JOHANNESBURG (miningweekly.com) – JSE-listed mining holding company Assore has increased its headline earnings for the six months to December 31 by a dramatic 119.4% to R2.4-billion, largely on the back of a 104.4% earnings jump by its 50%-owned subsidiary Assmang, which posted headline earnings of R4.3-billion for the period.

Earnings were further boosted by a 13% increase in average dollar selling prices for iron-ore exports, while manganese and chrome ore prices remained consistent during the period and prices for manganese alloys were generally lower.

“Based on the increased level of earnings for the period, the board has declared an interim dividend of 450c a share, which will be paid to shareholders on or about March 10,” the company said in a results statement on Wednesday.

Market conditions for the group’s commodities firmed during the period, with continued demand from Asia and improving demand from Europe and the US contributing to relatively stable markets.

The weaker rand:dollar exchange rate contributed “significantly” to Assmang’s turnover, which increased by 33.5% to R736-million, resulting in higher commissions earned by the group. 

DOMESTIC PULL

Meanwhile, sales volumes of iron-ore were higher for the current period, owing to increased sales in the local market from Assmang’s Beeshoek mine, in the Northern Cape, on the back of increased local demand.

“However, export sales volumes from Assmang’s Khumani iron-ore mine, in the Northern Cape, are being restricted, owing to a lack of plant availability and unreliable water supply by the regional water board – issues that are being addressed,” the company noted.

Steady production from the group’s manganese and chrome divisions enabled it to record budgeted export sales volumes for the period; however, local sales volumes of manganese ore were lower. 

CAPITAL OUTFLOW

Capital expenditure (capex) for Assmang narrowed from R2.3-billion in the prior year’s comparable period to R1.5-billion, with the majority of the capital spent on replacement and maintenance.

Major project capex of R131-million was undertaken at the Khumani operation, on the completion of the wet high-intensity magnetic separation plant, while R199-million was spent on the continuation of “debottlenecking” activities.

Some R297-million was spent in Assmang’s manganese division on infrastructure and feasibility studies for the expansion of the Northern Cape-based Black Rock mine’s capacity to at least four-million tons a year.

OUTLOOK

While robust steel production in China and elsewhere supported demand for the group’s products over the period, Assore cautioned that the short-term outlook for the Chinese steel industry was clouded by environmental concerns and the gradual transition from an economy based on high fixed domestic investment to consumer demand.

“Nevertheless, the group expects that world steel production will continue to grow from the record levels of 2013 and, thus, demand for the group’s products should increase. 

“However, some concern exists regarding supply-side developments in the group’s markets, which are finely balanced and remain exposed to fluctuations in the rand:dollar exchange rate,” Assore stated.