Wrap Text
Interim results for the six months ended 31 December 2014
African Rainbow Minerals Limited
Incorporated in the Republic of South Africa
Registration number 1933/004580/06
ISIN code: ZAE000054045
Interim Results
for the six months ended
31 December 2014
Shareholder information
Issued share capital at 31 December 2014 217 437 523 shares
Market capitalisation at 31 December 2014 ZAR 25.9 billion
Market capitalisation at 31 December 2014 US$ 2.2 billion
Closing share price at 31 December 2014 R119.00
Six-month high (1 July 2014 – 31 December 2014) R203.01
Six-month low (1 July 2014 – 31 December 2014) R109.51
Average daily volume traded for the six months 580 339 shares
Primary listing JSE Limited
JSE Share Code ARI
ADR ticker symbol AFRBY
Investor relations
Jongisa Magagula
Corporate Development and Head of Investor Relations
Telephone: +27 11 779 1300
Fax: +27 11 779 1312
E-mail: jongisa.magagula@arm.co.za
Betty Mollo
Manager: Investor Relations and Corporate Development
Telephone: +27 11 779 1300
Fax: +27 11 779 1312
E-mail: betty.mollo@arm.co.za
Company secretary
Alyson D'Oyley, BCom, LLB, LLM
Telephone: +27 11 779 1300
Fax: +27 11 779 1318
E-mail: alyson.doyley@arm.co.za
Salient features
- Headline earnings decreased by 56% to R1 026 million (1H F2014: R2 341 million). Headline earnings
per share were 473 cents (1H F2014: 1 084 cents).
- Basic earnings were negatively impacted by exceptional items of R225 million, the largest of which
related to a R222 million unrealised mark-to-market loss after tax on the Harmony investment.
- Costs were well controlled at most operations. The iron ore, manganese alloy, chrome ore and Two
Rivers operations achieved below inflation increases and the coal operations achieved a decrease
in production costs.
- Cash generated from non-ferrous operations increased significantly by R624 million to
R1 485 million (1H F2014: R861 million) while the dividend from Assmang remained constant at
R750 million.
- Lubambe Mine copper production increased to 12 563 tonnes (1H F2014: 10 567 tonnes). Ramp-
up has been slower than planned and as a result changes to the mine plan are currently being
considered.
- Cash operating profit at ARM Coal increased as the Tweefontein Optimisation Project ramps up.
- Two Rivers' life of mine will be increased by approximately 30 years by ARM's acquisition of
the Tamboti Platinum (Pty) Ltd mining right on a property adjacent to Two Rivers and through the
addition of portions of the Buffelshoek, Kalkfontein and Tweefontein farms into the Two Rivers
mining area.
- Review of the manganese alloy smelter at Machadodorp Works has been completed. The current
operating furnace at Machadodorp will be stopped and placed on care and maintenance at the end
of April 2015.
- ARM and Assore reached an in principle agreement on ARM's disposal of its effective 50% interest
in the Dwarsrivier Chrome Mine to Assore.
ARM operational review
The ARM Board of Directors (the Board) announces headline earnings of R1 026 million for the six months ended
31 December 2014 (1H F2015). These headline earnings are 56% lower than the previous corresponding period mainly
as a result of a decline in US Dollar commodity prices which was partially offset by a weakening of the Rand compared
to the US Dollar.
ARM is responding to the current commodity cycle by:
- Reviewing all non-performing operations;
- Focusing on reducing capital expenditure;
- Improving operational efficiencies;
- Reducing costs;
- Targeting a decrease in corporate office costs;
- Curtailing exploration expenditure; and
- Improving cash flow by optimising working capital management.
Headline earnings by division
six months ended 31 December
R million 2014 2013 % change
Platinum Group Metals 176 206 (15)
Nickel 101 157 (36)
ARM Platinum 277 363 (24)
ARM Ferrous* 833 2 153 (61)
ARM Coal (10) (34) 71
ARM Copper (233) (122) (91)
ARM Exploration (40) (24) (67)
Gold – –
Corporate and other* 199 5 >250
ARM headline earnings 1 026 2 341 (56)
*Includes IFRS 11 adjustments related to ARM Ferrous.
These results have been achieved in conjunction with ARM's partners at the various operations, Anglo American Platinum Limited
(Anglo Platinum), Assore Limited (Assore), Impala Platinum Holdings Limited (Impala), Norilsk Nickel Africa (Pty) Ltd (Norilsk),
Glencore South Africa (Glencore), Vale S.A. (Vale) and Zambian Consolidated Copper Mines Investment Holdings (ZCCM-IH).
The interim results for the six months ended 31 December 2014 have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the disclosures are in accordance with IAS 34: Interim Financial Reporting.
Rounding of figures may result in minor computational discrepancies on the tabulations.
ARM Ferrous headline earnings, at R833 million (1H F2014: R2 153 million), were impacted by lower US Dollar commodity
prices with average realised export iron ore prices decreasing 45% and average realised manganese ore prices
declining 17%.
ARM Platinum headline earnings declined by 24% to R277 million mainly as a result of decreased production and high cost
increases at Modikwa Mine together with lower nickel produced at Nkomati Mine due to a lower grade consistent with the
mine plan. Modikwa Mine's performance was disappointing and detailed plans to improve the operational performance of
the mine are being considered and will be finalised in the current financial year. Two Rivers Mine increased its contribution
to headline earnings to R176 million (1H F2014: R157 million).
The headline loss from ARM Coal reduced marginally from a loss of R34 million in 1H F2014 to a loss of R10 million. This
reduction was mainly due to an increase in production and a reduction in unit costs at the Goedgevonden and Participating
Coal Business (PCB) operations. PCB cash operating profit increased to R182 million (1H F2014: R45 million), however,
higher interest charges negatively impacted their headline earnings.
ARM Copper incurred a headline loss of R233 million (1H F2014: R122 million). Ramp-up of the Lubambe Mine has been
slower than planned mainly as a result of grade dilution which has impacted production. As a result of the grade dilution and
the current low copper price changes to the mine plan are being considered in order to improve profitability, reduce capital
requirements and optimise cash flow for the mine. The Lubambe Mine orebody is significant both in size and in grade.
ARM remains committed to ramping up the mine to steady state and expects a recovery in the copper price in the medium
to long term. An updated plan is expected to be approved and communicated within the 2015 financial year.
Safety
ARM maintained a good safety record in the six months under review. The number of Lost Time Injuries (LTIs) improved
marginally to 58 compared to 59 in 1H F2014. The Lost Time Injury Frequency Rate (LTIFR) improved to 0.40 per 200 000
man-hours (1H F2014: 0.41 per 200 000 man-hours).
Safety achievements
- Black Rock Mine received the award for the "best improved mine" from the Department of Mineral Resources (DMR) in
the Northern Cape.
- As at end December 2014, Machadodorp Works had been lost time injury free for four consecutive quarters.
- Two Rivers Mine completed two million fatality-free shifts on 5 September 2014.
- Nkomati Mine completed four million fatality-free shifts on 31 August 2014.
Safety figures and statistics in this report are presented on a 100% basis and exclude the ARM Coal operations.
Focus on operational efficiencies
In the current environment ARM continues to reinforce its strategy of focussing on operational efficiencies to ensure that
all its operations are positioned below the 50th percentile of each commodity's respective cost curve. This has become
challenging as cost curves shift due to lower cost production being added to global supply, especially in iron ore.
Through a number of initiatives implemented in ARM Ferrous, the iron ore, manganese alloy and chrome ore operations
achieved below inflation on-mine unit production cost increases. Unit production costs at the manganese ore operations
increased by 19% mainly as a result of a decrease in production of manganese units as a lower grade section was
intersected at the Nchwaning III shaft.
The Black Rock Project currently underway is aimed at modernising the Black Rock Mine and increasing production from
the Seam 2 resource. The project is expected to curtail cost increases bringing them in line with inflation. Establishment of
key underground and surface infrastructure, being undertaken as part of the project, is expected to eliminate the need for
inefficient material handling and ultimately enable the saleable production capacity of Black Rock Mine to be increased.
In ARM Platinum, Two Rivers Mine once again delivered a strong operational performance with unit costs increasing below
inflation compared to 1H F2014. Modikwa Mine however experienced an 11% decrease in production and a 21% increase
in unit production costs due to safety stoppages and reduced labour productivity. All aspects of the mine, especially costs
and capital expenditure, are currently being reviewed. Nkomati Mine on-mine cash cost per tonne milled increased below
inflation, at 3%. C1 unit cash cost net of by-products, however, increased by 15% as a result of a reduction in grade
consistent with the mine plan.
ARM Coal saw a marked improvement in unit costs especially at the PCB operations as commissioning of the Tweefontein
Optimisation Project (TOP) commenced. High cost underground operations at Tweefontein Mine have been closed as part
of the project which has contributed to a lowering of costs. Unit costs per saleable tonne decreased by 18% at the PCB
operations and by 8% at Goedgevonden Mine. As TOP ramps up, a further reduction in unit costs is expected.
Quality growth
The Black Rock Project approved by the boards of directors of ARM and Assore is progressing on schedule and on budget.
This project effectively comprises two inter-linking phases; the first being modernisation of the mine and the second being
an increase in the mining capacity from 3.4 million to 4.6 million tonnes per annum. The timing of capital expenditure
associated with the project has been carefully considered as part of an overall capital expenditure review. Development
of the project continues to be planned to align with Transnet's increase in manganese ore export capacity planned for
2019/2020.
The Sakura Ferroalloys Project in Malaysia is progressing on schedule with all major capital items for the project on site.
Key personnel for the operation including the General Manager and senior management have been appointed and are now
working with the project team to deliver the project. The project remains on schedule to achieve steady state production of
170 000 tonnes manganese alloy per annum by F2017.
Acquisitions and partnerships
ARM is pleased to announce a significant extension to the Two Rivers life of mine. The Two Rivers life of mine will be
increased by approximately 30 years by:
- The inclusion of portions of Buffelshoek, Kalkfontein and Tweefontein farms into the Two Rivers' mining area. The
previously outstanding transfer of the prospecting right from Impala to Two Rivers has been finalised. As a result
ARM's shareholding in Two Rivers reduced from 55% to 51% with effect from 6 February 2015. The incorporation
of these areas into the Two Rivers mining right is nearing completion.
- ARM acquired Tamboti Platinum (Pty) Ltd, the holder of a mining right over a property adjacent to Two Rivers
Mine for a consideration of R400 million. Based on previous drilling results available, this acquired property adds
approximately 7.45 million ounces to the Two Rivers resource. ARM is in discussions with its partner, Impala, to
transfer the acquired resources into the Two Rivers mining area.
As announced on 27 February 2015, ARM and Assore reached an in principle agreement on ARM's disposal of its effective
50% interest in the Dwarsrivier Mine to Assore. Pursuant to the implementation of this transaction, Assore will own an
effective 100% interest in Dwarsrivier Mine. The implementation of this transaction is subject to the execution of definitive
agreements and the receipt of relevant regulatory approvals.
The current commodity environment presents opportunities for consolidation and ARM continues to assess value accretive
mergers and acquisition opportunities.
Africa
The final phase of exploration on the Rovuma prospecting areas has been concluded. The Rovuma geological report is
being evaluated. The way forward is currently under review with Rovuma Resources.
Changes to the Board
On 6 February 2015, ARM announced that Mr Daniel Simelane had resigned as the Chief Executive of ARM Copper and
as an Executive Director of the Company, to pursue other interests.
Mr Thando Mkatshana, who was at the time Chief Executive of ARM Coal, was subsequently appointed as the Chief
Executive of ARM Copper and as an Executive Director of the Company with effect from 7 February 2015. In addition, he
maintains his role as Chief Executive of ARM Coal.
