Kumba production and sales report, and trading statement, for the six months ended 30 June 2024
18 July, 2024
Kumba’s Chief Executive, Mpumi Zikalala, said: “Kumba’s solid operational performance in the first half of 2024, stems from our relentless focus on safety and operational excellence as we unlock the value in our business and build resilience to ensure a sustainable future.
“Our commitment to the health and safety of our workforce contributed to our total recordable injury frequency rate (TRIFR) of 0.94 relative to 1.20 in the same period of 2023, notwithstanding an increase in the second quarter which was addressed by implementing an immediate Call to Action to drive further safety leadership across the business.
"In line with our business reconfiguration plan to align production to Transnet’s logistics performance, volumes were reduced by 2%, matching a 2% decrease in ore railed to port. Sales decreased by 5% with the benefit of the pro-active mini-shut and port equipment repairs undertaken in April 2024, largely offsetting the impact of port equipment outages in the first quarter. As a result, we have maintained our production and sales guidance for the full year 2024 of 35-37Mt and 36-38Mt, respectively.
"Progress is being made on our cost optimisation programme and we are well on track to achieving our C1 unit cost guidance of US$38/tonne. Guidance on capital expenditure is unchanged at R8.0 - 9.0 billion for the full year 2024.
“The iron ore market pulled back strongly in the first half and the reconfiguration of our business to a lower production and cost profile is helping to build greater resilience in the challenging market environment. Weak steel demand in China and Europe coupled with robust iron ore supply contributed to the Platts IODEX 62% Fe CFR benchmark iron ore price falling by 26% since the start of the year. An increase in steel exports provided some relief, while low levels of lump inventory supported the lump premium from which we benefit.
“Kumba achieved an average realised free-on-board (FOB) export price of US$97 per wet metric tonne (wmt) relative to the 62% Fe FOB export price of US$96/wmt as the timing effect of provisionally priced volumes in a lower price environment were largely offset by the lump and iron ore quality premium that our products attract."
Production and sales report for the six months ended 30 June 2024
Overview:
- A relentless focus on health and safety contributed to a TRIFR of 0.94 and fatality free production of more than eight years at Sishen.
- Total production for the six months ended 30 June 2024 ("the period") decreased by 2% to 18.5Mt (H1 2023: 18.7Mt).
- Sales decreased by 5% to 18.1Mt (H1 2024:18.9Mt), due to equipment challenges at Saldanha Bay Port.
- Total finished stock increased to 8.2Mt (31 December 2024: 7.8Mt), with 0.6Mt at Saldanha Bay Port and 0.2Mt loaded on a vessel but not yet sold.
- Average realised FOB export iron ore price of US$97/wmt (US$99 per dry metric tonne (dmt)) achieved, relative to the average benchmark price of US$96/wmt or US$98/dmt.
Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q2 2024 vs |
Q2 2024 vs |
H1 | H1 | H1 2024 vs |
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000 tonnes | 2024 | 2024 | 2023 | 2023 | 2023 | 2023 | Q2 2023 % |
Q1 2024 % |
2024 | 2023 | H1 2023 % |
Iron ore waste | 44,663 | 43,794 | 46,021 | 59,602 | 60,302 | 50,914 | (26) | 2 | 88,457 | 111,216 | (20) |
Iron ore production | 9,184 | 9,275 | 7,234 | 9,736 | 9,320 | 9,425 | (1) | (1) | 18,459 | 18,745 | (2) |
Iron ore sales | 9,556 | 8,533 | 9,343 | 8,873 | 9,456 | 9,487 | 1 | 12 | 18,089 | 18,943 | (5) |
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Kumba waste | 44,663 | 43,794 | 46,021 | 59,602 | 60,302 | 50,914 | (26) | 2 | 88,457 | 111,216 | (20) |
Sishen | 39,265 | 35,502 | 37,391 | 45,842 | 45,504 | 35,064 | (14) | 11 | 74,767 | 80,568 | (7) |
Kolomela | 5,398 | 8,292 | 8,630 | 13,760 | 14,798 | 15,850 | (64) | (35) | 13,690 | 30,648 | (55) |
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Kumba production by mine | 9,184 | 9,275 | 7,234 | 9,736 | 9,320 | 9,425 | (1) | (1) | 18,459 | 18,745 | (2) |
Sishen | 6,644 | 6,563 | 5,958 | 6,680 | 6,442 | 6,341 | 3 | 1 | 13,207 | 12,783 | 3 |
Kolomela | 2,540 | 2,712 | 1,276 | 3,056 | 2,878 | 3,084 | (12) | (6) | 5,252 | 5,962 | (12) |
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Kumba sales | 9,556 | 8,533 | 9,343 | 8,873 | 9,456 | 9,487 | 1 | 12 | 18,089 | 18,943 | (5) |
Lump | 5,925 | 5,620 | 6,220 | 5,878 | 6,241 | 6,358 | (5) | 5 | 11,545 | 12,599 | (8) |
Fines | 3,631 | 2,913 | 3,123 | 2,995 | 3,215 | 3,129 | 13 | 25 | 6,544 | 6,344 | 3 |
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Safety and health
The improvement in the TRIFR to 0.94 from 1.20 in the first half of 2023 is attributable to enhanced risk awareness, increased leadership time at our mine sites, the heightened focus on reducing high-potential indicators and improved safety risk compliance. Proactive measures including the implementation of an immediate Call to Action to address an increase in hand and finger injuries in the second quarter, ensures continual focus on safety as we strive to sustain and build upon our progress.
