Kumba Iron Ore contributed almost R10 billion to the fiscus during the half-year to the end of June, after delivering record financial returns and paying shareholders 100 percent of headline earnings, despite operational problems. Photographer: Waldo Swiegers/Bloomberg
Kumba Iron Ore contributed almost R10 billion to the fiscus during the half-year to the end of June, after delivering record financial returns and paying shareholders 100 percent of headline earnings, despite operational problems. Photographer: Waldo Swiegers/Bloomberg

Kumba Iron Ore contributes almost R10bn to fiscus

By Dineo Faku Time of article published Jul 28, 2021

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KUMBA Iron Ore contributed almost R10 billion to the fiscus during the half-year to the end of June, after delivering record financial returns and paying shareholders 100 percent of headline earnings, despite operational problems.

Kumba declared an interim cash dividend of R72.70 a share, an increase of 271 percent compared with R19.60 a share a year earlier, representing a payout ratio of 100 percent of headline earnings.

Kumba, an Anglo American plc subsidiary, said yesterday it was playing its part in South Africa’s economic recovery by contributing R9.2bn in income tax and mineral royalties in the first half of the year.

Chief executive Themba Mkhwanazi said Kumba paid the fiscus R6.8bn in income tax and R2.4bn in mineral royalties in the six months to the end of June, up from a R4.3bn a year earlier, including R3.3bn in income tax and R1bn in mineral royalties.

“In the context of Covid-19 and in the context of our challenges in terms of the social unrest, the role that we play in our communities is critical. Mining, as you know, has in many ways come to the rescue, particularly in terms of fiscus, given the greater revenues that have been collected,” Mkhwanazi said.

Strong iron ore prices provided a tailwind for Kumba, which had printed money during the period under review.

Kumba, which operates the Sishen and Kolomela mines in the Northern Cape, recorded a 101 percent surge in revenue to R63.6bn, up from R31.6bn a year earlier, mainly as a result of higher prices and sales volumes, partially offset by a stronger rand-dollar exchange rate.

Kumba’s average realised free on board export price surged by 137 percent to $216 (about R3 203) per wet metric ton (wmt), more than double the $91 per wmt received a year earlier.

Chief financial officer Bothwell Mazarura said the group had delivered a record first half, demonstrating a resilient operational performance and the benefit of a margin strategy in a strong iron ore market.

“Attributable free cash flow has grown from R7bn to more than R20bn in 2020, with more generated in the first half of this year than each of the previous three years. Dividends have increased significantly. We have created exceptional value for our shareholders,” said Mazazura.

Kumba said despite weather-related challenges and rail capacity constraints in the first quarter of the year, production increased by 12 percent to 20.4 million tons from 18.2 million tons a year earlier, and sales volumes were 19.5 million tons, up from 18.9 million tons a year earlier.

Kumba revised its sales guidance for the full-year 2021 down by 1 million tons to between 39.5 million and 40.5 million tons after taking into consideration the potential for further weather and logistical challenges, and the annual maintenance shutdown in the second half.

Mkhwanazi said extreme weather had contributed to rail-related challenges for Transnet. “There was a derailment as a consequence of wheel failure, which was an issue around an OEM supply issue, as opposed to Transnet

itself. We had the rain wash-out, and we also had the two swarms of locust infestation in the first quarter,” Mkhwanazi said.

He said the relationship between Kumba and Transnet was strong.

Kumba’s share closed 0.63 percent lower at R725.34 on the JSE yesterday.

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