ARM announced on 2 March 2015 that Dr M M M Bakane-Tuoane would cease to be the Lead Independent Non-executive
Director of the Board effective from 2 March 2015. Dr Bakane-Tuoane was also the Chairman of both the Nomination
Committee and the Non-executive Directors' Committee as required by the principles of King III: Report on Governance
for South Africa 2009 ("King III"). She therefore ceased to be Chairman of the Nomination Committee and Chairman
of the Non-executive Directors' Committee effective from 2 March 2015. Dr Bakane-Tuoane, an existing Remuneration
Committee member, was appointed by the Board to serve the Company as the Chairman of the Remuneration Committee
and continues as a member of the Nomination Committee and the Non-executive Directors' Committee.
Mr A K Maditsi, an Independent Non-executive Director of the Company, was appointed as the Lead Independent
Non-executive Director of the Board as well as the Chairman of the Nomination Committee and the Chairman of the
Non-executive Directors' Committee of the Company, with effect from 2 March 2015. Applying the principles of King III,
Mr Maditsi ceased to be the Chairman of the Remuneration Committee of the Company with effect from 2 March 2015.
Mr Maditsi will remain a member of the Remuneration Committee.
Changes to mineral resources and reserves
There has been no material change to ARM's mineral resources and reserves as disclosed in the Integrated Annual Report
for the financial year ended 30 June 2014, other than depletion due to continued mining activities at the operations and the
additional resources at Two River Mine.
Financial commentary
Headline earnings for the six-month period to 31 December 2014 were R1 026 million or 56% lower than the corresponding
prior period's headline earnings (1H F2014: R2 341 million). This equates to headline earnings per share of 473 cents per
share (1H F2014: 1 084 cents per share).
ARM's basic earnings for 1H F2015 were R801 million (1H F2014: R1 714 million) and were negatively impacted by
exceptional items of R225 million after tax (1H F2014: R627 million after tax). The largest exceptional item relates to the
unrealised mark-to-market loss of R222 million after tax on the Harmony investment made through the Income Statement.
This accounting adjustment is made using the closing share price of Harmony at 31 December 2014. Basic earnings per
share decreased by 54% to 369 cents per share (1H F2014: 794 cents per share). The reconciliation of basic earnings to
headline earnings is provided in note 8 of the financial statements.
Sales for the reporting period were 5% higher than the corresponding period last year at R4 829 million (1H F2014:
R4 606 million). Sales for the Assmang joint venture decreased by 26% to R5 167 million (1H F2014: R7 013 million).
The average gross profit margin has decreased to 17% (1H F2014: 22%). The margins achieved at each operation may
be ascertained from the detailed segment reports provided in note 2 to the financial statements as well as in the write-ups
for each operation.
The 1H F2015 average Rand/US Dollar of R10.99/US$ is 9.5% weaker than the corresponding period average of
R10.04/US$. For reporting purposes the closing exchange rate was R11.57/US$ (1H 2014: R10.46/US$).
ARM's earnings before interest, tax, depreciation and amortisation (EBITDA) excluding exceptional items and income from
associates and joint ventures were R1 130 million (1H F2014: R1 264 million).
The income from joint venture amounts to R830 million and is 61% lower than the corresponding period last year
(1H F2014: R2 153 million). The expanded segmental analysis for ARM Ferrous is shown in note 2 to the financial
statements.
The detailed segmental contribution analysis is provided in note 2 to the financial statements. Key features from the
segmental contribution analyses are:
- The ARM Ferrous contribution to ARM's headline earnings declined to R833 million (1H F2014: R2 153 million) largely
due to a 68% decrease in the iron ore division's contribution to R590 million. The manganese (manganese ore and
alloys) division contribution reduced to R236 million (1H F2014: R327 million).
- The ARM Platinum segment contribution, which includes the results of Nkomati, was R277 million which is R86 million
lower than the corresponding period (1H F2014: R363 million). The decreased contribution is mainly due to a poor
operational performance from Modikwa and lower nickel produced at Nkomati as a result of a lower grade (consistent
with the mine plan). The Two Rivers contribution increased by R19 million to R176 million.
- The ARM Coal segment result reflected a reduced loss of R10 million (1H F2014: R34 million loss). Goedgevonden
Mine contributed decreased headline earnings of R58 million (1H F2014: R93 million) while the PCB operations loss
reduced to R68 million (1H F2014: R127 million loss).
- ARM Copper which largely comprises the Vale/ARM joint venture interest in the Lubambe Copper mine and related
costs amounted to a loss of R233 million for the period (1H F2014: R122 million loss) which includes interest on
shareholder loans of R73 million (1H F2014: R58 million).
- The costs for the ARM Exploration segment were R40 million (1H F2014: R24 million) and includes the cost of
exploration on the Rovuma project and staff costs.
- The ARM Corporate, other companies and consolidation segment shows a positive contribution to headline earnings
of R199 million as compared to a positive contribution of R5 million for the previous corresponding period. The higher
contribution is largely due to increased management fees earned, foreign exchange gains on loans to Lubambe and
reduced finance costs.
At 31 December 2014 cash and cash equivalents increased to R1 976 million (1H F2014: R1 524 million) the details of
which are reflected in note 4 of the financial statements. This excludes the attributable cash and cash equivalents held at
ARM Ferrous (50% of Assmang) of R2 473 million (1H F2014: R2 646 million).
Gross debt at the end of the period was largely unchanged at R3 920 million (1H F2014: R3 854 million). There is no debt
at ARM Ferrous (1H F2014: nil).
The net debt position at 31 December 2014 amounts to R1 944 million (1H F2014: R2 330 million).
Cash generated from non-ferrous operations increased by R624 million to R1 485 million (1H F2014: R861 million) and
includes a reduction in working capital of R178 million (1H F2014: R671 million increase). ARM Platinum's cash generated
from operations increased to R1 323 million from R663 million in the previous corresponding period. Dividends received
from the Assmang joint venture were maintained at R750 million.
Dividends paid to ARM shareholders in October 2014 increased to R1.3 billion (1H F2014: R1.1 billion).
Cash capital expenditure was R707 million for the period (1H F2014: R679 million). Attributable capital expenditure at the
Assmang joint venture was R802 million (1H F2014: R732 million).
During the period R400 million was spent acquiring Tamboti Platinum (Pty) Ltd, a company holding a mining right over a
property adjacent to Two Rivers Mine.
Events after the reporting date are set out in note 12 to the financial statements.
ARM Ferrous
Assmang sales revenue decreased by 26% and headline earnings by 61% compared to the corresponding period last
year. The lower revenue and headline earnings were mainly as a result of declining US Dollar prices for export iron ore and
manganese ore. The lower US Dollar prices were partially offset by a 9.5% weakening of the Rand against the US Dollar.
Total costs were well controlled with ARM Ferrous cost of sales increasing by only 2% year-on-year.
ARM Ferrous headline earnings (on 100% basis)
six months ended 31 December
R million 2014 2013 % change
Iron ore division 1 181 3 644 (68)
Manganese division 472 655 (28)
Chrome division 56 37 51
Total 1 709 4 336 (61)
ARM share 855 2 168 (61)
Consolidation adjustments (22) (15) (47)
Total per IFRS financial statements 833 2 153 (61)
Assmang sales volumes
100% basis six months ended 31 December
Thousand tonnes 2014 2013 % change
Iron ore* 7 496 7 738 (3)
Manganese ore* 1 422 1 411 1
Manganese alloys 112 117 (4)
Chrome ore* 477 477 –
* Excluding intra-group sales.
ARM Ferrous iron ore sales volumes of 7.50 million tonnes were 3% lower than 1H F2014 as a result of loading problems
experienced during July 2014 at the port of Saldanha and three vessels totalling 553 thousand tonnes being loaded only on
3 January 2015. Local iron ore sales of 1.47 million tonnes were 41% higher than the previous year as a result of increased
sales to ArcelorMittal after start-up of their refurbished blast furnace in Newcastle.
Manganese ore sales volumes were maintained at 1.4 million tonnes through good stockpile management and co-operation
with Transnet Freight Rail (TFR). Manganese alloy sales volumes decreased by 4% as a decision was taken to shut down
two unprofitable furnaces at Cato Ridge Works.
Assmang remains on track to achieve iron ore sales of 16.1 million tonnes (13.7 million tonnes export sales and 2.4 million
tonnes local sales) in the 2015 financial year. Total manganese ore sales are expected to be 3.2 million tonnes of which
2.6 million tonnes will be exported through the Port Elizabeth, Durban and Saldanha ports.
Assmang production volumes
100% basis six months ended 31 December
Thousand tonnes 2014 2013 % change
Iron ore 7 967 7 606 5
Manganese ore 1 487 1 727 (14)
Manganese alloys 133 133 –
Chrome ore 510 496 3
Iron ore production improved marginally as a result of an operational efficiency programme launched to increase the
tonnage through the Khumani off-grade beneficiation plant. This programme resulted in a 30% improvement in the off-
grade plant throughput and in a balancing of the on:off grade ratio feed to the plant with the on:off grade ratio from the
Bruce and King pits.
The decline in manganese ore production was mainly due to mining being stopped in the North-West section of
Nchwaning III shaft mining area where lower than expected ore grades were intersected. Infill drilling in this area continues
to improve management's knowledge of the grade variations and specific geological features. The mining crews that were
mining there have been redeployed to other areas of the mine. Production at Nchwaning II shaft improved and is expected
to supplement the shortfall tonnage from Nchwaning III shaft.
Production of Seam 2 material at Nchwaning II shaft increased with the product being well received by customers.
Assmang cost and EBITDA margin performance
On-mine
Unit cost production
of sales unit cost EBITDA
change change margin
Commodity group % % %
Iron ore* 2 2 39
Manganese ore 4 19 32
Manganese alloys 12 4 3
Chrome ore 6 4 18
* Excluding the Khumani Mine housing element.
Through a number of initiatives implemented to improve productivity, Khumani Mine's on-mine production unit cost increase
was below inflation (at 4%). Beeshoek Mine on-mine production unit costs decreased by 9% as a result of operational
efficiency, increased throughput and 852 000 tonnes less waste mined.
On-mine production unit costs at Black Rock Mine increased by 19% mainly due to the lower grade manganese ore
production from Nchwaning III shaft.
Unit costs to produce manganese alloys at Machadodorp Works were 16% lower than 1H F2014 due to the cost
rationalisation project. Only one furnace was operational at the Machadodorp Works during the period under review. Cato
Ridge Works unit cost of production increased by 14% due to the higher ore cost from Black Rock and since Cato Ridge
Works already implemented its operational efficiency programme in 2013/14, the higher electricity tariff impacted directly
on the unit costs.
The unit production costs at Dwarsrivier Mine increased by 4% year-on-year.
Assmang capital expenditure
100% basis six months ended 31 December
R million 2014 2013
Iron ore 710 902
Manganese 849 541
Chrome 130 80
Total 1 689 1 523
Capital expenditure at the iron ore operations was largely for 7.2 million tonnes (4.1 million tonnes more than 1H F2014) of
waste removal at Beeshoek Mine's Village and East pits and 5.3 million tonnes (zero in 1H F2014) of capital waste removed
from the Bruce and King pits at Khumani Mine. The iron ore capital expenditure also included the King Transnet Freight Rail
mainline rail deviation, infill drilling and replacement capital.
A major portion of the manganese division capital expenditure related to the Black Rock Project. This capital expenditure was
mainly to recapitalise the underground infrastructure in order to improve operational efficiencies and increase production
from the Seam 2 resource at Nchwaning II shaft. The project's expenditure includes a sorting plant, development work
at Nchwaning III and Nchwaning I shafts, an upgrade of Nchwaning II shaft, sinking of a ventilation shaft at Gloria Mine,
infill drilling, a new load-out station and accommodation for contractors and employees who previously resided in hostels.
At Dwarsrivier Mine, the majority of the capital was spent on equipping the north shaft, trackless mechanised machines
and plant upgrades.
