Kumba Production and Sales Report for the first quarter ended 31 March 2023
25 April, 2023
Kumba’s Chief Executive, Mpumi Zikalala, said: “We are devastated that after more than six fatality-free years, Nico Molwagae, a drilling assistant employed by a service partner, was fatally injured at our Kolomela mine exploration site on 13 February 2023. Our deepest sympathies and thoughts are with his family, friends and colleagues. We remain resolute in our commitment to achieving zero harm and preventing fatalities in our workplace.
“Operationally, Kumba delivered a solid production performance with volumes increasing by 14% to 9.4 million tonnes (Mt), largely driven by a strong recovery from our Kolomela mine. Sales volumes were maintained at 9.5Mt. Subject to Transnet logistics performance, guidance for the full year 2023 is unchanged.
“On the marketing front, economic activity in China strengthened on the back of pro-growth policy decisions with improved demand from China expected to offset the slowdown in other markets. The demand outlook for our high-quality iron ore product continues to be positive given the steel intensity of the global energy transition. We continue to collaborate with several of our steel producing customers on the advancement of low carbon steelmaking processes. In addition to partnering with Salzgitter, Nippon Steel and Thyssenkrupp Steel, Anglo American plc recently announced the signing of a memorandum of understanding with H2 Green Steel, a Swedish hydrogen and steel producer, to study and trial the use of premium quality iron ore products, including from Kumba, as feedstock for H2 Green Steel's direct reduced iron production process.”
Overview:
- Safety performance: One fatality was recorded at Kolomela mine. Our relentless focus on safety continues.
- Total production increased by 14% to 9.4Mt due to improved operational performance at Kolomela mine.
- Total sales maintained at 9.5Mt, and up 38% in Q4 2022 when sales were impacted by the Transnet strike and annual maintenance.
- Finished stock increased to 8.0Mt from 7.8Mt on 31 December 2022, with 7.0Mt stockpiled at the mines.
- Average realised free on board (FOB) export iron ore price of US$121 per wet metric tonne (wmt) equivalent to US$123 per dry metric tonne (dmt), compared to the average benchmark price of US$110/wmt or US$112/dmt.
| Q1 | Q4 | Q3 | Q2 | Q1 | % change vs | % change vs | |
|---|---|---|---|---|---|---|---|
| Million tonnes | 2023 | 2022 | 2022 | 2022 | 2022 | Q1 2022 | Q4 2022 |
| Iron ore waste | 50.9 | 55.0 | 53.8 | 48.8 | 46.7 | 9 | (8) |
| Iron ore production | 9.4 | 10.0 | 10.0 | 9.5 | 8.3 | 14 | (5) |
| Iron ore sales | 9.5 | 6.9 | 10.0 | 10.2 | 9.5 | — | 38 |
| Kumba waste | 50.9 | 55.0 | 53.8 | 48.8 | 46.7 | 9 | (8) |
| Sishen | 35.0 | 39.8 | 41.4 | 40.0 | 35.7 | (2) | (12) |
| Kolomela | 15.9 | 15.3 | 12.4 | 8.8 | 11.1 | 43 | 4 |
| Kumba production | 9.4 | 10.0 | 10.0 | 9.5 | 8.3 | 14 | (5) |
| Lump | 6.1 | 6.5 | 6.5 | 6.2 | 5.4 | 14 | (6) |
| Fines | 3.3 | 3.5 | 3.5 | 3.2 | 2.9 | 13 | (6) |
| Kumba production by mine | 9.4 | 10.0 | 10.0 | 9.5 | 8.3 | 14 | (5) |
| Sishen | 6.3 | 7.0 | 7.1 | 7.1 | 5.8 | 9 | (10) |
| Kolomela | 3.1 | 3.0 | 2.9 | 2.4 | 2.5 | 25 | 4 |
Safety performance
Kumba is committed to safe production. Following extensive investigations into the fatal incident at our Kolomela mine exploration site on 13 February 2023, greater supervisory oversight, improved equipment design, as well as further initiatives to strengthen our safety culture have been implemented. Our relentless drive to achieve zero harm continues to focus on the safe way of work and the prevention of fatalities.
Mining and production
Total waste stripping increased by 9% to 50.9Mt (Q1 2022: 46.7Mt), driven by a strong recovery at Kolomela. Compared to Q1 2022 (comparative period) which was hampered by extremely high rainfall, Kolomela's waste stripping increased by 43% to 15.9Mt (Q1 2022: 11.1Mt), due to improved rain readiness capability and equipment reliability. At Sishen, waste stripping decreased by 2% to 35.0Mt (Q1 2022: 35.7Mt).
Improved feedstock availability at Kolomela underpinned a 25% increase in production at the mine to 3.1Mt (Q1 2022: 2.5Mt). However, Kolomela's feedstock quality was impacted by the waste mining challenges experienced in 2022, which depleted buffer stockpiles, resulting in a lower overall average product Fe quality of 63.1%. We are strongly focused on improving the quality of the feedstock buffer and this is expected to improve in the second half of 2023. Sishen continued to perform well, with production increasing by 9% to 6.3Mt (Q1 2022: 5.8Mt). Overall, production volumes increased by 14% to 9.4Mt (Q1 2022: 8.3Mt).
Logistics, sales and marketing
Ore railed to port by Transnet increased by 3% to 9.4Mt (Q1 2022: 9.1Mt), following the completion of outstanding maintenance on the rail line and the spraying programme successfully reduced the locust infestation which had impacted rail performance in the comparative period. However, rail performance was below planned levels required to drawdown stock held at the mines. Closing finished stock increased to 8.0Mt (31 December 2022: 7.8Mt) with 7.0Mt stockpiled at the mines, in line with that reported at the end of Q4 2022. Export sales of 9.5 Mt were flat compared to Q1 2022, although increasing by 38% relative to Q4 2022 which was largely impacted by the industrial strike action and annual maintenance shutdown by Transnet.
Kumba achieved an average lump:fine ratio of 67:33 and product quality of 63.1% Fe. This translated into an average realised FOB export iron ore price of US$121/wmt (equivalent to US$123/dmt), outperforming the average benchmark Platts 62 index FOB price of US$110/wmt (equivalent to US$112/dmt).
2023 guidance update
Kumba has maintained its production, sales and cost guidance for 2023 (announced at its annual results presentation on 21 February 2023). Subject to potential logistics-related disruptions, our guidance for 2023 is as follows:
| Guidance | FY2023 |
|---|---|
| Total sales (Mt) | 37 - 39 |
| Total production (Mt) | 35 - 37 |
| Sishen | ~26.0 |
| Kolomela | ~10.0 |
| Waste stripping (Mt) | |
| Sishen | 150 - 170 |
| Kolomela | 60 - 70 |
| On-mine unit cost (R/t) | |
| Sishen | 540 - 570 |
| Kolomela | 510 - 540 |
| C1 unit costs ($/t) | ~44 |
Volumes excluding waste stripping, and on-mine unit costs, are reported as wmt. Product is shipped with ~1.6% moisture.
Foreign exchange rate used for 2023 costs is ~R17/US$.
Production and sales volumes as referred to for the quarter ended 31 March 2023 are 100% of Sishen Iron Ore Company Proprietary Limited (“SIOC”), and attributable to shareholders of Kumba as well as the non-controlling interests in SIOC.
The information on which this announcement is based has not been reviewed and reported on by the Company’s external auditors.
Johannesburg
25 April 2023
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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