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Interim Results for the six months ended 31 December 2021 and interim dividend declaration
African Rainbow Minerals Limited
(Incorporated in the Republic of South Africa)
(Registration number 1933/004580/06)
JSE Share code: ARI
ISIN: ZAE000054045
(“ARM” or the “Company”)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2021
(1H F2022) AND INTERIM DIVIDEND DECLARATION
This short form announcement is the responsibility of the board of
directors of ARM (the "Board") who acknowledge their responsibility
to ensure the integrity of the interim results.
The details contained in this announcement are only a summary of
the information in the full announcement and do not contain full
details of the Company’s financial performance and position or
other relevant information about the business for the six months
under review. Any investment decisions by investors and/or
shareholders should therefore be based on the full announcement
published on the Company’s website at www.arm.co.za and is
available on the following link:
https://senspdf.jse.co.za/documents/2022/jse/isse/ARIM/HY2022.pdf
The full announcement is also available for inspection free of
charge during business hours (excluding weekends and public
holidays) from Thursday, 03 March 2022 at the registered office of
ARM at ARM House, 29 Impala Road, Chislehurston, Johannesburg. In
addition, copies of the full announcement may be requested by
emailing the Company’s investor relations department on
jade.kunstler@arm.co.za
Salient features
- Headline earnings for the six months ended 31 December 2021
(1H F2022) decreased by 27% to R3 696 million or R18.87 per
share (1H F2021: R5 039 million or R25.87 per share).
- An interim dividend of R12.00 per share is declared (1H F2021:
R10.00 per share).
- Sale and purchase agreement signed, subject to the fulfilment
of certain conditions precedent, for the acquisition of Bokoni
Platinum Mine (Bokoni Mine) for a consideration of R3 500
million payable in cash. Bokoni Mine has the second largest
platinum group metals (PGM) resource in South Africa.
- ARM Ferrous headline earnings decreased by 18% to R2 428
million (1H F2021: R2 955 million) mainly due to lower
headline earnings in the iron ore division (owing to a
decrease in US dollar iron ore prices) which was partially
offset by improved headline earnings in the manganese
division.
- ARM Platinum headline earnings decreased by 38% to
R1 245 million (1H F2021: R2 021 million) largely due to
negative mark-to-market adjustments related to the
receivables balance as at 30 June 2021 following a decrease
in the rhodium and palladium prices in the first three months
of the period.
- ARM Coal headline earnings increased by R573 million to
R351 million (1H F2021: R222 million headline loss) mainly
due to higher export thermal coal prices.
- Basic earnings were R3 893 million (1H F2021: R4 868 million)
and included an attributable impairment reversal of
R239 million on the investment in the Participative Coal
Business (PCB).
- Net cash improved by R2 854 million to R11 056 million at
31 December 2021 (30 June 2021: R8 202 million).
- The group net asset value per share increased by 2% to R183.32
per share (at 30 June 2021: R179.08 per share).
Safety performance
Our operations delivered improved safety performances despite the
challenges presented by Covid-19. The group lost-time injury
frequency rate (LTIFR) per 200 000 man-hours improved to 0.36
(1H F2021: 0.40), while the total recordable injury frequency rate
(TRIFR) improved to 0.67 (1H F2021: 0.82).
At 31 December 2021, Black Rock Mine had achieved 9.9 million
fatality-free shifts, and on 14 February 2022, the mine reached a
milestone of 10 million fatality-free shifts. The last fatality at
Black Rock Mine was in April 2009.
Regrettably, one of our colleagues was fatally injured in a
fall-of-ground incident at the Two Rivers Mine North Decline on
1 September 2021. We extend our heartfelt condolences to the family
of Mr Jacob Puleng Leshaba, his friends and his colleagues.
We remain committed to zero harm and continue to work with all our
employees to identify and minimise the occurrence of fatal hazards.
We continued to proactively prevent the spread of Covid-19 through
strict health and safety measures. 6 033 Covid-19 tests were
conducted in 1H F2022 of which 1 441 resulted in positive cases.
Sadly, we lost nine of our colleagues to Covid-19 in the period
under review. We extend our condolences to the families, friends
and colleagues of the employees who lost their lives to Covid-19.
This brings to 44 the number of colleagues we have lost to
Covid-19 since the onset of the pandemic.
It is encouraging to see that despite a spike in positive Covid-19
cases resulting from the Omicron variant, there has been a
significant improvement in recovery rates and a marked reduction
in the number of active Covid-19 cases. As at 30 January 2022 there
were 27 active cases in the group, representing a 99% recovery
rate.
Financial performance
Headline earnings
Headline earnings for the six months ended 31 December 2021
decreased by 27% to R3 696 million (or R18.87 per share) compared
to the corresponding period headline earnings of R5 039 million
(or R25.87 per share).
