African Rainbow Minerals (ARM), a diversified miner chaired by billionaire Patrice Motsepe, is focused on adding green metals to its portfolio, as it scouts for new acquisitions.
“We are significantly more alive and more cautious, to make sure that the utilisation of our cash is indeed in those commodities that are part of the future of mining, not just in SA, but globally,” Motsepe said. :And the emphasis, almost over emphasis, on emissions and climate change makes it clear that those mining companies that are mining and producing those minerals that are in demand [for decarbonising] will do well. And that's what we're looking at.”
The ARM policy is in keeping with a broader trend among mining companies to pivot towards metals key to decarbonising, including nickel, lithium, cobalt and copper.
ARM’s continued interest in acquiring new assets comes as the group released a strong set of results for the year ended in June 2021, with headline earnings increasing 136% to R13bn, or R66.88 per share. Net cash more than doubled from R3.73bn to R8.20bn. A final dividend of R20 per share was declared, bringing the total for the year to R30 per share.
ARM mines and beneficiates iron ore, manganese, chrome, platinum group metals (PGMs), nickel and coal. The group also has an investment in gold through its shareholding in Harmony Gold. While Motsepe had previously said the group was keen to add copper to its portfolio, on Monday he conceded that ARM had been burnt by its foray into copper when buying into the Lubambe mine in Zambia, from which it divested in 2017.
“It's important to overemphasise that, even though we are an aggressive company when it comes to concluding the appropriate transactions, we tend to be much more cautious [given] past experiences [like Zambia],” Motsepe said.
In the absence of any appropriate deals, ARM said it would consider returning the cash to shareholders through dividends or possibly even a share buyback.
The group is also looking to grow its platinum group metals offering. As a key component to control emissions in vehicle engines, and critical to hydrogen fuel cells, PGMs are expected to have a role to play in the greening of global economies.
According to ARM CEO Mike Schmidt, a separate listing of the PGM business remains a matter of internal debate, but remains in consideration as the group builds its PGM capacity for the future.
At its Two Rivers platinum operation, ARM will invest R5.7bn to develop a new operation on the Merensky Reef over the next three years. ARM has also been increasing its milling plant capacity with a view to add up to 60,000 ounces of production to its profile.
Despite its strong performance, ARM’s various business divisions felt the effects of operational and security troubles on the Transnet rail network.
In spite of buoyant export coal prices in 2021, ARM Coal had a particularly bad year, recording a R250m loss compared with a R2m loss in the 2020 financial year.
This resulted from the negative impact of the railing issues as well as 40% drop in domestic sales to Eskom as short-term contracts with the utility expired and were not renewed.
ARM said it was working very closely with the relevant departments, minister and with the Minerals Council to assist Transnet to improve the railing performance, which affects its iron ore, manganese, chrome and coal businesses.
Schmidt said that through collaboration with the sector, he was optimistic Transnet would overcome its challenges and that performance would improve.
Asked about a successor to Schmidt, who has served as CEO since 2011, Motsepe said the group had “very good succession process in place” with “excellent people in house, who are very good candidates to consider as potential CEO successors”.
An announcement would be made in due course, he said.
ARM’s share price was 3.16% lower at R238.04 at close of trade on Monday. With a market capitalisation of R53.43bn, the stock has gained 14.97% over the past 12 months.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.