Merafe Resources: Booklet | MarketScreener

Financial analysis

The condensed consolidated financial results for the year ended December 31, 2021 are shown below.

Rounding of figures may result in minor calculation discrepancies in the tables.

Merafe’s turnover and operating profit are mainly generated by the Venture, which is one of the world market leaders in the production of ferrochrome, with a total installed capacity of 2.3 million tonnes of ferrochrome per year. Merafe shares 20.5% of the earnings before interest, taxes, depreciation and amortization (“EBITDA”) of the Venture. Merafe has a reportable segment being the mining of chrome ore and the beneficiation of chrome ore into ferrochrome and associated minerals, therefore no segment report has been presented.

Merafe’s share of revenue from business, which includes management fees, increased by 69% year-on-year to R8,063 million (2020: R4,780 million). Ferrochrome revenues increased 75% year-on-year to R7,020 million (2020: R4,002 million), primarily due to a 50% increase in average prices net of cost, insurance and freight (“CAF”) and a 29% increase in ferrochrome sales volumes to 394 kt (2020: 305 kt). Chrome ore revenue increased 33% year-on-year to R1,036m (2020: R777m), driven by a 17% increase in sales volumes to 390kt

(2020: 332 kt) and an increase in the average selling price of 27% over the year. Certain products were manufactured and sold from the Platinum Group Metals (“MGP”) processing facility in which Merafe has invested (as disclosed in the announcement posted on SENS on January 14, 2022). This turnover was R2.6 million (2020: nil).

Share of Merafe in Venture’s EBITDA for the year ended

On December 31, 2021 is R2,498.1 million (2020: R197.8 million).

EBITDA includes Merafe’s share of ongoing charges of R108.7m (2020: R474.2m) and a foreign exchange gain of R104.3m (2020: loss of R59.7m). rand). There were no compression costs during the year (2020: R97 million). The company reduced inventory by R24.4m during the year (2020: R13.6m).

After taking into account business costs of R66.0 million (2020: R29.9 million), which include a cash-settled share-based payment charge of

R8.9m (2020: R0.7m credit), Merafe achieved an EBITDA of

R432.1 million (2020: R167.9 million). Company fees include

Business social investment expenditure of R3.1m (2020: R0.5m),

a bonus provision of R10.5 million (2020: R5.5 million) and a provision of

R12.7 million (2020: Rs 0,000) against previously claimed excise taxes which may be disallowed and must be expensed.

The result for the financial year ended December 31, 2021 amounts to

R1,673.7 million (2020: loss of R1,003 million), after taking into account

amortization charge of R111.2 million (2020: R153.4 million), an impairment

assets of R5.8 million (2020: R1,365 million), net finance income of

R11.1 million (2020: R4.8 million) and tax charge of R653.1 million

(2020: R342.7 million credit). While the FY2020 impairment adjustment related to the cash-generating unit (“CGU”), the current year impairment loss was specific to an asset that was written off.

An impairment assessment was performed at the end of the year, which

no other CGU impairment adjustments for the period. Taxation includes a deferred tax charge of R199.2 million (2020: credit of R344.2 million) which mainly results from temporary differences on property, plant and equipment as well as those relating to provisions and accrued liabilities. There is no outstanding capital expenditure balance as at 31 December 2021 (2020: R274.6 million) as taxable profits exceeded capital expenditure. Amortizations decreased year-on-year mainly due to an impairment loss processed in the prior year.

Sustaining capital expenditure increased by 34% to R448.1 million (2020: R333.7 million) due to catch-up expenditure necessitated by COVID-19 related expenditure restrictions during the previous year. The expansion capital includes R32 million spent on the PGM processing plant. Although the plant has started producing the product, its development is scheduled for full completion in fiscal 2022 and will be funded from its own cash reserves.

The R300 million unsecured credit facility with Absa remained unused during the year.

As of December 31, 2021, Merafe has cash and cash equivalents of

R972.1 million (2020: R277.6 million) which included cash held by

Merafe of R483.2 million (2020: R151.9 million) and R488.9 million

(2020: R125.7 million), i.e. Merafe’s share of the Venture’s cash balance. The Venture has set aside cash, reserved to fund its future environmental remediation obligations. Merafe’s share of this cash is R189.3 million and is included in its share of cash in the joint venture of R488.9 million mentioned above.

Trade and other receivables increased by 76% compared to the previous year, mainly due to higher prices, a weaker rand/US dollar exchange rate at the close and higher volumes sold at the last quarter of the year. The Rand/USD exchange rate closed at R15.94 (2020: R14.65) as of December 31, 2021.

Ferrochrome finished product volumes of 76 kt (2020: 90 kt) available at the end of the year represent approximately two to three months of sales. The closing value of inventory increased to R1,652.2 million (2020: R1,433.7 million) after inventory write-down. The increase in the closing value of inventory is attributable to higher costs as well as an increase in the volumes of our raw material inventories in an effort to secure supply.

As part of a share buyback program, the Company acquired

11,577,378 ordinary shares on the open market between January 19, 2021 and May 5, 2021. The shares represent 0.46% of the issued share capital of the Company immediately before the redemption. The shares were acquired at an average price of 49 cents, with prices ranging from 43 cents to

60 cents. The total cost of R5.8 million, including transaction costs, was deducted from share capital. Pursuant to JSE Limited’s approval, the repurchased shares were delisted and canceled on August 18, 2021.

The share buyback program was suspended on November 26, 2021.

The board declared a final cash dividend of R549.8 million

(2020: Rnil). This equates to 22 cents (2020: zero cents) per share before dividend tax, and brings the total dividend for the year to R724.7 million (2020: nil).


The safety of our employees remains our number one priority. The Venture was fatally accident free for the year. Our Total Recordable Injury Frequency Rate improved by 29.67% to 2.75 (December 2020: 3.91^).

A culture of safety is encouraged as evidenced by a concerted effort by everyone to ensure not only their own safety, but also that of their colleagues. The SafeWork program is another illustration of our concern for safety. The SafeWork program framework is risk-based, focusing on eliminating fatalities and serious injuries by identifying hazards that can lead to fatal incidents and developing life-saving behaviors and protocols to target them. This program was reviewed and a gap analysis against the new requirements was conducted during the latter part of 2021, with actions

ensure the continuous improvement of our safety program by creating a safe work environment.


COVID-19 remains a risk we face on a daily basis. Our operations continue to manage the spread of the virus by ensuring compliance with all approved COVID-19 protocols.

The implementation of antigen testing in all operations since January 2021 has gone a long way in curbing super spread events by preventing asymptomatic positive people from entering the workplace. On average, a total of 68,784 antigen tests were performed in 2021. To confirm the reliability of the antigen test, all positive results for COVID-19 were followed up with a polymerase chain reaction test which demonstrated a rate 99% efficiency.

With the emergence of the Delta variant, we have seen a substantial increase in positive cases across South Africa and across all of our operations. This was followed by the identification of the Omicron variant and the emergence of the fourth wave in South Africa. 2,873 members of our workforce tested positive in 2021 compared to 694 positive cases in 2020. It is with great sadness that we announce that in 2021 we lost 26 (December 2020: 5) of our colleagues to COVID -19.

  • There has been a restatement of the December 2020 statistic from 3.89 to 3.91. Fiscal 2020 data for hours worked has been corrected to align with reporting definitions. This impacts frequency rates.

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