Kumba cuts capex

Load and haul operations around the Western ramp area of the Leeufontein pit at Kolomela Iron ore Mine

Load and haul operations around the Western ramp area of the Leeufontein pit at Kolomela Iron ore Mine

Published Jul 21, 2015

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Johannesburg - South Africa's Kumba Iron Ore suspended its half-year dividend for the first time after a plunge in profits and warned low iron ore prices could scupper its annual dividend as well.

Part of global miner Anglo American, Kumba, like its peers, is grappling with low prices due to a supply glut and growth concerns in top user China.

Prices touched a 10-year low this month.

Kumba reported diluted headline earnings per share of 7.82 rand for the six months to June 30, down from 20.24 rand a year earlier. Headline earnings per share, which strips out certain one-off items, is South Africa's main profit measure.

Its shares fell 4.6 percent before recovering to trade up 0.9 percent at R123.73 at 09.52 GMT.

Some analysts saw positives in the company's money-saving efforts.

“Kumba is doing quite a lot of cost-cutting and there might be some restructuring coming on the horizon. That could be the reason to start looking at the stock once again,” said Nolan Macnamara, a trader at Nedbank Wealth in Johannesburg.

Kumba will cut capital expenditure this year by as much as a third to as low as R6.9 billion ($557 million).

It has cut jobs and last week announced it was in talks with unions about closing its Thabazimbi mine, the smallest of its three South African operations, putting about 1 200 jobs on the line.

CE Norman Mbazima told journalists on a conference call that paying a full-year dividend would depend on commodity prices but said the board would prefer to pay one.

“If we see some [price] stability going forward then I'm sure the directors will wish to declare a [final] dividend... we do not like keeping excess cash on our balance sheet,” he said.

However, the company said: “Iron ore prices are expected to remain under pressure as Australian and Brazilian producers increase supply, and demand growth from China slows”.

Kumba will proceed with the R4.2 billion relocation of a mining community in the Northern Cape province in order to continue mining activities in the area.

But Mbazima warned that shareholders, employees and the state would “have to share in the pain”.

“We just don't have the money that we used to,” he said.

Reuters

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