Logistics
Assmang continues to engage with Transnet regarding manganese ore export capacity as per the interim manganese
export capacity allocation (MECA2) process and is synchronising the ramp-up of the Black Rock Mine with the longer-term
(MECA3) process. Transnet has received approval from the Department of Public Enterprises for the 16 million tonnes per
annum expansion of the manganese export channel through a new terminal at the Port of Ngqura. Planning at this stage
indicates that the export channel will be operational by the first quarter of 2019.
Beeshoek Village Pit Project
The Beeshoek Village Pit Project is in the process of being executed. Waste stripping associated with the development of
the Village Pit is ahead of schedule. Additional exploration drilling work completed on the Village Pit resource has resulted
in an optimised pit design which has increased the reserve base of the pit and enabled a reduction of the waste stripping
ratio. The Village Pit reserve will enable Beeshoek Mine to sustain saleable production volumes of approximately 3.5 million
tonnes per annum, for at least the next nine years.
As part of the Village Pit Project, Beeshoek Mine personnel were successfully relocated from the mine village to
Postmasburg town. To this extent 300 houses were built and occupied within the district of the local municipality.
Black Rock Project
The Black Rock Project will recapitalise and expand the Black Rock Mine and is in the process of being executed. The
project is on schedule and within budget. Progress so far includes upgrades to ventilation systems, the building of contractor
accommodation, erection of additional water storage capacity and construction of the new ventilation shaft at Gloria Mine.
Capital expenditure approved for the project is R6.7 billion with funds committed to 31 December 2014 totalling R3.4 billion
and funds spent totalling R1.5 billion to date.
Sakura Ferroalloys Project
All the major items of equipment for the Sakura Ferroalloys Project in Malaysia are on site. The steel furnace shells have
been completed and the raw materials tunnel is ready to be equipped. The turnkey contractor, Metix, continues to perform
against the main project milestones. The project remains on schedule to achieve steady state production of 170 000
tonnes per annum in F2017. The general manager and senior management team for the operation have been appointed
and are focused on delivering the operations readiness plans including the appointment of all staff needed to work in the
key operational disciplines. The major logistics contracts have been put in place and the Bintulu Port Agreement for raw
material and final product shipments has been negotiated. The furnace raw materials recipes are finalised and contracts
are being negotiated with the relevant parties.
To date, partners in the Sakura Ferroalloys Project have contributed 90% of the equity commitment for the project.
(Assmang's total contribution was US$160.86 million).
Initiatives to deal with the current commodity environment
The ARM Ferrous division is responding to the fall in commodity prices through a number of division wide initiatives
including:
- Review and reduction of capital expenditure at all operations and renewed focus on operational efficiency and
elimination of bottlenecks.
- Reduction of operating costs at the Black Rock Mine. Future measures will form the subject of consultations with trade
unions at the mine and may include redeployment of employees and possible reduction of the workforce size.
- Timing of capital expenditure for the Black Rock Project is being reviewed to closely match the expected increase in
Transnet Freight Rail's capacity of the manganese export channels.
- The review of the manganese alloy smelter at Machadodorp Works has been completed, with the conclusion that
manganese alloy cannot continue to be produced sustainably at this operation. The current furnace will therefore be
stopped and placed on care and maintenance at the end of April 2015. Production of ferrochrome will continue from the
metal recovery plant only (where entrapped metal is recovered from historical ferrochrome slag).
The ARM Ferrous operations, held through its 50% investment in Assmang, consist of three divisions: iron ore, manganese and
chrome. Assore Limited, ARM's partner in Assmang, owns the remaining 50%.
ARM Platinum
While ARM Platinum's realised Rand metal prices were higher than the previous corresponding period, lower production
at Modikwa and Nkomati, together with high-cost increases at Modikwa, resulted in a 24% decrease in headline earnings
to R277 million (1H F2014: R363 million). Two Rivers performed well, generating a 12% increase in headline earnings.
PGM production (on 100% basis including Nkomati) decreased 7% to 396 813 6E ounces (1H F2014: 426 695 6E ounces).
Nkomati's nickel production decreased by 11% to 10 587 tonnes (1H F2014: 11 859 tonnes) mainly as a result of a lower
head grade consistent with the mine plan.
US Dollar prices for platinum and copper were lower than the corresponding period but higher US Dollar prices for
palladium, rhodium and nickel together with a 9% weakening of the Rand against the US Dollar resulted in the average
basket prices for Modikwa and Two Rivers increasing by approximately 10% to R340 452/kg (1H F2014: R305 767/kg) and
R346 072/kg (1H F2014: R315 316/kg) respectively.
The tables below set out the relevant price comparison:
Average US Dollar metal prices
six months ended 31 December
2014 2013 % change
Platinum US$/oz 1 332 1 424 (6)
Palladium US$/oz 825 724 14
Rhodium US$/oz 1 188 937 27
Nickel US$/t 16 935 13 935 22
Copper US$/t 6 746 7 177 (6)
Chrome concentrate (CIF) US$/t 148 133 11
Average Rand metal prices
six months ended 31 December
2014 2013 % change
Platinum R/oz 14 638 14 301 2
Palladium R/oz 9 071 7 267 25
Rhodium R/oz 13 053 9 403 39
Nickel R/t 186 119 139 910 33
Copper R/t 74 136 72 061 3
Chrome concentrate (CIF) R/t 1 623 1 333 22
Nkomati Mine's unit cost increased by 3% to R291 per tonne (1H F2014: R283 per tonne) while the C1 unit cash cost net of
by-products, increased by 15% to US$5.00/lb (1H F2014: US$4.35/lb), a direct result of lower nickel units and by-products
produced. Two Rivers Mine managed to keep its unit cash cost well under control with only a 4% increase to R5 376/6E
PGM ounce (1H F2014: R5 153/6E PGM ounce). Modikwa Mine's unit cash cost increased by 21% to R8 029/6E PGM
ounce (1H F2014: R6 639/6E PGM ounce) due to an 11% decrease in production.
ARM Platinum capital expenditure
100% basis six months ended 31 December
R million 2014 2013
Modikwa 418 320
Two Rivers 156 138
Nkomati 242 182
Total 816 640
Capital expenditure at ARM Platinum operations (on 100% basis) was R816 million (R486 million attributable). Modikwa's
major capital items related to the deepening of North shaft, the sinking of South 2 shaft, and mining fleet refurbishments.
The capital projects at Modikwa are currently under review to determine the most viable way forward.
Of the capital spent at Two Rivers, 28% is associated with fleet replacement and refurbishment. The deepening of the
Main and North declines, together with its electrical and mechanical installations, contributed 43% to the total capital
expenditure. The balance was for additional housing facilities and to sustain operations. Nkomati Mine's capital expenditure
relates to capitalised waste stripping costs (73%), fleet replacements to sustain operations.
Modikwa Mine
Due to decreased production output stemming from seven safety stoppages, an extended break during December 2014
and labour inefficiencies, Modikwa Mine's attributable headline earnings decreased by R49 million resulting in break-even
headline earnings for the period under review.
A 12% reduction in milled tonnes resulted in PGM production declining by 11% to 138 482 6E ounces (1H F2014: 154 911 6E
ounces). Consequently unit costs increased by 23% to R1 140 per tonne milled (1H F2014: R929 per tonne milled) and by
21% to R8 029 per 6E PGM ounce (1H F2014: R6 639 per 6E PGM ounce).
A recovery plan has been developed and is being evaluated. Execution of this plan is expected to enhance efficiencies and
head grade whilst simultaneously reducing cash costs. The senior management team on the mine has been replaced, with
a new General Manager and Financial Manager appointed in March 2015.
Modikwa Mine operational statistics
100% basis six months ended 31 December
2014 2013 % change
Cash operating profit R million 82 226 (64)
Tonnes milled Mt 0.98 1.11 (12)
Head grade g/t,6E 5.27 5.31 (1)
PGMs in concentrate Ounces,6E 138 482 154 911 (11)
Average basket price R/kg,6E 340 452 305 767 11
Average basket price US$/oz,6E 964 947 2
Cash operating margin % 7 18
Cash cost R/kg,6E 258 137 213 441 21
Cash cost R/tonne 1 140 929 23
Cash cost R/Pt oz 20 749 17 067 22
Cash cost R/oz,6E 8 029 6 639 21
Cash cost US$/oz,6E 731 661 11
Headline earnings attributable to ARM (41.5%) R million – 49 –
Two Rivers Mine
Headline earnings at Two Rivers Mine increased by 12% while tonnes milled increased by 2%, PGM ounces decreased by
3% as a result of a lower feed grade and increased concentrate stock as at the end of December 2014.
Unit cost increased below inflation (4%) to R5 376 per 6E ounce (1H F2014: R5 153 per 6E ounce). There was a
181 084 tonne increase in the UG2 run of mine stockpile to a total of 483 411 tonnes of ore (1H F2014: 302 327 tonnes).
Two Rivers Mine increased chrome concentrate sales by 154% to 111 104 tonnes, contributing R61 million (1H F2014:
R17 million) to cash operating profit.
Two Rivers Mine operational statistics
100% basis six months ended 31 December
2014 2013 % change
Cash operating profit R million 744 641 16
– PGMs R million 683 624 9
– Chrome R million 61 17 >250
Tonnes milled Mt 1.69 1.66 2
Head grade g/t,6E 3.97 4.01 (1)
PGMs in concentrate Ounces,6E 187 291 193 503 (3)
Chrome concentrate sold Tonnes 111 104 43 787 154
Average basket price R/kg,6E 346 072 315 316 10
Average basket price US$/oz,6E 979 977 –
Cash operating margin % 40 38
Cash cost R/kg,6E 172 837 165 667 4
Cash cost R/tonne 597 602 (1)
Cash cost R/Pt oz 11 530 11 068 4
Cash cost R/oz,6E 5 376 5 153 4
Cash cost US$/oz,6E 489 513 (5)
Headline earnings attributable to ARM (55%) R million 176 157 12
Nkomati Mine
Nkomati Mine's total ore tonnes mined increased by 5%, however, a 7% decrease in the average head grade resulted
in nickel units produced of 10 587 tonnes, 11% lower than the previous period. The lower head grade is due to the
mining of lower grade areas in the open pit, consistent with the mining plan. Attributable headline earnings decreased by
36% to R101 million (1H F2014: R157 million). Chrome concentrate sales increased by 60% to 188 079 tonnes (1H F2014:
117 211 tonnes).
Nkomati Mine's C1 unit cash costs net of by-products increased by 15% to US$5.00/lb (1H F2014: US$4.35/lb), a direct
result of the lower nickel output. Unit cost per tonne milled increased by 3% to R291 per tonne (1H F2014: R283 per tonne).
Nkomati Mine operational statistics
100% basis six months ended 31 December
2014 2013 % change
Cash operating profit R million 447 748 (40)
– Nickel Mine R million 330 695 (53)
– Chrome Mine R million 117 53 121
Cash operating margin % 17 30
Tonnes milled Thousand 3.92 3.96 (1)
Head grade % nickel 0.36 0.39 (8)
Nickel on-mine cash cost per tonne milled R/tonne 291 283 3
Cash cost net of by-products* US$/lb 5.00 4.35 15
Contained metal
Nickel Tonnes 10 587 11 859 (11)
PGMs Ounces 71 040 78 280 (9)
Copper Tonnes 4 625 5 171 (11)
Cobalt Tonnes 556 593 (6)
Chrome concentrate sold Tonnes 188 079 117 211 60
Headline earnings attributable to ARM (50%) R million 101 157 (36)
* This reflects US Dollar cash costs net of by-products (PGMs and Chrome) per pound of nickel produced.
Modikwa Mine Recapitalisation Project
The North Shaft deepening project and construction, together with development and construction of the South 2 Project is
on schedule and on budget. These projects are currently under review to determine the most viable way forward in light of
the challenging environment.
