Wrap Text
Interim results for the six months ended 31 December 2018
African Rainbow Minerals Limited
Incorporated in the Republic of South Africa
Registration number 1933/004580/06
JSE Share code: ARI
ISIN code: ZAE000054045
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
Shareholder information
Issued share capital at 31 December 2018 221 933 850 shares
Market capitalisation at 31 December 2018 ZAR31.6 billion
Market capitalisation at 31 December 2018 US$2.2 billion
Closing share price at 31 December 2018 R142.35
Six-months high (1 July 2018 - 31 December 2018) R144.33
Six-months low (1 July 2018 - 31 December 2018) R106.80
Average daily volume traded for the six months 587 884 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
Email: jongisa.magagula@arm.co.za
Company secretary
Alyson D'Oyley, BCom, LLB, LLM
Telephone: +27 11 779 1300
Email: alyson.doyley@arm.co.za
Salient features
- Headline earnings increased by 13% to R2 201 million (1H F2018: R1 945 million).
- Headline earnings per share were 1 149 cents compared to 1 023 cents in 1H F2018.
- Interim dividend of 400 cents per share declared (1H F2018: 250 cents per share).
- Basic earnings were R1 306 million (1H F2018: R1 753 million) and include an attributable
impairment of the Nkomati Mine assets of R892 million after tax.
- Dividends received from the Assmang joint venture were R1 750 million (1H F2018: R1 000 million).
- The consolidated financial position improved by R2 267 million to net cash of R1 165 million (net
debt of R1 102 million as at 31 December 2017).
- The coal debt attributable to ARM was reduced to R2 033 million.
Results overview
The ARM Board of Directors (the Board) announces a 13% increase in headline earnings to R2 201 million (R11.49 per
share) for the six months ended 31 December 2018 (1H F2018: R1 945 million or R10.23 per share) and declares an
interim dividend of 400 cents per share (1H F2018: 250 cents per share). The increase in headline earnings was driven
mainly by improved headline earnings at Modikwa Mine, the iron ore division and the manganese ore operations which
were partly offset by a headline loss at Nkomati Mine.
Basic earnings for the period were R1 306 million (1H F2018: R1 753 million) and include an impairment of the Nkomati
Mine assets of R892 million after tax. Basic earnings per share therefore decreased from 922 cents to 682 cents.
The Nkomati Mine impairment is discussed in further detail on page 48 and a reconciliation of basic earnings to headline
earnings is provided in note 12 to the financial statements.
US Dollar prices realised for all commodities, except platinum, were higher and the 1H F2019 average Rand/US Dollar
was R14.19/US$ (1H F2018: R13.39/US$). For reporting purposes, the closing exchange rate at 31 December 2018 was
R14.38/US$ (31 December 2017: R12.29/US$).
Sales from continuing operations (which are consolidated into ARM's revenue) were marginally lower in 1H F2019 at R4 147
million (1H F2018: R4 174 million). Sales for ARM Ferrous increased by 17% to R7 999 million (1H F2018: R6 816 million).
The average gross profit margin was 19% for both reporting periods. The gross profit margins achieved at each operating
division may be ascertained from the detailed segment reports provided in note 2 to the financial statements.
ARM's earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations, excluding special
items and income from associates and joint ventures, were 11% lower at R889 million (1H F2018: R999 million). The
change was largely as a result of a lower EBITDA contribution from Nkomati Mine (of R267 million) and ARM Corporate (of
R113 million) which was partially offset by a higher EBITDA contribution from Modikwa Mine (of R243 million).
The income from joint venture (ARM Ferrous) was R2 121 million (1H F2018: R1 765 million) after special items and is 20%
higher than the corresponding period.
The detailed and expanded segmental contribution analysis is provided in note 2 to the financial statements.
ARM Ferrous - Headline earnings at ARM Ferrous were 21% higher at R2 127 million (1H F2018: R1 765 million). The
iron ore division delivered a 41% increase in headline earnings as average realised US Dollar prices for export iron ore
increased by 15%, driven by a combination of higher fines market prices, increased lump premiums and a higher lump
to fines ratio in iron ore sales volumes. The manganese ore operations delivered a 41% increase in headline earnings,
however, a 62% decrease in headline earnings at the manganese alloy operations (mainly comprising of Cato Ridge Works
and Alloys) resulted in the manganese division's overall earnings increasing by 5%.
ARM Platinum - Interventions implemented at Modikwa Mine to improve the operational and financial performance of
the mine are yielding results. These, together with a higher Rand basket price and an improved purchase of concentrate
agreement (as concluded in F2018 for three years from 1 January 2017), contributed to the R173 million headline earnings
reported by Modikwa Mine (1H F2018: R36 million). Two Rivers Mine continues to experience grade challenges as a
result of complexity of the ore body. This impacted both PGM and chrome volumes in the six months under review. The
mine reported headline earnings of R180 million (1H F2018: R173 million). Nkomati Mine recorded a headline loss of
R186 million mainly as a result of reduced nickel and by-product sales volumes together with above inflation cost increases.
ARM has completed its review given the mine's operational challenges, cash support that could be required from the
partners and the relatively limited (eight year) life of the open pit mine. Part of this review indicated a decline in head grade,
resulting in decreased metal output, the mine's inability to generate sufficient cash to meet operational requirements and
an increase in production costs.
We are in discussions with our partner on the future of the mine.
ARM Coal - Headline earnings for ARM Coal were 59% lower at R65 million (1H F2018: R160 million) and include a
re-measurement loss of R206 million on the revaluation of the loans between ARM, ARM Coal and Glencore which were
restructured in F2018. The coal operations delivered improved operational cash flows which has resulted in accelerated
loan repayments. The value of the restructured loans is revalued at each reporting period to reflect the net present value
of the expected loan repayment profile. Where the repayment profile is expected to accelerate compared to expectations
in the previous reporting period, a re-measurement loss is recognised.
Although ARM Corporate EBITDA was lower, headline loss by R158 million improved by R42 million compared to the
corresponding period. EBITDA was lower mainly due to a R62 million increase in research and development costs.
Headline earnings were higher mainly due to R93 million lower tax expense.
A detailed segmental headline earnings contribution analysis is provided in note 2 to the financial statements.
Headline earnings/(loss) by division/operation
six months ended 31 December
R million 2018 2017 % change
ARM Platinum 167 226 (26)
Two Rivers Mine 180 173 4
Modikwa Mine 173 36 >200
Nkomati Mine (186) 17
ARM Ferrous 2 127 1 765 21
Iron Ore Division 1 230 873 41
Manganese Division 919 872 5
Chrome Division* (4) (9) 56
Consolidation adjustment (18) 29
ARM Coal* 65 160 (59)
Goedgevonden Mine (7) 35 (120)
PCB Operations 72 125 (42)
ARM Copper - (6)
ARM Corporate and other* (158) (200) 21
Headline earnings 2 201 1 945 13
Headline earnings from continuing operations 2 201 1 951 13
Headline earnings from discontinued operations - (6)
* 1H F2019 includes a re-measurement loss of R206 million at ARM Coal and a re-measurement loss of R59 million at ARM
Corporate on the valuation of the loans between ARM, ARM Coal and Glencore which were restructured in F2018.
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 (Implats), Norilsk Nickel Africa (Pty) Ltd
(Norilsk) and Glencore South Africa (Glencore).
The interim results for the six months ended 31 December 2018 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.
Capital allocation guiding principles
Cash generated from operations was R781 million (1H F2018: R 940 million) and is reported after a R570 million increase
in working capital requirements outflow (1H F2018: R471 million). Dividends received from the ARM Ferrous joint venture
were R 1 750 million (1H F2018: R1 000 million).
Net cash outflow from investing activities of R 707 million was recorded (1H F2018: R160 million inflow) mainly as a result
of a R211 million investment in Harmony in July 2018, as previously reported, while 1H F2018 included R741 million
proceeds on disposal of the Lubambe Mine received in December 2017.
The net decrease in cash and cash equivalents was R8 million for the year (1H F2018: R359 million increase).
Capital expenditure to maintain operations was 16% lower at R505 million for the period (1H F2018: R603 million).
Attributable capital expenditure at the Assmang joint venture was 70% higher at R946 million (1H F2018: R558 million).
Further details on the Assmang capital expenditure are included in the ARM Ferrous section on page 50.
Total borrowings repaid were R167 million (1H F2018: R325 million).
Gross debt at the end of the period was 29% lower than the corresponding period at R2 132 million (31 December 2017:
R3 021 million). This was mainly due to R390 million reduction in ARM Corporate and R461 million reduction in ARM Coal
debt. There was no debt at ARM Ferrous at 31 December 2018 (31 December 2017: nil).
ARM Company's Revolving Credit Facility expired on 24 August 2018. A new facility for R2 250 million which matures in
August 2021 was finalised on improved terms and conditions. This facility was undrawn as at 31 December 2018.
Dividends paid to ARM shareholders in October 2018 were R1 433 million (1H F2018: R1 236 million).
At 31 December 2018 cash and cash equivalents were R3 297 million (31 December 2017: R1 919 million), details of which
are reflected in note 9 to the financial statements. This excludes the attributable cash and cash equivalents held at ARM
Ferrous (50% of Assmang) of R2 186 million (31 December 2017: R3 198 million).
Net cash at 31 December 2018 of R1 165 million (31 December 2017: R1 102 million net debt).
Assets
The consolidated ARM total assets of R34.7 billion (1H F2018: R32.5 billion) include ARM's investment in Harmony which
was R1 882 million as at 31 December 2018 (31 December 2017: R1 444 million). Harmony's share price was R25.20 per
share at 31 December 2018 (31 December 2017: R22.69 per share, 30 June 2018: R21.22 per share).
Nkomati Impairment
As at 31 December 2018, an impairment loss of the Nkomati Mine cash generating unit was recognised, largely due to a
combination of:
- A decline in head grade, resulting in decreased metal output;
- An inability to generate sufficient cash to meet operational requirements; and
- An increase in production costs.
ARM's attributable share of the impairment loss amounted to R1 166 million before tax and R892 million after tax. The
difference between the pre and post-tax charge does not correspond with the South African Corporate tax rate of 28%, as
the tax charge on the impairment was limited to the deferred tax liability available for off-set on the Statement of financial
position. Management did not recognise a deferred tax asset as the recoverability of such an asset is uncertain in the
foreseeable future.
The recoverable amount of the cash generating unit was determined based on the value-in-use calculation performed in
terms of International Financial Reporting Standards.
A pre-tax discount rate of 20.2% was used for the impairment calculation together with the following metal prices and
exchange rate assumptions:
2H F2019 F2020 F2021 F2022 Long-term
Nominal Nominal Nominal Nominal Real
Nickel US$/t 12 998 13 498 13 999 15 539 15 364
Platinum US$/oz 855 1 090 1 138 1 172 1 173
Palladium US$/oz 1 027 1 050 1 050 1 032 965
Gold US$/oz 1 273 1 315 1 323 1 355 1 183
Copper US$/t 6 221 6 925 7 040 7 241 6 516
Cobalt US$/lb 35 33 30 25 19
Chrome concentrate-FOT* US$/t 62 75 75 77 72
Exchange rate R/US$ 14.40 14.08 13.61 13.92 13.27
Operating safely
We are committed to creating and maintaining a safe work environment for all our employees. There were no fatalities at
any of the ARM operations in the period under review. The Lost Time Injury Frequency Rate (LTIFR) improved to 0.36 in 1H
F2019 from 0.41 per 200 000 man-hours for 1H F2018. 40 Lost Time Injuries (LTIs) were recorded compared to 51 in the
corresponding period. All the South African ARM operations held annual Safety Days in alignment with the Mineral Council
South Africa's National Safety Day.
Safety achievements in the period under review:
- At the annual Mine Safe Conference held in August 2018, Beeshoek Mine was awarded the first prize for "best improved
safety performance" and second prize for "best safety performance in class". The mine recorded 17 000 fatality-free
production shifts on 18 September 2018, an accomplishment that took 15 years and 6 months to achieve. In addition,
Beeshoek Mine was announced second runner-up for the Best Performing Surface Mine in the annual Northern Cape
Mine Managers' Association on 23 November 2018.
- As at 31 December 2018, Cato Ridge Works has been lost time injury free for 18 months.
- As at December 2018, Nkomati Mine has been lost time injury free for 8 months.
Safety figures and statistics in this report are presented on a 100% basis and exclude the ARM Coal operations which are
managed by ARM's partner.
Changes to Mineral Resources and Mineral Reserves
There has been no material change to ARM's Mineral Resources and Mineral Reserves as disclosed in the Integrated
Annual Report for the financial year ended 30 June 2018, other than depletion due to continued mining activities at the
operations. An updated Mineral Resources and Mineral Reserves Statement will be issued in the Company's F2019
Integrated Annual Report.
ARM Ferrous
Headline earnings were 21% higher at R2 127 million (1H F2018: R1 765 million) driven by a 41% and 26% increase in
headline earnings at the iron ore and manganese ore operations, respectively. Headline earnings for the alloy operations
(including Sakura Ferroalloys) were 62% lower, impacted by reduced sales volumes and above inflation cost increases.
ARM Ferrous headline earnings (on 100% basis)
six months ended 31 December
R million 2018 2017 % change
Iron ore division 2 459 1 746 41
Manganese division 1 837 1 743 5
Chrome division (7) (18)
Total 4 289 3 471 24
ARM share 2 145 1 736 24
Consolidation adjustments* (18) 29
Headline earnings attributable to ARM 2 127 1 765 21
* The consolidation adjustment of R18 million relates to capitalised fees adjustments.
Capital expenditure
Assmang capital expenditure (on 100% basis) increased by 70% to R1 978 million (1H F2018: R1 166 million).
Capital expenditure at the Iron ore division (on a 100% basis) increased from R609 million to R1 028 million mainly due to:
- Commencement of capitalised waste stripping in the Bruce Pit;
- Increased capitalised waste stripping at the Khumani King Pit and Beeshoek Village Pit; and
- Fleet and mining equipment replacement at Khumani Mine as part of the life cycle of the machinery.
The Manganese division's capital expenditure increased by 71% to R950 million (1H F2018: R557 million). R713 million
of the capital expenditure related to the modernisation and optimisation of the Gloria Mine within the Black Rock Mine
as approved in F2018. The Gloria Mine decline shaft shut-down commenced in November 2018 and is on schedule
for completion in April 2019. Site establishment of the civils and earthworks contractor has also commenced while the
design work for the new Gloria Plant has been completed. The capital approved for Gloria Mine will enable Black Rock
Mine flexibility to produce different product specifications (from high to medium grade) as the ability to deliver different
specification products to customers has become a key differentiator. In addition, production capacity at Black Rock Mine
will increase to approximately 5 million tonnes per annum with any ramp up to be closely synchronised with Transnet rail
availability.
