Merafe Resources' share price drops 9% amid earnings warning

Merafe Resources’ share price plunged over 9% on Friday after it warned that headline earnings per share (HEPS) for the six months to June 30 would decrease between 45% and 65%.

The share closed at R1.20 on Friday, while the price 12 months ago was R1.47. Merafe earns its income primarily through participation in the Glencore-Merafe Chrome Venture, one of the largest ferrochrome producers in the world. Merafe holds a 20.5% stake in the venture.

The company said on Friday that HEPS would be between 9.8 cents and 15.4 cents, compared to HEPS of 28.2 cents for the same period a year before. The interim results are expected to be released on August 12, 2025.

In a production report, Merafe’s directors stated that their attributable ferrochrome production from the venture was 112kt for the six months to June 30, a decrease of about 28% in production compared to the six months ended 30 June 2024.

“This reduction in production is attributed to the suspension of production at our smelters due to adverse market conditions,” the directors said.

Merafe’s earnings per share were expected to be between 6.4 cents and 12.2 cents, compared to EPS of 28.8 cents for the prior comparative period, which is a decrease of between 58% and 78%.

The expected decline in EPS and HEPS was mainly driven by softer commodity prices, lower volumes sold, a stronger rand-dollar exchange rate, and further impairments over the reporting period, the directors said.

Cash and cash equivalents for the period comprised cash held by Merafe of R449 million and R693m, being Merafe's share of the cash balance in the venture. Included in the cash held by the venture is cash set aside to fund future environmental rehabilitation obligations, with Merafe's share of this cash being R378m.

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