JOHANNESBURG (miningweekly.com) – South Africa’s biggest iron-ore producer and marketer, Kumba Iron Ore, has shared R89-billion of the value it created in 2021 with its stakeholders, with more than R21-billion going to the government in tax revenues and mineral royalties.

The Johannesburg-listed Anglo American group company increased capital investment by 30% to R8-billion, “and this not only benefits the life of our operations, but represents our commitment to investing in our country and local communities”, new Kumba CEO Mpumi Zikalala pointed out at the company’s presentation of spectacular financial results. (Also watch attached Creamer Media video.)

The strong financial performance delivered R43.5-billion rand to shareholders, with its empowerment partners receiving more than R10-billion rand in dividends.

“Safeguarding local livelihoods is extremely important,” said Zikalala in pointing out that the company paid R5.6-billion rand in salaries and benefits.

Seventy-nine per cent of Kumba staff are employed from local communities in the Northern Cape.

“We also supported BEE suppliers with R10-billion rand of spend,” Zikalala said at the presentation covered by Mining Weekly.

Four-billion rand of that related to host community suppliers. One such initiative is the awarding of the R1.6-billion rand mining contract to a community-based joint venture to mine iron-ore at Kumba’s Kolomela mine. This joint venture supports communities and women-owned businesses.

“These and similar opportunities will go a long way towards helping our communities thrive,” said Zikalala.

The company further contributed R258-million towards direct social community-building investments, including R36-million in Covid-19 support.

RAIL INFRASTRUCTURE UPLIFTMENT

The 39.3-million tonnes of iron-ore railed to the Port of Saldanha was 1.2-million up on 2020, with export sales at 40.2-million tonnes.

Higher production impacted by rail constraints resulted in a higher stock level of 6.1-million tonnes, mostly at the mines.

Debottlenecking logistics remains high on the list of priorities. To address the rail infrastructure and equipment maintenance challenges, engagements with State-owned rail enterprise Transnet and industry peers have been stepped up.

Following these engagements, equipment reliability and shipping throughput has improved. This contributed to export sales improving by 6% in the second half.

In the short term, further uplift is expected from the improvement of the rail infrastructure which will help lift speed restrictions.

In addition, the three-year equipment refurbishment programme at Saldana port is expected to be completed this year.

A systematic shift to larger Cape-size vessels is under way to increase shipping capacity.

Although the iron-ore line is not yet back to pre-pandemic levels, some progress has been seen but with room for improvement.

In the medium term, a performance uplift is expected from the commissioning of the third tippler at the port and shorter periods of shutdown maintenance.

RECORD EARNINGS

Kumba delivered record 2021 earnings of R64.6-billion, and accumulated 47% more attributable free cash totalling R30.5-billion.

The average realised export price of $161/t, 18% above benchmark, helped the company to achieve a 63% earnings margin. Return on capital employed rose to 147%.

The final divided of R30.50 a share brought the total dividend to R103.20 a share. Combined with the interim cash dividend of R72.70 a share, the total cash dividend for the year increased by 69% to R103.20 a share, representing a payout ratio of 100% of headline earnings.

More than five years of fatality-free production and more than 75% of its workforce has been vaccinated to date, offering vital protection against Covid-19.

Cost savings of R0.9-billion in 2021 took savings since 2018 to R4.1-billion.

Despite weather and logistical challenges, production increased by 9% to 40.9-million tonnes, with improved performance at the Saldanha port lifting export sales by 1% to 40.2-million tonnes.

In 2021, Sishen’s life-of-mine was increased by four years to 2039 through ultrahigh dense media separation (UHDMS) technology and agreements were reached for relocation of the remaining homeowners of Dingleton to Siyathemba.

The UHDMS technology, which improves the positioning of Kumba’s product portfolio for a low-carbon future, enables the company to further enhance the quality of its product with the help of ore that would have previously been considered waste material.

While carbon emissions increased year-on-year to 0.99-million tonnes of carbon dioxide equivalent, the company continues to target 30% emission reduction by 2030 and is progressing its plans to develop a 60 MW to 80 MW solar photovoltaic plant at Sishen.

By creating R88.9-billion of enduring value for all stakeholders, including R21.2-billion of taxes and mineral royalty, Kumba is providing much-needed support to the South African economy.

“In the near term, we will continue to build on the Tswelelopele strategy of margin enhancement and life extension, focusing on maximising our potential through operational excellence, cost efficiencies and realising the full value of our premium products in the market,” Zikalala stated.

"Kumba’s world-class assets and the attractive physical characteristics of our products position us well to assist our customers with delivering more efficient and lower emission steel production."

“Through investment in UHDMS technology, we are increasing the overall grade of our products and broadening our customer base beyond China. We are committed to creating purpose-led value for our stakeholders,” Zikalala stated.