Assore operations

Dwarsrivier Chrome Mine Proprietary Limited (Dwarsrivier) achieved an improvement in its lost-time injury frequency rate (LTIFR) to 0,18 for the six months to 31 December 2018 (the current period, or H1 FY19) from 0,23 for the six months to 31 December 2017 (the previous period, or H1 FY18). However, incidents at Assore's other operations, resulted in an overall increase in the LTIFR from 0,21 to 0,29 over the same period.

Assmang operations

The combined LTIFR of the Assmang Proprietary Limited (Assmang) operations, which is jointly controlled by Assore and African Rainbow Minerals Limited (ARM), has deteriorated slightly to a level of 0,13 for the current period, compared to 0,12 for the previous period.

The group remains committed to the pursuit of continued, sustainable improvement in our overall safety performance.

Group financial performance

Headline earnings for H1 FY19 increased by 20% to R2,92 billion, compared to R2,43 billion for the H1 FY18. Assmang, in which Assore has a 50% interest, recorded headline earnings of R4,29 billion (H1 FY18: R3,47 billion), an increase of 23%, on a 100% basis. This contributed R2,14 billion towards the group's headline earnings. In accordance with International Financial Reporting Standards (IFRS), Assmang is classified as a joint venture and accordingly, its financial results are equity accounted. The rest of the group's operations reported headline earnings that were 15% higher than the previous period, at R0,77 billion, of which Dwarsrivier contributed R327 million (H1 FY18: R440 million), with commissions and interest earned making up most of the balance. Attributable earnings amounted to R2,92 billion, 19% higher than H1 FY18.

The average SA rand/US dollar exchange rate for the current period was R14,06, 5% weaker than the level that prevailed during H1 FY18. The index price for iron ore (62% iron content, fines grade, delivered in China (the index price)) was stable, while the lump premium for the current period increased to US dollar 20,49 from US dollar 15,03 in H1 FY18. Manganese ore price indices were higher for both quoted grades (44% and 37% manganese content) compared to H1 FY18. Sales volumes of iron ore and chrome ore were lower than in the previous corresponding period due to unforeseen inland logistical challenges while sales volumes of manganese ore and alloys were higher.

Production and sales volumes achieved by the group were as follows:

Metric tons ’000     Six months to 
31 December 
      Six months to
31 December
Production volumes (100%)                      
Iron ore     8 742       9 143   (4)  
Manganese ore     1 737       1 865   (7)  
Manganese alloys     194       190    
Chrome ore     765       717    
Sales volumes (100%)                    
Iron ore     8 752       9 130   (4)  
Manganese ore*     1 605       1 556    
Manganese alloys     164       162    
Chrome ore     757       794   (5)  

* Excluding intragroup sales

Strong cash generation resulted in group net cash increasing by 16% to R7,65 billion at December 2018 (December 2017: R6,6 billion). The board has declared an interim dividend of 1 000 cents (H1 FY18: 1 000 cents) per share, which will be paid to shareholders on or about 18 March 2019.

Market conditions

The markets into which the group sells its products were generally stronger in comparison to the 2017 calendar year. World crude steel demand is estimated to have grown by 3,9% in the 2018 calendar year (CY18), resulting in favourable iron ore and manganese ore prices for the current period. The world stainless-steel production is estimated to have grown by 6,1% in CY18. However, the demand for stainless steel eased towards the end of CY18 resulting in a decrease in the average index price for chrome ore compared to the previous period.

Assmang (iron ore and manganese)

Attributable earnings increased by 23% over the previous period to R4,28 billion (100% basis, H1 FY18: R3,47 billion). Iron ore delivered R2,43 billion (H1 FY18: R1,75 billion) while manganese ore and alloys contributed R1,85 billion (H1 FY18: R1,74 billion). This was driven mostly by increased turnover which was 17% up on the previous period to R16,29 billion on the back of the weaker average SA rand/US dollar exchange rate, an improved price basket and an increase in the volume of manganese ore sold.

Capital expenditure in Assmang amounted to R1,98 billion for the period (H1 FY18: R1,17 billion). Approximately half of this amount was spent in Assmang's Iron Ore division, including R443 million spent on waste stripping and R404 million on replacement capital. A further R225 million was spent in the Manganese division on the Black Rock Expansion Project (BREP) and R167 million was spent at Gloria. At 31 December 2018, 92% of the capital approved (R6,7 billion) for the BREP had been committed. The capital expenditure in the Manganese division, on the BREP and at Gloria, will provide Assmang with the capacity to produce up to 5,0 million tons per annum of manganese (subject to market conditions), while simultaneously optimising the Black Rock resource and providing grade flexibility.

