THE decline in iron ore prices is expected to feature heavily in the interim results of African Rainbow Minerals (ARM) scheduled for March 7.This was after it said in a trading statement on Tuesday that headline share earnings would fall by 45% to 55% for the six months ended December.It blamed the year-on-year decline on a 22% reduction in the average realised
dollar price for iron ore as well as lower production of the mineral and of manganese. Lower volumes contributed to higher cash costs which were compounded by a stronger rand to the dollar. Higher platinum group metal output offset these factors.Iron ore prices have tumbled the past two years owing to China’s property crisis in the past year. Although China has stabilised this year there is a glut of new production due to come on stream from BHP and the Simandou iron ore project in Guinea, which is being back by a consortium including Rio Tinto.The outcome at the headline level is share earnings of between R6.78 to R8.29 per share compared to R15.07 in interim share earnings for the 2023 financial year.At the basic earnings level, there was likely to be an increase owing to a reduction in impairments. ARM wrote down assets for R1.74bn in the comparable interim period last year compared to an expected write-down of R136m in the period under review.The expected write-downs relate to property, plant and equipment at Beeshoek (R96m after tax); R36m related to Assmang’s stake in Sakura Ferroalloys (no tax event); and property, plant and equipment at Cato Ridge (R4m after tax).As a result, interim basic share earnings will be 8% to 18% higher, coming in between R6,70 and R7,32 per share (2024: 620c/share).Attention is also likely to fall on a $195m claim ARM could face in Tanzania. This relates to allegations ARM breached a confidentiality agreement regarding a proposed joint venture to develop a graphite mine in the east of the country.Business Times reported in November that Pula Graphite Partners, owned by former US ambassador to Tanzania Charles Stith, alleged that ARM and African Rainbow Capital (ARC) violated a non-competition agreement and gained access to confidential, market-sensitive information during discussions about the project in Tanzania’s Ruangwa district.ARM executive chairman Patrice Motsepe is the founder and executive chair of ARM through Ubuntu-Botho Investments and is the majority shareholder in ARC.The post Iron ore price slump to knock ARM interim earnings appeared first on Miningmx.
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