KUMBA Iron Ore said on Tuesday about 490 jobs were under threat in terms of a restructuring of the business in which cost savings of R2.5bn to R3bn had been targeted.
The potential jobs losses, described as a ‘reconfiguration’ of the business, is the consequence of years of inept performance of the state-owned rail and ports company Transnet. Vandalism, inefficiency and corruption, as well as ageing rolling stock and an inability to service locomotives had resulted in Transnet’s railed ore falling 15% since 2019.
Kumba responded in December by shelving plans to increase production, partly to cope with on-mine stocks of about nine million tons as of the third quarter which the company described as unsustainable. Iron ore stocks were reduced to about seven million tons at the year-end.
Then in February, Kumba announced that following a business review it would cut production to 35 to 37 million tons (Mt) annually between 2024 and 2026. Unit costs would range between $38 and 40/t over the period.
Nompumelelo Zikalala, CEO of Kumba said in the firm’s 2023 full year results announcement today that the reconfiguration was necessary “despite extensive measures” take to minimise the negative effects of Transnet’s performance.
A final decision on the number of employees affected by the restructuring would be announced following discussions with unions and stakeholders in terms of a Section 189 notice issued by the company.
The reconfiguation would also involve a review of the company’s service providers which may affect as many as 160 suppliers, the group said.
Also affected was the approval of Kumba’s Ultra High Dense Media Separation (UHDMS) project, a long-standing project that would cut mining costs. The company said today it had been put on the backburner while it worked through the business reconfiguation.
In a press conference on Tuesday morning, Zikalala said the UHDMS project remained “fundamental” to Kumba but it was now faced with aligning the project to the new reality of lower production.
Kumba’s measures follow a similar announcement by Anglo American Platinum (Amplats) on Monday which said up to 3,700 employees might be affected by a restructuring amid a heavy decline in platinum group metal prices. Amplats also said 620 contractors could be affected.
Anglo American, which reports its financial results for the 12 months ended December 31 on Thursday (February 22), owns 70% of Kumba and 79% of Amplats.
Unlike Amplats, which reported a 71% decline in headline earnings, Kumba today reported an improvement in basic headline earnings for the 12 month period, up 26% to 70.80 South African cents per share.
The restructuring announced today is but the latest of a series of reductions in the scope and ambition of Kumba’s business. It initially wanted to grow annual production and sales to 42 million tons, but in July cut it sales to 36 to 38Mt from a previous target of 37 to 39Mt. Then came the latest production cut in February.
