Merafe Resources Limited (RZT.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Merafe Resources Limited's Interim Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I will now hand the conference over to Zanele Matlala. Please go ahead, ma'am.

Good morning. Welcome to the Merafe interim results presentation. The operating environment continues to be challenging, market uncertainty caused by geopolitical tensions and trade wars continues. And overall, our financial performance deteriorated, which is indicative of a tough environment. There was improved safety performance with no fatalities recorded. At the beginning of the year, we undertook a business review of our smelters. This review was finalized in Q2 with the remaining smelters being idled. Global stainless steel production increased and so did ferrochrome demand. However, South African ferrochrome production decreased significantly in response to adverse market conditions, especially ferrochrome prices being below cost of production. On the other hand, chrome prices fluctuated but remained strong. The stronger rand U.S. dollar exchange rate did not help. Revenue decreased by 47% due to lower volumes and prices. A further impairment of smelting assets have been processed, contributing to the further decrease in earnings. Headline earnings per share reduced to ZAR 0.126, which is a 55% decline. Global stainless steel production increased by 4% period-on-period. Ferrochrome demand followed a similar trend, increasing by 5%. 63.5% of global stainless steel production and 67.9% of ferrochrome demand came from China. The growth in ferrochrome demand was not matched by production. Ferrochrome production decreased by 8%, largely, South African producers, reducing production as a result of the market conditions. Chrome ore exports into China are expected to be higher, given that the volumes for 5 months are almost the same as 6 months volumes in the prior period. South Africa accounts for more than 80% of the imports into China. There was some volatility in pricing. UG2 prices remained resilient and ticked up closer to the end of Q2. Ferrochrome prices recovered about 10% from the lows in Q1 but this recovery is still not enough to bring back suspended smelters. The European benchmark price has been discontinued and will no longer be reported on. On the health and safety, the TRIFR improved significantly from December 2024, and there were no fatalities reported. The focus on safety remains in place despite challenges faced by the business. Power supply remained stable with minimal load curtailment. High tariffs remain at risk. The suspension of smelter stems very much from the high cost of electricity amongst other issues. The energy strategy communicated previously remains in place but certain projects are on hold due to prevailing market conditions. Alternative smelting technologies are being evaluated to mitigate the high cost of traditional smelting. Ferrochrome production declined by 27%, mainly as a result of the suspension of smelters. Boshoek and Wonderkop smelters were suspended in response to market conditions, whilst Lion was suspended due to planned maintenance. Given the structural change of the business, chrome ore production volume and costs will be included in future updates. Production costs per tonne of ferrochrome decreased by 5% from December 2024 due to lower chrome ore prices and lower reductant costs. Fixed costs were higher due to lower production volumes and inflation. Chrome ore costs increased by 7% from December 2024 as a result of higher labor, engineering and utility costs. Lower UG2 costs contributed positively to overall cost increases. PGM volumes increased due to the inclusion of the PGM X plant for the full period. Feed volumes and ounces produced were both higher. There has also been an improvement in pricing driven by platinum and rhodium prices. The Venture is still awaiting the outcome of the competition commission process before the CMAs can be implemented. As indicated earlier, flowing from the business review, smelters have been suspended. Engagement with stakeholders continue. Government has indicated support for the industry. However, no implementation dates are in place yet for the proposed measures. The interventions proposed by government include electricity tariffs alignment. Chrome ore to be included under export control. Chrome ore export tax and expansion of special economic zones, none of which are quick fixes. The workforce for Boshoek and Wonderkop smelters remain in place. With the suspension of the smelters, greater focus will be placed on the mining operations, and our reporting is being revised to reflect that. I will now invite Ditabe to take you through our financial performance.

