Overview

If uncertainty and volatility had a name, it would be "2025". For the South African ferrochrome industry, the year was a watershed one, with the sustainability of the local smelting industry brought into question.

Chrome ore revenue, supported by PGMs revenue, was once again a key pillar of Merafe's revenue performance and profitability in 2025. This contribution, was, however overshadowed by ferrochrome's performance. South Africa's ferrochrome smelting output fell sharply in 2025 as several smelters, including three of our plants, were idled. This led to multi-year lows in South African ferrochrome production.

Owing to the unsustainable operating environment for smelting, the Venture had to temporarily suspend Boshoek and Wonderkop smelters and take Lion smelter offline for maintenance. Chrome ore and ferrochrome prices were volatile with ore prices surging in parts of the year then softening, while ferrochrome margins were squeezed by rising input costs (chiefly electricity). This price/income squeeze led to curtailed smelter output.

The cost of electricity is a material contributor to ferrochrome production costs. While the Venture has made great strides in managing costs, high electricity tariffs are some of the administered costs that made South Africa's smelting industry uncompetitive compared to lower-cost producers, notably from China. The Venture entered into talks with the government and other stakeholders, with a view to finding viable medium to long-term interventions that would sustain the local smelting industry. This led to the National Energy Regulator of South Africa approving an Eskom proposed 12-month interim electricity tariff of 87.74c per kWh for the Venture in January 2026. This was part of government's move towards temporary electricity relief measures for smelters as policymakers weighed options to salvage the ferrochrome industry. While the Venture welcomes this interim tariff, and has consequently resumed production at the Lion smelter, it is not sufficient to trigger the restart of the Boshoek and Wonderkop smelters (which require a lower tariff to operate on a commercially viable basis).

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.

Since the suspension of our smelters, the Venture started discussions to have the previously reported 100MW solar plant power purchase agreement de-risked. As at reporting date, these discussions were ongoing.

Another consequence of the smelters' suspension has been a review of the Venture's environmental provisions, which has necessitated an increased rehabilitation expense in the reporting period. This arose from some rehabilitation work brought forward and spending on affected operations expected earlier than initially planned.

The Venture initiated a major cost-cutting exercise during 2025, project phoenix, which resulted in significant cost reductions. We expect to fully benefit from this initiative in 2026 and beyond. Merafe has also effected cost savings measures at its corporate office.

Merafe's 2025 basic earnings attributable to ordinary shareholders totalled R143 million (2024: R667 million), resulting in basic earnings per share of 5.7 cents (2024: 26.7 cents). Headline earnings per share (HEPS) was 12.2 cents (2024: 42.9 cents). The Company's weaker performance is primarily driven by materially lower ferrochrome sales volumes, continued pressure on the ferrochrome conversion margin, a stronger average ZAR:USD exchange rate, and retrenchment and rehabilitation costs.

Financial performance

Merafe reported revenue of R5 835 million for 2025 (2024: R8 443 million), a 31% year-on-year decrease. This decrease stems mainly from lower ferrochrome sales volumes of 124kt (2024: 298kt), lower ferrochrome prices and a stronger ZAR:USD exchange rate. Thanks to the resilience of chrome ore prices, chrome revenue, bolstered by PGMs revenue, supported total revenue. The ZAR:USD, however provided little support to revenue this year as the average rate, compared to the previous reporting period, strengthened.

Ferrochrome's average CIF price decreased by 6% to USc 93/lb (2024: USc 99/lb). This, coupled with the 58% drop in ferrochrome volumes sold resulted in ferrochrome revenue decreasing by 61% to R2 296 million (2024: R5 909 million). A 3% stronger average ZAR:USD exchange rate of R17.88 (2024: R18.34) also did not help. Chrome ore sales volumes experienced a 44% increase, reaching 683kt (2024: 475kt). This led to a 37% increase in chrome ore revenue to R3 110 million (2024: R2 262 million), after offset by a 4% lower average CIF chrome ore price of USD270/t (2024: USD281/t). The increase in PGMs revenue stems from a firmer average PGMs basket price and higher volumes sold. Revenue totalled R390 million (2024: R267 million). The average PGMs basket price increased by 31% to USD 1 415/oz (2024: USD 1 079/oz) while sales volumes increased by 10% to 14 948oz (2024: 13 557oz).

