KUMBA Iron Ore posted lower earnings because of a steep fall in iron ore prices in the first six months of the year, but it paid a strong dividend.
The company said on Tuesday that headline earnings for the six months to end-June were 16% lower at R6.5bn, with a 17% fall in the price of export iron ore the main contributor to the decline.
Kumba, a JSE-listed subsidiary of Anglo American, mined more tonnes at its mines, which raised costs, putting pressure on profits.
Kumba declared a R15.61 per share dividend, which represented an increase in dividend cover from 1.2 to 1.3 times.
"The strong supply of iron ore, particularly from Australia, has resulted in pressure on iron prices since the beginning of 2014," Kumba said.
Average iron ore prices fell 19% to $111 a tonne in the first half of the year.
"Iron ore prices are expected to remain at current levels in the third quarter of the year, though restocking by steel mills and a slowdown in Chinese domestic iron ore production in their winter is expected to support prices towards the end of the year," Kumba said.
Kumba, which produces lumpy iron ore, expects the premium paid for the product to increase, nearing the cost of producing sintered iron ore feedstock from fine ore. The ratio of lumpy to fine ore production at Kumba increased to 66:34 from 61:39 in 2013.
Kumba increased sales 2% in the interim period to 22.5-million tonnes, with a 38% increase in local sales to ArcelorMittal South Africa accounting for the overall rise in sales.
Export sales fell slightly to 19.7-million tonnes from 20.1-million tonnes a year earlier.
Revenue was flat at R26.4bn compared with R26.3bn a year ago.
Operating expenses were 18% higher at R14.1bn because of an extra 10-million tonnes mined and inflation of 6% as well as above-inflation increases in diesel and mining contractors costs.
Source: bdlive.co.za
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