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KUMBA IRON ORE LIMITED - Reviewed condensed consolidated interim results for the six months ended 30 June 2014 and cash dividend declaration

Release Date: 22/07/2014 08:00
Code(s): KIO     PDF:  
Wrap Text
Reviewed condensed consolidated interim results for the six months ended 30 June 2014 and cash dividend declaration

Kumba Iron Ore Limited 
A member of the Anglo American plc group 
(Incorporated in the Republic of South Africa) 
(Registration number 2005/015852/06) 
JSE Share code: KIO 
ISIN: ZAE000085346

KUMBA IRON ORE LIMITED 
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 
30 JUNE 2014 AND INTERIM CASH DIVIDEND DECLARATION

KEY FEATURES 
- Regrettably we had one fatality at Sishen mine 
- Production of 22.8 Mt, up by 5% from 21.6 Mt in 1H13 
  – Sishen mine’s production up by 5% as recovery plan is executed 
  – Strong performance at Kolomela mine continued 
- Planned increase in waste mined at Sishen mine continues, up by 6% to 86.9 Mt 
- Operating profit decreased by 14% due to lower export iron ore 
  prices and increased costs from mining activities 
- Total sales volumes increased by 2% to 22.5 Mt 
- R5 billion interim cash dividend declared to shareholders

COMMENTARY
Kumba Iron Ore Limited (‘Kumba’ or ‘the group’) announces its results for the six 
months ended 30 June 2014.

The group’s safety performance remains a key priority. Regrettably, one of our 
colleagues tragically lost his life in April 2014 when he fell from a height while 
doing maintenance work on a crane at Sishen mine. The lost-time injury frequency 
rate (LTIFR) was 0.20 (2013: 0.15). The focus on key safety improvement drivers 
remains in place with continued emphasis on preventing any loss of life or injury 
through the implementation of critical engineering controls and greater operational 
discipline.  

Kumba delivered a solid operational performance for the half year, with total 
tonnes mined up by 7% to 154.2 million tonnes (Mt) (2013: 144.0 Mt) as the 
production recovery plan at Sishen mine is executed and the strong performance at 
Kolomela mine continued. Total sales volumes increased by 2% to 22.5 Mt 
(2013: 22.1 Mt).

Sishen Iron ore Company (Pty) Limited (SIOC) has submitted its application for the 
21.4% undivided mining right at Sishen mine. In terms of the Constitutional Court 
ruling, SIOC is the only party that could apply for, and be granted, the right. 
SIOC is engaging with the Department of Mineral Resources (DMR) to finalise the 
granting of the right.

The first half of 2014 saw a stable labour environment. Wage negotiations, which 
commenced in June 2014, are progressing and are expected to be concluded soon.

Headline earnings were 16% lower at R6.5 billion (2013: R7.7 billion), mainly as a 
result of realised iron ore export prices, which weakened by 17%, together with 
input cost pressure during the period under review, partially offset by the 
favourable impact of a 16% depreciation of the Rand.

Attributable and headline earnings for the period were R20.30 and R20.28 per share 
respectively, on which an interim cash dividend of R15.61 per share has been 
declared at 1.3 times cover. In line with the board’s policy of reviewing the 
dividend at each declaration, the board increased the dividend cover from 1.2 to 
1.3 for the 2014 interim dividend, after considering, amongst other factors, iron 
ore price volatility and the group’s capital expenditure requirements.

Market overview
Global crude steel production increased by 4% to 819 Mt for the first half of 2014 
(2013: 791 Mt), with China’s record production of 409 Mt being 5% higher 
(2013: 389 Mt). In a seasonal pattern, Chinese steel mills drew down iron ore 
inventory levels in early 2014, reducing iron ore demand. Global seaborne iron ore 
supply has grown strongly and increased to around 700 Mt, driven by strong export 
growth of 25% from Australia, with a further 8% growth from Brazil. Chinese imports 
of iron ore grew strongly and displaced some of the high cost domestic material.

The strong supply of iron ore, particularly from Australia, resulted in pressure on 
iron prices since the beginning of 2014. Average iron ore prices in the first half 
of 2014 were down by 19% at $111/tonne (2013: $137/tonne). Iron ore index 
(CFR China 62% Fe) prices steadily declined from $134/tonne at the beginning of the 
year, with the index ending the first half of 2014 at $93/tonne.

