Platinum bolsters the bottom-line for African Rainbow Minerals

African Rainbow Minerals (ARM) was saved by soaring profits from its platinum division in the six months to end-December which offset drops in earnings from its coal and ferrous divisions and allowed the group to increase its interim dividend by 25%.

ARM Platinum’s headline earnings more than doubled to R489m (previous comparable six months – R167m) but, despite this, CEO Mike Schmidt said he viewed the group’s first half platinum performance as a “missed opportunity” which he vowed would be rectified with an even better performance in the second half of the group’s financial year to end-June.

Reason is the 12% drop in platinum group metals (pgm) production to 294,011oz ( 332,675oz) which resulted in sharp increases in operating costs with the cash cost at Two Rivers jumping 37% to R10,083/oz of pgm produced (R7,338/oz) while Modikwa’s cash costs were 31% higher at R11,222/oz (R8,560/oz).

So the jump in platinum profits came solely from the higher rand basket price for the metal produced which soared 49% and more than compensated for the operational problems.

Schmidt attributed the production losses primarily to safety stoppage issues at Modikwa and geological problems at Two Rivers where the nature of the reef being mined had changed significantly.

He said a lot of the safety stoppages at Modikwa were “self imposed” – and not forced on the mine by the Department of Minerals (DMR) – because management was focussed on raising safety standards to improve future productivity.

At Two Rivers he said mining operations were moving into lower grade areas pointing out that for the last 14 years there had been a “single homogenous orebody yielding 4g/t”.

“The orebody has changed. We are in the process of transitioning into split reef and that requires a change to the mining method making it slower and more difficult.” Schmidt said one of the ways to deal with this was to increase the capacity of the treatment plant and plans were to boost output from Modikwa from the current 300,000oz/year to 360,000oz/year sustainably over the next 18 months.

Turning to the market Schmidt commented, “we do believe the palladium and rhodium prices – based on the market shortfalls – are with us for at least a couple of years.”

ARM’s headline earnings for the six months were static at R2.2bn while adjusted headline earnings dropped 17% to R2bn (R2.5bn). The interim dividend was raised 25% to R5 a share (R4 a share).

The post Platinum bolsters the bottom-line for African Rainbow Minerals appeared first on Miningmx.


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