The average realised rand strengthened by 8% versus the US dollar
to R15.02/US$ in 1H F2022 compared to R16.26/US$ in 1H F2021. For
reporting purposes, the closing exchange rate at 31 December 2021
was R15.98/US$ (31 December 2020: R14.65/US$).
ARM Ferrous headline earnings were 18% lower at R2 428 million
(1H F2021: R2 955 million) driven by a 33% decrease in headline
earnings in the iron ore division which was partially offset by a
308% increase in headline earnings in the manganese division.
The iron ore division was negatively impacted by lower average
realised US dollar prices, lower export sales volumes, higher
freight rates and a stronger rand versus US dollar exchange rate.
In addition, iron ore headline earnings included a R479 million
(pre-tax) (attributable basis) realised negative fair value
adjustment on iron ore sales and a R133 million (pre-tax)
(attributable basis) negative unrealised fair value adjustment on
open iron ore sales.
Higher headline earnings in the manganese division were driven by
an increase in the average realised US dollar manganese ore and
manganese alloy prices which was partially offset by lower
manganese ore sales volumes, higher freight rates and the stronger
rand versus US dollar exchange rate.
ARM Platinum headline earnings decreased by 38% (or R776 million)
to R1 245 million (1H F2021: R2 021 million). Modikwa Mine delivered
a 29% increase in headline earnings to R594 million (1H F2021:
R462 million) as the mine increased production volumes by 37% and
reduced production unit costs (on a rand per 6E PGM ounce basis)
by 13%.
Two Rivers Mine headline earnings reduced to R725 million
(1H F2021: R1 279 million) mainly due to R669 million negative
mark-to-market adjustments (1H F2021: R569 million positive mark-
to-market adjustments), a 3% decrease in production volumes and a
16% increase in production unit costs (on a rand per 6E PGM ounce
basis).
For more information on the mark-to-market adjustments, refer to
page 13 of the full announcement.
Nkomati Mine reported a headline loss of R74 million (1H F2021:
R280 million headline earnings) as the mine was placed on care and
maintenance on 15 March 2021.
ARM Coal headline earnings of R351 million (1H F2021 headline loss:
R222 million) included a re-measurement gain of R18 million
(1H F2021: R2 million) on partner loans. Higher headline earnings
at coal were mainly because of increased export thermal coal
prices, which were partially offset by lower sales volumes due to
Transnet Freight Rail (TRF) logistics challenges.
ARM Corporate and other (including Gold) reported a headline loss
of R237 million (1H F2021: R345 million headline earnings) mainly
due to re-measurement losses of R364 million in the current period
(1H F2021: R120 million gain) and decreased management fees
received of R643 million (1H F2021: R779 million).
Machadodorp Works reported a headline loss of R91 million
(1H F2021: R60 million) as research into developing energy-
efficient smelting technology progressed.
Financial position
At 31 December 2021, ARM’s net cash was R11 056 million
(30 June 2021: R8 202 million), an increase of R2 854 million
compared to the end of the 2021 financial year. This amount excludes
attributable cash and cash equivalents held at ARM Ferrous (50% of
Assmang) of R4 428 million (30 June 2021: R4 099 million).
There was no debt at ARM Ferrous in either of these reporting
periods.
Cash flow
Cash generated from operations increased by R2 799 million to
R4 825 million (1H F2021: R2 026 million) after a reduction in
working capital requirements of R1 036 million (1H F2021:
R3 587 million increase), mainly due to a decrease in trade
receivables.
In 1H F2022, ARM paid R3 917 million in dividends to its
shareholders, representing the final dividend of R20.00 per share
declared for F2021 (1H F2021: R1 346 million was paid representing
the F2020 final dividend of R7.00 per share).
Net cash outflow from investing activities was R1 167 million
(1H F2021: R13 million inflow) and included a net investment in
financial assets of R314 million (1H F2021: R856 million net
proceeds from financial assets).
Borrowings of R68 million (1H F2021: R177 million) were repaid
during the period, resulting in gross debt of R1 026 million at 31
December 2021 (30 June 2021: R1 469 million). This excludes a
R549 million (1H F2021: R23 million) reduction in ARM Coal partner
loans that was repaid.
Investing in growth and our existing business
Our robust cash balance positions us well to invest in our
operations and opportunistically pursue value-enhancing growth
while continuing to pay dividends to shareholders. We continue to
evaluate opportunities to grow our company, deliver competitive
returns to shareholders and create sustainable value for our
stakeholders.
We are pleased to have signed a sale and purchase agreement for
the acquisition of the Bokoni Mine from Anglo American Platinum
Limited and Atlatsa Resources Corporation, subject to the
fulfilment of certain conditions precedent.
