JOHANNESBURG (miningweekly.com) – Manganese was the star performer for diversified mining company Assore in the 12 months to June 30, when the Johannesburg Stock Exchange-listed record-performer experienced greater stability in iron-ore pricing but also chrome price volatility caused by global tariff uncertainty.
In reporting record financial results with record sales and production and record dividend, the producer of iron-ore, manganese ore, manganese alloys and chrome ore reported record manganese ore production at its Black Rock mine in the Northern Cape and full capacity ferromanganese production at Sakura Ferroalloys in Malaysia.
Keeping iron-ore pricing on an even keel is a healthy steel industry in China, which has resulted in the iron-ore price index remaining fairly steady at around the $69/t year-on-year average level.
“We’ve been trading in and around the mid-sixties for quite a few months now. There’s actually more stability in the iron-ore price over the last few months than we’ve seen for quite some time,” Assore CEO Charles Walters told Mining Weekly Online.
Strong cash generation within the group resulted in net cash increasing by 56% to R7.9-billion in the 12 months to June 30, when a debt-free balance sheet and good operational cash generation enabled the company to declare a final dividend of R12 a share, taking the full dividend declaration for the year to the record R22 a share – well up on last year’s R14 a share.
Producers are finding no difficulty placing iron-ore tonnages. “It’s a nicely balanced market. It’s at a level where we can make a decent margin and can continue happily,” said Walters, who foresees ongoing market balance, with current prices unlikely to encourage the coming on stream of major new tonnages.
Meanwhile, expectations that the manganese price would “decline a tad” have not materialised and manganese has been holding up at fairly elevated price levels of $6.50/dry metric ton unit (dmtu) to $6.70/dmtu for 44% grade manganese material.
The same cannot be said for the chrome price, which has come off since Assore’s June 30 year-end, on the back of tariff-induced uncertainty in the ferrochrome and stainless steel value chain.
“It seems to have the stainless steel producers more concerned than the crude steel producers, in China in particular. But chrome we know to be pretty volatile and it can turn up and down probably three times in a year. That’s certainly something we watch, while ensuring that our costs continue on a downward curve in dollars per tonne to make sure we’ve got the right cost position in all our commodities.” Walters commented.
“The prospect of tariff imposition creates uncertainty for trading partners of the US, but essentially the good news here is that the crude steel production in China and its reliance on the US is very small. So, the Chinese crude steel industry is still going pretty well. It’s the stainless steel side that is more reliant on the US demand that is all nervous at this stage.
“Uncertainty causes people to hold back and we see that feeding back up the value chain to chrome ore, but the growth that we’re seeing in the steel industry across the world remains very positive,” he added.
For an exporter like Assore, the bulk of its revenue is dollar-based and the bulk of its costs are rand-based, apart from costs that have a dollar underpin, like diesel and mining equipment costs.
But, essentially, the company with a market capitalisation of $4-billion-plus experiences strong tailwinds when the domestic currency weakens.
The company, which averaged an exchange rate of R12.85 to the dollar in the 12 months to June 30, will benefit from a considerable currency-triggered uplift at current levels of R15.31 to the dollar.
Assore has balanced the dividend payout to shareholders with the need for financial retention to fund growth, which is being encouraged by favourable market conditions and a conservative balance sheet.
“The cash is building and it puts us in a very strong position to execute on some growth plans. We’re very pleased with the ability to both pay a healthy dividend to shareholders as well as retain significant capital for expansion in the future,” said Walters.
In May, former UBS Investment Bank metals and mining executive Kieran Daly was appointed executive director: growth and strategic development of Assore, which on Thursday reported four consecutive financial years of record sales and production, along with record attributable 2%-higher R5.1-billion earnings for the second consecutive year.
Its principal investments are made up of a 50% interest in Assmang, which it controls jointly with Patrice Motsepe’s African Rainbow Minerals, and 100% ownership of Dwarsrivier Chrome Mine, an underground Limpopo chrome mine with a production capacity for 1.6-million tons of chrome product a year.
Assmang mines both iron-ore at Khumani and Beeshoek, and manganese ore at Black Rock, all located in the Northern Cape.
It has manganese smelting facilities at Cato Ridge in KwaZulu-Natal and its dormant ferromanganese smelting facility at Machadodorp in Mpumalanga is on care and maintenance. In addition, Assmang holds 54.36% of Sakura, which has a design capacity of 216 000 t of ferromanganese a year.