As if on queue and despite an increase in revenue, Afarak reported a loss in its second quarter, blaming mining in South Africa. The company reported a E2.7-million loss in the second quarter based on revenues of E54.3-million vs. revenues of E50.2-million and a loss of E1.9-million in the first quarter of 2018. In the second quarter of 2017, the company’s revenues were E47.5-million while reporting a profit of E2.9-million.

In reporting the loss, Afarak’s CEO Guy Konsruck said: ““The second quarter presented some serious challenges for Afarak, mainly concerning the operations in South Africa. Unfortunately, our mining teams in Stellite and Mecklenburg came across some difficulties throughout the quarter. As a mining company, we cannot always predict the geology.  The unexpected quality of ore mined affected downstream processing at Mogale, cost of production and pricing of both mined and processed materials. In addition, the unfavorable exchange rate movements also impacted our bottom-line.”

The company’s ferroalloy segment, which covers its South African operations, reported second quarter production of 153,795 mt (135,270 mt from mining and 18,525 mt from processing (Mogale). In the first quarter of 2018, total production was 153,383 mt (123,720 mt from mining and 21,910 mt from processing).

Revenue rose to E27.8-million in the second quarter of 2018 vs. E24.9-million in the first quarter attributed to a growth in sales—up 25% mainly due to increases in demand for charge chrome. Mining production rose due to additional tonnages at Mecklenburg and Vlakpoort.

Afarak’s specialty alloys business (mainly EWW and its Turkish mines), reported production in the first quarter of 23,554 mt (15,582 mt mining and 7,972 mt processing [EWW]) vs. 24,580 mt (15,758 mt mining and 8,822 mt processing) in the first quarter of 2018. Sales from EWW were 7,989 mt in the second quarter of 2018 vs. 7,901 mt in the first quarter.

Needless to say, analysts are skeptical about Afarak’s performance, especially in relationship to its South African mining operations. “I think to dispel all doubts Afarak should open its South African ore sales contracts to an independent auditor to determine if the ore sales were made at a fair value,” one investor said. “This is the only way to determine if some sales were made a below market prices. And, the examination should go back several quarters.”

Also, while Afarak commented that the benchmark price fell in the third quarter and ore prices soften, the report covers the second quarter, not the first quarter.