Kumba Iron Ore delivers value through cost and capital discipline
Kumba has continued to deliver improved operational stability at both Sishen and Kolomela, while continuing to prioritise the elimination of fatalities and serious injuries across both operations, were the words of Mpumi Zikalala, Chief Executive of Kumba.
“Beyond the mine gate, however, there is no escaping the fact that ongoing logistics constraints have continued to place significant pressure on our value chain, resulting in stock levels at the mines increasing to unsustainable levels. We have therefore slowed down production and expect to end the year with production of between 35 – 36 million tonnes (previously 35 – 37 million tonnes) and sales at 36 – 37 million tonnes (previously 36 – 38 million tonnes). Sishen’s production has reduced to ~25 million tonnes (previously ~26 million tonnes) and Kolomela’s production guidance is unchanged at ~10 mill ion tonnes.
“As a consequence of the reduced production volumes, Sishen’s unit cost is anticipated to increase to between R570 – 590 per tonne (previously R540 – 570 per tonne). Kolomela’s unit cost is expected to improve to between R480 – 500 per tonne (previously R510 – 540 per tonne), due to lower waste mining, higher production volumes as well as cost savings. Notwithstanding lower production at Sishen, our continued focus on cost improvements together with the benefit of a weaker currency, has contributed towards our improved C1 unit cost guidance of US$42 per tonne (previously US$43 per tonne).
“In light of persistent logistics challenges, we conducted a strategic business review in the second half of this year, with the aim of reconfiguring our business and aligning production more closely to the prevailing logistics capacity in order to ensure that our business is sustainable. Given this imperative, we have lowered our production outlook for the next three years to 35 – 37 million tonnes per annum (previously 37 – 39 million tonnes in 2024 and 39 – 41 million tonnes in 2025). Despite flat production and ongoing cost inflation, our C1 unit cost is forecast to improve to between US$38 – 40 per tonne over the next three years, benefiting from our programme to optimise our cost base in line with the revised production profile.
“From a capital project perspective, as previously communicated, we have rephased our Kapstevel South project at Kolomela, reducing the waste mined, and we are on track to deliver first ore in H1 2024 as planned. At Sishen, where the ultra-high-dense-media-separation (UHDMS) project is under review, we have prioritised the reconfiguration of the business due to ongoing logistics challenges. “At half year, we revised our capital expenditure guidance for the full year 2023 by approximately R2 billion lower, to between R9 billion and R10 billion. This was largely driven by lower expansion capex due to the rephasing of Kapstevel South and the UHDMS project being under review, as well as a reduction in stay-in-business capex due to the re-prioritisation of heavy machinery and equipment spend as part of the mine plan optimisation. Our capital expenditure guidance for the full year 2023 is unchanged.
