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Kumba thrives but storm clouds form Posted: Fri, 17 Feb 2006 [miningmx.com] -- KUMBA Resources expected commodity prices, including iron ore, would provide another earnings blockbuster in its current financial year. This comes on the day the South African firm reported a 400% improvement in annual attributable earnings to end-December of R3.19bn. The firm reported a dividend for the year of R5.40 after a final dividend of R1.60. However, comments from China's government, on behalf of its iron ore buyers, have declared an interest in having a greater say in setting contract prices, scheduled for completion in April. Kumba, South Africa’s largest iron ore producer, posted a 232% increase in operating profit at its iron ore operations brought in R2.7bn for the year. This came on the back of a 71.5% increase in iron ore prices from April last year. Iron ore producers are asking for another “substantial” increase in iron ore prices this year during talks in Beijing, according to the Tex report. However, the Chinese Ministry of Commerce said it wants China, one of the world's leading consumers of iron ore, to have a greater say in the setting of prices. It has cautioned its steel makers that spot prices could fall. What exactly this entails for iron ore price contracts this year remains to be seen. For its part, Kumba is positive about the outlook for the prices of the commodities it produces –iron ore, coal, zinc and industrial minerals. “This, together with the ongoing benefits of Kumba’s business improvement programme, is expected to have a positive impact on the group’s results for the next six months,” said Con Fauconnier, CEO of Kumba. “A stronger rand will, however, affect earnings,” he said. Kumba’s view of the titanium dioxide market is less bullish given the oversupply of the mineral. The combined operating profit from Kumba’s South African and Australian heavy minerals units fell to R227m from R254m in the previous year, dragged down by the local operation where losses deepened eight times to a negative R79m. Kumba has plans to expand its iron ore production locally, but much hinges on whether there is the rail capacity to move it to harbours for export. The Sishen Expansion project, which will reach full capacity of 10 million tons a year (mtpa) in 2009 is synchronised with state transport utility Transnet’s commitment to expand the capacity of the rail link to the West Coast harbour of Saldanha and port capacity by that year. Kumba’s increased rail allocation will come to 35mtpa, of which 33.2mtpa will be for export. The capital cost of the expansion plan has risen 20% to R3.6bn.Free news alerts: click here to
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