The finished stock held by Kumba, SA’s largest iron ore producer, increased to 8.2-million tonnes at the end of June from 7.1-million tonnes, as SA’s logistics woes persists, though the mining house said it began to see improved performance from Transnet in the second quarter of this year.
The company, which Anglo American recently decided to keep after an extensive portfolio review, said its sales for the six months to end-June were down 5%.
Kumba CEO Mpumi Zikalala said on Thursday the company had been focused on safety and operational excellence as it sought to unlock the value in its business and build resilience to ensure the group’s sustainable future.
“In line with our business reconfiguration plan to align production to Transnet’s logistics performance, volumes were reduced by 2%, matching a 2% decrease in ore railed to port,” Zikalala said.
“Sales decreased by 5%, with the benefit of the proactive mini-shut and port equipment repairs undertaken in April 2024 largely offsetting the impact of port equipment outages in the first quarter,” she said.
Kumba had maintained its full-year production and sales guidance of between 35-million tonnes and 37-million tonnes and between 36-million tonnes and 38-million tonnes, respectively
“Progress is being made on our cost optimisation programme, and we are well on track to achieving our C1 unit cost guidance of $38/tonne. Guidance on capital expenditure is unchanged at R8bn-R9bn for the full year 2024.”
Kumba has refined its production strategy as Transnet falters, opting for producing higher-quality iron ore that fetches premium prices rather than attempting to match previous years’ volumes of lower-grade material.
It said Transnet’s performance at Saldanha Bay in the period under review was “primarily impacted in the first quarter by stacker-reclaimer reliability challenges, as well as adverse weather conditions”.
However, sales improved by 12% from the first quarter of the year, after port equipment maintenance.
“Kumba, as a participant in the Ore Users Forum, continues to seek solutions with Transnet to prevent further deterioration in the performance of the iron ore export channel,” Kumba said. “Planning and preparations are under way to ensure the annual maintenance shut in the fourth quarter of 2024 is executed successfully and disruption to the value chain is minimised.”
The company expects to report lower earnings for the first half, largely due to a lower average realised free-on-board (FOB) export iron ore price and a decrease in sales volumes.
Headline earnings for the six months to end-June are likely to be between R6.8bn and R7.3bn, a decrease of between 24% and 29% from the prior period. Headline earnings per share (HEPS) are likely to be between R21.34 and R22.89, compared with R30.04 a year ago.
Total production for the first half decreased 2% to 18.5-million tonnes and sales were down 5% to 18.1-million tonnes, due to the equipment challenges at Saldanha Bay port.
“Kumba achieved an average realised free-on-board export price of $97 per wet metric tonne (wmt) relative to the 62% Fe FOB export price of $96/wmt as the timing effect of provisionally priced volumes in a lower-price environment were largely offset by the lump and iron ore quality premium that our products attract,” Zikalala said.
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