Kumba Iron Ore CEO Themba Mkhwanazi
JOHANNESBURG (miningweekly.com) – The earnings of Kumba Iron Ore, the Anglo American iron-ore mining company up for sale, are soaring on higher export prices – but whether or not its rocketing performance will dissuade Anglo from disposing of the asset remains to be seen.
The JSE-listed company, headed by new CEO Themba Mkhwanazi, told shareholders on Wednesday that it expected the company’s headline earnings per share (HEPS) to shoot up by between 123% and 135%, with basic earnings per share (EPS) only slightly behind on the inclusion of a R5 978-million impairment charge.
Iron-ore prices reached the $55/t mark in the final quarter of last year, a 28% year-on-year improvement, the Sydney Morning Herald reported on Wednesday, in recording that diversified major BHP Billiton had also been able to cash in when its record production in the six months to December met up with the iron-ore price rebound.
Against that background, Kumba advised that, when it releases its financial results on February 14, it may have headline earnings as high as R8.9-billion and basic earnings as high as R8.8-billion for the 12 months to December 31, compared with R3.8-billion and R469-million for the comparative period last year.
HEPS could be as high as R27.27, compared with R11.82 in the comparable period, and EPS at R27.38 compared with the previous R1.46.
Still with no indication of potential suitors in sight, Kumba last year appointed State-owned Industrial Development Corporation representative Nonkululeko Dlamini as a full director, a year in which it also benefited from the end of a long-running legal dispute when South Africa’s Department of Mineral Resources (DMR) returned the residual 21.4% undivided share of the mining right for the Sishen mine to Kumba Iron Ore subsidiary, Sishen Iron Ore Company (SIOC).
The 21.4% share, initially held by steelmaking company ArcelorMittal South Africa (AMSA), has been the subject of a head-scratching dispute, which arose in 2010 when the DMR controversially granted the right to the politically connected Imperial Crown Trading.
The conditions include the continuation of the export parity price agreement between SIOC and AMSA in its role as a strategic South African steel producer, as well as SIOC’s continued support of skills development, research and development and initiatives to enable preferential procurement.
ALLEGED TAX LIABILITY
But Kumba's fight is not over as it now having to deal with another battle, this time with the South African Revenue Service (Sars), which claims that the iron-ore company still owes R1-billion in unpaid tax.
While Kumba and its subsidiaries believe that all taxes owed under South African tax legislation have been paid and that it complies with all applicable tax laws in all the jurisdictions in which it operates, SIOC received a R5.5-billion tax assessment from Sars for the 2006 to 2010 tax years, which includes R3.7-billion in interest and penalties.
In 2015 – a year of sharp iron-ore price fall – the company contributed R900-million in corporate taxes and mineral royalties, R4.7-billion in salaries and wages, R15.2-billion in local procurement and R174-million in social investment in health, housing, education and small business development – and also invested R6.8-billion in the business.
Kumba is by far South Africa’s foremost broad-based black economically empowered (BBBEE) model, having returned a whopping R21.7-billion to its BBBEE shareholders since listing on the JSE ten years ago.
In 2011, Kumba turned its 6 209 worker shareholders into pretax half-millionaires through its Envision employee share ownership plan (Esop), an Esop which has outdone all others.
But this has not stopped off-putting steps being taken against the company.