Lower metal prices take toll on ARM
• Miner expects interim headline earnings to fall as much as 50%
African Rainbow Minerals (ARM) expects a decrease in earnings for the half-year to end-December as a result of the decline in platinum group metals (PGMs) and thermal coal prices.
The diversified miner expects its interim headline earnings to fall by 40%-50% year on year to between R2.586bn and R3.103bn. Headline earnings per share (Heps) are expected to come in at R13.19-R15.83, compared with R26.39.
The precious metals and mining index was off 1.58%.
The company said it experienced a 43% drop in the average dollar PGM basket prices and lower thermal coal prices. However, it said this was partially offset by a weaker average rand/ dollar exchange rate and higher average export iron ore prices.
PGM prices have been and remain under pressure. According to a World Platinum Investment Council report, the PGM basket price slumped by about 40% in 2023, leading to lower profitability across all PGM miners, raising concern about the long-term sustainability of several operations.
The council estimates 25% of PGM mine production is generating negative cash margins at the current spot basket price of about $1,250 per PGM ounce, excluding recycled stock.
“Factors contributing to ARM’s downturn in earnings highlight the vulnerability of the company’s operations to global commodity price fluctuations,” IG senior market analyst Shaun Murison said.
“A weaker rand/dollar exchange rate and higher average realised export iron ore prices have mitigated some of the negative effects on ARM’s earnings, showcasing the complex interplay between commodity prices, currency movements and export dynamics,” Murison said.
ARM said it had recognised impairments on several key assets, totalling R1.74bn across different operations. “These impairments are indicative of the company’s asset revaluation in response to changing market conditions and the effect of lower commodity prices on asset valuations,” he said.
November, ARM said it had secured full ownership of Nkomati nickel mine in Mpumalanga, which was under care and maintenance.
The deal, which is subject to regulatory approval, is expected to close in 2024.
ARM said Nkomati had a predictable nickel sulphide ore body, critical to producing nickel, which is used in stainless steel and the manufacture of
IT EXPERIENCED A 43% DROP IN THE AVERAGE DOLLAR PGM BASKET PRICES AND LOWER THERMAL COAL PRICES
electric vehicle batteries.
The mine also has a relatively low carbon emission footprint, low capital intensity and short lead times to resuming steadystate production of class one compatible nickel sulphide concentrate, the preferred feed to nickel sulphate production sought by battery manufacturers. The use of green metals is expected to increase exponentially as the world transitions to a carbon-free future from environmentally damaging fossil fuels.
ARM’s share price had fallen 2.16% to R168.14 by the close on Wednesday. The shares have fallen about 35% over the past year.
The miner will release its interim results on March 8.