Assore raises dividend on record performances in several minerals

ASSORE, a diversified and tightly held mining company, increased its dividend payment after posting record annual performances in a range of minerals it produces.

Assore, which has as its key asset a 50% stake in mining company Assmang, which it shares with African Rainbow Minerals, reported a final dividend of 500c per share for the year to end-June, compared with 300c last year, bringing the total return to shareholders to 700c versus 600c before.

Iron ore output was 5% higher at 17-million tonnes and chrome ore increased 7% to 1.15-million tonnes. Manganese ore production climbed 11% to 3-million tonnes, while manganese alloy output slumped 22% to 175,000 tonnes.

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The results from Assore give some insight into ARM’s results, due out on Thursday.

Assore’s shares have gained 141% in the year to date, compared with a 108% fall in those of its partner, which has platinum, copper and coal assets in its portfolio.

Assore’s revenue fell to R2.9bn from R3.4bn despite record iron ore and chrome ore output in the year. It posted a profit of R1.5bn compared with R1.3bn the year before.

“Prices for the group’s products recovered during the second half of the financial year. However, global economic conditions remain challenging, with continued oversupply in the iron ore market,” said Assore chairman Des Sacco.

“Despite these dynamics, record sales volumes of iron and chrome ores were achieved by the group for the second year in a row,” he said.

Looking ahead, the outlook for iron ore prices remained constrained as higher-cost producers continued to mine, given the recent increase in the price of the ingredient to make steel coupled with a slowing Chinese economy, Assore said.

“Prices are therefore expected to remain under pressure and it is unlikely that the current price levels will be maintained,” it said.

Prices for manganese, an ingredient in the steel manufacturing business, would remain volatile because of excess supply of medium-grade ore. Manganese alloy prices were seen coming off their low base, it said.

“Consolidation in the South African ferrochrome industry, as well as stable levels of supply from chrome ore miners, have resulted in a notable recovery in chrome ore prices,” it said.

“Inventories of chrome ore in Chinese ports recently reached a 10-year low and, based on the current fundamentals, the chrome ore market should remain strong in the near future.”

However, mining and producing alloys in SA had become expensive, with electricity and labour driving cost increases more than inflation. “Therefore, the group has embarked on further right-sizing and restructuring projects in an attempt to improve and maintain the competitiveness of its operations.”

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Assmang’s 54.36%-held Sakura Ferroalloys smelting plant in Malaysia is nearing completion and shipped its first ferromanganese alloy in June. The plant has two furnaces, with the ferromanganese furnace having a capacity of 110,000 tonnes a year and the silico manganese furnace having capacity of 70,000 tonnes a year. It will be commissioned in September this year.

Assmang impaired its Furnace 6 at Cato Ridge in KwaZulu-Natal by R333m, after stopping high-carbon ferromanganese production at the furnace. It also impaired assets at Machadodorp for R72m.

Assore’s share of the impairments was R203m. Assore recorded impairments of R96m from other assets in its portfolio.

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