African Rainbow Minerals sets aside R319m for silicosis settlement

Patrice Motsepe-chaired African Rainbow Minerals (ARM) has set aside R319m for the lawsuit aimed at compensating victims of silicosis and other occupational lung diseases.

In July, a R5bn settlement between six gold miners, including ARM, and workers was approved by the high court in Johannesburg. This was the result of a historic class action dating back to 2012.

ARM said it had made a financial provision of R319m to cover the legal costs of the claimants’ attorneys, the costs of establishing and administering a trust, and payment of benefit contributions to the trust over a 13-year period.

“ARM has a contingency policy in this regard, which covers environmental site liability and silicosis liability, with Guardrisk Insurance Company,” it said. Guardrisk had reinsured the specified risks with Mannequin Insurance.

On Friday, ARM reported a 9% increase in headline earnings to R5.2bn for the year to end-June. Earnings were boosted by the group’s iron ore and Two Rivers operations.

The company declared a final dividend of 900c a share, from 750c a year before. That brings the total dividend for the year to 1,300c per share.

ARM said moves to tackle pollution, particularly in China, and tightening emission regulations globally are expected to support demand for high-quality bulk commodities, “positioning ARM’s high-grade iron ore and manganese ore well”.

“In the medium to long term, global emission reduction initiatives and the move to cleaner mobility and energy are expected to put pressure on demand for platinum group metals and thermal coal but create opportunities for other commodities in our portfolio.

“ARM continues to assess the impacts of these trends and invest in line with our capital allocation guiding principle to ensure that our assets are on the lower end of the global unit cost curve and that our commodity mix is well positioned to maximise on the opportunities created by these trends.”

Abdul Davids, portfolio manager at Kagiso Asset Management, said ARM’s full-year dividend of R13 a share, together with “certainty around the future of the Nkomati Nickel mine” were being well received by the market.

The company’s shares were 1.6% up at R163.21 on Friday afternoon.

“ARM cites a muted outlook for 2020 based on a slowdown in global growth that has been exacerbated by the trade tariff war between the US and China,” Davids said. “Further weakness in iron ore and manganese prices should be offset by continued strength in platinum group metal prices and a weaker rand exchange rate.”  

hedleyn@businesslive.co.za