Themba Mkhwanazi. Picture: ELAINE BANISTER / BUSINESS DAY
Themba Mkhwanazi. Picture: ELAINE BANISTER / BUSINESS DAY

Kumba Iron Ore, Africa's largest supplier of the steelmaking mineral, will continue mining, railing and shipping of its products, tapping into its stockpiles at the Saldanha port to supply customers.

Kumba, which is a JSE-listed subsidiary of Anglo American, operates the Sishen and Kolomela mines in the Northern Cape. It is linked to the port via a 860km railway line.

Kumba had advised the market to expect full-year production of between 41.5-million and 42.5-million tonnes of ore for 2020, but it lowered this forecast by up to three-million tonnes.

It had 6.4-million tonnes of processed ore stockpiled by the end of 2019 as domestic demand dried up because of the closure of ArcelorMittal's Saldanha steel mill.

This is because the mines will operate with half of normal staffing levels to meet the SA government's order for a 21-day national lockdown to combat the spread of Covid-19, which has claimed the first life in SA and infected more than 1,100 people.

The department of minerals and energy has granted permission to certain mines and smelters to continue operations with reduced staffing levels. Mines that are labour intensive, such as gold mines, have been temporarily closed.

Kumba has received permission from the department to continue mining, but with a 50% reduction in staffing levels, while Transnet Freight Rail has agreed to provide trains and port facilities to move ore out of SA.

To put Kumba in context, the global seaborne iron ore market is about 1.5-billion tonnes a year. However, Kumba sells highly sought after lumpy iron ore, which is fist-sized rocks of iron-bearing ore, as opposed to the fine, sand-like ore other miners about the world produce.

Lumpy ore fetches a premium in the market.

According to S&P Global, supply disruptions in India, SA and Canada could take 120-million tonnes of ore out of the global market. Australia and Brazil are the two largest suppliers.

Reports from China, the epicentre of the Covid-19 pandemic, are that industry is restarting. China is the largest steel maker and imports more than one-billion tonnes of ore a year.

Prices of ore with a 62% iron content have increased and are now about $84/tonne, with contracts for May deliveries to China rising above $93/tonne.

Kumba would continue to supply its nearby communities with water and other services, including healthcare and emergency medical services, under its social and labour plans that underpin its mining rights, said CEO Themba Mkhwanazi.

“We also have a clear responsibility to protect the integrity of our business and assets so that we are ready to restart and ramp up any affected operations safely and as quickly as possible once permitted to do so,” he said.

“This approach will enable us to minimise any interruption of supply to our customers and support what will be a vital economic recovery phase for SA.”