African Rainbow Minerals to Cut Capex, Jobs as Profit Slumps

  • Earnings from ferrous unit plunge on global iron-ore glut
  • Dividend cut as commodity prices tumble on China weakness

African Rainbow Minerals Ltd. will cut jobs and capital expenditure and reduced its dividend after the South African mining company’s full-year profit fell 58 percent due to a slump in commodity prices.

Earnings excluding one-time items plunged to 1.7 billion rand ($124 million), or 8.03 rand a share, for the year ended June 30 from 4.1 billion rand, or 19 rand a share, a year earlier, the Johannesburg-based company said in a statement on Friday. Profit from its ferrous unit, which includes iron ore, manganese and chrome, comprised 91 percent of total earnings and dropped 57 percent. African Rainbow also mines coal, platinum and copper.

Iron-ore prices have plunged as producers including BHP Billiton Ltd. and Fortescue Metals Group Ltd. expanded supplies, pushing the market into a glut, while demand from China, the companies’ biggest customer, slowed. Reduced demand from the country has also hurt the prices of other commodities including copper, which has declined 18 percent this year. Coal has fallen 15 percent over the same period.

“The downward pressure on commodity prices has continued for most of the commodities that African Rainbow Minerals produce,” the company said in the statement. “Capital expenditure is to be curtailed as far as possible,” it said, referring to a 500 million rand reduction in estimated spending for the 2016 fiscal year to 2.4 billion rand.

African Rainbow will pay a full-year dividend of 3.50 rand compared to 6 rand last year, it said in the statement. The company is in talks with unions at the Black Rock manganese operations over possible job cuts, it said.

African Rainbow booked a 534 million rand impairment on its 14.6 percent stake in Harmony Gold Mining Co. and wrote down the value of its Lubambe copper mine venture by 784 million rand, the company said. It also recorded a 292 million rand charge on its ferrous unit.

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