JOHANNESBURG (miningweekly.com) – JSE-listed base mineral and metals miner Assore, which on Friday reported net cash at a lower level of R8.1-billion, has declared an interim dividend of R7 a share for the half-year.

Headline earnings for H1 FY20 decreased by 28% to R2,1 billion, compared to R2,9 billion for the H1 FY19. Assmang, in which Assore has a 50% interest, recorded headline earnings of R3,7 billion (H1 FY19: R4,3 billion), a decrease of 14%, on a 100% basis. This contributed R1,85 billion towards the group’s headline earnings.

The rest of the group’s operations reported headline earnings that were 68% lower than the previous period, at R0,2 billion, of which Dwarsrivier contributed a profit of R31 million (H1 FY19: profit R327 million), with commissions and interest earned making up most of the balance. Attributable earnings amounted to R2,1 billion, 29% lower than H1 FY19.

Dwarsrivier was awarded the best improved safety performance and best safety performance in its class at the South Africa Chrome Industry Awards Dinner held on 5 September 2019. Performance improvements within Assore’s other operations resulted in an overall improvement in the combined LTIFR for Assore from 0,29 to 0,24 over the same period.

CEO Charles Walters says: “Our interim results were negatively affected by weaker prices in the chrome and manganese markets, and lower shipments of iron ore in the period under review. Higher iron ore prices and a slightly weaker currency helped to cushion the effects of the weaker pricing environment experienced in 3 of our 4 commodities. We continue to focus on costs and operational efficiencies in order to maximise returns. We have reiterated our commitment to safety with an improved overall LTIFR for Assore with Dwarsrivier bagging the best improved safety performance and best safety performance award.”

Manganese ore prices for H1 FY20 were weaker in comparison to H1 FY19, due to a combination of oversupply and weakened demand. Despite the high demand for iron ore, sales volumes decreased by 11% compared to H1 FY19. This was due to logistical and operational constraints, predominantly at Saldanha Bay port. World stainless steel production, excluding Chinese production, declined in CY19 on the back of a weaker world economic environment.

Walters says: “Growth in steel production is expected to slow in line with global growth. We are watching the situation in China with regards to the Corona virus. Should the virus be reasonably well-contained, we are confident of increasing our sales volumes in the second half of the year.”

With the net cash of R8,1 billion, Assore will be paying an interim dividend of R7.00 per share as the company continues to bolster its cash holdings with an eye on future opportunities.

and marketing company Assore, which on Friday reported net cash at a lower level of R8.1-billion, has declared an interim dividend of R7 a share for the half-year.

Headline earnings decreased by 28% to R2.1-billion in the six months to December 31, compared with R2.9-billion for the corresponding previous period.

Assmang, in which Assore has a 50% interest and African Rainbow Minerals the other 50%, recorded headline earnings of R3.7-billion, a decrease of 14%, on a 100% basis. This contributed R1.85-billion towards the group's headline earnings.

"Our interim results were negatively affected by weaker prices in the chrome and manganese markets, and lower shipments of iron-ore in the period under review,” Assore CEO Charles Walters stated in a release to Mining Weekly.

Higher iron-ore prices and a slightly weaker currency helped to cushion the effects of the weaker pricing environment experienced in three of Assore’s four commodities.

“We continue to focus on costs and operational efficiencies in order to maximise returns.

"We have reiterated our commitment to safety with an improved overall lost-time injury frequency rate (LTIFR) for Assore, with Dwarsrivier bagging the best improved safety performance and best safety performance award," Walters said.

Dwarsrivier Chrome Mine reported a deterioration in its LTIFR to 0.22 for the six months, from 0.18 in the previous corresponding period, but has been recognised for the best improved safety performance and best safety performance in its class by the South African chrome industry.

Performance improvements within Assore's other operations resulted in an overall improvement in the combined LTIFR for Assore from 0.29 to 0.24 over the same period.

The combined LTIFR of the Assmang operations deteriorated to a level of 0.24 for the current period, compared with 0.13 for the previous period.

Walters emphasised that the group remained committed to the pursuit of continued, sustainable improvement in its overall safety performance.

GROUP FINANCIAL PERFORMANCE

Half-owned Assmang recorded headline earnings of R3.7-billion, a decrease of 14% on a 100% basis. This contributed R1.85-billion towards the group's headline earnings.

In accordance with International Financial Reporting Standards, Assmang’s financial results are equity accounted. The rest of the group's operations reported 68%-lower headline earnings of R0.2-billion, of which Dwarsrivier contributed a profit of R31-million. Attributable earnings were 29% lower at R2.1-billion.

The average rand-dollar exchange rate was a 4%-weaker R14.69.

The index price for iron-ore delivered in China was a 38%-higher $95/t, but less iron-ore was shipped. Manganese ore and chrome ore prices were lower, but manganese ore sales volumes increased by 11% in line with the increased production volumes.

Working capital increased by R1.4-billion on the timing of cash payments to Assmang. As a result, the group's net cash position decreased by 10% to R8.1-billion (June 2019: R9.0-billion). The board has declared an interim dividend of 700c a share, down on the previous 1 000c a share.

MARKET CONDITIONS

While 2019 demand for steel in China is estimated to have grown by 7.8%, growth was limited in the rest of the world.

China produced 54% of the world's crude steel in 2019. The robust demand for crude steel, as well as continued supply disruptions of iron-ore, assisted in maintaining strong iron-ore prices through this period. However, the good demand for steel did not manage to hold prices of manganese ore during the six months to the end of December.

World stainless steel production, excluding Chinese production, declined in 2019 on the back of a weaker world economic environment. However, Chinese production, which amounts to 56% of the world's total, recorded year-on-year growth of 8.8%. These higher production levels resulted in increased demand for ferrochrome as well as chrome ore, although both commodities attracted lower prices due to over-supply.

Attributable earnings decreased by 14% over the previous period to R3.7-billion. Iron-ore delivered a 12%-higher R2.8 billion.

Manganese ore and alloys contributed only R0.9-billion to attributable earnings, R1-billion down on the previous period. The change in the mix of earnings was driven by firm iron-ore prices and notably lower prices for manganese ores and manganese alloys.

Capital expenditure in Assmang was at similar levels to the previous period, amounting to R2.1-billion. The iron-ore division spent R0.9-billion on mostly waste stripping and replacement. Expenditure in the manganese division was R1.2-billion, with R335-million going to the Black Rock Expansion Project and R443-million to modernising.

Approximately 96% of the approved and revised capital expenditure of R6.966-billion on the Black Rock Expansion Project was committed or spent and approximately 66% of the approved capital of R2.7-billion for the Gloria Mine modernisation and optimisation project was committed or spent.