African Rainbow Minerals (ARM) has scaled back on mechanised development at its Bokoni Platinum Mines in Limpopo and will restructure the operation to stop the cash bleed in a low metal price environment.
ARM, chaired by billionaire Patrice Motsepe, on Friday reported a 49% decline in headline earnings for the six months ended December 31 to R1.52bn or R7.75 a share, from R2.95bn or R15.07 a share.
By division, ARM Platinum’s headline earnings plummeted 144% to R689m, ARM Coal’s headline earnings declined 11% to R182m, ARM Ferrous headline earnings decreased 33% to R1.8bn and headline earnings from ARM Corporate and other divisions fell 41% to R190m.
Speaking at the results presentation, Motsepe said Bokoni remained a world-class ore body given its high grade and high quality. He said he was looking to ensure a balance of the company’s capital allocation discipline and investment across its portfolio.
“We have to ensure every cent we spend there is appropriate and makes commercial sense, and is also part of the long-term strategy of realising value when the prices of the commodities increase, which we expect. Also important is all of the assets we operate; there are no holy cows, and this is critical.”
Struggling assets would be placed on care and maintenance, something the company has previously stated, he said.
“You have got to look at how you justify the cost you are incurring in the context of profitability. There has to be a balance between long-term profitability and our short-term objectives. The short-term objective is profitability as well, but also the payment of dividends.”
CEO Phillip Tobias said Bokoni was the biggest contributor to losses in the platinum division and cost-cutting, including restructuring, would turn the ship around.“
At this point, taking into account the price cycle where we are, we have made a decision we are not going to proceed with the major capital growth,” Tobias said.
“We have stopped the mechanised development, we are redeploying those efforts to focus on available stoping and increasing the feed grade into our concentrator. We have issued a section 189 process to right-size the mine,” and the consultation process was under way.
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