Cato Ridge Works' capital expenditure (on 100% basis) was R20 million compared to R12 million in 1H F2018.
ARM Ferrous capital expenditure (on 100% basis)
six months ended 31 December
R million 2018 2017 % change
Iron ore 1 028 609 69
Manganese 950 557 71
Total 1 978 1 166 70
Iron ore division
Assmang's average realised US Dollar prices for export iron ore were 12% higher at US$69/t (1H F2018: US$59/t) (on an
FOB basis). This increase in realised prices was driven mainly by an increase in lump premiums together with higher lump
to fines ratio in iron ore sales (58% compared to 52% in 1H F2018).
Total iron ore sales volumes were 4% lower at 8.8 million tonnes (1H F2018: 9.1 million). Of the 8.8 million tonnes sold
7.2 million tonnes were exported (1H F2018: 7.4 million tonnes) and 1.6 million tonnes were sold locally (1H F2018:
1.7 million tonnes).
Production volumes decreased by 4% mainly due to water supply challenges at Khumani Mine. Assmang continues to
engage with the Sedibeng Water Board to address challenges experienced on the Vaal Gamagara Water System and
is part of a collaborative team effort to recapitalise and upgrade the water system to ensure sufficient capacity and the
sustainability of the system. The financial impact of possible adjustments to the capital user charge, as a result of the
upgrade of the Vaal Gamagara Water System, remains uncertain.
In addition, availability challenges were experienced on the Sishen Saldanha Export Channel. In December 2018 a truck
carrying an abnormal load which exceeded the bridge height collided into a railway bridge, causing structural damage to
the bridge and the railway line above. Train movements in both directions were therefore impacted. Transnet responded
by putting in place a temporary bridge during the construction of a new bridge, which was delivered two days earlier than
scheduled.
On-mine unit production costs at Khumani Mine increased by 8% to R218//t compared to R201/t in 1H F2018 mainly due
to the 5% decline in production volumes and above inflation increases in diesel and labour costs. Beeshoek Mine achieved
a 1% reduction in on-mine unit production costs.
Iron ore division operational statistics (on 100% basis)
6 months ended 31 December
unit 2018 2017 % change
Volumes
Export sales 000t 7 246 7 387 (2)
Domestic sales 000t 1 507 1 743 (14)
Total sales 000t 8 752 9 121 (4)
Production 000t 8 742 9 143 (4)
Export lump/fines split % 58/42 52/48
Export sales CIF/FOB split * % 48/52 47/53
Prices
Average realised price FOB ** US$/t 69 59 12
Unit costs
Change in on-mine production unit costs % 6 (1)
Change in unit cost of sales % 6 9
* CIF refers to sales on a Cost, Insurance and Freight basis while FOB refers to sales on a Free On Board basis.
** This is the average realised price of total sales where the CIF sales are adjusted to an FOB basis by taking off the freight rate.
Manganese ore division
Manganese ore sales volumes increased by 3% from 1.56 million tonnes in 1H F2018 to 1.61 million tonnes in 1H F2019. Of
the 1.61 million tonnes sold 1.53 million tonnes were exported. Production volumes at Black Rock Mine decreased by 7%
mainly as a result of the planned shutdown of the Gloria Mine conveyor together the commissioning of new infrastructure
at the mine as part of the Black Rock Project.
Black Rock on-mine unit production costs increased by 14% from R534 per tonne in 1H F2018 to R608 per tonne in
1H F2019. The main reasons for this above-inflation increase were higher labour costs and fuel prices, as well as lower
production volumes as discussed above.
Total manganese alloy sales volumes increased by 1% to 164 thousand tonnes (1H F2018: 162 thousand tonnes).
Manganese alloy production at Sakura increased from 122 thousand tonnes to 129 thousand tonnes.
At Cato Ridge (Works and Alloys) production volumes were lower by 1% to 68 thousand tonnes, however, sales volumes
were 9% higher at 62 thousand tonnes (1H F2018: 57 thousand tonnes).
Manganese division operational statistics (on 100% basis)
6 months ended 31 December
unit 2018 2017 % change
Manganese ore volumes
Export sales 000t 1 531 1 516 1
Domestic sales 000t 74 40 85
Total sales 000t 1 605 1 556 3
Production 000t 1 737 1 865 (7)
Manganese alloy volumes
South African operations - sales 000t 64 57 12
Sakura - sales 000t 100 105 (5)
South African operations - production 000t 68 68 (4)
Sakura - production 000t 129 122 6
Unit costs - manganese ore
Change in on-mine production unit costs % 14 23
Change in unit cost of sales % 11 5
Unit costs - manganese alloy
Change in unit production costs % 16 23
Change in unit cost of sales % 15 (12)
Logistics:
Assmang's manganese ore export volumes are fully contracted with Transnet for F2019, F2020 and F2021 through both
the Port Elizabeth and Saldanha export channels. In terms of the long-term allocation from F2022 onwards, Assmang is
in ongoing negotiations with Transnet to synchronise the ramp up of Black Rock Mine with the medium and longer-term
(MECA2 and MECA3) Transnet capacity process.
Transnet is expected to run short on deliveries for Assmang's export contractual commitments for manganese ore and
iron ore for F2019, due to availability challenges on the Sishen Saldanha Export Channel. Management have introduced
alternative modes of transport to achieve sales targets by the end of F2019.
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
ARM Platinum's attributable headline earnings decreased by 26% to R167 million (1H F2018: R226 million), mainly due to
a headline loss reported for Nkomati Mine. Modikwa Mine's attributable headline earnings improved due to an increase in
metal prices combined with a reduction in unit costs. As previously reported, the concentrate offtake agreements for both
Modikwa and Nkomati mines were renegotiated with temporary improvement to the agreement terms and conditions. This
impacted positively on Modikwa Mine's headline earnings and partly offset the headline loss at Nkomati Mine.
ARM Platinum attributable headline earnings/(loss)
6 months ended 31 December
R million 2018 2017 % change
Two Rivers Mine 180 173 4
Modikwa Mine 173 36 >200
Nkomati Mine (186) 17 -
Total 167 226 (26)
Improved Rand palladium (18%), rhodium (111%), nickel (23%) and cobalt (40%) prices contributed significantly to the
Modikwa and Two Rivers results. The average Rand per 6E kilogram basket price for both Modikwa Mine and Two Rivers
Mine increased by 20% to R452 307/kg (1H F2018: R375 776/kg) and R437 441/kg (1H F2018: R365 825/kg) respectively.
The tables below set out the relevant price comparison:
Average US Dollar metal prices
6 months ended 31 December
unit 2018 2017 % change
Platinum US$/oz 818 936 (13)
Palladium US$/oz 1 055 947 11
Rhodium US$/oz 2 391 1 199 99
Nickel US$/t 13 030 11 213 16
Copper US$/t 6 390 6 690 (4)
Cobalt US$/lb 36 27 33
UG2 chrome concentrate - Two Rivers (CIF*) US$/t 157 159 (1)
High sulphur chrome concentrate - Nkomati
(FOT**) US$/t 66 69 (4)
* CIF refers to Cost, Insurance and Freight
** FOT refers to Free On Truck
Average Rand metal prices
6 months ended 31 December
unit 2018 2017 % change
Exchange Rate R/US$ 14.19 13.39 6
Platinum R/oz 11 610 12 538 (7)
Palladium R/oz 14 967 12 677 18
Rhodium R/oz 33 932 16 050 111
Nickel R/t 184 896 150 145 23
Copper R/t 90 679 89 577 1
Cobalt R/lb 505 360 40
UG2 chrome concentrate - Two Rivers (CIF*) R/t 2 227 2 130 5
High sulphur chrome concentrate - Nkomati
(FOT**) R/t 940 920 2
* CIF refers to Cost, Insurance and Freight
** FOT refers to Free On Truck
Lower PGM production at Modikwa Mine (2%), Two Rivers Mine (10%) and Nkomati Mine (23%) resulted in ARM Platinum's
PGM ounces (on a 100% basis) reducing by 9% to 384 849 6E ounces (1H F2018: 422 104 6E ounces).
Nkomati Mine's nickel production decreased by 2% to 6 624 tonnes (1H F2018: 6 733 tonnes) as a result of a 5% decrease
in the average concentrator recovery due to Very Low Grade (VLG) MMZ stock pile material being milled.
Capital expenditure
Capital expenditure at ARM Platinum operations (on a 100% basis) slightly increased to R655 million (1H F2018:
R644 million).
Capital expenditure at Modikwa Mine (on 100% basis) decreased by 30% to R152 million (1H F2018: R218 million). Of
the capital spent in 1H F2018, 31% is associated with the North Shaft Project and 6% with the South Shaft Project, (both
of which are discussed further under Projects in this section). Thirty-nine percent of the capital expenditure was spent on
fleet refurbishment and critical spares.
Of the R247 million capital spent at Two Rivers in 1H F2019, 35% is associated with fleet replacement and refurbishment.
The deepening of the Main and North declines, together with its electrical and mechanical installations, comprised 55% of
the total capital expenditure.
Nkomati Mine's 1H F2019 capital expenditure of R256 million (on 100% basis) was mainly for capitalised waste stripping
which increased by 97% to R225 million as a result of accelerated waste stripping in order to expose higher grade MMZ ore.
ARM Platinum capital expenditure (on 100% basis)
six months ended 31 December
R million 2018 2017 % change
Modikwa 152 218 (30)
Two Rivers 247 226 9
Nkomati 31 86 (64)
Nkomati capitalised waste stripping 225 114 97
Total 655 644 2
Two Rivers Mine
Attributable headline earnings at Two Rivers Mine increased by 4% to R180 million (1H F2018: R173 million). A 3%
decrease in tonnes milled and a 5% reduction in head grade, led to PGMs produced declining by 10% to 160 971 6E
ounces (1H F2018: 178 702 6E ounces). In addition, chrome concentrate sales volumes declined by 10% to 104 555
tonnes as a result of a lower chrome yield, a direct consequence of the lower PGM grade. This, combined with a 24%
decline in the Rand chrome price from July 2018 to December 2018, resulted in chrome cash operating profit declining
by 23% to R79 million (1H F2018: R102 million).
Continued complexity in the ore body resulted in lower grades delivered to the plant. The decline in head grade is largely
attributable to geologically-induced dilution associated with high variability in the UG2 Reef on the Southern extent of the Main
Decline. This has resulted in the adaption of mining cuts to suit the highly variable split reef which results in lower grades.
There is also limited face length flexibility in obtaining the optimal blend of ore from split reef and normal reef sources at Main
Decline. An accelerated sinking programme is under execution to address the face length flexibility constraint. It is planned
to sink Main Decline and establish an additional two levels per year going forward, which will improve the mining mix blend.
Areas of thick, lower grade split reef are expected to continue affecting the overall mining grade negatively at Main Decline
for the next 12 months, resulting in overall mining grades of between 3.50 and 3.60 6E grams per tonne. Undercutting of the
thick internal waste within the split reef is also undertaken wherever practically possible.
Unit production costs on a Rand per tonne milled basis were well controlled increasing by 2% to R709 per tonne
(1H F2018: R694 per tonne). The Rand per PGM ounce, however, increased by 10% to R7 338 per 6E ounce (1H F2018:
R6 655 per 6E ounce), as a direct result of the decline in grade. There was a 16 310 tonne increase in the UG2 Run-of-
Mine stockpile to a total of 267 973 tonnes of ore as at 31 December 2018.
Two Rivers Mine operational statistics (on 100% basis)
six months ended 31 December
unit 2018 2017 % change
Cash operating profit R million 707 681 4
- PGMs R million 628 580 8
- Chrome R million 79 102 (23)
Tonnes milled Mt 1.67 1.71 (2)
Head grade g/t, 6E 3.53 3.70 (5)
PGMs in concentrate ounces, 6E 160 971 178 702 (10)
Chrome concentrate sold Tonnes 104 555 115 657 (10)
Average basket price R/kg, 6E 437 441 365 825 20
Average basket price US$/oz, 6E 959 850 13
Cash operating margin % 34 35
Cash cost R/kg, 6E 235 930 213 971 10
Cash cost R/tonne 709 694 2
Cash cost R/Pt oz 15 615 14 253 10
Cash cost R/oz, 6E 7 338 6 655 10
Cash cost US$/oz, 6E 517 497 4
Headline earnings attributable to ARM R million 180 173 4
Modikwa Mine
Modikwa Mine achieved attributable headline earnings of R173 million (1H F2018: R36 million). Tonnes milled remained
flat, but a 2% decrease in head grade resulted in PGM production decreasing by 2% to 171 704 6E ounces (1H F2018:
175 899 6E ounces). The decline in head grade was mainly due to a thinner main seam mined near challenging geological
structures and in-stope dilution caused by adverse hanging wall conditions. The above conditions are expected to improve
over the next two years as mining moves closer to the shaft barrels away from the geological structures causing dilution
and as South 2 Shaft deepens.
Unit production costs decreased by 3%, to R8 560 per 6E PGM ounce (1H F2018: R8 832 per 6E PGM ounce) and were
5% lower on a Rand per tonne basis at R1 189 per tonne (1H F2018: R1 258 per tonne).
South 2 Shaft phase 1 achieved on average 47 thousand tonnes per month for the past six months. It is anticipated that
steady state production rates of 50 thousand tonnes will be achieved in F2019.
Modikwa Mine operational statistics (on 100% basis)
six months ended 31 December
unit 2018 2017 % change
Cash operating profit/(loss) R million 708 200 >200
Tonnes milled Mt 1.24 1.24 -
Head grade g/t, 6E 5.07 5.15 (2)
PGMs in concentrate ounces, 6E 171 704 175 899 (2)
Average basket price R/kg, 6E 452 307 375 776 20
Average basket price US$/oz, 6E 991 873 14
Cash operating margin % 33 12
Cash cost R/kg, 6E 275 207 283 964 (3)
Cash cost R/tonne 1 189 1 258 (5)
Cash cost R/Pt oz 21 867 22 548 (3)
Cash cost R/oz, 6E 8 560 8 832 (3)
Cash cost US$/oz, 6E 603 660 (9)
Headline earnings/(loss) attributable to ARM R million 173 36 >200
Nkomati Mine
Nkomati Mine reported an attributable headline loss of R186 million (1H F2018: R17 million headline earnings) for the
period under review as spot nickel prices reduced from US$14 940 on 1 July 2018 to US$10 595 on 31 December
2018, resulting in a negative mark-to-market adjustment of R158 million. In the corresponding period, the nickel spot price
increased from US$9 375/t on 1 July 2017 to US$12 645/t on 31 December 2017, resulting in a positive mark-to-market
of R308 million during that period. Lower nickel sales volumes (3 532 tonnes compared to 4 178 tonnes) also contributed
to the headline loss.