Thank you, Zanele, and good morning, everyone. My part of the presentation starts with Slide 22. On this slide, we provide an overview of our revenue performance. The bulk of our revenue is export based, and in spite of the significant reduction in volumes sold, ferrochrome still accounts for a sizable part of our total revenue, 51% in the reporting period. The lower average prices achieved for ferrochrome and chrome ore period-on-period are evident on this slide. PGMs, on the other hand, saw an increase in prices over the same period. The contribution of PGMs business comes through domestic revenue. Finally, the appreciation of the average rand dollar exchange rate period-on-period is shown at the bottom of the slide. The factors -- these factors contributed to the decline in total revenue by 47% over the reporting period. On the next slide, we break down the commodities that make up our revenue and look at them individually, starting with ferrochrome. Due to weakness in the market, ferrochrome volumes sold were lower in the prior period -- than in the prior period. China produced about 70% of its requirements. Adverse market conditions weighed on ferrochrome pricing resulting in lower average prices achieved. As a result, ferrochrome revenue dropped significantly by 60% to ZAR 1.4 billion, arising from a 12% decrease in prices achieved and a 55% reduction in ferrochrome volume sold. Chrome ore revenue declined by 17% in the reporting period. Average chrome prices decreased marginally but volumes sold were 14% lower period-on-period due to unexpectedly lower demand in the first half of the year. And finally, PGMs revenue of ZAR 156 million represents a 19% increase. This improved performance was made possible by 7% higher prices achieved and 9% increase in volumes sold due to the contribution of our PGM X plant. As earlier reported, the average rand dollar exchange rate strengthened over the period, negatively impacting our revenues. The downward revenue trend for ferrochrome and chrome ore is clear on this slide. Over time, we do anticipate an increase in chrome ore volumes sold to counter decline in ferrochrome volume sold. Slide 24 outlines our earnings per share. As stated in the company's trading update, the 2025 interim financial performance reflects the decline in earnings per share. For the period, we achieved basic earnings per share of ZAR 0.093 and headline earnings of ZAR 0.126. The main difference between the 2 earnings measures relates to the financial impact of the full impairment of additional smelting plants. This is discussed further later in the presentation. In the next few slides, we look at our earnings in greater detail. The contribution of each of our operations to the venture's EBITDA is analyzed on the next slide. The increased importance of chrome ore to earnings over time is evidenced by this chart. As in the prior comparative period, chrome ore contributed 85% of the reported EBITDA from the Venture. The contribution by PGMs increased in the current period from 6% to 9%. Smelting losses used up an even larger share of EBITDA from 7% in the prior period to 23%. The impact of intercompany adjustments that ultimately net off against the mining and smelting operations is reflected in the head office adjustments. On Slide 26, the next slide, the proportions of the 2025 EBITDA variances in percentage terms relative to the 2024 EBITDA as the base are presented. The impact of lower ferrochrome and boom oil volumes is a negative 36%. The commodity prices impact is also significant at a negative 10%. Inflation erode at 15% from EBITDA, illustrating the under-landing cost pressures. Foreign exchange effects of a stronger closing rand dollar exchange rate led to a 9% reduction in EBITDA. Due to suspended operations, spending charges used up 7% of EBITDA. Various other costs resulted in the balance of the negative variance, which reduced EBITDA by 3%. The only positive contributor to EBITDA, where the efficiencies of our operations, which resulted in a reduction of unit costs in real terms. This contributed 20% to the period's -- prior period's EBITDA. Overall, the 2025 EBITDA from the Venture is 57% lower than the 2024 comparative figure. The next slide looks at Merafe's proportionate share of the venture's EBITDA of ZAR 535 million and reconcile that to Merafe's reported profit after tax of ZAR 233 million for the period. Profit after tax is arrived at after deducting the following items from the Venture's EBITDA and these are in order of size. Impairment of ZAR 113 million, this arises from adverse market conditions. And the -- as a result, the suspended Wonderkop smelter as well as Bokamoso and Tswelopele pelletizing plants were fully impaired in the reporting period. Depreciation and amortization expense of ZAR 106 million. Current and deferred tax of ZAR 73 million, corporate costs of ZAR 35 million, net financing income of ZAR 20 million and income from equity accounted investment of ZAR 5 million. The slide that follows explores some of these items further. On this slide, we present the income statement in its standard format. Revenue has been discussed already. Foreign exchange loss of ZAR 81 million resulted from a weaker closing rand dollar exchange rate. This is against a lower loss in the prior period. Operating expenses on the next line were lower in the current period principally due to lower volumes of ferrochrome and chrome ore sold. What further contributed to the decline is the decrease in the unit production cost of ferrochrome. This decrease is mainly due to the lower cost of chrome ore and reductants. The decrease is in spite of the increase in fixed -- in the fixed costs absorption rate per unit. Merafe's corporate costs were lower than in the prior year, mainly due to lower staff-related costs and consulting fees. The depreciation, amortization and