Assore’s cash war chest grows despite handsome dividend
Assore reported a R10/share dividend for the six months to end-December and in its 2018 year, it paid out a record R22/share in total dividends
Assore, a tightly held resources company, continued to build its cash pile after a strong interim period in which its iron ore and manganese interests benefited from higher prices.
Assore reported a R10/share dividend for the six months to end-December, in line with its interim dividend from the year before. In its 2018 financial year, it paid out a record R22/share in total dividends.
Interim post-tax profit of R2.93bn was higher than the previous year’s R2.48bn, as revenue grew to R3.95bn from R3.84bn.
Cash of R8.75bn on its balance sheet by the end of December left Assore in a net cash position of R7.65bn.
Assore has a 50% stake in Assmang, which it shares with African Rainbow Minerals (ARM).
The Assore results give an early look at one of the main pillars of ARM’s business portfolio, which includes platinum group metals, nickel and coal.
Assmang has iron ore and manganese mines in the Northern Cape as well as manganese alloy smelters. It reported headline earnings for R4.29bn for the six-month period, up from R3.47bn a year earlier.
Assmang contributed R2.14bn towards Assore’s headline earnings of R2.9bn, which were 20% higher than a year ago.
“During the first six months, we experienced an improved price basket and a weaker exchange rate, which were countered by some difficulties with inland logistics on certain product lines,” CEO Charles Walters said.
The dividend payment was kept steady in line with last year’s 60% increase in return to shareholders as the company continued to build its cash reserves to “fund our future growth ambitions”, he said.
Assore owns the Dwarsrivier chrome mines and is in the process of selling the Machadodorp smelting complex, a transaction it expects to wrap up in the next few days.
Assmang’s iron ore sales were 4% lower at 8.75-million tonnes in the interim period because of logistical constraints both on the railway line and at the Saldanha harbour.
While manganese sales from Assmang were 3% higher at 1.6-million tonnes, exports were constrained by the same logistical challenges as the iron ore business.
“During the current period, demand and prices for manganese ore remained elevated, driven by China's increased reliance on imported ore,” Assore said, noting there remained a supply deficit in the global manganese ore market.
In the manganese alloy market, however, there was an oversupply of the ingredient used in steel manufacturing.
“This, together with the sustained elevated prices of manganese ore (as a key input cost to alloy production), has led to some production cut backs by the manganese alloy industry,” Assore said.
Assmang is busy with two projects in its manganese business to grow ore production to five-million tonnes a year, including a R6.7bn expansion of its Black Rock mine. In 2018, the manganese division supplied 3.7-million tonnes of ore.
Assore’s wholly owned Dwarsrivier chrome ore business sold 757,000 tonnes in the interim period, a 5% drop. This was because of community unrest near the mine in Mpumalanga as well as congestion at Maputo harbour in Mozambique.
Assore bumped up its stake in AIM-traded IronRidge Resources to 31.3% during the past six months from nearly 29% at a cost of R56m.
IronRidge is exploring for economically viable deposits of lithium and gold in Ghana, Chad and Ivory Coast.