Sishen’s strong output, sales give a boost to Kumba

KUMBA Iron Ore shares shot up 4 percent in early trade yesterday as the country’s biggest iron ore producer reported that strong output and sales from its Sishen mine had put a shine on its quarter ended in September.

The share price eventually eased to gain 1.36 percent for the day and close at R132.17.

The company, which is 70 percent owned by Anglo American, operates the Sishen mine and Kolomela mine in the Northern Cape and Thabazimbi mine in Limpopo.

It said Sishen’s production rose 46 percent to 8.3 million tons compared with 5.7 million tons in the second quarter.

The company said the spike in production from Sishen was largely due to the restructuring measures it had put in place.

“The mine transitioned to a three-shift roster system in September, which is expected in further improvements in equipment efficiencies over the medium term,” the company said in a note yesterday.

Total production for the period in review increased 33 percent quarter on quarter and 3 percent year on year to 11.76 million tons.

Output from the newer Kolomela mine rose by 8 percent quarter on quarter to 3.4 million tons and 2 percent year on year. Kumba produced 48 million tons of iron ore last year.

The company expected the mine to exceed its target of 12 million tons for the full year.

It said export sales for the third quarter increased by 18 percent to 10.3 million tons compared with the second quarter. The company exports iron to countries such as China, Japan, Korea and some European markets.

Kumba attributed the trend to the improved production volumes at its Sishen mine during the quarter under review.

Waste removal fell from 60 million tons in the third quarter of last year to 35 million tons in the quarter under review. The company said its waste was consistent with the stipulated guidelines.

“Waste run rates remain in line with full year guidance of 135 million to 150 million tons,” the company said.

Kumba said Sishen was on track to produce 27 million tons for the full year.

Last month, the Department of Mineral Resources ended a seven-year dispute between Kumba and steel giant ArcelorMittal South Africa when it granted Kumba 21.4 percent of mining rights that were not already under its control.

Until 2009, Kumba and ArcelorMittal SA had held 78.6 percent and 21.4 percent respectively of the mining rights in Sishen.

In February, Anglo American announced it was considering disposing of its assets in Kumba to focus on its diamond, platinum and copper assets.

SA Institute of Race Relations chief economist Ian Cruickshanks said Anglo American would probably review its plan to sell the Kumba stake as demand had picked up over the past few months.

“Anglo will most probably put its plans to sell off Kumba on hold for the time being. Demand and revenue have gone up considerably,” Cruickshanks said. – Kabelo Khumalo