African Rainbow Minerals (ARM), chaired by billionaire Patrice Motsepe, posted record headline earnings during the six months ended December 2020 and doubled its interim dividend payout compared with a year earlier as commodity prices boosted its fortunes.
The group reported a 134 percent jump in headline earnings to a record R5.039 billion, or R25.87 a share, compared to R2.155bn, or R11.14 a share as iron ore prices reached record highs coupled with higher platinum metal group (PGM) dollar prices and manganese ore sales volumes.
ARM declared a R10 a share interim dividend representing a R2.24bn payout during the half year ended December compared to R5 a year ago.
Chief executive Mike Schmidt said the group’s operations navigated these turbulent times well, responding in an agile and responsible manner.
“We declared an interim dividend of R10 for the first half of the 2021 financial year from R5 per share and improved our financial position, which affords ARM flexibility to opportunistically pursue value-enhancing growth prospects,” said Schmidt.
The increase in commodity prices resulted in star performances from the ARM ferrous and platinum divisions, however, headline earnings plunged in the coal division on lower thermal coal prices, lower sales volumes due to reduced Eskom offtake and logistics and mining challenges and above-inflation production unit cost increase.
Headline earnings from ferrous was 60 percent higher at R2.95bn from R1.84bn a year earlier driven by a 99 percent increase in headline earnings in the iron ore division.
Attributable headline earnings from the platinum business increased by a whopping 200 percent to R2.021bn from R489 million as the Two Rivers and Modikwa mines benefited from a 35 percent and 162 percent increase in average realised dollar palladium and rhodium prices, respectively.
Schmidt said the group would grow organically to produce an additional 300 000 ounces PGMs by 2024 after its board approved the R5.7bn expansion of the Two Rivers Mine in Limpopo and the Modikwa mine was also ramping up production.
Last month Impala Platinum, which jointly operates the Two Rivers mine, announced the Two Rivers Merensky Project which at steady state the project is expected to produce 182 000 6E PGM ounces a year, as well as 1 600 tons of nickel, and 1 300 tons of copper a year.
The construction of the Two Rivers Merensky Project is expected in July, with plant commissioning expected in the second quarter 2023.
Schmidt said the project would ensure the Two Rivers mine was positioned in the bottom half of the industry cash cost curve.
“I am proud of what we are going to achieve. I have no doubt we will deliver on time and in budget,” said Schmidt.
Anchor Capital investment analyst Seleho Tsatsi said ARM’s portfolio of commodities had been well-positioned to benefit from the rally that “we’ve seen in commodity prices over the past year or so”.
“Iron ore and PGMs, in particular, have really rallied strongly and producers of those commodities are earning cyclically high margins. Going forward, it’s likely that iron ore and PGMs will continue to drive earnings for ARM and if commodity prices remain somewhere near spot, you could see continued earnings growth in the short-term,” Tsatsi said.
ARM shares closed 3.89 percent lower at R285.61 on the JSE yesterday.
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