Kumba Iron Ore's Kolomela mine, near Postmasburg in the Northern Cape. Picture: SUPPLIED
Kumba Iron Ore's Kolomela mine, near Postmasburg in the Northern Cape. Picture: SUPPLIED

Kumba Iron Ore will report a trebling of interim profit because of higher prices for the steel ingredient.

Kumba, which is SA and Africa’s largest iron ore miner and a 70%-owned subsidiary of Anglo American, said its basic earnings for the six months ended June would be in the range of R9.7bn to R10.2bn, compared with R2.9bn in the same period a year earlier.

It attributed the increase to higher export iron ore prices as well as a weaker rand. Its results will be released on July 23.

Kumba’s difficult operational performance during the first half of the year meant the company lowered its full-year production forecast by 1-million tons to between 42-million and 43-million tons. It kept its sales forecast intact at up to 44-million tons, with plans to draw down on 4.5-million tons of stockpiled ore.

Kumba noted first-half sales were up 1% to 21.3-million tons year on year, with an improved service provided by railway operator Transnet linking the Sishen and Kolomela mines in the Northern Cape to the port of Saldanha on SA’s west coast.

Of those sales, 19.89-million tons were in the export market and 1.46-million tons were sold on the domestic market.

However, the interim period was one of two halves, with the second quarter’s export sales falling by 4% to 9.8-million tons because of poor weather, which disrupted shipping and repairs to the stacker reclaimer, a machine that stacks iron ore and moves it to ships.

In the interim period, Kumba realised $108/ton for its exported ore, a 57% increase on the same period a year earlier, when it achieved an average $69/ton.

Operationally, Kumba had a difficult start to the year, with unplanned plant maintenance at its flagship Sishen mine and longer-than-expected maintenance at its dense media separation plant at Kolomela. First-half production was down 11% to 20.1-million tons.

“We are concerned by the continued plant challenges both at Sishen and Kolomela and will be looking to find out from management whether this problem will continue for financial year 2019,” said Thabang Thlaku, an analyst at SBG Securities.

Kumba produces a sought-after product called “lumpy” — pebble-sized chunks of ore. Its ratio of lumpy to fine ore was kept at 68:32 during the interim period and the iron content was stable at 64.3%.

“These factors contributed to the higher average realised free on board export iron ore price of $108/ton,” it said.

Kumba said its headline earnings, which account for one-off items, would be in a range of R9.78bn and R10.28bn, compared with R2.98bn a year earlier.