JOHANNESBURG (miningweekly.com) – Full ownership and execution of factors that are within management’s control are being elevated to the highest possible level by African Rainbow Minerals (ARM) CEO Phillip Tobias.

ARM has sharpened its pencil in as far as things that are within its control are concerned and success is being achieved tackling costs, increasing volumes, and managing grades.

“Your cost curve will really determine how far you are going to run so we want to be in the first quartile and it will come through hard work and we really want to commend our workforce, and our leadership as well, for heeding the call.

“When the clarion call was made, they really heeded it, and we’ve seen some improvement. It’s not over. It’s a continuous improvement. It’s like sweeping water uphill, so it’s a daily thing.

“We need to continue to look for those opportunities and any slight improvement in cost, volume and grade can be seen on the bottom line,” Tobias emphasised in an interview with Mining Weekly. (Also watch attached Creamer Media video

While ARM Ferrous reported 12% higher headline earnings, ARM Platinum reported a loss owing to the sharp price fall of platinum group metals (PGMs), and ARM Coal was 85% down compared with the corresponding period of last year.

It was the iron-ore division that made the big contribution to earnings before interest, taxes, depreciation and amortisation (Ebitda).

But major effort is being made to improve what is under management control at the PGM operations.

“I’m pleased to say that there has been a 4% increase on the Modikwa mining grade and we’ve also seen some marginal improvement on the Two Rivers mining grade although we are still mining the split reef.

“We have, to a certain extent, been able to optimise our cut and we are quite pleased,” said Tobias.

Making sure that an enabling environment is created for ARM employees and simplifying things for employees to perform to the best of their ability is also an ongoing priority.

“Global competitiveness is what is going to differentiate us, especially when there’s a price squeeze," he said.

Mining Weekly: In circumstances like the present, how beneficial is ARM’s diversified portfolio of mining assets?

Tobias: If you look at our results, you’d see that even from the Ebitda segment that iron-ore delivered about 80% of that. Previously, it was almost an equal distribution between iron-ore and the PGMs business but with PGMs falling to about 8%, the outcome was that iron-ore took a big chunk of that split and we are quite grateful that it was not only price related but there was an improvement in terms of volume of sales and production. We saw a 1% improvement on that and the cost as well. If you look at the unit cost on the iron-ore side with Khumani, it was just a 3% increase compared with the corresponding period. That’s quite helpful considering that we’ve seen a shortfall of approximately 40% in the PGMs basket price. You do need the cushion that diversification provides because mining is cyclical.

To what extent is ARM rationalising capital expenditure?

As we announced in our previous results, we’ve concluded capital expenditure on Black Rock, so now the focus is more on the PGMs business. What is very important is that in as much as the Two Rivers Platinum Merensky capital project of 200 000 t has been approved, we need to continue to make sure that we really focus on differentiating between the needs and the wants. The wants are what we can park and the business will still basically continue, and then, at the right time, when the price is right, you can bring in the wants. That is the rationalisation that is taking place. Also, regarding Bokoni, the board did approve the early ounces and we informed the market about that. That execution has gone well and we saw the first production at Bokoni in November last year, so we’ve got concentrates now. We’re producing and utilising the 60 000 t UG2 plant. The gradual build is probably going to be the approach that we’re going to take. We are busy with the studies in terms of how we optimise the base load capacity because we still have 110 000 t of the Merensky plant and we are looking at how we phase that. Those studies are under way and the timing of execution will also be subject to market conditions. This is where capital allocation comes in to say which button we press first, which button are we going to press next and ensuring that there’s not a negative effect on the balance sheet during this period of volatile market conditions.

IRON-ORE

The average realised dollar prices for iron-ore increased by 23% in the six-month period, export sales volumes were better than in the corresponding previous half-year, and engagement and communication with Transnet to address iron-ore line challenges have “improved significantly”, ARM stated in its presentation document.

“The biggest risks to our iron-ore operations include single customer risk at the Beeshoek mine, water supply challenges at the Khumani mine and logistical constraints, the company headed by executive chairperson Dr Patrice Motsepe added.

ARM is commited to balancing capital growth and also dividend payout whilst maintaining a very robust balance sheet. With net cash of R8-billion, ARM’s financial position remains strong.