Kumba Production and Sales Report for the first quarter ended 31 March 2024
23 April, 2024
Kumba’s Chief Executive, Mpumi Zikalala, said: “Safety is our highest priority and our total recordable injury frequency rate (TRIFR) of 0.48 relative to the first quarter 2023 rate of 1.27 demonstrates the progress we are making. This was underpinned by an ongoing focus on eliminating high energy, high-risk incidents through critical controls along with the management of practices and processes that enable a safe working environment.
“From a sustainability perspective, it is pleasing to report that both Sishen and Kolomela mines have achieved a 75% level of performance for the Initiative for Responsible Mining Assurance (IRMA) comprehensive mining standard. Kumba is the first iron-ore producer in Africa to complete the IRMA audit, providing all stakeholders with a way of accounting for sustainability practices that are transparent, verifiable, and comparable.
“Operationally, Kumba delivered a consistent and solid mining and production performance. In line with our business reconfiguration plan of aligning production volumes to Transnet’s logistics performance levels, total production decreased with a planned reduction at Kolomela, while Sishen delivered an increase in production.
“The execution of the business configuration plan is on track. The Section 189 Commission for Conciliation, Mediation and Arbitration consultations (CCMA) with affected employees commenced in March 2024 and is expected to be concluded by the end of May 2024. We are engaging with service partner companies as part of this reconfiguration process.
"Export sales volumes were significantly impacted by challenging operating conditions at the Saldanha Bay Port, with equipment maintenance now being undertaken by Transnet to primarily address the stacker-reclaimer reliability issues. Our production and sales guidance for the full year is unchanged at 35-37Mt and 36-38Mt, respectively.
“The iron ore market pulled back strongly in the first quarter and the reconfiguration of our business to a lower production and cost profile should ensure that we are more resilient in the face of a volatile market environment. Steel demand remained lacklustre after the Chinese New Year. This was compounded by modest Chinese government stimulus announced at the ‘Two Sessions’ congress in February 2024 and several steel production cuts across various provinces in China. Against this backdrop, Kumba achieved an average realised FOB export price of US$89 per wet metric tonne (wmt), reflecting the negative timing effect of provisionally priced volumes in a decreasing price environment. This was partly offset by the lump and iron ore quality premium that our products attract.”
Q1 2024 overview:
- Fatality-free production of more than seven years at Sishen and one-year at Kolomela, with an improved TRIFR of 0.48.
- Total production decreased by 2% to 9.3Mt (Q1 2023: 9.4Mt), in line with Kumba's business reconfiguration to a lower production profile.
- Total sales decreased by 10% to 8.5Mt (Q1 2023: 9.5Mt) due to port performance challenges, with 0.4Mt of shipments rolling over into the second quarter.
- Finished stock of 8.5Mt (31 December 2023: 7.1Mt) includes stockpiles of 6.9Mt at the mines, 1.2Mt at the Saldanha Bay Port and 0.4Mt of shipments.
- Average realised free on board (FOB) export iron ore price of US$89/wmt equivalent to US$91 per dry metric tonne (dmt), compared to the average benchmark price of US$103/wmt (equivalent to US$105/dmt).
| Q1 | Q4 | Q3 | Q2 | Q1 | % change vs | % changevs | |
|---|---|---|---|---|---|---|---|
| 000 tonnes | 2024 | 2023 | 2023 | 2023 | 2023 | Q1 2023 | Q4 2023 |
| Iron ore waste | 43,794 | 46,021 | 59,602 | 60,302 | 50,914 | (14) | (5) |
| Iron ore production | 9,275 | 7,234 | 9,736 | 9,320 | 9,425 | (2) | 28 |
| Iron ore sales | 8,533 | 9,343 | 8,873 | 9,456 | 9,487 | (10) | (9) |
| Kumba waste | 43,794 | 46,021 | 59,602 | 60,302 | 50,914 | (14) | (5) |
| Sishen | 35,502 | 37,391 | 45,842 | 45,504 | 35,064 | 1 | (5) |
| Kolomela | 8,292 | 8,630 | 13,760 | 14,798 | 15,850 | (48) | (4) |
| Kumba production by mine | 9,275 | 7,234 | 9,736 | 9,320 | 9,425 | (2) | 28 |
| Sishen | 6,563 | 5,958 | 6,680 | 6,442 | 6,341 | 4 | 10 |
| Kolomela | 2,712 | 1,276 | 3,056 | 2,878 | 3,084 | (12) | 113 |
| Kumba sales | 8,533 | 9,343 | 8,873 | 9,456 | 9,487 | (10) | (9) |
| Lump | 5,620 | 6,220 | 5,878 | 6,241 | 6,358 | (12) | (10) |
| Fines | 2,913 | 3,123 | 2,995 | 3,215 | 3,129 | (7) | (7) |
Safety and health performance
Our commitment to improving safety performance is supported by the continued implementation of our safety and health improvement programmes. These are focused on safeguarding our people and contractors by maintaining operational safety and stability as we reconfigure our business. We continued to invest in safety leadership and training in the first quarter, as well as eliminating high energy and high-risk incidents. This was driven by an ongoing focus on leading indicators, improved compliance in terms of critical controls and the management of practices and processes that enable a safe working environment.