Operational performance
Production summary (unaudited)
                                     Six months ended
’000 tonnes                     June 2014            June 2013          % change
Product type                       22,793               21,613                 5
Lump                               14,967               13,057                15
Fines                               7,826                8,556                (9)

Mine production                    22,793               21,613                 5
Sishen mine                        16,995               16,114                 5
  DMS plant                        10,983               10,717                 2
  Jig plant                         6,012                5,397                11
Kolomela mine                       5,461                5,264                 4
Thabazimbi mine                       337                  235                43

Sishen mine
Sishen’s pit continued to be mined according to the production recovery plan during 
the six months. The strategic redesign of the western pushbacks of the pit at 
Sishen mine was completed in the first half of 2014. Execution of the pit redesign 
plan is in progress, resulting in an improved mining plan that enables better 
utilisation of equipment, and the deployment of two priority pushbacks, with 
~600 Mt of waste taken out from the revised life of mine plan, reducing the average 
life of mine stripping ratio to 4.0.

Key initiatives of the improved mining plan to achieve 37 Mt production in 2016 
include:
- a focus on productivity through improved scheduling of work by implementation of 
  the Business Process Framework;
- the Dingleton project;
- construction of two new waste dumps; and
- the five-year fleet plan and associated infrastructure.

The Dingleton project to facilitate the expansion of Sishen to the west has 
commenced, and construction of the houses, businesses, churches and schools is 
underway.

Total tonnes mined at Sishen increased by 5% to 107.2 Mt (2013: 102.5 Mt). Total 
waste mined was 86.9 Mt (2013: 82.1 Mt), an increase of 6%, as internal waste 
mining to expose sufficient ore to achieve 35 Mt production in 2014 was ahead of 
schedule. Waste pre-stripping to achieve future production was impacted by 
excessive rainfall during the period. There has been a 50% improvement in the 
performance of the mining fleet to June 2014, as well an increase in floor stock.
Waste mining plans for the second half of the year were completed and are being 
executed, which includes further ramp-up and fleet efficiency improvements.

Total iron ore production at Sishen mine increased by 5% to 17 Mt (2013: 16.1 Mt) 
in line with the mining plan to ramp up production to 37 Mt by 2016.

Kolomela mine
Kolomela mine continued to perform strongly. Total tonnes mined at Kolomela mine 
rose by 11% to 31.3 Mt (2013: 28.2 Mt), of which waste mined was 24.4 Mt 
(2013: 21.7 Mt), an increase of 12%. The mine produced 5.5 Mt of iron ore, an 
increase of 4%. A reclaimer breakdown at the mine in the first quarter of the year 
resulted in increased stock at the mine to 1.2 Mt at 30 June 2014. Pre-stripping of 
the third pit at Kolomela is in progress to maintain flexibility. The group aims to 
increase current production through de-bottlenecking and optimisation of the plant.

Thabazimbi mine
A major reconfiguration is planned for Thabazimbi to capture low grade 
opportunities and increase production to 2 million tonnes per annum (Mtpa).

The project study for the reconfiguration is progressing through the feasibility 
phase. Waste mining at Thabazimbi mine increased by 18% to 15.4 Mt (2013: 13.0 Mt) 
as the mine progresses to its next phase. Production at Thabazimbi mine increased 
to 0.3 Mt for the six months (2013: 0.2 Mt). The mine is expected to produce ~1 Mt 
in 2014.

Logistics
Volumes railed on the Sishen-Saldanha Iron Ore Export Channel (IOEC) were 
5% lower at 19.7 Mt (including 0.7 Mt railed to Saldanha Steel) (2013: 20.7 Mt). 
Volumes railed from Kolomela mine were 4.5 Mt for the six months (2013: 5.5 Mt) and 
were impacted by the breakdown of a reclaimer referred to above. Kumba shipped 
19.3 Mt from the Saldanha port destined for the export market, down 4%.

