Its financial results for the half year ending 30 June 2013 saw Assore Limited’s (Assore) headline earnings for the period decreased marginally by 4.7% on the previous year to R3,5bn (2012 : R3,7bn).This reduction is mainly due to the decline in the headline earnings of Assmang Limited (Assmang), which decreased by 7.1% to R6,5bn (2012: R7.0bn), compared with the previous financial year. The iron, manganese and chrome ore miner, ferroalloy producer and mining group which owns 50% of Assmang Limited (Assmang), saw an increased turnover in Assmang which resulted in higher commissions earned by the group, partly limiting the extent of the decline in headline earnings and whilst these earnings for the six months ended 31 December 2012 were R1,1bn, second half headline earnings amounted to R2,4bn. Desmond Sacco, Chairman of Assore said: “Despite difficult market conditions, we produced results that are consistent with last year, mainly due to record iron ore sales volumes.” Market conditions for the group’s commodities were negatively impacted by lower US Dollar selling prices for iron ore across the year, which were mostly offset by a weaker Rand/US Dollar exchange rate and increased sales volumes achieved for iron and chrome ores. Support for the sale of the group’s products remained mainly from within China, where crude steel production was at record levels for the second half of the financial year. Sales of iron ore increased in Assmang’s Iron Ore Division due to the availability of additional railage capacity from the Khumani Iron Ore Mine. Assmang’s Chrome Division achieved record sales volumes of chrome ore, due to the suspension by Assmang of charge chrome production at Machadodorp because of the depressed global market conditions for ferrochrome and the increasing cost of electricity in South Africa. Assmang was required to record an impairment charge of R312 million against furnaces and associated equipment in its Manganese, and Chrome Divisions, which had become unprofitable to operate under current market conditions and cost structures. Assmang’s turnover for the year under review increased by 5.5% to R25,0bn (2012: R23,7bn). Most of the group’s capital expenditure occurs in Assmang, where R4,1bn (2012: R4,5 billion) was spent for the year under review. The majority of the expenditure took place within Assmang’s Iron Ore Division, and amounted to R2,7 billion. On 19 June 2013, the company announced the conditional approval for the construction by a US Dollar 328 million joint venture comprising Assmang, Sumitomo Corporation and China Steel of a manganese alloy smelting facility in Sarawak State, Malaysia to be known as Sakura Ferroalloys SDN.BHD. (Sakura). Sakura is a greenfields project and the facility, due to start early 2014, will be constructed in the Samalaju Industrial Park, in Sarawak. Sakura will initially consist of two 81MVA furnaces, complete with all related infrastructure, equipment and services to allow for the production of both high-carbon ferromanganese and silicon-manganese alloys. Besides being the majority shareholder, Assmang will provide marketing and technical services to Sakura. Assmang’s current cash resources are more than adequate to meet its commitments in terms of the project. The level of global crude steel production is expected to decline in the short term, which, together with more iron ore becoming available from new and established Australian producers, is expected to cause downward pressure on iron ore prices. Stocks of iron ore in China have stabilised at low levels, which should counteract any significant decline in selling prices. New entrants from South Africa into the manganese ore market are creating downward pricing pressure on medium grade manganese ore, which is also negatively impacting on high grade ore. Additional downward pricing pressure is expected on manganese ores for the foreseeable future due to increased volumes becoming available from producers in Australia and Gabon. The level and impact of state and regulatory intervention in the significant global economic powers remains unclear, creating a lack of certainty over the extent of global economic growth in the short, to medium term. Whilst it is expected that sales volumes are not likely to change significantly, the factors mentioned above could have a significant impact on the selling prices of the group’s products. The group remains exposed to fluctuations in exchange rates. The Board has declared a final dividend of 350 cents (2012: 300 cents) per share, making a total dividend in respect of profit for the year of 600 cents (2012: 550 cents) per share.
Financial results for the year ended 30 June 2013 • Headline earnings recover significantly in the second half • Record iron and chrome ore sales • Final dividend increased to R3.50 per share