ARM targets ‘external growth’

African Rainbow Minerals, which paid a record fullyear dividend, is in an “external growth” phase, looking for copper investments outside the Zambian copper belt where it has just burnt its fingers.

African Rainbow Minerals (ARM), which paid a record fullyear dividend, is in an “external growth” phase, actively looking for copper investments outside the Zambian copper belt, where it has just burnt its fingers.

ARM swung into a substantial profit for its 2017 financial year, prompting it to pay its highest dividend of R6.50 per share compared to 225c the year before.

ARM, chaired by billionaire Patrice Motsepe, reported a R1.4bn profit for the year to endJune compared to a R757m loss the year before, with its 50% share in the Assmang iron and manganese business contributing handsomely to the results.

Net debt fell to R1.27bn, from R4.24bn previously.

Since the end of its financial year in June, the company received a R1bn dividend payment from Assmang, its equally held and cash-flush joint venture with Assore.

By the end of June, ARM held R1.488bn in cash, up from the R1.29bn it held a year earlier.

This figure excludes the attributable cash of R3.17bn held by ARM Ferrous, the holder of the 50% stake in Assmang.

ARM and its partner, Brazil’s Vale, are selling their 80% stake in the perennially loss-making Lubambe copper mine in Zambia. Motsepe said the company wanted to remain in the copper business, but was interested in lower-cost assets.

“We are a growing company and we are now back in the realm of acquisitions,” he said.

“We have repositioned the company and restructured it for external growth. The internal growth will continue … and we’ll continue to invest to grow our asset base in the ore bodies we own, but the focus in the next few years is to focus on external growth,” he said.

Mike Schmidt, ARM’s CEO, said the company was investigating two copper opportunities that were not in the copper belt.

Assmang’s 54%-owned Sakura Ferroalloys plant in Malaysia, which buys about 460,000 tonnes of manganese ore from Assmang in SA annually, could be expanded if exports could be increased from SA where rail capacity is the key constraint, he said.

Aware of the large cash holdings in the partnership and nearing the end of a large investment in the new Blackrock manganese mine, the Assmang board would look for ways to spend its cash and could look for further opportunities in iron ore and manganese, said Andre Joubert, board member and head of ARM’s ferrous division.