The South African mining company reported solid growth for the period, with revenue increasing by 35 per cent to two billion rand due to a 25 per cent hike in ferrochrome production sales.
“Merafe’s revenue and operating income is primarily generated from the Glencore Merafe Chrome Venture (“Venture”) which is one of the global market leaders in ferrochrome production, with a total installed capacity of 2.3 million tonnes of ferrochrome per annum,” said [DATA MRF:Merafe Resources Limited]in a statement.
Merafe’s 20.5 per cent stake of the earnings before interest, taxation, depreciation and amortisation (EBITDA) from the Venture rose from 236.5 million rand in 2013 to 460.2 million rand this year
Profit for the period increased from 33.5 million rand in 2013 to 224.7 million rand.
The group’s operating capacity was at 90 per cent, an increase of 16 per cent from the previous period primarily due to a stronger market and impact of the Eskom buy-back agreement.
The second line of Merafe’s 5 billion rand Project Lion II was also successfully commissioned during the period with daily ferrochrome production reaching more than 60 per cent of design capacity. The plant is expected to reach full capacity within the next year.
Also, wage negotiations were settled at its eastern smelters and mines however are ongoing at the Ventures’ western mines and smelters.
A gross interim dividend of 1.12 cents per ordinary share was declared by Merafe’s Board.
Merafe said that along with its Venture partners, the strategy for the group would be changed as most projects such as the acquisition of the Wonderkop assets and the expansion of the Lion smelter complex have been completed.
While the group had initially decided to focus on diversification, a decision was made for the medium term goal to be on its ferrochrome operations and maximising cash flow from the Venture.
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“Consequently, the company has decided to reduce its staff complement, management team and the Board’s size and skills set going forward,” added the group.
In its outlook for the year ahead, Merafe expects stainless steel production and demand to increase by 5.5 per cent per year for the next three years with the demand for ferrochrome to follow suit with an increase of 6 per cent per year.
“Our suite of cost and energy efficient technology, further enhanced with the recent addition of Lion II, places us in an ideal position to significantly benefit from the projected increase in demand for ferrochrome,” concluded the statement.
“Furthermore, with our partnership and excellent relationship with Glencore, one of the world’s largest diversified miners and leaders in the marketing of chrome ore and ferrochrome, we are excited about the future prospects and further reinforcing our position in this industry.”