Kumba, the Anglo American subsidiary and Africa’s biggest iron ore producer, expects new processing technology to expand output in the coming years and extend the life of its Sishen mine to 2044.
Kumba said in a statement on Thursday that it had completed a full technical review of its ultra-high-dense-media-separation (UHDMS) processing technology project, which will replace the processing technology at its Sishen mine in the Northern Cape.
Following the review, Kumba’s board approved a further R7.6bn investment in the UHDMS project, adding to the R3.6bn that was approved in February 2021. Of the R11.2bn total capital investment, R1.8bn had already been spent on “the detailed engineering design, earthworks and the technical review”, while the remaining R9.4bn would be invested over the next four years, with full capacity expected by the end of 2028.
Kumba expects its new UHDMS technology to treble the proportion of premium quality ore production at Sishen, taking it to 55% from the current 18%.
Kumba CEO Mpumi Zikalala said the investment demonstrated Kumba’s focus on “value over volume”, noting the margin-enhancing quality of UHDMS, driven by growing global demand for high-grade iron ore.
“Premium iron ore is increasingly highly valued by our customers because it reduces carbon emissions from the steelmaking process and so plays a key role in green steel production,” said Zikalala.
“This supports higher margins and a compelling return on investment as well as creating a new pathway to extend Sishen’s life to 2044.”
Kumba estimates that the UHDMS project would increase its product premium by an additional $2-$3 per tonne on average above lump and Fe premiums, while delivering an internal rate of return exceeding 30%. It also expects the project to result in an earnings before interest, taxes, depreciation and amortisation (ebitda) margin of more than 50%.
“The UHDMS processing technology will provide Kumba with an enhanced ability to respond to future customer requirements and improve flexibility across the value chain,” Zikalala said.
“The implementation will be phased over four years to ensure safety and operating stability across the site during construction while maintaining disciplined capital allocation.”
Kumba reported a 2% decline in iron ore output in the first half of this year, hampered by Transnet’s deteriorating rail performance and lower commodity prices. As a result of the reduced output, Kumba reported a 5% decrease in sales in the period, with interim revenue at R35.8bn, down 6% from the year-earlier period.
As a result, Kumba slashing 490 jobs, successfully cutting costs by R1.8bn, in the first quarter of 2024.
Zikalala expressed optimism at the UHDMS project’s potential to boost output over the medium term and restore Kumba’s operational performance over the next four years.
“This major investment is also a clear demonstration of our long-term commitment to SA mining and to our host communities in the Northern Cape.”
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