The acquisition gives ARM an opportunity to develop Bokoni Mine’s
large, high-grade resource which will enable ARM to scale its PGM
portfolio, improve its global competitiveness and pursue further
value-accretive organic growth.
Bokoni Mine was placed on care and maintenance in October 2017
owing mainly to adverse market conditions. We are developing a new
mine plan for Bokoni Mine which will focus predominantly on mining
the UG2 resource employing fully mechanised mining methods and
targeting predominantly on-reef development.
This plan targets better ground conditions and higher-grade mining
areas, while fully leveraging existing mining and processing
infrastructure.
We will concurrently evaluate early mining opportunities to
capitalise on the current strong PGM basket prices. The new mine
plan is expected to improve efficiencies, reduce unit costs and
provide early revenue.
The focus for the next 12 months will be to finalise a definitive
feasibility study (DFS) and in parallel obtain all the requisite
mining approvals and fulfil all conditions precedent as per the
agreements concluded. This will enable ARM to commence mining
operations in 2023.
ARM envisages development capital of approximately R5.3 billion
(in real 2021 terms) to be spent over three years to ramp up the
mine to a steady-state production of approximately 300 000 ounces
of 6E PGM and 255 000 tonnes of chromitite concentrate per annum.
Steady state is expected to be achieved from 2028 onwards.
We continued to invest in our existing operations with segmental
capital expenditure of R1 933 million for the period (1H F2021:
R1 877 million). This included attributable capitalised waste
stripping at the iron ore operations of R277 million (1H F2021:
R271 million).
Capital expenditure for the divisions is discussed in each
division’s operational performance section from page 8 of the full
announcement.
Dividend declaration
ARM aims to pay ordinary dividends to shareholders in line with our
dividend guiding principles. Dividends are at the discretion of the
board of directors which considers the Company’s capital allocation
guiding principles as well as other relevant factors such as
financial performance, commodities outlook, investment
opportunities, gearing levels as well as solvency and liquidity
requirements of the Companies Act.
The Board approved and declared an interim dividend of 1 200 cents
per share (gross) (1H F2021: 1 000 cents per share).
The amount to be paid is approximately R2 694 million.
The dividend declared will be subject to dividend withholding tax.
In line with paragraphs 11.17(a) (i) to (x) and 11.17(c) of the JSE
Listings Requirements, the following additional information is
disclosed:
- The dividend has been declared out of income reserves
- The South African dividends tax rate is 20%
- The gross local dividend is 1 200 cents per ordinary share for
shareholders exempt from dividends tax
- The net local dividend is 960 cents per share for shareholders
liable to pay dividends tax
- At the date of this declaration, ARM has 224 458 652 ordinary
shares in issue, and
- ARM’s income tax reference number is 9030/018/60/1.
A gross dividend of 1 200 cents per ordinary share, being the
dividend for the six months ended 31 December 2021, has been declared
payable on Monday, 4 April 2022 to those shareholders recorded in
the books of the company at the close of business on Friday, 1 April
2022.
The dividend is declared in the currency of South Africa. Any change
in address or dividend instruction applying to this dividend must
be received by the Company’s transfer secretaries or registrar not
later than Wednesday, 30 March 2022. The last day to trade ordinary
shares cum dividend is Tuesday, 29 March 2022. Ordinary shares trade
ex-dividend from Wednesday, 30 March 2022. The record date is Friday,
1 April 2022 while the payment date is Monday, 4 April 2022.
No dematerialisation or rematerialisation of share certificates may
occur between Wednesday, 30 March 2022 and Friday, 1 April 2022,
both dates inclusive, nor may any transfers between registers take
place during this period.
Scope of independent auditor
The financial results for the six months ended 31 December 2021
have not been reviewed nor audited by the Company’s registered
auditor, Ernst & Young Inc. (the partner in charge is PD Grobbelaar
CA(SA)).
Basis of preparation
The condensed group interim financial statements for the six months
ended 31 December 2021 have been prepared on the historical cost
basis, except for certain financial instruments, which include
listed investments and unlisted investments that are fair valued.
The accounting policies used are consistent with those in the most
recent annual financial statements except for those listed below
and comply with IFRS.
The condensed group interim financial statements for the period
have been prepared under the supervision of the Finance Director,
Ms TTA Mhlanga CA(SA).
The presentation and functional currency is the South African rand
and the condensed group interim financial statements are rounded
to the nearest R million.
For all investor relations queries please contact:
Jongisa Magagula
Executive Director: Investor Relations and New Business Development
Tel: +27 11 779 1507
E-mail: jongisa.magagula@arm.co.za
Johannesburg
03 March 2022
Sponsor: Investec Bank Limited
Date: 03-03-2022 07:05:00
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