Charlotte Mathews
21 February 2008
Johannesburg — MINING investment company African Rainbow Minerals (ARM) planned to raise funds shortly to advance promising projects in Africa, it said yesterday.
CEO André Wilkens said the board would decide how to fund the capital requirements of 65%-held Teal Exploration and Mining over the next three months.
First results from drilling around the Konkola copper project in Zambia were "exciting" and ARM was happy with grades at the recently opened Kalumines copper mine in the Democratic Republic of Congo. These projects would need "quite a lot of money", Wilkens said.
The question was whether ARM would pursue the model already used for Teal, of guaranteeing a bank loan, or whether the market would be approached for funding.
ARM chairman Patrice Motsepe said the company was looking at "some interesting opportunities" in Africa outside Teal.
He said there was a sense of urgency to ARM's African growth strategy, which was best achieved through partnerships with bigger and more experienced companies.
"During the course of the year further announcements will be made in this regard," said Motsepe.
But he ruled out ARM's participation in 16%-held Harmony Gold Mining's search for a partner for its Papua New Guinea operations.
He said ARM had limited management capacity and was busy with opportunities on the African continent.
He said the mining sector was experiencing a commodities supercycle that was likely to persist into the medium term. For companies such as ARM this presented an opportunity to grow, reduce costs and form partnerships that would make it stronger for the future.
In the six months to December 31, ARM grew headline earnings 34% to 353c per share compared with the same period in 2006 as total revenue rose 58% to R4,1bn.
Wilkens said the increase was driven by high commodities prices and record volumes of production of manganese ore, iron ore, thermal coal and chrome ore, and control of costs. No interim dividend was declared. ARM said because of its significant growth pipeline it would consider paying annual dividends.
In the current financial year, ARM would spend about R2,8bn in capital, falling to R2,6bn next year, but this was rendered more affordable by the fact that ARM generated R1,6bn in cash from operations in the past six months, about three times the R551m generated in the comparable period a year before.
ARM is building three new mines. The R3,2bn Nkomati nickel project would achieve full production of 20500 tons a year by 2011, the R4bn Khumani iron ore project would achieve full production of 10-million tons a year by 2010, and the R3,2bn Goedgevonden coal project would reach full production of 6,7-million tons a year by 2011.
The Khumani ore body could support production of 20-million tons a year, and a feasibility study should be completed by June, Wilkens said. The issue was transport capacity and negotiations with Transnet were under way.
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