Monday, February 27, 2012

African Rainbow Minerals earnings up 24%

JOHANNESBURG – The half-year headline earnings of diversified miner African Rainbow Minerals (ARM) increased 24% to R1.94-billion in the six months to December 31.

Cash generated from operations increased by 25% to R2.56 billion, compared with R2.05-billion for the same period in 2011.

The company, which is not an operator but a portfolio manager, was boosted by the increased sales volumes of iron ore, manganese ore and manganese alloys through its black economic empowerment of Assmang; platinum group metals, nickel and chrome concentrate through its empowerment partnership with Implats, Amplats and Norilsk; and Eskom thermal coal through its empowerment partnership with Xstrata.

It has net cash – excluding partner loans – of R1.66-billion.

Growth projects from which it is continuing to benefit are Assore’s Khumani iron-ore expansion project from 10-million tons a year to 16-million tons a year, which is currently ramping up production well ahead of schedule.

The Nkomati Nickel large-scale expansion project with Norilsk is ramping up; Xstrata Coal’s Goedgevonden coal-mine reached design capacity and Vale’s Konkola North copper project in Zambia continues to advance on schedule and within budget. Commissioning of the concentrator plant is expected in December.

ARM, headed by executive chairperson Patrice Motsepe, says the South African government’s commitment to invest substantially in rail, port and electricity accelerates growth within its partnerships.

Iron-ore sales increased from four-million tons to 6.8-million tons; nickel sales increased 21% from 4 300 t to 5 200 t and manganese alloy sales 20% from 87 000 t to 104 000 t.

The initial drilling results across 10 612 m for the second phase of the Konkola North copper project are reportedly encouraging, with total production expected to increased to 100 000 t/y of copper.

ARM’s partners are working on expanding their iron-ore operations and increasing manganese ore production and expanding the Modikwa and Two Rivers platinum mines.

The target is to have all operations, with the exception of Nkomati Nickel, positioned below the 50th percentile of each commodity’s respective global cost curve by the end of 2012, with Nkomati is expected to reach this target in 2014.

Assmang has converted one furnace at the Machadodorp works from ferrochrome to ferromanganese and a further two furnaces will be converted by the end of the 2012.
ARM expects Konkola North to produce be producing copper below the median world production cost by 2015.

CEO SUCCESSION

ARM’s CEO succession process involves new designated CEO Mike Schmidt taking over from Andre Wilkens on March 1, with Wilkens continuing as executive director growth and strategy, based in Motsepe’s office.

Six-months sales for the reporting period were 30% higher than the corresponding period last year at R8.72-billion (1H F2011: R6.71-billion).

The consolidated average gross profit margin of 38% is lower than the corresponding period (1H F2011: 41%) owing to decreased dollar commodity prices for manganese ore, ferromanganese alloys, rhodium and nickel, coupled with inflation unit cost increases for iron ore, nickel and coal.

Nkomati operated at a gross loss for the period, hit by waste-stripping costs as the mine improves mining flexibility.

ARM’s earnings before interest, tax, depreciation and amortisation were R3 635-million, which represents an increase of 17% or R532 million on 2011.