Arm executive chairperson Pat-rice Motsepe notes that the company, which raised $33,3-million to fund development and exploration assets in Africa, will announce new growth opportunities in Africa over the medium to long term. Arm notes that it has a port- folio of “near-production mineral projects” in Africa, which include four advanced projects in Zambia, Namibia and the Democratic Repub-lic of Congo (DRC). Arm reports that it already has four advanced interests in Africa, which comprise two copper and cobalt projects in feasibility phase, in Zambia, a gold project, in Namibia, and a copper/cobalt project, in the DRC – together, these projects will be able to leverage 15,7-billion pounds of copper and 873 000 oz of gold. The diversified miner is also involved in exploration in Zambia for zinc and nickel.
Arm CEO Andre Wilkens explains that the properties it owns in prospective geological areas and its “significant drill-ready exploration targets” will help ensure “significant discovery potential”. Its exploration drive clearly aligns with Arm’s stated strategy of doubling production by 2010.
Wilkens explains that it was decided to list Teal on the TSX, as the exchange would expose Teal to shareholders with a “bigger appetite” to support the kind of assets it would target.
He says that, although the TSX represents a “stricter environment”, the Toronto listing also exposes the company to investors with “more confidence” in the nature of Teal’s business. Teal, says Wilkens, will also be looking to obtain a listing on the JSE within the next two months. Motsepe notes that he is confident in the new “young generation” of African leaders who believe and respect principles like security of tenure and security of title. Motsepe explains that the company has learned over the last ten years that Africa represents a number of “exciting opportunities”.
Indications are that Arm is on an acquisitive path, with Motsepe hinting that the company could also announce a South African acquisition before the end of the year, should negotiations go according to plan. “We are definitely under no pres- sure to conclude anything and will only look at appropriate cash-gene- rative opportunities,” says Motsepe.
The company, he says, is “very wary” of laying out capital for a new asset that could make a loss, should commodity prices drop below current levels.
“If things take a turn for the worse, we do not want to be in a position where we do not continue to do well. Commodity prices will not remain where they are. The trans- action will add cash to Arm – we have to have income on a cash basis,” continues Motsepe.
He says that the nature of the mining industry compels the company to make only informed long-term decisions, adding that the miner owns a string of assets with a long-life potential. Motsepe notes that Arm’s net gear- ing of 16% puts the company in a “position to borrow money and grow”.
Although the company’s R2,3-billion revenue for the six months to December 31, 2005, was similar to that for the comparative period in 2004, headline earnings for the half year were significantly higher at R131-million compared to the R19-million headline earnings for the comparable period. Wilkens explains that, during the half year, the company benefited from the current commodity cycle, which saw strong dollar prices for platinum, nickel and gold; volume growth and price increases for iron-ore; and stabilising prices for ferromanganese and ferrochrome.