Business Reconfiguration
Kumba’s business reconfiguration process is progressing with CCMA consultations on the new proposed structures and role profiles expected to be concluded by the end of May 2024. Concurrently, a contractor work management review process is underway to streamline work, optimise efficiencies, reduce duplication, and ensure a consistent approach to outsourcing work. Kumba management are holding regular company-wide employee engagements to ensure that safety remains top of mind, and that employees are kept informed and supported throughout the process.
Mining and production
Total waste stripping decreased by 14% to 43.8Mt (Q1 2023: 50.9Mt), driven by a 48% decrease at Kolomela to 8.3Mt (Q1 2023: 15.9Mt), in line with the lower waste guidance of 20-25Mt for the full year 2024. At Sishen, waste stripping increased by 1% to 35.5Mt (Q1 2023: 35.1Mt), reflecting operational stability.
Kumba's total production volumes decreased by 2% to 9.3Mt (Q1 2023: 9.4Mt) as part of the business reconfiguration plan to align production volumes more closely to logistics performance levels. This was largely driven by a 12% decrease in Kolomela's production to 2.7Mt (Q1 2023: 3.1Mt). Sishen's production increased by 4% to 6.6Mt (Q1 2023: 6.3Mt), supported by healthy buffer stocks sustained across the value chain.
Logistics, sales and marketing
Ore railed to port by Transnet of 9.4Mt was flat compared to the same period in 2023. Due to a derailment in March, coupled with equipment and locomotive failure, stock at the mines increased by 0.4Mt to 6.9Mt (31 December 2023: 6.5Mt).
At Saldanha Bay Port, Transnet’s performance was primarily impacted by stacker-reclaimer reliability challenges, as well as adverse weather conditions. This resulted in stock levels at the port increasing by 0.6Mt to 1.2Mt (31 December: 0.6Mt) and shipments for sale of 0.4Mt rolling over into the second quarter. Consequently, total finished stock increasing by 1.4Mt to 8.5 Mt (31 December 2023: 7.1Mt) and sales decreased by 10% or 1Mt to 8.5Mt (Q1 2023: 9.5Mt).
Kumba as part of the Ore User's Forum continues to support Transnet's logistics restoration programme. This included equipment maintenance on the rail and at the port in the second quarter. During this time, higher levels of stock at the port, combined with increased direct loading and additional loading arranged at the multi-purpose terminal, are expected to largely mitigate the impact of the maintenance and repairs shutdown.
Kumba's first quarter iron (Fe) content averaged 64.2% (Q1 2023: 63.1%) and the average lump to fines ratio was 66:34 (Q1 2023: 67:33). Due to the negative timing effect of lower prices on provisionally priced volumes, we achieved a lower average realised FOB export price of US$89/wmt (equivalent to US$91/dmt), compared to the 62% Fe benchmark price of US$103/wmt (equivalent to US$105/dmt).
2024 guidance update
Subject to ongoing logistics constraints, Kumba’s full year 2024 guidance (announced at the Company’s annual results presentation on 20 February 2024) is unchanged and is as follows:
| Guidance | FY2024 |
| Total sales (Mt) | 36 - 38 |
| Total production (Mt) | 35 - 37 |
| Sishen | ~26.0 |
| Kolomela | ~10.0 |
| Waste stripping (Mt) | |
| Sishen | 135 - 145 |
| Kolomela | 20 - 25 |
| On-mine unit cost (R/t) | |
| Sishen | 520 - 550 |
| Kolomela | 410 - 440 |
| C1 unit costs ($/t) | ~38 |
Volumes excluding waste stripping and on-mine unit costs, are reported as wmt. Product is shipped with ~1.6% moisture. The Group's sales volumes could differ to Kumba's results due to sales to other Group companies. Foreign exchange rate used for 2024 costs is ~R19/US$.
Production and sales volumes as referred to for the quarter ended 31 March 2024 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
23 April 2024
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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