PGM recovery puts the shine back on ARM earnings

You can also listen to this podcast on iono.fm here.

IMMY MOYAHA: African Rainbow Minerals [ARM] on Friday released their full-year results for their financial year ended 30 June 2026.

Of course, we did not have the opportunity to reflect on these results on a Friday because we don’t have a show on a Friday, but we are going to take this opportunity to speak to the company’s group chief executive officer Phillip Tobias around the performance of the business and get a sense of how they fared.

Mr Tobias, lovely having you on the show, as always. Thanks so much for taking the time. A strong year from the business, especially considering the macro environment you had to play in. It’s nice to see that the business was able to benefit from stronger commodity prices.

How did you feel about the year as a management team?

PHILLIP TOBIAS: Thank you very much to you and the listeners. We are quite pleased to have presented and delivered the set of results that we did.

Headline earnings actually increased from R2.7 billion to R3.2 billion, up by 19%.

Also what is very pleasing is that it was a fatality-free year.

The last time we had that was in financial year 2017. So we are very pleased that every employee of African Rainbow Minerals returned back home to loved ones safely on a daily basis.

JIMMY MOYAHA: Phillip, can we take a look at the moving parts throughout the year? The business had to contend with varying challenges and varying conditions from an operational standpoint across all of its operations. Despite this, the business was still able to benefit from the stronger year.

Take us through some of the moving parts. The rand/dollar exchange had a negative impact on the Khumani mine and a couple of other moving parts from a business perspective. What were some of the highlights and lowlights for you as a business?

PHILLIP TOBIAS: Look, the highlights were the fact that we continue to demonstrate the value and the resilience of the diversified portfolio.

ADVERTISEMENT

CONTINUE READING BELOW

If you look at the same reporting time the previous year, iron ore basically carried the business. And then we had a minus 2% on the Ebitda [earnings before interest, tax depreciation and amortisation] contribution from the platinum group metals [PGMs].

However, this year the platinum group metals increased that Ebitda to about 53%.

Which really shows the value and the resilience of the diversified portfolio, where you are able to have a counterbalance effect.

When you have the negative moving part it’s really sort of compensated by the positive part on that.

So we have seen the strong platinum group metal basket price, also on the back of a fairly, one can say, flat performance from the platinum group metals.

If we look at Two Rivers Platinum Mine, we were about minus 1% on the volumes year-on-year. That at the back of mining through some very challenging sympathetic faults, geotechnical conditions.

Because we’re mining through those, we have to make sure that we provide extra support so that our employees do not get injured. With that extra support there are also extra costs – and a slow advance rate when we’re mining through that.

At Modikwa Platinum Mine we’ve had a minus 3% reduction on the volumes year on year. And – just a reminder – last year we went through a number of labour reorganisations, Section 189 processes.

At Modikwa specifically we had two of those processes, the last one leading to the shutdown of one of the business units called the South 1 shaft. We therefore needed to replace those tonnes, and we started mining South 3 open-pit mine.

Mining an open-pit mine, even though it’s at higher grades, because the ore is oxidised you normally get lower recovery rates.

So those are the two things that affected the volumes on the platinum group metals operation side.

JIMMY MOYAHA: Phillip, sticking with the PGM aspect of the portfolio, how does this then affect the strategy going forward? I’m thinking about the two pipeline projects that have been confirmed in the Bokoni PGM Project, on which we recently concluded the feasibility study.

ADVERTISEMENT:

CONTINUE READING BELOW

You mentioned that the business is of course well-diversified at the moment, and that stands to benefit the business quite well.

Is that part of the strategy then going forward – to say, because of the cyclicality of the market and the industry and the sector that you play in, in the mining space, the diversification almost acts as its own natural hedge against that?

PHILLIP TOBIAS: Yes, what is very pleasing is that we already own the Bokoni Platinum Mine, which is a high-grade, high-quality, long-life ore body. Remember that at the end of last year we put the milling and the mining portion of that on care and maintenance, with the intention to advance the ore-reserve development while we were completing the definitive feasibility study.

We are pleased that the board in July approved that project. We’ll be investing R15.2 billion over the next seven years, with a net present value, NPV, of R5.9 billion, and an internal rate of return of 28%. So it’s a very robust business case.

We are slowly pivoting, one can say, into the platinum group metals. That will enable the portfolio to double its attributable ounces in the near future. So we are solidly strengthening our platinum group metal portfolio.

And with regard to Nkomati, it’s basically, one can say, low-risk and low-capital compared to the R15.2 billion. Here we’ll be spending about R1.9 billion over the next two years to restart this polymetallic ore body, Nkomati Nickel, which is the only nickel mine in South Africa.

JIMMY MOYAHA: Phillip, before I let you go, I want to take a look at how you see the commodity markets going forward. I’m thinking about things like the manganese market that didn’t perform as well from an export perspective in this previous financial year.

But alongside that the business left itself quite open to increasing your stake in companies like Surge Copper, and diversifying your interests in that respect.

How are you viewing the overall macro landscape in light of all of the geopolitical conversations that are happening, and how is that affecting your strategy in what you consider in terms of your portfolio mix?

PHILLIP TOBIAS: If you look at the iron ore business, or we can say the bulk – which is iron ore and manganese – we have really spent capital to expand and to modernise those businesses.

So what we need to do in terms of the iron ore now is to make sure that we continue to focus on things that are within our control: the cost, making sure that we increase quality volumes, and also collaborating with Transnet …

… in terms of debottlenecking the rail and the port performance, because Khumani can ramp up to about 14.5 million tonnes.

We are currently performing at about 12.3 million tonnes, and then the bottleneck there is just the rail. Should the rail manage to do that, we’ll be able to increase our strip ratio and ramp up that business, and the same with manganese ore.

If you look at the forecast for the iron ore, you would say we see a softer market outlook in terms of where we come from – that on the back of, if you look at construction production in China, it has slowed down.

ADVERTISEMENT:

CONTINUE READING BELOW

There’s also the introduction of some new tonnes – like Simandou, and there have also been new tonnes from Brazil.

So we believe that there we need to focus on optimisation, revenue enhancement, cost optimisation, and improve and enhance our profit margin.

On the manganese side we still believe that the outlook looks much better and stronger than we are – on the back of the growth in terms of the steel demand, which really contributes towards that.

And in that as well, in terms of the installed capacity, we just concluded some years ago, that modernisation project. So that mine can easily do between 4.3 million tonnes to 4.5 million tonnes. We are currently producing about 3.7 million tonnes, and we are forecasting to do about 3.9 million tonnes. So things are within our control,

The issues of costs and quality volume – those are what we are focusing on at this point in time.

With regard to the 19.9% interest in Surge Copper, we believe that is a quality asset in a quality tier-one jurisdiction.

It’s currently just transitioning into a definitive feasibility study, and then also into the licensing and the regulatory approval of those environmental approvals – and also the continuation, with the First Nations [Khoi-San peoples] in terms of making sure that we have that full support.

I think around 2030, 2031, we’ll have to make an investment decision when all these studies have been concluded.

So we are also looking and investing into the future, focusing on the commodity of copper, because we know that in terms of demand and supply there’s certainly going to be that gap.

JIMMY MOYAHA: The latest financial year proved to be a strong one for the African Rainbow Minerals stable, benefitting from diversification and a concerted effort in executing its strategy to continue to grow the business.

All the best to you and the team as you approach the new year, Phillip.

We’ll leave the conversation on that note. Phillip Tobias, the chief executive officer at African Rainbow Minerals, joined us to reflect on the year that was.

#PGM #recovery #puts #shine #ARM #earnings