South Africa's Merafe Resources Ltd said on Thursday it had agreed to take a stake in a plant producing chrome pellets with partner Xstrata Plc and issued 40 million shares to help pay for it.

Merafe, which already has a chrome joint venture with Xstrata, said it would have a 20.5 percent stake in the Bokamoso plant, the same percentage as in the other operations in the venture.

Merafe said it raised 66 million rand ($9.45 million) by placing 40 million shares to help pay for its share of costs for Bokamoso, estimated at 181 million rand. The issued shares represent around 1.7 percent of existing shares.

All the shares were placed with U.S. firm North Sound Capital at 1.65 rand per share, compared with Wednesday's close of Merafe shares at 1.66 rand. The remaining costs for Bokamoso will be paid with debt and existing cash flows, it added.

The Bokamoso operation is a plant that turns chrome ore into pellets and has an annual capacity of 1.2 million tonnes.

The pellets, which are fed to furnaces producing ferrochrome, improves the efficiency and helps cut costs at the smelters, a statement said. The first line of the plant was commissioned in July, and the second line is due to be commissioned by the end of this month.

Xstrata is the world's biggest producer of ferrochrome, mainly used as an alloy in stainless steel to prevent corrosion.