impairment charge is higher due to the impairment losses recognized that we've spoken to. Excluding impairments, the depreciation and amortization charge is actually lower due to last year's impairment of the Boshoek smelter. The investment in Unicon Chrome continued to contribute positively to profits. The net income -- net interest income is lower due to lower cash balances and interest rates. And the current tax expense is lower due to lower earnings in the period. The result in profit after tax for the period is ZAR 233 million, as earlier indicated. Next, we review the balance sheet. In spite of capital expenditure of ZAR 204 million, noncurrent assets decreased due to further impairment of smelting plants. The current assets balance closed lower than the opening balance. The material decreases related to trade and other receivables, which decreased due to lower revenue in Q2 of 2025 as well as trade and other payables, which decreased because of lowering -- of lower operating expenditure due to suspended operations. Inventory balances increased due to higher finished goods and raw materials volumes at period end. Ferrochrome finished goods increased from last year's closing balance of 83,000 tonnes to 118,000 tonnes due to lower sales. Cash and cash equivalents decreased mainly due to lower profitability and working capital movements. Liabilities include provision for environmental obligations of ZAR 165 million and the largest current liabilities trade and other payables of ZAR 720 million. In our year-end results, we reported on the contingent liability, which relates to a transfer pricing matter arising from the 2016 and 2017 years of assessment, and which was the subject of a SARS audit. It was reported then that the company disagrees with SARS findings and its additional assessment. The company has asked SARS to review its partial suspension of payment of the assessed amount. The amount, which has not been suspended and therefore is payable is ZAR 232 million. The company has also formally lodged an objection to SARS against its findings and assessment. This matter is ongoing. On the next slide, we explore our CapEx in greater detail. We had earlier reported that our capital expenditure for the period was ZAR 204 million. We provide a breakdown of the spend per operation on this slide. ZAR 101 million of this spend was on smelting operations, most of which was spent on the Lion smelter, ZAR 78 million was spent on chrome ore mining operations, and the balance of ZAR 25 million was on PGMs operations. If one looks at the venture's total capital expenditure, 73% was on replacement and sustaining capital expenditure to keep the lights on. 20% of the spend was on health and safety matters as well as environmental and community requirements to ensure compliance as well as the safety of our employees. 7% was on expansion projects, mainly related to our PGMs operations. Moving to Slide 31. Here, we provide a reconciliation of our cash balance. We started the year with a combined cash balance of ZAR 1.8 billion. Net cash utilized in our operations and our operating activities was ZAR 160 million. We've already spoken about CapEx and indicated that ZAR 204 million has been spent to date. A final dividend of ZAR 200 million was paid, and the closing cash balance was ZAR 1.1 billion after other sundry effects. We look at our cash balance further on the next slide. Moving to that Slide 32, Merafe's own cash at period end is ZAR 449 million. Merafe's share of cash at the Venture is ZAR 693 million, resulting in total cash of ZAR 1.1 billion. Cash at the Venture includes ZAR 378 million set aside for rehabilitation obligations, and various guarantees. The company was ungeared at period end and has sufficient headroom. My last slide -- 2 slides actually cover our dividend and capital allocation strategy. Starting with dividend slide, Slide 34. The Board has declared an interim cash dividend of ZAR 0.04 per share. This represents 31% of headline earnings and a yield of 3% on the closing share price at period end. The next slide, which is Slide 35 deals with our capital allocation strategy. We thought it was important to talk to this in light of the various changes that have taken place in our business. The Board constantly considers our capital allocation strategy against our company's long-term strategic goals to ensure alignment. What is guided is the stability of the company and its ability to take advantage of growth opportunities, which could be through diversification. In terms of our capital allocation options, we generally consider the following: Reinvestment in the business for organic growth. This is evidenced by our continual capital expenditure. We also consider our working capital needs to cover our day-to-day operational requirements. In this category, we include the repayment of any debt obligations that we may have, although technically speaking, this is not a working capital matter. Inorganic growth, where we are constantly on the lookout for suitable opportunities to diversify our operations is also considered. Capital expenditure, our capital return to shareholders is another key consideration. This includes dividends, which are guided by our dividend policy of a stable dividend of at least 30% of headline earnings per share. Share buybacks are also regularly reviewed by the Board. Our capital allocation strategy is influenced by our capital structure. Due to its cheaper cost, that will always be considered as a means of financing our business. This is considered both at Merafe as well as the Venture. Finally, the industry that we operate in and the dynamic nature of our business environment require that there be flexibility in our capital allocation strategy. This brings me to the end of my presentation. Thank you all for your attention. I now hand over to Zanele for closing remarks.