The poor financial performance was intensified by lower chrome concentrate sales (160 769 tonnes compared to 198 928
tonnes) combined with a 36% decrease in the average Rand chrome price from July 2018 to December 2018.
Nkomati Mine's total tonnes milled increased by 1% to 4.12 million tonnes (1H F2018: 4.08 million tonnes). Nickel
production volumes, however, decreased to 2% to 6 624 tonnes (1H F2018: 6 733 tonnes). The main reasons for this were:
- Pit 3 mining operations remain constrained as a result of the historical insufficient waste stripping, resulting in
insufficient MMZ ore availability during the reporting period;
- As a result of insufficient ore supply, higher than expected processing of Very Low Grade (VLG) MMZ stockpile
material (approximately 0,8 million tonnes during the period) was used to supplement the shortfall of MMZ ore to
ensure that both mills operate at maximum capacity. The VLG MMZ material had an average nickel grade of 0.18%,
which resulted in the average mill feed grade of 0.27% nickel for the period.
The mine revaluated of design parameters for the saprolite zones of the pit's Western high wall and design changes were
implemented to improve structural stability of the soft weathered zone. This has resulted in more stable high wall conditions
and hence improved mining efficiencies and volumes were achieved during the review period.
Nkomati Mine had 23 thousand tonnes of nickel concentrate in stock as at 31 December 2018 due to shipping delays.
Nkomati Mine's on-mine unit production cost (excluding capitalised waste stripping) was 11% higher at R346/t
(1H F2018: R311/t) as a result of above inflation increase in mining costs, diesel price, maintenance costs and tyres.
C1 unit cash cost net of by-products (including capitalised waste stripping cost) was 59% higher at US$7.87/lb (1H F2018:
US$4.95/lb) of nickel produced. The increase in C1 unit cash costs was due to reduced by-product credits, increased
mining cost and lower nickel units produced. Waste stripping costs of R225 million (1H F2018: R114 million) were
capitalised during the period.
Nkomati Mine operational statistics (on 100% basis)
six months ended 31 December
unit 2018 2017 % change
Cash operating profit R million (260) 293
- Nickel Mine R million (373) 175
- Chrome Mine R million 112 118 (5)
Cash operating margin % (24) 17
Tonnes milled Mt 4.12 4.08 1
Head grade % nickel 0.25 0.24 4
Nickel on-mine cash cost per tonne milled R/tonne 346 311 11
Nickel on-mine cash cost per tonne milled
(including capitalised waste stripping costs) R/tonne 401 339 18
Cash cost net of by-products* US$/lb 7.87 4.95 59
Contained metal
Nickel tonnes 6 624 6 733 (2)
PGMs ounces 52 174 67 503 (23)
Copper tonnes 3 222 4 482 (28)
Cobalt tonnes 386 356 8
Chrome concentrate sold tonnes 160 769 198 928 (19)
Headline (loss)/earnings attributable to ARM R million (186) 17
* This reflects US Dollar cash costs net of by-products (PGMs and Chrome) per pound of nickel produced.
Projects
Modikwa Mine
In order to maintain the current production profile and eventually ramp-up, the operation initiated the North Shaft Deepening
Project and the South 2 Shaft Project. The current status of these projects are detailed below:
- Deepening of North Shaft - Entails the deepening of North Shaft from Level 6 to Level 9 thereby establishing two
new mining levels. The 9 Level mining development and equipping is on track to meet the revised schedule; anticipated
handover for the ore transfer system is F2020.
- Sinking of South 2 Shaft - Scope included the establishment of a decline shaft system South of the current South
Shaft Infrastructure. The first phase of the project is expected to enhance mining flexibility while also contributing to
the overall production build-up of the mine. Phase one of the project has been completed and is expected to take the
production capacity to 50 000 tonnes of ore per month by F2019.
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 ARM subsidiary in which ARM has a 54% shareholding and Implats 46%. ARM's shareholding in
Two Rivers increased from 51% to 54% effective from 8 November 2017, when Two Rivers' amended mining right,
including the mining rights transferred to it, was executed by the Department of Mineral Resources.
- Nkomati - a 50:50 partnership between ARM and Norilsk Nickel Africa.
ARM Coal
ARM Coal attributable headline earnings decreased by 59% to R65 million (1H F2018: R160 million). Headline earnings
were negatively impacted by re-measurement losses of R206 million as discussed in the financial results overview section.
Interest expense reduced by 45% to R141 million (1H F2018: R257 million) due to the ARM Coal debt restructuring. The
notional interest together with the re-measurement loss, are not tax deductible, resulting in a substantial increase in the tax
charge for the period under review.
Seaborne coal prices were positively impacted by an increase in demand from India and China, slightly offset by a reduction
in demand from Europe. The impact of the higher US Dollar prices was enhanced by the weakening of the average realised
Rand/US Dollar exchange rate. Realised Rand prices for export coal increased by 15% from R1 000 per tonne in 1H F2018
to R1 154 per tonne in 1H F2019.
More than 80% of the export volumes at GGV Mine were high quality coal while only approximately 38% of PCB exports
were high quality. This resulted in PCB's average received export price (US$77.69/t) being lower compared to GGV Mine
(US$87.18/t).
ARM attributable saleable tonnes produced of 2.51 million tonnes were 3% lower than the 2.59 million tonnes produced
in 1H F2018.
ARM Coal attributable headline earnings analysis
six months ended 31 December
2017
R million 2018 published % change 2017*
Cash operating profit 873 751 16 751
Interest expense** (141) (257) 45 (164)
Amortisation (302) (249) (21) (249)
(Re-measurement loss)/fair value gain (201) (29) >(200) 1 081
Impairment reversal/(charge) 3 (19) - (19)
Profit before tax 232 197 18 1 400
Plus/(less): Impairment (3) 19 - 19
Less: Tax (164) (56) 191 (86)
Headline earnings attributable to ARM 65 160 (59) 1 333
* The ARM Coal debt was restructured with effect from 1 July 2017. The terms of the restructuring were finalised on 25 June 2018.
This 2017 column which is presented on the restructured basis is provided for information purposes.
** Post restructuring of the ARM Coal loans all interest expense is notional.
Goedgevonden (GGV) Mine
Average received export US Dollar prices increased by 9% compared to 1H F2018. The impact of the higher prices was
enhanced by a 6% weakening of the Rand versus the US Dollar. Export sales volumes was 13% lower compared to 1H
F2018 due to inclement weather causing port closures at Richards Bay Coal Terminal, as well as an underperformance
by Transnet Freight Rail. This resulted in an increase in coal stockpiles at GGV Mine. Attributable export revenue of R458
million in 1H F2019 was in line with 1H F2018.
An increase in local sales resulted in total attributable revenue increasing by 4.8% in 1H F2019 compared to 1H F2018.
Saleable production at GGV Mine was 9% higher than 1H F2018 due to an increase in plant feed resulting from a steady
improvement in ROM production.
On-mine unit production costs per saleable tonne increased by 8.6% to R342. The increase was largely due to above
inflationary increases in diesel costs.
Cash operating profit of R246 million was 3% higher than the previous period, however, GGV Mine reported a headline
loss of R7 million (1H F2018: R35 million headline earnings) mainly due to re-measurement loss of R48 million and an
increase in tax.
Goedgevonden Mine operational statistics (100% basis)
six months ended 31 December
unit 2018 2017 % change
Total production and sales(100% basis)
Saleable production Mt 3.59 3.30 9
Export thermal coal sales Mt 1.42 1.64 (13)
Domestic thermal coal sales Mt 1.81 1.75 3
ARM attributable production and sales
Saleable production Mt 0.93 0.86 8
Export thermal coal sales Mt 0.37 0.43 (14)
Domestic thermal coal sales Mt 0.47 0.46 2
Average received coal price
Export (FOB*) US$/tonne 87.18 80.22 9
Domestic (FOT**) R/tonne 259 232 12
On-mine saleable cost R/tonne 343 315 9
Cash operating profit
Total R million 948 923 3
Attributable (26%) R million 246 240 3
Headline (loss)/earnings attributable to ARM R million (7) 35 (120)
* FOB refers to Free On Board.
** FOT refers to Free On Truck.
Goedgevonden Mine attributable profit analysis
six months ended 31 December
2017
R million 2018 published % change 2017*
Cash operating profit 247 240 3 240
Interest expense** (72) (113) 36 (77)
Amortisation (84) (78) (8) (78)
(Re-measurement loss)/fair value gain (49) (6) >(200) 755
Profit before tax 42 43 2 840
Less: Tax (49) (8) >(200) (23)
Headline earnings attributable to ARM (7) 35 817
* The ARM Coal debt was restructured with effect from 1 July 2017. The terms of the restructuring were finalised on 25 June 2018.
This 2017 column which is presented on the restructured basis is provided for information purposes.
** Post restructuring of the ARM Coal loans all interest expense is notional.
Participating Coal Business (PCB)
PCB attributable cash operating profit increased by 23% to R626 million (1H F2018: R511 million). Revenue increased by
7% compared to 1H F2018 largely as a result of a 9% increase in US Dollar coal prices together with a 7% weakening of
the Rand versus the US Dollar. This was partially offset by a 6% reduction in overall sales volumes.
Unit production costs per saleable tonne increased by 18% from R334 per tonne in 1H F2018 to R395 per tonne in
1H F2019. The increase in unit costs is largely due to a decline in saleable production and above inflation increases in
diesel costs. Saleable production was 9% lower compared to 1H F2018.
The PCB operation was negatively impacted by industrial action in July 2018. ROM production was further impacted by
the occurrence of sinkholes arising from old underground mined areas currently being mined at the Tweefontein Mine.
Technical feasibilities have been performed and the mine is in the process of adopting a mining technique which will
address possible instabilities in advance.
Headline earnings attributable to ARM was R72 million. (1H F2018: R125 million), and includes a fair value loss of
R152 million.
PCB operational statistics
six months ended 31 December
unit 2018 2017 % change
Total production sales (100% basis)
Saleable production Mt 7.84 8.57 (9)
Export thermal coal sales Mt 5.86 6.71 (13)
Domestic thermal coal sales Mt 1.39 0.97 43
ARM attributable production and sales
Saleable production Mt 1.58 1.73 (9)
Export thermal coal sales Mt 1.18 1.36 (13)
Domestic thermal coal sales Mt 0.28 0.20 40
Average received coal price
Export (FOB*) US$/tonne 77.69 71.13 9
Domestic (FOT**) R/tonne 459 244 88
On-mine saleable cost R/tonne 395 334 18
Cash operating profit
Total R million 3 100 2 529 23
Attributable (20.2%) R million 626 511 23
Headline earnings attributable to ARM R million 72 125 (42)
* FOB refers to Free On Board.
** FOT refers to Free On Truck.
PCB attributable profit analysis
six months ended 31 December
2017
R million 2018 published % change 2017*
Cash operating profit 626 511 23 511
Interest expense ** (69) (144) 52 (87)
Amortisation (218) (171) (27) (171)
(Re-measurement loss)/fair value gain (152) (23) >(200) 325
Impairment reversal/(charge) 3 (19) (19)
Profit before tax 190 154 23 559
Plus: Impairment (3) 19 19
Less: Tax (116) (43) (170) (58)
Less: Tax on impairment 1 (5) (5)
Headline earnings attributable to ARM 72 125 (42) 515
* The ARM Coal debt was restructured with effect from 1 July 2017. The terms of the restructuring were finalised on 25 June 2018.
This 2017 column which is presented on the restructured basis is provided for information purposes
** Post restructuring of the ARM Coal loans all interest expense is notional.
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%.
Harmony Gold Mining Company Limited (Harmony)
Harmony reported a 93% decrease in headline earnings from R990 million to R73 million for 1H F2019 mainly due to
translation loss of R180 million on US Dollar denominated debt at 31 December 2018 and lower derivative gains recognised
in 1H F2019 of R20 million (1H F2018: R337 million). Headline earnings per share were 14 cents per share compared with
224 cents per share in 1H F2018.
Revenue increased by 40% mainly due to the inclusion of the Moab Khotsong operations (R2.7 billion) and Hidden Valley's
production (R1.7 billion increase) for the full six-month period to 31 December 2018. The average gold price received
declined by 1% to R572 898/kg (1H F2018: R580 672/kg).
Gold production increased by 34% to 23 359kg (1H F2018: 17 418kg) and was significantly boosted by the acquisition of
Moab Khotsong Mine (effective 1 March 2018) and by Hidden Valley Mine, which achieved commercial levels of production
in June 2018.
Harmony's all-in sustaining unit costs increased by 6% to R528 265/kg mainly as a result of lower production at Tshepong
Mine, deferred stripping at Hidden Valley Mine and increased capital development expenditure at the Tshepong, Joel,
Doornkop and Target 1 mines.
As announced on 11 December 2018, the Wafi-Golpu Joint Venture (WGJV) signed a Memorandum of Understanding
(MOU) with the Independent State of Papua New Guinea (PNG) which affirmed the parties' intent to proceed with the Wafi-
Golpu Project, subject to finalisation of the permitting process and Harmony and Newcrest Mining Limited board approvals.
The MOU also re-affirmed the intention of the parties to complete the permitting process and achieve the grant of a Special
Mining Lease (SML) by 30 June 2019.
The Harmony investment is reflected on the ARM Statement of Financial Position at R1 882 million as at 31 December
2018 (31 December 2016: R1 444 million). Harmony's share price was R25.20 per share at 31 December 2018
(31 December 2017: R22.69 per share, 30 June 2018: R21.22 per share). Gains and losses are recognised in equity (other
comprehensive income) and will not be reclassified through profit or loss. Dividends from Harmony are recognised in the
ARM Income Statement on the last day of registration following dividend declaration.
Harmony's results for interim period ended 31 December 2018 can be viewed on Harmony's website at
www.harmony.co.za.
ARM owns 14.03% of Harmony's issued share capital.
Events after the reporting date
Events after the reporting date are set out in note 20 to the financial statements. Since 31 December 2018, ARM received
a dividend of R1 500 million from Assmang.
