Kumba Iron Ore decries Transnet’s woes as it affects production outlook

Transnet’s inability to perform to its best is causing severe damage to companies such as Kumba Iron Ore.

The mining company said poor logistics performance, including a worker strike during 2022 at Transnet repressed the volume of ore railed to port by 9% to 35.9 million tons.

This has hamstrung South African coal and iron ore exporters across the board and that is the sentiment shared by Kumba CEO Mpumi Zikalala.

As a result, Kumba, the Anglo American subsidiary, which mines iron ore in the Northern Cape, said it would readjust its production outlook over the next three years.

The move is aimed at reflecting lower-than-expected Transnet rail performance, given the challenges faced in 2022.

“Rail capacity was predominantly impacted by derailments and a weather-related event in the first quarter, resulting in increased speed restrictions, while low availability of train wagon sets led to increased turnaround times,” Zikalala said according to IOL.

“Industrial strike action, equipment breakdown, and locust outbreaks further contributed to rail performance reducing to 80.3% of contracted tonnage.”

Then iron ore miner said output in 2023 may be maintained at between 35 million tons to 37 million tons as it clears stockpiles in its Kolomela operation.

“We are engaging with Transnet and the government to improve the stability and reliability of rail and port infrastructure as a matter of urgency,” added the CEO.

Speaking at the African Mining Indaba earlier this month, Mineral Resources and Energy Minister Gwede Mantashe, said the mining industry was not fully benefiting from the commodity boom due to inefficiencies at railways and ports.

Transnet has come under fire from many companies such as Kumba and other mining companies and in a bid to address the parastatal’s challenges in December, Transnet and the council established a partnership to maximise the potential of bulk commodities.

Zikalala said Kumba welcomed the collaboration, but there was a lot that needed to be done as their headline earnings per share (heps) plummeted 46% to R56.19 from the prior year.

Meanwhile, the miner declared a final 2022 dividend of R5.2bn bringing Kumba’s total shareholder dividends to R14.5bn, or R45 per share, representing a total payout ratio of 80% of headline earnings for the year.

“Despite market volatility, demand for our high-grade iron ore helped us realise an average price of $113 (R2 060) per wet metric tonne, 13% above benchmark prices,“ concluded Zikalala.