[miningmx.com] – KUMBA Iron Ore underlined its reputation as one of Anglo American’s best assets paying an interim dividend of R20.10/share (2012 H2: R12.50/share) and contributing an estimated $579m to the UK group’s half-year earnings which are due to be announced on July 26.
After the balance sheet woes of Anglo American Platinum which reported a 30% increase in net debt as part of its interim figures yesterday, the cash generating power of Kumba Iron Ore will come as great relief to Anglo.
The iron ore producer generated enough cash, even in the midst of weaker prices for iron ore, to record net cash of R2.3bn wiping out some R4.3bn in net debt as of December 31, 2012.
Analysts are hopeful Kumba Iron Ore could actually improve future dividend payments while this performance will surely have investors inquiring whether one of the first restructuring efforts of Anglo American’s newly appointed CEO, Mark Cutifani, should be to fully incorporate the 79.4% iron ore company into the parent in an offer to minority shareholders.
Shares in Kumba Iron Ore were trading up 1.88% at R471.64/share on the JSE following publication of the interim results, but year-to-date, the stock is 16% weaker.
Commenting on prospects, Kumba Iron Ore said the markets remained under pressure although there could be restocking this year that could give some succour to prices in the second half of the year.
Kumba Iron Ore said in would look at optimising production against costs at its two iron ore mines in the Northern Cape with a view to filling a rail route capacity to Saldanha Bay in the Western Cape of 41 million tonnes/year (mtpa). Kumba Iron Ore’s export volumes in the first half of its financial year totalled 20.1mt.
Kumba Iron Ore is not without its “issues’, however. Costs at its flagship Sishen Iron Ore continue to move in the wrong direction, partly owing to its mining of waste, a necessary but dilutory step Kumba says it must do in order to build long term flexibility into the mine.
As a result of waste stripping, and a surprising hangover from a strike last year at the mine, production at Sishen Iron Ore fell 10% to 16.1mt. However, it was another strong performance at the newly commissioned Kolomela mine that helped drive the performance at Kumba. The mine was in ramp-up mode last year so the production figures are not comparable, but output was 63% higher at 5.1mt.
Sales were lower, down 5% and iron ore prices were 7% softer, but a 16% deterioration in the rand against the dollar helped Kumba to flat year-on-year interim profit of R10.2bn (2012: R10.1bn). This was despite a heft 16% cost increase. Basic share earnings came out at R24.12 versus R23.81/share in the previous interim period.
In other developments, Kumba Iron Ore said it was in discussions with ArcelorMittal SA (AMSA) regarding future of the almost depleted iron ore mine, Thabazimbi.
And in a matter related to AMSA, Kumba said an appeal launched by Imperial Crown Trading and the Department of Mineral Resources (DMR) to the Constitutional Court regarding a claim over mining rights to part of Sishen Iron Ore Company would be heard on September 3.
There was no reference to another potential dispute between AMSA and Kumba Iron Ore relating to the steel company’s claim over mining of Kumba’s Phoenix iron ore project.