On 6 February 2019 the Competition Commission of South Africa approved the acquisition by ARM of the Machadodorp
Works business. The acquisition includes the assets and assumption of certain liabilities relating to the business. The
purchase price amounted to R130 million which will be adjusted for cash amounts received and paid during the period
1 January 2017 to 28 February 2019. Since ARM owns 50% of Assmang, effectively 50% of the purchase price received
by Assmang is attributable to ARM. These assets will be used for research and development purposes in the fields of
alternative smelting and extraction technologies.
Outlook
US Dollar commodity prices remain well supported despite concerns about a potential slowdown in China's growth.
China's focussed legislation and environmental restrictions in addressing pollution concerns continued to drive demand
and provided price support for the high-quality bulk metals that we produce. Supply disruptions in some bulk metals are
also contributing to commodity price strength in the short-term.
In the medium to long-term, China's shift to high-quality commodities and closure of high-cost and inefficient mines appears
to be structural and together with reduced investment in expansionary capital across a number of commodities globally, is
expected to provide price support for the commodities that we produce.
We are pleased to have moved towards improved regulatory certainty in the South African mining industry as evidenced
by the finalisation of Mining Charter III. This has reduced one of ARM's top 10 risks namely "Uncertainty regarding policy
change in South Africa". We anticipate the same level of engagement in effecting the Implementation Guidelines to Mining
Charter III which were published in December 2018.
We have seen an increased level of business interruption due to community unrest in communities where our mines are
located. While we have dedicated resources at executive and operational level for stakeholder engagement, along with
formal communication structures with surrounding communities, we expect that there is likely to be an increase in these
interruptions, which are primarily related to service delivery, as we approach national elections in May 2019.
Mining remains a long-term capital-intensive industry and we are committed to investing in current operations to grow
the business and be well positioned to take advantage of ever-changing pricing cycles in the commodities we mine. We
continue to assess value-accretive external growth opportunities and prioritise our policy to pay dividends bi-annually in line
with our communicated capital allocation framework.
ARM's financial position remains robust, allowing ARM to take advantage of future growth opportunities and realign existing
non-performing businesses where required.
Dividends
The Board has approved and declared an interim dividend of 400 cents per share (gross) in respect of the six months
ended 31 December 2018 (1H F2018: 250 cents per share). The amount to be paid is approximately R888 million.
This declaration is consistent with ARM's commitment, as a globally competitive company, to pay dividends while retaining
the ability to fund efficiency improvements and sustaining production.
The dividend declared will be subject to Dividend Withholding Tax. In accordance with paragraphs 11.17(a) (i) to (x) and
11.17(c) of the JSE Listings Requirements the following additional information is disclosed:
- The dividend has been declared out of income reserves;
- The South African Dividends Tax ("Dividends Tax") rate is 20% (twenty percent);
- The gross local dividend amount is 400 cents per ordinary share for shareholders exempt from the Dividends Tax;
- The net local dividend amount is 320.00000 cents per share for shareholders liable to pay the Dividends Tax;
- As at the date of this declaration ARM has 221 933 850 ordinary shares in issue; and
- ARM's income tax reference number is 9030/018/60/1.
A gross dividend of 400 cents per ordinary share, being the dividend for the six months ended 31 December 2018 has
been declared payable on Monday, 8 April 2019 to those shareholders recorded in the books of the Company at the close
of business on Friday, 5 April 2019. The dividend is declared in the currency of South Africa. Any change in address or
dividend instruction to apply to this dividend must be received by the Company's transfer secretaries or registrar not
later than Friday, 5 April 2019. The last day to trade ordinary shares cum dividend is Tuesday, 2 April 2019. Ordinary
shares trade ex-dividend from Wednesday, 3 April 2019. The record date is Friday, 5 April 2019 whilst the payment date
is Monday, 8 April 20189.
No dematerialisation or rematerialisation of share certificates may occur between Wednesday, 3 April 2019 and
Friday, 5 April 2019, both dates inclusive, nor may any transfers between registers take place during this period.
Review by independent auditors
The financial results for the six months ended 31 December 2018 have not been reviewed or audited by the Company's
registered auditors, Ernst & Young Inc.
Signed on behalf of the Board:
P T Motsepe M P Schmidt
Executive Chairman Chief Executive Officer
Johannesburg
1 March 2019
Group financial statements
Group statement of financial position
as at 31 December
Unaudited Audited
Six months ended Year ended
31 December 30 June
*Restated
2018 2017 2018
Notes Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 4 6 981 7 989 7 916
Intangible assets 115 124 120
Deferred tax assets 525 663 620
Loans and long-term receivables 5 406 38 462
Investment in associate 6 1 628 1 445 1 798
Investment in joint venture 7 15 904 15 626 15 504
Other investments 8 2 165 1 648 1 561
27 724 27 533 27 981
Current assets
Inventories 806 692 591
Trade and other receivables 2 649 2 283 2 357
Taxation 258 97 85
Cash and cash equivalents 9 3 297 1 919 3 291
7 010 4 991 6 324
Assets held for sale - 1 -
Total assets 34 734 32 525 34 305
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 11 11 11
Share premium 4 689 4 396 4 398
Treasury shares (2 405) (2 405) (2 405)
Other reserves 1 517 1 310 1 419
Retained earnings 22 452 20 073 22 484
Equity attributable to equity holders of ARM 26 264 23 385 25 907
Non-controlling interest 1 617 1 541 1 471
Total equity 27 881 24 926 27 378
Non-current liabilities
Long-term borrowings 10 1 679 2 311 1 744
Deferred tax liabilities 1 543 1 574 1 634
Long-term provisions 1 193 1 181 1 135
4 415 5 066 4 513
Current liabilities
Trade and other payables 1 654 1 505 1 406
Short-term provisions 252 235 374
Taxation 79 83 82
Overdrafts and short-term borrowings 10 453 710 552
2 438 2 533 2 414
Total equity and liabilities 34 734 32 525 34 305
Group statement of profit or loss
for the six months ended 31 December
Unaudited
Six months ended Year ended
31 December 30 June
Restated(1)
2018 2017 2018
Notes Rm Rm Rm
Revenue 4 524 4 794 9 112
Revenue from continuing operations 3 4 524 4 454 8 772
Revenue from discontinued operations 3 - 340 340
Sales 1&3 4 147 4 174 8 142
Cost of sales 1&3 (3 346) (3 369) (6 696)
Gross profit 801 805 1 446
Other operating income(2) 496 453 1 527
Other operating expenses(3) (797) (620) (1 263)
Profit from operations before special items 500 638 1 710
Income from investments 130 103 177
Finance costs (145) (174) (360)
Income from associate(4) 6 75 111 619
Income from joint venture(5) 7 2 121 1 765 3 510
Profit before taxation and special items 2 681 2 443 5 656
Special items 11 (1 166) 1 (42)
Profit before taxation from continuing
operations 1 515 2 444 5 614
Taxation 13 (19) (334) (573)
Profit for the period from continuing
operations 1 496 2 110 5 041
Discontinued operations
Loss for the period from discontinued operations - (219) (219)
Profit/(loss) for the period (all operations) 1 496 1 891 4 822
Attributable to:
Equity holders of ARM
Profit for the period from continuing operations 1 306 1 938 4 747
Loss for the period from discontinued operations - (185) (185)
Basic earnings for the period 1 306 1 753 4 562
Non-controlling interest
Profit for the period from continuing operations 190 172 294
Loss for the period from discontinued operations - (34) (34)
190 138 260
Profit for the period 1 496 1 891 4 822
(1) 1HF2018 and F2018 were restated as a result of implementing IFRS 15 -
Revenue from contracts with customers (refer note 1 and 3).
(2) Includes a R4 million fair value gain on investment in RBCT in terms of
IFRS 9 adopted this period (refer note 1).
(3) Includes a R4 million re-measurement loss on loans in Modikwa in
terms of IFRS 9 adopted this period (refer note 1).The re-measurement
adjustment loss on the ARM Coal loans was R113 million (1H F2018: nil),
(1H F2018: R652 million).
(4) The re-measurement adjustment loss on the ARM Coal loans was
R152 million (1H F2018: Nil), (F2018: R325 million).
(5) Impairment included in income from joint venture of R20 million before tax
of R6 million (1H F2018: nil), (F2018: R26 million before tax of R7 million).
Earnings per share 12
Basic earnings per share (cents) 682 922 2 393
Basic earnings from continuing operations per share (cents) 682 1 019 2 490
Basic loss from discontinued operation per share (cents) - (97) (97)
Diluted basic earnings per share (cents) 667 895 2 325
Diluted basic earnings from continuing operations
per share (cents) 667 990 2 419
Diluted basic loss from discontinued operation
per share (cents) - (95) (94)
Group statement of comprehensive income
for the six months ended 31 December 2018
Financial
instruments
at fair value
through
other Total
compre- share- Non-
hensive Retained holders controlling
income Other earnings of ARM interest Total
Rm Rm Rm Rm Rm Rm
Six months ended 31 December 2018 (Unaudited)
Profit for the period - - 1 306 1 306 190 1 496
Total other comprehensive income 248 41 - 289 - 289
Other comprehensive income that will not be
reclassified to the statement of profit or loss in
subsequent periods:
Net impact of revaluation of listed investment 248 - - 248 - 248
Revaluation of listed investment(1) 320 - - 320 - 320
Deferred tax on above (72) - - (72) - (72)
Other comprehensive income that may be reclassified
to the statement of profit or loss in subsequent periods:
Foreign currency translation reserve movement - 41 - 41 - 41
Total comprehensive income for the period 248 41 1 306 1 595 190 1 785
Six months ended 31 December 2017 (Unaudited)
Profit for the period - - 1 753 1 753 138 1 891
Profit for the period from continuing operations - - 1 938 1 938 172 2 110
Loss for the period from discontinued operations - - (185) (185) (34) (219)
Other comprehensive income that may be reclassified
to the statement of profit or loss in subsequent periods:
Total other comprehensive income/(loss) 50 (687) - (637) - (637)
Net impact of revaluation of listed investment 50 - - 50 - 50
Revaluation of listed investment(1) 64 - - 64 - 64
Deferred tax on above (14) - - (14) - (14)
Foreign currency translation reserve movement from
continuing operations - (37) - (37) - (37)
Foreign currency translation reserve movement from
discontinued operation in prior year(2) - (730) - (730) - (730)
Foreign currency translation reserve movement from
discontinued operation current year(2) - 80 - 80 - 80
Total comprehensive loss for the period 50 (687) 1 753 1 116 138 1 254
Financial
instruments
at fair value
through
other Total
compre- share- Non-
hensive Retained holders controlling
income Other earnings of ARM interest Total
Rm Rm Rm Rm Rm Rm
Year ended 30 June 2018 (Audited)
Profit for the period - - 4 562 4 562 260 4 822
Profit for the year from continuing operations - - 4 747 4 747 294 5 041
Loss for the year from discontinued operation - - (185) (185) (34) (219)
Other comprehensive income that may be reclassified
to the statement of profit or loss in subsequent periods:
Total other comprehensive loss (22) (526) - (548) - (548)
Net impact of revaluation of listed investment (22) - - (22) - (22)
Revaluation of listed investment(1) (29) - - (29) - (29)
Deferred tax on above 7 - - 7 - 7
Premium on non-controlling interest release - 14 - 14 - 14
Foreign currency translation reserve movement from
continuing operations - 110 - 110 - 110
Foreign currency translation reserve movement from
discontinued operation current year movement2 - (80) - (80) - (80)
Foreign currency translation reserve movement from
discontinued operation current year reversed -
included in sale of Lubambe(2) - 80 - 80 - 80
Foreign currency translation reserve movement
from discontinued operation(2) - (650) - (650) - (650)
Total comprehensive loss for the period (22) (526) 4 562 4 014 260 4 274
(1) The share price of Harmony Limited at 31 December 2018 was R 25.20, R21.22 at 30 June 2018, R22.69 at 31 December 2017,
and R21.68 at 30 June 2017 per share. The valuation of the investment in Harmony is based on a level 1 fair value hierarchy
level in terms of IFRS. The current period amount includes the revaluation of the additional 11 032 623 shares purchased at a
total cost of R211 million (refer cash flow statement). ARM shareholding at 31 December 2018 was 14.03% (1H2018:14.3%,
30 June 2018: 12.7%).
(2) This relates to the foreign currency translation reserve on presentation of Lubambe Mine financial results from US dollars translated
into South African Rands.
Group statement of changes in equity
for the six months ended 31 December 2018
Financial
instrument
at fair value
Share through Total
capital Treasury other com- Share- share- Non-
and share prehensive based Retained holders controlling
premium capital income payment Other earnings of ARM interest Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Six months ended
31 December 2018 (Unaudited)
Balance at 30 June 2018 4 409 (2 405) 392 1 107 (80) 22 484 25 907 1 471 27 378
Restatements
Fair value adjustment ARM Coal
RBCT1 - - - - - 72 72 - 72
Re-measurement adjustment
Modikwa(1) - - - - - 23 23 - 23
Opening balance restated
1 July 2018 4 409 (2 405) 392 1 107 (80) 22 579 26 002 1 471 27 473
Total comprehensive income for
the period - - 248 - 41 1 306 1 595 190 1 785
Profit for the period - - - - - 1 306 1 306 190 1 496
Other comprehensive income - - 248 - 41 - 289 - 289
Bonus and performance shares
issued to employees 291 - - (291) - - - - -
Dividend paid - - - - - (1 433) (1 433) - (1 433)
Dividend paid to Impala Platinum - - - - - - - (44) (44)
Share-based payments - - - 100 - - 100 - 100
Balance at 31 December 2018 4 700 (2 405) 640 916 (39) 22 452 26 264 1 617 27 881
Six months ended
31 December 2017 (Unaudited)
Balance at 30 June 2017 4 290 (2 405) 414 1 017 625 19 556 23 497 543 24 040
Total comprehensive income/(loss)
for the period - - 50 - (687) 1 753 1 116 138 1 254
Profit for the period - - - - - 1 753 1 753 138 1 891
Other comprehensive income/(loss) - - 50 - (687) - (637) - (637)
Bonus and performance shares
issued to employees 117 - - (117) - - - - -
Tamboti asset sale to Two Rivers - - - - (99) - (99) 99 -
Non-controlling interest derecognised
on sale of Lubambe - - - - - - - 822 822
Dividend paid - - - - - (1 236) (1 236) - (1 236)
Dividend paid to Impala Platinum - - - - - - - (61) (61)
Share-based payments - - - 107 - - 107 - 107
Balance at 31 December 2017 4 407 (2 405) 464 1 007 (161) 20 073 23 385 1 541 24 926
(1) This relates to the adoption adjustments in terms of IFRS 9 on the investment in RBCT and loans in Modikwa (refer note 1).
