Cheaper power hope: Merafe Resources says Eskom and the government support (in principle) a new electricity price for ferrochrome smelters: 62 cents per kWh. But it’s not final yet because the regulator, Nersa, must still approve the deal and the contract details.
How does 62c Compare?
Now that amount is cheaper than the kWh price per unit that you can achieve with a Grid Tie only system for your home of business from someone like Straton Solar.
Currently a Grid Tie only Solar installation will end up costing you between R0.75 and R1.20 per kWh over 20 years – NO escalation.
We presume that any negotiated price between Merafe and Eskom will contain some form of annual escalation or be tied to performance.
Merafe Resources Ltd is a prominent JSE-listed mining company (share code: MRF). It is a major global producer of ferrochrome through the Glencore-Merafe Chrome Venture.
They own a 20.5% share in a venture with Glencore, operating numerous mines and smelters across the North West, Limpopo, and Mpumalanga provinces.
The current CEO is Zanele Matlala.
Background:
The negotiations between Merafe Resources (specifically the Glencore-Merafe Chrome Venture) and Eskom reached a critical turning point as of late February 2026. The discussions center on a survival-tier electricity tariff to prevent the total collapse of South Africa’s ferrochrome smelting industry.
Here is the current status of the deal:
1. The “62 Cent” Breakthrough
Following months of high-stakes talks involving the Minister of Electricity and Energy, Kgosientso Ramokgopa, Eskom has proposed a massive tariff reduction for Merafe and Samancor Chrome.
The Proposed Rate: 62 cents per kWh.
This is a dramatic drop from the 136 cents (R1.36) the smelters were paying at the end of 2025, and lower than the interim relief of 87.74 cents granted in January 2026.
Industry experts and Merafe’s directors have stated that 62 cents is the “break-even” threshold required to make the Boshoek and Wonderkop smelters commercially viable again.
2. Current Status: Conditional Approval
While Eskom’s board has supported the framework for this 62c tariff, it is not yet “active” in a permanent sense.
NERSA Approval: The deal still requires final approval from the National Energy Regulator of South Africa (NERSA). Public hearings are scheduled for mid-March 2026.
Retrenchment Pause: In a show of good faith, Merafe has deferred its Section 189 (lay-off) procedures until March 31, 2026. If the final terms are not signed by then, the company has warned it will proceed with cutting thousands of jobs.
Risk-Sharing: The agreement includes a “risk-and-reward sharing” mechanism. This means if global ferrochrome prices surge, Eskom may benefit from a higher rate, but if prices stay low, the smelters are protected by the lower floor price.
3. Impact on Operations
The high cost of electricity (which has risen over 900% since 2008) caused a massive production slump for Merafe in 2025:
Production Drop: Merafe’s attributable ferrochrome production fell by over 50% in 2025 as furnaces were mothballed to avoid “economically destructive” losses.
Restart Plans: With the new tariff, the government hopes to see the number of operational smelters in SA jump from just 11 (currently) to 45 by the end of 2026. Merafe has already begun the process of ramping up capacity at its Lion Smelter following the initial interim relief.
4. Why this matters for Eskom
This deal is controversial because Eskom’s standard industrial tariff is significantly higher (around R2.00+ per kWh).
Strategic Retention: Eskom is fighting to keep its largest industrial customers on the grid. If the smelters close, Eskom loses a massive, consistent “base-load” demand that helps stabilize the utility’s finances.
Debt Relief Synergy: The “subsidy” for this 62c rate is reportedly being funded through the existing R230 billion government debt relief package for Eskom, rather than being passed on to residential consumers.
Should You Buy Shares in Merafe?
If you are a value investor with an appetite for South African industrial risk, Merafe looks like a classic “turnaround” play. The 62c tariff is the literal lifeline they needed. However, the next 28 days (until the March 31 deadline) will be volatile.
If NERSA approves the low tariff, Merafe’s production costs will drop by over 50% compared to late 2025. This could allow them to restart mothballed furnaces and dramatically increase revenue.
Merafe has a history of being a “dividend darling.” In early 2026, it is trading with a trailing dividend yield of roughly 10%. If the new tariff restores profitability, dividends could return to their 2023/2024 highs
The stock is currently trading at a Price-to-Earnings (P/E) ratio of around 4.3x, which is very low compared to the broader mining sector. It is also trading at a significant discount to its Net Asset Value (NAV).
Analysts have recently set price targets between R1.60 and R1.90 (it is currently hovering around R1.17 – R1.20), suggesting a potential upside of 30% or more if the Eskom deal is finalized.
Cautionary:
2025 was a brutal year for Merafe Resources. Revenue dropped by 47% and earnings per share fell by 68%. The company is currently in a “recovery” phase, and “catching a falling knife” (buying while a company is still struggling) is always risky.
