[miningmx.com] – MERAFE Resources, a ferrochrome producer in joint venture with Glencore Xstrata, said interim headline share earnings would fall by up to 4c per share from 5.5c/share in the 2012 interim period, owing to an impairment on its Horizon mine that it is selling.
The sale of Horizon, a ferrochrome mine in South Africa’s Limpopo province, is part of an investment review by the Glencore-Merafe Joint Venture. Horizon had previously been identified as the joint venture’s higher cost assets. Some R66m had been spent increasing its capacity to 40,000 tonnes/year.
In a statement today, Merafe Resources added that the joint venture already had enough stocks available to it suggesting the over-supplied nature of the ferrochrome industry. Ferrochrome is used in the manufacture of steel products.
Attention is also bound to fall on Merafe’s cash versus its debt levels when it reports its interim results scheduled for August 6. The group said in a statement today that it had a cash balance of R47m and long-term debt owing to Absa Capital of R560m.
Pressure on Merafe’s balance sheet comes amid a decline in ferrochrome prices. The average European benchmark ferrochrome price for the third quarter of 2013 was settled at 112.5 US cents per pound (c/lb), some 11% lower than the 127c/lb per in the second quarter of 2013, it said.
Ferrochrome production was up nearly a quarter in the first six months of the financial year. “Operating capacity utilisation for the first six months of 2013 was 79% compared to 64% for the first six months in 2012.
“This was primarily as a result of operational improvements of furnaces, additional winter month production and the impact of the successful commissioning and ramp up of the Tswelopele pelletising plant,” Merafe Resources said.
Ferrochrome production volumes in the first half of 2013 were also impacted by the Eskom power buyback agreement as in the 2012 comparative period, it said.
