Commentary – Interim Results for the half year ended 31 December 2013

CURRENTLY VIEWING: Interim results for the half year ended 31 December 2013 » Commentary



Headline earnings for the six months to 31 December 2013 increased by 119,4% to R2,4 billion, compared to the same period in the previous financial year. This is due mainly to increased headline earnings of Assmang Limited (“Assmang”) for the period, which increased by 104,4% to R4,3 billion compared to the same period in the previous financial year (“the previous period”).

Selling prices in US dollars for iron ore exports were on average 13% higher compared to the previous period. Prices for manganese and chrome ores remained consistent during the period, with increases in certain grades of both ore types offsetting decreases in other grades, while prices for manganese alloys were generally lower. Market conditions for all the Group’s commodities firmed during the period, with continued demand from Asia and improving demand from Europe and the United States contributing to relatively stable markets. The weaker rand/US dollar exchange rate contributed significantly to Assmang’s turnover, which increased by 33,5% over the previous period, resulting in higher commissions earned by the Group.

Assore holds a 50% interest in Assmang, which it controls jointly and which, until the previous accounting period, has been proportionately consolidated. In terms of new International Financial Reporting Standards (“IFRS”) effective for the Group from the beginning of the financial year, joint ventures are required to be accounted for on the equity accounting basis and Assore has therefore disclosed its share of Assmang’s profit after taxation in its income statement as its “Share of profit from joint venture after taxation” (refer “Accounting policies and basis of preparation” below).


Sales volumes of iron ore were higher for the current period, due to increased sales into the local market from Assmang’s Beeshoek Mine on the back of increased local demand. However, export sales volumes from Assmang’s Khumani Iron Ore Mine are being restricted due to a lack of plant availability and unreliable water supply by the regional water board, which are being addressed. Steady production from Assmang’s Manganese and Chrome divisions enabled the Group to record budgeted export sales volumes for the period, however local sales volumes of manganese ore were lower.

The table below sets out Assmang’s sales volumes for the current period:

Half year ended Increase/
31 December 31 December (decrease)
Metric tons ’000 2013 2012 %
Iron ore 7 738 7 433
Manganese ore* 1 411 1 513 (7)
Manganese alloys* 117 107
Charge chrome 17 48 (65)
Chrome ore* 477 483 (1)
*Excluding intra-group sales to alloy plants


Capital expenditure in Assmang amounted to R1,5 billion (2013: R2,3 billion) for the period. The majority of the capital was spent on replacement and maintenance capital. Major project capital expenditure was undertaken at the Khumani Iron Ore Mine, on the completion of the Wet High Intensity Magnetic Separation (“WHIMS”) plant (R131 million) and R199 million on the continuation of the debottlenecking activities (Khumani Optimisation Project). R297 million was spent in Assmang’s Manganese Division on infrastructure and feasibility studies for the expansion of the Black Rock Mines’ capacity to at least 4 million tons per annum.

The site has been established for Assmang¹s joint venture ferromanganese smelting project in Malaysia and groundwork has commenced. The project, valued at US dollar 328 million, is being undertaken by Sakura Ferralloys SDN.BHD, in which Assmang holds a 54,36% interest. The plant is scheduled to achieve full design production output of approximately 170 000 tons per annum towards the middle of 2016.


Robust steel production in China and the rest of the world during this reporting period supported the demand for the Group’s products and prices were stronger than anticipated. However, the short-term outlook for the Chinese steel industry is clouded by environmental concerns and the gradual transition from an economy based on high fixed domestic investment to a more consumer oriented economy. Nevertheless, the Group expects that world steel production will continue to grow from the record levels of 2013 and thus demand for the Group’s products should increase.

However, some concern exists regarding supply side developments in all of the Group’s markets. Australian miners exported over 90 million tons of additional iron ore in the 2013 calendar year and a similar increment is expected during this calendar year. Manganese ore producers, particularly in South Africa, continue to ramp up production, while South African chrome ore exports are at record levels and are increasing.

The Group’s markets are thus finely balanced and its results remain exposed to fluctuations in the rand/US dollar exchange rate, which has already weakened significantly since the start of the new calendar year.


The results in the announcement include the final dividend relating to the previous financial year of 350 cents (2012: 300 cents) per share, which was declared on 27 August 2013 and paid to shareholders on 23 September 2013. Based on the increased level of earnings for the period, the Board has declared an interim dividend of 450 cents (2012: 250 cents) per share, which will be paid to shareholders on or about 10 March 2014.


The financial results for the period under review have been prepared under the supervision of Mr CJ Cory, CA(SA) and in accordance with IAS 34 – Interim Financial Reporting and comply with International Financial Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Listings Requirements of the JSE Limited (“JSE”) and the Companies Act No 71 of 2008. In terms of IFRS 11 – Joint Arrangements, joint ventures are required to be accounted for using the equity accounting method. As determined by IFRS 11, Assmang is a joint venture, which up until the end of the previous financial year was proportionately consolidated. It has therefore been necessary to change the basis on which Assmang is accounted for to the equity accounting method from the beginning of the current period. While there was no impact on the Group results following the change, it did however, have a significant effect on disclosures made in both the consolidated income statement and statement of financial position. The results for the six months ended 31 December 2012 as previously reported have been included in order to illustrate the impact of the adoption of this standard.

In addition to the adoption of IFRS 11, the Group has adopted several new IFRSs and amendments to IFRSs which have not had any significant impact on the results or disclosures of the Group for the period under review.


Shareholders are advised that on 11 February 2014, the board of directors (“the Board”) declared Interim Dividend Number 114 (“the Dividend”), of 450 cents (2013: 250) per share (gross) for the period ended 31 December 2013.

In terms of paragraph 11.17 of the Listings Requirements of JSE Limited, shareholders are advised of the following with regard to the declaration:

  1. the Dividend has been declared from retained earnings;
  2. the local Dividend Tax rate is 15%;
  3. the Company does not have any Secondary Companies Tax (“STC”) credits available to reduce the impact of the Dividend Tax;
  4. the net local dividend amount is 382,5 cents per share for shareholders liable to pay the Dividend Tax;
  5. the issued ordinary share capital of Assore is 139 607 000 shares, of which 36 400 000 shares are accounted for as treasury shares in terms of IFRS and are therefore excluded from earnings per share calculations; and
  6. Assore’s Income Tax reference number is 9045/018/84/4.

The salient dates are as follows:

Last day for trading to qualify and participate in the final dividend Friday, 28 February 2014
Trading “ex dividend” commences Monday, 3 March 2014
Record date Friday, 7 March 2014
Dividend payment date Monday, 10 March 2014
Dates (inclusive) between which share certificates may not be dematerialised or rematerialised Monday, 3 March 2014 to Friday, 7 March 2014

On behalf of the Board

Desmond Sacco CJ Cory Johannesburg
Chairman Chief Executive Officer 12 February 2014