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Chief Executive Officer's strategic review


2019 was extremely challenging both from an operational and trading perspective. The uncertainty created by geopolitical events, such as Brexit and US/China trade wars continued to impact global sentiment. Weak chrome ore and ferrochrome prices as well as rising production costs had negative impacts on the financial results.



Chief Executive Officer


As reported in our interim results for the half-year ended 30 June 2019, there was unfortunately a fatality at the Venture’s Magareng mine as a result of a fall of ground incident.

We continue to place maximum focus on safety. We have a number of safety campaigns in our efforts to improve our safety performance. This is evidenced by the improved TRIFR of 2.56 compared to 3,39 for the year ending 31 December 2019.


We incurred a loss after tax of R1.36 billion mainly as a result of lower revenue, higher cost of sales, impairments and higher standing charges. Revenue was impacted by marginally lower ferrochrome sales volumes, lower net average CIF ferrochrome prices which were offset by weaker average Rand:US Dollar exchange rate and higher chrome ore sales volumes. Costs of sales was impacted by above inflation electricity tariff increase and higher reductant costs.

The balance sheet remained strong with net cash balance of R354 million. The business remains ungeared. Post year-end, a final cash dividend of R100 million has been declared by the Board.

I refer you to the Financial Capital section of this report as well as our Financial Statements which are on our website for more detailed information.


Ferrochrome production volumes decreased by 9% from 407kt in 2018 to 371kt in the current financial year. The contributing factors to the decrease were power supply disruptions, community unrest and scaled down production levels in the fourth quarter of 2019 in response to weaker demand for ferrochrome.

Load curtailment by Eskom had an impact on production volumes and costs. This remains a key risk for our business and the broader ferro-alloy sectors. In addition, electricity tariff increases are contributing to cost pressures in the business. The National Energy Regulator of South Africa approved a 13.87% tariff increase effective 1 April 2019 and 8.1% effective 1 April 2020.

While the tariff increases are less than amounts Eskom had applied for, the above inflation increases will have an impact on cost structures and margins.


As announced on 20 January 2020, the Venture has commenced consultation processes in terms of Section 189 and 189A of the Labour Relations Act at the Rustenburg smelter. The consultation process is a result of deteriorating market and operating conditions across the South African Ferrochrome industry, including unsustainable electricity tariff and power supply disruptions. These factors have also led to displacement of South African ferrochrome volumes.

The increasing and unrestricted exports of chrome ore from South Africa is also contributing to displacement of ferrochrome volumes from South Africa.


Global stainless steel production increased by 1.5%^ in 2019 to an estimated 51.9mt^. Stainless steel production in China and Indonesia exceeded 30mt^, an all-time high and approximately 8%^ higher than the prior year, while European and North American production declined around 7%^ year-on-year. Although Chinese stainless steel producers remain competitive on a global scale, they face headwinds due to an increase in global trade restrictions.

Global ferrochrome production increased 3.2%^ to an estimated 14.1 million^ tonnes in 2019, this is lower than the growth of 8.1%^ in 2018. Ferrochrome production in China increased 13%^ year-on-year, linked to a 15.4%^ increase in chrome ore exports from South Africa. Despite the increase in Chinese ferrochrome demand, South African ferrochrome production declined 8%^ during 2019 to 3.6mt^, owing to lower prices and weak rest-of-world demand. These cutbacks were exacerbated by power shortages in H2 2019. The environment for ferrochrome producers in South Africa is expected to remain challenging, while further capacity additions are expected in China.

Chinese chrome ore imports from countries other than South Africa reduced by 1.6%^ during 2019, owing to weak market conditions. This has increased China’s reliance on South African chrome ore imports from 76%^ to 79%^. Despite an increase in demand from Chinese ferrochrome smelters, chrome ore port stocks rose 20%@ to approximately 3.5mt@ by year end, owing to continued ore oversupply.

^ CRU commodity market analysts
@ Ferroalloy Net

Key market indicators

Global stainless steel production (mt) Global ferrochrome demand (mt) Global stainless steel production
Global ferrochrome demand    


The focus of the Company in 2019 continued to be on safety, ferrochrome production and maximising cash flows from the Venture.

As such we managed to return cash to shareholders by declaring and paying a dividend of R100 million for 2019.

We remain mindful that operating a long-term business like ours requires us to demonstrate to all our stakeholders that we consider on an annual basis the material issues which may impact the business in the future. In this regard I refer you to (Material issues section as well as the sections on Natural, Human and Social Capital).


Stainless steel production is expected to grow by 3.2% in 2020, however, both chrome and ferrochrome prices are expected to remain under pressure in the short term due to oversupply. The growth forecasted does not factor in the possible impact of COVID-19 (Coronavirus) and load shedding which is expected to last for 18 to 24 months.

We will continue to manage factors within our control. Cost management, efficient and safe operations, cash preservation and efficient cost allocation will continue to be management’s key areas for 2020.

The financial position of our business which is ungeared at year end remains strong and we remain of the view that this positions us to withstand the difficult times ahead.

In accordance with our strategy, we will continue to focus on maximizing return to our shareholders in the near term in the form of dividends and will continually assess opportunities to deliver shareholder value.

I would like to thank the Company’s staff and executive, its board as well as our partners in the Venture, Glencore, for their hard work and commitment during a difficult year.

Zanele Matlala

Chief Executive Officer

6 March 2020

Global Ferrochrome Production (mt) Chrome Ore Imports into China (mt)
UG2 Merchant prices (USD/t) Ferrochrome Merchant prices 49-70% (USc/lb) European benchmark ferrochrome price (USc/lb)