Sishen ramp-up equal to 'another Kolomela in one year' – Kumba Iron Ore

12th February 2013

By: Martin Creamer

Creamer Media Editor


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JOHANNESBURG ( – The waste ramp-up project planned at the Sishen iron-ore mine in the Northern Cape, which last year's unprotected strike interrupted, had the potential to deliver the equivalent of "another Kolomela mine" in just one year, Kumba Iron Ore CEO Norman Mbazima said on Tuesday.

Kolomela is Kumba’s newest mine, which came in ahead of schedule and below budget and which delivered 8.5-million tons of iron-ore to export markets in 2012 to earn billions of rands for South Africa in foreign exchange.

Speaking after delivering his maiden set of results for the 12 months to December 31, Mbazima told Mining Weekly Online in a video interview (see attached) that his immediate operational priority was to make sure that the company successfully achieved the ramp-up in waste planned at Sishen “which brings in another Kolomela within one year”.

Sishen mine’s highly satisfactory rate of operation in mid-2012 was interrupted after it fell victim to a wildcat strike during October when a group of employees held Kumba’s equipment to ransom.

Strikes and low prices resulted in the operating profit of JSE-listed Anglo American group company Kumba falling 28% to R23.2-billion in the period compared with the R32-billion of 2011, with the operating profit margin declining to 51% from 66% the previous year.

Kumba has distributed hundreds of millions of rands into the region, which has uplifted the lives of near-mine communities.

Only when new employees to replace the 100 who were dismissed completed their training in March would more employees be recruited to resume Sishen’s interrupted waste ramp-up project.

The company was on track to make up the loss of 5-million tons of production caused by the unprotected strike.

The removal of the large volume of waste was necessary owing to the Sishen orebody dipping to the west.

The strike resulted in the company failing in its attempt to mine an additional 30-million tons of waste last year, when waste mining was up 12% to 133.5-million tons.

Although the stripping ratio – which was arrived at by dividing waste tons by the volume of ex-pit ore – at the Sishen mine had increased from 2.6 in 2011 to 3.5 as the company continues with the waste ramp-up, it was also impacted by a 17% decrease in ex-pit ore mined.

The lower ex-pit ore volumes coupled with the increase in waste that was mined year-on-year had a greater impact on the stripping ratio than the waste removal alone implied.

It was anticipated that the company would catch up on its waste-removal plans this year and would push hard to mine an extra 10-million tons to 20-million tons more waste, on top of the additional 30-million tons previously guided,” Mbazima said.

“This will, of course, have a further cost implication, but will get us to a position of increased flexibility earlier,” Mbazima said.

The forecast would continue to 2015, when waste levels would peak at around 240-million tons before stability was reached.

The company would update the market in due course on an exercise it was currently conducting to achieve optimisation between Sishen and Kolomela.

New-broom Mbazima said he was setting out to lead all the company’s employees to the objective of adding value for the benefit of all stakeholders.

“We need to get efficiencies and costs to the right level, and grow the company” he told Mining Weekly Online.

The company’s target was to produce at a rate of 70-million tons of iron-ore a year by 2019.

This would be done from a base of 41-million tons of iron-ore a year from the Sishen mine and 9-million tons a year from Kolomela.

The Kolomela expansion was expected to add another 6-million tons a year and lower-grade materials would provide the remaining 14-million tons a year.

“We have the technology now to be able to bring the lower grade to account,” he told Mining Weekly Online.

Matching growth in rail capacity would have to be provided by State-owned rail company Transnet, which is in the process of completing a feasibility study on the expansion of the export channel.

“This year we’ll be getting together with Transnet,” he said, adding that the studies of the other private-sector iron-ore producers would also be brought to the table for the expansion decision to be taken.

Tons mined at Thabazimbi, in Limpopo, which was heading for closure and replacement by the proposed new Phoenix project, decreased by 30% to 32.2-million tons and domestic sales to steel producer ArcelorMittal South Africa (Mittal) were down 14% to 1.2-million tons.

The 800-employee and 800-contactor Thabazimbi mine, which operated on a cost-plus basis, was contractually dedicated to supplying Mittal, with which the future of the operation was under discussion.

“Our hope is that we can get Phoenix up and running so that there can be a smooth transition from one to the other,” Mbazima said.


Kumba GM commercial Dr Timo Smit said iron-ore was currently selling at $155/t following an improvement in sentiment on the back of better-than-expected Chinese numbers.

He said that sentiment was driving restocking in China, which had, in turn, been driving prices.

There had also been a definite improvement in sentiment in Japan, Korea was continuing as normal and Europe was stabilising.

There should be more iron-ore supply in the second half of the year, when prices were expected to soften.

The possibility of greater supply from Australia would be countered by supply lower than 2012 from India.

Overall, iron-ore prices for the year as a whole should be stronger than in 2012.


Kumba, which employs 11 773 people, is the Northern Cape’s largest private-sector employer.

The company spent R845-million on housing last year to accommodate its staff, 73% of which were from the area, and has spent R1.9-billion on housing since 2006.

“The Kolomela mine manager counts the full spectrum of staff as his immediate neighbours in the integrated housing development,” Mbazima reported.

The company also converted the last of its old-style hostels to family units two years ahead of the requirements of the Mining Charter.

The company has paid out R18-billion in dividends this year and, in addition to the dividends paid to the community trust, it has spent R277-million on education, health, skills, enterprise and infrastructure development in local communities.

In 2012, the Sishen Iron Ore Company Community Development Trust (SIOC-cdt), a 3% shareholder in SIOC, used R500-million of its dividends on 109 projects, benefiting more than 360 000 people in near-mine areas.

In its final dividend for 2012, SIOC will return a further R1.2-billion to its black economic-empowerment (BEE) shareholder, bringing its total return since listing to more than R17-billion.

The JSE-listed Exxaro BEE partner will receive R2.8-billion for its 20% interest in SIOC and the SIOC-cdt, which is valued at more than R7-billion, will receive R414-million for its community projects.

Employees, who also own 3% of the company, continue to share the benefits of SIOC’s performance in dividends.

The employee body Envision will receive a dividend of R137-million, of which R48-million will flow to 6 300 employees, amounting to R6 000 each after tax.

Kumba shares, which continue to outperform the JSE mining index, closed out at R568 a share at the end of December, which represented a capital growth of 14%.

Kumba’s dividend policy is to return surplus cash to shareholders.

Edited by Creamer Media Reporter


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