JOHANNESBURG (miningweekly.com) – South African iron-ore major Kumba Iron Ore has taken the knife to 1 772 jobs as low iron-ore prices cut a swathe through the industry.

Out of a previous complement of 572, only 221 permanent and fixed-term employees remained at head office, with the 351 head office jobs cut by the Anglo American group company in the first quarter representing a 61% reduction and a saving of R200-million a year.

A 31% reduction of permanent and fixed-term employees is under consultation at Kumba’s Sishen and Kolomela iron-ore mines in the Northern Cape as part of a Section 189A legal process, which will cut permanent and fixed-term employees by 261 people, reducing the employee complement from 846 to 585.

Kumba’s closure of its Thabazimbi mine, in Limpopo, will cut permanent employees by 800 and fixed-term employees by 360, taking the total job cuts carried out so far by the JSE-listed company to 1 772.

In presenting 61% lower headline earnings for the six months to June 30, Kumba CEO Norman Mbazima said that more than 200 individual cost-cutting measures undertaken in the six months to June 30 had reduced controllable costs by R1.8-billion.

The company was now targeting a decreased break-even cash iron-ore price of $45/t, a far cry from the $135/t averages of 2013.

“Our industry is facing very challenging times,” Creamer Media’s Mining Weekly Online reports Mbazima as saying in the attached video. (Click on picture to watch).

Mbazima outlined how high-cost global producers were ceasing production and many more were distressed after the iron-ore price had fallen to $44/t rising to $49/t in the same week, the greatest volatility since the iron-ore index was created.

Kumba 2014 cost-cutting strategy has proved inadequate with far weaker price outlook forcing a further review in order to stay competitive in the face of many disadvantages.

“Considerable changes are being implemented as the company does what it can to manage the increasingly challenging iron-ore pricing environment,” said Investec Securities in a note.

Earnings were 52% lower, mines are being reconfigured to produce lump ore and the interim dividend has been scrapped.

“We have one advantage, which is the quality of our lump ore, and loads of disadvantages. We’re a significantly longer distance away from the port. We’re a significantly longer distance away from China.

“So we have to work doubly hard to be able to compete in the market we’re faced with right now,” he said.

Stay-in business capital expenditure (capex) had been cut to a maximum of R4.1-billion on reduced fleet and less housing development.

Capex on waste stripping had also been reduced to a maximum of R2.3-billion on the revised waste profile at Sishen and the Thabazimbi closure.

Mbazima sees the company being able to manage an iron-ore market price of $45/t by year-end.