Merafe Resources Limited
INTEGRATED ANNUAL REPORT
2025
Delivering today. Investing in tomorrow.
The Directors' Report for the year ended 31 December 2025 is set out in the 2025 annual financial statements (annual financial statements) and an abridged version of the Directors' Report is set out below.
Merafe was incorporated in South Africa with interests in the ferrochrome and chrome industry. The activities of the Group are undertaken through the Company and its principal subsidiary and joint arrangements. The Group operates in South Africa. Merafe holds 100% of the issued share capital in Merafe Ferrochrome and Mining Proprietary Limited (Merafe Ferrochrome) which through a pooling and sharing venture with Glencore Operations South Africa Proprietary Limited (GOSA), participates in chrome mining and the beneficiation of chrome ore into ferrochrome. The Glencore-Merafe Chrome Pooling and Sharing Venture (Venture) operates five ferrochrome smelters (including pelletising and sintering plants), 22 ferrochrome furnaces, PGMs processing plants in the Western and Eastern limbs of the Bushveld Complex, five chrome ore mines and three UG2 plants, situated in the North West, Limpopo and Mpumalanga Provinces of South Africa. The Venture is one of the largest ferrochrome producers in the world, with an installed capacity of 2.3 million tonnes per annum. Merafe Ferrochrome's share of the EBITDA is 20.5%. Merafe Ferrochrome shares in the revenue, expenses and liabilities at 20.5%. The Venture comprises assets that both GOSA and Merafe Ferrochrome have granted the right of use but own in different proportions. Merafe Ferrochrome, through the Venture agreement, has a 20.5% interest in Unicorn Chrome Proprietary Limited (Unicorn Chrome).
Listed below are the operations to which Merafe Ferrochrome has granted the right of use to the Venture:
| Ferrochrome smelters | Chrome mines | UG2 plants and pelletisers | PGM plants | ||||
| Asset | Merafe Ferrochrome's interest |
Asset | Merafe Ferrochrome's interest |
Asset | Merafe Ferrochrome's interest |
Asset | Merafe Ferrochrome's interest |
| Wonderkop smelter | 50% | Kroondal and | 50% | Impala Merafe UG2 plant | 100% | Western PGM plant | 20.5% |
| (furnaces 5 and 6) | Wonderkop mines | ||||||
| Boshoek smelter | 100% | Helena mine | 20.5% | K4 UG2 plant | 20.5% | Eastern PGM X plant | 50% |
| Lion I smelter | 20.5% | Magareng mine | 20.5% | Rowland UG2 plant | 20.5% | ||
| Bokamoso pelletising plant | 20.5% | ||||||
| Lion II smelter | 20.5% | Motswedi pelletising plant | 100% | ||||
| Marikana | 26% | Tswelopele pelletising plant | 20.5% | ||||
| Unicorn Chrome | 20.5% | ||||||
The financial statements set out the financial results of the Group and Company and have been prepared using appropriate accounting policies, conforming to IFRS Accounting Standards as issued by the International Accounting Standards Board and the requirements of the Companies Act, supported by reasonable and prudent judgements where required.
Revenue reduced to R5 835 million (2024: R8 443 million) and was supported by resilient prices and higher sales volumes of chrome ore. Ferrochrome prices and volumes were lower than the previous year and the average ZAR:USD exchange rate was stronger in 2025. Merafe's attributable share of the Venture's EBITDA was R580 million (2024: R1 766 million), inclusive of R633 million in standing charges (2024: R287 million) and a R165 million foreign exchange loss (2024: R29 million). A R4 million inventory write-down was recorded (2024: R79 million) in addition to the smelters' retrenchment costs of R198 million (2024: R67 million) and rehabilitation costs of R136 million (2024: R14 million).
Although there was no impairment adjustment processed against the CGU, specific asset adjustments were processed against the Bokamoso and the Tswelopele pelletising plants, as well as the Wonderkop smelter. The full carrying values of these plants were impaired, resulting in an impairment loss of R222 million (2024: R575 million) over the reporting period.
After deducting corporate costs of R69 million (2024: R85 million), which includes R1 million in cash-settled share-based credit (2024: R15 million expense), R4 million in CSI (2024: R3 million), and R9 million in bonus provisions (2024: R13 million), Merafe achieved EBITDA of R533 million (2024: R1 698 million).
Cost management remained a key focus. A higher fixed costs allocation rate arising from the suspension of smelting units, increased production costs, while reductions in chrome prices, reductant costs and variable power prices mitigated the overall impact, resulting in an overall 14% year-on-year increase in production costs. Despite logistical challenges, projected shipment volumes were achieved. The investment in Unicorn Chrome continued to perform well, benefiting from resilient chrome ore prices. Collaboration with co-investors will continue to explore the best ways to maximise this investment's value.
