JOHANNESBURG (miningweekly.com) – The headline earnings of the South African diversified mining company African Rainbow Minerals (ARM) fell 30% in the six months to December 31.

The earnings of R1.41-billion for the second half of 2012 compared with R2-billion in the first half of 2012. 

The JSE-listed company, headed by executive chairperson Patrice Motsepe, cited the fall in iron-ore prices, coupled with above-inflation unit cost increases at some operations as the prime reasons.

The 30% earnings fall was, however, partially offset by improved performances at Nkomati Nickel and ARM Coal.

Headline earnings a share were 654c a share compared with 937c a share in 2012’s first half.

Sales revenue remained flat at R8.8-billion compared with R8.7-billion, despite increased sales volumes for iron-ore, platinum-group metals, nickel, Dwarsrivier chrome and thermal coal.

Cash generated from operations decreased by 38% to R1.67-billion (R2.67-billion), with net cash excluding partner loans of R630-million remaining positive after capital expenditure of R2.02-billion and an increase in working capital of R1.5-billion.

Nkomati Nickel improved its mining and metallurgical recoveries, which 87%-increased production and 50%-reduced unit costs to $5.13/lb.

The nickel operation contributed R147-million to headline earnings, turning around the R75-million first-half loss.

ARM’s concentrator plant at the Lubambe copper project at Konkola North in Zambia was commissioned in October 2012, two months ahead of schedule.

Assore’s Khumani iron-ore mine is also ramping up ahead of schedule.

ARM said that reconfirmation of the government's commitment to investment in infrastructure boded “very well” for the development of its South African projects. 

ARM partners Assore in iron-ore and manganese, Anglo American Platinum and Impala Platinum in platinum, Russia’s Norilsk in nickel, Xstrata in coal, and the Brazilian Vale and Zambian Consolidated in copper.

ARM’s growth will be through the ramping up of production in iron-ore, nickel, coal and copper, with the Lubambe project producing 3 214 t of copper concentrate in the period.

The project is on schedule to produce 45 000 t of copper a year from 2015.

Lubambe’s second phase is also progressing with six exploration drill rigs deployed and a total of 10 535 m drilled.

Khumani iron-ore production is up 14% to 7.7-million tons and the plant has reached steady state.

Tons milled at Nkomati improved 19% to 3.74-million tons and the Goedgevonden coal mine produced 4.41-million tons of saleable product in the second half of 2012, which is 58% up on the first half and higher than the average steady-state capacity of 6.7-million tons a year.

The board has given the go-ahead for the start of early works in the R5.8-billion expansion of the Black Rock mine from 3-million tons of manganese a year to 4-million tons a year over the next four years.

Feasibility studies are well advanced for the expansion of the Modikwa platinum mine, the iron-ore operations and for an increase in the production of manganese ore.

The expansions require additional rail, port, water and electricity capacity.

ARM's target is for all its operations to be positioned below the 50th percentile of each commodity's respective global cost curve.

ARM has managed to achieve this target for all its operations except Nkomati Nickel and the ferrochrome operation, despite inflationary pressure on the South African mining industry resulting from above-inflation increases in the cost of diesel, electricity and labour.

Nkomati is expected to reach this target in 2013 while the ferrochrome operations are in the process of being converted from ferrochrome to ferromanganese.

Three furnaces at Machadodorp have been converted and Lubambe is expected to produce copper below the median world production cost by 2015.

ARM and 29 other respondents have been served with an application for the certification of mineworkers who have silicosis and dependants who died as a result of silicosis.

Thando Mkatshana has been appointment CE of ARM Coal and the previous incumbent, Mangisi Gule, remains executive director corporate affairs.