| Wed 20 Oct 2010, 8:00 | | MRF - Merafe Resources Limited - Shareholders Announcement |
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MRF
MRF
MRF - Merafe Resources Limited - Shareholders Announcement
Merafe Resources Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1987/003452/06)
JSE share code: MRF
ISIN: ZAE000060000
("Merafe")
Shareholders Announcement
Lion II
Shareholders are referred to the announcement by Xstrata plc today of the
construction of Lion II, a 360,000 tonne per annum ferrochrome smelter in
Steelpoort, Limpopo. Merafe has the right, in terms of its agreement with
Xstrata, to participate in Lion II at cost and in accordance with its
participation interest (20,5%) which is expected to be R1 billion. Should
Merafe decide to participate in 20.5% of Lion II, it is expected that the
majority of the financing will be sourced from future internal cash flows with
the balance from loan financing.
Merafe will be assessing Lion II and an announcement regarding the Company`s
participation in the project will be made by the end of the year.
For ease of reference, the Xstrata plc announcement is copied below.
Sandton
20 October 2010
Sponsor
Deutsche Securities SA (Pty) Ltd
XSTRATA NEWS RELEASE
Johannesburg, 20 October 2010
Xstrata plc ("Xstrata") has approved the development of the second phase of its
Lion ferrochrome complex expansion in South Africa. The expansion will involve
the construction and commissioning of a 360,000 tonne per annum capacity smelter
and will increase the Xstrata-Merafe chrome venture`s ("the Venture") total
ferrochrome capacity to over 2.3 million tonnes per annum. The project has met
all of Xstrata`s key value and risk metrics for some three years since it was
first considered. However, the absence of security of supply of electricity
resulted in the project`s approval being held in abeyance until a firm
allocation of capacity was received by Eskom for the second phase of the Lion
complex. In addition, emerging plans within Xstrata Alloys for an "own
generation" capability further reduces Xstrata`s concerns on the availability of
electricity by the time this plant is commissioned.
The development will entail a total capital investment of R4.9 billion (US$710
million) and includes R700 million (US$100 million) for the concurrent
development of the 1.2 million ROM tonne per annum Magareng mine within the
Thorncliffe mine complex. Construction is scheduled to begin in the first
quarter of 2011, with commissioning planned for the first half of 2013. The
expansion will create over 1,000 permanent jobs and a further 1,800 jobs will be
generated during the construction phase. Around 80% of the total expenditure on
project goods and services will be sourced locally.
The expansion will utilise Xstrata`s proprietary energy-efficient Premus
technology, and will reduce the overall cost of the Venture`s total ferrochrome
production by around 6%. Xstrata`s Premus technology consumes approximately a
third less electricity than other available smelting technologies - an industry
leading average of between 2.2 to 2.4 megawatts per tonne. In addition, Xstrata
is advancing its own power generation plans and is currently completing a
feasibility study for the first phase of a 600MW thermal power generation plant
that will supplement future electricity supply.
Xstrata`s pooling and sharing venture (PSV) partner, JSE-listed Merafe
Resources, holds a 20.5% interest in the Venture and has an option to
participate in the expansion.
Commenting on the decision, Xstrata Alloys` Chief Executive, Peet Nienaber, said
"The use of our energy-efficient Premus technology for the expansion project
will expand Xstrata`s cost leadership in a global environment of escalating
energy costs. The project is further aligned with some of the key principles
contained in the South African government`s recently publicised draft Integrated
Resource Plan 2010 including world leading energy-efficiency and using
electricity to create sustainable jobs.
"This investment is aligned with the South Africa`s Industrial Policy Action
Plan and demonstrates Xstrata`s continued commitment to beneficiation following
the R917 million investment by the Venture in Project Tswelopele, a chrome
pelletising plant in Rustenburg. The Lion smelter development is also the first
major investment of its kind for South Africa since the government announced the
amended Mining Charter, which strives to extract maximum benefit for the country
through fixed investment, new and sustainable job creation, beneficiation,
enhancement of South Africa`s export earnings and contribution to the National
Fiscus. The expansion will also allow us to significantly increase procurement
from BEE enterprises, support the growth of new local enterprises and develop
technical skills. These are some of the key pillars of the amended Mining
Charter. We also look forward to Merafe`s participation in the expansion and
understand that they have their own processes to follow prior to making a
commitment," he continued.
Xstrata plc Chief Executive Officer Mick Davis says "This expansion further
enhances Xstrata`s leading position in the ferrochrome market and will allow the
Group to benefit from anticipated growth in global demand for stainless steel.
The Venture`s management team has already, through the first phase of this
expansion, demonstrated its ability to deliver projects on time and on budget. I
am confident that the team is equally committed to the expansion`s second
phase".
ends
Date: 20/10/2010 08:00:08 Produced by the JSE SENS Department.
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