Financial capital

Financial capital makes it possible for other types of capital to be owned and traded. Financial capital is also representative of how successful we have been at achieving the sustainable development of our natural, human, social and manufactured capitals.

Financial Director

Ditabe chocho
  • Global economic environment
  • Ferrochrome demand and prices
  • Energy supply and prices
  • Rand/US Dollar exchange rate
  • Production costs

Sustainable organisations need a clear understanding of how financial value is created, in particular, dependence on other forms of capital. We enhance our financial capital by:

  • effective risk management;
  • corporate governance structures;
  • ensuring the equitable use of wealth created; and
  • assessing the wider economic impact of our activities on society.


R9 244 million

(2022: R7 939 million)

Cash balance of

R1 656 million

2022: R1 269 million


R2 545 million

(2022: R2 141 million)

Final and interim
dividends for 2023

R1 050 million

(2022: R625 million)

Net Profit

R1 753 million

(2022: R1 410 million)

* For a complete appreciation of the financial results, this Financial capital section must be read in conjunction with the complete set of audited consolidated annual financial statements. The Board has used its discretion in determining the material matters to be reported in this section.

The Company's consolidated financial statements for the year ended 31 December 2023 were approved by the Board on 15 March 2024 and are available on the Company's on this link www.meraferesources.co.za/results/annuals-2023/pdf/afs.pdf.

The summarised financial statements below are an extract from audited consolidated financial statements but are not themselves audited. The following individuals were responsible for the preparation of the financial statements: Busisiwe Nteyi CA(SA), Financial Manager and Ditabe Chocho CA(SA), Financial Director.


The year 2023 was complex for the chrome mining industry. It saw challenges and setbacks against a backdrop of steady, resilient growth.

Challenges included volatile prices for ferrochrome, which reduced from 2022 highs. Chrome ore prices, which increased mainly due to logistics problems, more than compensated for this challenge. Volatility is another challenge that always creates uncertainty for producers and traders. Due to a planned pullback in production in response to market conditions, only the Lion smelter operated over the three-month high electricity demand winter season, a period of elevated power prices. These factors resulted in lower ferrochrome production for the year, allowing the business to destock high volumes of finished stock that had built up. Geopolitical and economic instability continued as evidenced by the ongoing wars in Ukraine and the Middle East and global economic slowdowns that impacted demand and supply chains.

On the positive front, we've seen overall market growth. Despite the challenges, the ferrochrome market continued to expand, driven by increasing demand for stainless steel and other uses.

The business continues to manage all controllable costs as best as possible despite persistent cost pressures. For this reason, the approval of our Negotiated Pricing Agreement ("NPA") application with Eskom by both the National Energy Regulator of South Africa and Eskom is a welcome development since, among other benefits, it gives the business certainty on electricity tariffs over the term of the agreement.

A key achievement for the year was the inclusion of the Eastern Platinum Group Metals ("PGMs") operation in the Venture (refer to SENS announcement dated 7 September 2023). This operation increases the combined capacity of the Venture's PGMs processing plants and allows for further economies of scope. The addition of another PGM processing plant, PGM X, is underway, which will give the business additional scale.

We refer you to material issues for a review of financial matters impacting the business and our responses thereto.

Merafe recorded basic earnings from operations of R1 753 million (2022: R1 410 million), translating to basic earnings per share of 70.1 cents (2022: 56.4 cents). The headline earnings per share for the year were 60.1 cents (2022: 56.4 cents). Favourable chrome ore prices, higher volumes of chrome ore sold, and a weaker average ZAR: USD exchange rate were the main contributors to this performance.

Financial performance

Revenue was R9 244 million (2022: R7 939 million), amounting to a year-on-year increase of 16% despite 7% lower volumes of ferrochrome sold at 327kt (2022: 350kt). Higher realised chrome ore prices, higher chrome ore volumes sold, a weaker ZAR:USD exchange rate, and revenue from the Eastern PGMs operations improved revenue performance against the comparative period.

