KUMBA Iron Ore took the hatchet to its export guidance for 2022 owing to disruptions at Transnet-managed Saldanha port in South Africa’s Western Cape.
Commenting in its third quarter production report, Kumba said rail constraints and the impact of a two-week strike at Transnet had resulted in low levels of finished stock at Saldanha. As a result, export sales guidance was cut to between 36 to 37 million tons (Mt) from a previous estimate of 38 to 40Mt.
RMB Morgan Stanley said in a morning note that the mismatch between mine capacity and rail constraints would lead to “a resizing of mining operations” which would come into focus during 2023. Kumba is 70% owned by Anglo American.
Kumba had improved its waste mining rate partly owing to drier weather conditions such that it kept production guidance albeit at the lower level of between 38 to 40Mt. Total iron ore output at Sishen would increase to 27.5Mt from 26.5Mt but volumes at Kolomela were expected to decline to 10.5Mt from 12.5mt for the year.
Kolomela’s poorer performance in the third quarter was put down to the impact of the Transnet strike and a “slow recovery” related to a hangover from a safety stoppage in the second quarter. That would be exacerbated by input cost inflation resulting in an upwards adjustment in Kolomela’s unit cost guidance to between R505 to R525 per ton from a prevous estimated of R420 to R440/t.
Commenting on market conditions, Kumba said economic slowdown and energy shortages in Europe as well as rolling Covid lockdowns in China “weighed negatively on steel demand and iron ore prices”.
On the upside, the market was paying more for high quality (lumpy) iron ore of the type that Kumba produces owing to sintering cuts in China aimed at improving the country’s air quality, said Kumba.
As a result, the company has achieved an 8.4% premium year-to-date above the average benchmark price of $106 per ton. Iron Ore prices have contracted about 24% year-to-date.
Metal build emerges at Amplats
Anglo American Platinum, which is 80% owned by the UK parent, kept full year guidance ended December 31 unchanged despite a 40,400 ounce build in work-in-progress inventory which the group put down to Eskom related power rationing.
Metal-in-concentrate guidance was maintained at 3.9 to 4.3 million PGM ounces and refined PGM production guidance was kept at 3.7 to 3.9 million oz for the year. Unit cost guidance of between R14,000 to R15,000 per PGM oz was also maintained. However, Amplats noted “persisent inflationary pressure on consumables”.
This year’s guidance includes the impact of the rebuild of Amplats’ Polokwane smelter. In the third quarter, refined PGM production declined 30% to 994,800 oz. The rebuild would be completed in the current quarter.
RMB Morgan Stanley calculated an inventory build of some 113,000 oz over the quarter.