JOHANNESBURG (miningwekly.com) – Anglo American group iron-ore mining company Kumba Iron Ore, which has achieved record half-year earnings with great exuberance, has shared a sky-high first-half R51-billion with its spread of stakeholders that take in the fiscus, local suppliers, nearby communities, employees, shareholders and society at large.
From a financial perspective, Kumba delivered earnings before interest, taxation, depreciation and amortisation (Ebitda) of R44.4-billion, underpinned by higher realised iron-ore prices and a focus on cost containment, and a return on capital employed of 225%.
With attributable free cash flow of R31.5-billion, the board has declared a record half-year dividend of R72.70 a share, which will return more than R23-billion to shareholders, an increase of 227% over last year.
From the 2017 base, Ebitda has increased by almost five-fold in the half-year when cash flow totalled R31.5-billion. Cost savings in the half-year totalled R370-million.
The average realised free-on-board export price of $216/wmt was 32% above benchmark and more than double the $91/wmt achieved in the first half of last year.
As a result, Kumba’s Ebitda margin rose to 70%, up from 55% this time last year.
Projects that stimulate economic growth at a local and regional level include youth training and employment, educational support in the form of bursaries and scholarships, small and medium-sized business funding as well as infrastructure products.
It has also completed five years of fatality-free production and provided comprehensive Covid support in its prioritisation of lives and livelihoods.
“The earnings that we’ve generated and the value that we’ve created has allowed us to contribute about R51-billion to our stakeholders,” Kumba CEO Themba Mkhwanazi said during a media conference in which Mining Weekly participated.
The JSE-listed Kumba is partnering with government, organised business and civil society to ensure the most efficient and impactful contribution towards stimulating economic recovery.
“With mining contributing much higher than forecast tax revenues to South Africa, it is helping to ease the national debt and strengthen the rand. Kumba played its part by contributing close to R10-billion in tax revenues and mineral royalties to the fiscus in the first six months of 2021,” said Mkhwanazi.
It is also helping its host communities economically and socially by employing 85% of its workforce and procuring R1.7-billion of goods and services locally.
“Together with Anglo American we are making a long-term commitment to help rebuild and reset South Africa and its economy.
“With global demand for many metals and minerals driving prices and industry profits higher, mining is contributing significantly to the government fiscus, and ensuring that more resources are available to help our fellow South Africans get back on their feet,” he said.
Despite weather-related and logistical challenges, Kumba’s operational performance resulted in production volumes increasing by 12% to 20.4-million tonnes, surpassing production in the first half of the past two years, while increasing sales by 3% to 19.5-million tonnes.
Kumba’s ability to maximise returns from producing and marketing high-quality products continues to ensure that it receives a premium well above benchmark.
Attributable free cashflow improved to R31.5-billion, which supported the board’s decision to support a payout ratio of 100% of headline earnings.
Kumba’s strategies of extending the life-of-mine and doing all it can to deliver quality products continues to bear fruit and place it in a decarbonisation pole position. The last remaining residents of Dingleton were safely relocated to Siyathemba, allowing for unconstrained mining of the Sishen mine pit. The ultra-high-dense-media-separation project, approved in February 2021, will further extend Sishen’s life-of-mine to 2039 and enhance product quality. At Kolomela, the new Kapstevel South openpit operation is mining ahead of plan and activities to advance its exploration programme in the Northern Cape continue. As the global drive towards decarbonisation gathers pace, high-quality products, which enable cleaner, greener steelmaking, provide a sustained competitive edge.
“Kumba’s first half performance reflects operational resilience and benefits our value over volume realisation strategy. We are maximising the value of our products and positioning our business for the future, to the benefit of all our stakeholders,” Mkhwanazi said.
Amidst these challenges, Kumba has achieved five years without a fatal incident, a significant accomplishment for the South African mining industry.
Through its WeCare programme, it has invested R100-million to support employees and communities through the second year of the pandemic.
Working with the National Department of Health and Anglo, Kumba has started to implement its government-licensed vaccination programme at its Sishen and Kolomela mine clinics, serving its workforce first and ultimately their families and communities.