Thank you, Ditabe. We expect the uncertainty in the market to continue. Stainless steel production still expected to grow. China is expected to grow its ferrochrome production and, therefore, become more self-reliant, although South Africa is a key source of chrome ore. Ferrochrome production in the country will remain under pressure. Ferrochrome prices are likely to remain depressed and cost pressures are expected to continue. Our response to all these challenges is to continue to engage with stakeholders to find long-term solutions to the challenges face by the ferrochrome industry. On a PSV level, Lion smelter will be brought back into production post the maintenance period, but the timing thereof will depend on inventory levels. We will be placing greater focus on our mining operations. Cost reduction in this period becomes quite key, and cash preservation to protect value for our shareholders. Thank you. We will now take questions. Japie Fullard is also on the call, and will be available for operational questions.

[Operator Instructions] Our first question comes from Tim Clark of SBG Securities.

Okay. I've got a few questions. Let's just start off with chrome ore sales versus ferrochrome. You've slowed down the ferrochrome production for the first half but we haven't seen a consummate increase in chrome ore sales. I was grateful that you said that you would give us more details on chrome ore revenue and costs going forward. But I wonder if you could just speak about maybe it's just an interim period but I sort of expect the chrome ore sales to pick up? That's my first question.

Okay. Maybe on the first question, Tim, is that chrome ore sales were slower in the first quarter, and mainly influenced by uncertainties that were brought by the tariffs. So when we look at our 6 months sales, there were more sales in the second quarter, and we think that would improve as we go forward. But obviously, it depends on the market. And in this particular case, it was better uncertainty. So there was efforts of a pullback on demand.

Okay. So let's talk about chrome ore a little bit more then, let's carry on with chrome ore. So how should we think about it? In the past, my understanding is that you sell foundry grade chrome and you sell it for quite a lot higher price than, say, UG2 Chrome. But in future, the ferrochrome capacity that you will have mothballed or slowed. If you don't get government relief, if that doesn't come through, and there's no real kind of certainty on that yet. You'll be selling UG2 chrome ore. So can you give us some kind of guidance on the cost of UG2 chrome ore or the margin that you would have earned on the UG2 versus the foundry grade chrome in the first half?

Okay. Maybe we can request Japie to come in here. Japie?

I just want to point out if you can actually hear me.

Yes, perfect. Thanks, Japie.

Okay. So I mean, obviously, seeing that we are [Technical Difficulty] ferrochrome in the near future, we are producing, I would say just quickly roughly, 4/5 would be underground ore and then 1/5 would be UG2, and I mean, for that reason, we will then also sell the all accordingly based on that ratio. Obviously, from the higher underground ore, we do make foundry, and we do make chemical product and that we also sell into the market. I'm not sure if that answered your question? Or do you have a follow-up on that?

I suppose what I'm trying to model is going forward that the ferrochrome capacity that you've closed that ore that was going into those ferrochrome plants, you'll be selling us chrome ore, what product would you sell that at? Is that -- is it better than UG2? Or is it a slightly better grade than UG2? And how should we think about costs on that? Because we don't have any real sense of chrome ore costs at the moment.

Yes. I mean to 100%. So obviously, all our higher grade quality chrome ore went into our furnaces, especially from the Lion perspective. Let's -- that's where our biggest operations are in terms of the 3 major mines. And the quality of the ore is definitely better than UG2. And that's why we also are seeing a premium between UG2 and let's say this higher quality underground ore. We are evaluating if we should, in a way, drop the quality slightly so call us to be able to capitalize more on that. If I can just refer to the cost of underground ore or, let's call it, primary mining. So it's definitely, I would say, close to more than double in terms of the cost of production versus the UG2 ore. I mean the UG2 ore, we extract from the -- I mean it's a byproduct from the PGM operations. So if I just quickly compare the cost structure, if that makes sense to you.

