Merafe Resources - Glencore JV to close two ferrochrome smelters and axe jobs

A government proposal on electricity tariffs to save the Glencore Merafe Chrome Venture's ferrochrome smelters from closing will only benefit one of its three smelters, and retrenchment notices have been issued.

Merafe Resources had on November 19 provided an update on the consultation process for retrenchments, due to the cessation of the ferrochrome smelters. JSE-listed Merafe holds a 20.5% stake Glencore Merafe Chrome Venture, which has a 2.3 million ton per year capacity or about a third of South Africa annual exports of the Mineral.

"Following recent engagements with Eskom Holdings, a proposal regarding electricity tariffs was presented on November 28. While the proposal remains subject to further approval processes, the venture's analysis thereof indicates that the proposal only supports the continued operation of the Lion smelter. Regrettably, the proposal does not provide a sustainable solution for the long-term viability of the Boshoek and Wonderkop smelters," Merafe's directors said Tuesday in a notice to its shareholders.

Accordingly, formal retrenchment notices had been issued and approvals of Voluntary Severance Packages, with effect from December 1, 2023 at the two smelters. The specialist online mining publication Miningmx reported that about 2 425 direct jobs and more than 17 000 indirect jobs would be affected by these processes.

"These retrenchment notices and VSP approvals remain conditional until December 8, 2023. In the absence of a viable solution from the South African government by the termination date, the conditional retrenchment notices and VSP approvals will automatically take effect and become binding with effect from December 9, 2023," the company said.

Glencore Merafe Chrome Venture has been negotiating for lower electricity tariffs for years to try and save the long term future of its smelters in South Africa.  In the absence of a viable solution, both the Wonderkop and Boshoek smelters will be placed on care and maintenance from January 1, 2024, the statement said.

"The company remains committed to engaging with all stakeholders throughout this process and maintain operational sustainability where possible," Merafe's directors said.

Merafe had warned shareholders on February 3, 2025, that a business review process had been initiated for the ferrochrome smelting business, because sustained pressure from a prolonged economic downturn in the global ferrochrome market, which was not expected to ease in the near to medium term, had been exacerbated by rising electricity tariffs.

Miningmx reported that about 300 000 to 350 000 jobs had been lost due to the closure of 14 smelters across the country.

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