[miningmx.com] – EXPORTS of chrome ore to China grew 48% this year compared to the first six months of last year, said Merafe Resources which added that it was advancing talks with the South African government about the activity.
Chrome exports were 3.1 million tonnes (mt) from January to June which compares with exports of 4.7mt reported by Merafe Resources’ during its 2011/2012 financial year results presentation last year.
Merafe Resources has been critical in the past of chrome exports to China which it says is helping Chinese ferrochrome producers take market share from their South African counterparts.
South Africa dominated chrome ore reserves globally, and used to control about half of ferrochrome production in 2001. Now, however, South African ferrochrome comprises only 41% of global consumption, with China having stepped in since 2001 to become a main competitor.
Speaking at the company’s interim results announcement, Merafe CEO, Zanele Matlala, said that South Africa comprised 56% of all chrome imports by China. “If South Africa exports 3mt of chrome ore, it takes away 1mt of ferrochrome that could have been produced in South Africa,” Matlala said. “This is not sustainable for the country,” she added.
Former CEO of Merafe Resources, Stuart Elliot, said the South African government was considering installing an export levy as an interim measure to curtail the exports while it sought a longer-term solution.
That was more than a year ago and despite the establishment of a task team by the mineral resources department (DMR), there hasn’t been any progress so far. “The task team is coming up with proposals that will be presented to the DMR and could result in reduction of chrome exports into China,” said Matlala.
Merafe Resources said in its results announcement today that it hoped for better days following the forecast commissioning of its R5bn Lion II project that would lower costs and lift output. The project is held in joint venture with Glencore Xstrata which is financing R4bn of the capital expenditure of Lion II.
Nonetheless, financing the project has proved a difficult journey for Merafe Resources which is only capitalised at R1.67bn. It has a R560m long-term debt facility with Absa Capital of which R240m was yet to be drawn down.
A decline in ferrochrome prices during the period, and the effects of a strike, made for a difficult interim period for Merafe Resources. It consequently booked a 1.7 cent per share decline in share earnings to 3.8c/share.
Cash resources diminished to R47m from R83m in the previous interim period of which R17m belongs directly to Merafe with the balance held in the joint venture with Glencore Xstrata.
Merafe Resources also confirmed a R75.9m impairement on its Horizon mine, in the Limpopo province, which it is hoping to sell.
