Diversified black-controlled mining company African Rainbow Minerals (Arm) will be investing R12-billion in projects in the next four years.
Executive chairperson and founder Patrice Motsepe says the R12-billion expenditure between 2008 and 2011 will reflect the second major expansionary phase following the R8-billion spent in the previous four years.
Arm has experienced growth across its diversified board in iron-ore, manganese, platinum, nickel, coal and chrome.
“The challenge for us is to focus on those areas where we are globally competitive,” Motsepe says of the JSE-listed Arm, which now has a market capitalisation of R50-billion and which is sitting on a cash war chest of R2,6-bil- lion.
It has an earnings before interest, tax, depreciation and amortisation marparameters for ball millgin of 57% and it is obtaining its nickel free, thanks to by-product credits.
“We have big plans for the future, but we know that growth for the sake of [growth] is the most dangerous thing you can do. We have been there before with Harmony Gold, where we went on an extremely aggressive growth phase and a period of illiquidity and we didn’t allow sufficient money for an element of flexibility.
“We have to grow and we will grow but it has to be prudent, appropriate and long-term growth, andtypes iron ore mixed with sulfur we have to pay what we believe is a good price for our shareholders and be able to add value,” he says.
A beady eye has to be kept on costs, Motsepe emphasises, and the company needs to build a record of continuously reducing costs.
On the company’s exploration company, Teal, which is listed on the Toronto and Johannesburg stock exchanges, he says: “ I am not very happy with Teal.”
Teal is Arm’s company on the continent and more resources and capital are being allocatblack sand equipment from australiaed to the company to improve its performance.
Southern Africa is the com- pany’s ‘home ground’ and the company continues to be engaged in discussions to grow the company, including through acquisition.
Arm CEO André Wilkens says that part of the company’s strategy in growing the company and, at the same time, containing costs is through volume growth.
“We don’t want to be above inflation, but if you experience all the cost pressure, we’ve done quite well,” he says.
That has increased Arm’s aver-age margin from 37%, to 57%.
“There is huge focus on growing volume and lower-cost production growth and, over time, being below 50% on the cost curve to be well positioned to manage the turns and cycles of the resources economy,” he says.
The company’s energy coal division, together with its partner, Xstrata, has delivered a “significant” amount of coal to South Africa’s coal-hungry power stations.
The company has also been able to increase plati- num-group metal (PGM) ounces year-on-year through greater production at Modikwa and the building of a second new Two Rivers mine.
“Most PGM producers are battling to maintain volumes and we are happy that we have increased ounces,” Wilkens says.
Iron-ore production is going to be increased to 16-million tons a year and the big profit spinner is manganese, which has a margin beyond 65%.
Arm, with its astute Assmang-Assore partners, is tripling its iron-ore production and witness- ing growing manganese demand because of the upsurge in the amount of manganese for each ton of iron-ore being used in sophisticated steels.
The new Khumani iron-ore mine will be operating at a cost lower than the current Beeshoek mine and Assore has come in for special praise for being ‘light on its feet’ in its successful marketing of manganese.
To view a video on Arm chairperson Patrice Motsepe, click here.