Merafe jumps 10% as SA's rail dysfunction helps lift chrome prices

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Shares in Merafe Resources, the junior partner in a joint venture in Glencore's SA operations, jumped more than 10% on Tuesday morning, when it reported that a weaker rand and higher chrome prices helped it up its interim dividend by two-thirds.

Net cash climbed more than a quarter to R1.6 billion in the six months to end-June, the group said on Tuesday, when chrome ore prices remained elevated due to a lack of supply growth and continued logistics constraints out of SA, which represents over 90% of global seaborne trade. This echoes similar comments by JSE-listed Tharisa resources.

READ | Tharisa reports boost as SA's energy and rail dysfunction helps support chrome prices

Merafe, valued at over R3 billion on the JSE, is part of a joint venture with mining and trading giant Glencore - formerly Xstrata - formed the 2004. They had pooled their chrome operations, with Merafe receiving 20.5% of the core profit from the venture. During its half year, it also received a boost from an 18% weakening of the average rand to dollar exchange rate.

The group upped its dividend two thirds to 20c per share, about a R500 million payout.

"Logistics challenges continue with not much improvement in rail availability," the group said. "The chrome industry and Transnet Freight Rail continue to collaborate on improving rail performance."

The group expects the second half to be softer on a weaker market outlook, saying chrome prices have already started abating.

Shares in the group were up almost 11% in late morning trade but have still fallen 5% on a one-year basis.