Sales summary (unaudited)
                                     Six months ended
’000 tonnes                     June 2014            June 2013         % change 
Sales volumes                      22,499               22,137                2
Export sales                       19,710               20,123               (2)
Domestic sales                      2,789                2,014               38
  Sishen mine                       2,484                1,710               45
  Thabazimbi mine                     305                  303                1

Sales
Total sales for Kumba for the half year were 2% higher at 22.5 Mt (2013: 22.1 Mt), 
mainly as a result of a 38% increase in domestic sales volumes made in terms of the 
new supply agreement with ArcelorMittal South Africa Limited (ArcelorMittal 
S.A.). Export sales volumes were marginally down at 19.7 Mt (1H2013: 20.1 Mt). CFR 
sales accounted for 62% of export sales volumes (2013: 63%). Finished product 
inventory held at the mines and ports increased to 3.6 Mt from 2.9 Mt as at 
31 December 2013 (1H2013: 3.6 Mt).

66% of total export volumes were directed to China compared to 67% during the first 
half of 2013. The group’s lump:fine ratio was 66:34 for the period (2013: 61:39). 
Small variations from one period to another may be expected as a result of changes 
in stock levels of individual products.

FINANCIAL RESULTS

Revenue
The group’s total revenue of R26.4 billion for the period was marginally higher 
than the R26.3 billion for the comparable period in 2013, mainly as a result of the 
16% decline in the Rand/US$ exchange rate (1H2014: R10.68/US$1 compared to 1H2013: 
R9.19/US$1), 2% higher total sales volumes and R556 million higher shipping 
revenue, largely offset by 17% lower average realised export iron ore prices (2014: 
US$104/tonne; 2013: US$125/tonne).

Operating expenses
Operating expenses rose by 18% to R14.1 billion from R12 billion in the first half 
of 2013; principally as a result of:
- 10.2 Mt growth in total mining volumes;
- inflationary pressure on input costs from CPI of 6.2%;
- above-inflationary input cost increases in diesel, mining contractor rate, 
  blasting material and tyre prices; and
- R541 million higher freight costs offset by 5% lower selling and distribution 
  costs.

Unit cash costs at Sishen mine remained flat at R266 per tonne (FY2013: R267 per 
tonne). This is primarily as a result of input cost pressures (+R12/tonne) and 
higher mining volumes (+R15/tonne) being largely offset by higher production 
volumes (-R26/tonne). 

Kolomela mine incurred unit cash costs of R211 per tonne (FY2013: R182 per tonne),
a 16% increase. The increase was due to input cost pressures (+R8/tonne), and 
higher mining volumes (+R7/tonne), marginally offset by improved production volumes 
(-R2/tonne). In addition, drilling cost to ensure optimal placement of waste dumps, 
reclaimer related maintenance and exploration drilling to increase geological 
confidence in resources in the life of mine plan was incurred (+R16/tonne).

Operating profit
Kumba’s operating profit margin for the first half of 2014 decreased by 8% to 47% 
(2013: 55%), 51% from mining activities (2013: 58%). 

Operating profit decreased by 14% to R12.3 billion (2013: R14.3 billion). The 
increase in operating expenses outlined previously has impacted profitability.

Cash flow
The group continued to generate substantial cash from its operations, with 
R15.3 billion generated during the six months. These cash flows were used to pay 
taxation of R2.4 billion, royalties of R0.9 billion and aggregate dividends of 
R8.5 billion during the six months. The group’s working capital position remains 
healthy, ensuring sufficient reserves to cover short-term positions.

At 30 June 2014 the group had a net debt position of R687 million 
(2013: R2.3 billion net cash).

Capital expenditure
Capital expenditure of R3.3 billion was incurred: R2.8 billion on stay-in-business 
(SIB) activities (including deferred stripping), and R643 million on expansion 
projects. The group expects total capital expenditure for 2014 to be in the range 
of R7.5 billion to R8.2 billion. Capital expenditure in 2015 and 2016 will include 
the results of the finalisation of the Sishen fleet plan for the next 5 years, as 
well as the construction activities related to the Dingleton project, which is 
expected to cost an estimated R4.2 billion over a four to six year period. The 
level of sustainable SIB capex in future, is expected to average around 
R1.7 billion per annum through the cycle. This excludes once-off capital items, 
namely the ramp up in the mining fleet at Sishen and related infrastructure, which 
relates to the growth of the mine.

