JOHANNESBURG (miningweekly.com) – The basic earnings of iron-ore mining company Kumba for the six months to June 30 are expected to between 24% and 29% lower than for the first six months of last year.

The decreased R6 847-million to R7 347-million half-year earnings are largely attributable to a lower average realised free-on-board export iron-ore price and a decrease in sales volumes relative to the comparative period, the Anglo American group company stated in a release to Mining Weekly on Thursday.

Operationally, the first-half performance of the Johannesburg Stock Exchange-listed company was solid, which Kumba CE Mpumi Zikalala said stemmed from “relentless focus on safety and operational excellence as we unlock the value in our business and build resilience to ensure a sustainable future”.

Kumba achieved an average realised free-on-board export price of $97 per wet metric tonne (wmt) relative to the 62% Fe FOB export price of $96/wmt as the timing effect of provisionally priced volumes in a lower price environment was largely offset by the lump and iron-ore quality premium that its products attract.

On the logistics front, Kumba reported that 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 18.1-million tonnes (H1 2023: 18.9-million tonnes).

Rail performance was impacted by several derailments and locomotive breakdowns, resulting in ore railed to port decreasing by 2% to 18.1Mt (H1 2023: 18.4-million tonnes).

Total finished stock remained high at 8.2Mt (31 December 2023: 7.1-million tonnes), with stock at the mines increasing to 7.4-million tonnes (31 December 2023: 6.5-million tonnes), while stock at Saldanha Bay port was at 0.6-million tonnes (31 December 2023: 0.6-million tonnes), with 0.2-million tonnes on a vessel loaded but not yet sold.

As a participant in the Ore User's Forum, Kumba 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 yearly maintenance shutdown in the fourth quarter of 2024 is executed successfully and value chain disruption minimised.

"Our commitment to the health and safety of our workforce contributed to our total recordable injury frequency rate, or 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,” said Zikalala.

In line with Kumba’s 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 proactive mini-shut and port equipment repairs undertaken in April, which largely offset the impact of port equipment outages in the first quarter.

As a result, Kumba has maintained full-year production and sales guidance of between 35-million to 37-million tonnes and 36-million to 38-million tonnes.

Progress on cost optimisation is reported: “We are well on track to achieving our C1 unit cost guidance of $38/t.”

Guidance on 2024 capital expenditure is unchanged at R8-billion to R9-billion.

IRON-ORE MARKET

With the iron-ore market having pulled back strongly in the first half, Kumba’s reconfiguration of the business to a lower production and cost profile contribued greater resilience in the challenging market environment of weak steel demand in China and Europe coupled with robust iron-ore supply, resulting in the 62% Fe benchmark iron-ore price falling by 26% since the start of the year.

The iron-ore produced by Kumba at the Sishen and Kolomela mines in the Northern Cape is exported to customers in China, Japan, South Korea, Europe and the Middle East.