Okay. That's helpful. And then perhaps maybe just my last question just in this round. Just on CapEx and your guidance for CapEx, it's come down a bit lower in the first half. You've mothballed a whole lot of operations. What should we think about in terms of CapEx going forward?

Yes. I mean I can tell you that we have actually cut down on capital quite drastically, especially in areas like Boshoek smelter and also Wonderkop smelter. We've reduced the capital almost to just staying business type of capital. And the reason is in the uncertainty where we are in terms of governmental assistance, we are not sure if we are going to restart Boshoek, Wonderkop. Currently, I can tell you that in our volume going forward, we do not see in 2026 in the absence of any governmental assistance, Wonderkop and Boshoek smelter restart. Lion, we are spending a bit more capital there because we brought the maintenance a bit forward, but that's the reason for that. So in totality, we have clamped down quite substantially on the capital. Does that make sense?

Yes. That's helpful. And then maybe, Ditabe, just going back to you, just on the ZAR 232 million size number, is that why you sort of held back more cash in the dividend effectively?

So Tim, before any dividend is declared, the Board considers various factors, including possible liabilities that the company might have to settle, so that would have been one of the things that's volume are considered, correct.

Okay. I'll pass it on to someone else.

Yes, Okay. And I suppose, Tim additionally is that we're also in a very uncertain environment. And this is interim, so we took all those into account to come to the dividend decision.

Ladies and gentlemen, with no further questions from the telephone lines. I will now hand over for questions submitted via the webcast.

Thank you. I will go through the questions as they have come through the webcast, starting with the first question from David. And the question is impact of proposed export tax on chrome concentrate. Zanele, do you want to deal with perhaps?

Yes. Thanks, David, for that question. Obviously, at this stage, there is no export tax that has been promulgated, it's just a concept that was thrown in there from government as one of the things to consider. So unless you know who -- when it would be -- when it could come into place and what levels and which products it impacts, very difficult to say what that impact will be. So I think we'll only know once -- what we have detailed at this stage, like I said in the presentation, those are not quick fixes. I think there's still quite a lot of work to be done to a point where from a government point of view, they decide whether they go with it or not.

Thanks for that, Zanele. Second question is from, Craig. Question is what is the revised full forecast for saleable chrome ore production tonnages, given the 8% year-on-year production decrease. With this production loss likely to be offset by an increase in tonnes. That I can give this one over to you, Japie.

Thanks, Ditabe. I mean, obviously, we -- the production tonnage that was dropped, it was due to, let's say, some engineering issues and production issues. But I mean it's definitely not something that we planned for. I mean we actually plan to do the same as the forecast as per the budget. So no, it's definitely not going to be offset by an increase in buy-in tonnes at all. As you know that we are mining underground ore from various operations. And then we also take out UG2 from our plants that we do manage. So there's no plan to do buy-ins at all, no.

Thanks, Japie. The next question also from Craig, how many tonnes of chrome concentrate from part of the 30 June inventory balance. And that one I can say, we had about 246,000 tonnes of chrome ore at the end of June, in inventory balances. The next question is from Richard. Chrome ore margins are very good. Why are you not producing and exporting more chrome ore. And as this, I'll pass over to Japie.

Thanks for that Ditabe. I think that's exactly why we are not operating our furnaces. We are selling the rather sell are then convert chrome into ferrochrome. That's exactly what we are doing. We are not planning to produce more because we are already optimized in terms of our underground production. So I mean there from Richard is a very good question. The fact that we are closing down or not operating smelters is for the pure fact that we are selling the ore.

Thanks, Japie. Next question from Martin. What price of ferrochrome would be required to get the smelter going again?

Maybe I can deal with that. I guess with sort of breakeven prices or prices that would make sense for the smelters to get going again. It always depends on what the chrome ore input price is and also exchange rate. But given where we are with those sectors, what is clear is that at current prices of about ZAR 0.89 per pound sold, it's not that's attainable for us to produce at those levels but probably at a price over, say, $1, then it might make sense. But also, like I said, it depends on the other input factors, what the pricing is at this point.

