JOHANNESBURG (miningweekly.com) – South Africa would get through its current labour impasse and emerge as a competitive global investment destination, African Rainbow Minerals (ARM) executive chairperson Patrice Motsepe said on Monday.

Motsepe was responding to Mining Weekly Online after his black-led diversified mining company posted 8% higher headline earnings for the year to June 30, leading to a 4% rise in the company’s share price to R196 a share. (Also watch attached video).

“I remain absolutely confident,” the ARM head said, shortly after his company announced that it would be building up cash from the current R2.7-billion to take advantage of any acquisition opportunities.

In defiance of the tough times experienced by South Africa’s mining sector, ARM saw its platinum/nickel and coal performances rocket to new highs.

He said that ARM was dealing with the industry’s legacy housing issue, which the Marikana tragedy had exposed, and said it was necessary for the industry to partner government and municipalities to provide acceptable accommodation.

His confidence stemmed from his frequent interfaces with labour.

“I speak a lot with labour and I go to meetings where business is attacked in the most aggressive manner,” he said, adding that a clearer understanding of what was giving rise to labour’s negative perceptions was needed in view of business being so important for job creation.

He believed business was failing by not always communicating its critical importance as effectively as it could.

He was, nevertheless, convinced that the industry would come through its current labour problems and emerge as a good, globally competitive destination for investment.

The 8% earnings rise in the 12 months to June 30 took headline earnings to R3.74-billion, compared with R3.45-billion in the previous financial year, and headline earnings a share rose 1 735 c, compared with 1 615 c last year.

ARM's earnings before interest, tax, depreciation and amortisation and income from associates were 11% higher at R7.23-billion.

The average gross profit margin of 34% is marginally down on the 35% of last year.

The contribution to headline earnings of the ARM Platinum division, which includes the nickel assets, rocketed in the period from R60-million to R572-million, and ARM Coal lifted its contribution from R52-million to R148-million.

The usual hefty contribution from ARM Ferrous slipped slightly to R3.2-billion from R3.5-billion last year.

Accounting policy resulted in basic earnings of R1.6-billion being reduced by an exceptional net R2-billion after-tax unrealised mark-to-market impairment of ARM’s investment in South African gold major Harmony Gold.

Increased sales volumes were achieved in nickel, platinum-group metals, iron-ore, chrome ore, export coal and Eskom coal, from Goedgevonden.

Costs were kept in check, helped by Dwarsrivier chrome mine and Nkomati and Goedgevonden managing to lower their unit costs.

The iron-ore growth mines in the Northern Cape have ramped up to steady-state production and the turned-around Nkomati increased production by 66% to 23 220 t of nickel and reduced costs by 42% to $4.98/lb.

The Lubambe copper mine commissioned its concentrator plant two months ahead of schedule, produced 14 871 t of copper and is seeing to improving the quality of concentrate delivered to the smelter.

ARM has approved the establishment of a joint venture manganese alloy smelting facility, in the Sarawak State of Malaysia, with Sumitomo Corporation and China Steel Corporation - a project that is expected to cost $328-million at full capacity of 169 000 t/y.

Construction of the two 81 MVA furnaces and all related infrastructure, due to start in 2014, will be commissioned in 2016.

ARM has a number of other potential projects including further expansion of its iron-ore operations, increasing manganese ore production and the expansion of Modikwa platinum mine.

ARM is a black-economic-empowerment portfolio investor in a variety of South African and African operations of the JSE-listed Anglo American Platinum, Assore, Impala Platinum, Norilsk Nickel, Glencore Xstrata, Vale and Zambian Consolidated Copper Mines Investment Holdings, and is the largest single shareholder in Harmony Gold.

ARM’s issued share capital as at end June, of 215 624 972 shares, put its market capitalisation at R32.3-billion (R$3.3-billion).

The company’s closing share price at end June was R149 a share, down from a 12-month high of R208 and up on the 12-month low of R139 a share.