Two Rivers Mine Extension of Life
The acquisition of the Prospecting Right from Impala in respect of portions of the farms Kalkfontein, Tweefontein and
Buffelshoek is complete. The incorporation of these areas into the mining right of Two Rivers is nearing completion.
The ARM Platinum division comprises:
- Three operating mines:
- Modikwa – ARM Mining Consortium has an effective 41.5% interest in Modikwa where local communities hold an
8.5% effective interest. The remaining 50% is held by Anglo American Platinum.
- Two Rivers – an incorporated joint venture with Impala, with ARM holding 51% and Impala 49%. ARM's shareholding
in Two Rivers reduced from 55% to 51% after the reporting period (6 February 2015).
- Nkomati – a 50:50 partnership between ARM and Norilsk Nickel Africa.
- Two projects:
- The "Kalplats Platinum Project" in which ARM Platinum holds 46%, Platinum Australia (PLA) 44% and Anglo
American 10%.
- The "Kalplats Extended Area Project" in which ARM Platinum and PLA each have a 50% interest.
ARM Coal
The ARM Coal headline loss reduced relative to the previous corresponding period to R10 million (1H F2014: R34 million
loss). Total attributable cash operating profit improved by 45% to R398 million (1H F2014: R275 million).
At Goedgevonden Mine feed to the plant and saleable production increased by 21% and 17% respectively. Run of mine
(ROM) and saleable production at PCB increased by 7% with the partial commissioning of the Tweefontein Optimisation
Project (TOP). ARM Coal saleable coal produced therefore increased by 10% and a decrease in unit production costs was
achieved at all the ARM Coal operations.
Attributable export sales volumes were 26% higher. Realised US Dollar prices however declined from US$74.40 per tonne
to US$58.58 per tonne which resulted in a R312 million reduction in the attributable export revenue. This was offset to an
extent by a weaker Rand/US Dollar exchange rate which contributed R132 million to revenue.
ARM Coal attributable profit analysis
six months ended 31 December
R million 2014 2013 % change
Cash operating profit 398 275 45
Less: Interest paid (189) (127) (49)
Amortisation (198) (178) (11)
Fair value adjustments (24) (15) (60)
Profit before tax (13) (45) 71
Less: Tax 3 11 (73)
Headline loss attributable to ARM (10) (34) 71
Goedgevonden Coal Mine
Goedgevonden Mine produced outstanding production results for 1H F2015. An 18% increase in run of mine production
and a 21% increase in the feed to plant resulted in a 17% increase in saleable production and a 9% reduction in on-mine
production cost per saleable tonne.
Export sales volumes increased by 39% due to an improvement in rail performance by Transnet Freight Rail (TFR). Eskom
however curtailed buying of additional coal, resulting in a 34% reduction in Eskom sales.
Goedgevonden Mine attributable revenue was R27 million higher as a combined result of increased export sales volumes
and a weaker Rand/US Dollar exchange rate which was partially offset by a decline in US Dollar export coal prices.
Total on-mine production costs increased by 6%, however, due to the increased production, unit on-mine costs per saleable
tonne decreased by 9% to R189 per tonne. Higher export volumes gave rise to an increase of R49 million in distribution
costs.
Goedgevonden Mine headline earnings decreased by 38% from R93 million to R58 million due to a 6% reduction in
cash operating profits together with an increase in interest paid (as the interest holiday on the project facility expired on
30 September 2014). The depreciation charge was R30 million higher due to an increase in the asset base and higher
production and sales volumes which are used to determine the depreciation charge.
Goedgevonden Mine operational statistics
six months ended 31 December
2014 2013 % change
Total production sales
Saleable production Mt 4.40 3.77 17
Export thermal coal sales Mt 2.97 2.13 39
Eskom thermal coal sales Mt 1.20 1.81 (34)
Attributable production and sales
Saleable production Mt 1.14 0.98 16
Export thermal coal sales Mt 0.77 0.55 40
Eskom thermal coal sales Mt 0.31 0.47 (34)
Average received coal price
Export (FOB) US$/tonne 59.05 79.98 (26)
Eskom (FOT) R/tonne 194.97 195.74 –
On-mine saleable cost R/tonne 189.10 207.20 (9)
Cash operating profit
Total R million 830 883 (6)
Attributable (26%) R million 216 230 (6)
Headline earnings attributable to ARM R million 58 93 (38)
Goedgevonden Mine attributable profit analysis
six months ended 31 December
R million 2014 2013 % change
Cash operating profit 216 230 (6)
Less: Interest paid (63) (43) (47)
Amortisation (61) (48) (27)
Fair value adjustments (11) (8) (38)
Profit before tax 81 131 (38)
Less: Tax (23) (38) 39
Headline earnings attributable to ARM 58 93 (38)
Participating Coal Business (PCB)
PCB attributable cash operating profit increased from R45 million to R182 million and the headline loss reduced from
R127 million in 1H F2014 to R68 million in the period under review. Interest paid was R42 million higher than 1H F2014
due to increased borrowings to fund the TOP project. Depreciation increased by R13 million compared to H1 F2014 due
to an increase in the asset base as well as an increase in production and sales volumes which are used to determine the
depreciation charge.
Attributable export revenue was R81 million higher due to a 20% increase in export coal volumes and the weaker Rand/
US Dollar exchange rate. These were partially offset by a decrease in the US Dollar prices of coal. Revenue realised from
domestic sales was some R37 million higher than 1H F2014 due to higher volumes and Eskom prices.
Despite the closure of some high cost underground operations, all production indicators were higher in 1H F2015. ROM
production from TOP is progressing to a steady state level resulting in PCB producing 7% more ROM volume than in
1H F2014. The increased ROM production has resulted in the stockpile increasing approximately 1 million tonnes since
June 2014. This increased ROM stockpile was in preparation for the commissioning of the Coal Handling and Processing
Plant (CHPP) which commenced during the last quarter of the 2014 calendar year and has contributed towards an increase
of 7% in total saleable production from PCB. The on-mine saleable cost per tonne decreased by 18% from R417 per tonne
to R341 per tonne as a result of the increase in production and a 13% reduction in total on-mine costs.
Participating Coal Business operational statistics
six months ended 31 December
2014 2013 % change
Total production sales
Saleable production Mt 6.38 5.98 7
Export thermal coal sales Mt 5.96 4.97 20
Eskom thermal coal sales Mt 0.89 0.78 14
Local thermal coal sales Mt 0.65 0.22 195
Attributable production and sales
Saleable production Mt 1.29 1.21 7
Export thermal coal sales Mt 1.20 1.00 20
Eskom thermal coal sales Mt 0.18 0.16 13
Local thermal coal sales Mt 0.13 0.04 225
Average received coal price
Export (FOB) US$/tonne 57.99 67.78 (14)
Eskom (FOT) R/tonne 213.89 201.83 6
Local (FOR) R/tonne 327.73 347.04 (6)
On-mine saleable cost R/tonne 341.23 417.44 (18)
Cash operating profit
Total R million 899 223 303
Attributable (20.2%) R million 182 45 304
Headline loss attributable to ARM R million (68) (127) 46
Participating Coal Business attributable profit analysis
six months ended 31 December
R million 2014 2013 % change
Cash operating profit 182 45 >250
Less: Interest paid (126) (84) (50)
Amortisation (137) (130) (5)
Fair value adjustments (13) (7) (86)
Loss before tax (94) (176) 47
Less: Tax 26 49 (47)
Headline loss attributable to ARM (68) (127) 46
Tweefontein Optimisation Project
TOP comprises opencast operations which includes the mining of some old underground operations and the construction
of the new and more efficient CHPP.
The mining operations will employ truck and shovel and dragline equipment. The truck and shovel operations have already
been fully commissioned and the dragline is being refurbished for commissioning in the first quarter of the 2015 calendar
year. The project has provided new job opportunities with the majority of the labour coming from the local communities.
Commissioning of the plant started in the last quarter of 2014 and will be put through performance testing throughout the
first quarter of 2015. The new large and efficient CHPP is replacing three old and less efficient plants and will result in a
further 3% to 5% improvement on coal recovery. A reduction of two-thirds in plant labour complement is expected to be
realised. The new rapid train load out facility will be replacing the front end loaders and is expected to reduce train loading
time by an average of six hours. This will result in a saving on TFR rates as well as getting preference on train allocation.
As at 31 December 2014, 87% of the total project costs had been committed and almost 80% actually spent. The project
is progressing on schedule for full implementation by next financial year with an expected saving of at least R300 million
against the project budget.
Initiatives to deal with the current commodity environment
The operations are progressing well with efficiency improvements and production cost reduction. The following have been
realised:
- Closure of high cost underground operations at Tweefontein and reduction of underground shifts with just over
100 employees taking pension or severance packages, while others have been redeployed.
- A decrease in waste stripping costs together with the replacement of contractors by permanent employees for some
functions resulted in costs reducing by more than 15%.
- Capital expenditure of all operations has been critically reviewed and has resulted in deferment of over R300 million of
capital expenditure at PCB.
ARM's economic interest in PCB is 20.2%. PCB consists of two large mining complexes situated in Mpumalanga. ARM has
a 26% effective interest in the Goedgevonden Mine situated near Ogies in Mpumalanga.
Attributable refers to 20.2% of PCB whilst total refers to 100%.
ARM Copper
Lubambe Copper Mine
Longitudinal Room and Pillar (LRP) stoping is currently the only mining method being used at the Lubambe Mine and at the
end of December 2014 24 stopes were being mined. Valuable practical experience, regarding the mining of the ore body,
is still being gained and constant refinements are being put in place to improve extraction percentage and reduce dilution.
Operational statistics
six months ended 31 December
100% basis 2014 2013 % change
Waste development Metres 2 701 5 861 (54)
Ore development Metres 2 809 4 281 (34)
Ore development Tonnes 156 009 220 516 (29)
Ore stoping Tonnes 727 225 436 394 67
Ore tonnes mined Tonnes 883 234 656 910 34
Tonnes milled Thousand 859 979 716 005 20
Mill head grade % copper 1.83 1.97 (7)
Concentrator recovery % 80.0 75.04
Copper concentrate produced Tonnes 29 879 25 167 19
Copper concentrate sold Tonnes 30 299 33 607 (10)
Contained metal
Copper produced Tonnes 12 563 10 567 19
Copper sold Tonnes 12 718 14 325 (11)
Headline loss attributable to ARM (40%)* R million (233) (122) (91)
* The headline loss is after deducting attributable interest on shareholders' loans of R73 million (1H F2014: R58 million).
The Lubambe Mine ore tonnes mined from stoping showed a good increase when compared to the previous period.
The grade from stoping and development declined by 7% due to marginally lower grade areas being mined together with
an increase in dilution in the flatter dipping stopes. To counter this, there has been a slight adaptation to the mining method
to enable better development placement within the orebody which then facilitates parallel drilling aimed at improving
extraction and reducing dilution. This change is in progress and grade improvements are expected to be seen shortly with
full head grade recovery by the end of 2015.
Concentrate production is within contract specification of the Zambian smelters to which Lubambe is delivering concentrate.
The plant recoveries are in line with the design parameters and increased to 80%.
Lubambe Copper Mine was planned to ramp-up to full production during the 2015 financial year. In the last nine months
waste development was negatively affected by a kaolin intrusion in one of the main access ramps. This intrusion resulted
in poor ground conditions which necessitated rehabilitation work lasting three months. Fissure water also flowed into ramp
4 slowing down the required development rate. Both these ramps are now fully rehabilitated and advancing at the required
rates.
The sand zone on the South Limb is still hampering the rate of ore access from the main ramps in this area and the sand
zone variability makes mining through it slow and expensive. An exercise is currently underway to evaluate the impact of
the slower development rates on the ramp-up profile and how best to approach the extraction strategy. The expectation is
to complete the full evaluation by the end of March 2015.
