Chrome producer Bauba Resources warns that if prices of the metal drop below their June 2021 level for an extended period, or the dollar significantly strengthens against the rand, it could face problems as directors said there was a “reasonable expectation” it would only have resources to keep going for a year.
“Future work on the development of these projects may be adversely affected by factors outside the control of the group as the group’s operating results are subject to changes in the average chrome price and dollar exchange rate,” the company said on Friday in its results for the eight months to end-February. It changed its financial year from June 30 to February 28 to align with its controlling stakeholder, construction and materials group Raubex.
The company, founded in 2010, raises capital for exploration and other activities when needed, but it cannot assure its projects will be fully developed in line with its current plans and deadlines, or within budget.
Raubex might be giving Bauba Resources a lifeline after becoming the majority shareholder as the construction and materials group continues to diversify away from only road construction.
The market price of 42% chrome concentrate increased by 31% to $207.50 during the reporting period and was $275 at the end of April. The range in which the rand had traded against the dollar by 2.50pm on Friday was R15.97 to R16.20.
Bauba’s chrome concentrate production soared 40% to 138,053t, while run-of-mine production increased 16% to 205,940 tonnes and also during the reporting period Nuco Chrome, an exploration and mining company with mineral rights, commenced production. Run-of-mine is ore in its natural, unprocessed state.
Meanwhile, freight costs rose in dollar terms as global demand outweighed capacity and with new capacity not becoming available quickly enough. Freight costs worsened on home soil because of the Covid-19 pandemic, maintenance and problems at ports, a cyberattack disrupting port operations and the unrest and looting in July 2021.
On the financial side of things, the group’s loss dropped by 66.56% year on year to R52.3m and the headline loss per share fell by 17.23% to 5.92c, while revenue increased 7.5% to R256m and its investment in property, plant and equipment went up 45% to R293.8m.
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