African Rainbow Minerals (ARM), the largest black economic empowerment (BEE) mining group in South Africa, has announced headline earnings of R20 million for the second half of 2004.

It represents a dramatic turnaround for the platinum group after recording a loss of R1 million during the same period the year previously.

According to Reuters, profits at ARM have been driven largely by strong sales performance in its ferrous metals and nickel divisions, and higher commodity prices.

Overall, operating profit at the diversified miner quadrupled over the year from R125 million to R626 million for the six-month period up to the end of 2004.

Shareholders were told to expect headline earnings per share of between nine and 11 cents per share, up from a loss of one cent per share for the six months to the end of 2003.

While the positive results for the black-owned group are welcome, the chairman of Angloplat, Barry Davison, has warned that the strong rand could threaten the development of the black economic empowerment mining sector.

He explained that black investors may be "swamped in debt" if they are prevented from issuing shares to raise capital, a situation compounded by the strong rand.

"Clearly, companies undertaking BEE transactions must protect themselves against any prejudice which might flow from a loss of BEE credits by contractually preventing an empowerment partner from diluting its status," Mr Davison told Business Day.

"This can, in turn, limit an empowerment company's access to capital markets and so constrain its ability to grow and realise its potential."