Since the start of the new financial year, the copper price deteriorated by 33% from a high of US$7 225 per tonne of copper
in July 2014 to US$5 428 per tonne in January 2015. With this fall in copper prices and market expectations that a recovery
will take a few years, the main focus on the mine is to consolidate production and reduce further funding requirements in a
sustainable manner. This approach will give the operation the ability to focus on optimum ore extraction, correct dewatering
procedures, efficiencies and effectiveness which will stand the mine in good stead into the future. The revised plan is
expected to be finalised by the end of the 2015 financial year.
A significant change to the taxation of mining companies in Zambia was announced by the Zambian Government during
the reporting period. As a result of this announcement, Lubambe Mine will now pay a royalty tax of 8% as a final tax. The
mining industry is engaged with the Zambian Government on a number of aspects of the new tax regime.
The Lubambe Extension Project
The geohydrological borehole has been completed. Further study work in this area has been deferred as a temporary
measure to conserve cash flows.
ARM Copper owns 50% of the Vale/ARM joint venture. The Vale/ARM joint venture then owns 80% of the Lubambe Mine
and ZCCM-IH has a 20% shareholding.
ARM Strategic Services and Exploration
ARM Strategic Services and Exploration expenditure was R40 million (1H F2014: R24 million).
The agreement with Rovuma Resources is ongoing. ARM agreed to continue with the option for a fourth year (commencing
April 2014) and to fund exploration costs at the cost of approximately US$6 million. Exploration to end December 2014 has
intersected substantial thickness of copper, zinc, gold and silver sulphides with a strike of 2.5 kilometres. The way forward
on this opportunity is currently under review with Rovuma Resources.
The Strategic Services team continued to provide project management and technical services for the Black Rock and
Sakura Ferroalloys projects.
ARM Strategic Services and Exploration is cognisant of the current environment and have implemented cost-cutting
initiatives which include the reduction of the team size. In addition, no new exploration opportunities will be pursued. The
team's efforts will be focused instead on assisting the ARM operations improve operational efficiencies and on merger and
acquisition opportunities.
Harmony Gold Mining Company Limited (Harmony)
Harmony reported a headline loss of R763 million for the six months ended 31 December 2014 (1H F2014: R71 million loss).
Harmony's revenue for the six-month period increased 1% to R8 146 million (1H F2014: R8 089 million) mainly as a result of
a higher realised Rand gold price. Gold produced and gold sold decreased by 7% and 3% respectively while cash operating
costs increased by 13%.
Harmony announced the results of the updated Golpu prefeasibility study (PFS) on 15 December 2014. Emphasis in preparing
the PFS was to create flexibility to allow the size of the project to be adapted to different levels of gold and copper prices and
phase the development of Golpu. The updated study reduces the capital of the project, lowers operating costs and improves the
rate of return on the project. Harmony intends to fund the earlier stages of the project from internal cash flows, and is reviewing
other options for the latter stages.
The ARM Statement of Financial Position as at 31 December 2014 reflects a mark-to-market investment in Harmony of
R1 375 million at a share price of R21.61 per share (1H F2014: R25.90 per share). Changes in the value of the investment in
Harmony, to the extent that they represent a significant or prolonged decline below the cost of the investment, are adjusted
through the Income Statement, net of tax. Gains above the cost are accounted for, net of deferred capital gains tax, through the
Statement of Comprehensive Income. Dividends are recognised in the ARM Income Statement on the last day of registration
following dividend declaration.
Harmony's results for the six months ended 31 December 2014 can be viewed on Harmony's website at www.harmony.co.za.
ARM owns 14.6% of Harmony's issued share capital.
Outlook
ARM is invested into mining for the long term and understands that within that longer period commodity prices are cyclical.
ARM's strategy is developed to focus on the long term while still allowing short and medium term interventions to address
cyclical issues when necessary.
ARM is responding proactively to the current challenges in the mining industry. These are largely characterised by declines
in US Dollar commodity prices, cost pressures and labour issues.
The key areas under review by ARM include:
- Restructuring of existing mining plans to optimise profitability from operations under the prevailing business
circumstances;
- Improving productivity at all operations;
- Reviewing all capital allocations and reducing or deferring capital expenditure;
- Reducing costs at both operational and corporate level;
- Using technology to enhance efficiencies;
- Focusing on maintaining/improving planned cash flows by the abovementioned methods and also by increasing focus
on working capital management;
- Maintaining good labour and stakeholder relations at all operations; and
- Considering the curtailment or exit from operations which are not profitable.
The global economy which utilises ARM's commodities continues to show different growth rates. The Chinese economy
continues to grow significantly in absolute terms, however, given the larger base is slowing down in percentage terms. The
US economy has continued to improve while growth in Europe and Japan is expected to recover gradually.
The current business environment is expected to remain challenging for the next two to three years and as a result the key
focus for ARM is to maintain a prudent approach to managing its businesses, maximising cash flows while continuing to
consider value enhancing merger and acquisition opportunities, particularly in platinum and copper.
Review by independent auditors
The financial results for the six months ended 31 December 2014 have not been reviewed or audited by the Company's
registered auditors, Ernst & Young Inc. Any forward-looking information contained in this announcement has not been
reviewed or reported on by ARM's external auditors.
Signed on behalf of the Board:
P T Motsepe M P Schmidt
Executive Chairman Chief Executive Officer
Johannesburg
16 March 2015
Financial
statements
Group statement of financial position
as at 31 December 2014
Unaudited Audited
Six months ended Year ended
31 December 30 June
2014 2013 2014
Note Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 12 733 11 647 11 752
Investment property – 12 12
Intangible assets 156 171 166
Deferred tax assets 438 426 381
Loans and long-term receivables 53 75 73
Financial assets 2 3 2
Investment in associate 1 199 1 211 1 267
Investment in joint venture 3 14 385 13 909 14 305
Other investments 1 556 1 779 2 119
30 522 29 233 30 077
Current assets
Inventories 893 1 101 934
Trade and other receivables 3 043 2 864 3 292
Taxation 1 3 5
Cash and cash equivalents 4 1 976 1 524 2 150
5 913 5 492 6 381
Assets held for sale 5 12 – –
Total assets 36 447 34 725 36 458
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 11 11 11
Share premium 4 178 4 079 4 108
Other reserves 1 099 875 1 258
Retained earnings 20 810 19 736 21 311
Equity attributable to equity holders of ARM 26 098 24 701 26 688
Non-controlling interest 1 528 1 563 1 511
Total equity 27 626 26 264 28 199
Non-current liabilities
Long-term borrowings 6 2 363 3 148 2 420
Non-current financial liabilities 7 – –
Deferred tax liabilities 1 936 1 829 1 911
Long-term provisions 630 608 558
4 936 5 585 4 889
Current liabilities
Trade and other payables 1 977 1 817 1 741
Short-term provisions 302 278 479
Taxation 41 75 68
Current financial liabilities 8 – –
Overdrafts and short-term borrowings 6 1 557 706 1 082
3 885 2 876 3 370
Total equity and liabilities 36 447 34 725 36 458
Group income statement
for the six months ended 31 December 2014
Unaudited Audited
Six months ended Year ended
31 December 30 June
2014 2013 2014
Note Rm Rm Rm
Revenue 5 210 4 983 10 863
Sales 4 829 4 606 10 004
Cost of sales (4 011) (3 582) (7 531)
Gross profit 818 1 024 2 473
Other operating income 576 499 961
Other operating expenses (785) (743) (1 763)
Profit from operations before exceptional item 609 780 1 671
Income from investments 76 52 119
Finance costs (74) (120) (259)
Loss from associate* (68) (240) (374)
Income from joint venture** 3 830 2 153 3 549
Profit before taxation and exceptional items 1 373 2 625 4 706
Exceptional items 7 (273) (631) (616)
Profit before taxation 1 100 1 994 4 090
Taxation 9 (208) (164) (546)
Profit for the period 892 1 830 3 544
Attributable to:
Non-controlling interest 91 116 255
Equity holders of ARM 801 1 714 3 289
892 1 830 3 544
Additional information
Headline earnings (R million) 8 1 026 2 341 4 108
Headline earnings per share (cents) 473 1 084 1 900
Basic earnings (R million) 801 1 714 3 289
Basic earnings per share (cents) 369 794 1 521
Diluted headline earnings per share (cents) 470 1 076 1 886
Diluted basic earnings per share (cents) 367 788 1 510
Number of shares in issue at end of period (thousands) 217 438 216 462 216 748
Weighted average number of shares in issue (thousands) 217 023 215 971 216 268
Weighted average number of shares used in calculating
fully diluted earnings per share (thousands) 218 315 217 492 217 784
Net asset value per share (cents) 12 003 11 411 12 313
EBITDA (R million) 1 130 1 264 2 620
Dividend declared after year-end (cents) – – 600
* Impairment included in loss from associate Rnil (1H 2014: R113 million; F2014: R132 million).
