Johannesburg - Merafe Resources says revenue gained 12% in the six months to June, partially thanks to a 12% increase in ferrochrome sales to 191 000 tons.
The listed miner earns its revenue and operating income mostly from its 20.5% stake - on an earnings before interest, tax, depreciation and amortisation basis - in the Glencore Merafe Chrome Venture. This mine, says Merafe, is the “global market leader in ferrochrome production” with the ability to produce 2.3 million tons of ferrochrome a year.
Merafe also benefited from an increase in chrome ore sales volumes and an 11% weaker rand/dollar exchange rate. This was partially reduced by an 11% decrease in net ferrochrome prices.
Commodity prices have been under increasing pressure recently, with gold and platinum sliding to multi-year lows.
However, Merafe says its period-on-period increase in cost of sales is above inflation - currently 4.7% - due to the start-up costs of Lion II and above inflation increases in labour and electricity costs. Going forward, Lion II is expected to have a positive impact on these costs, it says.
The 360 000 tons a year phase II of the Lion ferrochrome plant will increase the venture’s total installed capacity to more than 2.3 million tons a year. This smelter, based on the energy-efficient Premus technology, was commissioned towards the end of 2013, and ferrochrome production from the first furnace of the Project Lion II started on April 6, 2014. Ferrochrome production from the second furnace kicked off on May 30, 2014.
During the first quarter of 2015, daily Ferrochrome production reached more than 80 percent of design capacity.
Merafe’s attributable share of production from the venture for the first half of 2015 increased by 16% year-on-year as Lion II reached full capacity in the second quarter.
Merafe reported profit of R124.3 million in the first half, which is lower than the R224.7 million reported a year ago.
However, this takes into account higher depreciation and net financing costs, although it scored on the tax front.
Net financing costs increased as it borrowed more for Lion II, and its capex also increased during the first half.
Looking ahead, Merafe expects global stainless steel production, for which ferrochrome is a vital base, for 2015 to increase by 1% year-on-year, with Chinese stainless steel production expected to increase by 3.25% over the same period.
The listed company declared a 1c a share dividend, which amounts to a payout of R25 million. Its share price climbed R1 to R80 in early morning trade on the back of its results.
IOL