Johannesburg - African Rainbow Minerals (ARM) bucked the widespread mining industry pessimism on Monday, claiming it would use the economic downturn currently shredding industry balance sheets to buy assets.
"Where there is pain, everything becomes available," said Patrice Motsepe, ARM executive chairperson.
He was speaking at a presentation of ARM's interim results, in which it posted a 201% increase in headline earnings.
The results were driven by a strong performance from ARM's ferrous business, which produces metals such as ferrochrome and manganese for the steel industry.
However, the market didn't like what it saw. ARM's share price was down 4.4% at 12:00 on Monday and was last trading at R109.89/share. The JSE's Resources index was slightly in the green with Anglo American up 2%.
ARM said it had rescheduled its capital expenditure programme out to 2011, the effect of which was to spend about R9bn, roughly 30% less than planned previously. Spend in the current 2009 financial year would total R2bn against R3.8bn in the 2008 financial year.
But the balance sheet was strong with R3.7bn in cash. Said Andre Wilkens, CEO of ARM: "In October we looked at the market and decided to conserve cash. The numbers show our conservatism."
Motsepe said: "A number of opportunities have been presented to us, particularly those in extreme distress."
However, he sounded a note of caution, saying only "irresistible" offers would be contemplated.
Vale: opportunities galore
In an interview with Miningmx, Wilkens said the group was considering potential acquisitions of junior mining firms where there was distress, or in the exploration field. "It doesn't have to be a company, but a great orebody," he said.
This may have particular resonance given ARM's transaction with Vale, the Brazilian mining conglomerate. ARM announced in December that it would sell its 65% stake in TEAL Mining & Exploration into a joint venture shared by itself and Vale.
Motsepe said ARM had "had an exciting meeting with the CEO of Vale. We have laid the foundation to do lots of interesting things on the [African] continent and within South Africa itself."
A source close to ARM said that formal discussions between it and Vale had focused on building copper assets in Zambia and the Congo. But other opportunities were also being mooted.
Speaking to Miningmx, Motsepe said Vale - with some $15bn in cash - presented a multitude of other possibilities.
Meanwhile, ARM would press ahead with its capital expenditure programme, the thrust of which is the further expansion of Nkomati nickel mine to 16 million tonnes/year of metal from its current 10 million tonnes/year at an estimated start-up cost of R1.2bn.
A feasibility study for the expansion would be completed before the end of the financial year. A financing package was being negotiated, said Wilkens.
"We cannot and will not stop growth projects," said Motsepe. "We don't want to be caught off-guard for when the global economy has found a firm foundation. We need to be able to sell into the market," he said.
- Miningmx.com
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