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  • ZANELE MATLALA
    Chief Excutive Officer

    CHIEF EXECUTIVE OFFICER’S STRATEGIC REVIEW

    The focus of the Company in 2018 continued to be on safety, ferrochrome production, maximising cash flows from the Venture, reducing costs and distributing cash to shareholders...

    VIEW STRATEGIC REVIEW


  • DITABE CHOCHO
    Financial Director

    FINANCIAL DIRECTOR

    Merafe's revenue and operating income is primarily generated from the Glencore Merafe Chrome Venture (Venture) which is one of the global market leaders in ferrochrome production...

    VIEW FINANCIAL CAPITAL

  • CHRIS MOLEFE
    Chairperson

    CHAIRPERSON

    We support and agree with King IV which states that the governing body of an organisation should be transparent in the manner in which it exercises its governance role and responsibilities...

    VIEW CHAIRPERSON'S REPORT



2018 year in review

KEY FEATURES

    

Revenue of

R5.6 billion

(2017: R5.9 billion)

Headline earnings of

27.2c per share

(2017: 36.4c)

EBITDA of

R1.35 billion

(2017: R1.7 billion)

Ferrochrome sales volumes of

372kt

(2017: 375kt)

Net profit of

R683 million

(2017: R914 million)

Ferrochrome sales volumes of

407kt

(2017: 395kt)

Fatalities: 1

(2017: 1 fatality)

TRIFR of

3.39

(2017: 3.74)

Total dividend for 2018 of

R351 million

(2017: R301 million)

Average European benchmark ferrochrome price of

131 USc/lb

(2017: 142 USc/lb)

VIEW 2018 YEAR IN REVIEW


OUR OPERATING CONTEXT

THE GLOBAL POSITION OF FERROCHROME

Elements influencing the global demand for and pricing of ferrochrome

  • Global economic conditions
  • Exchange rates
  • Stainless steel demand
  • Growth of Chinese ferrochrome industry
  • Chrome ore exports

90%
of the ferrochrome produced is used in stainless steel and specialty steels

Stainless steel production grew from 48.5 million tonnes in 2017 to 51.4 million tonnes in 2018

Legend

  • Stainless steel producers
  • The Venture

OUR COMPETITIVE ADVANTAGE

  • Lowest-cost producer in South Africa
  • Flexibility provided by variety of cost efficient technologies
  • Savings in energy consumption per tonne of alloy produced as a result of major investments in energy efficiency (Lion Complex and two pelletising and sintering plants)
  • Lion II achieves further energy efficiencies
  • Significant chrome ore reserves and access to UG2

Ferrochrome production and its role in stainless steel

Produced by high-temperature reduction (smelting) of chromite, ferrochrome contains iron, chrome, minor amounts of carbon and silicon, and impurities such as sulphur, phosphorous and titanium. Chrome is a metallurgical marvel. It brings critical properties to the metals with which it is alloyed. Add it to carbon steel in the form of ferrochrome and the steel becomes ‘stainless’ – corrosion resistant, mechanically strong, heat resistant, hard wearing, shiny and glamorous. Stainless steel is used almost everywhere in modern life from nuclear reactors to exhaust pipes, architecture, kitchenware and a host of other applications. Specialty steels produced for applications such as tools, injection moulds, camshafts, etc also derive the high mechanical strength, hardness and heatresistance required from their chrome content.

Key statistics for 2018

  • Global ferrochrome production increased from 12.6 million tonnes in 2017 to approximately 13.4 million tonnes in 2018.
  • Ferrochrome demand increased from 12.2 million tonnes in 2017 to 13.1 million in 2018.
  • South Africa produced approximately 3.9 million tonnes of ferrochrome in 2018.
  • China imported approximately 14.3 million tonnes of chrome ore in 2018 with South Africa accounting for 10.9 million tonnes of imports into China.

SOUTH AFRICAN CHROME INDUSTRY

Facts

Approximately 3.9mt of the world’s ferrochrome production of 13.4 mt was supplied by South Africa in 2018

Over 72% of the world’s chrome reserves are in South Africa

Provides over 200 000 direct and indirect jobs

Challenges faced by South African ferrochrome producers

  • Increasing production costs
    • electricity
    • labour
  • Socio-political challenges
  • Legislative uncertainty
  • Commodity prices and demand
  • Chrome ore exports
  • Electricity supply
For more information on ferrochrome production, consumption stainless steel production and chrome ore imports, see the CEO’s strategic review