JSE-listed Kumba Iron Ore achieved a solid operational and financial performance for the six months ended June 30, despite ongoing logistics constraints and weak global steel demand impacting on iron-ore markets, while continuing to drive for zero harm and the elimination of fatalities, CEO Mpumi Zikalala says.

Kumba’s production guidance for the full-year has been maintained at between 35-milllion and 37-milllion tonnes.

However, with rail performance deteriorating, resulting in sales decreasing by 4% for the first half and more recently 8% in the second quarter, it has revised its sales guidance to between 36-milllion and 38-milllion tonnes, compared with previous guidance of between 37-million and 39-milllion tonnes.

In the period, operationally, total waste stripping increased by 16% to 111.2-million tonnes from the prior year’s comparative period, driven by a strong recovery at Kolomela compared with the first half of 2022 which was hampered by operational challenges.

Waste stripping at Kolomela increased by 54% to 30.7-million tonnes and at Sishen by 6% to 80.5-million tonnes.

Zikalala says Kumba strengthened the alignment between sales and operational planning as it continues to focus on mitigating rail operator Transnet’s logistics challenges.

Zikalala tells Engineering News that logistics challenges led to a reduction in sales. She explains that rail disruptions owing to various factors, including derailments and an emerging trend of cable theft, have led to already low levels of finished stock at the Saldanha Bay port declining further, resulting in sales decreasing by 4%. 

Moreover, logistics challenges led to losses in revenue for Kumba. 

However, she indicates that the company is continuing to engage with Transnet around understanding the challenges and identifying where it can assist. Zikalala says that there is considerable work to be done, and maintenance especially will take time, however, the company will persist with this collaboration and doing its part on the mining side as well. 

“China’s reopening led to a strong first quarter, but the recovery slowed down in the second quarter as economic stimulus measures failed to sustain demand. Consequently, the Platts 62% iron free on board (FoB) benchmark price decreased by 14% to $102/t.

“Kumba achieved an average realised FoB export price of $106/t, 4% above the benchmark price. Notwithstanding lower prices, we achieved an earnings before interest, taxes, depreciation and amortisation margin of 52% and attributable free cash flow of R7.9-billion.

“These operational and financial results have given our board the confidence to declare an interim cash dividend of R22.60 a share, representing a payout ratio of 75% of headline earnings,” Zikalala outlines.

In terms of sales, ore railed to port decreased by 3% to 18.4-million tonnes with collaborative work between the Ore User’s Forum (OUF) and Transnet on the maintenance of the Iron Ore Export Channel (IOEC) and the locust spraying programme partially mitigating some of the challenges.

This was more than offset by derailments resulting in the line being closed for seven days, which coincided with incidents of cable theft in June, says Zikalala.

Security has been put in place, with drones monitoring the IOEC line in the short term, and Kumba is working on a longer-term security solution with Transnet.

Owing to the rail constraints, total finished stock levels remained high at 7.9-milllion tonnes, with the majority of the stock at the mines, while low levels of finished stock at the Saldanha Bay port resulted in sales decreasing by 4% to 18.9-million tonnes.

Kumba has welcomed the establishment of the National Logistics Crisis Committee, which has been formed to urgently pursue interventions to address the rail, port and road crises in parallel with a reform agenda with longer-term implications, including the opening of rail and port networks to private operators.

Meanwhile, Zikalala says the company’s Kapstevel South project at Kolomela is over 70% complete with the first ore on track for delivery in the first half of 2024.

Kumba has re-phased a portion of the waste mining as it optimises the mine plan, and as a result Kolomela’s waste mining guidance has been revised to 45-million to 55-million tonnes from 60-million to 70-million tonnes.

“We have significantly progressed detailed design work on our ultra-high dense media separation (UHDMS) technology to improve our premium product offering at Sishen. This project is currently under review,” Zikalala outlines.

The solid financial performance included closing net cash of R13.8-billion.

The company also continued its value delivery, with attributable free cash flow of R7.9-billion and return on capital employed of 77%.

SUSTAINABILITY

Zikalala says that, during the financial year under review, Kumba advanced its decarbonisation plan to reduce Scope 2 emissions from operations by more than 30% by 2030.

The environmental authorisation was granted to build a 68 MW solar plant at Sishen on a rehabilitated waste dump site. Geotechnical investigations are in progress and major earthworks began this month.

This forms part of the Anglo American group’s renewable energy ecosystem, which is targeting renewable energy penetration of between 85% and 95% by 2030 through a combination of embedded solar photovoltaic (PV) projects together with the wheeling of renewable solar and wind energy.

“The Anglo American group's ambition is to halve Scope 3 emissions by 2040. We are working with our steelmaking customers to pilot carbon reduction technologies, that allow us to meet the growing demand for ‘green steel’.

“Currently, 30% of our iron-ore customers by sales volumes are already participating in these programmes. Alongside this work, eight of the ten Ubuntu liquefied natural gas (LNG) dual-fuelled new-build ships have entered into service on the South Africa to Asia route. These LNG ships are expected to deliver an about 35% reduction in carbon dioxide emissions, compared with conventional marine fuelled vessels,” Zikalala avers.

This year, Kumba published its inaugural Climate Change Report, which supplements its longstanding Sustainability Report. It provides details on the company’s decarbonisation pathway and its strategic approach to Scope 1 and 2 carbon emission reduction at its own operations and the Scope 3 emissions generated by its steelmaking customers.

The period saw Kumba mark over eight years without any level three to five environmental incidents.

In terms of its safety performance, Kumba reported the death of one employee in February.

Zikalala says the miner is implementing its learnings across the business including greater supervisory oversight, improved equipment design, as well as further initiatives to strengthen its safety culture.

Total recordable cases increased from 15 to 18, resulting in a total recordable injury frequency rate of 1.20. This was as a result of its lost-time injuries increasing from nine to ten, of which 90% were related to low energy incidents such as slip, trip and fall incidents, as well as materials handling incidents, with 90% of injuries sustained to hands and fingers.

High potential incidents, which represent Kumba’s leading indicators, increased from six to ten.

To address the increase in safety indicators, deep dives were held to identify areas of improvement. 

“After resetting our base last year, 2023 is a year of transition and building on the next phase of our value delivery through our refreshed strategy. Fundamentally, we must remain competitive, and our refreshed strategy will continue to focus on delivering value over volume as we unlock the full potential of our core.

“Beyond this, we need to ensure that our business is well positioned to deliver a sustainable future and support the green steel transition that is driving demand for our premium ore,” Zikalala says.

“Our refreshed strategy will ensure we remain focused on maintaining our competitive position as we unlock the full potential of our core and position Kumba for a sustainable future and the green transition that is driving demand for our premium ore,” she states. 

Zikalala also highlights that the company's operations are at a stable place as it moves forward; and further, the company's shareholding includes its employees.