KUMBA Iron Ore left production and cost guidance for the 2026 financial year unchanged despite being buffeted by freight and mining cost escalation in the first half of its year, while weaker iron ore prices and port disruptions also weighed heavily on the group’s margin.
The miner declared an interim dividend of R7,90 per share – or R2.5bn – following a 41% decline in headline earnings to R13,24/share.
Kumba CEO Mpumi Zikalala said the decline in performance year-on-year was owing to “… a challenging external environment and difficult operating conditions.” The payout is 60% of headline earnings against a payout policy of 50% to 75% of earnings.
As previously flagged by the group, heavy rainfall in the Northern Cape, where Kumba’s Sishen and Kolomela mines are located, disrupted operations. Kolomela was especially hit: it lost 16% of iron ore production year-on-year amid the heaviest regional rainfall since 1918. The outcome was a 3% fall in group half-year production to 17.7 million tons.
Zikalala said, however, the group was on track to mine 31 to 33Mt for the year, reduced from last year’s 36.1Mt in order to accommodate the installation of UHDMS processing technology at Sishen mine. Production for 2027 is expected to rise to 35 to 37Mt. Sales of 35 to 37Mt for this year were also on track despite logistical difficulties.
In addition to a stronger rand, Kumba was also hit by 47% higher freight charges, disruptions following a 10-day shutdown by rail and ports operator Transnet, and a decline in the iron ore price. The combination of lower production and logistical interruptions drove an 18% increase in unit costs to $46 per wet metric ton. Kumba has guided to full-year cash costs of $46/wmt.
The group reported an average iron ore price of $90/t – 8% higher than the index – though there are signs of pressure in the industry after achieving a price of $95/t last year.
“From May to June, the iron ore market came off quite substantially, and as a result we’ve seen some slight negative timing effects on our marketing premium, which has impacted the overall pricing,” said Ebrahim Dadoo, Kumba’s head of sales and marketing.
Asked whether there might be continued effects from oil price inflation and clogged supply lines owing to the Middle East hostilities, Dadoo replied: “We still see freight rates remaining a little elevated. Have we seen the highest? That’s perhaps a little uncertain — it depends on what happens with energy costs. By and large, we haven’t seen oil go beyond $100 again for now; it’s retreated a little,” he added.
Despite the tie-in of the UHDMS technology at Sishen, Kumba will draw down from stocks to supplement sales, depending on further disruptions from Transnet. Transnet undertook a 10-day maintenance shutdown but has another planned for the second half. Stocks fell 500,000 tons to 7Mt in the period, of which 4.8Mt were on-mine.
The UHDMS is an R11bn project long in the making at Kumba. The plan is that it will reduce the strip ratio and improve yields while also lowering costs. Zikalala has described the technology in the past as “game-changing.”
