African Rainbow Minerals (ARM) yesterday reported a 21% decline in annual profit, citing lower production and weaker commodity prices.
In its results for the financial year ended June 30, 2023, the diversified miner said headline earnings per share were R48.51 compared with R57.87 the previous year.
The group declared a final dividend of R12 per share. Last year it was R20 per share.
The group said iron ore, manganese ore, and thermal coal volumes were negatively impacted by logistic challenges.
The group said the average realised rand weakened by 17% versus the US dollar to R17.76 per dollar compared to R15.21 per dollar in the 2022 financial year.
"Unit production costs remained under pressure due to lower production volumes and above-inflation increases in the costs of explosives, diesel, electricity, consumables, and maintenance costs," the company said.
The group reported that ARM Ferrous headline earnings were 17% lower, driven by a 34% decrease in headline earnings in the manganese division, and an 11% decrease in the iron ore division.
"Lower headline earnings in the iron ore division were driven by a decrease in the average realised dollar iron ore prices and lower export sales volumes, partially offset by the weaker rand versus the dollar exchange rate and lower freight costs," it said.
Iron ore headline earnings included a R279 million (pre-tax) negative fair value adjustment on sales, of which 66% was based on confirmed prices and 34% on forward prices, the group said.
Lower headline earnings in the manganese division were driven by a decrease in the average realised US dollar manganese ore and alloy prices and higher production and railage costs, which were partially offset by the weaker rand versus US dollar exchange rate and lower freight costs.
ARM said it remained confident about the long-term profitability of Bokoni after concluding the acquisition of Bokoni Mine from Anglo American Platinum and Atlatsa Resources Corporation.
"Good progress has been made in advancing the DFS (definitive feasibility study). The project remains robust and is expected to be attractive in terms of industry cost competitiveness. The DFS will now advance to bankable feasibility and then be presented to the board for approval," the group said.
Looking ahead, the group said volatility in global commodity markets continued to be driven by multiple sources of uncertainty, including a potential slowdown in growth in both China and the rest of the world, continued high inflation, tightening monetary policy across major economies, lingering economic repercussions from COVID-19 as well the conflict in Ukraine.
"Global commodity markets have further been impacted by a series of supply shocks, which have mostly been driven by weather-related events," it said.
BUSINESS REPORT