Financial
instrument
at fair value
Share through Total
capital Treasury other com- Share share- Non-
and share prehensive based Retained holders controlling
premium capital income payment Other earnings of ARM interest Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Year ended 30 June 2018 (Audited)
Balance at 30 June 2017 4 290 (2 405) 414 1 017 625 19 556 23 497 543 24 040
Total comprehensive (loss)/income
for the year - - (22) - (526) 4 562 4 014 260 4 274
Profit for the year 30 June 2018 - - - - - 4 562 4 562 260 4 822
Other comprehensive loss - - (22) - (526) - (548) - (548)
Bonus and performance shares
issued to employees 119 - - (119) - - - - -
Tamboti assets sale to Two Rivers - - - - (99) - (99) 99 -
Reclassification of foreign currency
translation reserve included in loss
on sale of Lubambe - - - - (80) 80 - - -
Dividend paid - - - - - (1 714) (1 714) - (1 714)
Dividend paid to Impala Platinum - - - - - - - (253) (253)
Non-controlling interest derecognised
on sale of Lubambe - - - - - - - 822 822
Share based payments - - - 209 - - 209 - 209
Balance at 30 June 2018 4 409 (2 405) 392 1 107 (80) 22 484 25 907 1 471 27 378
Group statement of cash flows
for the six months ended 31 December 2018
Unaudited Audited
Six months ended Year ended
31 December 30 June
2018 2017 2018
Notes Rm Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 4 412 4 748 9 195
Cash paid to suppliers and employees (3 631) (3 808) (7 261)
Cash generated from operations 14 781 940 1 934
Interest received 111 54 159
Interest paid (35) (48) (100)
Taxation paid (264) (325) (426)
593 621 1 567
Dividends received from joint venture 7 1 750 1 000 3 000
2 343 1 621 4 567
Dividends paid to non-controlling interest - Impala Platinum (44) (61) (253)
Dividends paid (1 433) (1 236) (1 714)
Net cash inflow from operating activities 866 324 2 600
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and equipment to maintain
operations (505) (603) (1 150)
Dividends received from investments 8 22 22
Proceeds on disposal of property, plant and equipment 1 2 3
Proceeds on disposal of investment - 741 741
Investment in Harmony 8 (211) - -
Investments in Richards Bay Coal Terminal - (2) -
Loans and receivables received - - 3
Net cash (outflow)/inflow from investing activities (707) 160 (381)
CASH FLOW FROM FINANCING ACTIVITIES
Long-term borrowings raised - 200 496
Long-term borrowings repaid (137) (173) (746)
Short-term borrowings raised - - 27
Short-term borrowings repaid (30) (152) (132)
Net cash outflow from financing activities (167) (125) (355)
Net (decrease)/increase in cash and cash equivalents (8) 359 1 864
Cash and cash equivalents at beginning of period 2 910 1 031 1 031
Foreign currency translation on cash balances 12 (12) 15
Cash and cash equivalents at end of period 9 2 914 1 378 2 910
Made up as follows:
- Available 1 714 195 1 779
- Restricted 1 200 1 183 1 131
2 914 1 378 2 910
Cash generated from operations per share (cents) 408 494 1 015
Notes to the financial statements
for the six months ended 31 December 2018
1. Statement of compliance
The Group financial statements for the six months ended 31 December 2018 have been 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 2018 have been prepared on the historical cost basis,
except for certain financial instruments, which include listed investments, and unlisted investments that are fair valued. 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 Finance Director, Miss
AM Mukhuba CA(SA).
The presentation and functional currency is the South African Rand and the Group financials statements are rounded to the
nearest R million.
Adoption of new and revised accounting standards
The Group has adopted the following new and/or and revised standards and interpretations issued by the International Financial
Reporting Interpretation Committee (IFRIC) of the IASB during the period under review.
Effective date
IAS 28 Investment in associates and joint ventures - clarification that measuring investees
at fair value through profit or loss is an investment - by - investment choice 1 January 2018
IFRS 1 First-time adoption of International Financial Reporting Standards -
Deletion of short-term exemptions for first-time adopters 1 January 2018
IFRS 2 Share-based payment (Amendment) 1 January 2018
IFRS 4 and IFRS 9 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts -
Amendments to IFRS 4 1 January 2018
IFRS 9 Financial Instruments 1 January 2018
IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRIC 22 Foreign currency transactions and Advance Consideration 1 January 2018
Apart from IFRS 9 and IFRS 15 (refer note 1 and 3) the adoption of the other standards had no significant effect on the Group
Financial Statements.
IFRS 9 FINANCIAL INSTRUMENTS
IFRS 9 is effective for ARM from 1 July 2018. ARM has opted to apply the modified approach, whereby opening retained income
at 1 July 2018 is adjusted and the figures for F2018 were not restated.
The following financial instruments were impacted by the implementation of IFRS 9:
Equity investments (other than investments in subsidiaries, associates and joint ventures)
Listed investments
ARM continues to classify the listed shares in Harmony as fair value through other comprehensive income, whereby fair value
gains and losses are recognised in equity (other comprehensive income) and will not be reclassified through profit or loss.
Unlisted investments
Previously, unlisted investments were measured at cost. Under IFRS 9, these investments in equities should be measured at
fair value.
Unlisted investments subject to adjustment - Investment in Richards Bay Coal Terminal (RBCT).
This investment is held by ARM Coal which is a jointly-controlled operation of ARM and Glencore Operations South Africa
Proprietary Limited (GOSA), and hence ARM's share of the investment is recognised in the ARM company financial statements.
Up until 30 June 2018, this investment was carried at cost.
For 1H F2019, the fair value of this investment was determined by calculating the present value of the future wharfage cost
savings by being a shareholder in RBCT as opposed to the wharfage payable by non-shareholders. The cumulative fair value
adjustment is R76 million, of which R72 million relates to prior periods (adjusted against retained earnings), and R4 million
relates to 1H F2019. The current period's fair value adjustment is accounted for through profit or loss.
This is a level 3 valuation in terms of IFRS 7 and 13. The fair value is most sensitive to the wharfage cost.
Trade and other receivables (including loans advanced)
Previously, receivables that contained provisional pricing features linked to commodity prices and exchange rates have been
designated to be measured at fair value through profit or loss because of the embedded derivative which would otherwise
require separation. Under IFRS 9, such instruments continue to be measured on the same basis. Other receivables, including
loans advanced, continue to be measured at amortised cost under IFRS 9. The impairment model for amortised cost financial
assets under IFRS 9 requires the recognition of expected losses, rather than only incurred losses. The expected credit loss
model had no material impact on ARM's results.
The long-term loans to ARM Coal, Glencore and PCB continue to be accounted for at amortised cost.
Non-current liabilities
An interest free non-current liability owed by ARM Mining Consortium Ltd to Rustenburg Platinum Mines Ltd (Anglo American
Platinum Ltd) was impacted by IFRS 9, resulting in a cumulative fair value adjustment of R19 million, of which R23 million relates
to prior periods (fair value gain recorded against retained earnings), and R4 million loss recorded in statement of profit or loss.
1H F2019
Impact of adopting IFRS 9 - Financial Instruments Rm
Effect in statement of profit or loss is as follows:
Fair value gain on the RBCT investment 4
Re-measurement loss on the Anglo American Platinum Limited loan (4)
Net movement through statement of profit or loss -
Effect in statement of equity is as follows:
Fair value gain on the RBCT investment 72
Re-measurement gain on the Anglo American Platinum Limited loan 23
Net movement against opening retained earnings 95
Statement of Financial Position - impact
Other investments - increase - Investment in RBCT 76
Long-term borrowing - Anglo American Platinum Limited 31 December 2018 95
Re-measurement loss on the Anglo American Platinum Limited loan 4
Re-measurement gain on the Anglo American Platinum Limited loan (23)
Long-term borrowing - increase - Anglo American Platinum Limited (reclassified from short-term) 114
Short-term borrowing - decrease - Anglo American Platinum Limited (reclassified to long-term) 114
IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
IFRS 15 became applicable to ARM for the financial year commencing 1 July 2018. ARM has selected the full retrospective
approach, requiring comparative years to be restated. The impact of IFRS 15 has been assessed based on the operating
segments of the group.
IFRS 15 replaces the risks and rewards principle that was applicable under IAS 18.
Revenue under IFRS 15 is recognised under the following five step model:
- Identify the contract with customers;
- Identify the performance obligations;
- Determine the transaction price;
- Allocate the transaction price; and
- Recognise revenue when performance obligations are satisfied.
The impact of the adoption of IFRS 15 on the segments in ARM:
ARM Corporate
ARM provides management services to operations within the group. ARM invoices and recognises revenue on a monthly basis
using the actual results of the component meaning no uncertainty surrounding the transaction price. The adoption of IFRS 15
therefore had no impact on the revenue recognition in ARM Corporate.
ARM Ferrous
The change that had the most significant impact was on sales with cost, insurance and freight (CIF)/cost and freight (CFR) Inco
terms. Sales with CIF/CFR Inco terms result in two distinct performance obligations -namely the supply of the commodity and
shipping of the commodity.
IFRS 15 had no impact on the equity accounted earnings of Assmang. However the composition of sales has changed as
reflected below:
1H 2019 1H 2018 1H 2018 F2018 F2018
Rm Rm Rm Rm Rm
Currently Currently Previously Currently Previously
under under under under under
On a 50% basis IFRS 15 IFRS 15 IAS 18 IFRS 15 IAS 18
Revenue from contracts with customers 7 885 6 842 6 816 13 836 13 774
Cost, insurance and freight (CIF) and
cost and freight (CFR) 4 583 3 376 6 443
Free on board (FOB and free carrier
(FCA) 3 302 3 466 7 393
Sales - - 6 816 13 774
Fair value adjustments to contract
revenue 107 (30) (84)
Other sales 7 4 - 22
Sales per segments 7 999 6 816 6 816 13 774 13 774
ARM Platinum
The following areas are impacted:
Assay estimates
Commodity sales are subject to assay estimates, which means that the transaction price is variable. IFRS 15 constrains the
estimate of variable consideration recognised such that amounts are only included in the calculation of revenue where it is highly
probable that a significant revenue reversal will not occur when the uncertainty relating to final assay/quality is subsequently
resolved, i.e. finalisation of the sale by the customer. The assay differences are typically not significant at approximately 1% of
commodity sales revenue and therefore management did not change the approach followed under IAS 18. The adjustments
to revenue arising from assay adjustments will continue to be recognised consistently as per the prior accounting treatment,
i.e. included in revenue from contracts with customers.
Provisional pricing
Commodity sales are subject to provisional pricing features such as commodity prices and foreign exchange rates which are
only finalised sometime after transfer of the commodities.
On initial recognition, revenue is recognised at fair value. The revenue and related trade receivable is then re-measured at every
subsequent month-end until the sale has been finalised. The sale is finalised at average commodity prices and exchange rate
for the month preceding the month of invoicing.
Previously, the changes in the fair value were recognised as part of revenue. These changes arise from re-measuring the
related trade receivable to fair value at every month-end.
The related trade receivables will continue to be measured at fair value under IFRS 9, which was adopted at the same time as
IFRS 15. The resultant changes in fair value are not within the scope of IFRS 15, since they are re-measurements of a financial
asset. Accordingly, they are not subject to the IFRS 15 variable consideration constraint. IFRS 9 requires the full change in fair
value to be recognised.
Since the changes in fair value relate to sales, management believes it is appropriate to continue to present such fair value
changes as revenue (albeit not 'revenue from contracts with customers'). The revenue note disclosure disaggregates total
revenue such that 'revenue from contracts with customers' is distinguished from these fair value adjustments.
Penalties and treatment charges
Adjustments, in the form of penalties and treatment charges, are made to the pricing to the extent the commodities sold do not
meet certain specifications and as part of the terms of the various off-take agreement. As a result, the IFRS 15 constraint on
variable consideration applies, which seeks to limit the amount of revenue recognised to guard against significant reversals in
subsequent reporting periods.
The following changes are applicable to the various ARM Platinum operations:
Modikwa
Chrome and moisture penalties were previously a deduction to revenue under IAS 18 and this is consistent with the requirements
of IFRS 15, there is therefore no impact on Modikwa's revenue.
Two Rivers Platinum
Previously, grade, chrome and moisture penalties as well as smelting, refining and drying fees were classified as cost of sales.
In terms of IFRS 15, the grade, chrome and moisture penalties as well as smelting, refining and drying fees are to be off-set
against revenue.
Nkomati
Previously, arsenic and MGO penalties as well as transport recoveries were classified as cost of sales. In terms of IFRS 15, the
arsenic and MGO penalties as well as transport recoveries will be debited against revenue.
ARM Coal
Management's assessment of domestic and export contracts against the requirements of IFRS 15 indicated that the adoption
of IFRS 15 will have no impact.
Group impact of IFRS 15 - Revenue from contracts with customers
The impact on the group was as follows:
1H F2019 1H F 2018 F2018
Rm Rm Rm
Revenue impact
Penalty and treatment charges - now deducted from revenue
- Nkomati (29) (31) (62)
Penalty and treatment charges - now deducted from revenue
- Two Rivers (143) (55) (142)
(172) (86) (204)
Cost of sales impact
Penalty and treatment charges - no longer included in cost of sales
- Nkomati 29 31 62
Penalty and treatment charges - no longer included in cost of sales
- Two Rivers 143 55 142
172 86 204
Net effect - - -
These changes had no effect on basic earnings, headline earnings or diluted earnings.
Please refer to note 3: Revenue, for the disaggregation of revenue into "revenue from contracts with customers'' and fair value
adjustment to revenue.
NEW STANDARDS ISSUED BUT NOT YET EFFFECTIVE
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
IAS 1 Presentation of financial statement - new definition 1 January 2020
IAS 8 Accounting policies, changes in accounting estimates and errors - new definition 1 January 2020
IAS 12 Income taxes - clarification 1 January 2019
IAS 19 Employee benefits 1 January 2019
IAS 23 Borrowing costs 1 January 2019
IFRS 3 Business Combinations - Amendment 1 January 2019
IFRS 9 Financial Instruments - Classification and Measurement (Amendment) 1 January 2019
IFRS 16 Leases 1 January 2019
IFRS 17 Insurance 1 January 2022
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019
The Group does not intend early adopting any of the above amendments, standards or interpretations.
