International Ferro Metals has entered into a settlement agreement with Rustenburg Platinum Mines regarding its interests under a chromite supply agreement under which Rustenburg is obliged to supply UG2 chrome ore to IFM, the South African ferrochrome producer said Thursday.
The terms of the settlement are that Rustenburg will supply IFM with 10,000 mt/month of UG2 for calendar year 2016 at no cost and 7,500 mt/month from January 2017 through November 2020 at a cost of Rand 170/mt ($10/mt).
The backlog of around 57,000 mt at the end of December 2015 will be supplied at a rate of 10,000 mt/month from January 2016, also at no cost.
The original contract provided for Rustenburg to supply 15,000 mt/month until November 2020 at no cost.
IFM is an integrated ferrochrome producer with a total operating capacity of around 265,000 mt/year of ferrochrome. The company's Lesedi chromite mine and integrated beneficiation and smelting operations are situated at Buffelsfontein, 100 km northwest of Johannesburg; production is currently suspended.
The company also holds an 80% stake in the nearby Sky Chrome deposit.
In August last year, IFM entered into Business Rescue, which is a South African statutory means of enabling a financially distressed company to continue in business, under the supervision of a Business Rescue Practitioner, protected from its creditors.
In December, IFM's creditors agreed unanimously to sell the company's ferrochrome smelting and chrome ore assets to another South African producer Samancor Chrome, for Rand 720 million.
The Rustenburg settlement "has eliminated the uncertainty surrounding the supply agreement and accordingly will assist the asset sale process currently being conducted," IFM said Thursday.
But, the company added, "it has a material impact on the agreement's value and consequently on the value of the assets of IFMSA. As a result, there will be a material impact on the purchase consideration to be payable by Samancor for the assets of IFMSA."
The business rescue practitioner will propose an amendment of the business rescue plan to the creditors of IFMSA to take account of the settlement agreement, and a meeting of creditors will be convened to vote on the proposed amendment to the business rescue plan, it added.
"It is not expected that that the timing of the proposed transaction with Samancor will be materially impacted," IFM said.
