What’s bugging Patrice Motsepe?

He also spoke of the importance for government, business and labour to partner with each other in order to build world class companies.

“Our future is inextricably intertwined. None of us can succeed unless all of us do,” Motsepe said at an African Rainbow Minerals (ARM) results presentation.

“The country has to grow in the direction of a mature democracy. The historical suspicion and distrust we’ve had in labour has no place in the future,” he said in reference to mining. He commended efforts to teach miners about the markets in which their employers operate.

For ARM, challenging market conditions made for a less than ideal interim period.

During the six months to December 31 2015, the diversified miner reported a loss of R966 million in basic earnings, down from a profit of R801 million in the prior corresponding period. This was largely due to an impairment of R1.4 billion taken against its Zambian copper Mine, Lubambe, which has been placed under review.

Encouragingly, widespread cost cutting initiatives has seen ARM reduce the unit production costs of a number of commodities it mines to below the inflation rate (see chart below).

But significant declines in the dollar-based prices of all the commodities ARM produces caused some pain as its platinum, coal and copper operations reported headline losses. Support from the weak rand, allowed its ferrous operations to deliver headline earnings of R599 million. Among its ferrous divisions, chrome performed best with headline earnings rising 39% to R78 million on a 100% basis. And despite a 33% decline in average dollar based iron prices, the division’s headline earnings fell by only 19% to R957 million. Thanks to foreign exchange gains on loans from ARM to Lubambe, which has a dollar functional currency, ARM corporate posted a 66% increase in headline earnings to R331 million. Still, group headline earnings fell 51% to R507 million, which is equivalent to headline earnings per share (Heps) of 233 cents.

ARM is positive about a recovery in commodity prices and believes that measures taken to enhance efficiency and profitability hold it in good stead. “The fundamentals for the metals we own remain very positive over the long term and we’re well positioned on the cost curve,” said CEO Mike Schmidt. Six of the company’s ten operations fall below the 50^th percentile of the cost curve, and it is working to bring the other four in line and make further improvements to operational efficiencies across the board.

It also highlighted that its low gearing ratio of 10.9% and long-life asset portfolio enable it to assess opportunities for growth.

“”This environment is an environment for opportunities… As long as they’re cash generative and they contribute to us being below the 50^th cost percentile, we will pursue them,” Motsepe said of potential acquisitive growth.

Schmidt said ARM’s business development unit is probing the Kumba Iron Ore assets, which parent company Anglo American is putting up for sale. And while “there are certainly synergies from an operational point of view”, he said that it is still “early days”.