The average ferrochrome CIF price decreased by 6% to US105c/lb (2022: US111c/lb). Ferrochrome revenue was 1% higher at R6 885 million (2022: R6 795 million), supported by the ZAR:USD exchange, which weakened by 13% to R18.45 (2022: R16.37). Chrome ore sales volumes for the year increased by 77% to 470kt (2021: 265kt), and, on average, CIF chrome ore prices increased by 11% to USD262 (2022: USD237). The resultant chrome ore revenue was 114% higher at R2 222 million (2022: R1 040 million). PGMs revenue now includes results from PGMs operations in the West, the Kroondal plant, and those in the East. PGMs revenue increased to R133 million (2022: R100 million). Although the average basket price of PGMs achieved decreased by 36% to 1 284 USD/oz (2022: 2 007 USD/oz), higher volumes sold of 6 588 oz (2022: 3 055 oz) and a weaker average ZAR:USD exchange rate more than made up for the price impact.

Total operating expenses (excluding Merafe head office costs)

Operating expenses increased by 20% to R6 972 million (2022: R5 802 million). This increase was influenced by higher chrome ore sales volumes and inflationary pressures, as evidenced by our unit production cost, which increased by 28% year-on-year.

The main contributors to operating costs were:

  • the increased cost of chrome ore inputs to our production;
  • the increased cost of reductants;
  • the increased cost of electricity due to Eskom's tariff adjustments;
  • other inflationary increases, which include higher staff costs incorporating increases agreed with labour unions; and
  • an increase in selling expenses due to higher chrome ore volumes sold.

The cost of reductants and fluxes increased due to insufficient local anthracite and coke. This led to the importation of this stock, resulting in higher costs.

Standing charges also increased to R346 million (2022: R108 million) due to a planned pullback in production over the more expensive winter months.

The adjustments resulting from the impairment of PPE in earlier years have decreased the depreciation charge that was capitalised to inventory by R13 million (2022: R25 million decrease).

The diesel rebate matter with SARS is ongoing and has yet to be resolved. Accordingly, the disallowed amount (net of income tax) of R20 million (2022: R17 million) and interest payable to SARS of R5 million (2022: R5 million) continue to be fully provided for at year end.

Foreign exchange adjustments

The volatility of the Rand against the US Dollar resulted in a foreign exchange gain of R99 million for the year (2022: R68 million).


All the above factors increased Merafe's share of the Venture's EBITDA for the year to R2 358 million (2022: R2 228 million). Merafe's EBITDA was R2 545 million (2022: R2 141 million) after accounting for its corporate costs, which were R76 million (2022: R65 million). Corporate costs include a share-based payment expense (which is influenced by the Company's share price) of R11 million (2022: R13 million), Corporate Social Investment spend of R2 million (2022: R3 million), and a bonus provision of R11 million (2022: R12 million). The higher corporate costs include an expensed VAT apportionment adjustment of R4 million (2022: R1 million), higher legal fees, and various sundry expenses.

Gain on acquisition of joint operation

Merafe's EBITDA also includes a gain on contribution to the Venture of PGM operation in the Eastern Limb.

The SENS announcement published by the Company on 7 September 2023 refers to the contribution of the Eastern PGMs production plant to the Venture. This plant's contribution led to a gain of R250 million for the Group arising from the net asset value of the operation which was acquired for no consideration by Merafe. Effective from 1 January 2023, the Group started benefiting from this operation.

Depreciation and impairment

Merafe's share price at the end of the financial year traded at a discount to its net asset value per share, thereby indicating possible impairment. Consequently, a calculation of the recoverable amount had to be made as per IAS 36: Impairment of Assets. The recoverable amount was primarily based on Merafe's share of the value-in-use of the Venture as the cash‑generating unit ("CGU"). The recoverable amount includes the valuation of Unicorn Chrome (Pty) Ltd ("Unicorn Chrome"). The directors have considered that no conclusive evidence supports recognising any impairment for the year. No operational or market factors identified by management point to possible impairment other than the market capitalisation of the Group being lower than the asset value of the business.