Total operating expenses (excluding Merafe head office costs) decreased by 24% to R5 066 million (2024: R6 690 million*). This was driven primarily by lower ferrochrome sales volumes. A key component of operating costs is the cost of ferrochrome production. 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. Standing charges increased to R633 million (2024: R287 million) due to smelters that were suspended from H1 2025. Additionally, operating expenses include inventory write-down of R4 million (2024: R79 million) during the year, arising from a net realisable value adjustment on some closing stock. The expenses also include the affected smelters' retrenchment costs of R198 million (2024: R67 million) and rehabilitation costs of R136 million (2024: R14 million). The unresolved diesel rebate matter with SARS resulted in a disallowed amount (net of income tax) of R32 million (2024: R30 million) and interest payable to SARS of R10 million (2024: R8 million), both fully provisioned for at year end.

Foreign exchange volatility resulted in a foreign exchange loss of R165 million (2024: R29 million gain).

EBITDA

The factors mentioned above decreased Merafe's share of the Venture's EBITDA to R605 million (2024: R1 782 million*). Prior-year property, plant and equipment (PPE) impairment adjustments decreased the depreciation charge to inventory by R26 million (2024: R16 million). After deducting corporate costs of R72 million (2024: R85 million), which include R1 million in cash-settled share-based payments (2024: R15 million), R4 million in CSI (2024: R3 million), and R12 million in bonus provisions (2024: R13 million), Merafe achieved EBITDA of R533 million (2024: R1 698 million*).

Depreciation and impairment

Merafe's year-end share price traded at a discount to its net asset value per share, raising the possibility of impairment. Consequently, a recoverable amount calculation (per IAS 36) was performed, primarily based on Merafe's share of the Venture's value-in-use (as the cash-generating unit (CGU)), including the valuation of Unicorn Chrome (Pty) Ltd. No CGU impairment adjustment was recognised in the current reporting period.

While there was no CGU impairment at year end, there were grounds pointing to the likely impairment of additional smelting plants. After considering several critical factors which included the state of the ferrochrome market and the level of our operating costs, management concluded that Tswelopele and Bokamoso pelletising plants and the Wonderkop smelter should be fully impaired resulting in a total impairment loss of R222 million (2024: R575 million) at year end.

The depreciation expense for the reporting period reduced to R201 million (2024: R354 million), mainly arising from recent plant impairments.

Income from equity-accounted investments

Resilient chrome ore prices helped support Impala Chrome (Pty) Ltd's (Unicorn Chrome's only investment) financial performance in 2025, although profitability was lower than in 2024. The Company's share of income from the equity-accounted investment was R13 million (2024: R20 million).

Net finance income

Finance costs totalled R2 million (2024: R1 million), primarily due to commitment fees on the banking facility. Interest income from cash reserves and a notice deposit amounted to R69 million (2024: R99 million*) due to lower cash balances and interest rates.

Taxation

The taxation expense included a deferred tax credit of R101 million (2024: R85 million) due to temporary differences relating to property, plant and equipment; receivables; provisions; and accruals. Taxable profits exceeded capital expenditure and, thus, there was no unredeemed capital expenditure at year end (2024: Rnil). The current tax expense of R149 million (2024: R304 million), is lower primarily due to reduced earnings for the year.

Profit for the year

Consequently, Merafe reported profit after tax of R143 million (2024: R667 million) for the year ended 31 December 2025.

Financial position

Due to the suspension of smelting operations, ferrochrome production at Merafe's operations was 63% lower than the previous year. Ferrochrome finished goods inventory at year end was 71kt (2024: 83kt) – representing six to seven months' (2024: three to four months') sales. The closing inventory balance was R1 899 million (2024: R1 795 million) due to higher raw materials balances. There was a slight increase in the trade and other receivables balance to R1 209 million (2024: R1 175 million) due to the mix and timing of sales in the last quarter of 2025. The trade and other payables balance decreased to R721 million (2024: R894 million) at year end. Maintaining optimal working capital remains a key focus for the business. The Venture's debt facilities remain unutilised, and the business remains ungeared at the end of the financial year. The provision for environmental rehabilitation increased to R303 million (2024: R160 million) for reasons provided earlier. Arising from the initiation of the s189 process, the provision for retrenchment cost was R215 million.

