International Ferro Metals Ltd., a producer of ferrochrome in South Africa, gained the most in seven weeks in London trading after higher metal prices and an electricity buyback deal helped make it profitable last month.
The shares jumped 11 percent, the most since March 8, to 17 pence by the close today.
The producer said today it would restart in June two furnaces taken offline in March and April under a financially beneficial power buyback agreement with utility Eskom Holdings SOC Ltd. The shutdown of an estimated 24 of 52 furnaces in South Africa will have a significant effect on the market, the Sydney-based company said in a statement.
“IFM will come out of the Eskom-enforced shutdowns in a strong position,” Numis Securities Ltd., which recommends investors buy the stock, said in an e-mailed note to clients. “There is no change to our positive view that the shares remain too cheap.”
Industry stocks of ferrochrome are expected to drop during the second quarter and to remain relatively low for the rest of 2012, the company said.
International Ferro Metals said it would welcome the introduction of a chrome-ore export duty in South Africa.
“There is significantly more interest from government’s perspective for looking at and considering a duty,” Chief Executive Officer Christiaan Jordaan said by phone from London. “We support the initiative. It would have a significant impact on the alloy industry.”
Ferrochrome production in South Africa, the biggest maker of the metal used in stainless steel to prevent corrosion, is being displaced by China, which imports 42 percent of its ore, according to Merafe Resources Ltd. South African chrome-ore exports to China increased 51 percent to about 4.7 million metric tons last year.
International Ferro sold 52,930 metric tons of ferrochrome in the quarter ended March 31, an increase of 9 percent from a year earlier, it said. Chrome ore sales were “substantially higher” at 59,226 metric tons.