Diversified miner African Rainbow Minerals (ARM) announced that its headline earnings for the six month period ending December 2012 fell by 30% to R1.41 billion, compared to R2 billion in the first half of 2012.

The company, which has assets in iron ore, nickel, coal and platinum, said that the main culprit for the fall was lower iron ore prices as well as above-inflation unit costs at some of its operations.

In spite of increased sales volumes for iron ore, platinum-group metals, nickel, chrome and thermal coal, sales revenue remained flat at R8.8 billion, compared to R8.7 billion in the first half of 2012.

Cash generated from its operations decreased by 38% to R1.67 billion when compared to R2.67 billion previously. Net cash excluding partner loans of R630 million remained positive after capital expenditure of R2.02 billion and an increase in working capital of R1.5 billion.

The JSE-listed company said that its Nkomati nickel operation improved overall mining and metallurgical recoveries, with a 19% increase in total tonnes milled, 40% improvement in head grade and a substantial enhancement in concentrator recoveries resulting in an 87% growth in nickel produced.

The nickel operation contributed R147 million to headline earnings, turning around the R75 million first-half loss, while ferrous metals, which include iron ore, are the largest contributors to the earnings of the group with a market value of R42 billion.

Regarding ARM‘s projects that are in the pipeline, the company revealed that the board has given the go-ahead for the start of early works in the R5.8 billion expansion of the Black Rock mine from 3 to 4 Mtpa of manganese over the next four years.

Further, ARM said that feasibility studies are well advanced for the expansion of the Modikwa platinum mine, the iron ore operations and for an increase in the production of manganese ore. While it noted that additional rail, port, water and electricity were required for the expansions, it acknowledged that reconfirmation by government to commit to investment in infrastructure augured well for the development of its South African projects.

Commenting on the company’s outlook, ARM highlighted global markets behaviour as a key factor. Global commodity markets and related sentiments are expected to continue to be volatile as sovereign risks, particularly in Europe and the US, are addressed. In this business environment ARM will enhance its key focus on areas that lie within its ability to control unit operating costs, optimisation of capital allocation, efficient mining at its operations and delivering on its growth projects.

In addition, ARM will maintain its strong relationships with all stakeholders, including labour. While any recovery in Europe is expected to remain subdued at best, the economic outlook for eastern economies remains positive. A positive development since the end of the reporting period has been the recovery in iron ore, PGM and manganese ore prices.

Thando Mkatshana has been appointment chief executive of ARM Coal and the previous incumbent, Mangisi Gule, remains executive director of corporate affairs.

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