Mining company Kumba Iron Ore has reported a robust set of results for the six months ended June 30 despite a challenging market. CE Mpumi Zikalala says the company’s first-half results reflect strong execution of its business reconfiguration plan while improving safety across operations.

“By prioritising operational safety, stability, capability and cost-effective production, we are delivering on our strategic objectives of unlocking value from our core and positioning for a sustainable future, which are essential for creating enduring stakeholder value,”  she says, adding that Kumba's performance demonstrates good operational momentum achieved.

In line with Kumba’s business reconfiguration plan to align production to Transnet’s logistics performance, volumes were reduced by 2% to 18.5-million tonnes, matching a 2% decrease in ore railed to port compared with the first half of 2023.

Sales decreased by 5% to 18.1-million tonnes with the benefit of the proactive mini-shutdown and port equipment repairs undertaken in April, largely offsetting the impact of port equipment outages in the first quarter.

As a result, Zikalala says, the company maintains its full-year production and sales guidance of 35-million to 37-million tonnes and 36-million to 38-million tonnes, respectively.

She points out that the company’s focus on rightsizing its operations unlocked savings of R1.8-billion for the period, contributing to an improved C1 unit cost of $38.50/per wet metric tonne (wmt).

“This ensures that we are well on track to achieving our target of $38/wmt for the full year.”

Meanwhile, Zikalala notes that the iron-ore market pulled back strongly in the first half, noting that the reconfiguration of Kumba’s business to a lower production and cost profile provides further resilience in the face of a volatile market environment.

She points out that weak steel demand in China and Europe, coupled with robust iron-ore supply, contributed to the Platts Iron-ore Index 62% iron cost and freight benchmark iron-ore price falling by 26% since the start of the year.

An increase in steel exports provided some relief, while lump premium was supported by lump stock being at multiyear lows.

Additionally, Kumba achieved an average realised free-on-board (FOB) iron-ore export price of $97/wmt, $1/t above the average 62% iron benchmark FOB export price.

Zikalala says the lump and iron-ore quality premium that Kumba’s products attract was largely offset by the unfavourable timing effect of provisionally priced volumes in a falling iron-ore price environment.

“While we continue to operate in a challenging macro[economic] and logistics environment, Kumba delivered a solid performance,” she says.

Further, earnings before interest, taxes, depreciation and amortisation (Ebitda) of R15.6-billion and an Ebitda margin of 44% contributed to the company’s attributable free cash flow of R9.1-billion.

Zikalala says this supported the board's decision to declare an interim cash dividend of R18.77 a share, representing a payout ratio of 85% of headline earnings.