Merafe's share of the 120-day notice deposit that is managed by Glencore Holdings South Africa through a Treasury Service Agreement was R394 million (2024: R361 million*). The Venture has ring-fenced this investment for future environmental rehabilitation obligation. These funds are unrestricted. Additionally, this investment is used to back Eskom's and the DMRE and Energy's bank guarantees. In prior periods, the deposit was erroneously classified as cash and cash equivalents. This was corrected in this reporting period.

Cash position

Merafe's year-end cash balance was R458 million (2024: R603 million*). Net cash inflow from working capital resulted from decreases in trade and other receivables and inventories partially offset by a decrease in trade and other payables.

Additionally, Merafe's share of balances held with Central Treasury was R698 million (2024: R831 million*). There was reclassification of these balances out of cash and cash equivalents in the statement of cash flows in prior periods. This treatment was corrected in the current reporting period.

Debt position

Merafe's credit facilities with Absa remained unutilised at year end. During the reporting period, the revolving credit facility was successfully refinanced for an additional three years.

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 its transfer pricing policies. As a result, significant judgment is required to determine whether the Group is subject to direct and indirect tax in the South African jurisdiction. 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 tax assessments for 2016 and 2017. 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 2016 and 2017.

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.

Share buy-back

The Board concluded that a dividend was preferable to a share buy-back programme at this time.

Dividend

The Board declared a final cash dividend of R200 million (2024: R200 million), equivalent to 8 cents per share (2024: 8 cents). This, combined with the interim dividend, brings the total dividend for the year to R300 million (2024: R700 million).

Outlook

The high cost of electricity remains a significant challenge for ferrochrome smelting operations. Future competitiveness depends primarily on a reduction in electricity tariffs. Government measures to address this issue will be crucial.

The global demand for ferrochrome is closely linked to stainless steel production. A rebound in global steel markets could increase demand for ferrochrome, potentially boosting prices and profitability for South African smelters. Stainless steel production in 2026 is expected to show growth of approximately 4% according to commodities research firms.

Global ferrochrome production growth remains a key risk to supply balance and pricing, and China is a key contributor to this risk.

The Venture will continue exploring and leveraging technologies to optimise production processes and reduce operational costs. We expect the benefits of our major cost-cutting initiatives in 2025 to be sustained in future years.

Overall and in the medium to long-term, the viability of our smelting operations depends on decisive and deliberate action to materially lower energy costs for smelters as well as sustained improvement in global ferrochrome/steel demand and prices. Structural policy actions that change the domestic cost/benefit calculus (e.g. beneficiation incentives or forced shifts in ore export policy) are another option, but their efficacy has been questioned.

While the future of the smelting operations remains uncertain, the chrome ore business has done well in 2025, and the Venture will continue to invest in this part of our business. As in 2025, we expect both the chrome ore and the PGMs businesses to contribute positively towards our financial performance in 2026.

We remain cautious in our approach to 2026 and will continue to focus on efficient operations, cash preservation, cost control and efficient capital allocation.

We are committed to creating shared value for our stakeholders.

Ditabe Chocho
Financial Director

6 March 2026

*

Restated. In line with IAS 8, the 2024 figure has been restated to correct the treatment of cash and cash equivalents and financial assets held with Central Treasury, as well as interest income related thereto, to be in line with IAS 7. Refer to the 2025 audited consolidated and separate annual financial statements for detail.

