February 11, 2014 / 12:01 PM / 4 years ago

UPDATE 2-S.Africa's Kumba says efforts pay off to improve labour relations

* FY diluted headline EPS 48.02 rand vs 38.76 year earlier

* Company had flagged to market it expected 46.60-49.00 rand

* Says no significant stoppages in 2013

* To pay total div of 40.04 rand/shr vs year ago 31.7

* Shares down 0.4 percent

By Olivia Kumwenda-Mtambo and Ed Stoddard

JOHANNESBURG, Feb 11 (Reuters) - South Africa’s Kumba Iron Ore On Tuesday hailed the vastly improved labour relations it had achieved since suffering a crippling and violent illegal strike in 2012, setting an example for the country’s turbulent mining sector.

Reporting a 24 percent rise in underlying full-year earnings, Africa’s top iron ore producer highlighted its recovery from the wave of illegal strikes, rooted in a bruising union turf war, which swept South Africa’s mining sector in 2012.

Kumba said it had worked hard to improve the labour environment at its operations, centred in the remote and sparsely populated Northern Cape province.

“In Kumba, 2013 saw improved relations with no significant work stoppages, quite different from 2012 when we had a serious unprotected strike at Sishen mine,” the company said.

“This was achieved by significantly improving communication with our employees and instituting a number of post-strike studies and remedial actions,” it added.

Kumba is a unit of Anglo American and is the biggest contributor to the latter’s profits, making it a stand-out in the global mining group’s troubled portfolio in the southern African region, which includes the world’s top platinum producer Anglo American Platinum (Amplats).

Amplats is still reeling from an almost three-week strike in the platinum sector by the hardline Association of Mineworkers and Construction Union (AMCU), which has poached tens of thousands of members from the once-unrivalled National Union of Mineworkers (NUM) in the labour conflict.

Amplats also faced a number of brief strikes last year as AMCU protested against planned job cuts.

Kumba Chief Executive Norman Mbazima said on a conference call with journalists that in 2012 the company had been caught up “in the contagion of what happened elsewhere”, but had since gone to great pains to explain to the workforce the “advantages of working for Kumba”.


The company struggled to recover from the strike fallout during the first part of the year and the tense labour situation on the ground and Mbazima said in the first quarter of the year “we were working at about 70 percent of our normal operations.”

A share ownership scheme that paid out in late 2011 brought windfalls of close to $70,000 for more than 6,000 workers at Kumba, some of whom at the time were earning only a few hundred dollars a month in basic wages.

That may have provoked resentment from those excluded because of when they joined the company, but it has helped curb the tide of labour militancy.

Mbazima said the NUM represented about 47 percent of its labour force while the Solidarity trade union, comprised mostly of skilled workers and with a reputation for moderation, had 20 percent.

He said AMCU only represented around 5 percent of its workers now and was in the process of securing a recognition agreement with the company but still fell short of the threshold needed for bargaining rights.

This makes for a big contrast with the deep-level gold and platinum mines, where AMCU has made its inroads among a migrant rural labour force that is largely unskilled or semi-skilled.

“We are very mechanised and so the level of skills we need to employ even at the lower levels are significantly higher than in the underground industry. As a result are pay levels are much different and much higher,” Mbazima said.

The company also said earnings had been boosted by higher export prices and a weaker rand.

Diluted headline earnings per share for the year to end-December rose to 48.02 rand from 38.76 a year earlier. The company had flagged to the market that it expected a number between 46.60 rand and 49.00.

Headline EPS, the main measure of profit in South Africa, excludes certain one-time items.

Kumba also said it had been granted a crucial mining right for rail properties needed for the expansion of its key Sishen mine. Mbazima told Reuters last week in Cape Town it was expected by June.

Total production reached 42.4 million tonnes for the year, down 2 percent from the prior year due to output shortfalls at Sishen.

The company, whose shares were little changed, down 0.4 percent by 1017 GMT, said it would pay a final dividend of 19.94 rand per share, bringing the total for the year to 40.04 rand against 31.7 the year before.

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