South Africa's Kumba Iron Ore calls on private sector to resolve rail crisis

Haul trucks are seen at Kumba Iron Ore, the world's largest iron ore mines in Khathu, Northern Cape province, South Africa
Haul trucks are seen at Kumba Iron Ore, the world's largest iron ore mines in Khathu, Northern Cape province, South Africa, File. REUTERS/Siphiwe Sibeko/File Photo
  • Kumba cuts production outlook for 2023, 2024
  • Profit down 46% in 2022
  • Stockpiles grow as rail service deteriorates
  • Shares fall 3.7%

JOHANNESBURG, Feb 21 (Reuters) - Kumba Iron Ore Ltd (KIOJ.J) on Tuesday cut its production outlook for the next three years due to a lack of freight trains to carry minerals to ports, and joined calls for private-sector involvement in state-owned logistics firm Transnet.

South Africa's freight rail capacity has plummeted as Transnet is hobbled by years of underinvestment, a lack of locomotives, and theft of hundreds of kilometres of copper cable from rail lines, costing coal and iron ore exporters billions of rand in revenue.

Kumba, a unit of Anglo American (AAL.L), warned at the start of the month that its profit would take a hit. Headline earnings per share for 2022 came in lower than expected at 56.19 rand ($3.10), a 46% drop from the previous year.

Kumba's shares were down 4%.

"We believe private sector participation in the port and rail network is critical, this will benefit all stakeholders including government, emerging and established miners," Kumba CEO Mpumi Zikalala said in a presentation to investors.

Kumba is engaging with Transnet and the government to improve the stability and reliability of rail and port infrastructure "as a matter of urgency", the company said.

Miners have been pushing for Transnet to open itself up to private-sector involvement, though the model to be followed remains unclear. Anglo American CEO Duncan Wanblad earlier this month called for a public-private partnership on Transnet.

Kumba now expects to produce between 35 and 37 million tonnes of iron ore in 2023, having last year guided to 39 to 41 million tonnes. For 2024, it sees an output of 37 to 39 million tonnes, down from 41 to 43 million tonnes previously.

The company will have to wait until 2025 to reach production levels it previously expected for 2023.

Production fell by 8% to 37.7 million tonnes in 2022, from 40.9 million tonnes the previous year. Kumba said the amount of ore sent by rail to Saldanha port fell by 9%, and a build-up of stockpiles at its mines limited space for further production.

Overall, sales of iron ore to the export market fell by 9%. Kumba was left with 7.8 million tonnes of iron ore stockpiled at its mines and at the port, up 28% from the previous year, as the lack of trains left commodities stranded.

($1 = 18.1153 rand)

Reporting by Helen Reid; Editing by Kim Coghill, Uttaresh.V and Shounak Dasgupta

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