KUMBA Iron Ore cut fourth quarter production 26% to ease pressure on mineral stockpiles at its mines and Saldanha port which it said had become unsustainably high.
Commenting in a production update, the Anglo American controlled firm said iron ore production totalled 7.2 million tons (Mt), 26% less than in the third quarter’s 9.7Mt. This enabled a 700,000 ton drawdown in on-mine stocks to 6.5Mt.
Sales of 9.3Mt are a 5% increase over the third quarter, but Kumba said the stocks at Saldanha Port remained high. For 2023, production was expected to come in at 35.7 Mt and sales of 37.2 Mt in line with revised guidance of 35-36Mt and 36-37Mt. Despite lower output, unit costs improved to $41 per ton below our revised guidance of $42t.
As the group warned in December, there would be no easy fixes to the logistical problems at the state-owned rail and ports company, Transnet.
“Due to a significant amount of work required to turn the situation around over time, the logistics network is expected to remain constrained over the medium-term,” said Kumba CEO Mpumi Zikalala in the production update today.
Zikalala said the full extent of Kumba’s rejig in medium-term production to account for Transnet’s troubles would be explained when the firm published its full year results this month. It was speculated last year Anglo had held discussions with the South African government over possible job cuts.
“Some clients we’ve spoken to have suggested that Kolomela might be placed on care and maintenance,” said RMB Morgan Stanley in a note. “We don’t think that’s likely, its more likely that ROM (run of mine) and waste volume at Sishen is materially reduced and headcount reduced in proportion,” it said.
Kumba announced in December it had shelved plans to increase production saying that following a business review output will be 35 to 37 Mt a year between 2024 and 2026. Unit costs would range between $38 and 40/t over the period.
One mote of good news is a fourth quarter revival in the iron ore price. Kumba said prices had strengthened on the back of “tight market fundamentals” including low port inventories (among customers) and China government stimulus of its steel sector.
Higher lump premiums due to low lump stocks and sintering cuts helped Kumba to an average realised price of $117 per ton, 15% above the benchmark price.