Africa’s largest iron ore miner, Kumba, has approved its first major project in a decade, launching a new R7bn pit at its Kolomela operation in the Northern Cape.
The Kapstevel project will keep Kolomela at 13-million tonnes of ore a year for the rest of its 13 years of life. It will come into production during 2024, with the bulk of the R7bn spent on clearing waste rock and on buying new equipment to do the work during the next three years.
It is the first major project since the R8.5bn construction of Kolomela near Postmasburg. The mine came into production at the end of 2011.
Kapstevel South will deliver a direct-shipping ore, which means it needs little processing before it can be sold, said Kumba CEO Themba Mkhwanazi.
The project will be funded out of cash and ensure the 6,000-strong workforce will remain at that size for the duration of mining, instead of tapering off as output gradually fell if there was no replacement project such as Kapstevel.
Kumba was in a net cash position of R15.7bn at the end of June compared with R18.4bn a year earlier.
The project, which will deliver ore from 2024, is a life-extension investment rather than adding additional ore to Kumba, Mkhwanazi said. The company’s strategy is to extend the lives of its mines — which are both estimated to be 13 years — to 2040, using exploration in the Northern Cape and technology.
Kumba, which is 70% owned by Anglo American, announced the project as its flagship Sishen mine near Kathu and Kolomela come out of the lockdown. The lockdown has been gradually eased since it was imposed in March, disrupting the company’s production and financial performance in the first half of 2020.
A second project to be decided on towards the end of the year is the ultra-high dense medium separator (UHDMS), which will allow Kumba to tackle about 213-million tonnes of low-grade iron ore tailings to convert them to high-quality saleable ore.
Mkhwanazi said on Tuesday the cost of the UHDMS project will be R3bn to R4bn — compared with an earlier estimate of R3bn. The results of a final study and a decision on whether it would be built are due to be unveiled in the fourth quarter of this year.
Kumba reported after-tax profit of R11bn for the six months to end-June compared with R13.2bn in the same period a year earlier. Revenue dipped to R31.6bn from R34.5bn.
Kumba declared an interim dividend of R19.60 a share compared with R30.79 before. The dividend came in at the top end of the company’s policy of returning 50%-75% of headline earnings, which were R26.19 a share.
“Operational performance during the period reflects the lockdown and subsequent reopening of our operations with a reduced proportion of our workforce in April before ramping up to pre-Covid-19 run rates in June,” said Mkhwanazi.
There is a bottleneck in exports, mainly at the ports, where one-fifth of staff are not at work. This is expected to normalise in September, Mkhwanazi said. Kumba has a stockpile of 6.2-million tonnes to sell.
Transnet’s logistical capacity on its railway line linking the Northern Cape mines to the Saldanha port was at 80% of normal traffic during June.
Kumba’s production fell by 11% to 17.9-million tonnes from 20.1-million tonnes, with the biggest decline coming in the second quarter when SA entered a strict lockdown to curtail and prepare for the spread of Covid-19.
Sales volumes dropped 13% to 18.6-million tonnes. Kumba forecast total sales for the year of 38-million to 40-million tonnes and production of up to 39-million tonnes.
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