Lower platinum group metals (PGM) and coal prices tipped full year headline earnings in African Rainbow Minerals (ARM) for the year to June downwards by 43%, with the company’s total dividend for the year resultantly falling to R15 per share compared to R26 per share in the previous corresponding period.

This saw the company’s share price on the JSE dragging down by 2.9% to R157.29 per share at the close of Friday’s trade session. Year to date, ARM’s stock is 21.4% weaker.

Headline earnings for the full year to June 2024 dipped 43% to R5 billion or R25.91 per share.

“The decline in headline earnings was mainly due to the decline in the average US dollar 6E PGM basket price and the lower thermal coal prices,” said ARM on Friday.

However, this had partially been offset by a weaker average rand/US dollar exchange rate and higher firmer export prices for iron ore.

During the period under review, the rand weakened by 5% versus the US dollar to R18.70/$1 compared to R17.76/$1 in the 2023 financial year. The company used a closing exchange rate as at 30 June 2024 of R18.25/$1 for reporting purposes compared to R18.90/$1 a year ago.

Over the year period to June 30 2024, unit costs for African Rainbow “remained under pressure due to lower production volumes, above-inflation increases in electricity costs, and higher waste-stripping” for its iron ore operations.

In July, ARM decided to place the Two Rivers Merensky project on care and maintenance due to the “the current downward cycle in the PGM” prices market. It said it would evaluate re-commencement of the project when PGM prices recover.

At Bokoni Mine, ARM is now focusing on conserving cash while ramping up production “in a phased and measured manner, given the depressed commodity” prices.

“This approach will maximise the use of Bokoni’s existing surface and concentrator plant infrastructure, reducing capital costs. Subsequent to year end, the construction of a chrome recovery plant was approved by the board,” said ARM.

Headwinds persisted for the company, with water supply to the Khumani Mine remaining at risk as refurbishment of the Vaal Gamagara pipeline has not yet started. This has forced the mine to rely on dewatering programmes of neighbouring mines for water supplies.

African Rainbow believes that the long-term solution to sustainable water supply at Khumani is the urgent start of phase 2 of refurbishing the Vaal Gamagara pipeline.

Construction of the company’s solar power plant was however on schedule, with the project on target for to start delivering 100MW of to ARM Platinum by August next year.

Despite the headwinds experienced for the period, ARM closed the year to June 2024 with net cash of R7.1bn compared to R9.7bn a year ago. This was after it R8.5bn invested into existing operations mainly due to the Merensky project at Two Rivers Mine.

Segmentally, ARM’s ferrous headline earnings dipped 9% lower to R5bn, driven by a 90% decrease in headline earnings in the manganese division although headline earnings in the iron ore division firmed up by 19%.

Lower headline earnings in the company’s manganese ore segment were mainly driven by a decrease in the average realised US dollar manganese ore prices, adjustments in sales mix arising from lower grade products being sold as well as increased railage tariffs.

ARM’s PGM headline earnings decreased 162% to a headline loss of R910 million against earnings of R1.4bn in the prior year.

The coal segment of the company reported headline earnings of R391m against R1.5bn a year earlier, with the dip driven by a reduction in the realised coal prices.

BUSINESS REPORT