ARM takes impairment on the chin


ARM takes impairment on the chin

Published Date: 2019-08-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

ARM takes impairment on the chin

  • The diversified mining group says impairments will result in a decline in full-year earnings but headline earnings will be higher;
  • It reduced the value of its Nkomati Nickel mine by over R1 billion following a decline in output and rising costs;
  • The group paid a bigger interim dividend so shareholders may be in line for a higher final payout too.
  • African Rainbow Minerals will report a full-year decline in basic earnings after it wrote down the value of its Nkomati Nickel mine and Sakura Ferroalloys.

    In a trading statement, the diversified mining group said basic earnings per share for the year to end-June would be between 22% and 29% lower than the R23.93 reported last year. It said earnings were negatively impacted by after-tax impairments of R1.07 billion on Nkomati and R507 million on Sakura. Excluding the impairments, headline earnings per share would be 2% to 10% higher than last year's R25.26, it said.

    The Nkomati Mine in Mpumalanga is the biggest producer of nickel on the continent. In March, it attributed the impairment loss to a decline in head grade, which had resulted in a fall in metal output. The mine was unable to generate enough cash to meet its operational requirements while production costs were on the rise. It said it was in discussions regarding Nkomati's future with Russia's Norilsk Nickel, ARM's partner in the mine. It holds a stake in Malaysia's Sakura Ferroalloys in its Assmang joint venture with Assore.

    The group said it continued to benefit from portfolio diversification, realising higher dollar prices for its iron ore, manganese alloy, platinum and thermal coal. The weaker rand also helped. It said its iron ore division delivered its higher-ever reported earnings.

    Despite the large impairment it raised its interim dividend by 60% to R4, which could indicate a higher full-year payout too.

    Its results are due for release on 30 August. Its shares closed 3c higher at R160.51 yesterday.

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