Business Maverick

BUSINESS MAVERICK

Life after the pandemic: Kumba approves R7bn mine expansion project

The Anglo American head office in Johannesburg. (Photo: Gallo Images / Sharon Seretlo)

Even amid the Covid-19 pandemic and global economic turbulence, companies are allocating capital to expansion projects. Kumba Iron Ore, a unit of Anglo American, has announced approval of funding for its R7-billion Kapstevel South project at the Kolomela mine in the Northern Cape province. This underscores Anglo’s commitment to South Africa.

Kumba Iron Ore made the announcement on Tuesday, 28 July along with its interim results, which reflected a decent performance, given the challenges presented by the Covid-19 pandemic.  

“Kumba’s operational performance for the period reflects the lockdown and subsequent reopening of operations in Q2 2020 with reduced workforce levels of approximately 50%, before ramping up production to pre-Covid-19 run-rates in June [2020]. Consequently, total tonnes mined for the period decreased by 15% to 117.6 Mt,” the company said. 

Headline earnings declined 16% to R8.4-billion and the board declared an interim cash dividend of R19.60 per share, representing 75% of headline earnings. The company ended the period with net cash of R15.7-billion.

This puts the company, which has been delivering fat dividends to shareholders under its affable CEO Themba Mkhwanazi, in a strong position in the face of a turbulent period, enabling it to expand.  

“While our focus for the first six months of 2020 has been on responding to the Covid-19 pandemic, we remain committed to our strategic ambition of margin enhancement and extending our life of mine to 2040. Our strategy protects our margin, and we are currently more resilient and better positioned than we were in previous down-cycles. Both the Kumba and Anglo American boards have approved the Kapstevel South project at Kolomela, which contributes significantly to sustaining production of ~13 Mt for the remaining life of mine,” the company said. 

Still, the outlook for the rest of 2020 is as clear as a bottle of bootleg sherry. Kumba at the end of the day produces iron ore, the key ingredient for steel. China is its biggest market and a lot will hinge on the strength of the recovery in the Asian giant and other markets. 

“The extent of the impact of the Covid-19 pandemic on Kumba’s operational and financial performance… will depend on many factors, including the duration and severity of the pandemic and related restrictions, all of which are uncertain and cannot be fully predicted. The implications for our export markets are still unfolding. Although we are encouraged by China’s recovery and the reopening of the European economies, we remain alert to the possibility of further risks developing including a second wave of infection,” the company said. 

Kumba’s Anglo sister, Anglo American Platinum, also produced a solid set of results this week and paid out R2.8-billion in an interim dividend. Stay tuned now for Thursday, 30 July when the Mother Ship, Anglo American publishes its results. DM/BM

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