Thanks, Zanele. The next question also from Martin, when will maintenance at Lion end? And when will it likely reopen. Japie, do you want to take this one?

Thanks, Ditabe. If it's okay, I see that there are 3 questions from Martin that I'm so going to touch on it if that's okay. So the first one is when will maintenance at Lion and we would -- if it's okay, when will it be open? So I'm going to touch on that. The stainless production was up and growth in ferrochrome demand not been -- not met by introduction. Why did you suspend your ferrochrome smelters. I can also talk to that. And then what alternative smelting technologies are being evaluated to mitigate the high cost of traditional smelting. So first of all, we have brought forward the maintenance of Lion for us to be able to restart Lion whenever we are ready. What I can tell you is that the way that we are going to restart Lion is not necessarily going to be a 4-furnace operation. It could be a 2-furnace operation. So we are evaluating that as well and seen that we've got quite [Technical Difficulty] stocks. We will determine when we are going to result Lion. So it could be that we are most probably going to keep Lion smelter out for the rest of the year. So we'll do the maintenance, but we will just see how our ferrochrome stock is going to be depleted and then obviously, we will then restart. We are not selling currently ferrochrome into China at all. So our stocks on ferrochrome is going to be depleted over a longer period. So that's on the Lion complex but we are getting ourselves ready for that. In terms of the stainless steel production was up and growth in ferrochrome demand. We must remember that there's demand for current units and not necessarily ferrochrome. Now you can supply chrome units in the form of a ore or in ferrochrome. Now, as it was already discussed previously that it doesn't make sense for us to convert chrome into ferrochrome currently because the conversion margin versus China, there's about a ZAR 0.10 to ZAR 0.15 per pound difference. So for that reason, we will rather sell the ore than convert that into ferrochrome. So we are, let's say, supplying the chrome units, but in the form of chrome ore. Then in terms of the last question in terms of technology, the smelter technology is about the one that we are now investigating the most. We are at various stages of that. We've got 16 steps and 4 of the 16 steps, we already crossed that specific hurdles. The pilot test was done, it is working, but we looking at what will be the cost to commercialize that going forward. In the absence of any electricity certainty and obviously supply, we are not in acquisition currently PSV to spend a lot of capital on this technology in the absence of electricity security. Thanks.

Thanks for that, Japie. There's another question from Martin that although it's not related to production as such. But we could assist with is the one on alternative smelting technologies. Or did you do the deal with -- okay. Sorry I missed it. The next question from Martin is why were the higher engineering cost in production of chrome ore and what engineering are you referring to? So engineering that we referred to in category -- in the tax that we provided still with infused mechanical, electrical and civil work. And the key reason for the increase in the cost this year has to do with a couple of breakdowns that we experienced in our operation on conveyor belts as well as mobile machinery amongst other breakdowns that we had to deal with. Another question from Martin is on outlook for stainless steel demand and how this impacts on the outlook for ferrochrome demand. We rely on research by CRU for forecast and their forecast for the 2026 year right through 2029 is an increase in stainless steel production of around 3% to 4% annually, and ferrochrome demand is also expected to mirror that increase. And the next question is from Martin but I think this might have been dealt with by Japie's response. So it's around whether we are going to be a chrome ore producer versus a ferrochrome producer. And then the next question also from Martin is, what is your view on Eskom charging a low tariff for smelters when ferrochrome prices are low and higher tariffs based on higher ferrochrome prices. Do you want to take that one, Zanele.

Yes. I think that's already something that catered for in the current NPAs. So it's a concept that network that when prices are low, then you introduce their cost of electricity and then when prices are better, then you share those profits with the utility provider.

Thank you, Zanele. The next question is also from Martin, how much benefit for ferrochrome could be obtained from IGZ status for smelters? Japie, perhaps do you want to take that one?

I just want to know if it's specifically if we are included into a special economic zone, is that the question? The IDZ status.

I think that's the question.

