Integrated report 2023
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Kumba has delivered solid performance in another challenging year, characterised in particular by the poor performance of Transnet’s rail and port infrastructure and support services. These logistical constraints have placed significant pressure on our value chain, resulting in stock levels at the mines increasing to unsustainable levels and contributing to a 5% decline in production for the year. Although we are working actively with government and Transnet to find solutions to these challenges, we recognise that this will take time. We have thus taken the decision to reconfigure the business to align production more closely with the current and anticipated logistics capacity to ensure Kumba’s continuing viability in a very competitive cost environment.
An important development this year was the launch of our Refreshed strategy, replacing our previous five-year Tswelelopele strategy that came to an end in 2022. The immediate focus of the new strategy is to unlock the full potential of our core business by reconfiguring our operations and delivering ambitious cost efficiencies, while retaining a crucial focus on our safety culture. The safety, health and wellbeing of our employees remains our first priority. Our Refreshed strategy is a multi-year initiative. Kumba has a compelling value proposition: a strong resources and reserves endowment, the capacity of our people, our proven ability to progress on our decarbonisation strategy and play a meaningful role in the sector’s “green steel” transition, and our various opportunities for organic and inorganic growth.
Integrated report 2023
Sustainability report 2023
Climate change report 2023
Ore Reserves (and saleable product) and Mineral ...
Annual financial statements 2023
Notice of Annual General Meeting 2024
Attributable free cash flow
Total cash dividend per share
Return on Capital Employed
The development of our Refreshed strategy has been informed by the following:
We announced at the 2023 interim results that we were embarking on the next phase of value delivery. The Tswelelopele strategy has successfully created value over the last five years. Our Refreshed strategy aims to address four interconnected trends: the decarbonisation of the steel industry, technology, the future of work, and society’s changing expectations of big business. By responding to these trends, we remain alert to new business opportunities and ensure that we can thrive in a rapidly changing macro environment. Our primary focus is on unlocking the full potential of our core which starts with having strong leadership and culture. These, in turn, drive operational excellence and cost competitiveness. Concurrent to this, we are positioning for a sustainable future. and progressing our own decarbonisation journey. Key to this is the role we play in the green steel industry. Fundamentally, as GDP per capita grows, steel per capita also grows. The steel industry will increasingly pivot towards carbon-light steelmaking, resulting in direct reduced iron (DRI) production increasing around the world and creating further demand for high-quality iron ore products. At the same time, we continue to invest in social development programmes that are directly aligned with the UNSDGs. These include providing access to high-quality education, healthcare and infrastructure development.
In response to the persistent Transnet-related logistics challenges, we conducted a strategic business review in the second half of the year with the aim of reconfiguring our business and aligning production more closely to the anticipated logistics capacity. To ensure the ongoing viability of our business in a particularly cost competitive environment, we have lowered our production outlook for the next three years to 35 to 37 Mt per annum for the period. Previously, we had an outlook of 37 to 39 Mt in 2024 and 39 to 41 Mt in 2025. This reconfiguration will enable the much-needed drawdown of high mine stockpiles and will support critical cost reductions. To this end, we have identified between R2.5 and R3.0 billion of sustainable cost-saving initiatives for 2024, and we have revised our C1 unit cost guidance to US$38 to US$40/wmt for the next three years. As we progress, we will be doing more work to identify and embed further cost savings and efficiency opportunities into our plans. The initiatives identified are centred around optimising our mine plan and use of contractors, improving our efficiencies, extracting further supply chain savings, and streamlining overhead costs.
During 2023, we streamlined our office-based roles and given the required change to our production footprint in the medium term, we do also need to reconfigure the size of our workforce. Therefore, despite the extensive measures taken to mitigate the impact of the logistics challenges on our business, Kumba has announced a proposed reconfiguration process. As the reconfiguration will, regrettably, involve job losses, it will be carried out in consultation with our stakeholders, including trade unions and other affected, non-unionised employees in terms of section 189A of the Labour Relations Act, 66 of 1995. The potential reconfiguration of our business is expected to impact ~490 jobs (including fixed-term employees) across Kumba's operations.
The section 189A process involves a consultation period with trade unions and affected employees and will be facilitated by the Commission for Conciliation, Mediation and Arbitration. Only when the consultation process is concluded will the final number of impacted jobs be known. In parallel, a contractor/vendor review process is underway that may see ~160 service providers/contractors impacted. This could result in some of the contractor services being rescoped or terminated as part of the business reconfiguration process. We recognise that this is a challenging time for all our people. The decision to potentially reconfigure our business has not been taken lightly but it is necessary if we are to remain globally competitive to sustain our mines and those who depend on them for the long term, including our employees, service partners, communities, local businesses, and our government through our contribution to the fiscus. As part of the Anglo American group, we are developing an integrated social response plan that is intended to help mitigate the socio-economic impact on affected employees, contractors and communities.