Global climate change mitigation is amplifying the demand for good-quality, low-impurity metals, which are being rewarded with high price premiums.
There is a huge drive in China towards better quality, which will eventually use less energy and cause less pollution.
The JSE-listed African Rainbow Minerals (ARM), headed by founder and executive chairperson Patrice Motsepe, is well positioned to feed into global markets that are demanding lower pollution.
The premium for lumpy iron-ore, which was $1/t in May, is currently above the $15/t mark, and manganese that has low levels of impurity is preferred, as it lowers the cost of steelmaking.
Increased environmental controls in China and efficiency objectives at Chinese steel mills have resulted in a notable increase in premiums being paid and higher levels of crude steel production have resulted in a marked improvement in manganese ore prices.
The message about quality, which has been coming through consistently for the last three to four years, is now amplifying.
“Quality is the name of the game,” ARM CEO Mike Schmidt told Creamer Media’s Mining Weekly in an interview, following the declaration by the black-controlled diversified mining company of a 189%-higher dividend to a record 650c a share for the 12 months to June 30.
The headline earnings of ARM Ferrous jumped 157% to R3 709-million as iron-ore, manganese ore and manganese alloy prices recovered.
Iron-ore export prices were 45% better and manganese-ore export prices were 93% higher than in the previous financial year.
The company continues to benefit from lumpy iron-ore premiums and good production, with capital expenditure below $5/t in the period, mainly on fleet replacement and waste stripping.
The excellent prices that Sakura, the new manganese alloy plant in Malaysia, has been receiving for its manganese alloy is also on account of its quality.
“Customers are very happy and we’re getting exceptionally good prices,” Schmidt told Mining Weekly of Sakura, which is uniquely positioned to more than double its capacity and also refine when the time is right.
“There’s huge upside potential for us in the alloy business,” said Schmidt.
Even more benefit from manganese is expected should demand from battery electric vehicles begin to intensify, which would also boost the nickel and copper coming out of the ARM stable.
TheNkomati mine’s sulphide nickel is suitable for electric vehicle production and ARM is targeting additional right-priced and right-quality copper assets, given the high expected upcoming demand for copper in the modernising world.
The dollar prices of all ten ARM products – platinum, copper, nickel, rhodium, manganese alloys, palladium, export iron-ore, export thermal coal, chrome concentrate and export manganese ore – rose in the period, and, for the fifth consecutive year, costs remained below the inflation rate, with the exception of coal.
“Over the next couple of months, we’ll see coal costs come down quite considerably.”