JOHANNESBURG (miningweekly.com) – The board of South Africa’s iron-ore major, the JSE-listed Kumba Iron Ore, has approved R4.2-billion for the relocation of 3 000 people to make way for mining - and the company also received a new right yesterday to mine what until recently was a no-go railway-line area.

Kumba CEO Norman Mbazima was questioned on the relocation plan after he presented 24% higher full-year headline earnings of R15.4-billion at the company’s presentation of results for the 12 months to December 31.

And shortly before the presentation, the Department of Mineral Resources granted Kumba subsidiary Sishen Iron Ore Company (SIOC) a mining right over the Rail Properties at the Sishen mine.

The Anglo American group company, which struggled with constrained mining conditions at Sishen last year, has lowered its output target down to 37-million tons a year at the mine from its previous target figure of 41-million tons.

The relocation involves the moving of more than 300 families from the township of Dingleton into the town of Kathu, where they will be rehoused.

“We’ll be building them houses. Where there’re businesses, we’ll rebuild those businesses. We’ll build churches, extend schools so that they can integrate into the town of Kathu,” Mbazima told Mining Weekly Online in a video interview (see attached).

Already completed is the relocation of the Transnet railway line to make way for the Sishen Western Expansion Project.

Not only the rail line, but also the water and electricity lines have been moved in the extension, which affects an area 30 m wide and 14 km long to the west of the pit.

“The law doesn’t allow for mineral rights to be given to anybody under a railway line and so we had to apply for a 14 km strip of land,” Mbazima explained to Mining Weekly Online.

The granting of the mining right gives SIOC access to 33% of reserves included in SIOC's 70-year life-of-mine plan, which is located on either side of the affected area.

Kumba will start waste stripping in the released area from the second half of this year.

JSE-listed Kumba produced and exported less in the 12 months to December 31 but raised its dividend on markedly increased earnings.

Total production of iron-ore fell 2% to 42.4-million tons as a result of the production shortfalls at Sishen mine, largely offset by a top-notch performance at the new Kolomela mine.

Full-year headline earnings rose 24% to R15.4-billion compared with R12.5-billion in 2012.

Two per cent lower export volumes to 39.1-million tons were redeemed by 2% stronger export prices, taking revenue to R54.5-billion, 20% up on last year.

While Kumba ended 2013 with no loss of life at its operations, the lost-time injury frequency rate for every 200 000 hours worked deteriorated markedly to 0.18 from 0.10 in 2012.

Although Sishen mine’s production was down 8% for the year, there was a 31% improvement in the last two quarters and Kolomela was up 27% to 10.8-million tons.

The year saw a new supply agreement with steelmaker ArcelorMittal South Africa and a thumbs up from the Constitutional Court to apply for the disputed 21.4% of the Sishen mining right.

The company found the global 2013 steel and iron-ore markets to be better than anticipated. An increase in global steel production of 3% to 1 582-million tons compared with 1 529-million tons, supported the demand for iron-ore. The sustained government infrastructure spend in China, as well as steel mill restocking prior to the winter season, assisted this rise.

China increased its production by 7% to 779-million tons compared with 2012’s 731-million tons.

Growth in Japan and South Korea was also above expectations.

Seaborne iron-ore supplies increased by 10% to 1 324-million tons, the increase from Australia more than compensating for lower supplies from India and flat exports from Brazil.

Iron-ore index prices averaged 4% higher at $135/t, reaching a high of $160/t in February 2013 and falling to a low of $110/t in May, before stabilising at $135/t towards the end of the year.

The premiums paid for Kumba’s lump ore surprised on the upside.

“We’re blessed to have ores that are very hard and we can produce more lump than say the Australians can do out of their ores.

“In China, some of the smaller mines have had to close because of their emissions and the sinter plants that take the fine ore have also had to close.

“As a result, the lump ore is becoming much more valuable in China than it was in the past and hence we’ve seen a very significant increase in the lump premium in the second half of 2013,” Mbazima told Mining Weekly Online in the attached video.

Lump premiums are now being published weekly and currently the premium adds an extra $16/t to the price, down from $19/t at the end of 2013.

The contribution of the premium is the result of the Chinese government becoming much tougher on enforcing environmental restrictions, which force users to make greater use of lump material.

OPERATIONAL PERFORMANCE

Kumba ended 2013 without any loss of life. However, the marked deterioration in the company’s lost-time injury frequency rate saw 33 lost-time injuries recorded for the year, compared with 20 in the previous year, most arising from materials handling.

Total tons mined at Sishen mine rose 22% to 208.8-million tons, with waste mined up 26% at 167.8-million tons.

The waste ramp-up is designed to alleviate the current pit constraints, which saw Sishen production fall 8% to 30.9-million tons.

Production from the dense media separation plant was impacted by availability of material from the pit and resulted in 12% lower output for the year.

Production from the jig plant was still below design capacity owing to low feedstock quality.

Sishen has insufficient exposed ore and a production recovery plan includes rotating mining direction in some areas through 90 degrees.