MININGMX / 20 FEBRUARY 2019 - 10.06 / CHARLOTTE MATHEWS
KUMBA Iron Ore is concerned that an important aspect of the Mining Charter – gazetted last September – may be difficult to implement which will have an adverse and unintended consequence for the industry, CEO Themba Mkhwanazi said on Tuesday.
Mkhwanazi, however, welcomed an aspect of the very latest amendment to the charter which was gazetted in December and requires the first reports by mining companies on their charter progress to be submitted in March 2020.
But it’s the substance of the September version of the charter which was retained through to December that calls on the renewal of mining licences once they have expired. Speaking on a media call following Kumba’s full year results, Mkhwanazi said the Minerals Council is continuing to engage with the mines minister, Gwede Mantashe, especially around the guidelines for implementation in the charter.
He did not rule out the possibility of further changes.
Chris Griffith, CEO of Anglo American Platinum – which is also part of the Anglo American group – highlighted similar concerns regarding the Mining Charter.
Asked by Miningmx for his view on future amendments to the Mining Charter, Griffith said they might occur and turn on the High Court hearing in November 2017 which found that once mining companies had met empowerment goals, they were always empowered. The Mining Charter as gazetted in December insists that once mining licences have expired, mining companies are required to re-empower themselves.
Said Griffith: “We have mining licences that last for 20 years so it’s not an immediate risk for us, but there are companies that have to renew their licences. With the court case judgement, there is no requirement to do renewals. I know the the Department of Mineral Resources and the Minerals Council have a desire to resolve it. So it needs to be resolved in court or there needs to be an agreement to amend the charter”.
Anglo American CEO, Mark Cutifani, told Miningmx earlier this month that the South African government had made strides in implementing a predictable and fair regulatory environment for mining companies, but it hadn’t quite gone far enough; not, at least, to warrant new capital from Anglo. Cutifani may speak on the matter on February 21 when it reports its full year numbers.
IRON ORE PRICE REVISED
Kumba, which is 69.71% owned by Anglo American, declared a dividend of R30.24 a share for the year to December on earnings of R30.28 a share. Last year, it changed its dividend policy to pay out 50-75% of headline earnings and topped up the interim dividend by R7.53 a share from surplus cash on the balance sheet.
Although Kumba mined 8% more tonnage last year, it reduced iron ore production by 4% to 43.1 million tonnes (Mt) to respond to rail constraints and market demand. Total sales of iron ore fell to 43.3Mt from 44.9Mt in 2017, with a 4% drop in export sales to 40Mt because of logistical issues.
These issues included a temporary closure of the dedicated iron ore rail line to Saldanha after a truck collided with a railway bridge in November. Mkhwanazi said in the second half of the year there was an improvement in engagement between Transnet and Kumba, with a joint executive committee formed to manage the iron ore line. This helped to re-open the line two days faster than expected after the November incident.
Kumba improved the grade of its final product to an average iron content of 64.5% from 64.1% and the lump: fine ratio to 68% from 66%, which enables it to realise higher prices because a premium is paid for higher-grade iron ore. The average price it realised was $72/tonne, 1% more than in 2017. Its break-even price was $41/tonne, only $1/tonne more than in 2017 as a result of cost-saving initiatives. It has realised cost savings of R1bn so far against a target of R800m.
Following the Brumadinho tailings dam disaster in Brazil, at an iron ore mine owned by Vale, Kumba’s executive head of marketing, Timo Smit, said Kumba had revised upwards its forecast for iron ore prices this year to an average of $70-75/tonne. The disaster was expected to remove a net 40Mt from the market this year.
Kumba has been focusing its export sales more on regions using direct-charge materials, so it has grown sales to EU/MENA and Japan/Korea at the expense of sales to China, Mkhawanazi said.
The group intends to spend R4.6bn to 4.8bn on capital projects in 2019, slightly higher than previous guidance of R3.9bn because of a higher stripping ratio at Sishen and a programme to recondition spares for longer, which allows the expense to be capitalised.
Towards the end of this year the group will take an investment decision on whether to spend R2bn to R3bn on an ultra-high dense media separation (UHDMS) plant which will allow it to process more low-grade material.
Additional reporting by David McKay.
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