Merafe returns to profitability in 2021 despite reporting low rail utilisation rates

MERAFE Resources returned to profitability in 2021 as it recovered from last year’s production downtime caused by Covid-19 lockdowns.

The ferrochrome producer said in a trading statement today that basic interim earnings for the six months ended June would be between 19.2 and 26.8 cents a share. This compares to a loss of 38.3 for the prior comparative period.

Attributable ferrochrome production was 199,000 tons for the six months ended June compared to 120,000 tons in 2020. Merafe Resources, listed in Johannesburg, has a 20.5% in the Glencore-Merafe Chrome Venture.

In addition to improved production, the interim profit was driven by higher sales and better ferrochrome prices for the period, offset by a stronger rand against the dollar.

Merafe said that net cash had improved to R797m as of end-June compared to net cash of R278m as of December 31.

The improvement in sales comes despite difficulties moving ferrochrome volumes to port for export. Merafe and Glencore said in March that the companies had encountered “huge problems” exporting ferrochrome with utilisation rates on the rail and ports facilities managed by Transnet, the government-owned company, as low as 40% on occasions.

Japie Fullard, head of ferrochrome operations at Glencore, said logistical backlogs had been made a top priority of Glencore-Merafe Chrome Venture’s financial year.

“It is a huge concern for us. We have been having a huge discussion with the CEO of Transnet (Portia Derby). We would like to join hands in getting the logistical problems sorted,” said Fullard.

Merafe is due to report its interim numbers on August 10.