Our opinion on the current state of ARM(ARI)
African Rainbow Minerals (ARI) is a diversified mining company controlled by Patrice Motsepe, engaged in various mining ventures, including platinum group metals (PGM), iron ore, manganese, chrome, coal, and copper. The company also owns a 12.2% stake in Harmony Gold, leading to some speculation about possible acquisitions or strategic partnerships. One potential acquisition could involve the Wafi-Golpu copper and gold resource, jointly owned by Harmony and Australian mining company Newcrest. Harmony is seeking financial support to cover its share of the development cost for this massive resource, estimated at around R21bn, and ARM could potentially be part of that solution.
In addition to this, ARM is looking for acquisitions of "green metals" mines—those that produce metals used in efforts to avert climate change, which aligns with the global move towards sustainability.
In its results for the year ending 31st December 2023, ARM reported a 43% decrease in headline earnings and net cash of R7,935m. Despite an 8% weakening of the average rand exchange rate against the US dollar and a 6% increase in export iron ore sales, the company faced challenges. ARM Platinum, in particular, experienced a significant downturn, with headline earnings 121% lower, resulting in a R282 million loss compared to R1,330 million in earnings for the first half of the previous financial year. This was attributed to depressed commodity prices and above-inflation unit cost increases.
In a trading statement for the year ending 30th June 2024, ARM estimated that headline earnings would decrease by between 40% and 50%. The decline in earnings was primarily due to a decrease in the average US dollar 6E PGM basket price and lower thermal coal prices.
Technically, the share has been declining since the beginning of 2023 due to falling commodity prices but may be nearing a bottom. ARM is a strong mining company with stability gained from its diversification into base metals. However, it remains a risky investment, especially if the board decides to venture into new areas like Wafi-Golpu, which would require significant long-term commitment.
In addition to this, ARM is looking for acquisitions of "green metals" mines—those that produce metals used in efforts to avert climate change, which aligns with the global move towards sustainability.
In its results for the year ending 31st December 2023, ARM reported a 43% decrease in headline earnings and net cash of R7,935m. Despite an 8% weakening of the average rand exchange rate against the US dollar and a 6% increase in export iron ore sales, the company faced challenges. ARM Platinum, in particular, experienced a significant downturn, with headline earnings 121% lower, resulting in a R282 million loss compared to R1,330 million in earnings for the first half of the previous financial year. This was attributed to depressed commodity prices and above-inflation unit cost increases.
In a trading statement for the year ending 30th June 2024, ARM estimated that headline earnings would decrease by between 40% and 50%. The decline in earnings was primarily due to a decrease in the average US dollar 6E PGM basket price and lower thermal coal prices.
Technically, the share has been declining since the beginning of 2023 due to falling commodity prices but may be nearing a bottom. ARM is a strong mining company with stability gained from its diversification into base metals. However, it remains a risky investment, especially if the board decides to venture into new areas like Wafi-Golpu, which would require significant long-term commitment.
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