** Impairment included in income from joint venture Rnil (1H 2014: Rnil: F2014: R187 million).
Group statement of comprehensive income
for the six months ended 31 December 2014
Total
Available- share- Non-
for-sale Retained holders controlling
reserve Other earnings of ARM interest Total
Rm Rm Rm Rm Rm Rm
Six months ended 31 December 2014
(Unaudited)
Profit for the period – – 801 801 91 892
Other comprehensive income that may
be reclassified to the income statement
in subsequent periods:
Reclassification adjustment due to impairment
of available-for-sale listed investment (334) – – (334) – (334)
Deferred tax on above 62 – – 62 – 62
Net impact of above (272) – – (272) – (272)
Foreign currency translation reserve movement – 67 – 67 – 67
Total other comprehensive income (272) 67 – (205) – (205)
Total comprehensive income for the period (272) 67 801 596 91 687
Six months ended 31 December 2013
(Unaudited)
Profit for the period – – 1 714 1 714 116 1 830
Other comprehensive income that may
be reclassified to the income statement
in subsequent periods:
Sale of subsidiary – (5) – (5) – (5)
Cash flow hedge reserve – 31 – 31 – 31
Foreign currency translation reserve movement – 57 – 57 – 57
Total other comprehensive income – 83 – 83 – 83
Total comprehensive income for the period – 83 1 714 1 797 116 1 913
Year ended 30 June 2014 (Audited)
Profit for the year – – 3 289 3 289 255 3 544
Other comprehensive income that may
be reclassified to the income statement
in subsequent periods:
Revaluation of listed investment 334 – – 334 – 334
Deferred tax on above (62) – – (62) – (62)
Net impact of revaluation of listed investment 272 – – 272 – 272
Cash flow hedge reserve – 31 – 31 – 31
Foreign currency translation reserve movement – 73 – 73 – 73
Total other comprehensive income 272 104 – 376 – 376
Total comprehensive income for the year 272 104 3 289 3 665 255 3 920
Group statement of changes in equity
for the six months ended 31 December 2014
Share Total
capital Available- share- Non-
and for-sale Retained holders controlling
premium reserve Other earnings of ARM interest Total
Rm Rm Rm Rm Rm Rm Rm
Six months ended 31 December 2014
(Unaudited)
Balance at 30 June 2014 4 119 272 986 21 311 26 688 1 511 28 199
Profit for the period – – – 801 801 91 892
Other comprehensive income – (272) 67 – (205) – (205)
Total comprehensive income
for the period – (272) 67 801 596 91 687
Share-based payments – – 84 – 84 – 84
Share options exercised 32 – – – 32 – 32
Bonus and performance shares
issued to employees 38 – (38) – – – –
Dividend paid – – – (1 302) (1 302) – (1 302)
Dividend paid to Impala Platinum – – – – – (74) (74)
Balance at 31 December 2014 4 189 – 1 099 20 810 26 098 1 528 27 626
Six months ended 31 December 2013
(Unaudited)
Balance at 30 June 2013 4 007 – 769 19 294 24 070 1 393 25 463
Profit for the period – – – 1 714 1 714 116 1 830
Other comprehensive income – – 83 – 83 – 83
Total comprehensive income
for the period – – 83 1 714 1 797 116 1 913
Share-based payments – – 70 – 70 – 70
Share options exercised 36 – – – 36 – 36
Bonus and performance shares issued
to employees 47 – (47) – – – –
Dividend paid – – – (1 102) (1 102) – (1 102)
Dividend paid to Impala Platinum – – – – – (45) (45)
Acquisition of non-controlling interest
in Kalumines – – – (170) (170) 99 (71)
Balance at 31 December 2013 4 090 – 875 19 736 24 701 1 563 26 264
Year ended 30 June 2014 (Audited)
Balance at 30 June 2013 4 007 – 769 19 294 24 070 1 393 25 463
Profit for the year – – – 3 289 3 289 255 3 544
Other comprehensive income – 272 104 – 376 – 376
Total comprehensive income
for the year – 272 104 3 289 3 665 255 3 920
Share-based payments – – 167 – 167 – 167
Share options exercised 62 – – – 62 – 62
Bonus and performance shares
issued to employees 50 – (50) – – – –
Dividend paid – – – (1 102) (1 102) – (1 102)
Dividend paid to Impala Platinum – – – – – (236) (236)
Acquisition of non-controlling interest
in Kalumines – – – (170) (170) 99 (71)
Sale of subsidiary – – (4) – (4) – (4)
Balance at 30 June 2014 4 119 272 986 21 311 26 688 1 511 28 199
Group statement of cash flows
for the six months ended 31 December 2014
Unaudited Audited
Six months ended Year ended
31 December 30 June
2014 2013 2014
Note Rm Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 5 578 4 519 9 950
Cash paid to suppliers and employees (4 093) (3 658) (7 877)
Cash generated from operations 10 1 485 861 2 073
Interest received 64 42 99
Interest paid (55) (65) (113)
Dividends received – – 1
Dividends received from joint venture 750 750 1 750
Dividends paid to non-controlling interest (74) (45) (236)
Dividend paid (1 302) (1 102) (1 102)
Taxation paid (198) (72) (395)
Net cash inflow from operating activities 670 369 2 077
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
to maintain operations (689) (321) (724)
Additions to property, plant and equipment
to expand operations (18) (358) (409)
Proceeds on disposal of property, plant and equipment 2 184 118
Proceeds on disposal of subsidiary – 1 1
Transfer of cash on disposal of subsidiary – (16) (16)
Investment in associate – – (189)
Investment in subsidiary (400) – –
Investment in insurance cell (25) – –
Investments in Richards Bay Coal Terminal (21) (15) (20)
Decrease in loans and long-term receivables 21 15 17
Net cash outflow from investing activities (1 130) (510) (1 222)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds on exercise of share options 32 36 62
Payment to non-controlling interest in Kalumines – (71) –
Long-term borrowings repaid (54) (235) (728)
Decrease in short-term borrowings (112) (49) (93)
Net cash outflow from financing activities (134) (319) (759)
Net (decrease)/increase in cash and cash equivalents (594) (460) 96
Cash and cash equivalents at beginning of period 1 669 1 569 1 569
Foreign currency translation on cash balances (1) 4 4
Cash and cash equivalents at end of period 4 1 074 1 113 1 669
Cash generated from operations per share (cents) 684 399 959
Notes to the financial statements
for the six months ended 31 December 2014
1 STATEMENT OF COMPLIANCE
The Group financial statements for the six months ended 31 December 2014 are prepared in accordance with and contain the
information required by IAS 34 – Interim Financial Reporting and comply with International Financial Reporting Standards (IFRS)
and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB), requirements of the
South African Companies Act 2008, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by the Financial Reporting Standards Council and the Listings Requirements of the
JSE Limited.
BASIS OF PREPARATION
The Group financial statements for the six months ended 31 December 2014 have been prepared on the historical cost
basis, except for certain financial instruments, which include listed investments, that are fairly valued by mark-to-market. The
accounting policies used are consistent with those in the most recent annual financial statements except for those listed below
and comply with IFRS. The Group financial statements for the period have been prepared under the supervision of the financial
director, Mr M Arnold CA(SA).
The Group has adopted the following new and revised standards and interpretations issued by the International Financial
Reporting Interpretation Committee (IFRIC) of the IASB that became effective on or before 1 July 2014.
Standard Subject Effective date
IFRS 1 First-time Adoption of International Financial Reporting Standards
(Annual improvement project) 1 July 2014
IFRS 2 Share-based Payments (Annual improvement project) 1 July 2014
IFRS 3 Business Combinations (Annual improvement project) 1 July 2014
IFRS 7 Financial Instruments: Disclosures (Amendment) 1 January 2014
IFRS 8 Operating Segments (Annual improvement project) 1 July 2014
IFRS 10 Consolidated Financial Statements (Amendment) 1 January 2014
IFRS 12 Disclosure of Interest in Other Entities (Amendment) 1 January 2014
IFRS 13 Fair Value Measurement (Annual improvement project) 1 July 2014
IAS 16 Property, Plant and Equipment (Annual improvement project) 1 July 2014
IAS 19 Employee Benefits (Amendment) 1 July 2014
IAS 24 Related Party Disclosure (Annual improvement project) 1 July 2014
IAS 27 Separate Financial Statements (Amendment) 1 January 2014
IAS 32 Financial Instruments Presentation – Offsetting financial assets
and financial liabilities (Amendment) 1 January 2014
IAS 36 Impairment of Assets – Recoverable amount disclosure for
non-financial assets of impaired assets (Amendment) 1 January 2014
IAS 39 Financial Instruments – Novation of derivatives and continuation
of hedge accounting (Amendment) 1 January 2014
IAS 40 Investment Property (Annual improvement project) 1 July 2014
IFRIC 21 Levies 1 January 2014
The adoption of these amendments had no significant effect on the Group financial statements.
In addition the following amendments, standards or interpretations have been issued but are not yet effective. The effective date
refers to periods beginning on or after, unless otherwise indicated.
Standard Subject Effective date
IFRS 5 Non-current Asset Held for Sale and Discontinued Operations
(Annual improvement project) 1 January 2016
IFRS 7 Financial Instruments: Disclosures (Annual improvement project) 1 January 2016
IFRS 9 Financial Instruments – Classification and Measurement (Amendment) 1 January 2018
IFRS 10 Consolidated Financial Statements (Amendment) 1 January 2016
IFRS 11 Accounting for Acquisitions of Interest in Joint Operations (Amendment) 1 January 2016
IFRS 12 Disclosure of Interest in Other Entities (Amendment) 1 January 2016
IFRS 14 Regulatory Deferral Accounts 1 January 2016
IFRS 15 Revenue from Contracts with Customers 1 January 2017
IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (Amendment) 1 January 2016
IAS 16 and IAS 41 Agriculture: Bearer Plants (Amendment) 1 January 2016
IAS 1 Disclosure initiative (Amendment) 1 January 2016
IAS 19 Employee Benefits (Annual improvement project) 1 January 2016
IAS 27 Separate Financial Statements – Equity method (Amendment) 1 January 2016
IAS 28 Investment in Associates and Joint Ventures (Amendment) 1 January 2016
IAS 34 Interim Financial Reporting (Annual improvement project) 1 January 2016
The Group does not intend early adopting any of the above amendments, standards or interpretations.
The impact of the above standards or interpretations are still being assessed.
For management purposes the Group is organised into operating divisions. The operating divisions are ARM Platinum (which
includes platinum and nickel), ARM Ferrous, ARM Coal, ARM Copper, Corporate and other, ARM Exploration, and Gold. Corporate
and other, ARM Exploration and Gold are included in ARM Corporate in the table below.
2. SEGMENTAL INFORMATION
Total per
IFRS
*IFRS financial
ARM ARM ARM ARM ARM Adjust- state-
Platinum Ferrous Coal Copper Corporate Total ment ments
Rm Rm Rm Rm Rm Rm Rm Rm
Primary segmental information
Six months ended
31 December 2014 (Unaudited)
Sales 3 820 5 167 574 435 – 9 996 (5 167) 4 829
Cost of sales (3 051) (3 754) (455) (516) 22 (7 754) 3 743 (4 011)
Other operating income 106 76 21 2 405 610 (34) 576
Other operating expenses (289) (380) (2) (128) (366) (1 165) 380 (785)
Segment result 586 1 109 138 (207) 61 1 687 (1 078) 609
Income from investments 19 105 – – 57 181 (105) 76
Finance cost (20) (17) (57) (8) 84 (18) 17 (1)
Finance cost ZCCM:
Shareholders' loan Vale/ARM
joint venture – – – (13) – (13) – (13)
Finance cost ARM:
Shareholders' loan Vale/ARM
joint venture – – – (60) – (60) – (60)
Loss from associate – – (68) – – (68) – (68)
Income from joint venture – 13 – – – 13 817 830
Exceptional items – (4) – – (273) (277) 4 (273)
Taxation (164) (354) (23) (3) (9) (553) 345 (208)
Non-controlling interest (144) – – 58 (5) (91) – (91)
Consolidation adjustment – (22) – – 22 – – –
Contribution to earnings 277 830 (10) (233) (63) 801 – 801
Contribution to headline
earnings 277 833 (10) (233) 159 1 026 – 1 026
Other information:
Segment assets including
investment in associate and
joint venture 10 869 18 608 3 158 3 775 4 260 40 670 (4 223) 36 447
Investment in joint venture – 14 385 14 385
Investment in associate 1 199 1 199 1 199
Segment liabilities 2 393 1 591 1 690 935 1 826 8 435 (1 591) 6 844
Unallocated – Deferred taxation
and taxation 4 609 (2 632) 1 977
Consolidated total liabilities 13 044 (4 223) 8 821
Cash generated from operations 1 323 1 490 170 (34) 26 2 975 (1 490) 1 485
Cash inflow/(outflow) from
operating activities 1 141 1 307 173 (63) (1 331) 1 227 (557) 670
Cash outflow from investing
activities (443) (1 072) (118) (146) (423) (2 202) 1 072 (1 130)
Cash outflow from
financing activities (43) – (55) (36) (134) – (134)
Capital expenditure 486 802 177 146 1 1 612 (802) 810
Amortisation and depreciation 331 491 72 115 3 1 012 (491) 521
EBITDA 917 1 600 210 (92) 64 2 699 (1 569) 1 130
* Includes IFRS 11 adjustments related to ARM Ferrous.
For management purposes the Group is organised into operating divisions. The operating divisions are ARM Platinum (which
includes platinum and nickel), ARM Ferrous, ARM Coal, ARM Copper, Corporate and other, ARM Exploration, and Gold. Corporate
and other, ARM Exploration and Gold are included in ARM Corporate in the table below.
