Mike Schmidt
Mike Schmidt

ARM platinum sector buffers manganese ore, coal decline

By Dineo Faku Time of article published Mar 2, 2020

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JOHANNESBURG - African Rainbow Minerals (ARM), chaired by billionaire Patrice Motsepe, said on Friday that its platinum division had helped cushion the company from the decline in manganese ore, manganese alloys and thermal coal prices during the six months to December 2019.

ARM, the diversified JSE-listed company, said that its platinum headline earnings soared by 193percent to R489million from R167m in the previous six months as both the Two Rivers and Modikwa mines doubled headline earnings compared to the corresponding period.

Average realised platinum, palladium and rhodium prices increased by 9percent, 58percent and 97percent, respectively.

However, headline earnings for the ferrous division fell by 13percent to R1.8billion in 2019 and as a result of lower seaborne thermal coal prices, the coal division recorded a headline loss R101m from headline earnings of R65m a year earlier.

ARM’s chief executive, Mike Schmidt, said that ARM’s financial position was robust and closed the half-year at a net cash position of R2.86bn at the end of December, from R2.9bn a year earlier, and R2.6bn at the end of June 2019.

Cash generated from operations increased by R140m to R921m. The company declared an interim dividend of R5, up from R4 in June 2019, bringing the amount to be paid to R1.1bn.

“ARM maintained a robust financial position which allows continued investment in our existing business while giving us the flexibility to pursue growth and pay dividends in line with our dividend guiding principles,” said Schmidt.

ARM also received R2bn in dividends from the Assmang joint venture with Assore, which is involved in mining iron ore, chrome and manganese ore. 

Schmidt said that ARM’s operations came under immense unit cost pressure, mostly from volume declines.

The group had approved initiatives to restore volumes and address above-inflation unit cost escalations going forward.

“The reintroduction of load shedding by national power utility Eskom poses a risk to achieving production volume and unit cost targets, as unreliable electricity supply and high energy cost increases remain a serious concern,” said Schmidt. 

The headline earnings for the ferrous division fell by 13percent to R1.8bn in 2019 from R2.12bn a year earlier. The group said that the 16percent increase in headline earnings in the iron ore division was more than offset by a 52percent decline in headline earnings in the manganese division. 

Schmidt said three employees had died on duty during the period under review.

“Initiatives are ongoing at the operations to ensure that safety training continues and safety standards are strictly upheld,“ said the company.

ARM shares closed 7.81percent lower at R136.49 onthe JSE on Friday.


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