KUMBA Iron Ore would produce about 37 million tons (Mt) of iron ore in its 2020 financial year which closes end-December, the company said today.
The number is at the lower end of expectations after previously guiding to production iron ore put of 37Mt to 39Mt and provided further evidence of slippages in global supply.
“To ensure that the value chain is balanced, and finished stock is maintained at optimal levels, production is likely to be closer to the lower end of the guidance range,” said Themba Mkhwanazi, CEO of Kumba Iron Ore, in a statement to the JSE.
Sales guidance has been put at about 39Mt compared to previous guidance of 38Mt to 40Mt, following the completion of the annual rail and port maintenance by Transnet.
Brazilian iron ore giant, Vale, yesterday said it would produce less iron ore than forecast which Goldman Sachs said in a report supported the theme of weaker supply, a development that would be positive for iron ore prices. Production from the miner would be 300Mt to 305Mt compared to an earlier forecast of at least 310Mt.
In addition, the Brazilian iron ore mine, Samarco – jointly owned by Vale and BHP – would resume with production of only eight million tons a year. Prior to the Fundao dam burst accident in 2015, which led to its suspension, the mine produced 12Mt a year of iron ore.
“Kumba continues to focus on the safety, health and wellbeing of our workforce and we are committed to delivering on our value drivers of quality, efficiency and cost reduction which are instrumental in unlocking the full value from our world class assets,” said Mkhwanazi.
On mine unit cost guidance for Sishen mine, which produces the majority of mineral output for Kumba Iron Ore, had fallen to between R380 and R390 per ton from a previous estimate of R385/t to R395/t.
However, Kolomela’s costs were likely to increase to between R290 and R300/t compared to previous guidance of between R280/t and R290/t. Kumba’s C1 unit cost guidance for production of $32/t was unchanged, it said.
“2020 has presented a unique set of challenges and it is pleasing to see the strong commitment across our operations to produce responsibly and ensure that we end the year in good shape and are well positioned for 2021 and the longer term,” said Mkhwanazi.
In July, the company announced a R19.60 per share interim dividend, representing 75% of headline earnings. However, this was less than the stellar 98% payout of headline earnings at the same time last year as Covid-19 interruptions disrupted the business.
In response to the uncertainty created by the pandemic, Kumba also deferred R1bn in other non-critical capital expenditure to 2021 and said it would extract R400m in new cost savings this year taking total cost savings for 2020 to R1bn.
For its 2021 financial year, Kumba has guided to production of 40Mt to 41Mt from previous guidance of 42Mt to 43Mt. New guidance for its 2023 financial year was production of between 41Mt and 42Mt.