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PrintFerrochrome producer Merafe Resources has reported diluted headline earnings per share of 5.5 cents for the six months ended June 2012‚ from 3.4 cents a year ago.
Merafe’s income is generated from the Xstrata-Merafe Chrome Venture. It shares in 20.5% of the venture’s earnings before interest‚ taxation‚ depreciation and amortisation (EBITDA).
Revenue declined 7% to R1.23bn. Merafe’s earnings from the venture increased during the period primarily due to a weaker rand against the US dollar and the compensation received from Eskom relating to a power buyback arrangement.
This was offset by a fall in ferrochrome sales tonnes and a decline in the average European benchmark ferrochrome price.
The average rand-dollar exchange rate was R7.90 in the first half of 2012‚ compared with R6.90 for the 2011 comparative period.
The average European benchmark ferrochrome price fell from 130 US cents a pound to 125USc/lb‚ period on period‚ and Merafe’s share of ferrochrome sales tonnes dropped from 146‚100 tonnes in the first half of 2011 to 123‚900 tonnes in the first half of 2012.
Chrome ore revenue as a percentage of total revenue grew from 11% in the first half of 2011 to 14% in the first half of 2012 - of which 65% related to chrome ore exported to Asia during the first half of 2012.
Merafe’s share of EBITDA from the venture was R279.3m. The profit and total comprehensive income for the period is R138.1m after taking into account depreciation of R67.8m‚ net financing costs of R10.4m‚ current tax expense of R0.5m‚ deferred tax expense of R79.1m and a R33.0m write-back arising from prior years’ overprovision of current tax.
CEO Zanele Matlala said production costs were contained at an overall increase of 4.5%‚ period on period‚ despite high mining inflation levels.
“We closed the period with a cash balance of R80m and have undrawn debt facilities with Absa of approximately R500m.”
“I am also pleased to report that project Tswelopele‚ our new pelletiser at the Rustenburg plant‚ is on track and on budget‚ and will be commissioned in the second half of this year.”
“Our flagship project‚ Lion II‚ is also within budget and on track to be completed in the second half of 2013‚” Matlala said.
Looking ahead‚ the group said despite the recent economic slowdown‚ stainless steel production was expected to increase by 4% in 2012 to over 35 million tonnes‚ which will lead to continued growth in demand for ferrochrome globally.
The lower production in South Africa is expected to result in a drawdown of stocks and thus ferrochrome availability is expected to remain tight in the short term.
Stainless steel production is expected to grow by 5% in the long term‚ which is expected to increase demand for ferrochrome.
The company said the venture’s suite of energy efficient technologies positioned it well for the upturn in global demand.
“Merafe has the advantage of a strong balance sheet‚ low gearing‚ a healthy cash flow and partnering with Xstrata‚ one of the world’s largest diversified mining companies with a reputation for running responsible and efficient operations‚” Matlala said.
The venture has is one of the lowest-cost and most energy-efficient producers of ferrochrome.
“Our significant investment in improving the venture’s energy efficiency gives us a competitive advantage and contributes to its future sustainability.”
“The Merafe Board continues to recognise the importance of diversification and this will be a major focus for the management team‚” Matlala said. - I-Net Bridge
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