Kumba Iron Ore Limited Production and Sales report for the third quarter ended 30 September 2022
27 October, 2022
Kumba's Chief Executive, Mpumi Zikalala, said: “Kumba’s Q3 2022 operational performance reflects our ongoing focus on safe and responsible production. Our safety commitments have kept our business fatality-free since 2016.
Despite lower waste mined and production compared to Q3 2021, we have seen improved mining and processing stability. As a result, waste mining has increased by 10% and production by 5% since Q2 2022. Sishen continued to deliver a solid performance and Kolomela saw a 40% increase in waste mining and a 22% increase in production post its safety reset reported in Q2 2022.
Consequently, we have maintained our full year 2022 production guidance, although at the lower end of 38-40 Mt, despite the impact of industrial action at Transnet in October and the subsequent delay in Transnet’s annual maintenance shut. However, the combined impact of low levels of finished stock at Saldanha Port due to rail constraints year-to-date and industrial action at Transnet in October, has necessitated a revision to our full year 2022 export sales guidance from 38-40 Mt to 36-37 Mt.
More broadly, economic slowdown, energy shortages in Europe and rolling Covid lockdowns in China continue to weigh on steel demand and iron ore prices. More positively, sintering cuts in China to improve air quality have resulted in higher lump premia. Our premium product strategy continues to benefit us through increasing demand for high quality iron ore products that have carbon emission reduction properties. This contributed to Kumba achieving a year-to-date average realised price of US$115 per wet metric tonne (wmt) for Q3 2022, 8.4% above the benchmark price."
Overview
- Commitment to sustaining a fatality-free workplace and further improving health and broader safety performance.
- Total production decreased by 8% to 10 Mt. Relative to Q2 2022, production increased by 5% driven by a 22% improvement at Kolomela.
- Export sales of 10 Mt were flat year-on-year and 2% lower relative to Q2 2022 as rail constraints kept finished stock levels low at Saldanha Port.
- Finished stock of 4.6 Mt (30 June 2022: 4.5 Mt), with high levels of on-mine stock.
- Average year-to-date (YTD) realised FOB export iron ore price of US$115 per wmt (US$117 per dry metric tonne (dmt)), 8.4% above the average benchmark price of US$106 per wmt (US$108 per dmt).
| Sales summary | ||||||||
|---|---|---|---|---|---|---|---|---|
| Million tonnes | Quarter ended | % change | Quarter ended | % change | ||||
| Q3 2022 | Q3 2021 | vs Q3 2021 | Q2 2022 | vs Q2 2022 | ||||
| Total | 10.0 | 10.1 | - | 10.2 | (2) | |||
| - Export sales | 10.0 | 10.1 | - | 10.2 | (2) | |||
| Production summary | ||||||||
|---|---|---|---|---|---|---|---|---|
| Million tonnes | Quarter ended | % change | Quarter ended | % change | ||||
| Q3 2022 | Q3 2021 | vs Q3 2021 | Q2 2022 | vs Q2 2022 | ||||
| Total | 10.0 | 10.8 | (8) | 9.5 | 5 | |||
| - Sishen Mine | 7.1 | 7.5 | (6) | 7.1 | - | |||
| - Kolomela Mine | 2.9 | 3.3 | (11) | 2.4 | 22 | |||
1. Volumes, excluding waste stripping, are reported as wet metric tonnes. Product is shipped with approximately 1.6% moisture.
Safety
Safety is our first value and our priority is ensuring that our colleagues return home safely each day. By the end of Q3 2022 (the "period"), Kumba had achieved over six years of being fatality-free, in line with our Elimination of Fatalities safety strategy.
Pleasingly, we have safely cleared the blasting misfire area at Kolomela and continue to embed our safety reset initiatives. We are focusing on driving an operationally safe way of work across our operations, through our “Stand Up For Safety” programme, recently launched at our Global Safety day. The programme encourages our workforce to know, do and always challenge actions that do not support responsible production. Our aim is to create continual safety awareness and a positive safety mindset, as well to be deliberate about safety and share our learning.
Mining and production
Total waste stripping decreased by 5% to 53.8 Mt relative to Q3 2021 (the “comparative period”), driven by a 23% decrease to 12.4 Mt at Kolomela. Kolomela’s mining performance was impacted by a slower than expected ramp-up in mining activity post the safety reset in Q2 2022. This was partly offset by Sishen’s waste stripping increasing by 2% to 41.4 Mt due to improved mining stability and shovel availability.
