Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kumba Iron Ore Ltd (KIROY, Financial) achieved a significant improvement in safety, with the total recordable injury frequency rate decreasing from 1.2 to 0.94.
- The company reported an EBITDA of ZAR15.6 billion, reflecting strong cost optimization and working capital initiatives.
- Kumba Iron Ore Ltd (KIROY) declared an interim dividend of ZAR8 billion, with empowerment partners receiving ZAR2 billion.
- The company achieved a 25% improvement in operating time through better fleet utilization and maintenance.
- Kumba Iron Ore Ltd (KIROY) has made significant progress in reducing its C1 unit cash cost to $38 per wet metric tonne, positioning it well for future cost competitiveness.
Negative Points
- Production decreased by 2% to 18.5 million tonnes, tracking against the full-year guidance of 35 to 37 million tonnes.
- Sales volumes decreased by 5% to 18.1 million tonnes due to significant port equipment challenges.
- The average realized FOB price of $97 per tonne was 8% lower than the comparative period, impacting revenue.
- The company faced challenges with Transnet logistics performance, affecting sales and requiring collaborative efforts to improve.
- Kumba Iron Ore Ltd (KIROY) had to pause the UHDMS project to upgrade engineering designs, delaying potential benefits from the project.
Q & A Highlights
Q: Could you provide more granularity on the rail performance in the second quarter and into the third quarter?
A: We saw a reduction in performance in the second quarter, partly due to a proactive five-day mini shutdown and a couple of derailments. The independent technical assessment is being finalized, and we are working with Transnet to identify critical projects. Production has stabilized recently, but it's not yet at desired levels. Transparency and collaboration with Transnet's new leadership are key to future improvements. β Nompumelelo Zikalala, CEO
Q: Can you provide more details on the Kolomela mine's life extension projects?
A: We are exploring the potential of Bluff Fountain and other areas. We typically finalize work at a feasibility study level before bringing it forward as a project. The resource is there, and we are progressing through various steps to develop it into a project. β Nompumelelo Zikalala, CEO
Q: Can you provide more color on the technical hub in Northern Cape?
A: The hub will offer services such as human resources, finance, and technical skills to both Sishen and Kolomela mines. It is well set up to drive operational excellence and support our business reconfiguration. β Nompumelelo Zikalala, CEO
Q: With regards to cost savings, should we expect the run rate achieved in the first half to continue?
A: We saved ZAR1.8 billion in the first half, ahead of our run rate. We are targeting ZAR2.5 billion to ZAR3 billion for the full year. We will continue to look for cost savings and aim to reduce our breakeven price to the mid-50s per tonne. β Bothwell Mazarura, CFO
Q: How is it that mining companies can still find more cost savings?
A: We proactively reconfigured our business to align with logistics realities and optimized our central cost overhead. This positions us well for future expansion and efficiency. Continuous improvement and operational excellence are key to unlocking more value. β Bothwell Mazarura, CFO and Nompumelelo Zikalala, CEO
Q: Can you explain the $12 adjustment related to timing effects on iron ore pricing?
A: Our ore is priced on an M plus two basis, leading to a two-month lag effect. The $12 adjustment includes $4 from provisional pricing effects and $8 from the timing effect. This can swing quickly and is expected to dilute over the year. β Unidentified Company Representative
Q: What is the outlook for lump and grade premiums in the iron ore market?
A: Lump premiums have improved due to lower stock levels at Chinese ports. Long-term, we expect lump premiums to trade higher due to CO2 benefits. Grade premiums have also risen due to improved mill margins and low stock levels of high-quality fines. β Unidentified Company Representative
Q: When will the UHDMS project be approved and what are the main factors being considered?
A: The UHDMS project is critical and we are upgrading the engineering design. We will come back before the end of the year with an update. The project offers benefits in terms of cost reduction, premium products, and life extension. β Nompumelelo Zikalala, CEO
Q: What are the critical projects identified with Transnet and how will they be funded?
A: The independent technical assessment has identified critical projects focusing on the rail track, rolling stock, and port. We are working with Transnet to support these projects. Funding will involve public-private partnerships and government support. β Nompumelelo Zikalala, CEO
Q: What is the expected working capital reversal in the second half?
A: We optimized working capital in the first half, benefiting from better debt collection and stockpile drawdown. In the second half, we don't expect the same level of benefit, and some of the working capital movement may unwind. β Bothwell Mazarura, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
