JOHANNESBURG (miningweekly.com) - Explosives and specialty chemicals group AECI's mining solutions segment's revenue declined by 2.2% to R9.7-billion in the year ended December 31, owing to lower ammonia prices and a stronger rand against the dollar - more than 50% of revenue in this segment is dollar based.
Profit from operations, however, improved significantly to R1.09-billion - 20.4% ahead of the prior year's R911-million. The operating margin also improved from 9.2% to 11.3%. Volume growth of 5.5% and a more favourable product mix were key drivers.
The mining sector accounted for 52% of AECI's revenue and 69% of its profit in the last year.
Speaking at a presentation of the company's results, in Johannesburg, on Tuesday, AECI CEO Mark Dytor noted that commodity prices had a significant effect on the company's customer base.
"What we saw in these results was definitely an uptick in copper. We're seeing now volumes starting to go up in Central Africa around copper and nickel, we see older mines reopening up and we see our volumes moving up," he pointed out.
Dytor further highlighted that gold in Africa was a "great story", with most of the contracts won in the last half of 2017 deriving from the gold sector. "This is still very much an investment opportunity."
However, AECI's performance in the platinum industry was marked as disappointing as it "did not move", which Dytor highlighted as a risk going forward, particularly in light of a strengthening rand.
Currently, platinum accounted for 22% of revenue in the mining solutions division, followed by gold at 20%.
AEL Mining Services MD Edwin Ludick said the company was closely monitoring the consolidation of platinum mines in South Africa, which could lead to the closure of certain shafts. "We will be affected, but there are other markets we can go into," he pointed out.
Dytor highlighted that the iron-ore and coal sectors were areas that would hold significant growth for the division.
Ludick, meanwhile, noted that new projects added to its explosives portfolio would start reflecting on the company's results by half-year. This segment grew 4.8% in South Africa last year.
In the rest of Africa, AECI saw volumes increase 5.2%, while Asia Pacific experienced a "massive" volume increase of 12.5%, on the back of its Mount Pleasant thermal coal contract, in New South Wales.
Ludick pointed out that the company was experiencing an increase in ad hoc business from Australia. "I firmly believe it's because our brand is becoming known in the country."
On the mining chemicals side, the company experienced a decrease in volumes to 1.3%, although local results were robust and AECI's xanthates expansion project was on track.
Dytor noted that the company could not currently keep up with demand for xanthates, but when its plant becomes operational in the second half of the year, AECI expects to capture around 4 000 t/m to 4 500 t/m, primarily focused on exports.
Looking ahead, Dytor said the industry's mood has changed. "We are seeing more exploration, we see more projects being talked about, quoting more projects, seeing a lot more positivity in this sector, especially compared to 18 months ago, when it was all doom and gloom.
"We like this area," he added.