Kumba shares R89 billion of value created in 2021 with stakeholders


JOHANNESBURG (miningweekly.com) – South Africa’s largest iron ore producer and marketer, Kumba Iron Ore, has shared R89 billion of the value it created in 2021 with its stakeholders, plus 21 billion rand going to the government in tax revenue and mining royalties.

The Johannesburg-listed Anglo American group company has increased its capital investment by 30% to R8 billion, “and this not only benefits the duration of our operations, but represents our commitment to investing in our country and our local communities”, new CEO of Kumba Mpumi Zikalala highlighted during the company’s presentation of spectacular financial results.

The strong financial performance delivered R43.5 billion to shareholders, with its empowerment partners receiving over R10 billion in dividends.

“Safeguarding local livelihoods is extremely important,” Zikalala said, pointing out that the company pays R5.6 billion in wages and benefits.

Seventy-nine percent of Kumba’s staff are employed in local communities in the Northern Cape.

“We have also supported BEE suppliers with expenditure of R10 billion,” Zikalala said during the presentation covered by Weekly mining.

Four billion rand related to hospitality community providers. One such initiative is the awarding of the R1.6 billion mining contract to a community joint venture to extract iron ore from the Kolomela mine in Kumba. This joint venture supports women-owned communities and businesses.

“These opportunities and others like them will go a long way in helping our communities thrive,” Zikalala said.

The company further contributed R258 million in direct investment in social community development, including R36 million for Covid-19 support.

STRENGTHENING OF RAILWAY INFRASTRUCTURES

The 39.3 million tons of iron ore transported by rail to the port of Saldanha was 1.2 million more than in 2020, with export sales of 40.2 million tons.

Higher production impacted by rail constraints resulted in a higher inventory level of 6.1 million tonnes, mainly in mines.

Decongestion logistics remain at the top of the priority list. To address the challenges of maintaining rail infrastructure and equipment, engagements with state-owned rail company Transnet and industry peers have been intensified.

As a result of these commitments, equipment reliability and shipping throughput have improved. This contributed to a 6% improvement in export sales in the second half.

In the short term, further improvement is expected from improved railway infrastructure, which will help lift speed restrictions.

In addition, the three-year equipment refurbishment program at the port of Saldana should be completed this year.

A systematic move to larger Cape-size vessels is underway to increase carrying capacity.

Although the iron ore line has yet to return to pre-pandemic levels, some progress has been seen, but with room for improvement.

In the medium term, an improvement in performance is expected from the commissioning of the third switch at the port and shorter maintenance periods at shutdown.

RECORD REVENUES

Kumba made a record profit of R64.6 billion in 2021 and accumulated 47% more attributable free cash for a total of R30.5 billion.

The average realized export price of $161/t, 18% above the benchmark, helped the company realize a profit margin of 63%. The return on capital employed is 147%.

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

More than five years of production without deaths and more than 75% of its workforce have been vaccinated to date, providing vital protection against Covid-19.

Cost savings of R0.9 billion in 2021 brought 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 Port of Saldanha boosting export sales by 1% to 40.2 million tonnes.

In 2021, the mine life of Sishen was extended by four years to 2039 using Ultra-Dense Media Separation Technology (UHDMS) and agreements were reached for the relocation of the remaining Dingleton owners in Siyathemba.

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

While carbon emissions have increased year on year to 0.99 million tonnes of carbon dioxide equivalent, the company continues to target a 30% reduction in emissions by 2030 and is advancing its plans development of a 60 MW to 80 MW photovoltaic solar power plant in Sishen.

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

“In the near term, we will continue to build on the Tswelelopele strategy of improving margins and extending life, focusing on maximizing our potential through operational excellence, profitability and achieving the full market value of our premium products,” Zikalala said.

“Kumba’s world-class assets and attractive physical characteristics of our products position us well to help our customers deliver more efficient, low-emission steel production.”

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

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