ARM, founded by business tycoon Patrice Motsepe, saw its headline earnings for the year to 30 June 2021 shoot up 136% to just over R13-billion or R66.80 per share. A final dividend of R22 per share was declared, bringing the total dividend for the year to R30 a share, making it the latest mining company to deliver for its shareholders. 

ARM has a diverse suite of mining assets, exposing it to the sector’s highs and lows in South Africa. 

Iron ore prices were among the highs, with the average realised US dollar price for the commodity received by ARM rising 79% in the year under review compared to the previous period. Headline earnings for its platinum group metals (PGMs) division roared over 300% higher to R4.666-billion. 

The surge in PGM prices, notably for rhodium – which saw its price soar about 17-fold from the start of 2018 to March this year, when it was fetching around $30,000 an ounce – is flowing straight to the bottom line of producers. 

“Headline earnings at Two Rivers Mine improved by 179% as the mine increased volumes by 15% and kept unit production costs flat year on year,” ARM said. So cost containment and a decent boost in volumes translates into a massive lift in profits. 

The commodities cycle has cranked into high gear as the pace of the global economic recovery picks up. This has made South Africa’s mining sector a key driver of domestic economic growth, and has resulted in record trade and current account surpluses, which have in turn supported the rand. 

But South Africa’s failing state and flailing SOEs are throttling potential profits in some sectors. 

ARM said its coal division had a headline loss which – excluding some gains related to partner loans – reached R492-million. The company said this was “mainly due to lower coal sales volumes – owing to underperformance from Transnet Freight Rail – and above-inflation unit cost increases which were partially offset by higher average received coal prices.”

So Transnet’s inability to move ARM’s coal efficiently is hampering the company’s profits, a worrying state of affairs that other mining groups have also flagged. DM/BM