Impairment losses from prior years have led to a much lower depreciation charge for historical assets for reporting periods since 2020. However, capital expenditures made over subsequent years have gradually increased the depreciation expense. Depreciation of R249 million (2022: R219 million) was expensed for the year.

Income from equity-accounted investments

Due mainly to high chrome ore prices, Impala Chrome (Pty) Ltd, Unicorn Chrome's only investment, had its best financial performance in 2023 since our acquisition of the investment in May 2020. Accordingly, Merafe's share of income from equity-accounted investment increased to R19 million (2022: R4 million).

Net finance income

Finance costs, mainly from commitment fees from our Absa Bank Limited's ("Absa's") Revolving Credit Facility ("RCF") and interest on the utilised portion of the RCF, amounted to R3 million (2022: R1 million). Interest on cash reserves was the source of finance income of R41 million for the year (2022: R26 million).


The taxation expense includes a deferred tax charge of R147 million (2022: R36 million) due to temporary differences on property, plant and equipment, receivables, provisions, and accruals. Due to its taxable profits exceeding its capital expenditure as at 31 December 2023, Merafe had no unredeemed capital expenditure balance at year end (2022: Rnil). This resulted in a current tax expense of R453 million (2022: R503 million). The current tax expense was lower due to the increase in capital expenditure for the year.

Profit for the year

Merafe reported a profit after tax of R1 753 million (2022: R1 410 million) for the year ended 31 December 2023.

Financial position

Ferrochrome production at our operations was 22% lower than the comparative period, primarily due to production pullback, as discussed earlier. The pullback, which enabled a drawdown of ferrochrome finished goods, decreased inventory volumes from 109kt to 81kt at year end. The above finished goods levels represent approximately two to three months of sales, a decrease from three to four months in the prior year. The closing inventory balance was R1 916 million at year end (2022: R2 373 million). The key reason for the higher closing trade and other receivables balance of R1 545 million (2022: R868 million) was higher sales volumes in the last quarter of 2023. Working capital remains crucial to our financial position, and we continue to focus on optimising its levels. The Venture's debt facilities are unutilised, and the business remains ungeared at the end of the financial year.

Our rehabilitation obligation is assessed periodically by an independent expert. For the year under review, the liability was assessed to be lower due to the upward revision of the discount rate. The provision for environmental rehabilitation decreased by R139 million, reducing total provisions from R294 million to R155 million. Our provisioning already caters for the impact of the National Environmental Management Act.

Boshoek Mine, which was on care and maintenance, is still in the process of being sold and has been classified as held for sale. At year end, only regulatory approvals remained as the outstanding conditions to be met.

Cash position

The closing cash balance was R1 656 million (2022: R1 269 million). This comprises Merafe's share of cash in the Venture and Unicorn Chrome of R959 million (2022: R652 million) and Merafe's cash of R697 million (2022: R617 million). The cash movement includes net cash outflow from working capital movements, mainly affected by an increase in trade and other receivables by R675 million, countered by a decrease in inventories by R454 million and an increase in trade and other payables by R106 million. Additionally, there was an outflow of cash from investing activities due to sustaining capital expenditure of R618 million (2022: R466 million), expansionary capital expenditure of R54 million (2022: R18 million), and payment of both the 2022 final dividend and the 2023 interim dividend of R825 million (2022: R850 million) in total. Expansionary capital includes R47 million (2022: R15 million) spent on the PGMs processing plants.

As earlier mentioned, the Venture has set aside cash, ringfenced for its future environmental rehabilitation obligations. This cash is not restricted. With the approval of the NPA application, there will be a call for increased Eskom guarantees by the Venture. Accordingly, this cash may, in the future, also include cash set aside for Eskom guarantees. This cash is available to back any Eskom and Department of Minerals Resources and Energy bank guarantees put in place. Merafe's share of the cash sits at R328 million (2022: R301 million) and is included in its share of the cash in the Venture and Unicorn Chrome of R959 million referred to above.

