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Cash-flush Kumba Iron Ore reports record earnings in exceptional year of delivery

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Kumba Iron Ore CEO Mpumi Zikalala

22nd February 2022

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Iron-ore mining and marketing company Kumba Iron Ore delivered record earnings of R64.6-billion in 2021, when it accumulated 47%-higher attributable free cash flow of R30.5-billion.

The average realised export price of $161/t, 18% above benchmark, helped the company to achieve a 63% earnings margin. Return on capital employed rose to 147%.

The final divided of R30.50 a share brought the total dividend to R103.20 a share. Combined with the interim cash dividend of R72.70 a share, the total cash dividend for the year increased by 69% to R103.20 a share, representing a payout ratio of 100% of headline earnings.

“2021 has been an exceptional year of delivery across the business,” new CEO Mpumi Zikalala stated in a media release to Mining Weekly

“Having joined the Kumba family at the start of the year, I’m delighted to find a team that shares the same set of values and a commitment to operate the business responsibly and sustainably. Kumba’s strong safety record, and its solid operational and highly profitable business demonstrates this, giving us a strong base to build on,” Zikalala added.

The Johannesburg-listed company has achieved more than five years of fatality-free production and more than 75% of its workforce has been vaccinated to date, offering vital protection against Covid-19.

Cost savings of R0.9-billion in 2021 took savings since 2018 to R4.1-billion.

Despite weather and logistical challenges, production increased by 9% to 40.9-million tonnes, with improved performance at the Saldanha port lifting export sales by 1% to 40.2-million tonnes.

In 2021, Sishen’s life-of-mine was increased by four years to 2039 through ultrahigh dense media separation (UHDMS) technology and agreements were reached for relocation of the remaining homeowners of Dingleton to Siyathemba.

The UHDMS technology, which improves the positioning of Kumba’s product portfolio for a low-carbon future, enables the company to further enhance the quality of its product with the help of ore that would have previously been considered waste material.

While carbon emissions increased year-on-year to 0.99-million tonnes of carbon dioxide equivalent, the company continues to target 30% emission reduction by 2030 and is progressing its plans to develop a 60 MW to 80 MW solar photovoltaic plant at Sishen.

By creating R88.9-billion of enduring value for all stakeholders, including R21.2-billion of taxes and mineral royalty, Kumba is providing much-needed support to the South African economy.

At a regional level, R4.1-billion worth of goods and services were procured locally, with a focus on women and youth-owned businesses. This, in conjunction with its community vaccination and Covid-19 programme, continues to help protect the lives and livelihoods of its workforce, their families and its host communities.

“Kumba has delivered an excellent performance and I’m privileged and excited to be taking on the stewardship of this remarkable business,” stated Zikalala, who takes over the reins from Themba Mkhwanazi, who had five years at the helm.

“In the near term, we will continue to build on the Tswelelopele strategy of margin enhancement and life extension, focusing on maximising our potential through operational excellence, cost efficiencies and realising the full value of our premium products in the market,” Zikalala stated.

"Kumba’s world-class assets and the attractive physical characteristics of our products position us well to assist our customers with delivering more efficient and lower emission steel production."

“Through investment in UHDMS technology, we are increasing the overall grade of our products and broadening our customer base beyond China. We are committed to creating purpose-led value for our stakeholders,” Zikalala stated.

Edited by Creamer Media Reporter

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