Total per
IFRS
*IFRS financial
ARM ARM ARM ARM ARM Adjust- state-
Platinum Ferrous Coal Copper Corporate Total ment ments
Rm Rm Rm Rm Rm Rm Rm Rm
Six months ended
31 December 2013 (Unaudited)
Sales 3 571 7 013 547 488 – 11 619 (7 013) 4 606
Cost of sales (2 747) (3 690) (386) (462) 23 (7 262) 3 680 (3 582)
Other operating income 35 105 17 – 417 574 (75) 499
Other operating expenses (162) (569) (1) (110) (470) (1 312) 569 (743)
Segment result 697 2 859 177 (84) (30) 3 619 (2 839) 780
Income from investments 15 100 – – 37 152 (100) 52
Finance cost (19) (12) (46) (6) 9 (74) 12 (62)
Finance cost ZCCM:
Shareholders' loan Vale/ARM
joint venture – – – (9) – (9) – (9)
Finance cost ARM:
Shareholders' loan Vale/ARM
joint venture – – – (49) – (49) – (49)
Loss from associate** – – (240) – – (240) – (240)
Income from joint venture – 7 – – – 7 2 146 2 153
Exceptional items – – – (10) (621) (631) – (631)
Taxation (193) (786) (38) – 72 (945) 781 (164)
Non-controlling interest (137) – – 26 (5) (116) – (116)
Consolidation adjustment – (15) – – 15 – – –
Contribution to earnings 363 2 153 (147) (132) (523) 1 714 – 1 714
Contribution to headline
earnings 363 2 153 (34) (122) (19) 2 341 – 2 341
Other information:
Segment assets including
investment in associate and
joint venture 10 336 17 940 2 949 3 649 3 882 38 756 (4 031) 34 725
Investment in joint venture – 13 909 13 909
Investment in associate 1 211 1 211 1 211
Segment liabilities 1 909 1 486 1 528 1 025 2 095 8 043 (1 486) 6 557
Unallocated – Deferred taxation
and taxation 4 452 (2 548) 1 904
Consolidated total liabilities 12 495 (4 034) 8 461
Cash generated from operations 663 2 480 272 (31) (43) 3 341 (2 480) 861
Cash inflow/(outflow) from
operating activities 546 1 803 272 (31) (1 168) 1 422 (1 053) 369
Cash outflow from investing
activities (388) (1 041) (40) (63) (19) (1 551) 1 041 (510)
Cash (outflow)/inflow from
financing activities (48) – (235) (71) 35 (319) – (319)
Capital expenditure 389 732 58 247 3 1 429 (732) 697
Amortisation and depreciation 371 428 56 55 2 912 (428) 484
EBITDA 1 068 3 287 233 (29) (28) 4 531 (3 267) 1 264
* Includes IFRS 11 adjustments related to ARM Ferrous.
** Impairment included in loss from associate R113 million.
For management purposes the Group is organised into operating divisions. The operating divisions are ARM Platinum (which
includes platinum and nickel), ARM Ferrous, ARM Coal, ARM Copper, Corporate and other, ARM Exploration, and Gold. Corporate
and other, ARM Exploration and Gold are included in ARM Corporate in the table below.
Total per
IFRS
*IFRS financial
ARM ARM ARM ARM ARM Adjust- state-
Platinum Ferrous Coal Copper Corporate Total ment ments
Rm Rm Rm Rm Rm Rm Rm Rm
Year ended 30 June 2014
(Audited)
Sales 7 986 13 781 961 1 085 (28) 23 785 (13 781) 10 004
Cost of sales (5 811) (7 733) (724) (1 048) 73 (15 243) 7 712 (7 531)
Other operating income 79 176 24 36 752 1 067 (106) 961
Other operating expenses (531) (1 228) (3) (319) (910) (2 991) 1 228 (1 763)
Segment result 1 723 4 996 258 (246) (113) 6 618 (4 947) 1 671
Income from investments 36 225 – – 83 344 (225) 119
Finance cost (51) (27) (89) (2) 14 (155) 27 (128)
Finance cost ZCCM:
Shareholders' loan Vale/ARM
joint venture – – – (38) – (38) – (38)
Finance cost ARM:
Shareholders' loan Vale/ARM
joint venture – – – (93) – (93) – (93)
Loss from associate** – – (374) – – (374) – (374)
Income form joint venture*** – 11 – – – 11 3 538 3 549
Exceptional items (2) (260) 5 2 (621) (876) 260 (616)
Taxation (506) (1 361) (48) (3) 25 (1 893) 1 347 (546)
Non-controlling interest (319) – – 73 (9) (255) – (255)
Consolidation adjustment – (35) – – 35 – – –
Contribution to earnings 881 3 549 (248) (307) (586) 3 289 – 3 289
Contribution to headline
earnings 883 3 736 (120) (309) (82) 4 108 – 4 108
Other information:
Segment assets including
investment in associate and
joint venture 10 807 18 749 3 468 3 530 4 348 40 902 (4 444) 36 458
Investment in joint venture – 14 305 14 305
Investment in associate 1 267 1 267 1 267
Segment liabilities 2 280 1 936 1 636 826 1 538 8 216 (1 936) 6 280
Unallocated – Deferred taxation
and taxation 4 542 (2 563) 1 979
Consolidated total liabilities 12 758 (4 499) 8 259
Cash inflow/(outflow) from
operating activities 1 386 4 485 407 (158) (1 308) 4 812 (2 735) 2 077
Cash outflow from investing
activities (690) (2 382) (305) (204) (23) (3 604) 2 382 (1 222)
Cash outflow from
financing activities (104) – (152) – (503) (759) – (759)
Capital expenditure 731 1 753 129 299 6 2 918 (1 753) 1 165
Amortisation and depreciation 650 892 117 176 6 1 841 (892) 949
Impairment – 260 183 – – 443 (260) 183
EBITDA 2 373 5 888 375 (70) (107) 8 459 (5 839) 2 620
* Includes IFRS 11 adjustments related to ARM Ferrous.
** Impairment included in loss from associates R132 million.
*** Impairment included in income from joint venture R187 million.
Additional information
The ARM platinum segment is analysed further into Nkomati, Two Rivers Platinum Proprietary Limited and ARM Mining Consortium
Limited which includes 50% of the Modikwa Platinum Mine.
ARM
Two Rivers Modikwa Nkomati Platinum
Platinum Rm Rm Rm Rm
Six months ended 31 December 2014 (Unaudited)
Sales 1 873 597 1 350 3 820
Cost of sales (1 336) (598) (1 117) (3 051)
Other operating income 6 1 99 106
Other operating expenses (87) (10) (192) (289)
Segment result 456 (10) 140 586
Income from investments 7 3 9 19
Finance cost (16) (1) (3) (20)
Taxation (127) 8 (45) (164)
Non-controlling interest (144) – – (144)
Contribution to earnings 176 – 101 277
Contribution to headline earnings 176 – 101 277
Other information:
Segment assets 4 248 3 092 3 529 10 869
Segment liabilities 1 053 553 787 2 393
Cash inflow from operating activities 551 90 500 1 141
Cash outflow from investing activities (127) (207) (109) (443)
Cash outflow from financing activities (43) – – (43)
Capital expenditure 156 209 121 486
Amortisation and depreciation 205 42 84 331
EBITDA 661 32 224 917
Six months ended 31 December 2013 (Unaudited)
Sales 1 700 627 1 244 3 571
Cost of sales (1 242) (551) (954) (2 747)
Other operating income 11 7 17 35
Other operating expenses (59) (9) (94) (162)
Segment result 410 74 213 697
Income from investments 3 5 7 15
Finance cost (17) – (2) (19)
Taxation (112) (20) (61) (193)
Non-controlling interest (127) (10) – (137)
Contribution to earnings 157 49 157 363
Contribution to headline earnings 157 49 157 363
Other information:
Segment assets 3 896 2 889 3 551 10 336
Segment liabilities 842 406 661 1 909
Cash inflow from operating activities 337 154 55 546
Cash outflow from investing activities (140) (160) (88) (388)
Cash outflow from financing activities (48) – – (48)
Capital expenditure 138 160 91 389
Amortisation and depreciation 181 41 149 371
EBITDA 591 115 362 1 068
Pro forma analysis of the ARM Ferrous segment on a 100% basis
Total per
IFRS
Manga- *IFRS financial
Iron ore nese Chrome Ferrous ARM Adjust- state-
division division division Total share ment ments
Rm Rm Rm Rm Rm Rm Rm
Six months ended 31 December 2014
(Unaudited)
Sales 5 757 3 868 708 10 333 5 167 (5 167) –
Other operating income 276 133 5 414 76 (76) –
Other operating expenses (682) (254) (87) (1 023) (380) 380 –
Operating profit 1 478 656 84 2 218 1 109 (1 109) –
Contribution to earnings and
total comprehensive income 1 174 473 56 1 703 852 (22) 830
Contribution to headline earnings 1 181 472 56 1 709 855 (22) 833
Other information:
Segment assets 25 480 11 625 1 090 38 195 18 608 (4 223) 14 385
Segment liabilities 5 748 2 547 426 8 721 1 591 (1 591) –
Cash inflow/(outflow) from operating activities 663** 632 (206) 1 089 1 307 (1 307) –
Cash outflow from investing activities (835) (1 187) (97) (2 119) (1 072) 1 072 –
Capital expenditure 710 849 130 1 689 802 (802) –
Amortisation and depreciation 751 209 43 1 003 491 (491) –
EBITDA 2 229 865 127 3 221 1 600 (1 600) –
Additional information for ARM Ferrous
at 100%
Non-current assets
Property, plant and equipment 21 312 (21 312) –
Other non-current assets 2 857 (2 857) –
Current assets
Inventories 4 963 (4 963) –
Trade and other receivables 4 038 (4 038) –
Financial asset 80 (80) –
Cash and cash equivalents 4 945 (4 945) –
Non-current liabilities
Other non-current liabilities 6 193 (6 193) –
Current liabilities
Trade and other payables 1 829 (1 829) –
Short-term provisions 416 (416) –
Taxation 284 (284) –
* Includes consolidation and IFRS 11 adjustments.
** Dividend paid amounting to R1.5 billion included in cash flows from operating activities.
Pro forma analysis of the ARM Ferrous segment on a 100% basis
Total per
IFRS
Manga- *IFRS financial
Iron ore nese Chrome Ferrous ARM Adjust- state-
division division division Total share ment ments
Rm Rm Rm Rm Rm Rm Rm
Six months ended 31 December 2013
(Unaudited)
Sales 9 222 4 022 782 14 026 7 013 (7 013) –
Other operating income 313 98 5 416 105 (105) –
Other operating expenses (887) (355) (102) (1 344) (569) 569 –
Operating profit 4 753 917 47 5 717 2 859 (2 859) –
Contribution to earnings
and total comprehensive income 3 644 655 37 4 336 2 168 (15) 2 153
Contribution to headline earnings 3 644 655 37 4 336 2 168 (15) 2 153
Other information:
Segment assets 24 894 10 908 939 36 741 17 940 (4 031) 13 909
Segment liabilities 5 549 2 424 331 8 304 1 486 (1 486) –
Cash inflow from operating activities 1 576** 475 54 2 105 1 803 (1 803) –
Cash outflow from investing activities (795) (1 208) (78) (2 081) (1 041) 1 041 –
Capital expenditure 902 541 80 1 523 732 (732) –
Amortisation and depreciation 596 242 38 876 428 (428) –
EBITDA 5 349 1 159 85 6 593 3 287 (3 287)
Additional information for ARM Ferrous
at 100%
Non-current assets
Property, plant and equipment 20 058 (20 058) –
Other non-current assets 1 554 (1 554) –
Current assets
Inventories 4 479 (4 479) –
Trade and other receivables 5 272 (5 272) –
Financial asset 85 (85)
Cash and cash equivalents 5 293 (5 293) –
Non-current liabilities
Other non-current liabilities 5 779 (5 779) –
Current liabilities
Trade and other payables 1 732 (1 732) –
Short-term provisions 407 (407) –
Taxation 386 (386) –
* Includes consolidation and IFRS 11 adjustments.
** Dividend paid amounting to R1.5 billion included in cash flows from operating activities.
ARM Corporate as presented in the table on page 78 is analysed further into the Corporate and other, ARM Exploration and Gold
segments.
ARM Corporate* Total ARM
Exploration and other Gold Corporate
Primary segmental information Rm Rm Rm Rm
Six months ended 31 December 2014 (Unaudited)
Cost of sales – 22 – 22
Other operating income – 405 – 405
Other operating expenses (40) (326) – (366)
Segment result (40) 101 – 61
Income from investments – 57 – 57
Finance cost – 84 – 84
Exceptional items – – (273) (273)
Taxation – (60) 51 (9)
Non-controlling interest – (5) – (5)
Consolidation adjustment – 22 – 22
Contribution to earnings (40) 199 (222) (63)
Contribution to headline earnings (40) 199 – 159
Other information:
Segment assets – 2 885 1 375 4 260
Segment liabilities – 1 826 – 1 826
Cash generated from operations (40) 66 – 26
Cash outflow from operating activities (40) (1 291) – (1 331)
Cash outflow from investing activities – (423) – (423)
Cash outflow from financing activities – (36) – (36)
Capital expenditure – 1 – 1
Amortisation and depreciation – 3 – 3
EBITDA (40) 104 – 64
* Corporate, other companies and consolidation adjustments.
