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Merafe’s precarious financial position

  • Monday, July 29, 2013
  • Source:

  • Keywords:Merafe
[Fellow]
Merafe told shareholders last week to expect the worst. The South African charge chrome producer will report basic earnings per share for the first half of 2013 of between ZAR1.2¢ and ZAR1.4¢, compared to ZAR5.5¢ for the same 2012 period and headline earnings per share of between ZAR3.5¢ and ZAR4¢ compared to ZAR5.5¢.The company, which has a 20.5% interest in the Xstrata/Merafe joint chrome venture, will take an impairment loss as a result of the joint venture considering the sale of the Horizon chrome mine. The venture has spent ZAR40-million to raise the mine’s output but has a very high cost of production compared to UG2, the venture’s first choice of feed.
 
Merafe has sufficient feed without the mine. The sale of the Horizon mine, if concluded, would not have an impact on Merafe’s participation interest in the venture and the proceeds from sale would accrue to the venture partners in accordance with their participation interests.
 
Merafe closed the first half of 2013 with a cash balance of ZAR47-million and has a long-term debt to ABSA Capital of ZAR560-million.
 
Ferrochrome production was up nearly 25% in the first six months of 2013 to 145,000 mt from 118,000 mt. "Operating capacity utilization for the first six months of 2013 was 79% compared to 64% for the first six months in 2012,” the company said. "This was primarily as a result of operational improvements of furnaces, an additional winter month production and the impact of the successful commissioning and ramp-up of the Tswelopele pelletizing plant. “
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