UPDATE 1-Anglo unit Kumba says expects key S.Africa mining licence by June

Tue Feb 4, 2014 7:45am EST

By Silvia Antonioli

CAPE TOWN Feb 4 (Reuters) - The chief executive of Kumba Iron Ore, a unit of Anglo American, said he expected South Africa to grant a key mining licence for the company's expansion programme by the end of the first half of the year.

Like other major iron ore miners, Kumba, Anglo's most profitable division, plans to expand output but technical problems are constraining production and it is waiting for a licence important to the expansion of the Sishen mine in the Northern Cape province.

The company said it expected to get the mining rights over logistics group Transnet's rail properties on its expansion site by the first half of this year.

Failure to secure such rights could result in the company not being able to access about 30 percent of Sishen's reserves.

"We have been interacting with (the authorities) about the process and nothing that we have seen so far suggests that there is any problem with getting that right granted," Chief Executive Norman Mbazima told Reuters.

"If we don't get it by the end of the first half ... it could impact production in the longer term. We would have to replan the mine and we haven't done any new plans yet; the geologists are doing it now just in case. We really want to get the rights and I have no doubt that we'll get it."

Large iron ore miners such as Anglo Australian miners BHP Billiton and Rio Tinto have plans to ramp up their production in the next few years to offset declining prices for the steelmaking ingredient.

The Kumba executive said he expected iron ore prices to remain stable in the first half of 2014 and then soften in the second half, as more supply from large producers came on stream.

"In the last two weeks prices have been moderating fairly rapidly but we think they have stabilised now and we expect that stability to continue for the first half of the year," he said.

"After that, I think that the (growing) supply from the majors will start to soften the prices again."

Iron ore was trading at around $122.60 per tonne on Tuesday.

Kumba is aiming to expand its output at the Sishen mine from 31 million tonnes in 2013 to 35 million in 2014 and 37 million by 2016 and for the rest of the mine's life.

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