Kumba to cut output to weather orecollapse

No price recovery foreseen

KUMBA Iron Ore said it would cut output at Africa’s largest mine for the steelmaking ingredient as it did not foresee a recovery in prices that had slumped more than two-thirds since the start of 2013.

“The period ahead is likely to result in formidable changes for the industry, with the market now pricing in a more muted trend for the iron-ore price,” the Pretoria-based unit of Anglo American said in a statement yesterday.

“These circumstances have reinforced the need to make tough decisions for the business.”

Kumba is scaling back production as it targets a third of its workforce in job cuts to weather a collapse in iron ore.

A slowdown in China restricts demand from the biggest user, while the largest mining companies, including Vale and Rio Tinto, have raised production to build market share, spurring a glut.

The World Bank forecasts the raw material will post the biggest loss among metals this year as low-cost supply continues to outstrip consumption.

Headline earnings fell 66 percent to R11.82 a share from a year earlier, Kumba said. Total production decreased by 7 percent to 44.9 million tons.

The company cut its forecast for output this year from Sishen, its biggest mine, by 25 percent to 27 million tons. The pit produced 31.4 million tons last year.

Kumba is also booking an impairment of R6 billion on Sishen and planned to reduce its breakeven costs by about $10 (R160.50) a ton this year, from $41 a ton achieved at the end of last year, the company said.

Ore with 62 percent ferrous content delivered to China’s Qingdao port, a benchmark, was at $45.73 a dry ton on Friday, according to Metal Bulletin.

Following an audit, the SA Revenue Service (Sars) wants Kumba to pay additional tax of about R1.8bn for 2006 to 2010.

Kumba lodged an objection and was awaiting Sars’s response, it said.

The producer appealed to the minister of mineral resources against conditions imposed by the ministry when it granted Kumba a 21.4 percent right to Sishen, it said.