Iron ore

The average index price for iron ore for the current period remained stable, at US dollar 69 per ton compared to the previous period. However, the lump premium increased by 36% to an average of US dollar 20 per ton, compared to the previous period. This was primarily due to Chinese steel mills utilising increased volumes of higher grade ore amid ongoing environmental restrictions. In addition, there was an increase in the premium achieved for spot sales during the current period.

Assmang's iron ore operations achieved total production of 8,74 million tons and total sales volumes were 8,75 million tons (H1 FY18: 9,14 million tons), 4% lower due to logistical challenges experienced on the export rail line to Saldanha.

Manganese ore and alloys

During the current period, demand and prices for manganese ore remained elevated, driven by China's increased reliance on imported ore. The world market for manganese ore remained undersupplied during the period. Robust levels of Chinese steel production, which were reported to have increased by 6,6% year-on-year in CY18, resulted in higher alloy production, and this continued to support elevated price indices for the period for both higher grade (44% manganese content) and medium grade (37% manganese content) ores.

On the contrary, the world manganese alloy market experienced a period of oversupply which has resulted in pressure on prices. 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.

Assmang's total sales volumes of manganese ore increased by 3% from the previous period to 1,6 million tons. However, export volumes from Saldanha were negatively impacted by the logistical challenges experienced on the export rail line, which necessitated the use of the road network.

Dwarsrivier (chrome ore)

Increased beneficiation plant utilisation gave rise to a 7% increase in production volumes at Dwarsrivier to 765 000 tons, compared to 717 000 tons produced in the previous period. The Chinese markets for chrome ore (and ferrochrome) were weaker compared to the prior period, resulting in the average US dollar price decreasing by 10% to USD186 per ton (44% chrome content material,delivered China).

Sales volumes decreased by 5% to 757 000 tons (H1 FY18: 794 000 tons) due to inland logistical challenges resulting mainly from community unrest in the vicinity of the mine, as well as congestion experienced in the port of Maputo during the latter quarter of the year. Dwarsrivier thus recorded a reduction in turnover of 8% and a reduction in earnings of 26%. Capital expenditure amounted to R214 million (H1 FY18: R121 million) of which R92,6 million was replacement and the balance being on improving efficiencies and compliance.

Marketing and shipping

Consolidated marketing commissions earned by the group increased over H1 FY18 in line with Assmang's turnover. Interest earned on the group's cash resources amounted to R308 million (H1 FY18: R219 million).


The group increased its interest in IronRidge Resources Limited (IronRidge), an Australian minerals exploration company listed on London's Alternative Investment Market (AIM) from 28,9% to 31,27% in November 2018, following a rights issue to the value of R56,6 million. IronRidge has a portfolio of gold, lithium, bauxite and iron ore prospects in Africa and Australia. During the current period, the activities of IronRidge were focused mainly on lithium and gold exploration prospecting in Ghana, Chad and Ivory Coast.


World economic growth remained strong for CY18. However, this growth momentum has started to wane with growth in CY19 forecast to be marginally lower. The expected decline in growth is reflected in the slowdown observed in some of the major advanced economies towards the end of CY18 as a result of ongoing trade actions and the uncertain geopolitical environment. Chinese stimulus measures are being put in place to cushion the slowdown in that economy.

Chinese environmental policies are expected to continue to impact high grade iron ore and manganese ore markets positively thereby supporting the demand for the group's high quality products. The demand for lump iron ore and pellets is expected to remain firm, which should be supportive for premiums on these products. However, the recent decline in steel prices and reduced steel mill profitability in China is anticipated to result in a substitution in favour of ore with lower iron content. This is likely to result in a narrowing of price differentials between the various grades of the group's products.

The growing oversupply in the ferrochrome market and the subsequent pressure on chrome ore prices is set to constrain any major upward chrome ore price movements.

The group remains confident that its portfolio of mines and marketing operations are well positioned for the future.

The outlook statement has not been reviewed and reported on by the group's external auditors.

