JOHANNESBURG (Business Day) -- Diversified miner African Rainbow Minerals (ARM) [JSE:ARI] regarded the developing Khumani iron-ore mine in Northern Cape, where construction has now begun, as its "crown jewel", CEO Andr'e Wilkens said yesterday.
ARM has a 50% stake in Assmang, which produces manganese, iron-ore and chromite, with Assore holding the remainder. Assmang is developing the Khumani iron-ore mine in two phases, the first costing R3.2 billion (US$441 million) to produce 8.4-million metric tons a year by 2010 for export, and the second phase costing R1.8 billion (US$248 million) to 2016 to produce 16.8-million metric tons.
Wilkens said the group was still confident the first-phase budget would be met, despite pressure on input costs. In negotiations with Transnet on rail capacity it was agreed that the second-phase ramp-up would be accelerated, which would affect the budget because some infrastructure would have to put in place earlier than originally anticipated.
ARM was also excited about copper prospects being explored by Toronto- and JSE-listed subsidiary Teal Exploration & Mining [TSX:TL], Wilkens said. Teal's copper properties in the Democratic Republic of Congo and Zambia were "fantastic" ore bodies. "Teal has the potential to become a large copper-producing company in the next three to five years, which will create a lot of value for ARM," Wilkens said. ARM intended to maintain its stake in Teal at 65%, he said.
The group spent R1.7 billion (US$234 million) in the past year on capital projects, most of which was incurred by the platinum division. The change of mine plan at the Modikwa platinum mine from down-dip to strike mining had incurred additional development costs, a process that would continue for another year, Wilkens said. After that, spending would be mainly on replacement of assets. Next year, ARM estimated, it would spend R1.9 billion (US$262 million) in total, mainly at Khumani.
In the year to June, ARM increased headline earnings 36% to 225 cents a share as all four divisions - iron ore, ferromanganese, nickel and platinum group metals - grew production. Total reported sales were down to R4.6 billion (US$635 million) from R5.5 billion (US$758 million) because Assmang was fully consolidated for eight months of the financial year and proportionately consolidated for the remaining four months after the Assore/Assmang restructuring. No dividend was declared.
"A year ago it was manganese and it was nickel growth, but we've now seen our platinum division come in very strongly - the first mine we've built with Anglo Platinum at Modikwa is now very close to full production, and it made very nice first headline earnings for the year. The second platinum mine Two Rivers went into production ahead of time and below budget - that mine is starting to make some good money now going forward," Wilkens said.
Teal reported a consolidated net loss of $0.27 a share for the seven-and-a-half months to June during which it was a separate entity from ARM. Teal president and CEO Rick Menell said Teal was advancing its feasibility study at its largest copper asset, Konkola North, as quickly as possible. With Classic Business Day.
