Picture: REUTERS
Picture: REUTERS

Iron ore producer Assore expects to benefit from the weaker rand, which slid past R15.50 to the dollar on Tuesday.

The currency was reacting to news that the SA economy had entered a recession after it experienced negative economic growth in the first and second quarters of 2018.

The weaker currency works in favour of Assore, which also produces manganese and chrome, because it means mostly cheaper costs and higher income from sales.

The rand fell further on Wednesday to R15.69.

On Thursday evening it was trading at R15.32.

"The business itself remains insulated from the SA economy and sells 95% of its product into global markets," said Assore CEO Charles Walters.

"Obviously as SA citizens we are concerned about reasons for the blowout and local economic woes we struggle with … mine community issues and the like," he said. Assore, which is the equal partner in Assmang with African Rainbow Minerals, on Thursday reported profit for the year to end-June of R5.175bn, up from R5.138bn. The company declared a dividend of R12, taking the full-year return for shareholders to a record R22, significantly up from R14 per share in 2017. Assore is a tightly held stock with a market value of R47.7bn.

Walters said cash has been retained for growth purposes, although there are no new projects on the horizon as yet. Assmang has, however, approved spending of R2.7bn over the next few years to modernise Gloria, a manganese mine in its Black Rock operations in the Northern Cape.

The effect on the business of a potential trade war between the US and China has been muted. "What we hear in rhetoric and what’s actually happening are two different things," said Walters.

He said it is also important to differentiate the crude steel market in China, which is expanding production at more than 6% a year and is less affected by steel tariffs imposed by the US. On the stainless steel side, the Chinese do export quantities of the product to the US and that is causing some weakness in chrome pricing.

Walters said Assore benefits from having high-quality ores, which fetch higher prices than other players in the world.

steynl@businesslive.co.za

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