Motsepe bullish despite ARM decline

Published Feb 27, 2013

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Dineo Faku

AFRICAN Rainbow Minerals (ARM) cited a drop in iron ore prices and above-inflation cost increases at some operations for a fall in interim profit yesterday.

The JSE-listed diversified mining firm posted a 30 percent drop in headline earnings to R1.41 billion in the six months to December compared with a year earlier. Headline earnings a share fell to R6.54 from R9.37.

“This is a positive set of results,” said Clinton Duncan, an analyst at Avior Research. “They have done well on cost control.”

All its peers had been affected by declining commodity prices, he said, and ARM’s earnings drop of 30 percent compared well with Anglo American’s 44 percent decline in the period.

Despite challenging market conditions, ARM’s platinum division, which includes Nkomati Nickel, improved performance on a recovery in the price of nickel.

Attributable headline earnings ballooned by 244 percent to R299 million, driven by performance at the Nkomati nickel mine in Mpumalanga. Nkomati’s nickel output rose 87 percent to 11 258 tons because of improved grade and plant recoveries.

ARM’s coal division contributed R105m to headline earnings, compared with a R12m loss previously.

“Obviously the ramp-up in production in coal and nickel has offset the decline,” Duncan said.

The company attributed the significant boost in profit in coal to the change of strategy to open cast mining from underground mining.

ARM was confident it was in a good business space in the long term, its chairman, Patrice Motsepe, said yesterday. “When there is uncertainty, we get a good opportunity to buy.”

Motsepe was reported by Bloomberg last month as saying at the World Economic Forum in Davos that the company was interested in making platinum acquisitions. His comments came as the platinum sector struggled on many fronts, including the loss of about 600 000 ounces through illegal strikes last year.

ARM did not escape the strikes and its Modikwa mine was rocked by turmoil last year.

ARM’s goal was to be a global competitor and it had visited Papua New Guinea to look for opportunities in copper mining, Motsepe said yesterday.

He and a team of senior executive members would be conducting a road show to meet investors in London and New York next week, he added.

Mike Schmidt, the chief executive, said yesterday that the predominant union at its operating mines was the National Union of Mineworkers.

The National Union of Metalworkers of SA was the predominant union at its smelting operations. The start-up Association of Mineworkers and Construction Union was the majority union at Two Rivers, Schmidt said.

ARM shares fell 2.32 percent to R188.51 yesterday.

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