WITH net debt down to around R1bn, African Rainbow Minerals (ARM) is keen to embark on new merger & acquisition (M&A) activity and first up could be an acquisition to replace the disastrous Lubambe copper mine in Zambia which has now been sold.
Addressing investors in Johannesburg today at a presentation of ARM’s results for the year to end-June, chairman Patrice Motsepe highlighted the decrease in debt from around R4bn a year previously and commented, “we are back in the realm of acquisitions……not that we have ever stepped away from them……..but we have re-positioned and restructured the company for what we call external growth.”
Motsepe added that internal growth at ARM would continue but commented, “the focus in the short to medium term is on external growth.”
In his presentation CEO Mike Schmidt said that, “copper remains an absolute key focus of ours and there are currently one or two operations that are being evaluated because copper is very high on our wish list and our want list.”
But, at question time, he denied that a new copper project was the top priority for the group and said , “We don’t rank our opportunities. We put them into a basket and say our focus is copper, manganese, iron ore and pgms (platinum group metals) and we have certain criteria we have to follow.
“There are one or two copper opportunities that we are looking at – and investigating – and doing the evaluations. There’s no absolute preference in terms of copper but we believe it’s a commodity in terms of the electric vehicles that are upcoming by 2025. It’s a clear focus in terms of opportunity . “
Schmidt declined to specify where the projects that ARM is looking at were located other than to say they were outside of South Africa and “not on the Copperbelt”.
ARM and partner Vale invested some US$400m in the Lubambe mine but sold it earlier this year to private equity firm EMR Capital Bidco for just $97,1m after a string of technical problems at the mine including massive inflows of water.
In his presentation Schmidt commented ; “it (Lubambe) is a great orebody but the down-dip extension – as rich and as unique as it is – is pretty geo-technically complex. It’s very deep and – a number of our holes that we drilled to try to access that orebody – we struggled to get through the dolomitic structures and there is a significant amount of water there.
“It will always remain on the wrong end of the cost curve so we made a strategic decision to get out of that operation but copper remains an absolute key focus of ours.”
Asked what changes ARM had made to its evaluation procedures to ensure it did not pick another “dog” like Lubambe again Motsepe rejected the contention it was a bad investment and replied, “Lubambe was a good one. What changed at Lubambe was the copper price took a significant dip and the taxes in the country went up.”
