MERAFE-Glencore Chrome Venture said on Tuesday it had extended a deadline for a new electricity deal with Eskom.
This is the fifth time the venture has delayed retrenchments at its ferrochrome operations in South Africa while it waits on the state-owned power deal for a five year tariff agreement that would enable at least breakeven production.
“Shareholders are hereby advised that, at Eskom’s request, the Glencore-Merafe Chrome Venture has agreed to a further extension of the Termination Date to 9 April 2026,” said the venture’s partner, Merafe Resources, in a statement. “Further updates will be shared as soon as new information becomes available,” it added.
While the uncertainty will be unwelcome for Merafe-Glencore Chrome Venture’s 1,500 employees who have yet to lose their jobs, the extension is nonetheless a promising sign that critical terms and conditions to an earlier in-principle agreement may be workable.
On February 28, the venture said it would keep its ferrochrome operations in South Africa open after Eskom offered a tariff of 62 cents per kilowatt hour, a heavy discount on a Negotiated Pricing Agreement, an earlier special tariff, which set power costs at 87c/kWh.
Japie Fullard, head of Glencore’s South African ferroalloys operations, said, however, that agreement lacked specifics.
“The problem is that the terms and conditions must be commercially viable. There is no way we can lock in for a five-year period and then, if we breach, face a liability so massive that we could never sustain it,” he said in March at PGM Day, a conference.
Fullard said he had “no problem” with benefit-sharing at the lower tariff, such as divvying up profits at the cash level, if any were made. But he also said the lower 62c/kWh proposal was not a panacea to South Africa’s difficulties in competitive beneficiation. “It only keeps us in the ring,” he said.
Fullard also had sobering words should Eskom fail to have the terms and conditions on the lower tariff approved. “If we do not get the 62 cents, I promise you, within a week or two I am going to retrench another 1,500 people. And that is heartbreaking. It is heartbreaking for South Africa.
“But if we close all the smelters and simply export ore, what is going to happen to the export price? The supply-demand balance is going to collapse. There will be no real competition,” he said.
Conversely, the lower tariff would also invite other intensive energy users to demand the same prices – a development Fullard viewed positively.
“If we get the 62 cents now, I can promise you — it is a blueprint. The manganese players are already there, ferromanganese is out there, ferrosilicon, vanadium — all the players are just waiting for this 62 cents. This can be the revival of beneficiation in South Africa.”
Paul Dunne, president of the Minerals Council, told Miningmx last month demands from other miners for a lower tariff would be inevitable.
“In the immediate term, let’s find a solution for the ferrochrome industry, which is quicker and can help protect that industry for the country,” said Dunne. “And then let’s see what the implications are for other large users. Whatever gets done for ferrochrome needs to be, shall we say, able to be replicated — but it’s not a given.”
