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Merafe resources Earnings to fall as production declines

February 1 2013 at 08:00am

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Merafe Resources warned yesterday of lower earnings for the year to December 2012 after ferrochrome production fell. It recorded an 8 percent drop in production from a year earlier, primarily because of weak demand and participation in Eskom’s power buy-back programme. “The compensation received from Eskom for the electricity not consumed was adequate to cover the costs and lost profits on the associated volumes,” Merafe said. Capacity utilisation reduced to 66 percent from 72 percent for 2011. The company is involved in the production and sale of ferrochrome to the stainless steel industry through its 20.5 percent participation in the Xstrata-Merafe Chrome Venture. It anticipated headline earnings a share for the period of between 4.6c and 5.1c, down from 6.4c in 2011. Merafe attributed the lower earnings to an impairment which resulted from the chrome venture considering the sale of high cost mining assets as part of its cost-saving initiatives. Merafe closed with a cash balance of R83 million and had long-term debt of R512m at December 31. Merafe shares fell 12.5 percent yesterday to close at 77c. – Dineo Faku


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