The margin squeeze on our smelting business was palpable resulting in the suspension of three smelting plants. This led to the commencement of the consultation process in terms of section 189 of the Labour Relations Act, No. 66 of 1995 (s189) from September 2025. Discussion with government also commenced resulting in much welcome relief in the form of a lower electricity tariff of 87.74c/kWh. While the finalisation of this tariff paves the way for the restart of the Lion smelter, it is insufficient for the restart of Wonderkop and Boshoek smelters. While discussions with Eskom continue, the s189 was suspended until 28 February 2026. Management is actively considering strategies to ensure the resilience and sustainability of our business.
Full details of the financial position and cash flows of the Group and Company are set out in the consolidated and separate annual financial statements.
The Group had cash and cash balances held with Central Treasury of R1 156 million on 31 December 2025 (2024: R1 434 million). The Group's Revolving Credit Facility (RCF) of R300 million was unutilised at year end. Refer to note 28 of the annual financial statements for the disclosure of the Group's facilities and covenants associated with these facilities, including the Venture's facilities.
The Group had a notice deposit, cash and balances held with Central Treasury of R1 550 million and no debt at the reporting date. The Group benefits from unutilised debt facilities through its 20.5% share of the Venture, which the Board considers sufficient to sustain the business for at least the next 12 months if the need arises. The Group's forecasts and projections of its short to medium-term profitability, taking account of likely changes in production and performance, show that the Group will be able to operate within the level of its cash resources and facilities for at least 12 months from the approval date of the annual financial statements.
The Group generated EBITDA of R533 million and made a profit after tax of R143 million in the current year. Merafe Group and the Company maintain healthy cash balances per note 14 of the annual financial statements with access to banking and other lending facilities. The Group and Company's credit and liquidity risks have been assessed in notes 28.1 and 28.2 of the annual financial statements. Having considered the Group and Company's key risks, current financial position, solvency and liquidity, debt levels, lending facilities available through the Venture, impairment review, as well as the Group and Company's financial budgets with their underlying business plans, the directors believe that the Group and Company have sufficient resources and cash flows to be able to continue as a going concern at least for the year ahead. The Group and Company's lending facilities are referenced in note 28.2 of the annual financial statements.
The Company has a hybrid dividend policy with features of a stable and residual dividend policy. The Company intends to pay a dividend of at least 30% of headline earnings at least once a year, taking into account, among other things, the annual financial performance, expansionary projects and economic circumstances prevailing at the time. In addition, in any given year, the directors may consider an additional distribution in the form of special dividends and share buy-backs dependent on the Company's financial position, future cash requirements, future earnings prospects, availability of distributable reserves and other relevant factors. Dividends are recognised when they are declared by the Board of the Company
On 6 March 2026, the Board resolved to declare a final dividend of 8 cents (2024: 8 cents) per ordinary share. This follows an interim dividend of 4 cents (2024: 20 cents) per share, bringing the total dividend for the year ended 31 December 2025 to 12 cents (2024: 28 cents) per share and amounts to 101% of headline earnings.
The full details of the authorised and issued share capital of the Company are set out in note 15 of the annual financial statements and shareholder information of this report. No shares were issued in 2025.
Details of transactions with directors and key management are detailed in note 34 of the annual financial statements and in Remuneration Report of this report. The Board composition during the year under review is set out in Directors' Report of the annual financial statements and in governance of this report.
The following shareholders were the registered holders of 5% or more of the issued ordinary shares in the Company at 31 December 2025:
The analysis of the ordinary shareholding is given in shareholder information.
Refer to note 35 of the annual financial statements and the Remuneration Report of this report for the beneficial interests of directors in shares of the Company as well as note 34 of the annual financial statements for transactions with executive and non-executive directors.
Details of material interests in a subsidiary company, associate and joint arrangements are presented in the annual financial statements in notes 5 and 6 in this report. The interests of the Group in the profits and losses of its subsidiary, associate and joint arrangements for the year ended 31 December 2025 are as follows:
| 2025
R'000 |
2024
R'000 |
|
| Subsidiaries and joint arrangements | ||
| Total profits after income tax | 158 921 | 677 147 |
| Associates | ||
| Total share of income from equity accounted investments | 13 168 | 20 122 |
| Total | 172 089 | 697 269 |
There was no change in the nature of the property, plant and equipment of the Group or in the policy regarding their use during the year. The Group recognised an impairment loss of R222 million against specific assets during the current year (2024: R575 million). Refer to notes 3 and 38 in the annual financial statements.
Deloitte & Touche were re-elected as the Company's independent external auditor on 13 May 2025 in accordance with section 90 of the Companies Act. They will again be proposed for re-election for the 2025 financial year at the forthcoming AGM of shareholders.
The Audit and Risk Committee's Report is presented the annual financial statements and Report of the Audit and Risk Committee of this report.
