Interim results for the 6 months ended 31 December 2009

22 February 2010

“ARM’s financial position continues to be robust with net debt to equity of 8.4%.

We are pleased about the significant increase in headline earnings compared to the preceding six months; as well as the increased sales volumes and reduced unit costs relative to the corresponding reporting period”, says ARM Executive Chairman, Patrice Motsepe.

Salient features of the interim results

  • Headline earnings of R454 million reflect a decline of R1.78 billion relative to the corresponding period but reflect an increase of R369 million over the headline earnings of the preceding six months
  • Significant decline in commodity prices and a strengthening of the Rand against the US Dollar negatively impacted earnings
  • Increased sales volumes across platinum group metals, nickel, iron ore, manganese ore, chrome ore and alloys
  • Decreased unit costs at platinum, nickel and iron ore operations
  • ARM’s financial position remains robust with net debt to equity of 8.4%
  • Delivering on growth projects:
    • Khumani Iron Ore Mine ramping up to 10 million tonnes per annum
    • Phase 2a of the Nkomati Large Scale Expansion project commissioned
    • Goedgevonden Coal Mine commissioned; long-term off-take agreement signed with Eskom

African Rainbow Minerals Limited announces improved operational results compared to the previous six months to 30 June 2009 (2H F2009), with significant increases in sales volumes in ARM Platinum and ARM Ferrous despite a challenging global economic environment. Headline earnings for the half-year to 31 December 2009 (1H F2010), were R454 million, representing a decrease of 80% compared to the corresponding half-year to 31 December 2008 (1H F2009). Headline earnings however increased by 434% when compared to the preceding six months to 30 June 2009 (2H F2009: R85 million) signalling the start of a recovery in commodity markets, particularly in China and the rest of Asia.

The decline in commodity prices when comparing the half–year to 31 December 2009 to the previous corresponding period have been marked, ranging from 16% for thermal coal to 75% for manganese ore. The impact of the exchange rate on headline earnings has been pronounced with the average Rand/ US Dollar exchange rate having strengthened by 14% to R7.65/$ relative to the corresponding period (1H F2009: R8.88/$) and by 17% compared to the preceding 6 months (2H F2009: R9.19/$).

Despite this challenging economic environment, ARM increased sales volumes at ARM Ferrous and ARM Platinum. Key operational contributors to increases in sales volumes (on 100% basis except for platinum group metals (“PGM”) production which is shown on an attributable basis) were:

  • 29% in iron ore sales to 4.4 million tonnes
  • 13% in external manganese ore sales to 1.5 million tonnes
  • 71% in manganese alloys to 120 thousand tonnes
  • 11% in PGMs produced to 183 986 ounces
  • 52% in contained nickel to 3 785 tonnes
  • 26% in chrome ore/chrome concentrate to 537 thousand tonnes

ARM continues to focus on cost containment. The period under review reflects the benefits of reorganisations undertaken in 2H F2009 at the Modikwa Platinum Mine (“Modikwa”) and Two Rivers Platinum Mine (“Two Rivers”), which have yielded a positive impact on costs. Cash costs for Two Rivers and Modikwa were reduced by 8% and 6% respectively, while the R/tonne milled costs at the Nkomati Nickel Mine (“Nkomati”) decreased by 28%. The headline earnings loss contribution from ARM Exploration was reduced to R85 million from a loss of R454 million in 1H F2009. In addition unit operating costs for iron ore decreased by 19.5% as a result of the production ramp up at Khumani Iron Ore Mine (“Khumani”).

Conditions in the global economic markets have begun showing signs of improvement, albeit at a much more subdued pace in the United States and in Europe. This was evident during the last half of the reporting period under review where signs of the recovery became evident in the increased Dollar prices for commodities. The concern remains however that the current strength of the Rand against the US Dollar will continue to erode the gains made in Dollar commodity prices. Having continued with the development of our long-term growth projects (even during the recessionary period) ARM is now well positioned to take advantage of an upswing in commodity demand as the long-term growth projects’ ramp up coincides with improving commodity markets.

We believe that a safe and healthy workplace is every employee’s right and is an integral part of the way we run our business. Safety awareness, risk assessment and responsible supervision has led to zero fatalities in ARM during the past six months, compared to the five fatalities during the previous financial year.

ARM’s 2 X 2010 growth strategy remains on track with the Khumani 10 mtpa mine ramping up production. The Goedgevonden Coal Mine (“Goedgevonden”) and Phase 2a of the Nkomati Large Scale Expansion project were successfully commissioned during the period and have also commenced production ramp up.

ARM CEO Andr� Wilkens commented, “ARM has delivered a solid operational performance in the 6 months to 31 December 2009. With our growth projects firmly on track, a robust financial position and a continuous focus on cost reduction, ARM is in a good position to deliver into improved markets”.

For all investor relations queries please contact:

Jongisa Klaas
Telephone +27 11 779 1507
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Corn� Dippenaar
Telephone +27 11 779 1300
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