Kumba Iron Ore reduces output due to Transnet logistics challenges

South African mining company, Kumba Iron Ore says it’s had to reduce its mining output to accommodate the logistics challenges at Transnet, especially on the rail front.

For the reporting period of the six months ended June 2024, Kumba says it cut its volume output by 2% to 18.5 million tonnes, compared to the same period in 2023.

Due to lower iron ore prices, the miner’s revenues were lower, but they managed to still post a decent profit, albeit lower than the prior year.

Transnet’s logistical constraints have meant Kumba Iron Ore having to reconfigure its business or its production so that it doesn’t overproduce material that it won’t be able to export.

The miner has had to revise its production and sales targets as a result.

Kumba’s CEO Mpumi Zikalala explains, “We’ve clearly been challenged and that’s what got us to a position towards the end of last year where we decided to fundamentally reconfigure our business as a business that will deliver from a production volumes perspective between 35 and 37 million tonnes. And from a sales perspective, we’ve said 36 to 38 million tonnes and that’s simply because we got to the end of the third quarter and we were stock bound. All our on-mine stockpiles were full and we had started trucking out material to fill stockpiles, but the essence of the reconfiguration caused us to pause and fundamentally focus on stripping out the cost.”

As a result of having to reconfigure the company’s business, Kumba gives its latest update on what had happened in terms of job losses in the period.

Zikalala adds, “Sadly for us, that also came with the reality of having to go through section 189 restructuring where 490 of our roles have been impacted as part of this and we’ve also had to engage with some of our contractor companies.”

Despite their challenges, Kumba’s financial performance remained robust, with profit still elevated, albeit at a lower level.

Head of Equities at Ashburton Investments, Charl De Villiers says, “Their numbers are down year-on-year, but that’s got to be seen in the context of a lot of the commodity prices that have rolled over year-on-year.”

Going forward, Kumba is cautiously optimistic that its work with Transnet and other stakeholders looking to improve the state-owned enterprise’s fortunes will see its medium-term fortunes improve.