ARM to spend R14.5bn in PGM expansion after clinching Bokoni Platinum deal

Patrice Motsepe, chairman, ARM. Photo: Getty Images

AFRICAN Rainbow Minerals (ARM) will invest R14.5bn in two platinum projects over the next three years as the group anticipates that a recovery in autocatalyst demand and tightening emissions standards will be “positive for platinum group metal (pgm) demand in the short to medium term”.

The projects are the development of the Bokoni Platinum mine which ARM bought from Anglo American Platinum for R3.5bn – to be settled this month after closure of the deal in August – and the expansion of the Two Rivers operation to mine the Merensky Reef.

According to the ARM results statement for the year to end-June the focus at Bokoni is to finalise a definitive feasibility study this year after which mining operations will begin in 2023.

ARM intends spending development capital of about R5.3bn over the next three years to ramp up the mine to a steady state production of about 300,000 ounces of platinum group metals (PGMs) and 255,000 tons of chromite concentrate annually.

At the Two Rivers mine – which is a joint venture with Impala Platinum – ARM intends spending a total of R5.7bn (on a 100% basis) over the next three years to open up the Merensky Reef targeting annual production of 182,000oz of PGMs, 1,600 tons of nickel and 1,300t of copper annually.

Mining started on the Merensky Reef in February and “is ramping up after initial lower production rates” despite which the project completion date has been kept at November 2024.

ARM’s results for the year to end-June were a mixed bag with lower platinum and iron ore earnings being largely offset by a massive jump in coal earnings much of which was used to settle the loans due to Glencore South Africa by ARMCoal.

ARM’s headline earnings dropped 13% to R11.4bn (previous financial year: R13.1bn) equivalent to R57.87 a share (R66.88/share). The final dividend was maintained at an unchanged R20/share to make a total of R32/share (R30/share) for the year.

ARM Platinum’s earnings dropped 34% mainly because of a negative mark-to-market adjustment caused by the impact of the sharp drop in rhodium and palladium prices in the second half of calendar 2021.

According to ARM, the Two Rivers and Modikwa mines report revenues using provisional pricing with the sales price of the concentrate determined on a provisional basis at the date of sale. Post refining and delivery adjustments are made to reflect final pricing.

“A portion of ARM Platinum receivables as of June 2021 was realised at lower prices after the sharp decline in rhodium and palladium prices in the first three months of the current financial year.”

In their outlook statement ARM chairman, Patrice Motsepe and CEO Mike Schmidt tip-toed around the current transport logistics and infrastructure crisis in South Africa.

They commented: “Although there are numerous challenges in the performance of logistics channels, the reliable supply of power and water security we are working with government and all stakeholders to find sustainable solutions that benefit the mining sector and the country”.