Okay. Okay. I also see that there are certain questions further on also referring what exactly that we ask for from the government. And I think this is one of the comments that it was -- there was that [Technical Difficulty] came out on the 26th of June, where the government said that they are going to look at revitalizing ferrochrome beneficiation in South Africa. And I refer to a couple of mechanisms that, that they are looking at, first of all, is cheaper electricity. And you know that we've got guarantee and NPA, a negotiated price agreement. That's already special tariff but unfortunately, that special tariff is not special enough for us to actually beneficiate in South Africa. So we need an electricity tariff that's even better than what we are seeing now. And we are working with government to find solutions around that. And we are, in my view, fairly close to come to a possible solution. Then the second one was to improve energy intensive unit, the ferrochrome industry into what they call special economic zones or even special resource zones. So that's what the new terminology is, and there will be obviously certain benefits and tax place. So for instance, we know that in a special economic zone, the company tax would be 15% versus where it is currently at 27%. And there's also employee benefits as well. So those would be the type of initiatives that the government will be looking at in terms of some of those solutions.

Thank you, Japie. The next question also from Martin is what many diversify into? And I'll take that one. There are [ suitable ] diversification opportunities that are always considered by the business. An investment in PGMs was such an opportunity, although this obviously is in a byproduct of our chrome business, opportunities in the steel value chain are investments that will be of interest to Merafe going forward. Next question is from [ Elan, ] could you provide a comment on when -- I think that's covered already. Next question is from Bruce. I think that's what Japie was talking to. I think that has been covered already, right? Next question is from [indiscernible], any update on the situation regarding Transnet and general logistics? Has this been improving? And what are your expectations going forward? Zanele?

Yes. Logistics has been a bit better for the half, and our expectation -- I mean, we've seen some improvements even just in the way issues are being approached from a Transnet point of view and our expectation is that we shouldn't have any major challenges.

Thanks for that. Next question is from Tom. Question is, is Zimbabwean chrome ore currently banned from being exported? Japie, do you have any knowledge of that?

We have lost, Japie.

Okay. We might have lost, Japie. We certainly...

Yes. So I mean, obviously -- yes. Can you hear me?

Yes, we can.

We can.

Okay. Just on Zimbabwean chrome ore, currently, I mean, it was in the news that apparently that they banned all exports from chrome ore but it's quite easy because they are small. So they are small in relation to, let's say, South African chrome ore. Last year, we have produced in the region of about 27 million tonnes and we only could convert 7 million tonnes into ferrochrome, which is 3.5, 3.6 [indiscernible]. So they are in a position to do that, yes. But I -- according to what I understand, they did ban the export of chrome ore, yes.

Okay. Thanks for that, Japie. My next question is from, Craig. With said greater shift to chrome ore sales, what impact will this has on the utilization of the ventures rail allocation. What is the split between rail and truck has to look like? I pass that on to you as well, Japie.

Yes. Thanks. I mean we always evaluate our logistical chain road versus rail. And I think Zanele also expressed that Transnet is definitely showing an increase in their capacity in terms of exporting chrome via rail. So it's something that we're continuously doing. Our split is different. It's sometimes 30-70, sometimes it's 50-50. We do have the flexibility to actually switch between rail and road. Obviously, the first choice would always be rail, but it's not always possible to do that. I hope I've answered that one. And then also, if you don't mind, I'm going to go to the next one. In H1, there was any loss -- was there any loss of chrome ore units because of the restructuring sell ferrochrome? No, except for what, Ditabe, discussed in terms of some of the challenges that we had in terms of conveyors and also engineering issues. And it had to do more with our roof bolting fleet. And it's got to do with the fact that we are driving safety very hard. And so we've got roe bolting -- mechanical roof bolting. And obviously, that gave us a bit of challenges. So -- but in terms of units lost, no, not at all. I think also, Zanele, spoke about that we do have chrome stocks, and she spoke about something like [indiscernible] it's more than 1 million tonnes of chrome ore that we've got in our stock.

Thanks for that, Japie. I think we might have come to the end of the questions on the line. And...

Yes, there are no further questions. Thank you very much for your attendance. Like we said, it was a tough half but the positive side is that it was still profitable even though the ferrochrome operations were loss making. Thank you.

Thank you.

Thank you very much. Ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.