African Rainbow Minerals
“African Rainbow Minerals was founded by our current executive chairman Mr P T Motsepe who is a black entrepreneur in South Africa. He founded the company in the early 1990’s. He had a contract mining company which he eventually grew into acquiring some assets, marginal assets in Anglo Gold at the time” Monique Swartz, Corporate Development and Head of Investor Relations for African Rainbow Minerals (ARM) explains.
“That’s when his partnership with our current CEO Andre Wilkens began. From then he has been able to grow the business into what we have now today through a series of merger transactions.”
With foundations like this, both ARM’s partnerships and diverse portfolio are quite unique. Swartz explains that in the early days of the company, larger partners were a key part of ARM’s growth plan.
“ARM’s important -“We-do-it-better” principle over the last decade has really been around ARM’s ability to ensure that operations, acquired are successfully operated as a smaller, more entrepreneurial company, able to reduce costs and able to limit labour reductions, by keeping assets which had previously been closed, operational” she explains.
“The other principle of success for ARM, which worked quite well, was the company’s ability to partner with large organisations and actually draw on their skills to ensure that ARM was effectively able to optimise the assets which they owned.”
Today ARM has a huge portfolio of different projects but there are three main avenues which they are focusing on.
DETAILING DIVERSITY – PROJECT OVERVIEWS
“We are a diversified mining company and have assets in platinum, the precious metals side which we operate and also have assets in gold. We have a simple equity investment in Harmony but we don’t have any actual management control there. We’re also exposed to bulk materials which we do manage and that includes iron ore, manganese and chrome. We also have investments in thermal coal mining and we’re actively involved in those operations” Swartz summarizes.
“The other operations are more on the exploration side, very exciting, in Africa where we are looking to be in copper production in the longer term. If you look at 3 operational divisions, apart from the exploration side, there are three key projects.”
Swartz explains that ARM has a flagship project under each of their three operational divisions.
“Under the platinum division it’s actually a nickel operation which is currently evolving from a very high grade nickel ore body, which has come to the end of its life, to a really large scale lower grade open pit operation which will produce about 20,000 tons per annum of nickel in about a year and a half’s time” she says.
“That’s quite an exciting project at least certainly on revised numbers because even with the recent slowdown in the market we’re still looking at a cash cost of around $3.50. Even with depressed nickel pricing it’s still a very attractive project for us. It’s well on its way and we will have secured sufficient funding as well to ensure its completion.”
Under their coal division ARM have a very exciting project known as Goedgevonden or GGV, where ARM has and effective 26 per cent ownership and Xstrata Coal SA owns the balance.
“This is a thermal coal project of approximately 50% export and local. GGV will be one of the first South African projects to be a drag-line operation actually built from scratch, and we are currently in the process of ”walking” the drag-line” Swartz explains.
“It’s going to be an open pit operation and one which sits at the bottom end on the global cost curve so it can be a very cost competitive operation so we’re very excited about that. That commissioning should be starting in by year end.”
Another exciting current development is ARM’s Khumani iron ore mine, where ARM owns an effective 50 per cent.
“It’s actually in ramp up as we speak” Swartz reveals.
“We have built a 10 million ton iron ore operation so it’s nothing substantial from a global perspective. But from an ARM perspective it is quite substantial when you consider that previously we were producing around 6 million tons of iron ore. This is quite a high grade operation with a typical 65-66 per cent Fe product and again it’s a really low cost and a new mine.”
THE ARM APPROACH
Swartz is acutely aware of the position ARM is in and its exemplary growth and development, starting with their carefully selected and internationally respected partners.
“ARM is very unique in its size and its diversification. Yes there are other companies of our size or in our range, but very few have the diverse portfolio that we have, spanning across the precious, bulks, thermal coal and base as well, so we have quite a healthy exploration portfolio. We are often compared to the likes of a BHP Billiton in terms of our mix, except for the platinum” she says.
“What sets us apart is our growth project so even though we’re a smaller company, we have a very well diversified commodity exposure. We’ve got very exciting projects in all of the key areas and it’s not growth at the expense of quality or margins.”
ARM has struck that coveted balance between understanding their local market position and building on that, with an international profile and potential for expansion. Swartz places great emphasis on the stand-alone quality of ARM’s projects as a base for their development strategy.
“They (ARM projects) are very cost competitively positioned globally and that’s certainly unique because a lot of smaller companies have relatively lower grade, relatively higher cost operations. We’ve been quite fortunate in the quality of portfolios we’ve been able to grow organically.”
“These are assets which existed in the company and we just needed to prove-up through the feasibility study so our growth exposure is something quite unique.”
And that is exactly what ARM has done, is doing, and continues to do.