Logistics challenges force Kumba to cut its production guidance for 2024, 2025

Although South African iron-ore miner Kumba Iron Ore has continued to deliver improved operational stability at both its Sishen and Kolomela mines, the logistical constraints facing the country have resulted in “unsustainable levels” of stock building up at the two operations.

“In light of persistent logistics challenges, we conducted a strategic business review in the second half of this year, with the aim of reconfiguring our business and aligning production more closely to the prevailing logistics capacity in order to ensure that our business is sustainable,” says CEO Mpumi Zikalala.

As a result, Kumba has lowered its production guidance for 2024 to between 35-million and 36-million tonnes, from the 35-million to 37-million tonnes previously planned.

Sales guidance has also been lowered to between 36-million and 37-million tonnes, compared with the previously planned 36-million to 38-million tonnes.

Further, production for 2025 will also be between 35-million and 37-million tonnes, compared with the 39-million to 41-million tonnes previously guided.

“I am pleased to add that, despite flat production and ongoing cost inflation, our C1 unit cost is forecast to improve to between $38/t and $40/t over the next three years, benefiting from our programme to optimise our cost base in line with the revised production profile,” she says.

Zikalala adds that the company has identified R2.5-billion to R3-billion of sustainable cost-saving initiatives for 2024.

“As we progress, we will be doing more work to identify and embed further cost savings and efficiency opportunities into our plans. The initiatives identified are centred around optimising our mine plan and use of contractors, improving our efficiencies, extracting further supply chain savings and streamlining overhead costs.

“From a capital project perspective, as previously communicated, we have rephased our Kapstevel South project at Kolomela, reducing the waste mined, and we are on track to deliver first ore in the first half of 2024 as planned,” she says.

At Sishen, where the ultra-high-dense-media-separation (UHDMS) project is under review, Kumba has prioritised the reconfiguration of the business owing to the ongoing logistics challenges.

“The changes resulting from the optimisation of our mine plan will be incorporated into the project technical review and we expect to submit the project to the board for approval in mid-2024.

“We remain confident that the UHDMS technology will play an essential role in positioning our business for a sustainable future. We continue to see significant value uplift, due to the benefit from lowering the cut-off grade which reduces our strip ratio, increasing product quality and extending the life-of-mine,” Zikalala comments.

She notes that Kumba earlier this year lowered its capital expenditure (capex) guidance for this year by about R2-billion to between R9-billion and R10-billion, primarily as a result of the lower expansion capex for the Kapstevel South and UHDMS projects.

Stay-in-business capex was also reduced through the reprioritisation of heavy machinery and equipment spend.

Capex for this year remains unchanged from the guidance provided at the half-year mark. Kumba has yet to provide capex guidance figures for 2024 and 2025, but says sustaining capex is likely to remain at about R5-billion a year over the medium term.