ARM’s interim earnings slip on firmer rand and weaker iron prices

AFRICAN Rainbow Minerals (ARM), a diversified miner founded and chaired by billionaire Patrice Motsepe, said yesterday that its interim headline earnings decreased 27 percent knocked by a firmer rand against the dollar and weaker iron prices.

Headline earnings for the six months to end December 2021 decreased by 27 percent to R3.7 billion, or R18.87 per share.

Last year, China halted importing coal from Australia after a diplomatic fight between the countries, leading to a shortfall in coal supply. This resulted in iron ore prices falling by 7 percent to $116 (R1 782) a ton on average from $125, and the rand strengthened 8 percent against the dollar.

“The iron ore division was negatively impacted by lower average realised US dollar prices, lower export sales volumes, higher freight rates and a stronger rand versus US dollar exchange rate," ARM said.

Total iron ore sales volumes increased by 1 percent at 8.2 million tons, with export sales volumes increasing by a similar margin at 6.7million tons.

The mining company declared an interim dividend of R12 per share, increasing from R10 per share a year before, as net cash improved by R2.8bn to just more than R11bn.

ARM said its Ferrous headline earnings decreased by 18 percent to R2 428 million due to lower headline earnings in the iron ore division which was partially offset by improved headline earnings in the manganese division.

“ARM Platinum headline earnings decreased by 38 percent to R1 245 million largely due to negative mark-to-market adjustments related to the receivables balance as of 30 June 2021 following a decrease in the rhodium and palladium prices in the first three months of the period,” ARM said.

ARM's Black Rock mine achieved 9.9 million fatality-free shifts, while one of its colleagues at the Two Rivers Mine North Decline was fatally injured in a fall-of-ground incident at the Two Rivers Mine North Decline on September 1, 2021.

ARM said the purchase agreement to acquire Bokoni Platinum mine was signed, subject to the fulfilment of certain conditions for consideration of R3.5bn payable in cash. Bokoni Platinum Mine has the second-largest platinum group metals (PGM) resource in South Africa. In December, Anglo American Platinum (Amplats) announced that it planned to sell its 49 percent share to ARM.

Investment analyst at Anchor Capital Seleho Tsatsi said ARM had a challenging six months with headline earnings down 27 percent for the period.

“Investors may be somewhat willing to overlook this given the strong moves we’re seeing in iron ore and PGM prices, and their implications for forward earnings for ARM.

“The Russia-Ukraine conflict could have a significant effect on platinum group metals (PGM) supply. PGMs are a major part of ARM's portfolio, so it should benefit from the higher PGM prices we've seen in response to the conflict,” said Tsatsi.

In late afternoon trade the share was at R285, 3.38 percent higher.

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