Assore, the South Africa-focused base metals company, is suffering as a result of weak iron ore, chrome and manganese prices. Its headline earnings for the financial year to 30 June 2015 – declining by 53.3% to R2 billion, compared to R4.2 billion in the previous financial year.

Profit for the year, which is stated after impairment charges of R886 million, decreased even further by 68% to R1.3 billion, compared to R4 billion.

These declines are due mainly to the lower level of headline earnings of Assmang for the year, which were lower by 56.8%, at R3.3 billion compared to the previous financial year and impairment charges in Assmang amounting to R812 million.

Assore holds a 50% interest in Assmang, which it controls jointly with African Rainbow Minerals (ARM).

The declines in prices were caused by lower than expected demand from China and increased global supply. Manganese alloy prices also reduced during the year although the decline for refined alloys was less than for high carbon ferromanganese.

Steady increases in the demand for stainless steel resulted in prices for chrome ore generally remaining fairly stable over the year. The lower US dollar selling prices for the group’s products were partly offset by a weaker rand/US dollar exchange rate, which across the year was 8% weaker than the previous year.

Operations and furnace closures

Following a technical and financial review of the underground chrome mines at Rustenburg Minerals, the group has decided to suspend indefinitely further underground development, resulting in an impairment charge of R365  million.

In addition, Assmang has closed its last operational furnace at Machadodorp Works and a further ferromanganese furnace at Cato Ridge Works has been closed due to the weak alloy market and increased electricity and labour costs necessitating impairment charges amounting to R812 million, of which 50% has been included in the Group’s results.

Record production achievements

Assmang achieved record sales volumes of iron ore, brought about by strong local demand, which was met from the Beeshoek iron ore mine and improvements in the throughput of the off-grade plant at Khumani iron ore mine.

Record sales volumes of chrome ore were also achieved by Dwarsrivier chrome mine, due to better availability of rail capacity.

Expansion and capital expenditure

On 24 June 2015, Assore announced the acquisition from ARM of its 50% indirect share of Dwarsrivier Chrome Mine (held in Assmang) for a consideration of R450 million. The completion of the transaction is subject to certain conditions precedent, the most significant of which is the consent required, in terms of the MPRDA, by the DMR for the transfer of the mining right from Assmang to a new entity that will operate Dwarsrivier.

Once consent is granted, Assore will own 100% of Dwarsrivier, retrospective to 1 July 2014.

Capital expenditure for the year by Assmang amounted to R3.8 billion (2014: R3.6 billion), of which R1.3 billion was spent in Assmang’s manganese division on the sustainability and expansion of the Black Rock mines, which will increase the mines’ capacity to 4 Mtpa by 2017.


Growth in crude steel production is expected to remain subdued for the short to medium term with the Chinese economy, in particular, showing continued signs of weakness and reduced demand.

Economic growth in the rest of the world is also expected to remain muted and, combined with the increased supply of low cost iron ore and central and local government support for Chinese iron ore mines, prices are not anticipated to recover over this period and may deteriorate further from current levels.

Similar dynamics are evident in the markets for manganese, where additional mine capacity has resulted in oversupply of mostly medium grade ores.

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