Ore reserves and mineral resources
There have been no material changes to the ore reserves and mineral resources as 
disclosed in the 2013 Kumba Integrated Report.

Growth
The group remains focused on delivering on its growth strategy, targeting an 
additional ~5 Mt in South Africa over the next three to five years, through 
incremental growth at Sishen and Kolomela. The projects in support of the growth 
target are in various stages of study and subject to internal approval. The project 
pipeline remains dependent on available rail line capacity, among other factors, 
and Kumba continues to work together with Transnet to determine an optimum solution 
for incremental expansion of the IOEC.

The exploration programme in Liberia under the joint venture with Jonah Capital was 
completed. The programme was found not to be economic and therefore closed. The 
group’s long-term growth strategy remains unchanged with the focused assessment of 
various opportunities in target countries in Central and West Africa continuing.

Outlook
In China, recent data are consistent with a recovery in economic growth – which 
should hold at around 7% to 7.5% over the next 18 months – following the 
authorities’ targeted stimulus measures in the spring. China’s housing market and 
the financial system remain fragile and there are concerns around the impact of the 
government’s high-profile anti-corruption campaign.

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. Lump premiums are expected to increase to approach the marginal cost of 
sintering in the second half of the year.

The production outlook for Sishen mine in 2014 remains at around 35 Mt. The Sishen 
pit, however, remains constrained, therefore the planned waste ramp up is 
continuing as part of the strategy to improve mining flexibility over the longer 
term. It is expected that waste tonnages will reach ~220 Mt for the year as a 
whole.

At Kolomela mine, 2014 output remains at approximately 10 Mt in line with the 
mine’s production design capacity, with waste mined at approximately 40 to 50 Mt.

Export sales volumes for the year are expected to be in line with 2013 levels. 
Domestic sales volumes are anticipated to be 6.25 Mt for the year in line with the 
supply agreement with ArcelorMittal S.A.

It remains the group’s intent to continue to pay excess cash to its shareholders, 
after considering growth and investment opportunities, while remaining within its 
committed debt facilities.

Profitability remains sensitive to iron ore export prices and the Rand/US$ exchange 
rate.

Appointment of Company Secretary
The board of Kumba announced the appointment of Ms Avanthi Parboosing as company 
secretary with effect from 28 July 2014. She will be replacing Mr Kevin Lester, 
Head of Legal Anglo American South Africa, who has been acting as company secretary 
on a temporary basis from 1 March 2014. The board expresses gratitude to Mr Lester 
for his contribution to the Company during this time.

The presentation in support of the company’s results for the six months ended 
30 June 2014 will be available on the company’s website www.angloamericankumba.com 
at 08h30 CAT and the webcast will be available from 11h30 CAT on 22 July 2014.

SALIENT FEATURES AND OPERATING STATISTICS
for the period ended
                                       Unaudited      Unaudited          Unaudited
                                        6 months       6 months          12 months
                              Note  30 June 2014   30 June 2013   31 December 2013
                              
Share statistics (‘000)          6
Total shares in issue                    322,086        322,086            322,086
Weighted average number 
of shares                                320,745        321,150            321,187
Diluted weighted average 
number of shares                         321,378        321,745            321,596
Treasury shares                            1,275            875              1,445
Treasury shares (Rand million)               590            409                665

Market information
Closing share price (Rand)                   339            461                443
Market capitalisation 
(Rand million)                           109,187        148,353            142,829
Market capitalisation 
(US$ million)                             10,264         14,910             13,655
Net asset value 
(Rand per share)                           65.65          60.42              64.68
Capital expenditure 
(Rand million)
Incurred                         5         3,281          2,322              6,453
Contracted                                 2,901          2,318                600
Authorised but not contracted              3,434          1,551              4,943
Finance lease commitments                    268            339                300
Operating commitments
Operating lease commitments                   25             60                 27
Shipping services                         11,316          9,228             12,222
Economic information
Average Rand/US Dollar 
exchange rate (ZAR/US$)                    10.68           9.19               9.62
Closing Rand/US Dollar 
exchange rate (ZAR/US$)                    10.64           9.95              10.46
Sishen mine FOR unit cost
Unit cost (Rand per tonne)                 319.7          287.8              325.3
Cash cost (Rand per tonne)                 266.5          238.9              266.9
Unit cost (US$ per tonne)                   29.9           31.3               33.8
Cash cost (US$ per tonne)                   25.0           26.0               27.7
Kolomela mine FOR unit cost
Unit cost (Rand per tonne)                 272.2          229.9              241.0
Cash cost (Rand per tonne)                 211.0          172.5              181.8
Unit cost (US$ per tonne)                   25.5           25.0               25.0
Cash cost (US$ per tonne)                   19.8           18.8               18.9
Thabazimbi mine FOR unit cost
Unit cost (Rand per tonne)               1,368.0
Cash cost (Rand per tonne)                 985.0
Unit cost (US$ per tonne)                  128.1
Cash cost (US$ per tonne)                   92.3