Debt position

Merafe's credit facility with Absa and the Glencore debt facilities available to the Venture through Glencore Holdings South Africa (Pty) Ltd were unutilised at year end. Although R200 million of Merafe's R300 million committed revolving credit facility with Absa was used to fund the 2023 interim dividend, this utilised portion had been fully repaid by year end.

Contingent liability

The Group is subject to direct and indirect tax in the South African jurisdiction. The Group's subsidiary undertakes various cross-border transactions within the Venture, subject to the Group's transfer pricing policies. As a result, significant judgement is required to determine the Group's income tax provision. The income tax and annual assessments are subject to examination within prescribed periods by the South African Revenue Services ("SARS").

At 31 December 2023, the previously reported transfer pricing matter with SARS was still ongoing. The Group has a deadline of 30 April 2024 to respond to SARS' letter of audit findings for the 2016 and 2017 years of assessment, which the Group is contesting with SARS. Management still relies on opinions from external legal and tax advisers to inform and support the significant judgement required in interpreting relevant tax legislation. The matter has been disclosed as a contingent liability as its outcome remains uncertain, and any potential tax exposure cannot be reliably estimated. Accordingly, the consolidated financial statements have no adjustment for any effects on the Group.

Share buy-back

The Board has considered whether the share buy-back programme should be resumed and concluded that a dividend is preferable at this stage.


The Board has declared a final cash dividend of R550 million (2022: R325 million). This amounts to 22 cents (2022: 13 cents) per share and brings the total dividend for the year to R1 050 million (2022: R625 million).


Looking ahead:

  • The market is expected to continue growing in the coming years, driven by factors such as infrastructure development and the rise of electric vehicles;
  • Price stability and production predictability are crucial for ensuring industry health. Although volumes will grow, the expectation is that price volatility will continue with risk on the downside;
  • ESG matters will likely gain prominence and become even more important. The Venture continues to explore sustainable practices for its operations, and its green energy initiatives will not only contribute to the decarbonisation of its footprint but to power stability as well;
  • Additionally, the NPA will enable our business to plan with more pricing certainty;
  • Inclusion of the Eastern PGMs further grows our business and strengthens our PGMs footprint; and
  • While a thawing of geopolitical tensions was expected in 2023, further tensions were experienced, and a spillover to 2024 has been inevitable.

Overall, 2023 was a year of resilience and adaptation for the ferrochrome industry. While facing headwinds, it laid the groundwork for continued growth and a focus on sustainable practices in the future. However, a resilient 2023 appears set to be followed by a looming slowdown in 2024.

Financial Director | 15 March 2024

The full set of audited consolidated financial statements from which these summarised consolidated financial statements have been derived, were prepared under the supervision of Ditabe Chocho CA(SA), Financial Director. The directors take full responsibility for the preparation of the summarised consolidated financial statements.

Summarised consolidated statement of financial position

    As at
  Notes 31 December
31 December
Property, plant and equipment   1 387 714 1 074 971
Intangible asset   25 413 29 626
Investment in associate   14 150 6 709
Deferred tax   6 210
Long-term receivable   37 287 38 663
Other long-term receivable   14 229 14 229
Total non-current assets   1 478 793 1 170 408
Inventories   1 916 476 2 372 540
Trade and other receivables   1 544 037 868 122
Current tax receivable   65 218
Cash and cash equivalents   1 655 807 1 268 599
    5 181 538 4 509 261
Non-current asset held for sale 11 963 963
Total assets   6 661 294 5 680 632
Share capital   1 288 876 1 288 876
Retained income   3 969 665 3 041 413
Total equity attributable to owners of the company   5 258 541 4 330 289
Lease obligation   5 911 9 059
Deferred tax   271 554 131 020
Environmental obligations   131 330 265 350
Share-based payment liability   10 040 12 518
Total non-current liabilities   418 835 417 947
Trade and other payables   945 859 840 039
Lease obligation   3 148 3 884
Current tax payable   178 52 073
Environmental obligations   10 907 4 345
Share-based payment liability   11 258 7 794
    971 350 908 135
Liabilities directly associated with the assets held for sale   12 568 24 261
Total liabilities   1 402 753 1 350 343
Total equity and liabilities   6 661 294 5 680 632