ARM Corporate as presented in the table on page 79 is analysed further into the Corporate and other, ARM Exploration and Gold
segments.
ARM Corporate* Total ARM
Exploration and other Gold Corporate
Rm Rm Rm Rm
Six months ended 31 December 2013 (Unaudited)
Cost of sales – 23 – 23
Other operating income – 417 – 417
Other operating expenses (24) (446) – (470)
Segment result (24) (6) – (30)
Income from investments – 37 – 37
Finance cost – 9 – 9
Exceptional items – 6 (627) (621)
Taxation – (45) 117 72
Non-controlling interest – (5) – (5)
Consolidation adjustment – 15 – 15
Contribution to earnings (24) 11 (510) (523)
Contribution to headline earnings (24) 5 – (19)
Other information:
Segment assets – 2 234 1 648 3 882
Segment liabilities – 2 095 – 2 095
Cash generated from operations (24) (19) – (43)
Cash outflow from operating activities (24) (1 144) – (1 168)
Cash outflow from investing activities – (19) – (19)
Cash inflow from financing activities – 35 – 35
Capital expenditure – 3 – 3
Amortisation and depreciation – 2 – 2
EBITDA (24) (4) – (28)
* Corporate, other companies and consolidation adjustments.
ARM Corporate as presented in the table on page 80 is analysed further into the Corporate and other, ARM Exploration and Gold
segments.
ARM Corporate* Total ARM
Exploration and other Gold Corporate
Rm Rm Rm Rm
Year ended 30 June 2014 (Audited)
Sales – (28) – (28)
Cost of sales – 73 – 73
Other operating income – 752 – 752
Other operating expenses (81) (829) – (910)
Segment result (81) (32) – (113)
Income from investments – 83 – 83
Finance cost – 14 – 14
Exceptional items – 6 (627) (621)
Taxation – (92) 117 25
Non-controlling interest – (9) – (9)
Consolidation adjustment – 35 – 35
Contribution to earnings (81) 5 (510) (586)
Contribution to headline earnings (81) (1) – (82)
Other information:
Segment assets – 2 366 1 982 4 348
Segment liabilities – 1 538 – 1 538
Cash outflow from operating activities (81) (1 227) – (1 308)
Cash outflow from investing activities – (23) – (23)
Cash outflow from financing activities – (503) – (503)
Capital expenditure – 6 – 6
Amortisation and depreciation – 6 – 6
EBITDA (81) (26) – (107)
* Corporate, other companies and consolidation adjustments.
Unaudited Audited
Six months ended Year ended
31 December 30 June
2014 2013 2014
Rm Rm Rm
3. INVESTMENT IN JOINT VENTURE
This investment relates to ARM Ferrous and comprises Assmang
as a joint venture which includes iron ore, manganese and
chrome operations.
Opening balance 14 305 12 506 12 506
Income for the period 852 2 168 3 584
Consolidation adjustments (22) (15) (35)
Net income for the period 830 2 153 3 549
Less: Dividends paid for the period (750) (750) (1 750)
Closing balance 14 385 13 909 14 305
Refer to note 2 for further detail relating to the
ARM Ferrous segment.
4. CASH AND CASH EQUIVALENTS
– African Rainbow Minerals Limited 288 100 746
– ARM Finance Company SA 102 81 63
– ARM Platinum Proprietary Limited 17 120 28
– Kingfisher Insurance Co Limited 119 192 137
– Nkomati 200 139 216
– Two Rivers Platinum Proprietary Limited 285 9 9
– Vale/ARM joint venture 34 66 92
– Venture Building Trust Proprietary Limited 3 3 4
– Restricted cash 928 814 855
Total as per statement of financial position 1 976 1 524 2 150
Less overdrafts (refer note 6) 902 411 481
Total as per statement of cash flows 1 074 1 113 1 669
5. ASSETS HELD FOR SALE 12 – –
During the reporting period the investment property situated
in Marshalltown, Johannesburg was sold. The transaction and
the transfer thereof is expected to be finalised by the end of the
current financial year.
Unaudited Audited
Six months ended Year ended
31 December 30 June
2014 2013 2014
Rm Rm Rm
6. BORROWINGS
Long-term borrowings are held as follows
– African Rainbow Minerals Limited – 564 –
– ARM Finance Company SA 567 774 659
– ARM Coal Proprietary Limited (partner loan) 1 220 1 290 1 209
– Two Rivers Platinum Proprietary Limited 61 89 88
– Vale/ARM joint operation 10 – 12
– Vale/ARM joint operation (partner loan) 505 431 452
2 363 3 148 2 420
Short-term borrowings are held as follows:
– African Rainbow Minerals Limited – 8 –
– Anglo Platinum Limited (partner loan) 114 114 114
– ARM Coal Proprietary Limited (partner loan) 188 30 217
– ARM Finance Company SA 289 63 191
– Two Rivers Platinum Proprietary Limited 64 80 79
655 295 601
Overdrafts are held as follows:
– African Rainbow Minerals Limited 346 – –
– ARM Mining Consortium Limited 80 – 24
– Two Rivers Platinum Proprietary Limited 287 261 300
– Vale/ARM joint operation 169 120 130
– Other 20 30 27
902 411 481
Overdrafts and short-term borrowings 1 557 706 1 082
Total borrowings 3 920 3 854 3 502
Unaudited Audited
Six months ended Year ended
31 December 30 June
2014 2013 2014
Rm Rm Rm
7. EXCEPTIONAL ITEMS
Impairment of available-for-sale listed investment (273) (627) (627)
(Loss)/profit on sale of property, plant and equipment – (10) 6
Profit on sale of subsidiary – 6 5
Exceptional items per income statement (273) (631) (616)
Impairment on property, plant and equipment accounted
for directly in associate ARM Coal – (157) (183)
Impairment of property, plant and equipment accounted
for directly in joint venture – Assmang – – (260)
Loss on sale of property, plant and equipment accounted for
directly in joint venture – Assmang (4) – –
Exceptional items before taxation effect (277) (788) (1 059)
Taxation accounted for in associate – ARM Coal – 44 51
Taxation accounted for in joint venture – Assmang 1 – 73
Taxation on impairment of available-for-sale listed investment 51 117 117
Taxation on other exceptional items – – (1)
Total amount adjusted for headline earnings (225) (627) (819)
8. HEADLINE EARNINGS
Basic earnings per income statement 801 1 714 3 289
Impairment of available-for-sale listed investment 273 627 627
Impairment of property, plant and equipment
in associate – ARM Coal – 157 183
Impairment of property, plant and equipment in
joint venture – Assmang – – 260
Loss/(profit) on sale of property, plant and equipment – 10 (6)
Loss on sale of property, plant and equipment in joint
venture – Assmang 4 – –
Profit on sale of subsidiary – (6) (5)
1 078 2 502 4 348
Taxation accounted for directly in associate and joint venture (1) (44) (124)
Taxation on impairment of available-for-sale listed investment (51) (117) (117)
Taxation on other exceptional items – – 1
Headline earnings 1 026 2 341 4 108
9. TAXATION
South African normal tax – current year 175 116 423
South African normal tax – mining 164 101 322
South African normal tax – non-mining 11 15 101
South African normal tax – prior year – – 8
Deferred tax – current year 31 48 115
Foreign taxes 2 – –
208 164 546
Unaudited Audited
Six months ended Year ended
31 December 30 June
2014 2013 2014
Rm Rm Rm
10. CASH GENERATED FROM OPERATIONS
Cash generated from operations before working
capital movement 1 307 1 532 3 032
Working capital changes 178 (671) (959)
Movement in receivables 340 (524) (978)
Movement in payables and provisions (211) (158) (160)
Movement in inventories 49 11 179
Cash generated from operations (per statement of cash flows) 1 485 861 2 073
11. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments in respect of future capital expenditure which
will be funded from operating cash flows and by utilising debt
facilities at entity and corporate levels, are summarised below:
Approved by directors
– contracted for 213 312 359
– not contracted for 77 120 7
Total commitments 290 432 366
Shareholders are advised that there have been no significant
changes to the contingent liabilities of the Group as disclosed
in the 30 June 2014 annual report other than (i) additional
guarantees issued for R274 million and (ii) an attributable
estimated contingent liability of R76 million at the Nkomati mine
for Eskom infrastructure.
12. EVENTS AFTER REPORTING DATE
Subsequent to the end of the reporting period the following events have occurred that do not effect the reported results but which
require disclosure:
12.1 The current operating furnace at Machadodorp will be stopped at the end of April 2015. The attributable carrying value
of the furnace at 31 December 2014 was R192 million.
12.2 The transfer of Kalkfontein portions 4, 5 and 6 and Tweefontein prospecting rights into the Two Rivers mining area
occurred on 6 February 2015 from which date ARM's shareholding in Two Rivers reduces to 51% from 55%. Two Rivers
will remain a subsidiary of ARM after the changed shareholding as all criteria for control still exist after the reduction in
shareholding.
12.3 ARM and Assore have reached an in principle agreement on ARM's disposal of its effective 50% interest in the
Dwarsrivier Chrome Mine to Assore. The Dwarsrivier Chrome Mine makes up the substantial portion of the Chrome
Division in the ARM Ferrous segment report reflected in note 2.
Contact details and administration
African Rainbow Minerals Limited
Incorporated in the Republic of South Africa
Registration number 1933/004580/06
ISIN code: ZAE000054045
Registered office
ARM House
29 Impala Road
Chislehurston, Sandton, 2196
South Africa
PO Box 786136, Sandton, 2146
South Africa
Telephone: +27 11 779 1300
Fax: +27 11 779 1312
E-mail: ir.admin@arm.co.za
Website: http://www.arm.co.za
Transfer secretaries
Computershare Investor Services
Proprietary Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Telephone: +27 11 370 5000
Telefax: +27 11 688 5222
E-mail: web.queries@computershare.co.za
Website: http://www.computershare.co.za
Sponsor
Deutsche Securities (SA) Proprietary Limited
Forward-looking statements
Certain statements in this report constitute forward-looking statements that are neither reported
financial results nor other historical information. They include but are not limited to statements that
are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives.
Such forward-looking statements may or may not take into account and may or may not be affected
by known and unknown risks, uncertainties and other important factors that could cause the actual
results, performance or achievements of the Company to be materially different from the future results,
performance or achievements expressed or implied by such forward-looking statements. Such risks,
uncertainties and other important factors include among others: economic, business and political
conditions in South Africa; decreases in the market price of commodities; hazards associated with
underground and surface mining; labour disruptions; changes in government regulations, particularly
environmental regulations; changes in exchange rates; currency devaluations; inflation and other
macro-economic factors; and the impact of the HIV and Aids crisis in South Africa. These forward-
looking statements speak only as of the date of publication of these pages. The Company undertakes
no obligation to update publicly or release any revisions to these forward-looking statements to reflect
events or circumstances after the date of publication of these pages or to reflect the occurrence of
unanticipated events.
Directors
P T Motsepe (Executive Chairman) W M Gule**
M P Schmidt (Chief Executive Officer) A K Maditsi*
F Abbott* H L Mkatshana
M Arnold Dr R V Simelane*
Dr M M M Bakane-Tuoane* Z B Swanepoel*
T A Boardman* A J Wilkens
A D Botha*
J A Chissano (Mozambican)*
* Independent Non-executive
** Non-executive
www.arm.co.za
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