Chromed pipes
Send this article to a friend
Print this page

» SA chromite exports frustrate Xstrata
» Merafe seeking coal acquisitions
» Merafe edging to R240m funding

> JSE:MERAFE RESOURCES LIMITED:
84c 0%
If you want to share this article, simply sign into one of these sites and select your network. It’s that easy Click here to find out more about how to use this button

Merafe bullish on ferrochrome prices
Allan Seccombe
Posted: Wed, 02 Aug 2006

[miningmx.com] -- MERAFE Resources will earn “meaningful” profits in the second half of the year as the ferrochrome market recovers. The company took a beating in the interim period from low ferrochrome prices, furnace closures and rand weakness.

Merafe posted a headline loss per share of R0.0123 for the period to end-June 2006 from headline earnings, which strip out once-off items, of R0.0262 in the same period last year.

The ferrochrome price rebounded strongly in the third quarter as stainless steel production kicked up. Ferrochrome prices jumped 19% to $0.75/pound from the $0.63 in the first quarter of the year, when stainless steel production was soft.

Stainless steel production has increased as demand picks up, particularly in Europe, Merafe said, adding global stainless steel output is seen growing 8.6% to 26.4m tonnes in 2006 versus 2005.
ferrochrome is expected to show good growth
“Consequently, demand for ferrochrome is expected to show good growth of around 8% to over 6 million tonnes for the full year of 2006, resulting in improved ferrochrome production capacity utilisation and increased sales volumes in the second half.”

In July, Merafe increased its stake to 20.5% from 17% in the Chrome Venture it has with the world’s leading ferrochrome producer Xstrata, which means it will take a bigger chunk of earnings generated in the partnership in the second half of the year. Merafe's attributable saleable ferrochrome from the Venture was 84,474 tonnes in the period.

Merafe is bringing its 360,000 tonnes/year ferrochrome operation Project Lion on stream through phased commissioning during the second half of 2006, ramping up to full production during the first six months of 2007.

All these factors “should result in Merafe returning to profitability and posting meaningful profits for the remaining six months of 2006,” Merafe said in notes accompanying its interim results.
Free news alerts: click here to subscribe
The weak ferrochrome prices early this year prompted South African ferrochrome producers, which last year supplied 42% of global output, to close furnaces to bring balance to the market.

The Chrome Venture trimmed operating capacity by 15%, but three furnaces will be returned to production at the end of the South African winter because of the expected turn up in the global ferrochrome market.

Merafe took a R17.9m charge on the temporary furnace closure, while its share of the foreign exchange loss was R14.6. It paid corporate expenses of R12.7m.

Merafe and Xstrata have taken steps to ease the foreign exchange loss in future by converting a portion of a US loan into rands.