JSE-listed Kumba Iron Ore’s headline earn- ings per share fell 66% year-on-year to R11.80 for the year ended December 31, compared with R34.30 a year earlier.
The 42% drop in the average iron-ore price to $56/t contributed to the lower earnings.
Basic earnings per share were R1.46, owing to a significant impairment charge of R6-billion relating to the Sishen mine as a consequence of the low-price environment and actions taken to restructure the business.
Production decreased 7% year-on-year to 44.9-million tonnes, owing to operational challenges at the Sishen mine. Kolomela continued to perform well.
Kumba achieved record export sales of 43.5-million tonnes in the year under review.
“The sharp decline and volatility in the iron-ore price over the past year has been a significant factor for Kumba and the mining industry in general. We have responded decisively to position our business to withstand a longer period of lower iron-ore prices,” CEO Norman Mbazima said at a presentation of the company’s results last week.
He added that a shift from a volume-based to a value-based strategy had led to a reconfiguration of Kumba’s mines to reduce the amount of waste and save costs.
“Sishen’s pit was restructured to a lower cost shell and production at Kolomela was increased by ramping up low-cost tonnes and improving the waste profile, while mining at Thabazimbi was stopped.
Kumba achieved record export sales of 43.5-million tonnes in the year under review – an 8% year-on-year increase – underpinned by the availability of stock and increased shipments through the multipurpose terminal at the Saldanha port of 3.4-million tonnes.
China accounted for 63% of Kumba’s export sales and, of this, cost and freight sales accounted for 69%.
The group’s lump to fine ratio was 65:35 for the period, with lump products achieving an average premium of $6/t as the shift in the focus of Chinese steel mills from productivity to cost led to lower price differentials across iron-ore grades.
Market Overview
While supply growth had slowed somewhat, there was a more cautious outlook on China’s economic growth trajectory, said Mbazima.
China’s slowdown in investment expenditure, he noted, had weighed particularly on metal and mineral prices.
As a result, 2015 marked a year of much weaker demand growth. Iron-ore fundamentals deteriorated on the back of declining global demand and growth in low-cost supply, particularly from Australia.
Global crude steel production contracted 3%, with increased competition in export
markets. Chinese growth slowed despite record steel exports, while Japan, Korea and Taiwan recorded weak domestic demand and increased competition, particularly from Chinese exports in seaborne steel markets.
Rising imports and capacity closures impacted on European crude steel output.
Global seaborne iron-ore supply rose 3% in 2015, led by an increase of 7% in
Australian exports, with major infrastructure and capacity projects now reaching
execution.
The ramp-up of the Minas-Rio mine and rising shipments to Malaysia supported an
8% increase in Brazilian iron-ore exports.