ARM continuously evaluates the impact of these standards and amendments, the most prominent being IFRS 16 Leases. In
summary the following are the current expectations in relation to IFRS 16.
IFRS 16 - LEASES
IFRS 16 was issued in January 2016 and is effective for annual periods beginning on or after 1 January 2019 (i.e. for the
financial year beginning 1 July 2019 for ARM).
ARM does not intend to adopt the standard before its effective date.
IFRS 16 requirements will result in almost all leases being recognised on the statement of financial position, as the distinction
between operating and finance leases is removed.
Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The
only exceptions are short-term and low-value leases.
The standard will affect primarily the accounting for the Group's operating leases and embedded leases in service contracts.
The Group has opted to adopt the modified retrospective transition approach such that the cumulative effect of transition to IFRS
16 will be recognised in retained earnings and the comparative period will not be restated.
ARM continues its assessment in determining the impact of IFRS 16. Management has appointed external advisors who are
in the process of reviewing all potential contracts which could contain possible leases under IFRS 16. Once this review is
completed, management would be in a position to quantify the potential impact on ARM's financial statements.
Apart from IFRS 16 discussed above, the adoption of the other standards are not expected to have a significant effect on the
Group Financial Statements.
2. SEGMENTAL INFORMATION
Primary segmental information
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, Corporate and other (which includes Corporate, gold and other) in the
table below.
Total per
IFRS
IFRS financial
ARM ARM ARM ARM Adjust- state-
Platinum(1) Ferrous(2) Coal Corporate Total ment(3) ments
Rm Rm Rm Rm Rm Rm Rm
2.1 Six months ended
31 December 2018 (Unaudited)
Sales 3 550 7 999 597 - 12 146 (7 999) 4 147
Cost of sales (2 920) (4 516) (437) 27 (7 846) 4 500 (3 346)
Other operating income(4) 44 86 11 398 539 (43) 496
Other operating expenses(5) (155) (786) (55) (587) (1 583) 786 (797)
Segment result 519 2 783 116 (162) 3 256 (2 756) 500
Income from investments 19 138 6 105 268 (138) 130
Finance cost (28) (19) (80) (37) (164) 19 (145)
Income from associate(6) - - 75 75 - 75
(Loss)/income from joint venture - (47) - - (47) 2 168 2 121
Special items before tax (1 166) (7) - - (1 173) 7 (1 166)
Taxation 120 (709) (49) (81) (719) 700 (19)
(Loss)/profit after tax (536) 2 139 68 (175) 1 496 - 1 496
Non-controlling interest (189) - - (1) (190) - (190)
Consolidation adjustment(7) - (18) - 18 - - -
Contribution to basic (losses)/
earnings (725) 2 121 68 (158) 1 306 - 1 306
Contribution to headline earnings/
(losses) 167 2 127 65 (158) 2 201 - 2 201
Other information
Segment assets including investment
in associate and joint venture 8 368 20 744 3 639 6 823 39 574 (4 840) 34 734
Investment in associate 1 628 1 628 1 628
Investment in joint venture 15 904 15 904
Segment liabilities 1 948 1 946 1 391 1 892 7 177 (1 946) 5 231
Unallocated - Deferred taxation
and taxation 4 516 (2 894) 1 622
Consolidated total liabilities 11 693 (4 840) 6 853
Cash generated from operations 620 2 831 155 6 3 612 (2 831) 781
Cash inflow/(outflow) from
operating activities 507 2 320 158 (1 549) 1 436 (570) 866
Cash outflow from investing
activities (392) (890) (109) (206) (1 597) 890 (707)
Cash outflow from financing
activities (30) - (42) (95) (167) - (167)
Capital expenditure 451 946 165 3 1 565 (946) 619
Amortisation and depreciation 303 526 84 2 915 (526) 389
Impairment loss/(reversal) 892 14 (3) - 903 (14) 889
There were no significant inter - division sales
(1) Refer note 2.4 for more detail on the ARM Platinum segment.
(2) Refer note 2.7 and note 7 for more detail on the ARM Ferrous segment.
(3) Includes IFRS 11 - Joint Arrangements - adjustments related to ARM Ferrous.
(4) Included in the ARM Coal segment is R4 million fair value gain in terms of IFRS 9 adopted during this period (refer note 1).
(5) Included in Modikwa is R4 million re-measurement loss in terms of IFRS 9 adopted during this period (refer note 1). ARM
Platinum (Modikwa) and ARM corporate segments' IFRS 9 adjustments (gain for ARM Platinum and losses for ARM
corporate) of R18 million and interest of R20 million resulting from the revaluation of interest-free intercompany loans, which
eliminate on consolidation for group, were not included. This is representative of the manner in which ARM's chief decision
maker in terms of IFRS 8: Operating segments, reviews and analyses the business. The re-measurement adjustment on the
ARM Coal loans was R113 million (ARM Coal segment R54 million and the ARM Corporate segment R59 million).
(6) Impairment included in income from associate is R4 million less tax of R1 million. Re-measurement loss on the ARM Coal
loans of R152 million.
(7) Relates to capitalised fees in ARM Ferrous.
Continuing operations
Total per Discon-
IFRS tinued
IFRS financial operations
ARM ARM ARM ARM Adjust- state- ARM
Platinum(1) Ferrous(2) Coal Corporate Total ment(3) ments Copper
Rm Rm Rm Rm Rm Rm Rm Rm
2.2 Six months ended
31 December 2017 Restated(1)
(Unaudited)
Sales(1) 3 603 6 816 571 - 10 990 (6 816) 4 174 340
Cost of sales(1) (2 940) (4 029) (433) 69 (7 333) 3 964 (3 369) (282)
Other operating income 26 29 23 379 457 (4) 453 4
Other operating expenses (120) (641) (3) (497) (1 261) 641 (620) (70)
Segment result 569 2 175 158 (49) 2 853 (2 215) 638 (8)
Income from investments 15 151 - 88 254 (151) 103 -
Finance cost (25) (19) (115) (34) (193) 19 (174) (12)
Finance cost ZCCM:
Shareholders loan Vale/
ARM joint venture - - - - - - - (20)
Income from associate(4) - - 111 - 111 - 111 -
Income from joint venture - 111 - - 111 1 654 1 765 -
Special items before tax 1 - - - 1 - 1 (117)
Taxation (163) (682) (8) (174) (1 027) 693 (334) (62)
Profit/(loss) after tax 397 1 736 146 (169) 2 110 2 110 (219)
Non-controlling interest (170) - - (2) (172) - (172) 34
Consolidation adjustment(5) - 29 - (29) - - - -
Contribution to basic
earnings/(losses) 227 1 765 146 (200) 1 938 - 1 938 (185)
Contribution to headline
earnings/(losses) 226 1 765 160 (200) 1 951 - 1 951 (6)
Other information
Segment assets including
investment in associate
and joint venture 9 371 20 063 3 588 3 940 36 962 (4 437) 32 525
Investment in associate 1 445 1 445 1 445
Investment in joint venture 15 626 15 626
Segment liabilities 1 894 1 595 1 825 2 223 7 537 (1 595) 5 942
Unallocated liabilities -
Deferred taxation and taxation 4 550 (2 893) 1 657
Consolidated total liabilities 12 087 (4 488) 7 599
Cash generated/(utilised) from
operations 784 1 918 210 19 2 931 (1 918) 1 013 (73)
Cash inflow/(outflow) from
operating activities 637 1 505 211 (1 448) 905 (505) 400 (76)
Cash (outflow)/inflow from
investing activities (431) (471) (127) 577 (452) 471 19 141
Cash (outflow)/inflow from
financing activities (78) - (86) 46 (118) - (118) (7)
Capital expenditure 435 558 108 - 1 101 (558) 543 46
Amortisation and depreciation 274 467 85 2 828 (467) 361
EBITDA 843 2 642 243 (47) 3 681 (2 682) 999 (8)
There were no significant inter - division sales
(1) Refer note 2.5 for more detail on the ARM Platinum segment.
Restated in terms of IFRS 15 - Revenue from contracts with customers (refer note 1 and 3).
(2) Refer note 2.8 and note 7 for more detail on the ARM Ferrous segment.
(3) Includes IFRS 11 - Joint Arrangements - adjustments related to ARM Ferrous.
(4) Impairment included in income from associate is R19 million less tax of R5 million.
(5) Relates to capitalised fees after tax and reversal of provision in ARM Ferrous.
Continuing operations
Total per Discon-
IFRS tinued
IFRS financial operations
ARM ARM ARM ARM Adjust- state- ARM
Platinum Ferrous(2) Coal Corporate Total ment(3) ments Copper
Rm Rm Rm Rm Rm Rm Rm Rm
2.3 Year ended 30 June 2018 -
Restated(1) (Unaudited)
Sales(1) 7 114 13 774 1 028 - 21 916 (13 774) 8 142 340
Cost of sales(1) (5 846) (8 103) (857) 37 (14 769) 8 073 (6 696) (282)
Other operating income(4) 60 217 896 504 1 677 (150) 1 527 4
Other operating expenses (284) (1 249) (7) (972) (2 512) 1 249 (1 263) (70)
Segment result 1 044 4 639 1 060 (431) 6 312 (4 602) 1 710 (8)
Income from investments(5) 34 299 10 133 476 (299) 177 -
Finance cost (80) (34) (172) (108) (394) 34 (360) (12)
Finance cost ZCCM:
Shareholders loan Vale/ -
ARM joint venture - - - - - - - (20)
Profit from associate(6) - - 619 - 619 - 619 -
Profit form joint venture(7) - 118 - - 118 3 392 3 510 -
Special items before tax (39) (25) (3) - (67) 25 (42) (117)
Taxation (287) (1 460) (45) (231) (2 023) 1 450 (573) (62)
Profit/(loss) after tax 672 3 537 1 469 (637) 5 041 - 5 041 (219)
Non-controlling interest (291) - - (3) (294) - (294) 34
Consolidation adjustment(8) - (27) - 27 - - - -
Contribution to basic earnings/
(losses) 381 3 510 1 469 (613) 4 747 - 4 747 (185)
Contribution to headline
earnings/(losses) 420 3 528 1 485 (613) 4 820 - 4 820 (6)
Other information
Segment assets including
investment in associate 9 009 20 223 4 689 5 103 39 024 (4 719) 34 305
Investment in associate 1 798 1 798 1 798
Investment in joint venture 15 504 15 504
Segment liabilities 1 880 1 883 1 453 1 878 7 094 (1 883) 5 211
Unallocated liabilities - Deferred
taxation and taxation 4 552 (2 836) 1 716
Consolidated total liabilities 11 646 (4 719) 6 927
Cash inflow/(outflow) generated
from operations 1 593 4 880 305 109 6 887 (4 880) 2 007 (73)
Cash inflow/(outflow) from
operating activities 1 120 3 789 309 (1 753) 3 465 (789) 2 676 (76)
Cash (outflow)/inflow from
investing activities (907) (1 447) (188) 573 (1 969) 1 447 (522) 141
Cash outflow from financing
activities (38) - (115) (195) (348) - (348) (7)
Capital expenditure 802 1 474 140 2 2 418 (1 474) 944 46
Amortisation and depreciation 572 971 167 2 1 712 (971) 741
Impairment before tax 39 26 19 - 84 (26) 58
EBITDA 1 616 5 610 1 227 (429) 8 024 (5 573) 2 451 (8)
There were no significant inter - division sales
(1) Refer note 2.6 for more detail on the ARM Platinum segment.
Restated in terms of IFRS 15 - Revenue from contracts with customers (refer note 1 and 3).
(2) Refer note 2.9 and note 7 for more detail on the ARM Ferrous segment.
(3) Includes IFRS 11 - Joint Arrangements - adjustments related to ARM Ferrous.
(4) The restructuring of the ARM Coal loans had an impact of R652 million profit with no tax effect.
(5) Intercompany interest of R127 million receivable by ARM Corporate and accrued by ARM Copper is presented in terms of IFRS 5.
(6) The restructuring of the ARM Coal loans had an impact of R325 million profit with no tax effect. Impairment loss included in
income from associate are R19 million less tax of R5 million.
(7) Impairment loss included in income from joint venture R26 million before tax of R7 million.
(8) Relates to capitalised fees in ARM Ferrous.
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(1) Modikwa Nkomati(1) Platinum
Rm Rm Rm Rm
2.4 Six months ended 31 December 2018 (Unaudited)
Sales(1) 1 912 1 089 549 3 550
Cost of sales(1) (1 367) (788) (765) (2 920)
Other operating income(2) 11 22 11 44
Other operating expenses(2) (74) (31) (50) (155)
Segment result 482 292 (255) 519
Income from investments 5 11 3 19
Finance cost (16) (6) (6) (28)
Special items before tax - - (1 166) (1 166)
Taxation (137) (89) 346 120
Profit/(loss) after tax 334 208 (1 078) (536)
Non-controlling interest (154) (35) - (189)
Contribution to earnings 180 173 (1 078) (725)
Contribution to headline earnings 180 173 (186) 167
Other information
Segment and consolidated assets 5 035 2 597 736 8 368
Segment liabilities 1 134 331 483 1 948
Cash inflow/(outflow) from operating activities 323 273 (89) 507
Cash outflow from investing activities (188) (76) (128) (392)
Cash outflow from financing activities (27) - (3) (30)
Capital expenditure 247 76 128 451
Amortisation and depreciation 157 51 95 303
Impairment - - 892 892
EBITDA 639 343 (160) 822
2.5 Six months ended 31 December 2017 (Unaudited) Restated(1)
Sales 1 895 877 831 3 603
Cost of sales (1 363) (822) (755) (2 940)
Other operating expenses 11 12 3 26
Other operating expenses (58) (12) (50) (120)
Segment result 485 55 29 569
Income from investments 6 6 3 15
Finance cost (14) (2) (9) (25)
Special items before tax - - 1 1
Taxation (141) (16) (6) (163)
Profit after tax 336 43 18 397
Non-controlling interest (163) (7) - (170)
Contribution to basic earnings 173 36 18 227
Contribution to headline earnings 173 36 17 226
Other information
Segment and consolidated assets 5 143 2 367 1 861 9 371
Segment liabilities 1 153 431 310 1 894
Cash inflow from operating activities 347 177 113 637
Cash outflow from investing activities (223) (110) (98) (431)
Cash outflow from financing activities (17) - (61) (78)
Capital expenditure 226 109 100 435
Amortisation and depreciation 151 45 78 274
EBITDA 636 100 107 843
(1) Restated in terms of IFRS 15 - Revenue from contracts with customers (refer note 1 and 3).
