JOHANNESBURG (miningweekly.com) – Black-controlled diversified mining company African Rainbow Minerals (ARM), which saw its half-year headline earnings plummet by 56%, is responding with an across-the-board review of its performance and expenditure.

The JSE-listed company, headed by executive chairperson Patrice Motsepe, on Monday put forward a seven-point plan of reviewing all nonperforming operations, focusing on reducing capital expenditure (capex), improving operational efficiencies, reducing costs, targeting a decrease in corporate office costs, curtailing exploration expenditure and improving cash flow by optimising working capital management.

Strong steps already taken include the stopping of the operating furnace at the manganese smelter in Machadodorp ahead of placing the operation on care and maintenance at the end of April.

South Africa’s loss has been Malaysia’s gain as ARM proceeds to close the Machadodorp smelter and its Sakura ferroalloys project in Malaysia takes on key personnel and remains on schedule to achieve steady state production of 170 000 t manganese alloy a year in 2017.

ARM and Assore, the JSE-listed company on which ARM confers black economic empowerment in view of its black control, have also reached agreement on the disposal of ARM’s effective 50% interest in Assore’s Dwarsrivier chrome mine.

ARM put its 56% headline earnings fall down mainly to the fall in the prices of the iron-ore, platinum, coal, chrome, manganese alloy and other commodities it supplies, which were only partially offset by rand weakness against the US dollar.

Modikwa platinum mine again let the side down with an 11% decrease in production and a 21% increase in unit production costs and all aspects of the mine, especially costs and capex, are currently under review.

Headline earnings of R1 026-million for the six months to December 31 compared with R2 341-million for the corresponding period last year.

Headline earnings a share of 473c compared with 1 084c in the prior period and basic earnings took a R225-million exceptional-item knock this half-year, mainly on a R222-million after-tax, market-to-market loss on ARM’s holding in JSE-listed Harmony Gold.

Costs at the company’s iron-ore, manganese alloy, chrome and Two Rivers platinum operations were kept below inflation and coal operations achieved a production cost decrease.

Gross debt stayed at R3 920-million with ARM Ferrous debt free. Net debt was R1 944-million at end December.

Cash from nonferrous operations rose heftily to a R624-million higher R1 485-million while Assore’s dividend was held at R750-million and cash generated at ARM Platinum's operations increased to R1 323-million from R663-million.

Dividends paid to ARM shareholders in October 2014 increased to R1.3-billion from R1.1-billion before and cash capex was R707-million for the period.

While the ramp-up of production at the Lubambe copper mine has been slower than planned to 12 563 t from 10 567 t, Glencore’s Tweefontein Optimisation Project ramp-up gave ARM Coal a cash operating profit boost.

ARM's acquisition for R400-million of the Tamboti Platinum mining right puts an additional 30 years on the life-of-mine of Two Rivers platinum through the addition of portions of the Buffelshoek, Kalkfontein and Tweefontein farms into the Two Rivers mining area.

ARM’s modernisation of the Black Rock iron-ore mine project it has with Assore in the Northern Cape is targeting increased production from the Seam Two resource.

The project is expected to align cost increases with inflation by establishment of key underground and surface infrastructure, eliminating inefficient material handling and increasing saleable production capacity.

Nkomati’s on-mine cash cost a tonne milled increased below inflation at 3%. C1 unit cash cost net of by-products, however, increased by 15% as a result of a reduction in grade consistent with the mine plan.

Other ARM partners include Anglo American Platinum, Impala Platinum Holdings, Norilsk Nickel Africa, Vale and Zambian Consolidated Copper Mines.