Interim Results for the six months ended 31 December 2007
20 February 2008
African Rainbow Minerals Limited today announced its Interim Results for the six months ended 31 December 2007.
- Headline earnings increased by 35% to R741 million
- Headline earnings per share increased by 34% to 353 cents per share
- EBITDA increased by 38% to R1 740 million
- Record volumes in Manganese Ore, Iron Ore, Chrome Ore and Thermal Coal
- 9% increase in PGM sales
- All projects are progressing on schedule and within budget
- Khumani Iron Ore Mine (10 million tonnes per annum);
- Nkomati Nickel expansion (20 500 tonnes per annum); and
- Goedgevonden Coal project (6.7 million tonnes per annum)
- Modikwa achieves a safety record of 2 million fatality free shifts
The company achieved record results thereby continuing to deliver on its stated strategies of organically and efficiently growing ARM into a globally competitive diversified mining company. ARM continues to be well positioned to participate in the local and global merger and consolidation opportunities.
Headline earnings, for the period, have increased by 35% to R741 million or 353 cents per share for the six months ended 31 December 2007 (2006: R548 million or 264 cents per share). The period under review has been characterised by strong commodity prices across the businesses and a 4% stronger average Rand/US dollar exchange rate at R6.94/US dollar. In addition, these results have been impacted by solid volume increases from the ferrous assets held through Assmang Limited (Assmang) and sales volumes which were maintained at the Platinum and Nickel operations.
Operational highlights for the period include (100% basis):
- 37% increase in manganese ore sales to 1.4 million tonnes;
- 18% increase in iron ore sales to 3.3 million tonnes;
- 12% increase in manganese alloy sales to 122 thousand tonnes;
- 55% increase in domestic thermal coal sales to 7 million tonnes;
- 9% increase in PGM sales to 243 thousand ounces;
- 177% increase in chrome ore sales to 653 thousand tonnes; and
- first copper production from TEAL in the Democratic Republic of Congo (DRC)
The operational volume increases, together with ARM’s organic growth projects, are in line with the Company’s strategy of growth to double production from 2005 levels by 2010 in key commodities with high margin operations. ARM has established a diversified commodity exposure, providing the Company with varied pricing, volume and stage of mine development exposure.
ARM’s organic growth projects with its partners remain on schedule and within budget, having spent R1.4 billion (attributable to ARM) on capital expenditure over the period. Khumani Iron Ore Mine is the first project to begin ramping up with export sales from Khumani of ore processed through its own plant planned by the end of financial year 2008. Nkomati Nickel and Goedgevonden Thermal Coal projects are both on track for full production by 2011. ARM continues to develop partnerships and relationships in South and Southern Africa. ARM’s commitment to grow its South and Southern African mining businesses is clearly demonstrated by its increasing investments in Africa through TEAL.
ARM continues to focus on operational cost containment through this growth phase, costs being a significant determinant of management’s remuneration. Operational cost changes are in line with the planned growth, as ARM’s mining production ramps up. The new and modern operations continue to incorporate best practices from ARM and its joint venture partners, using new technology, more open cast mining and better positioning with regard to infrastructure and logistics.
ARM’s balance sheet remains robust with net debt (excluding partner loans) of R2.1 billion in 2007 and net gearing of 20%. ARM’s earnings before interest, tax, depreciation and amortisation (excluding exceptional items) (EBITDA) margin for the period under review is 44%, with strong EBITDA growth of 38% to R1 740 million (2006: R1 265 million).
The national power shortage, which manifested itself during the past few weeks, has somewhat impacted production and processing at most of ARM’s operations. There has been a compensating price spike for the majority of ARM’s commodities. ARM’s operations are shallow relative to the majority of other South African mines and make significant use of diesel as an energy source, in addition to their electricity requirements. This significantly reduces the safety and operational risks that may arise due to power cuts. ARM is reviewing all its operations to ensure that production is maximised in the most efficient and profitable manner at a 90% average level of power supply.
The ARM Board of Directors has decided to consider dividends on an annual basis due to its significant growth pipeline. As a result no dividend was declared for the six months ended 31 December 2007.
For further details, contact
Tel: +27 11 779 1507
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