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environment|exploration|export|gold|iron-ore|mining|resources|steel|underground|products|environmental|operations

Assore earnings up, dividend maintained

Assore image on latest presentation booklet.

Assore image on latest presentation booklet.

26th February 2019

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Mining and marketing company Assore on Tuesday reported 20% higher headline earnings to R2.92-billion in the six months to December 31, buoyed by an improved price basket and weaker exchange rate.

Assore's jointly controlled Assmang recorded headline earnings of R4.29-billion, an increase of 23% on a 100% basis, which made a R2.14-billion headline earnings contribution.

Assmang, in which African Rainbow Minerals is a 50% partner, mines both iron and manganese ore in the Northern Cape, has manganese smelting facilities at Cato Ridge in KwaZulu-Natal and holds 54.36% of Sakura Ferroalloys, a manganese smelter in Malaysia.

Assore owns 100% of Dwarsrivier underground chrome mine in Limpopo, which contributed R327-million to group operational earnings.

Following the 60% increase in the interim dividend last year, this year's interim dividend has been maintained at R10 a share.

Manganese ore prices were higher for both 44% and 37% manganese grades and sales of iron-ore and chrome ore were lower on unforeseen inland logistical challenges.

The index price achieved for iron-ore was stable while the lump premium increased.

Increases in demand out of China for high quality ores continued to play out well for Assore’s quality product portfolio, said Assore CEO Charles Walters in a media release.

However, a declining trend in steel prices and reduced steel mill profitability experienced in China towards the end of the period is expected to trigger a swing back to lower grade ore, he added.

While the average index price for iron-ore in the six-months remained stable at $69/t, the lump premium increased by 36% to average $20/t. In addition, there was an increase in the premium achieved for spot sales.

Assmang’s total iron-ore sales volumes were 4% lower at 8.75-million tons owing to logistical problems on the export line to Saldanha while its manganese ore sales volumes rose by 3% to 1.6-million tons.

Robust levels of Chinese steel production, up 6,6% year-on-year, continued to support elevated price indices for both higher grade 44% manganese ore and medium grade 37% manganese ore, while an oversuppplied manganese alloy market  led to manganese alloy production cutbacks.

Increased beneficiation plant utilisation gave rise to a 7% increase in chrome production to 765 000 t, but Chinese markets for chrome ore and ferrochrome were weaker, resulting in a 10% average price decline to $186/t for 44% chrome content material. Sales volumes decreased by 5% to 757 000 t, lowering Dwarsrivier turnover by 8% and earnings by 26%.

The group increased its interest in Australian minerals exploration company IronRidge Resources from 28,9% to 31,27% following a rights issue to the value of R56.6-million. IronRidge has a portfolio of gold, lithium, bauxite and iron ore prospects in Africa and Australia. During the current period, the activities of IronRidge were focused mainly on lithium and gold exploration prospecting in Ghana, Chad and Ivory Coast, with Assore keeping a close eye on particularly lithium discovery.

As world economic growth momentum has started to slow, the company’s 2019 growth forecast is marginally lower. The expected decline in growth is reflected in the slowdown observed in some of the major advanced economies as a result of ongoing trade actions and the uncertain geopolitical environment. Chinese stimulus measures are being put in place to cushion the slowdown in that economy, Assore noted.

Chinese environmental policies are expected to continue to impact high-grade iron-ore and manganese ore markets positively thereby supporting the demand for the group’s high quality products. The demand for lump iron-ore and pellets is expected to remain firm, which should be supportive for premiums on these products.

However, the recent decline in steel prices and reduced steel mill profitability in China is anticipated to result in a substitution in favour of ore with lower iron content. This is likely to result in a narrowing of price differentials between the various grades of the group’s products.

The growing oversupply in the ferrochrome market and the subsequent pressure on chrome ore prices is set to constrain any major upward chrome ore price movements.

The group remains confident that its portfolio of mines and marketing operations are well positioned for the future.

Edited by Creamer Media Reporter

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