(2) Included in the Modikwa segment is a R4 million re-measurement loss in terms of IFRS 9 adopted during this period (refer
note 1).
ARM Platinum (Modikwa) and ARM corporate segments' IFRS 9 adjustments (gain for ARM Platinum and losses for ARM
corporate) of R18 million and interest of R20 million resulting from the revaluation of interest-free intercompany loans, which
eliminate on consolidation for group, were not included. This is representative of the manner in which ARM's chief decision
maker in terms of IFRS 8: Operating segments, reviews and analyses the business.
ARM
Two Rivers(1) Modikwa(2) Nkomati(1) Platinum
Platinum Rm Rm Rm Rm
2.6 For the year ended 30 June 2018 Restated(1) (Unaudited)
Sales(1) 3 741 1 796 1 577 7 114
Cost of sales(1) (2 737) (1 631) (1 478) (5 846)
Other operating income 22 31 7 60
Other operating expenses (152) (44) (88) (284)
Segment result 874 152 18 1 044
Income from investments 11 16 7 34
Finance cost (63) (3) (14) (80)
Special items before tax - (40) 1 (39)
Taxation (239) (46) (2) (287)
Profit after tax 583 79 10 672
Non-controlling interest (277) (14) - (291)
Contribution to basic earnings 306 65 10 381
Contribution to headline earnings 306 105 9 420
Other information
Segment and consolidated assets 4 774 2 321 1 914 9 009
Segment liabilities 1 158 348 374 1 880
Cash inflow generated from operations 1 175 149 269 1 593
Cash inflow from operating activities 688 161 271 1 120
Cash outflow from investing activities (560) (136) (211) (907)
Cash inflow/(outflow) from financing activities 27 - (65) (38)
Capital expenditure 455 133 214 802
Amortisation and depreciation 318 92 162 572
Impairment loss/(reversal) before tax - 40 (1) 39
EBITDA 1 192 244 180 1 616
(1) Restated in terms of IFRS 15 - Revenue from contracts with customers (refer note 1).
(2) On 16 July 2018, Anglo American Platinum and ARM agreed to temporarily amend the terms of the Sale of Concentrate
agreement to improve the cash flow generation of the mine while a turnaround and operational improvement plan is
implemented. These terms are effective for concentrate deliveries for a three- year period which commenced 1 January 2017.
As a result, the financial results for the year ended 30 June 2018 include an adjustment for 18 months, 1 January 2017 to
30 June 2018. There were no significant inter-company sales.
Analysis of the ARM Ferrous segment
Total per
IFRS
Manga- ARM IFRS financial
Iron ore nese Chrome Ferrous ARM Adjust- state-
division division division(1) Total share ment(2) ments
Rm Rm Rm Rm Rm Rm Rm
at 100% basis
2.7 Six months ended 31 December 2018
(Unaudited)
Sales 8 828 7 170 - 15 998 7 999 (7 999) -
Other operating income 356 251 - 607 86 (86) -
Other operating expenses (1 089) (927) 11 (2 005) (786) 786 -
Operating profit/(loss) 3 064 2 513 (10) 5 567 2 783 (2 783) -
Contribution to basic earnings and total
comprehensive income 2 432 1 854 (7) 4 279 2 139 (18) 2 121
Contribution to headline earnings 2 459 1 837 (7) 4 289 2 145 (18) 2 127
Other information
Segment assets 22 529 19 713 519 42 761 20 744 (4 840) 15 904
Segment liabilities 6 453 3 158 428 10 039 1 946 (1 946) -
Cash (outflow)/inflow from operating activities(3) (1 630) 2 769 - 1 139 2 320 (2 320) -
Cash outflow from investing activities (994) (786) - (1 780) (890) 890 -
Cash (outflow)/inflow from financing activities (4) 4 - - - - -
Capital expenditure 1 028 950 - 1 978 946 (946) -
Amortisation and depreciation 743 341 - 1 084 526 (526) -
EBITDA 3 807 2 854 (10) 6 651 3 309 (3 309) -
Additional information for ARM Ferrous
at 100%
Non-current assets
Property, plant and equipment 23 555 (23 555) -
Investment in joint venture 2 779 (2 779) -
Other non-current assets 748 (748) -
Current assets
Inventories 4 788 (4 788) -
Trade and other receivables 6 288 (6 288) -
Financial asset 230 (230) -
Cash and cash equivalents 4 372 (4 372) -
Non-current liabilities
Other non-current liabilities 7 149 (7 149) -
Current liabilities
Trade and other payables 1 750 (1 750) -
Short-term provisions 1 130 (1 130) -
Taxation 9 (9) -
Refer note 2.1 and note 7 for more detail on the ARM Ferrous segment
(1) Refer to events after reporting date note 20.
(2) Includes consolidation and IFRS 11 - Joint Arrangements - adjustments.
(3) Iron ore division includes dividend paid amounting to R3.5 billion included in cash flows from operating activities.
Total per
IFRS
Manga- ARM IFRS financial
Iron ore nese Chrome Ferrous ARM Adjust- state-
division division division Total share ment(1) ments
Rm Rm Rm Rm Rm Rm Rm
at 100% basis
2.8 Six months ended 31 December 2017
(Unaudited)
Sales 7 592 5 958 83 13 633 6 816 (6 816) -
Other operating income 253 141 - 394 29 (29) -
Other operating expenses (888) (686) (44) (1 618) (641) 641 -
Operating profit/(loss) 2 223 2 153 (26) 4 350 2 175 (2 175) -
Contribution to basic earnings and total
comprehensive income 1 746 1 743 (18) 3 471 1 736 29 1 765
Contribution to headline earnings 1 746 1 743 (18) 3 471 1 736 29 1 765
Other information
Segment assets 25 507 15 259 527 41 293 20 063 (4 437) 15 626
Segment liabilities 6 122 2 740 412 9 274 1 595 (1 595) -
Cash (outflow)/inflow from operating activities(2) (270) 1 279 - 1 009 1 505 (1 505) -
Cash outflow from investing activities (423) (518) - (941) (471) 471 -
Cash (outflow)/inflow from financing activities (7) 7 - - - - -
Capital expenditure 609 557 - 1 166 558 (558) -
Amortisation and depreciation 686 277 - 963 467 (467) -
EBITDA 2 909 2 430 (26) 5 313 2 642 (2 642) -
Additional information for ARM Ferrous
at 100%
Non-current assets
Property, plant and equipment 21 904 (21 904) -
Investment in joint venture 2 733 (2 733) -
Other non-current assets 800 (800) -
Current assets -
Inventories 3 978 (3 978) -
Trade and other receivables 5 252 (5 252) -
Financial asset 229 (229) -
Cash and cash equivalents 6 397 (6 397) -
Non-current liabilities -
Other non-current liabilities 6 616 (6 616) -
Current liabilities -
Trade and other payables 1 550 (1 550) -
Short-term provisions 576 (576) -
Taxation 532 (532) -
Refer note 2.2 and note 7 for more detail on the ARM Ferrous segment
(1) Includes consolidation and IFRS 11 - Joint Arrangements - adjustments.
(2) Iron ore division includes dividend paid amounting to R2 billion included in cash flows from operating activities.
Total per
Continued IFRS
Manga- operation ARM IFRS financial
Iron ore nese Chrome Ferrous ARM Adjust- state-
division division division Total share ment(1) ments
Rm Rm Rm Rm Rm Rm Rm
at 100 0% basis
2.9 For the year ended
30 June 2018 (Audited)
Sales 14 534 12 833 180 27 547 13 774 (13 774) -
Other operating income 692 664 - 1 356 217 (217) -
Other operating expenses (1 853) (1 645) 78 (3 420) (1 249) 1 249 -
Operating profit/(losses) 4 230 5 105 (58) 9 277 4 639 (4 639) -
Contribution to basic earnings and total
comprehensive income 3 343 3 772 (42) 7 073 3 537 (27) 3 510
Contribution to headline earnings/(losses) 3 343 3 808 (42) 7 109 3 555 (27) 3 528
Other information
Consolidated total assets 23 149 17 992 524 41 665 20 223 (4 719) 15 504
Consolidated total liabilities 6 165 3 190 426 9 781 1 883 (1 883) -
Cash inflow from operating activities(2) 1 522 3 001 55 4 578 3 789 (3 789) -
Cash outflow from investing activities (1 725) (1 153) (15) (2 893) (1 447) 1 447 -
Capital expenditure 1 780 1 285 16 3 081 1 474 (1 474) -
Amortisation and depreciation 1 401 594 8 2 003 971 (971) -
EBITDA 5 631 5 699 (50) 11 280 5 610 (5 610) -
Additional information for ARM Ferrous
at 100%
Non-current assets
Property, plant and equipment 22 712 (22 712) -
Investment in joint venture 3 011 (3 011) -
Other non-current assets 786 (786) -
Current assets -
Inventories 4 392 (4 392) -
Trade and other receivables 5 522 (5 522) -
Financial asset 228 (228) -
Cash and cash equivalents 5 014 (5 014) -
Non-current liabilities -
Other non-current liabilities 6 796 (6 796) -
Current liabilities -
Trade and other payables 1 819 (1 819) -
Short-term provisions 961 (961) -
Taxation 206 (206) -
Refer note 2.3 and note 7 for more detail on the ARM Ferrous segment
(1) Includes consolidation and IFRS 11 - Joint Arrangements - adjustments.
(2) Iron ore division included dividend paid amounting to R3 billion included in cash flows from operating activities.
ARM Corporate as presented in the table on page 83 to 85 is analysed further into the ARM Corporate and other and Gold
segments.
1H F2019 1H F2018 June 2018
Total
Corporate Total ARM Corporate Total ARM Corporate ARM
and other(1) Gold Corporate and other(1) Gold Corporate and other(1) Gold Corporate
Primary segmental
information Rm Rm Rm Rm Rm Rm Rm Rm Rm
2.10 (Unaudited)
Cost of sales 27 - 27 69 - 69 37 - 37
Other operating income 398 - 398 379 - 379 504 - 504
Other operating
expenses(2) (587) - (587) (497) - (497) (972) - (972)
Segment result (162) - (162) (49) - (49) (431) - (431)
Income from investments 105 - 105 66 22 88 111 22 133
Finance cost (37) - (37) (34) - (34) (108) - (108)
Taxation (81) - (81) (174) - (174) (231) - (231)
Loss/(profit) after tax (175) - (175) (191) 22 (169) (659) 22 (637)
Non-controlling interest (1) - (1) (2) - (2) (3) - (3)
Consolidation
adjustment(3) 18 - 18 (29) - (29) 27 - 27
Contribution to basic
losses (158) - (158) (222) 22 (200) (635) 22 (613)
Contribution to headline
losses (158) - (158) (222) 22 (200) (635) 22 (613)
Other information
Segment assets 4 941 1 882 6 823 2 496 1 444 3 940 3 752 1 351 5 103
Segment liabilities 1 862 - 1 862 2 223 - 2 223 1 878 - 1 878
Cash generated from
operations 6 - 6 19 - 19 109 - 109
Cash (outflow)/inflow from
operating activities (1 550) - (1 550) (1 470) 22 (1 448) (1 753) 22 (1 731)
Cash (outflow)/inflow from
investing activities (206) - (206) 577 - 577 573 - 573
Cash (outflow)/inflow from
financing activities (95) - (95) 46 - 46 (195) - (195)
Capital expenditure 3 - 3 - - - 2 - 2
Amortisation and
depreciation 2 - 2 2 - 2 2 - 2
EBITDA (160) - (160) (47) - (47) (429) - (429)
(1) Corporate, other companies and consolidation adjustments.
(2) Included is R59 million loss on loan re-measurement adjustment on the ARM Coal intercompany loan (gain in ARM Coal).
(3) Relates to capitalised fees in ARM Ferrous which are reversed at ARM Corporate for consolidation purposes.
Unaudited
Six months ended Year ended
31 December 30 June
2018 2017 2017 2018 2018
Rm Rm Rm Rm Rm
Currently Currently Previously Currently Previously
under under under(1) under under(1)
IFRS 15 IFRS 15 IAS 18 IFRS 15 IAS 18
3. REVENUE AND COST OF SALES
Revenue 4 524 4 794 5 020 9 112 9 603
Revenue - continuing operations 4 524 4 454 4 680 8 772 9 263
Revenue - discontinued operations - 340 340 340 340
Total Revenue(2) 4 524 4 794 5 020 9 112 9 603
Fair value adjustments to revenue(2) 267 288 - 62 -
Revenue from contracts with customers(2) 4 257 4 506 5 020 9 050 9 603
Sales of commodities continuing operations 4 052 3 972 4 260 8 284 8 346
Sales of commodities discontinued operations - 340 340 340 340
Penalty and treatment charges(2) (172) (86) - (204) -
Dividends received - - 22 - 22
Fees received 377 280 280 630 630
Interest received - - 81 - 155
Insurance income received - - 22 - 72
Property rental received - - 5 - 16
Royalty received - - 10 - 22
SALES
Sales previously - IAS 18 4 319 4 260 4 260 8 346 8 346
Penalty and treatment charges(2) (172) (86) - (204) -
Sales per statement of profit or loss (IFRS 15) 4 147 4 174 4 260 8 142 8 346
COST OF SALES
Cost of sales previously - IAS 18 (3 518) (3 455) (3 455) (6 900) (6 900)
Penalty and treatment charges(2) 172 86 204 -
Cost of sales per statement of profit or loss - IFRS 15 (3 346) (3 369) (3 455) (6 696) (6 900)
(1) The prior periods were restated in terms of IFRS 15 where penalty and treatment charges are now deducted from revenue
and not included in cost of sales and dividend, interest, rental, insurance and royalties received does not form part of
revenue anymore.
(2) Refer note 1 for details of the impact of adopting and implementing IFRS 15.
4. PROPERTY, PLANT AND EQUIPMENT
Nkomati Nickel Mine
Notwithstanding the increase in the nickel price over the reporting period as at 31 December 2018, an impairment loss of the
Nkomati Nickel Mine was recognised, largely as a result of:
i) A decline in head grade, resulting in decreased metal output.
ii) Inability to generate sufficient cash for operational requirements; and
iii) An increase in production costs.
ARM's attributable share of the impairment charge amounted to R1 166 million before tax and R892 million after tax.
