22/07/14 – Anglo American Says Kumba Iron Ore Hit By Prices And Costs

LONDON (Alliance News) – Anglo American PLC subsidiary Kumba Iron Ore Ltd said Tuesday it will provide the parent company with a lower contribution to underlying earnings, due to lower iron ore prices and higher costs.

The announcement comes ahead of Anglo American’s half-year results release on Friday.

The major iron ore mining subsidiary, which operates in South Africa, will contribute USD409 million to Anglo American for the six months ended June 30, a fall of 29% from USD579 million the previous year.

The subsidiary said its IFRS headline earnings fell 28% to USD606 million from USD840 million as operating profit fell 14% due to lower export iron ore prices and costs from increased mining activities.

Kumba said that despite a production increase of 5% to 22.8 million tonnes from 21.6 million tonnes, a 17% fall in export iron ore prices negatively hit its headline earnings.

The subsidiary said that looking ahead, steel fundamentals will remain under pressure as growth in the Chinese economy slows and its export sales for the full year are likely to be in line with 2013 levels.

The news comes a day after Anglo American Platinum Ltd, the platinum mining subsidiary of Anglo American, said that it will contribute an underlying loss of USD1 million for the six month period, which is adjusted to remove special items and remeasurements, and any related tax and non-controlling interests. In the prior year period, Anglo American Platinum contributed an underlying profit of USD92 million to Anglo American results.

Anglo American Platinum reported IFRS headline earnings of USD14 million, compared to USD140 million a year ago as five months of strike action by South African platinum miners hit operations.

Anglo American also Monday unveiled plans to sell off major platinum mines in South Africa, as part of its ongoing platinum review. It said the decision has been made to exit its Union and Rustenberg mines, along with its Pandora joint venture operation through sales or public market exits. It is also contemplating an exit from its Bokoni joint venture operations.

The new divestment programme could cut staff in South Africa by 20,000, according to The Sunday Times, only a month after a five-month long strike ended in the country.

The move could represent cuts of a fifth of the company’s overall workforce and is a key part of Mark Cutifani’s plans to cut costs and improve the company’s operations since he took over as chief executive last year.

Source – London South East (LSE.co.uk)