Kumba forecast to lift Q2 iron ore output a fifth but sales may fall, says bank

KUMBA Iron Ore was expected to report a one-fifth increase in iron ore production for the second quarter following rains and equipment reliability constraints that negatively affected operations in the previous quarter.

However, sales would be flat year-on-year and 3% lower quarter-on-quarter while production would be 6% higher on a year-on-year basis, said banker Citi in a report today.

Production would total about 10.4 million tons (Mt) which was in line with Kumba’s annual guidance, the bank said. The company produced 40.9Mt in its 2021 financial year representing a 9% year-on-year improvement.

The difference between production and sales may relate to ongoing freight constraints on the rail network operated by Transnet Freight Rail (TFR), a unit of the government-owned company, Transnet.

TFR’s performance over the last 12 months in particular has been in the crosshairs of South African coal mining firms owing to significant under-performance.

The country is currently set to deliver about 56Mt of coal, below the 58.72Mt achieved last year, itself an underperformance. The lower freight rates were related to copper cable theft and the low availability of locomotives, according to Transnet.

TFR’s performance on the iron ore line has been generally better, however. Kumba is expected to report its second quarter production numbers on July 21.

Kumba said in February that deliveries of iron ore were set to improve in the medium term as Transnet undertook the last of three major annual shutdowns. One benefit would be an increase in trains each carrying 1.5Mt tons of iron ore. “If we get two trains a month more than would result in a meaningful difference,” said Timo Smit, head of Kumba’s marketing.

There were also new plans to improve the efficiency of the Saldanha port with possible interventions including changing vessel sizes, adding a tippler at the port and looking at the optimal port layout.

TFR embarked on a 10-day maintenance shutdown last week.

“Plans are at an advanced stage for the successful execution of this mega project aimed at uplifting a total of 16 temporary speed restrictions equating to 34 kilometres of railway track,” said Transnet. “This project will see the restoration of eight slots in the network for the North Corridor,” it added, referring to its coal line.

“Amongst the benefits, will be to improve the deteriorated network conditions, to create resilient Infrastructure and accelerate the Network Renewal programme,” said Transnet managing executive for the North Corridor, Ali Motala.

Anglo American Platinum (Amplats) will also publish its production statistics for the quarter as well as Anglo American itself, which owns 80% of Amplats and 70% of Kumba. Anglo American said earlier this month that it had produced first copper from Quellaveco, its $5.3bn project in Peru held in joint venture with Mitsubishi.