Merafe shares hit by news of output drop and strike

Published Oct 20, 2014

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Andre Janse van Vuuren

SHARES in Merafe Resources declined the most in more than a year on Friday after the ferrochrome producer said third-quarter output fell 14 percent and some of its mines were shut by a strike.

Merafe, which owns 20.5 percent of the world’s largest ferrochrome operation in South Africa in a venture with Glencore, dropped as much as 11.5 percent in Johannesburg trading, the most since August last year. It closed 8.85 percent weaker on the day at R1.03 on Friday.

Ferrochrome output for the three months to September 30 decreased to 74 000 tons from 85 600 tons a year earlier as sales declined 18 percent to 60 200 tons, the company said on Friday.

The venture’s western mines near Rustenburg had been shut since the last week of September after the National Union of Metalworkers of SA started a pay strike, investor relations manager Kajal Bissessor said. But its eastern operations and all smelters were fully operational.

The country was the largest producer of chrome ore in 2011, according to the US Geological Survey. Ferrochrome is produced mostly in a higher-carbon format and used largely as a feedstock for stainless steel.

The strike “has no impact on current ferrochrome production or sales obligations”, Merafe said. Castro Ngobese, a union spokesman, did not immediately take calls seeking comment.

The decline in production was due to planned maintenance in July and August “as opposed to the prior year, when maintenance was performed in the first half”, Merafe said.

The venture’s Lion II project, adding 360 000 tons to an existing 1.98 million ton capacity, would reach full production capacity by the middle of 2015, it said. – Bloomberg

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