JOHANNESBURG (miningweekly.com) – Product-improving  Kumba Iron Ore generated hefty operational cash flow, paid a competent final 2018 cash dividend, pressed on with exploration in a new area and supported the creation of 2 600 new jobs in the local community, during a fatality-free, safety-boosted year, characterised by higher prices for its products, better logistics and flourishing cooperation with State rail enterprise Transnet.

As an Anglo American group producer in the Northern Cape, Kumba exported 43.3-million tonnes of its sought-after product at an average price of $72/t, up from $71/t in 2017, to outperform its peers. The earnings before interest, taxes, depreciation and amortisation (Ebitda) margin rose by 3% to 45% on an Ebitda rise of 5% to R20.6-billion.

Kumba generated close to R19-billion worth of operational cash flow, buoyed by a flexible approach to production that lifted average product quality to an iron (fe) content of 64.5%, ­up from the previous 64.1% fe and a 3% increase in productivity to 68% of the benchmark set.

“We achieved our production and sales volume guidance, with unit costs remaining well contained,” Kumba CE Themba Mkhwanazi told Mining Weekly Online.

In producing 43-million tonnes of iron-ore, 29-million tonnes at Sishen and 14-millon tones at Kolomela, Kumba delivered to its 12 000 employees and host communities on safety, health and economic inclusivity, demonstrating its commitment to President Cyril Ramaphosa’s ten-point challenge to the mining industry.

The company paid R4.6-billion in salaries and benefits, while shareholders, including employees and empowerment partners Exxaro and the community development trust, received R12.7-billion in dividends. It paid R4-billion in income tax, close to R1-billion in royalties and spent R12-billion on products and services procured from empowered suppliers, including R1.4-billion with local community businesses.

In line with its target of producing three jobs for every one permanent on-site job by 2025, the local businesses it supported created 2 600 new jobs and provided income to more than 16 000 people.

Capital expenditure totalled R4.5-billion, up from R3-billion in 2017, and the stripping ratio increased to 4.7.

Costs were cut by nearly R1-billion and a total 2018 dividend of R30.24/share declared, representing a 100% payout ratio on headline earnings per share.

Cash generated from operations totalled R18.9-billion, resulting in a net cash balance of R11.7-billion. Headline earnings of R30.28 a share were in line with 2017.

Permission to expand Kolomela into the adjacent Heuningkranz area presents an “exciting” opportunity to extend the life-of-mine and Mhkwanazi talks of the company having “significant value to unlock”, which includes benefiting from premium-priced lumpy iron-ore and the feasibility study into the establishment of a dense media separation plant to convert low-grade material is 68% complete and on track for approval in the last quarter of this year.  The expected timing of production of the Ultra High Dense Media Separation project is the last quarter of 2022.

“We have the right strategy and team's in place to create sustainable shareholder value,” he added.

Following the Brazil iron-ore tailings tragedy, the Brazilian company is taking an expected 40-million tonnes of product out of the market as it reconfigures its tailings dam safety, which is expected to result in iron-ore prices of $71/t to $75/t going forward.

Kumba, which has experienced no environmental incidents for the third consecutive year, has rehabilitated 130 ha with an additional 2 500 ha assigned for biodiversity offset.

Fatality free since May 2016, Kumba has linked safety to business performance through an incentive structure that rewards a positive safety culture.

The total recordable safety case frequency rate declined to 1.80 from 3.23 in 2017 and lost-time injuries remained constant at 21.