ARM shows platinum ambition in Implats deal

[miningmx.com] – AFRICAN Rainbow Minerals (ARM) has struck a deal with Impala Platinum (Implats) which will extend the life of its Two Rivers platinum mine in South Africa’s Mpumalanga province from the present seven years to 30 years.

Two Rivers is a joint venture with Implats in which ARM holds 55% and Implats 45%, but ARM’s stake had dropped “temporarily’ to 51% following the new arrangement, according to ARM executive chairman Patrice Motsepe.

The deal follows comments made by Motsepe last year in September and March that ARM was looking at possible platinum mergers and acquisitions in South Africa.

In reply to questions at the presentation of ARM’s results for the six months to December held in Sandton today, Motsepe confirmed further deals for ARM were possible in the platinum sector.

But he repeated his statement made last year that ARM was “not interested’ in any of the assets that Anglo American Platinum (Amplats) was looking to sell near Rustenburg.

Motsepe said: “So we said the last time, we are not looking at Rustenburg because ARM is focused on low-cost, mechanised mining. So Rustenburg does not fit into our strategy going forward.

“The transaction we have done is a highly value accretive one. We continue to look at other opportunities. There was another opportunity that we were looking at but the seller wanted more than we were prepared to pay and that deal was not as important to us as this transaction at Two Rivers.’

Motsepe described Two Rivers as “… the lowest or second-lowest cost producer in the platinum sector.’

In terms of the deal, ARM’s interest in Two Rivers had dropped to 51% following completion of the transfer of Kalkfontein portions 4,5 and 6 and the Tweefontein prospecting rights. Portions of the Buffelshoek, Kalkfontein and Tweefontein farms were added into the Two Rivers mining area.

In addition, ARM has acquired a company called Tamboti Platinum for R400m which holds a mining right over another property adjacent to Two Rivers and “ARM is in discussions with Implats to transfer this property to Two Rivers.’

ARM Platinum’s divisional contribution to ARM’s headline earnings dropped 24% to R277m in the six months to end-December (2013: R363m) as a 12% increase in earnings from Two Rivers was offset by lower production at the Modikwa and Nkomati mines and a poor cost performance at Modikwa.

ARM’s headline earnings plunged 56% to R1bn (R2.34bn) as the group’s revenues were hit “… primarily by the decline in US dollar commodity prices,’ according to Motsepe.

Basic earnings dropped 53% to R801m (R1.7bn) as ARM was forced to take an “unrealised mark-to-market loss of R222m after tax on the Harmony investment made through the income statement.’ ARM holds a 14.9% stake in gold producer Harmony.

CEO,Mike Schmidt , said he expected the current “challenging’ business conditions to continue for two to three years.

He commented: “ARM is responding pro-actively with a number of key areas under review. I am not going to elaborate on that at this stage.’