Our opinion on the current state of MRF

This is a ferrochrome operation controlled by Glencore which operates mines, furnaces and smelters in Mpumalanga and Limpopo. The Glencore-Merafe joint venture can produce up to 2,3m tons of ferrochrome per annum. Merafe gets 20,5% of the proceeds and the balance goes to Glencore. The problem is electricity supply, because smelters require huge amounts of current. The 15,6% increase in Eskom tariffs last year was a major factor and the current year's increase of just under 10% from 1st April 2022 is a further problem. The company is concerned about Eskom's ability to supply additional power for expansion. Their Lion 3 expansion has accordingly been suspended until this difficulty can be overcome. All smelters except Lydenburg are operating. The availability of trains from Transnet to move its product is another problem. In its results for the six months to 30th June 2023 the company reported ferrochrome production down 9% and revenue up 11%. Headline earnings per share (HEPS) were 42c - slightly up from the 37c of the previous period. The company's net asset value (NAV) increased by 22%. In a production report for the 9 months to 30th September 2023 the company reported ferrochrome production down 21% due to a planned pull-back. Obviously, this is a commodity share and has risks, but the world's demand for stainless steel did increase with the economic boom in America, but that now appears to be coming to an end. Technically, the share reached a high of 192c on 4th April 2022 and was trending down until a rally in September 2022. It has found some support at 104c per share, but remains a volatile commodity share.