Kumba Iron Ore production numbers

On Friday we received production numbers from Kumba Iron Ore. Remember a few weeks ago there was a trading update which suggested that earnings per share were expected to come in between R36.30 and R38.80. This was down significantly from the previous reporting period which came in at R53.13. So let's look at these production numbers.


For the quarter the company managed to produce just over 9 million tons. This was down from 11.16 Mt in the last quarter of 2011. The quarter also included the much publicized strike which had a big impact on Sishen production. Here are the numbers per mine (the Sishen numbers are for the entire mine and includes proceeds to other shareholders). Sishen produced 6.038 Mt compared to 9.8 Mt last year. That strike had a big impact, this shows a 38% decrease. Here is what management had to say.


"Sishen mine's production decreased by 38% year on year and quarter on quarter to 6.0 Mt, owing principally to the impact of an illegal strike during the fourth quarter, and low attendance in the mining section subsequent to the strike action. As at 31 December 2012, around 5 Mt of production was lost at Sishen mine as a result of the prolonged impact on the production ramp up following the illegal strike. Production rates continue to improve."

Kolomela has been the saving grace of this company having started production just last year. It produced a record 2.793 Mt for the quarter compared to last year's 1.167 Mt and last quarter's 2.5 Mt.


"The faster than planned ramp up of Kolomela mine contributed to offsetting the negative impact on production at Sishen mine. Kolomela mine exceeded monthly design capacity since July 2012 and reached record levels in the fourth quarter. The mine, which produced 2.8 Mt for the quarter, is on track to produce at design capacity of 9 Mt per annum in 2013."


Again the majority of sales were exported. Of the 9.813 Mt sold, 8.980 Mt were sent overseas. As Sasha so often says, who should take credit for these miners success? The operators, the citizens or is it thanks to a massive infrastructure boom in China? I guess the operators have to actually pull it out of the ground but if it weren't for the Chinese miracle these companies would be nowhere near where they are today. Should the citizens benefit? Well that is a whole new debate all together.


As I said in my last note about Kumba, single commodity miners can be a wild ride but these guys make lots of money and the majority of it gets paid out to shareholders. It was a tough year for Kumba but hopefully this year can be better production wise while iron ore prices have already shown some massive increases.