The difference between the pre and post tax charge does not correspond with the South African Corporate tax rate of 28%, as
the tax charge on the impairment was limited to the corresponding deferred tax liability available for off-set on the statement
of financial position. Management did not recognise a deferred tax asset as the recoverability of such an asset is uncertain in
the foreseeable future.
The recoverable amount of the cash generating unit was determined based on the value-in-use calculation performed in terms
of International Financial Reporting Standards.
A pre-tax discount rate of 20.2% was used for the impairment calculation together with the following metal prices and exchange
rate assumptions.
F2019 F2020 F2021 F2022 Long-term
Nominal Nominal Nominal Nominal Real
Platinum - US$/ounce 855 1 090 1 138 1 172 1 173
Palladium - US$/ounce 1 027 1 050 1 050 1 032 965
Gold - US$/ounce 1 273 1 315 1 323 1 355 1 183
Nickel - US$/tonne 12 998 13 498 13 999 15 539 15 364
Copper - US$/tonne 6 221 6 925 7 040 7 241 6 516
Cobalt - US$/lb 35 33 30 25 19
Chrome concentrate - US$/tonne 62 75 75 77 72
Exchange rate - R/US$ 14.40 14.08 13.61 13.92 13.27
Unaudited
Six months Audited
ended Year ended
31 December 30 June
2018 2017 2018
Rm Rm Rm
5. LOANS AND LONG - TERM RECEIVABLES
ARM Platinum (Modikwa) - 17 17
ARM Coal 60 21 58
Glencore South Africa 346 - 387
Total 406 38 462
The ARM Coal loans were restructured in June 2018.
Unaudited Audited
Six months ended Year ended
31 December 30 June
2018 2017 2018
Rm Rm Rm
6. INVESTMENT IN ASSOCIATE
Opening balance 1 798 1 334 1 334
Income from associate per statement of profit or loss 75 111 619
Profit for the period 227 111 294
Re-measurement on loans (152) - 325
Movement in loans (245) - (155)
Closing balance 1 628 1 445 1 798
7. 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 15 504 14 860 14 860
Net income for the period 2 121 1 765 3 510
Income for the period 2 139 1 736 3 537
Consolidation adjustments (18) 29 (27)
Foreign currency translation reserve 29 1 134
Less dividends received for the period (1 750) (1 000) (3 000)
Closing balance 15 904 15 626 15 504
Refer to notes 2.1, 2.2, 2.3, 2.7, 2.8 and 2.9 for further detail
relating to the ARM Ferrous segment.
8 OTHER INVESTMENTS
Harmony 1 882 1 444 1 351
Opening balance 1 351 1 380 1 380
Fair value in other comprehensive income 320 64 (29)
Additional shares acquired refer statement of cash flow 211 - -
Guardrisk 30 34 33
Preference shares 1 1 1
RBCT (refer note 1) 252 169 176
Closing balance 2 165 1 648 1 561
Unaudited Audited
Six months ended Year ended
31 December 30 June
2018 2017 2018
Rm Rm Rm
9. CASH AND CASH EQUIVALENTS
Total unrestricted 2 097 736 2 160
- African Rainbow Minerals Limited 1 447 225 1 634
- ARM BBEE Trust 1 1 1
- ARM Coal 7 - -
- ARM Finance Company SA 238 203 228
- ARM Platinum Proprietary Limited 307 173 123
- ARM Treasury Investments Proprietary Limited 39 37 39
- Nkomati 16 27 88
- Two Rivers Platinum Proprietary Limited 11 35 14
- Teal Minerals Barbados Incorporated 19 22 22
- Teal Exploration and Mining Barbados Incorporated 8 8 8
- Teal Exploration and Mining Incorporated 1 1 1
- Venture Building Trust Proprietary Limited 3 4 2
Total restricted 1 200 1 183 1 131
- Mannequin Cell Captive (restricted) 866 797 819
- Other restricted cash(1) 334 386 312
Total as per statement of financial position 3 297 1 919 3 291
Less - Overdrafts (refer note 10) (383) (541) (381)
Total as per statement of cash flows 2 914 1 378 2 910
(1) This relates largely to rehabilitation trust funds at respective operations.
10. BORROWINGS
Long-term borrowings are held as follows:
- African Rainbow Minerals Limited - 200 -
- Anglo Platinum Limited (partner loan)1 95
- ARM BBEE Trust 398 473 470
- ARM Coal Proprietary Limited (partner loan) 1 117 1 578 1 231
- Nkomati 2 9 6
- Two Rivers Platinum Proprietary Limited 67 51 37
1 679 2 311 1 744
Short-term borrowings are held as follows:
- Anglo Platinum Limited (partner loan)(1) - 114 114
- Nkomati 7 7 7
- Two Rivers Platinum Proprietary Limited 63 48 50
70 169 171
Overdrafts are held as follows:
- African Rainbow Minerals Limited - 190 -
- Nkomati 42 - 21
- Two Rivers Platinum Proprietary Limited 322 327 336
- Other 19 24 24
383 541 381
Overdrafts and short-term borrowings 453 710 552
Total borrowings 2 132 3 021 2 296
(1) This loan was reclassified from short-term after fair value adjustment as reflected in note 1.
Unaudited Audited
Six months ended Year ended
31 December 30 June
2018 2017 2018
Rm Rm Rm
11. SPECIAL ITEMS
Impairment on property, plant and equipment - Nkomati (1 166) - -
Impairment reversal on property, plant and equipment - Nkomati - 1 1
Impairment loss on property, plant and equipment - Kalplats - - (40)
Loss on sale of property, plant and equipment - ARM Coal - - (3)
Special items per statement of profit or loss before
taxation effect (1 166) 1 (42)
Impairment loss on property, plant and equipment accounted
for directly in joint venture - Assmang (20) - (26)
Impairment reversal/(loss) on property, plant and equipment
accounted for directly in associate - PCB 4 (19) (19)
Pre-tax loss on sale of Lubambe - (117) (117)
Profit on sale of property, plant and equipment accounted for
directly in joint venture - Assmang 12 - 1
Special items before taxation effect (1 170) (135) (203)
Taxation accounted for in associate - impairment loss in PCB (1) 5 5
Taxation accounted for in joint venture - impairment loss in
Assmang 6 7
Taxation accounted for in joint venture - profit on sale of
property, plant and equipment in Assmang (4) - -
Taxation - impairment loss of Nkomati assets (refer note 4) 274
Taxation loss on sale of property ARM Coal - - 1
Taxation - sale of Lubambe - (62) (62)
Total amount adjusted for headline earnings (895) (192) (252)
Unaudited Audited
Six months ended Year ended
31 December 30 June
2018 2017 2018
Rm Rm Rm
12. EARNINGS PER SHARE
Headline earnings (R million) 2 201 1 945 4 814
Headline earnings from continuing operations (R million) 2 201 1 951 4 820
Headline loss from discontinued operation (R million) - (6) (6)
Headline earnings per share (cents) 1 149 1 023 2 526
Headline earnings per share from continuing operations (cents) 1 149 1 026 2 529
Headline loss per share from discontinued operation (cents) - (3) (3)
Basic earnings per share (cents) 682 922 2 393
Basic earnings from continuing operations per share (cents) 682 1 019 2 490
Basic loss from discontinued operation per share (cents) - (97) (97)
Diluted headline earnings per share (cents) 1 123 994 2 453
Diluted headline earnings per share from continuing operations
(cents) 1 123 997 2 456
Diluted headline loss per share from discontinued operation
(cents) - (3) (3)
Diluted basic earnings per share (cents) 667 895 2 325
Diluted basic earnings from continuing operations per share
(cents) 667 990 2 419
Diluted basic loss from discontinued operation per share (cents) - (95) (94)
Number of shares in issue at end of the period (thousands) 221 934 219 692 219 709
Weighted average number of shares (thousands) 191 575 190 163 190 622
Weighted average number of shares used in calculating
diluted earnings per share (thousands) 195 919 195 740 196 217
Net asset value per share (cents) 11 834 10 644 11 792
EBITDA (R million) 889 991 2 443
EBITDA from continuing operations (R million) 889 999 2 451
Interim dividend declared (cents per share) 400 250 250
Dividend declared after period end (cents per share) - - 750
Reconciliation to headline earnings
Basic earnings attributable to equity holders of ARM 1 306 1 753 4 562
Impairment loss on property, plant and equipment - Kalplats - - 40
Impairment loss on property, plant and equipment - Nkomati 1 166 - -
Impairment reversal on property, plant and equipment - Nkomati - (1) (1)
Impairment loss of property, plant and equipment in joint venture
- Assmang 20 - 26
Impairment (reversal)/loss of property, plant and equipment in
associate - PCB (4) 19 19
Pre -tax loss on sale of Lubambe - 117 117
Loss on disposal of investment - - 3
Profit on sale of property, plant and equipment in joint venture
- Assmang (12) - (1)
2 476 1 888 4 765
Taxation accounted for directly in associate and joint venture (1) (5) (12)
Taxation - impairment loss of Nkomati assets (274) - -
Taxation loss on sale of property ARM Coal - - (1)
Taxation - sale of Lubambe - 62 62
Headline earnings 2 201 1 945 4 814
Unaudited Audited
Six months ended Year ended
31 December 30 June
2018 2017 2018
Rm Rm Rm
13. TAXATION
South African normal tax - current year 87 79 193
South African normal tax - mining 18 89 141
South African normal tax - non-mining 69 (10) 154
South African normal tax - prior year - - (102)
Deferred tax - current year (68) 255 380
Total taxation from continuing operations 19 334 573
Tax from discontinued operation - 62 62
19 396 635
14. CASH GENERATED FROM OPERATIONS
Cash generated from operations before working capital movement 1 351 1 411 2 451
Working capital changes outflow (570) (471) (517)
Movement in inventories (outflow)/inflow (216) (36) 48
Movement in payables and provisions outflow (83) (192) (266)
Movement in receivables (outflow) (271) (243) (299)
Cash generated from operations (per statement of cash flows) 781 940 1 934
15. RELATED PARTIES
The Company, in the ordinary course of business, enters into
various sale, purchase, service and lease transactions with
subsidiaries, associated companies, joint ventures and
joint operations.
Transactions between the Company, its subsidiaries and joint
operations relate to fees, insurances, dividends, rentals and
interest and are regarded as intra-Group transactions and
eliminated on consolidation.
Amounts accounted in the statement of profit or loss relating
to transactions with related parties
Anglo American Platinum 1 089 877 1 796
Impala Platinum 1 912 1 895 3 883
Joint venture
Assmang Proprietary Limited
- Provision of services 336 277 627
- Dividends received 1 750 1 000 3 000
Subsidiary
Impala Platinum - dividend paid 44 61 253
Amounts outstanding at year-end (owing to)/receivable by
ARM on current account
Joint venture
Assmang - debtor 42 26 101
Joint operations
Anglo American Platinum - debtor 732 545 610
Norilsk Nickel - creditor (7) - (2)
Norilsk Nickel - debtor 51 95 134
Anglo American Platinum - long - term borrowing
(reclassified from long-term) 95 - -
Anglo American Platinum - short - term borrowing
(reclassified to long-term) - (114) (114)
Glencore Operations SA - long-term borrowing (1 117) (1 578) (1 231)
Subsidiary
Impala Platinum - debtor 1 221 1 083 1 146
Unaudited Audited
Six months ended Year ended
31 December 30 June
2018 2017 2018
Rm Rm Rm
16. ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS
The sale of Lubambe Copper Mine in Zambia was completed on 22 December 2017. The sale resulted in a loss on sale
before tax of R179 million. Details of this sale are included in the financial results for the year ended 30 June 2018 and the
interim results for the six-months results ended 31 December 2017 which can be found on www.arm.co.za.
17. PROVISIONS
Silicosis and tuberculosis class action provision
The provision has not materially changed since 30 June 2018.
Details of this is included in the financial results for the year ended 30 June 2018 and the interim results for the six-months
results ended 31 December 2017 which can be found on www.arm.co.za.
18. COMMITMENTS
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 237 92 108
- not contracted for 16 21 16
Total commitments 253 113 124
19. CONTINGENT LIABILITIES
The Assmang guarantee previously reported relating to the Sarawak Energy Board is now $109million. This guarantee includes an
amount of $87million which is based in Malaysian Ringgit.
AEL Mining Limited has instituted arbitration proceedings against Assmang, claiming an amount up to R381 million. Assmang
is defending this matter.
There have been no other significant changes in the contingent liabilities of the Group as disclosed since 30 June 2018
integrated annual report.
For a detailed disclosure on contingent liabilities, refer to ARM's integrated annual report for the year ended 30 June 2018
available on the group's website (www.arm.co.za).
20. EVENTS AFTER REPORTING DATE
Since the period end ARM received a dividend of R1.5 billion from Assmang.
On 6 February 2019, the Competition Commission of South Africa approved the acquisition by ARM of 100% of the Machadodorp
Works business. The acquisition includes assets and assumption of certain liabilities relating to the business. The purchase
price for the business amounted to R130 million. Since ARM owns 50% of Assmang, effectively R65 million of the purchase
price received by Assmang is attributable to ARM. The purchase price will be adjusted for cash amounts received and paid
during the period 1 January 2017 and 28 February 2019. For this reason we cannot disclose all the requirements of IFRS 3 -
Business Combinations (refer note 2.7).
No other significant events have occurred subsequent to the reporting date that could materially affect the reported results.
Contact details and administration
African Rainbow Minerals Limited Transfer secretaries
Incorporated in the Republic of South Africa Computershare Investor Services
Registration number 1933/004580/06 Proprietary Limited
ISIN code: ZAE000054045 Rosebank Towers, 15 Biermann Avenue
Rosebank, Johannesburg, 2196
Registered office
ARM House PO Box 61051, Marshalltown, 2107
29 Impala Road Telephone: +27 11 370 5000
Chislehurston, Sandton, 2196 Telefax: +27 11 688 5222
South Africa E-mail: web.queries@computershare.co.za
PO Box 786136, Sandton, 2146 Website: http://www.computershare.co.za
South Africa
Sponsor
Telephone: +27 11 779 1300 Investec Bank Limited
E-mail: ir.admin@arm.co.za
Website: http://www.arm.co.za
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 epidemic 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** J P MOller*
Dr M M M Bakane-Tuoane* A M Mukhuba
T A Boardman* D C Noko*
A D Botha* Dr R V Simelane*
J A Chissano (Mozambican)* J C Steenkamp**
* Independent Non-executive Z B Swanepoel*
** Non-executive A J Wilkens
www.arm.co.za
Sponsor: Investec Bank Limited
Date: 01/03/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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