Anglo’s S.African iron ore unit cuts production as rail woes persist

By Nelson Banya

(Reuters) -South Africa’s Kumba Iron Ore, a unit of global mining giant Anglo American Plc, on Friday said it was cutting production over the next three years to align output to constrained capacity to transport minerals via rail to port.

Transnet, South Africa’s state-owned freight rail and port operator, is struggling to haul minerals and other commodities to export markets due to locomotive shortages, cable theft and vandalism of its infrastructure. This has cost exporters billions of rand in potential revenue.

Kumba, whose iron ore stockpiles had grown to 9 million tons by September due to the rail bottlenecks, said it expects to end 2023 with production of between 35-36 million tons, from the previous forecast between 35–37 million tons.

Kumba has also lowered its production outlook for the next three years to 35–37 million tons per year, from previous targets of 37–39 million tons in 2024 and 39–41 million

tons in 2025, it said in a production update.

“There is no escaping the fact that ongoing logistics constraints have continued to place significant pressure on our value chain, resulting in stock levels at the mines increasing to unsustainable levels. We have therefore slowed down production,” Kumba CEO Mpumi Zikhalala said.

The persistent logistics problems have resulted in a 15% decrease in iron ore railed to port since 2019, Kumba said.

Anglo American CEO Duncan Wanblad told an investor call on Friday that the group had decided to slow down production at Kumba and move stockpiles until Transnet’s logistics problems were resolved.

“As soon as we get the transport capacity, we would be able to ramp the production back up,” Wanblad said.

The global mining giant was preparing to freeze spending on growth and widen job cuts in South Africa, including mothballing some higher-cost platinum mines, sources familiar with the matter told Reuters on Thursday.

At Kumba, the restructuring had already seen a 30% reduction in head office staff in September, Zikhalala said during an investor call. The company was also reviewing its use of contractors, she added.

On Friday, Anglo American said it aims to cut capital expenditure by $1.8 billion by 2026, as it grapples with a fall in demand for most of the metals it mines and a huge writedown for its British fertiliser project.

Kumba is targeting up to 3 billion rand ($159 million) in 2023 cost savings, having reduced its capital expenditure the year by about $105 million to between $475 million and $530 million earlier in the year.

($1 = 18.9120 rand)

(Reporting by Nelson Banya; Editing by Elaine Hardcastle and David Evans)