Transnet failures push Kumba to cut production – and jobs 

Transnet’s inefficient railways and general lack of capacity have forced Kumba Iron Ore, a subsidiary of Anglo America, to cut its production and, thus, jobs. 

Kumba is the country’s largest iron ore producer and the fifth-largest globally but has been beset by challenges, predominantly from Transnet’s deteriorating performance. 

Over the past few financial years, the company has been forced to stockpile iron ore from its mines in the Northern Cape at various facilities as it was unable to move the material via rail to Saldanha Bay for export. 

Subsequently, it has run out of space to store the iron ore and is currently undergoing a process to reduce its output to match Transnet’s capacity. 

In Kumba’s annual report released last week, CEO Mpumi Zikalala outlined the substantial impact Transnet’s poor performance has had on the company. 

Total production for 2023 was down 5% to 35.7 Mt, with production at Sishen reducing by 6% to 25.4 Mt and at Kolomela by 4% to10.3 Mt. 

As a consequence of low production volumes, Sishen’s unit costs increased to R589/dmt (2022: R479/dmt), while at Kolomela, tight cost discipline and improved efficiencies helped to reduce the unit cost to R482/dmt (2022: R490/dmt).

In response to persistent Transnet-related logistics challenges, Kumba conducted a strategic business review towards the end of 2023 to reconfigure its business and align production more closely to anticipated logistics capacity. 

To ensure the ongoing viability of our business in a particularly cost-competitive environment, we have lowered our production outlook for the next three years to 35 to 37 Mt per annum. 

Previously, we had an outlook of 37 to 39 Mt in 2024 and 39 to 41 Mt in 2025. This reconfiguration will enable the much-needed drawdown of high mine stockpiles and will support critical cost reductions. 

Zikalala said this will result in job cuts throughout the company, from its head office to contractors and service providers. 

Despite the extensive measures taken to mitigate the impact of the logistics challenges on our business, Kumba announced in February a proposed reconfiguration that will impact around 490 jobs. 

In parallel, a contractor review process is underway that may impact around 160 contractors. 

This could result in some of the contractor services being rescoped or terminated as part of the business reconfiguration process. 

“The decision to potentially reconfigure our business has not been taken lightly, but it is necessary if we are to remain globally competitive to sustain our mines and those who depend on them for the long term, including our employees, service partners, communities, local businesses, and our government through our contribution to the fiscus,” Zikalala said. 

“My priorities for 2024 are to maintain operational safety, stability and capability as we reconfigure the business to a lower production profile and realise our ambitious cost-savings targets.”