CONDENSED GROUP BALANCE SHEET
as at
Rand million
Note
                                        Reviewed       Reviewed            Audited
Rand million                  Note  30 June 2014   30 June 2013   31 December 2013
Assets
Property, plant and 
Equipment                        5        32,038         26,944             29,922
Biological assets                              5              8                  6
Investments held by 
environmental trust                          781            691                737
Long-term prepayments and 
other receivables                            627            322                605
Deferred tax assets                          850            946                920
Non-current assets                        34,301         28,911             32,190
Inventories                                5,128          4,464              5,171
Trade and other receivables                3,375          3,264              6,124
Current tax asset                              –             87                  –
Cash and cash equivalents                  3,039          2,685              1,053
Current assets                            11,542         10,500             12,348
Total assets                              45,843         39,411             44,538
Equity
Shareholders’ equity             6        21,144         19,460             20,831
Non-controlling interest                   6,421          5,878              6,353
Total equity                              27,565         25,338             27,184
Liabilities
Interest-bearing borrowings      7         2,000            262              2,234
Provisions                       4         1,861          1,741              1,809
Deferred tax liabilities                   8,768          7,480              7,888
Non-current liabilities                   12,629          9,483             11,931
Short-term portion of 
interest-bearing borrowings      7         1,726             96                615
Short-term portion of 
Provisions                                   296             30                355
Trade and other payables                   2,826          3,675              3,888
Current tax liabilities                      801            789                565
Current liabilities                        5,649          4,590              5,423
Total liabilities                         18,278         14,073             17,354
Total equity and liabilities              45,843         39,411             44,538

CONDENSED GROUP INCOME STATEMENT
for the period ended
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                 Note   30 June 2014   30 June 2013   31 December 2013
Revenue                                   26,429         26,299             54,461
Operating expenses              8        (14,124)       (11,960)           (26,076)
Operating profit                          12,305         14,339             28,385
Finance income                                35             30                117
Finance costs                               (181)          (168)              (396)
Loss from equity accounted 
joint venture                                 (2)           (34)               (46)
Profit before taxation                    12,157         14,167             28,060
Taxation                                  (3,584)        (4,002)            (7,760)
Profit for the period                      8,573         10,165             20,300
Attributable to:
Owners of Kumba                            6,511          7,759             15,446
Non-controlling interest                   2,062          2,406              4,854
                                           8,573         10,165             20,300
Earnings per share for profit 
attributable to the owners 
of Kumba (Rand per share)
Basic                                      20.30          24.16               48.09
Diluted                                    20.26          24.12               48.03

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the period ended
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                 Note   30 June 2014   30 June 2013   31 December 2013
Profit for the period                      8,573         10,165             20,300
Other comprehensive income 
for the period, net of tax                    46            350                570
  Exchange differences on 
  translation of foreign 
  operations                                  46            351                570
  Net effect of cash 
  flow hedges                                  –             (1)                  –
Total comprehensive income 
for the period                             8,619         10,515              20,870
Attributable to:
Owners of Kumba                            6,547          8,038              15,917
Non-controlling interest                   2,072          2,477               4,953
                                           8,619         10,515              20,870