Accounting policies and basis of preparation

The directors of Assore take full responsibility for the preparation of this announcement. The financial results for the period under review have been prepared under the supervision of Mr RA Davies, CA(SA) and in accordance with IAS 34 Interim Financial Reporting and comply with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Pronouncements as issued by Financial Reporting Standards Council, the Listings Requirements of the JSE Limited (JSE) and the Companies Act, No 71 of 2008 (as amended). The accounting policies applied are consistent with those adopted in the financial year ended 30 June 2018 except for the new accounting standards, as described on the following page, that became effective from 1 July 2018.

Ernst & Young Inc., the group's independent external auditor, has reviewed the condensed consolidated half-year results included in this announcement and their modified report on the review is available for inspection at the registered office of the company. The modified opinion in the report is only in respect of comparability to unreviewed results in the previous period. The review was conducted in terms of ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

The auditor's report does not necessarily report on all of the information contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report together with the accompanying financial information from the company's registered office.

New accounting standards

The following accounting standards, as published by the International Accounting Standards Board (IASB) have become effective for the group from 1 July 2018:

IFRS 15 Revenue from contracts with customers (IFRS 15)

IFRS 15 was issued in May 2014, and amended in April 2016, and will supersede all current revenue recognition requirements under IFRS. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. The core principle of IFRS 15 is that an entity shall recognise revenue at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The group's revenue is primarily derived from the sale of commodity products. The timing of the revenue recognition is dependent on the sales contract terms as documented in the International Commercial terms (incoterms). In terms of IFRS 15, there was no change in the revenue recognised for free on board (FOB) shipments. The shipping service for all export sales shipped using the cost, insurance and freight (CIF) and cost and freight (CFR) incoterms, represents a separate performance obligation, ie the sale and shipment of goods represent two performance obligations. The primary performance obligation is the supply of the commodity, in which instance the revenue will be recognised once the buyer takes control of the goods. This will not result in a change in revenue recognition from IAS 18 Revenue to IFRS 15. The other performance obligation is the delivery of the shipping service where the revenue earned will be recognised over the period that the service is rendered. In December 2018 and December 2017 most of the sales were FOB and therefore the deferral of revenue component was negligible. The application of IFRS 15 did not result in changes to the revenue recognised arising from commission income.

The group has elected to adopt a full retrospective approach to the adoption of the standard. The impact on the reported gross profit for the H1 FY18 is negligible and did not require adjustment. The group will be making additional disclosure in the notes to the financial statements, setting out the respective components of revenue as reported at 30 June 2019.

IFRS 9 Financial Instruments (IFRS 9)

IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement and applies to the classification and measurement of financial assets and financial liabilities, their impairment and hedge accounting. The group adopted the new standard on 1 July 2018 which is the group's effective date of adoption and no comparative information was restated. The classification and measurement of financial assets and liabilities adopted by the group will remain mostly unchanged, except for available-for-sale investments, which will be classified as financial assets measured at fair value through other comprehensive income. The impact of this is that all fair value gains and losses will not be recognised in the income statement but will remain in other comprehensive income. This represents a change from the previous treatment of gains and losses recorded on remeasurement of these investments, which required impairment losses as well as gains and losses on disposal to be recognised in the income statement.

The impact of the expected credit losses on financial assets classified at amortised cost in the group was determined as being negligible.

Subsequent event

On 6 February 2019, all conditions precedent for the conclusion of the sale of Assmang's smelter operations at Machadodorp had been met, and the assets (which had been previously fully impaired) are due to be disposed of, by 28 February 2019.

Declaration of interim dividend

Shareholders are advised that on 25 February 2019, the board approved interim dividend number 124 (the dividend), of 1 000 cents per share (gross) for the half-year ended 31 December 2018.

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 (dividend tax) rate of 20% will apply
  3. the net local dividend amount is 800 cents per share for shareholders liable to pay the dividend tax
  4. the issued ordinary share capital of Assore is 139 607 000 shares, of which 36 460 825 (H1/18: 36 455 970) shares are accounted for as treasury shares in terms of IFRS and are therefore excluded from earnings per share calculations; and
  5. 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 interim dividend;
Tuesday, 12 March 2019
  • Trading “ex dividend” commences;
Wednesday, 13 March 2019
  • Record date;
Friday, 15 March 2019
  • Dividend payment date; and
Monday, 18 March 2019
  • Dates (inclusive) between which share certificates may not be dematerialised or rematerialised.
Wednesday, 13 March 2019 to Friday, 15 March 2019

On behalf of the board

Desmond Sacco

Charles Walters
Chief Executive Officer


26 February 2019