| Thu 27 Sep 2007, 8:00 | | MRF - Merafe - Regarding Merafe`s participation in |
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MRF
MRF
MRF - Merafe - Regarding Merafe`s participation in project Bokamoso - a 1.2 mtpa
pelletising and sintering plant
MERAFE RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/003452/06
Share Code: MRF
ISIN: ZAE000060000
("Merafe" or "the Company")
Announcement regarding Merafe`s participation in Project Bokamoso - a 1.2 mtpa
pelletising and sintering plant
1. Introduction
In the Company`s reviewed results for the six months to June 2007, it was stated
that Merafe was in discussions with Xstrata with regard to Merafe`s option to
participate in Project Bokamoso. Shareholders are advised that an agreement in
this regard has been reached and Merafe will participate in 20.5% (its
proportionate share in the Xstrata-Merafe Chrome Venture) of Project Bokamoso.
2. Background to the Project
Project Bokamoso (meaning "the future") is a mega chrome ore pelletising and
sintering plant using Outokumpu technology with an annual capacity of 1.2
million tonnes produced from 2 separate lines with a capacity of 600 000 tonnes
each ("the Project"). It is located at the Wonderkop operations of the Xstrata-
Merafe Chrome Venture ("the Venture") and the pellets will be used in the
Wonderkop and Rustenburg smelters. The commissioning of the 1st line took place
in July this year and the 2nd line will be commissioned by the end of September
2007. The Project is on schedule and within budget.
3. Rationale for the Project
A typical furnace requires 80% lumpy or agglomerated chrome ore. The lumpy ore
yield from the chrome mines has declined to 25% due to geological challenges as
well as the use of mechanical drilling methods. Project Bokamoso will prevent
excess fine ore build-up, improve furnace efficiencies, reduce production costs
and increase the use of chromite fines from UG2 tailings due to increased
agglomeration capacity.
4. Benefits of the Project
The Venture is expected to significantly benefit from Project Bokamoso in the
following respects:
- additional production of ferrochrome;
- improved chrome content in the ferrochrome;
- cost savings per tonne of ferrochrome production;
- less working capital tied-up in excess chrome ore fines;
- uses less chrome ore per tonne of ferrochrome produced;
- lower electricity consumption;
- the use of pellets results in a more stable production environment
thereby improving operational efficiencies; and
- increased use of chromite fines from UG2 tailings.
The Venture already has an Outokumpu pelletising and sintering plant at its two
furnaces at Boshoek, a Premus pelletising plant at its four furnaces in
Lydenburg and at its two furnaces at Lion Ferrochrome. Project Bokamoso now
provides pelletising and sintering technology to supplement the existing
agglomeration capacity at the Venture`s six furnaces at Wonderkop and six
furnaces at Rustenburg.
The successful commissioning of Lion Ferrochrome, now coupled with Project
Bokamoso, achieves the Venture`s stated objective of moving it further down the
cost curve.
5. Consideration for the Project
Merafe`s proportionate share of the Project, at cost, is expected to be R181
million, including interest, payable to Xstrata.
The Company has raised R66 million via a general issue of shares for cash by
placing 40 million shares at 165 cents each being an 8.5% premium to the 30 day
volume weighted average price on 21 September 2007. The entire issue was placed
with North Sound Capital, Greenwich, Connecticut. The full R66 million will go
towards paying for this project and the balance will be settled with debt and
existing cashflows.
Sandton
27 September 2007
Sponsor
Deutsche Securities SA (Proprietary) Ltd
Date: 27/09/2007 08:00:01 Produced by the JSE SENS Department.
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