Notwithstanding a difficult operational period for South Africa’s embattled mining industry, diversified miner African Rainbow Minerals (ARM) increased its headline earnings per share (HEPS) for the financial year ended June 30 by 9% year-on-year to R27.18 a share.

This compares with the HEPS of R25.26 reported for the 2018 financial year.

The increase, CEO Mike Schmidt said on Friday, was mainly driven by HEPS delivered by the miner’s iron-ore and the Two Rivers platinum operations.

Basic earnings a share decreased by 22% to R3.6-billion, from the R4.6-billion reported in the prior comparable period.

Revenue for the period increased by 5% to R9.5-billion for the year, while ARM’s net cash position improved by 161% to R2.6-billion.

Segmental earnings before interest, taxes, depreciation and amortisation (Ebitda) were 16% higher year-on-year at just over R9.3-billion.

ARM declared a final dividend of R9 a share, which together with an interim dividend of R4 a share paid in April, brings the total dividend for the year to R13 a share, an increase of 30% on the R10 a share declared in the year before.

The miner further continued to benefit from its portfolio diversification as lower dollar prices for manganese ore and alloys, platinum, nickel and thermal coal were offset by higher dollar prices in iron-ore, palladium and rhodium.

The average realised rand:dollar price weakened by 11% during the year to R14.19 to the dollar.

DIVISIONAL UPDATE

ARM Ferrous increased its HEPS by 41% to R4.9-billion as the iron-ore operations achieved a 103% increase in HEPS.

This was on the back of higher iron-ore prices in the period under review. Concurrently, lump premiums increased by 9% over the financial year.

The combination of higher fines prices, increased lump premiums and a higher lump to fines ratio in sales volumes resulted in average realised iron-ore prices increasing by 34%, while on-mine unit production costs at the iron-ore operations increased by 8%.

The manganese operations recorded a 15% year-on-year decline in HEPS, mainly owing to reduced profitability at the manganese alloy operations as a result of lower manganese alloy prices and higher input costs, particularly for manganese ore and reductants.

ARM Platinum’s HEPS, meanwhile, declined by 73% year-on-year, with the Two Rivers mine delivering a 5% increase in HEPS as it benefitted from an increase in the rand platinum-group metals (PGM) basket price, which was partially offset by lower sales volumes.

The Two Rivers mine, in South Africa, continues to be impacted on by lower head grades and, as a result, initiatives to improve the PGM volumes at the mine are being considered, including the installation of additional milling capacity.

The addition of about 40 000 t a month of milling capacity at the Two Rivers mine plant will result in PGM production volumes increasing to about 380 000 oz of platinum, palladium, rhodium, ruthenium, iridium and gold (6E) a year.

This ramp-up, which will start in March 2020, will continue for 18 months and will dovetail the growth with the new tailings dam, Schmidt told shareholders and media at a presentation on Friday.

The Modikwa mine’s headline earnings remained flat at R105-million and, although it benefited from higher PGM prices, the reported headline earnings were negatively impacted on by a R156-million fair value loss on intercompany loans in accordance with the International Financing Reporting Standards.

Modikwa’s Ebitda was, however, 34% higher at R327-million, compared with the R244-million reported in the 2018 financial year.

Meanwhile, ARM’s Nkomati mine incurred a headline loss of R315-million as a result of higher production costs and a R130-million negative mine-to-market adjustment as the nickel price reduced to $12 675/t at the end of the period.

Schmidt further said on Friday that an agreement had been reached by the joint venture partners to scale down production at the lossmaking Nkomati mine, and place the mine on care and maintenance from September 2020 in preparation for closure.

ARM Coal reported headline earnings of R411-million, including a loan re-measurement gain of R245-million. The previous financial year’s headline earnings had included a fair value gain of R1.2-million on the restructuring of ARM Coal loans.