Half Year 2026 Merafe Resources Ltd Earnings Call Transcript
Key Points
- Merafe Resources Ltd (FRA:RZT) reported a 65% increase in EBITDA from the venture, driven by higher chrome ore volumes and improved commodity prices.
- The approval of lower electricity tariffs of $0.62 per kilowatt hour in May 2026 paved the way for the restart of suspended smelters, with Lion smelter fully operational from May 2026.
- Chrome ore revenue surged 78% to ZAR1.8 billion, supported by an 11% increase in average prices and a 75% rise in volumes sold.
- PGM revenue increased 63% to ZAR255 million, driven by a 96% jump in prices achieved, offsetting lower volumes.
- The company maintained a strong balance sheet with total liquid reserves of ZAR2 billion, no gearing, and declared an interim dividend of ZAR0.16 per share, representing a 12% yield.
- Ferrochrome production plummeted to 28 kilotons due to the suspension of Boshoek and Wonderkop smelters, with total production costs per ton rising 33% due to higher chrome ore costs and fixed cost absorption.
- The operating environment remains volatile and uncertain, with geopolitical tensions causing oil price shocks and ongoing cost pressures from inflation.
- Smelting operations continue to incur losses, with a negative EBITDA contribution of 10% in the period, and the new tariff does not guarantee profitability, as noted by management.
- Chrome ore prices have come under pressure in recent weeks, and ferrochrome margins are expected to face further pressure as more supply comes on stream.
- The pending transfer pricing dispute with SARS remains unresolved, treated as a contingent liability, and the stronger rand exchange rate negatively impacted US dollar-denominated revenues.
Good morning, ladies and gentlemen. Welcome to Merafe Resources Limited's income results conference call. (Operator Instructions) Please note that this event is being recorded.
I will now hand over to the CEO, Zanele Matlala. Please go ahead, ma'am.
Good morning and welcome to the Merafe interim results presentation. The operating environment continued to be volatile and uncertain, mainly due to geopolitical tensions, which led to oil price shocks.
At Merafe, the uncertainty was mainly due to the smelters being idled, whilst negotiations regarding electricity tariffs were underway. Thankfully, a positive outcome was achieved, with NASA approving tariffs of $0.62 per kilowatt hour in May 2026. Despite the challenging and uncertain environment, Merafe profits were higher for the six months to June 2026. If we look at the market, global stainless-steel production increased by 3% to 33.2 million tons. This increase was largely driven by China, Japan and Indonesia.
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