Details of related party transactions are set out in note 33 to the annual financial statements.
Electricity supply and pricing have been concerns for several years now although Eskom managed to bring stability to supply for most of 2025. While the NPA with Eskom and the conclusion of the 100MW solar plant agreement with Pele Green had brought some relief, these were inadequate in sufficiently addressing the electricity pricing challenge faced by the Venture given the competitive pressure brought on by especially Chinese production. Discussions with government have brought about renewed hope for intervention that will result in the medium to long-term sustainability of ferrochrome smelting in South Africa.
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 judgment is required to determine the Group's provisions for income taxes. The income tax and annual assessments are subject to examination within prescribed periods by SARS.
As previously reported, SARS finalised the audit of the transfer pricing matter on 30 October 2024 and adjusted (increased) the Company's taxable income for the 2016 and 2017 years. Pursuant to the finalisation of the audit, SARS issued additional assessments on 30 October 2024 levying additional income tax, dividends tax, understatement penalties, and interest in the aggregate amount of R406 million against the Company for the 2016 and 2017 years.
The Company disagrees with the additional assessments. After taking several procedural steps, including submitting an objection that was ultimately denied by SARS, the Company filed a notice of appeal in November 2025. This formally initiates the Tax Court appeal process. Furthermore, the Company is currently awaiting SARS' response regarding its request to review the partial suspension of payment for the disputed tax debt.
Management continues to rely on opinions obtained 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, due to the dispute, remains uncertain, and any potential tax exposure cannot be reliably estimated. Accordingly, the consolidated financial statements have made no adjustment for any effects on the Group.
Eskom
In January 2026, NERSA approved a 12-month interim tariff of 87.78c/kWh. However, the interim tariff is not enough to restart all suspended smelters, which require a tariff of 62c/kWh. On 27 February 2026, in-principle support for the proposed 62c/kWh electricity tariff (Proposed Tariff) was received from Eskom and the South African government (Government). Specific terms and conditions of the Proposed Tariff are critical and engagements with Eskom and Government continue. In good faith, the Venture has extended the current termination date under s189 and 189A of the Labour Relations Act, 66 of 1995 consultation process from 28 February 2026 to 31 March 2026.
Change in directorate
Mr. David McGluwa resigned from the Board on 11 March 2026. His nomination to the Board was by the IDC who holds approximately 22% of the issued share capital of the Company. Shareholders will be advised of the replacement of Mr. David McGluwa, once the necessary processes have been completed.
Dividend
On 6 March 2026, the Board resolved to declare a final dividend of 8 cents (2024: 8 cents) per share for the 2025 financial year. The total gross cash dividend for the year amounted to 12 cents per share. The dividend will be paid out of income reserves. The directors are not aware of any other material event which occurred after the reporting date and up to the date of this report that may require adjustment or disclosure in these annual financial statements.
The shareholders passed all special resolutions at the 2025 AGM held on 13 May 2025.
The next AGM of the shareholders of the Company will be held (subject to any adjournment or postponement) on Wednesday, 13 May 2026.
The Group's environmental rehabilitation costs are in accordance with the National Environmental Management Act No. 107 of 1998 (NEMA) and Regulation No. 1147 of 20 November 2015. There are proposed amendments to the 2015 financial provisioning regulations of the same Act, which were gazetted on 27 August 2021. These have not yet come into effect on the reporting date.
There has been an increase in the rehabilitation provision as a result of the revised rehabilitation periods for non-operating smelters (refer note 17 of the annual financial statements).
The directors are satisfied that there are no foreseeable material risks relating to the Mineral Resources and Mineral Reserves of the Venture and the ability of the Venture to conduct its mining operations. There are also no legal proceedings or other material conditions that may impact the ability of the Venture to continue its mining or exploration activities. The abridged Mineral Resources and Mineral Reserves statement and the detailed Mineral Resources and Mineral Reserves statement have been signed off by a Competent Person in accordance with the South African Mineral Reporting Codes for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves 2016 edition and in compliance with the JSE Listings Requirements.
Each of the directors, whose names are stated below, hereby confirms that:
Zanele Matlala
Chief Executive Officer
6 March 2026
Ditabe Chocho
Financial Director
The audited consolidated and separate annual financial statements of Merafe Resources Limited were approved by the Board on 6 March 2026 and signed by:
Steve Phiri
Chairperson
6 March 2026
Zanele Matlala
Chief Executive Officer
The CEO's and FD's responsibility statement as required by paragraph 3.84(k) of the JSE Listings Requirements is set out in full and in the CEO and FD's responsibility statement of the annual financial statements which forms part of our online Integrated Annual Report for 2025.
See manufactured capital of this report for a table on the Venture's plants, technology and mines and natural capital for further information on the reserves and resources of the Venture.