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

		As at
	Summarised consolidated statement of financial position	31 December 2025 R'000	Restated 31 December 2024 R'000
	Assets
	Non-current assets
	Property, plant and equipment	1 147 920	1 124 913
	Intangible assets	16 972	21 188
	Investment in associate	38 181	32 676
	Long-term receivable	96 112	64 260
	Other long-term receivable	17 133	17 730
		1 316 318	1 260 767
	Current assets
	Inventories	1 898 609	1 794 492
	Trade and other receivables	1 208 700	1 175 161
	Current tax receivable	82 005	116 966
	Other short-term financial assets*	393 966	360 756
	Cash and cash equivalents and balances held with Central Treasury*	1 156 408	1 434 155
		4 739 688	4 881 530
	Total assets	6 056 006	6 142 297
	Equity and liabilities
	Equity
	Share capital	1 288 876	1 288 876
	Retained income	3 429 932	3 587 239
		4 718 808	4 876 115
	Liabilities
	Non-current liabilities
	Lease obligation	3 370	4 723
	Deferred tax	84 856	186 146
	Environmental obligations	278 360	142 356
	Share-based payment liability	3 685	7 254
		370 271	340 479
	Current liabilities
	Trade and other payables	720 957	893 686
	Lease obligation	1 353	1 150
	Current tax payable	–	106
	Environmental obligations	240 083	17 376
	Share-based payment liability	4 534	13 385
		966 927	925 703
	Total liabilities	1 337 198	1 266 182
	Total equity and liabilities	6 056 006	6 142 297

*	Restated. Refer to note 41 of the annual financial statements.

		For the year ended
	Summarised consolidated statement of profit or loss and other comprehensive income	31 December  2025  R'000	Restated  31 December  2024  R'000
	Revenue	5 834 877	8 443 462
	Foreign exchange (loss)/gain	(165 170)	29 321
	Operating and other expenses*	(5 136 662)	(6 774 473)
	Earnings before interest, taxation, depreciation and amortisation*	533 045	1 698 310
	Depreciation and amortisation	(201 348)	(354 410)
	Impairments	(222 285)	(575 429)
	Income from equity-accounted investment	13 168	20 122
	Results from operating activities*	122 580	788 592
	Finance income*	68 794	99 118
	Finance expense	(1 553)	(1 358)
	Profit before taxation	189 821	886 353
	Taxation	(47 233)	(219 146)
	Total comprehensive income for the year	142 588	667 207
	Earnings per share
	Basic earnings per share (cents)	5.7	26.7
	Diluted earnings per share (cents)	5.7	26.7

*	Restated. Refer to note 41 of the annual financial statements.

		For the year ended
Summarised consolidated statement of changes in equity		31 December  2025  R'000	31 December  2024  R'000
	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 the beginning of the year	3 587 239	3 969 665
	Total comprehensive income for the year	142 588	667 207
	Dividends	(299 895)	(1 049 633)
	Balance at the end of the year (retained income)	3 429 932	3 587 239
	Total equity for the end of the year	4 718 808	4 876 115

		For the year ended
Summarised consolidated statement of cash flows		31 December  2025  R'000	Restated  31 December  2024  R'000
	Cash flows from operating activities
	Cash generated from operations*	679 466	2 034 712
	Dividends received from associate	7 663	1 596
	Finance income received	38 308	66 359
	Finance expense paid	(1 970)	(2 164)
	Taxation paid	(113 667)	(356 374)
	Net cash from operating activities*	609 800	1 744 129
	Cash flows from investing activities
	Acquisition of property, plant and equipment – sustaining	(407 237)	(608 373)
	Acquisition of property, plant and equipment – expansionary	(39 280)	(53 819)
	Proceeds from sale of property, plant and equipment	1 100	644
	Proceeds from sale of land and mineral rights	–	7 894
	Other long-term receivable advanced/(paid)	597	(3 501)
	Movement in balances held with Central Treasury*	(8 719)	(128 335)
	Net cash utilised in investing activities*	(453 539)	(785 490)
	Cash flows from financing activities
	Repayment of capital portion on lease liabilities	(1 150)	(3 186)
	Dividends	(300 035)	(1 049 633)
	Net cash utilised in financing activities	(301 185)	(1 052 819)
	Total cash movement for the year*	(144 924)	(94 180)
	Cash at the beginning of the year*	602 730	696 910
	Total cash at the end of the year*	457 806	602 730

*	Restated. Refer to note 41 of the annual financial statements.