Kumba gears up while luck is with it

Published Feb 12, 2014

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Johannesburg - Kumba Iron Ore’s luck has changed in the past year and it has set the bar higher with plans to expand production capacity, address constraints and pen a recognition agreement with the Association of Mineworkers and Construction Union (Amcu).

The Anglo American subsidiary has resolved a bitter fight with ArcelorMittal South Africa over a supply agreement and its legal battle over mining rights at its Sishen mine was concluded late last year.

Kumba also obtained rights to mine land previously used by railway operator Transnet at its Sishen mine. Kumba would begin stripping the area, which was 30m wide and 14km long, in the second half of this year, it said yesterday.

“This is not only positive for Kumba but indeed for the whole South African resources industry and it illustrates win-win solutions can be achieved through constructive engagement,” Norman Mbazima, Kumba’s chief executive, said.

Speaking on the sidelines of the results presentation yesterday, Mbazima said: “We will sign a recognition agreement with Amcu just now.”

Overall production at Kumba was lacklustre in the year to December, falling 2 percent to 42.2 million tons.

Output at Sishen fell by 8 percent to 30.9 million tons because of insufficient exposed ore and a reduction in working faces as well as safety stoppages in August.

The unit cash cost at Sishen rose 35 percent. Kumba cited the planned increase in mining activity, the production shortfall and cost escalations that came in above the rate of inflation.

In a bid to restore Sishen’s production to 37 million tons a year by 2016, a recovery plan to address pit constraints and a long-term operational strategy were being implemented.

In addition, Kumba had reconfigured its Thabazimbi mine into a commercial operation and was expected to produce 1 million tons this year.

Kumba said lower output from Sishen was “mostly offset by the excellent performance at Kolomela mine”, which improved output by 27 percent.

Kumba posted a 20 percent boost in operating profit to R28.4 billion. The performance was boosted by the weaker rand exchange rate, which resulted in a 20 percent increase in revenue to R54.5bn.

Headline earnings rose 24 percent year on year to R15.4bn, while shareholders were rewarded with a final cash dividend of R19.94 a share.

Kumba shares lost 3.45 percent to close at R444.12 on the JSE yesterday after hitting a day’s high of R467.39. - Business Report

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