Merafe takes payout to R1bn as chrome drives record earnings

Zanele Matlala, CEO, Merafe Resources

MERAFE Resources posted a record full year profit on the back of “elevated” chrome sales and despite a 14.5% decrease in the average ferrochrome price.

Full year earnings came in at R1.75bn compared to R1.4bn a year earlier. The company, which is in joint venture with Glencore, announced a R550m final dividend – equal to 22 South African cents per share (2022: 13c/share) – taking the total dividend for the period to R1.05bn (R625m).

Commenting on the outlook for the current financial year, Merafe CEO Zanele Matlala said margins were likely to be squeezed. “With continued economic uncertainty in 2024, we expect commodity prices to come under pressure,” said Matlala. “Given the unrelenting inflationary pressures, our margins remain at risk of being squeezed in 2024.”

Merafe has 20.5% stake in the Glencore Merafe Joint Venture with Swiss miner and marketing company, Glencore.

Merafe had cash and cash equivalents of R1.67bn as of December 31 comprising R697m in cash held by Merafe (2022: R617m) and R959m being Merafe’s share of the cash balance in the Glencore Merafe Joint Venture. Of the cash is the joint venture, Merafe has R328m set aside for rehabilitation liabilities.

Attributable production for the 12 months fell 22% to 300,000 tons owing to weaker market conditions, Merafe said. The company also only operated its Lion smelter during the winter months when state-owned power supplier Eskom implements a higher winter tariff. Overall the tariff was 18.65% higher, effective April 1 last year (2023).

Merafe said it elected not to bring back its Rustenburg smelter as weaker market conditions persisted.

Commenting on the market, Merafe said the introduction of additional low-cost capacity in China heightened pressure on global alloy conversion spreads, resulting in production cutbacks in other regions worldwide.

Ferrochrome demand outside of China experienced a year-on-year decrease as stainless-steel melt rates in the EU and the US reached multi-year lows, it said.