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Headline earnings increased by 204% to R3 196 million (F2016: R1 051 million). Headline earnings per share were 1 684 cents compared to 494 cents in the previous corresponding financial year. Dividend declared increased by 189% to 650 cents per share (F2016: 225 cents per share). This is the highest dividend to date and is ARM’s eleventh consecutive annual dividend. Basic earnings were R1 372 million (F2016: R565 million basic loss) and include:
– an attributable impairment previously reported in the interim results for the six months ended 31 December 2016 (1H F2017) of the Nkomati Mine assets of R711 million after tax; and
– an attributable impairment previously reported in 1H F2017 of the Modikwa Mine assets of R734 million after tax and non-controlling interest; and
– an attributable partial impairment reversal of the Lubambe Mine assets of R144 million after non-controlling interest following the classification of Lubambe Mine as an operation held for sale.
• Higher US Dollar prices were realised for all the commodities in ARM’s portfolio.
• Cost containment initiatives yielded good results.
The iron ore, manganese ore, manganese alloy, nickel, copper and Participating Coal Business (PCB) operations achieved unit production cost increases below inflation.
Unit production cost increases at Modikwa and Two Rivers Mines were in line with inflation.
• ARM’s financial position has strengthened.
At 30 June 2017 ARM was in a net debt position of R1 271 million compared to net debt of R4 235 million at 30 June 2016.
• ARM and Vale announced the disposal of their 80% interest in Lubambe Mine for a purchase consideration of US$97 million.
• ARM’s interest in Two Rivers will increase to 54% on execution of Two Rivers’s amended mining right which is imminent.
• ARM and Glencore Operations South Africa are in discussions concerning the restructuring of the ARM Coal partner loans to improve ARM’s debt obligations in terms of these loans.
ARM operational review
The ARM Board of Directors (the Board) announces a 204% increase in headline earnings for the financial year ended 30 June 2017 (F2017) to R3 196 million (F2016: R1 051 million). The significant increase was mainly as a result of higher US Dollar prices realised for all the commodities in ARM’s portfolio relative to the previous corresponding year. During the financial year under review the Rand strengthened 6% against the US Dollar partially offsetting the positive impact of higher US Dollar commodity prices.
Dividend declared increased by 189% to 650 cents per share (F2016: 225 cents per share). This is the highest dividend to date and is ARM’s eleventh consecutive annual dividend.
ARM Ferrous headline earnings increased by 157% to R3 709 million as iron ore, manganese ore and manganese alloy prices recovered. The division was able to deliver into this improved price environment realising average US Dollar prices for export iron ore that were 45% better than F2016. The average realised US Dollar price for export manganese ore was 93% higher than F2016.
ARM Platinum headline earnings improved by R360 million as each operation in the division improved its contribution to earnings. There was a significant turnaround at Nkomati Mine from a headline loss of R244 million in F2016 to headline earnings of R91 million in the year under review. Two Rivers Mine headline earnings were up 2% to R325 million (F2016: R318 million) while Modikwa Mine reported a reduced headline loss of R66 million (F2016: R84 million).
ARM Coal headline earnings of R82 million in F2017 are a significant turnaround from the headline loss of R297 million reported in F2016. The improvement was mainly due to the PCB operations which contributed R181 million headline earnings to ARM (F2016: R210 million headline loss). The Goedgevonden (GGV) Mine continued to be loss-making as operational challenges negatively impacted on sales volumes and unit costs.
The ARM Copper headline loss was R203 million (F2016: R361 million). On 15 August 2017 ARM and Vale announced the disposal of their 80% interest in the Lubambe Mine which is discussed in further detail below. The Lubambe Mine is classified as a discontinuing operation for reporting purposes.
The Corporate and other headline loss was R778 million (F2016: R301 million headline earnings) and includes a provision of R330 million for a possible settlement of the silicosis and tuberculosis class action claims and related costs.