MERAFE Resources shares firmed slightly to around 90 cents on the JSE today after the release of interim results showing the ferrochrome producer had coped well with grim market conditions during the six months to end-June.
Merafe – which is the black economic empowerment minority partner in the Glencore – Merafe chrome joint venture (the Venture) – maintained its interim dividend while chopping debt and keeping costs under control despite the 9.4% jump in electricity charges introduced from April 1.
Replying to an analyst’s question on today’s results conference call CEO, Zanele Matlala, confirmed the group’s performance for the six months had been significantly helped by improved business conditions in the second quarter compared with the first quarter, but she declined to provide a quarterly profit break-down.
Global ferrochrome production dropped 4% to 5.2 million tonnes in the first half of 2016 compared with the first half of 2015 and ferrochrome pricing dropped “… to the lowest levels since 2009 when the 2016 second quarter European ferrochrome benchmark price reduced to 8 cents per pound (c/lb).” That price has subsequently recovered to 98c/lb for the third quarter of 2016.
Matlala stressed that Merafe was now poised to benefit materially from improving market demand for stainless steel – which is the major consumer of ferrochrome – and given that Merafe had a three-year wage deal in place.
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