Relative to the comparative period, total production was 8% lower at 10 Mt. Feedstock constraints largely due to the slower ramp-up in mining, resulted in Kolomela’s production decreasing by 11% to 2.9 Mt. At Sishen, the combined impact of Eskom loadshedding and plant reliability challenges resulted in production reducing by 6% to 7.1 Mt.
Since H1 2022, as operating conditions improved during the drier winter months, we have seen a marked progress in operational performance overall. In Q3 2022, waste stripping improved by 10% compared to Q2 2022, with Sishen increasing by 4% and Kolomela by 40%. Q3 2022 production relative to Q2 2022, also improved increasing by 5%. Sishen maintained a consistent rate of production and Kolomela improved by 22% as operations began to normalise following the headwinds experienced earlier in the year.
Logistics, sales, and the market environment
Ore railed to port decreased by 2% to 10.1 Mt compared to Q3 2021 (YTD decrease of 3.1% to 29.1 Mt). This resulted in finished stock levels remaining high at the mines and at sub-optimal levels at Saldanha Port, impacting shipping throughput. Due to continued rail constraints, export sales remained flat at 10 Mt compared to Q3 2021 and decreased by 2% relative to Q2 2022. Finished stock levels were at 4.6 Mt, similar to that of 4.5 Mt in Q2 2022.
More broadly, economic slowdown, energy shortages in Europe and rolling Covid lockdowns in China have weighed negatively on steel demand and iron ore prices. More positively, sintering cuts in China to improve air quality have resulted in higher lump premia. Our premium product strategy continues to benefit us through increasing demand for high-quality iron ore products with carbon emission reduction properties.
Year-to-date, Kumba has achieved an average lump:fine ratio of 66:34 (YTD Q3 2021: 69:31) and iron (“Fe”) content of 63.9% (YTD Q3 2021: 64.1%). In the context of the lower carbon emitting value-in-use of our products, this translated into an average year-to-date realised FOB export iron ore price of US$115 per wmt (YTD US$117 per dmt), 8.4% above the average benchmark price of US$106 per wmt (YTD US$108 per dmt).
Full year 2022 guidance
Kumba’s full year 2022 production guidance has been maintained, although at the lower end of 38-40 Mt, despite the impact of industrial action at Transnet in October and the subsequent delay in Transnet’s annual maintenance shut. However, the combined impact of low levels of finished stock at Saldanha Port due to rail constraints year-to-date and industrial action at Transnet in October, has necessitated a revision to our full year 2022 export sales guidance from 38-40 Mt to 36-37 Mt.
Production guidance at the mine level has been updated, with Kolomela’s production guidance decreasing to ~10.5 Mt (from ~12.5 Mt) as a consequence of the industrial action and a slower recovery in Q3 2022. Sishen’s production was not impacted and guidance has been increased to ~27.5 Mt (from ~26.5 Mt). In addition, our waste mining guidance has been revised to 180-210 Mt (from 190-220 Mt).
Given these impacts and the ongoing challenge of cost inflation, driven by high diesel prices and supply chain disruptions, particularly following the Transnet strike, Kolomela’s unit cost guidance has been revised to R505 – R525/t (from R420 – R440/t). Sishen’s unit cost and the total C1 unit cost guidance has been maintained at R500 – R530/t and US$44/t, respectively.
Kumba's revised full year 2022 guidance subject to potential logistics, weather and loadshedding disruptions, is as follows:
| Guidance | FY2022 (wmt) | FY2022 Revised (wmt) |
|---|---|---|
| Total sales (Mt) | 38 - 40 | 36 - 37 |
| Total production (Mt) | 38 - 40 | Unchanged |
| Sishen | ~26.5 | ~27.5 |
| Kolomela | ~12.5 | ~10.5 |
| Waste stripping (Mt) | 190 - 220 | 180 - 210 |
| Sishen | 140 - 160 | Unchanged |
| Kolomela | 50 - 60 | 40 - 50 |
| On-mine unit cost (R/t) | ||
| Sishen | 500 - 530 | Unchanged |
| Kolomela | 420 - 440 | 505 - 525 |
| C1 unit costs ($/t) | 44/t | Unchanged |
1. Volumes, excluding waste stripping, are reported as wet metric tonnes. Product is shipped with approximately 1.6% moisture.
Production and sales volumes referred to for the period are 100% of Sishen Iron Ore Company Proprietary Limited (“SIOC”), and attributable to shareholders of Kumba as well as to the non-controlling interests in SIOC.
This announcement contains forward-looking statements which are based on the Company’s current beliefs and expectations about future events. The operational and financial information provided in this announcement are estimates and forecasts and have not been reviewed and reported on by the Company’s external auditors.
Centurion
27 October 2022
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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