Load and haul operations around the Western ramp area of the Leeufontein pit at Kolomela Iron ore Mine. Sales volumes of 36.3 million tons for the period “reflect low levels of finished stock levels at the port due to logistics” constraints under Transnet. Picture: Supplied
After posting a plunge in full year earnings due to a rollback in sales and commodity prices, Kumba Iron Ore is keen to participate in the revival of Transnet’s logistical logjam.
Mpumi Zikalala, the CEO of Kumba Iron Ore, on Tuesday said she believed that private players should be allowed to run the iron ore rail line to Saldanha.
Kumba Iron Ore, like other South African bulk commodity producers, has suffered under rail and port logistical constraints. The Anglo American unit’s production of 35.7 million tons matched ore railed to Saldanha Bay port of 35.6 million tons for the full year to December.
Sales volumes of 36.3 million tons for the period “reflect low levels of finished stock levels at the port due to logistics” constraints under Transnet.
Zikalala said she believed that the rail corridor to port of Saldanha should be put into the hands of private players to improve shipments.
“The entire line could be concessioned to a player who will be able to focus on this line. That could make a massive impact,” Zikalala said during a call with the media after the company released its financials on Tuesday.
In the company’s financial statement, Kumba Iron Ore said as part of the Ore User’s Forum (OUF) it was “working closely with Transnet to convert the outcomes of the independent technical assessment into a multi-year programme of focused projects to restore the capacity” of the Ore Export Corridor (OEC).
“As a member of the OUF, Kumba has been a strong advocate of private sector participation to improve the performance of the OEC through concessions,” it said.
Transnet had already taken first steps towards this, with the network statement it released representing “a significant step forward in terms of the liberalisation of the South African railway” industry.
In terms of its financial performance, Kumba’s total revenue of R68.5 billion for the year slumped by 21% as a result of a 21% decrease in the average realised full on board iron ore export price of $92 (around R1 700) per wet metric ton.
This had impacted revenues by R17.6bn. It also attributed the plunge in revenues to a 2% decrease in total sales volumes to 36.3 million tons, contributing R2bn to the overall decrease in revenues.
With analysts saying the company was “right on target” with “lot of rebuilding/infrastructure” development, shares in Kumba Iron Ore rose 7.47% to R368.63 per share in afternoon trade on the JSE on Tuesday while parent company Anglo American traded nearly 1% weaker.
The decrease in revenue in Kumba was however, partly offset by a 38% increase in shipping revenue to R8.2bn due to higher freight rates and CFR volumes increasing to 65% of total sales volumes.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) in Kumba stood at R28.1bn for the full year, underpinning the company’s attributable free cash flow of R14.5bn. Consequently, Kumba has declared a final cash dividend of R19.90 per share, bringing the total cash dividend for the full year to R38.67 per share
“The reconfiguration of our operations, coupled with our focus on operational excellence, has unlocked R4.4bn in value through cost savings, reducing our C1 unit cost by 5% to $39 per wet metric ton. With iron ore markets remaining volatile, this reduction in cost ensures Kumba is in a more resilient financial position,” said Zikalala.
During the period under review, “iron ore supply outpaced steel demand resulting in a sharp decrease” in iron ore prices. However, demand for lump was underpinned by successive rounds of metallurgical coal price cuts.
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