Mining and Production
Kumba’s operational performance reflects strong execution of the company’s business reconfiguration initiatives to unlock value through operational excellence and cost optimisation. As planned, waste mining and production were reduced, while maintaining healthy feedstock and the flexibility to ramp-up production should Transnet’s logistics performance improve. Alongside the decrease in waste mining, our focus on operational excellence resulted in the optimisation of heavy mining equipment and improvements in operational efficiency.
Total waste stripping decreased by 20% to 88.5Mt (H1 2023: 111.2Mt) driven by a 55% decrease at Kolomela to 13.7Mt (H1 2023: 30.6Mt) and 7% less waste mined at Sishen at 74.8Mt (H1 2023: 80.6Mt). This is in line with the waste guidance for 2024 of 155 - 170Mt.
Kumba's total production decreased by 2% to 18.5Mt (H1 2023: 18.7Mt), in line with Transnet's rail performance and is tracking well to end the year within guidance of 35 – 37Mt. This performance reflects a 12% decrease in Kolomela's production to 5.3Mt (H1 2023: 6.0Mt) and a 3% increase at Sishen to 13.2Mt (H1 2023:12.8Mt).
Sishen and Kolomela's unit cost guidance for the full year 2024 have been maintained at R520–R550/t and R410-R440/t, respectively and the C1 unit cost guidance is unchanged at US$38/t.
Logistics, sales, and marketing
Transnet’s performance at Saldanha Bay Port was primarily impacted in the first quarter by stacker-reclaimer reliability challenges, as well as adverse weather conditions. Following a five-day planned mini-shut in April 2024, targeting port equipment maintenance, sales improved by 12% compared to the first quarter of the year. Consequently, the overall impact on sales for the first half of the year was limited to a decrease of 5% to 18.1Mt (H1 2023: 18.9Mt).
Rail performance was impacted by several derailments and locomotive breakdowns, resulting in ore railed to port decreasing by 2% to 18.1Mt (H1 2023: 18.4Mt). Total finished stock remained high at 8.2Mt (31 December 2023: 7.1Mt), with stock at the mines increasing to 7.4Mt (31 December 2023: 6.5Mt), while stock at Saldanha Bay Port was at 0.6Mt (31 December 2023: 0.6Mt), with 0.2Mt on a vessel loaded but not yet sold.
Kumba as a participant in the Ore User's Forum continues to seek solutions with Transnet to prevent further deterioration in the performance of the Iron Ore Export Channel. Planning and preparations are underway to ensure the annual maintenance shut in the fourth quarter of 2024 is executed successfully and disruption to the value chain is minimised.
In the first half, Kumba’s iron (Fe) content averaged 64.1% (H1 2023: 63.3%) and the average lump to fine ratio was 64:36 (H1 2023: 67:33). An average realised FOB export price of US$97/wmt (equivalent to US$99/dmt) was achieved relative to the 62% Fe FOB export price of US$96/wmt (equivalent to US$98/dmt). The premium earned from Kumba’s high-quality products has more than offset the negative timing effect of lower prices on provisionally priced volumes during the period.
Full year 2024 guidance
Subject to Transnet's logistics performance, Kumba's guidance is unchanged. The full year guidance is as follows:
Guidance | FY2024 |
Total sales (Mt) | 36 - 38 |
Total production (Mt) | 35 - 37 |
Sishen | ~26 |
Kolomela | ~10 |
Waste stripping (Mt) | 155 - 170 |
Sishen | 135 - 145 |
Kolomela | 20 - 25 |
On-mine unit cost (R/tonne) | |
Sishen | 520 - 550 |
Kolomela | 410 - 440 |
C1 unit costs (US$/tonne) | ~38 |
Capital expenditure (Rbn) | 8.0 - 9.0 |
Trading statement for the six months ended 30 June 2024
Kumba is finalising its financial results for the six months ended 30 June 2024 (the period) and further information will be provided in the company's results for the period, which will be released on the Stock Exchange News Service of the JSE (SENS) on 23 July 2024.
In accordance with paragraph 3.4(b) of the JSE Limited Listings Requirements, shareholders are advised that headline earnings for the period are likely to be between R6,848 million and R7,348 million, a decrease of between 24% and 29% from the previous six months ended 30 June 2023 (comparative period). Headline earnings per share (HEPS) are likely to be between R21.34 and R22.89, a decrease of between 24% and 29% from the comparative period. Reported headline earnings and HEPS for the comparative period (released on SENS on 25 July 2023) were R9,643 million and R30.04, respectively.
Basic earnings for the period are expected to be between R6,847 million and R7,347 million, a decrease of between 24% and 29% from the comparative period. Basic earnings per share (EPS) are expected to be between R21.33 and R22.89, a decrease of between 24% and 29%. Reported basic earnings and EPS for the comparative period were R9,642 million and R30.04, respectively.
The decrease in earnings for the period is largely attributable to a lower average realised FOB export iron ore price and a decrease in sales volumes, relative to the comparative period.
This announcement contains forward-looking statements which are based on the Company’s current beliefs and expectations about future events. The financial information contained in this announcement, has not been reviewed and reported on by the Company's external auditors.
Volumes excluding waste stripping, and on-mine unit costs, are reported as wmt. Product is shipped with ~1.6% moisture and the foreign exchange rate of ~R19/US$ was used to calculate the full year 2024 cost guidance.
Production and sales volumes referred to for the period ended 30 June 2024 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.
Johannesburg
18 July 2024
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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