Little Merafe builds nearly R1bn in cash following storming year for ferrochrome

MERAFE Resources, a ferrochrome producer in joint venture with Glencore, increased cash to nearly R1bn at the close of its 2021 financial year.

The company, which is listed in Johannesburg, said in a trading update today that an improvement in ferrochrome and chrome prices, as well as higher production, resulted in a massive lift in earnings to 67 to 66.8 cents per share. This compares to a loss in the previous year of 0.8 cents/share.

Cash and cash equivalents increased to R972m compared to R278m at the close of the previous financial year. Included in the cash and cash equivalents for the current reporting period is R189m which has been ringfenced for rehabilitation obligations, Merafe said.

Depending on its financial commitments, shareholders in Merafe may be looking forward to a generous dividend announcement.

Merafe owns 20.5% of the Merafe Glencore Joint Venture which is expected to announce attributable production of 298,000 tons after Glencore said it had produced 1.49 million tons last year – a 43% year-on-year improvement.

The two companies said in January that they would build a platinum group metals (PGMs) plant at the Kroondal Mine.

The PGM production plant would be supplied with chrome ore from the joint venture’s Western Chrome Mines. Material will also be supplied from tailings and ore from other mines operating in the region to which the joint venture has interests.

Glencore states on its website that the joint venture with Merafe has “interests” in a number of mines and smelters in the region including the Helena, Magareng and Thorncliffe chrome mines on the eastern limb of the Bushveld Complex.

Glencore has said in the past it has no interest in the PGM business as it’s not a sector it understands especially well. In 2015, Glencore sold its 23.9% stake in Lonmin which it had previously bought via its takeover of Xstrata.

However, processing chrome ore for PGMs has become a lucrative business owing to the improvement in the basket price of PGMs over the last two years. A number of businesses had adopted the retreatment of mined chrome ore for PGMs including Tharisa and Jubilee Metals, both listed on the Johannesburg Stock Exchange.