By Salini Krishnan
JOHANNESBURG : African Rainbow Minerals Ltd. (ARM) issued a trading update Tuesday forecasting a surge in basic earnings of up to 75% for the first half of its 2026 financial year. The South African diversified miner attributed the jump to a combination of higher platinum group metal (PGM) prices and significant accounting gains from recent asset disposals and acquisitions.
For the six months ended Dec. 31, 2025, the company expects basic earnings to land between R2.3 billion and R2.44 billion. Compared to the R1.394 billion reported in the prior year period, the numbers represent a sharp recovery for a firm that has spent much of the last 24 months navigating a depressed PGM market and domestic infrastructure bottlenecks.
But here is the thing: a 75% jump in basic earnings does not mean the underlying business has suddenly become 75% more efficient.
The discrepancy between the company’s basic and headline earnings tells a more nuanced story of strategic maneuvering and accounting remeasurements. While basic earnings are skyrocketing, headline earnings: which strip out one-time items and disposals: are expected to rise by a more modest 5% to 15%.
The Accounting Delta: Basic vs. Headline
In the world of South African mining finance, the “headline” figure is often the one that keeps analysts awake at night. It is the cleaner metric. ARM expects headline earnings to reach between R1.596 billion and R1.748 billion, up from R1.52 billion a year earlier.
The gap between the two figures: roughly R700 million at the upper end: is largely the result of two major corporate actions. First, the company recognized a profit on the disposal of its interest in Sakura Ferroalloys. Second, it realized a gain on the remeasurement of its pre-existing 50% interest in the Nkomati Mine. This remeasurement followed ARM’s acquisition of Norilsk Nickel Africa’s 50% stake, giving the company full control over the asset’s future closure and environmental obligations.
“The strategic calculus here isn’t subtle,” said one analyst familiar with the Johannesburg Stock Exchange (JSE) mining sector. “ARM is aggressive in tidying up its portfolio. By taking full control of Nkomati, they’ve cleared a path for a definitive closure strategy while benefiting from a one-time accounting lift. That’s not a typo. It’s a calculated move to strengthen the balance sheet while the PGM market finds its floor.”
PGM Basket Prices Lead the Charge
While accounting gains provided the headline-grabbing 75% figure, the operational heart of the company remains tied to the PGM basket. ARM reported that higher U.S. dollar PGM prices at its Two Rivers and Modikwa mines were primary drivers of the improved performance.
The PGM market in 2026 has remained a volatile theater. After years of surplus-driven price suppression, supply-side constraints in South Africa: the world’s primary source of platinum and rhodium: have finally begun to exert upward pressure on prices.
| Metric | H1 2025 (Actual) | H1 2026 (Projected) | Change (%) |
|---|---|---|---|
| Basic Earnings | R1.394 Billion | R2.30 – R2.44 Billion | 65% – 75% |
| Headline Earnings | R1.520 Billion | R1.60 – R1.75 Billion | 5% – 15% |
| Basic EPS (cents) | 711 | 1,173 – 1,244 | 65% – 75% |
| Headline EPS (cents) | 775 | 814 – 891 | 5% – 15% |
The recovery in the PGM basket price is critical for ARM’s margins, which have been hammered by double-digit inflation in electricity and labor costs. At Two Rivers, the company has been pushing through a significant expansion phase, even as peer companies across the Bushveld Igneous Complex have moved toward “care and maintenance” strategies.
For investors, the question is whether these prices are sustainable. Some argue that the 2026 supply-demand balance is shifting permanently as internal combustion engine (ICE) production persists longer than some EV-optimists predicted, maintaining demand for catalytic converters. This is particularly relevant given that the copper deficit of 2026 is drawing investor attention away from PGMs, potentially creating an undervalued entry point for diversified players like ARM.
Nkomati and the Cost of Consolidation
The acquisition of Norilsk Nickel’s stake in Nkomati represents the end of a long-standing partnership and the beginning of a massive environmental cleanup. The gain on remeasurement mentioned in the trading update is essentially an accounting recognition of the fair value of the asset vs. its book value at the time of the transaction.
However, the reality of Nkomati is grim. The mine is in a closure phase. By taking 100% ownership, ARM has accepted full responsibility for the environmental liabilities associated with the site. While this results in a basic earnings gain today, it commits the company to significant cash outflows for rehabilitation in the decade to come.
This mirrors broader trends in the industry where majors are spinning off or consolidating “legacy” assets to streamline operations. It’s a strategy often seen in the gold sector, such as the proposed Barrick breakup and North American spinoffs, where value is unlocked by separating high-growth assets from mature, liability-heavy ones.
Operational Headwinds and the March 6 Reveal
Despite the rosy earnings forecast, ARM continues to battle the systemic issues plaguing South African miners. Logistics remains the primary stranglehold. State-owned rail operator Transnet has struggled to move bulk commodities: iron ore, manganese, and coal: to port efficiently. ARM’s iron ore and manganese divisions, operated through the Assmang joint venture, are highly dependent on these rail corridors.
While the trading update focused heavily on the PGM-driven earnings boost, the full interim results, scheduled for release on March 6, 2026, will likely reveal the true cost of these logistical failures.
“You can have the best geology in the world, but it doesn’t matter if you can’t get the ore to the ship,” said Sonny Jimerson, an analyst at SMR OPS. “ARM is doing what it can with the PGM side, which is less rail-dependent than iron ore, but the manganese side is where the real margin compression is happening.”
The March 6 report will also be scrutinized for management’s guidance on the Merensky Project at Two Rivers. The industry is watching closely to see if ARM will maintain its capital expenditure schedule or if it will take a page from the BHP playbook and favor discipline over aggressive expansion.
The 2026 Outlook: A Rebound or a Reprieve?
ARM’s projected basic earnings per share (EPS) of 1,173 to 1,244 cents is a significant jump from 711 cents. Headline EPS is expected to reach 814 to 891 cents, compared to 775 cents.
While the market greeted the news with cautious optimism, the underlying message is one of stabilization rather than explosive growth. The 5% to 15% headline growth suggests that operational costs are still eating a significant portion of the price gains seen in the commodity markets.
South African miners are currently caught in a vice. On one side, global demand for PGMs and critical minerals remains robust. On the other, domestic instability, power outages, and rail decay act as a constant “South Africa discount” on their valuations.
For ARM, the 2026 financial year is an inflection point. The company has cleared several strategic hurdles: exiting Sakura and consolidating Nkomati: and is now positioned to benefit from any sustained rally in PGMs. Whether it can convert these accounting gains into long-term operational cash flow remains the billion-rand question.
Investors should look toward the March 6 release for the final word on dividends and the specific impact of Transnet’s performance on the bulk commodity divisions.
Conclusion: The Accounting Mirage
It is easy to get blinded by a 75% increase. In the mining industry, those numbers are rare. But the savvy investor knows that basic earnings are the “shiny AI revolution” of the balance sheet: they look great in a headline, but the headline earnings are where the brutal reality lives.
ARM is performing better, certainly. The PGM basket is helping, and their balance sheet maneuvers are technically proficient. But until the logistical stranglehold in South Africa is broken, even a 75% jump feels like a reprieve rather than a permanent escape from the industry’s structural challenges.
The clock is ticking toward March 6. By then, we will know if the PGM rally has enough legs to carry ARM through the rest of the 2026 fiscal year, or if this earnings spike is a one-time accounting gift.
For more in-depth analysis on mining finance and critical mineral supply chains, visit our Markets and Commodities section or check our latest updates on central bank gold reserves.
