Patrice Motsepe’s African Rainbow Minerals takes a hit

African Rainbow Minerals (ARM) reported weak results for the 2024 financial year as low platinum prices negatively impacted the company’s earnings.

ARM – which was founded by billionaire Patrice Motsepe and mines iron, platinum, coal and other minerals – released its results for the year through June 2024 on Friday, which revealed poor results for the miner.

Its revenue fell by almost 20%, while sales dropped by over 22%. Its cost of sales rose by 19.30%.

This saw the company’s profit for the year more than halve, dropping from R9.32 billion in 2023 to R2.30 billion – a 75% decrease.

ARM’s earnings per share also dropped significantly, from 4,121 cents per share in 2023 to 1,604 cents. This is a 61% decrease.

The miner’s headline earnings per share decreased by 43% to R5.08 billion or 2,591 cents per share.

The company attributed this decline to the fall in the average US dollar 6E PGM basket price and the lower thermal coal prices. 

However, it noted that this was partially offset by a weaker average rand/US dollar exchange rate and higher average realised export iron ore prices.

ARM’s Ferrous segment saw headline earnings drop by 9%, driven by a 90% decrease in headline earnings in the manganese division.

This was partially offset by a 19% increase in headline earnings in the iron ore division.

Iron ore headline earnings include a R22 million negative fair value adjustment on sales. The

fair value adjustment comprises a R28 million positive fair value based on confirmed prices and a R50 million negative fair value adjustment based on forward prices.

Lower headline earnings in manganese ore 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. 

Lower headline earnings in manganese alloys were driven by lower sales volumes due to lower demand, a significant decrease in ferromanganese prices and an increase in provisions for onerous contracts and restoration.

However, higher headline earnings in the iron ore division were driven by an increase in average realised US dollar iron ore prices, slightly higher sales volumes, as well as the weaker rand/US dollar exchange rate, partially offset by higher mining costs and higher railage expenses.

ARM’s Platinum segment saw headline earnings decrease by 162% to a headline loss of R910 million, compared to earnings of R1.47 billion the year prior.

The company attributed this mainly to significant declines in the basket price for platinum group metals.

The miner’s Coal segment also reported a significant drop in earnings from R1.64 billion in 2023 to R391 million.

This decrease was mainly driven by a reduction in the realised coal price at ARM’s Goedgevonden Mine and its Participative Coal Business.

One division that performed well was ARM’s Corporate segment, which reported headline earnings of R762 million, an increase from 2023’s earnings of R651 million.

The miner explained that this division got a boost from its investment in Harmony Gold, which earned ARM dividends of R166 million.

In the 2024 financial year, ARM recognised the following impairments:

• An impairment of property, plant and equipment at Two Rivers Mine of R1.10 million after tax and non-controlling interests
• An impairment of property, plant and equipment at Modikwa Mine of R376 million after tax and non-controlling interests
• An impairment of property, plant and equipment at Beeshoek Mine of R422 million after tax
• An impairment of property, plant and equipment at Cato Ridge Works of R29 million after tax

The miner’s cash reserves also took a hit in the year, with its net cash falling from R9.78 billion in 2023 to R7.20 billion, a decrease of R2.58 billion.

ARM said this was largely driven by a decrease in cash generated from its operations after an outflow in working capital of R130 million.

Based on these results, ARM declared a dividend of R6 per share, down from the R14 dividend it declared last year. This brings the total dividend for the 2024 financial year to R15.00 per share.