) concentrate sold over the period, from the new processing plant that Merafe invested in (as reported in the announcement published on SENS on 14 January 2022), generated revenue of R46 million (June 2021: Rnil).
Merafe’s portion of the Venture’s EBITDA for the six months ended 30 June 2022 is R1 397.1 million (June 2021: R839.2 million).
The EBITDA includes Merafe’s attributable share of standing charges of R31.5 million (June 2021: R31.1 million) and a foreign exchange gain of R27.4 million (June 2021: R47.1 million loss). There was no write-down of inventory during the six months ended 30 June 2022 (June 2021: R17.4 million).
Merafe achieved EBITDA of R1 373.0 million (June 2021: R818.8 million). Corporate costs also include Corporate Social Investment expenses of R147 thousand (June 2021: R1.8 million) and a bonus provision of R5.8 million (June 2021: R5.1 million). Earnings for the six months ended 30 June 2022 amounted to R925 million (June 2021: R576.3 million), after taking into account depreciation and amortisation of R105.5 million (June 2021: R12.9 million), net financing income of R10.3 million (June 2021: R2.8 million).
