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Kumba ‘very bullish’ on exploration prospects

25th July 2018

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Iron-ore mining and marketing company Kumba Iron Ore is bullish about its R664-million exploration programme, that has funded more than 200 000 m of drilling.

"We’re very bullish and very excited,” Kumba Iron Ore technical and projects head Glen Mc Gavigan commented to Mining Weekly Online during question time at Tuesday’s presentation of results.

The high-grade ore is being targeted and technology will be applied to further enhance whatever finds are made. (Also watch attached Creamer Media video).

The Northern Cape’s global differentiator is its high-quality haematite ore and this is being highlighted once more as the Anglo American group company goes about carrying out both brownfield and greenfield exploration in the province.

“We’re excited about prospects. We’ve always said that the Northern Cape presents the best opportunity for high-quality haematite ores,” said Kumba CE Themba Mkhwanazi, who promised eventual feedback under the very strict Samrec guidelines.

The company is looking to convert its prospects in the “next two to three years”.

The positive exploration outlook must also be viewed against the backdrop of the progress that Kumba has made in being able to elevate lower grades of ore to a high-grade product by applying ultra-high dense medium separation (UHDMS) beneficiation technology.

The company’s first resource development plan is focused on mineral endowment potential beyond the life of its current assets Sishen and Kolomela mines.

“We’re excited about the long-term future of the region,” said Mkhwanazi of the area where it has 676.4-million operational tonnes, split 74% and 26% between Sishen and Kolomela.

In addition, it has access to a further 733-million tonnes of exclusive mineral resource, with investigations under way to convert 510-million tonnes of that into reserves in the next two to three years.

Its approach to conversion centres on a productivity drive, which reduces costs, and the optimisation of Sishen slope design, which has the potential to unlock 80-milliion tonnes at Sishen and 70-million tonnes at Kolomela.

Steps are being taken to incorporate fully the UHDMS beneficiation technology into the business, with 210-million tonnes of low-grade mineral resource in the Sishen pit earmarked for UHDMS projects.

A further 150-million tonnes could be achieved through the optimisation of the pit shell and incorporating the costs and stripping benefits that the UHDMS projects will realise.

Active development of additional beneficiation technologies could enable Kumba to reduce the cutoff grade at Sishen to below 40%, which would further extend mine life.

As of December 31, 2017, Kumba had access to a haematite ore reserve of 676-million tonnes at an average feed grade of 59.6% iron, with Kolomela contributing 175.6-million tonnes of that at 64.4% iron, against a 50% iron cutoff grade and a year-on-year decrease of 8%, and Sishen contributing 500.8-million tonnes 58.0% iron, against a 40% iron cutoff grade and a year-on-year decrease of 9%.

The company hopes to extend Sishen’s remaining 13 years through brownfield exploration.

UHDMS can be used to produce a high-quality iron-ore product from low-grade material and a bankable feasibility study into installing a large-scale UHDMS plant to treat 260-million tonnes of stockpiled material is at an advanced stage.

UHDMS is seen to have the capacity to produce another one-million to two-million tonnes a year of high-grade iron-ore.

High-grade premiums have soared in the six months, with Kumba standing to benefit still further going forward through its imminent introduction of a new super premium lump product with an average iron content of 66%.

The lump premium also staged an impressive recovery in the period, increasing from 7.9c for every dry metric tonne unit (dmtu), the internationally agreed-upon unit of measure for iron-ore pricing, at the start of the year, to 32 c/dmtu, which takes the year-to-date average to an equivalent of $12/t.

Kumba executive head of marketing and seaborne logistics Timo Smit said at question time during Tuesday’s interim results presentation that an opportunity remained for the price premium to rise still further and that the company was working on that being reflected in the prices realised in the second half of 2018.

“You have to keep in mind that we’re playing catch-up here. Those prices for the first quarter in China, for example, we negotiated back in November and December last year. What we’ve seen in the first half of this year is a widening of the gap between the 62 and the 65 indices, indicative of a probable increased premium towards the end of the quarter,” Smit said.

Kumba’s realised price averaged $69/t free-on-board as the Platt 62 index came down by $5/t and the freight costs rose by $2/t in the six months to June 30. However, this was partly offset by a $5/t higher lump premium.

Platts 65 and Platts 58 low alumina indices with the Platts 65 to 62 premium, which averaged $18/t in the first half of 2018, is currently trading at a record $28/t.

Demand for the high-grade ore is being driven by stricter pollution controls in China. About two-thirds, or 5.5-million tonnes a year, of Kumba’s yearly production comprises premium lumpy product.

Multiple sintering closures in China and strong demand for low alumina ores have been the key drivers of the recent rally in lump premium.

Supply side reforms have removed 250-million tonnes of steelmaking capacity in the last two years. As a result, steel capacity utilisation has risen by 15% to 77% in 2018.

Mkhwanazi has declared China’s flight to quality as being “here to stay”.

Edited by Creamer Media Reporter

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