ARM continues with aggressive growth strategy

Provisional results for the financial year ended 30 June 2010

“ARM has achieved good operational results with significant volume growth and continues to control its costs. We have delivered on our 2 x 2010 growth strategy and are continuing with an aggressive growth strategy in our portfolio of commodities. ARM’s financial positions remains robust”.

Patrice Motsepe
ARM Executive Chairman

Salient features of the provisional results

• Headline earnings down 26% to R1.7 billion from R2.3 billion mainly due to a 16% stronger Rand and lower commodity prices (headline earnings per share of 807 cents per share compared to 1 094 cents per share in the previous financial year)
• Second half (2H F2010) headline earnings substantially up 178% to R1.26 billion from the first half year (1H F2010) headline earnings of R454 million
• Significant increase in the 2H F2010 headline earnings to R1.26 billion compared to the corresponding six month period (2H F2009) headline earnings of R85 million
• ARM declares an increased dividend of 200 cents per share (F2009: 175 cents per share)
• Significant increases in sales volumes across all commodities except domestic thermal coal
• Decrease in unit costs of iron ore, nickel and platinum group metals (PGM) reflects a strong focus on continuing cost control
• Cash and cash equivalents of R3.0 billion; net debt to equity of 1.7%
• Approval of the development of Konkola North Copper Project in Zambia. The mine will be developed in conjunction with ARM’s partner Vale at project cost of US$380 million (on a 100% basis)
• Successful conclusion of 2 X 2010 growth strategy
• Continuation of aggressive growth in ARM’s portfolio of commodities

Against the background of the decline in commodity prices and the strengthening of the Rand against the US Dollar, African Rainbow Minerals Limited is pleased to announce good operational results for the financial year ended 30 June 2010. ARM has successfully completed its 2 X 2010 production growth strategy which commenced in 2005 and is continuing with its aggressive growth strategy in its portfolio of commodities. Headline earnings for the year were R1 714 million or 807 cents per share and represent a 26% decrease compared to the 2009 financial year. The 2H F2010 headline earnings of R1 260 million are 178% more than the R454 million achieved for 1H F2010.

Dividends

The ARM board is pleased to declare its fourth annual dividend of 200 cents per share. The amount to be paid will be R425 million (F2009: R371 million). This declaration of a dividend is a 14% increase on the F2009 dividend and is in line with ARM’s commitment as a globally competitive company to pay dividends to shareholders while continuing to grow the company for the future.

Volume growth

Conditions in commodity markets continued to be challenging especially in the first six months of the financial year as the global economy continued to be affected by the economic slowdown that began in the latter part of the 2009 calendar year. Notwithstanding this ARM managed to increase annual sales volumes across all commodities except domestic thermal coal. Operational features for the year (on a 100% basis) include:

• 516% increase in chrome concentrate sales to 313 735 tonnes (Nkomati Mine only)
• 112% increase in nickel sales to 8 697 tonnes
• 103% increase in ferromanganese sales to 238 thousand tonnes
• 44% increase in manganese ore sales to 3.1 million tonnes
• 32% increase in iron ore sales volumes to 9.8 million tonnes
• 31% increase in ferrochrome sales to 272 thousand tonnes
• 11% increase in PGM sales to 688 957 ounces
• 6% increase in export thermal coal sales to 11.9 million tonnes

ARM’s headline earnings were negatively impacted by both lower US Dollar commodity prices, especially in iron ore and manganese, as well as the strengthening of the average Rand exchange rate against the US Dollar by 16% relative to F2009. The Platinum Division showed a significant improvement by increasing from a headline loss of R319 million in F2009 to headline earnings of R523 million in F2010 owing to an improvement in US Dollar platinum prices, increased sales volumes and rigorous cost control.

In the period under review, consistent with ARM’s strategy to get each of the mining operations below the 50th percentile of the global cost curve by 2012, ARM continued to focus on cost containment. Unit production cost reductions were achieved at the Khumani Iron Ore mine, Nkomati Nickel mine as well as at the Modikwa and Two Rivers Platinum mines. Above inflation cost increases at the manganese operations were as a result of reduced mine production at the Nchwaning and Gloria Mines. The ferromanganese and ferrochrome operations were impacted by increases in electricity tariffs and by the price of reductants. Through the restructuring of ARM Exploration and the benefit of sharing costs with ARM’s joint venture partner, Vale, the headline loss from ARM Exploration was reduced substantially by 79% to R143 million.

2 X 2010 growth

The financial year 2010 represents a significant milestone for ARM as the company successfully completed its 2 X 2010 growth strategy to double production volumes from 2005 in its portfolio of commodities including iron ore, nickel and coal. The Khumani Iron Ore Expansion to 10 million tonnes per annum (mtpa) was successfully completed on time and within budget. The project is now fully ramped up to name plate capacity. Phase 2a of the Nkomati Large Scale Expansion Project which involved the building of a 375 thousand tonnes per month (ktpm) plant was commissioned on time and within budget in September 2009. The Goedgevonden Coal Mine was also commissioned in October 2009 and is currently ramping up to its name plate capacity of saleable 6.7 mtpa. Since 2005 ARM has spent approximately R13.5 billion (on an attributable basis) on growth projects and maintenance capital expenditure. This includes R2.7 billion spent in the 2010 financial year.

ARM is well positioned financially given that the Company’s growth is supported by a robust balance sheet with low gearing. At end June 2010 ARM’s net debt to equity percentage had been maintained at below 2% year on year.

Konkola North Copper Project

ARM’s strategy is to continue to pursue profitable growth opportunities vigorously. In August 2010 the ARM Board approved the development of the Konkola North Copper Project in Zambia. Development of the project has commenced and will be at a capital cost of US$380 million, in July 2010 terms, to produce 45 000 tonnes of contained copper in concentrate per annum with potential for significant expansion.

Safety

Regrettably one fatality was reported during the financial year ending 30 June 2010 at Machadodorp Works. On 10 April 2010 Mr Erick Maluka was fatally injured during slinging operations. ARM and its board of directors convey their deepest condolences to Mr Maluka’s family, friends and colleagues.

Achievements

• Beeshoek Mine achieved 7 000 fatality-free production shifts in the DMR competition on 2 August 2009.
• Khumani Iron Ore Mine was the winner and Cato Ridge Works was the runner-up in the ARM Internal �Excellence in Safety’ competition during the financial year 2010.
• Modikwa Platinum Mine achieved 6 000 000 fatality-free shifts on 2 December 2009; to date the mine has completed 52 months fatality free.
• On 16 April 2010, Nkomati Mine achieved 1 000 000 fatality free shifts and received the ARM internal St Barbara floating trophy.
• Two Rivers Platinum Mine surpassed 1 500 000 fatality-free shifts during January 2010.

Andr� Wilkens, CEO of ARM said: “We believe demand for ferrous commodities will be driven by the development of steel manufacturing capacity in China, India, Brazil and other developing economies seeking to build infrastructure, while supply growth will be constrained by infrastructure limitations.

“Our three new mines which are currently ramping up are coming into steady state production at an opportune time. We will increase our copper exposure in order to take advantage of the improved prices whilst our operating teams will continue to deliver projects on time and within budget and will continue to contain unit costs.

“ARM is confident about the future as it is well positioned financially to continue to grow a profitable asset base with its focus on long-life, low cost mines”.