Monday, June 23, 2008

Kermas Snaps Up South African Ferrochrome Rival

Kermas Ltd., which controls the world's second-biggest ferrochrome producer, will buy the rest of a smaller South African rival, Mogale Alloys, after securing a majority stake.

``We're buying 100 percent,'' Kermas Chairman Danko Konchar said adding that a price hasn't been agreed to. ``It's cheaper to build than to buy, but we can't build in the next five years'' because of power shortages in South Africa.

PGR 17 Investments Ltd. agreed to sell its 56.2 percent stake in Mogale to closely-held Kermas in a deal valued at about 1.86 billion rand ($233 million), PGR shareholder Metmar Ltd. said June 2. That values Mogale at about 3.3 billion rand.

Kermas, based in London, controls South Africa's Samancor Chrome Ltd., the world's biggest ferrochrome producer after Xstrata Plc. Mogale has the capacity to produce 150,000 metric tons a year of ferrochrome in South Africa, the world's biggest source of the stainless steelmaking ingredient.

South African utility Eskom Holding Ltd. is rationing power to mines and smelters after its system, straining to meet rising demand, nearly collapsed in January. That pushed up ferrochrome prices which have more than doubled in the past year to a record $1.92 a pound. Power shortages will last until at least 2012.

Sebeso, Dezzo Trading and a workers' trust are the other shareholders in Mogale, located west of Johannesburg, Johan Oosthuizen, who controls PGR 17 Investments, said from his mobile phone today. Sebeso owns 27.69 percent and workers 10 percent, said Oosthuizen, who also manages Mogale.

``We got a very good price,'' he said, declining to be specific. A plan to boost Mogale's annual capacity by 100,000 tons was scrapped because of power shortages, he added.

Samancor produces ``in excess of 1 million tons'' of ferrochrome annually, according to its Web site. Xstrata produced 1.22 million tons last year.

Finnish investment company Ruukki Group Oyj said on June 17 that Kermas offered to sell it 100 percent of Mogale. Ruukki, based in Espoo, Finland, will assess the opportunity ``in the near future,'' it added.

``We're a major shareholder in Ruukki,'' Konchar said, declining to comment further on the agreement.

Konchar controls Nassau, Bahamas-based RCS Trading Corp., which owned shares and forward contracts amounting to more than 26 percent of Ruukki on May 22, according to a Helsinki stock exchange release that day.

Source: Bloomberg

No comments: