The benefits of ARM’s quality, diversified portfolio enabled the company to maintain a robust financial position, despite lower commodity prices and challenges with logistics, power and above-inflation costs. We continued investing in our existing businesses and value-enhancing growth projects while paying dividends.
Dr Patrice Motsepe
Executive chairman
Headline earnings for the 2023 financial year were 21% lower at R9.0 billion (F2022: R11.3 billion), due to a challenging operational and market environment.
Our strategy remains focused on delivering competitive returns to our shareholders and creating sustainable value for all stakeholders by:
We declared total dividends of R26.00 per share for F2023; down 19% from R32.00 per share in the prior year. This represented a 13% dividend yield (as at 30 June 2023) and pay-out ratio of 82% of dividends received from our underlying operations.
Our resolute focus on maintaining a safe and healthy work environment for all employees and contractors is evidenced in the improved key safety metrics for the year. The lost-time injury frequency rate (LTIFR) improved by 13% to 0.27 per 200 000 man-hours in F2023 (F2022: 0.31) on the back of fewer reportable or serious accidents.
Our occupational health and hygiene programmes are continually updated to limit at-source workplace exposure to hazards.
Continued challenges of unreliable power, water and logistics supply during the year were compounded by above-inflation escalations in input costs. We are focused on the factors that are under our control, including managing costs, improving productivity and efficiencies through the adoption of mechanisation and appropriate new technologies.
Unit production costs remained under pressure in F2023, with above-inflation increases across most operations except the Black Rock mines.
The Black Rock project was completed in September 2022 and within the approved budget of R7.4 billion, with 1.4 million fatality-free shifts and a LTIFR of 0.22.
Construction on the Gloria project was completed in June 2023. With close-out underway, the project is forecast to be formally closed out within the approved budget of R3 billion.
We are proactively managing unit costs across our portfolio of assets and investing in volume growth at the Two Rivers and Modikwa mines.
In F2023, we invested R7.2 billion in attributable capital expenditure across our operations, R2.6 billion of which was expansionary capital.
As part of our short to medium-term growth projects:
Growth is central to our strategy, as evidenced by the R3.5 billion acquisition of Bokoni Platinum Mine in September 2022. Bokoni complements our existing PGM portfolio on the Eastern Limb of the Bushveld Complex in Limpopo province.
This will enable us to scale our PGM portfolio, improve our global competitiveness and pursue further value-accretive organic growth.
In addition to competitive returns for shareholders, the development of Bokoni Mine allows ARM to create sustainable value for a range of stakeholders as local communities, employees and black industrialists will together own 15% of the mine. Bokoni Mine will create around 5 000 jobs, half of which will be permanent roles.
ARM is committed to supporting the goals of the Paris Agreement to limit the global average temperature increase to 2°C, and strive to reduce this to 1.5°C. We are steadily translating this commitment into concrete plans with measurable targets, as detailed in our climate change and water report on our website.
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Refer to page 55 of the Climate change and water report for detailed disclosure. |
In line with our commitment under the International Council on Mining and Metals (ICMM) Sustainable Development Framework and climate-change principles, our operations apply global good practice in managing scarce natural resources and protecting our environment.
The escalating pace of natural weather events globally, from floods to droughts and wildfires, have highlighted the urgency of substantial and effective global action to combat climate change. In addition to producing metals that are critical to creating a low-carbon future, our broader environmental initiatives concentrate on mitigating the impacts of climate change by reducing carbon emissions as well as the responsible and efficient use of water and energy.
Across our operations, we are identifying opportunities to reduce carbon emissions through improved energy and fuel efficiency.
We are also making good progress in adopting technologies and processes to enhance energy efficiency and reduce our carbon footprint; aiming to achieve net-zero greenhouse gas emissions from mining by 2050.
In F2023, we continued to develop decarbonisation pathways detailing the short-term steps to achieve this long-term target. We are working to identify appropriate carbon-reduction initiatives for each operation that are both sustainable and financially responsible.
In F2023, we signed a power-purchase agreement with an independent power producer to wheel 100MW of renewable solar photovoltaic (PV) power to our platinum operations. ARM Platinum studies indicate that wheeling this quantum of renewable energy over 20 years could generate some 4 900GWh of electricity and save around 4.8mtCO2e in carbon emissions. Construction of the solar PV facility started in October 2023. Electricity from this facility is expected to begin supplying ARM Platinum’s mining operations in F2026. In our Ferrous division, the Northern Cape mines are progressing with a prefeasibility study to explore the correct energy mix that will cater for baseload demand.
In F2023, the ARM workforce comprised around 23 000 employees and contractors.
We invested R371 million or 9.3% of payroll during the year on skills training across our operations (F2022: R198 million or 7.1% of payroll).
We remain committed to ensuring that our workforce and management represent South Africa’s demographics. An inclusive and diverse workforce enriches both our company and our country. At F2023 financial year end, 72% of management at all levels was represented by historically disadvantaged South Africans.
ARM is committed to improving the living conditions and standards of living of people in communities neighbouring our operations.
In F2023, our operations invested R124 million in community projects, particularly those supporting women, youth, historically disadvantaged groups and people living with disabilities. Focus areas include:
We also continue to contribute to increasing the pool of entrepreneurial and business-specific skills in our neighbouring communities and support the development of local small and medium businesses.
We are pleased that the ARM Mining Consortium declared a dividend of R102 million (F2022: R255 million) to the seven communities with an effective 8.5% shareholding in Modikwa Mine. These dividends will be invested in sustainable community upliftment and development projects to benefit around 100 000 people living in communities neighbouring the mine.
We continue to work with our community forums, municipalities, the Department of Mineral Resources and Energy (DMRE) and other stakeholders to advance job creation and poverty-alleviation projects.
Mining is a trillion-rand industry and important contributor to South Africa’s fiscus. Its economic contribution remains a key source of revenue for the government at a time when state-supplied electricity and transport logistics face crippling constraints that are affecting the economy, the viability of many businesses, and threatening the jobs of so many amid record unemployment.
In calendar year 2022, the industry employed almost 476 000 people (up around 17 000), contributed R494 billion or 7.5% directly to gross domestic product (GDP) and exported R878 billion worth of commodities, a significant portion of the country’s total exports. Collectively, the industry paid over R175 billion in wages, salaries and benefits to employees who, in turn, support an estimated 4.8 million dependants. Taxes paid by the South African mining industry included corporate income tax of R74 billion, R29 billion in value added taxes and R14 billion in mineral royalties.
The success of our industry relies heavily on the efficient provision of utilities and logistics infrastructure. Although there are numerous challenges in the performance of logistics channels, the reliable supply of power and the security of water supply, ARM and other mining companies operating in South Africa are working with the government and other stakeholders to find sustainable solutions that benefit the industry, the fiscus and all stakeholders.
Our skilled and experienced board is committed to good governance practices. The collective contribution of our directors is invaluable as we focus on achieving our strategic objectives for the sustainable benefit of our shareholders and all stakeholders. As reported last year, we welcomed two experienced independent non-executive directors, Bongani Nqwababa and Brian Kennedy, to the board. Bongani was also appointed to the audit and risk committee at the 2022 annual general meeting. My deepest gratitude to all our directors for their ongoing guidance and commitment.
On 1 May 2023, Mike Schmidt stepped down as CEO and executive director. Following a comprehensive internal and external process to identify his successor, the board appointed Phillip Tobias, ARM’s chief operating officer (COO), as executive director and CEO from 1 May 2023 until his appointment is approved by shareholders at the annual general meeting in December 2023.
Phillip is a mining engineer with over 28 years’ experience in the industry. As COO of ARM since November 2021, he worked closely with Mike and the executive management team. Prior to joining ARM, Phillip was COO of Harmony Gold Mining Company and held executive positions at Anglo American Platinum Limited and Gold Fields Limited.
Over the past 11 years, Mike has provided outstanding leadership as CEO and we are grateful for his dedicated service. The board is pleased to retain his skills as executive: growth and strategic development. Equally, the board welcomes Phillip as the new CEO. I am confident that he will contribute to ARM’s success and global competitiveness.
In July 2023, Jongisa Magagula stepped down as the executive director: investor relations and new business development. We express our gratitude for her good work in that role and wish her all the best in her future endeavours.
My thanks also go to our employees and world-class management for their continued hard work, dedication and commitment.
As always, we are grateful for the ongoing support and cooperation of our shareholders, worker representative organisations, our host communities and all other stakeholders.
The global repercussions of the pandemic and the geopolitical tensions of Russia’s invasion of Ukraine are stark reminders of the interconnectedness of today’s world.
The scale of current global challenges – spanning health, social, environmental and economic issues – requires cooperation and constructive partnerships between governments, the private sector, civil society and all stakeholders.
The mining industry remains an important partner in addressing these widespread challenges. ARM is committed to working together with governments, local communities and employees to create sustainable benefits for its shareholders and all stakeholders.
Dr Patrice Motsepe
Executive chairman
10 October 2023
1 Minerals Council South Africa Facts & Figures 2022, published February 2023