African Rainbow Minerals | Competitive dividend
African Rainbow Minerals (ARI) released a decent FY '18 result with its final dividend surprising to the upside. The results were impacted by the restructuring of the ARM Coal loans which in our view is positive for the Group. Assmang's operations continue to perform well while positive developments at Nkomati should assist with the cash burn in the short-term.While we disagree with ARI's reason for not having a formal dividend policy, the Group remains committed to pay an industry competitive dividend every half. We estimate that ARI trades on a one-year rolled forward dividend yield of 9%.
ARI continues to position itself for growth. However, we believe that ARI's poor historical capital allocation and failure at Lubambe adds to shareholder uncertainty. In our view, the poor historical record contributes to the discount implied in the counter.
African Rainbow Minerals is engaged in the exploration, development, operation and holding of interests in the mining and minerals industry. Co.'s operations are focused on precious metals, ferrous metals and alloys, which include platinum group metals, nickel, iron ore, manganese ore, chrome ore, ferromanganese and ferrochrome alloys. Co. maintains an investment in Harmony. Co.'s partners at its South African operations are Anglo Platinum, Assore, Impala Platinum, Norilsk Nickel and Xstrata Coal South Africa. Co. is organized in four operating divisions: ARM Platinum (which includes platinum and nickel), ARM Ferrous, ARM Coal and ARM Exploration.
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