By Dineo Faku
JOHANNESBURG - KUMBA Iron Ore, the producer of the steel making ingredient, has lowered its sales and production guidance for the 2020 financial year underscoring the impact of the Covid-19 disruptions.
Kumbal which operates the Sishen and Kolomela iron ore mines in the Northern Cape, told investors last week that the group had cut its production target to 37 million tons from a previous guidance of between 37 million tons and 39 million tons.
The Anglo American plc subsidiary said it expected 25.5 million tons in output from Sishen, down from the 26 million tons it previously guided, while Kolomela would likely produce 11.5 million tons compared to the previous guidance of 12 million tons.
Chief executive Themba Mkhwanazi said Kumba expected 39 million tons in sales, down from a previous sales guidance of between 38 million tons and 40 million tons following the completion of the annual rail and port maintenance by Transnet.Unit costs were expected to decline to between R380 a ton and R390 a ton, down from a previous guidance of between R385 a ton and R395 a ton.
However, Kumba expected unit costs to increase at Kolomela to between R290 a ton and R300 a ton from a previous guidance of between R280 a ton and R290 a ton.
Unit costs at the Kumba C1 is expected to be unchanged at $32 (R488) a ton.
“2020 has presented a unique set of challenges and it is pleasing to see the strong commitment across our operations to produce responsibly and ensure that we end the year in good shape and are well positioned for 2021 and the longer term,”Mkhwanazi said.
Kumba, an Anglo American plc subsidiary, also cut its 2021 output saying that it would produce between 40 million tons and 41 million tons in 2021 compared to the previous guidance of between 42 million tons and 43 million tons. It would produce between 41 million tons and 42 million tons in 2022, 2 million tons less than the guidance of between 42 million tons and 43 million tons and between 41 million tons and 42 million tons in 2023.
During the six months to June, Kumba’s total production declined by 11 percent to 17.9 million tons from 20.1 million tons a year earlier reflecting lower workforce levels in response to the Covid-19 lockdown, the subsequent reopening of operations with reduced workforce levels of 50 percent and the ramp up of production to normal run rates in June. Iron ore prices rose to a seven-year high last Wednesday , after Vale, one of the world’s biggest iron ore producers, lowered its production outlook to between 300 million tons and 305 million tons of iron ore this year, compared to a previous 2020 target of at least 310 million tons due to heavy rains and a delay in a regional licence.
Vale said it expected annual production of between 315 and 335 million tonnes for 2021.
BUSINESS REPORT