ARM mulling bid for Kumba - Motsepe
Johannesburg - African Rainbow Minerals (ARM) might consider a bid for Kumba Iron Ore, the company that Anglo American wanted to exit, the diversified mining company controlled by billionaire Patrice Motsepe said.
Even if ARM and its iron ore venture partner Assore decided against a possible purchase of Kumba, the company would seek to save costs by combining overheads with the Anglo unit, because many of their operations were located near one another in Northern Cape, chief executive Mike Schmidt said on Friday.
The company would decide in the next few weeks whether it would inform Kumba of its intent to study the business, Schmidt said in Johannesburg. “We know their ore bodies, they know our ore bodies.”
ARM’s interest in Kumba comes after Anglo American said last month that it planned to dispose of its 69.7 percent stake as part of plans to focus on mining platinum, copper and diamonds. Iron ore and steelmaking commodities, such as manganese and chrome, contributed 44 percent to ARM’s earnings before interest, tax, depreciation and amortisation in the six months to the end of December.
ARM might bid for new platinum assets after signing non-disclosure agreements with sellers, Schmidt said. It was also evaluating opportunities for expansion in copper, he said.
“There are some low-hanging fruits that we’ve identified in platinum and copper,” Motsepe said at an investor presentation.
The company is looking at acquisitions after all its units except the steelmaking-commodities division suffered half-year losses.
Earnings excluding one-time items for the six months to December 31 fell 51 percent to R507 million from a year earlier, aided by a R599m profit from its ferrous unit, ARM saidon Friday.
All of its other divisions, including platinum, coal and copper, had reported losses for the period, the company said.
“African Rainbow is critically reviewing non-performing operations and assessing whether these have the potential to achieve improved results in the future,” it said. The company would cut costs, improve mines and seek to ensure “that where shareholder funding is required, this is minimised”.
The company would not seek money from shareholders, but might need to fund some operations with its venture partners, Schmidt said.
Motsepe said that it would continue to pay dividends.
Mining companies globally have seen their margins eroded by a slump in commodity prices, caused by supply gluts and a slowdown in economic growth in China.