Summarised consolidated statement of profit or loss and other comprehensive income

   For the year ended 
   Notes  31 December
31 December
Revenue  5  9 244 022  7 939 061 
Gain on contribution of joint operation  6  249 909  – 
Foreign exchange gain     99 377  68 310 
Other expenses     (7 048 087) (5 866 720)
Earnings before interest, taxation, depreciation, amortisation and impairment     2 545 221  2 140 651 
Depreciation and amortisation     (249 319) (219 473)
Impairment     –  (236)
Income from equity-accounted investment     19 083  3 944 
Results from operating activities     2 314 985  1 924 886 
Finance income     40 941  26 078 
Finance expense     (2 670) (1 487)
Profit before taxation     2 353 256  1 949 477 
Taxation     (600 292) (539 467)
Total comprehensive income for the year     1 752 964  1 410 010 
Basic earnings per share (cents)    70.1  56.4 
Diluted earnings per share (cents)    70.1  56.4 

Summarised consolidated statement of changes in equity

   For the year ended 
   31 December
31 December
Issued share capital – ordinary shares  24 991  24 991 
Balance at the end of the year (issued share capital) 24 991  24 991 
Share premium – ordinary shares  1 263 885  1 263 885 
Balance at the end of the year (share premium) 1 263 885  1 263 885 
Balance at beginning of the year  3 041 413  2 481 106 
Total comprehensive income for the year  1 752 964  1 410 010 
Dividends paid  (824 712) (849 703)
Balance at the end of the year (retained earnings) 3 969 665  3 041 413 
Total equity for the end of the year  5 258 541  4 330 289 

Summarised consolidated statement of cash flows

   For the year ended 
   31 December
31 December
Profit before tax  2 353 256  1 949 477 
Depreciation and amortisation  249 319  219 473 
Effect of exchange rate fluctuations  (7 843) 49 623 
Income from equity-accounted investment  (19 083) (3 944)
Finance income  (40 941) (26 078)
Finance expense  2 670  1 487 
Impairment  –  236 
Movement in rehabilitation provision  (25 635) 11 478 
Other non-cash movement  4 422  4 223 
Loss/(profit) on sale of property, plant and equipment  29  (650)
Fair value adjustment on provisionally priced revenue  (781) 63 933 
Movement in long-term receivable  1 376  (25 219)
Share grants vested  (10 129) (2 284)
Share-based payment expense  11 115  12 848 
Net realisable value inventory adjustment  2 046  1 288 
Changes in working capital:       
Inventories  454 018  (721 650)
Trade and other receivables  (675 134) 622 565 
Trade and other payables  105 820  (22 555)
Cash generated from operating activities  2 404 525  2 134 251 
Interest received  37 721  23 666 
Interest paid  (3 901) (3 358)
Dividends from associates  11 642  – 
Taxation paid  (570 661) (456 863)
Net cash generated from operating activities  1 879 326  1 697 696 
Acquisition of property, plant and equipment – sustaining  (617 551) (466 396)
Acquisition of property, plant and equipment – expansionary  (53 814) (17 841)
Proceeds from the sale of property, plant and equipment  –  697 
Movement in other long-term receivable  –  (14 229)
Net cash utilised in investing activities  (671 365) (497 769)
Repayment of capital portion on lease liabilities  (3 884) (4 131)
Dividends paid  (824 712) (849 703)
Net cash utilised in financing activities  (828 596) (853 834)
Total cash movement for the year  379 365  346 093 
Cash at the beginning of the year  1 268 599  972 129 
Effect of exchange rate movement on cash balances  7 843  (49 623)
Total cash at the end of the year  1 655 807  1 268 599