Assore posts record headline earnings of R5.2bn as commodity prices rebound

JOHANNESBURG (miningweekly.com) – Mining investment holding company Assore achieved a 199% increase in headline earnings to R5.2-billion for the financial year to June 30, compared with R1.7-billion in the previous year.

Attributable earnings amounted to R5-billion, which was an improvement of 226% from 2016, which was also a record level for the group.

Assore CEO Charles Walters told Mining Weekly Online, on Wednesday, that the difference of R188-million between headline and attributable earnings was mainly the result of a one-off transaction, following Assmang’s sale to Assore of the Dwarsrivier chrome mine, in Mpumalanga.

He pointed out that iron-ore and manganese ore prices had reflected improved global economic conditions.

Walters noted that the markets into which the group sold its products had recovered during the financial year under review and were generally stronger than in 2016. The growth in the production of crude steel in China, which manufactures more than half of the crude steel produced globally, drove commodity prices higher during the year.

Walters mentioned that prices for iron-ore (62% iron content, fines grade, delivered in China) were 37% higher than in 2016, at an average index price of $70/t, while the premium for lumpy grade material was $7.38/t, which was marginally lower than the level for 2016 over 2015.

He further remarked that increased environmental controls in China and efficiency objectives at Chinese steel mills, however, resulted in a notable increase in this premium towards the end of the financial year.

The higher levels of crude steel production also resulted in a marked improvement in manganese ore prices, with the average index price for 44% grade manganese content material, delivered in China, doubling to $5.77 per dry metric ton unit from $2.89 in 2016.

Ferromanganese prices also rallied on the back of the increase in ore prices and robust demand in North America and Europe. Stainless steel showed remarkable growth in the 2016 calendar year, with production growing by 8% when compared with the 2015 calendar year.

Walters stated that the resulting demand for chrome ore in China, in conjunction with consolidation of supply in South Africa, had led to a supply deficit for chrome ore. Accordingly, average prices for 44% chrome content material, delivered in China, were much higher, at $300/t, than the $150/t achieved in 2016.

The average rand/dollar exchange rate across 2017 was R13.71, which was 5% stronger than the level that prevailed during 2016. This had the effect of countering somewhat the higher commodity prices for the financial year under review.

Meanwhile, Walters highlighted that Assore had achieved record volumes of iron-ore and chrome ore sales, with the 2017 financial year the third consecutive year in which record volumes of these products had been sold.

“Underlying market fundamentals remain positive; however, the possibility of additional supply of iron-ore, particularly from Australia and Brazil, is expected to have an effect on prices,” he cautioned.

The factors above resulted in Assmang’s turnover (excluding Dwarsrivier) for the 2017 financial year increasing by 39% year-on-year.

OPERATIONAL OVERVIEW
Assore’s principal investments comprise a 50% interest in Assmang, which it controls jointly with South African diversified mining company African Rainbow Minerals (ARM) in terms of a long-standing shareholders’ agreement and 100% ownership of Dwarsrivier.

Dwarsrivier is an underground chrome mine, near Steelpoort and Lydenburg, in Limpopo, and currently produces 1.4-million tons a year of chrome product.

Assmang mines both iron-ore and manganese ore in the Northern Cape, the former at the Khumani and Beeshoek mines and the latter at the Black Rock mines. It has manganese smelting facilities at Cato Ridge, in KwaZulu-Natal.

In addition, Assmang holds a 54.36% shareholding in Sakura Ferroalloys, which is a manganese smelter located in Sarawak, Malaysia. Sakura has a design capacity of 216 000 t/y of ferromanganese.

The group also has a 29.9% interest in IronRidge Resources – an Aim-listed minerals exploration company with a diversified portfolio of gold, lithium, bauxite, titanium and iron-ore projects in Africa and Australia. IronRidge acquired further prospecting rights in Chad and gold and lithium licences in Côte d'Ivoire and Ghana during the past year both directly and through joint ventures.