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the period ended
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                 Note   30 June 2014   30 June 2013   31 December 2013
Total equity at the 
beginning of the period                   27,184         19,664             19,664
Changes in share capital 
and premium                     6       
Shares issued during the 
period                                         –              1                  2
Treasury shares issued to 
employees under employee 
share incentive schemes                       74             79                 87
Purchase of treasury shares                    –              –               (265)
Changes in reserves
Equity-settled share-based 
Payment                                      228            234                504
Vesting of shares under 
employee share incentive 
schemes                                      (74)           (83)               (91)
Total comprehensive 
income for the period                      6,547          8,038             15,917
Dividends paid                            (6,462)        (4,047)           (10,561)
Changes in non-controlling 
interest
Total comprehensive income 
for the period                             2,072          2,477              4,953
Dividends paid                            (2,050)        (1,079)            (3,146)
Movement in non-controlling 
interest in reserves                          46             54                120
Total equity at the end 
of the period                             27,565         25,338             27,184
Comprising
Share capital and premium 
(net of treasury shares)       6            (223)           (41)              (297)
Equity-settled share-based 
payment reserve                            1,398            971              1,236
Foreign currency translation 
reserve                                    1,047            842              1,010
Cash flow hedge reserve                        8            (15)                 8
Retained earnings                         18,914         17,703             18,874
Shareholders’ equity                      21,144         19,460             20,831
  Attributable to the 
  owners of Kumba                         20,281         18,670             19,977
Attributable to the 
non-controlling interest                     863            790                854
Non-controlling interest                   6,421          5,878              6,353
Total equity                              27,565         25,338             27,184
Dividend (Rand per share) 
Interim *                                  15.61          20.10              20.10
Final                                                                        19.94
* The interim dividend was declared after 30 June 2014 and has not been recognised 
as a liability in this interim financial report. It will be recognised in 
shareholders’ equity in the year ending 31 December 2014.

CONDENSED GROUP CASH FLOW STATEMENT
for the period ended
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                 Note   30 June 2014   30 June 2013   31 December 2013
Cash generated from 
Operations                                15,340         17,092             29,354
Net finance costs paid                       (70)           (80)              (161)
Taxation paid                             (2,382)        (2,756)            (6,171)
Cash flows from operating 
activities                                12,888         14,256             23,022
Additions to property, plant 
and equipment                   5         (3,281)        (2,322)            (6,453)
Investments in other 
financial assets                              (2)             –                (17)
Proceeds from the disposal of 
property, plant and equipment                 30             17                 37
Proceeds from disposal of 
investments                                    –              –                  5
Cash flows from investing 
activities                                (3,253)        (2,305)            (6,428)
Shares issued                  6               –              1                  2
Purchase of treasury shares    6               –              –               (265)
Dividends paid to owners 
of Kumba                                  (6,422)        (4,047)           (10,500)
Dividends paid to 
non-controlling shareholders              (2,090)        (1,079)            (3,207)
Net interest-bearing 
borrowings raised/(repaid)     7             877         (5,831)            (3,332)
Cash flows from financing 
activities                                (7,635)       (10,956)           (17,302)
Net increase/(decrease) 
in cash and cash equivalents               2,000            995               (708)
Cash and cash equivalents 
at beginning of period                     1,053          1,527               1,527
Exchange differences on 
translation of cash and 
cash equivalents                             (14)           163                 234
Cash and cash equivalents 
at end of period                           3,039          2,685               1,053

HEADLINE EARNINGS
for the period ended
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                        30 June 2014   30 June 2013   31 December 2013
Reconciliation of 
headline earnings
Profit attributable to 
owners of Kumba                            6,511          7,759              15,446
Net profit on disposal and 
scrapping of property, plant 
and equipment                                 (3)           (13)                (2)
Net profit on disposal of 
investment                                     –             (5)                (5)
                                           6,508          7,741             15,439
Taxation effect of adjustments                 1              4                  3
Non-controlling interest 
in adjustments                               (4)              3                  1
Headline earnings                         6,505           7,748             15,443
Headline earnings (Rand per share)
Basic                                     20.28           24.13              48.08
Diluted                                   20.24           24.08              48.02

The calculation of basic and 
diluted earnings and headline 
earnings per share is based on 
the weighted average number of 
ordinary shares in issue as 
follows:
Weighted average number 
of ordinary shares                  320,745,287     321,149,798        321,186,591
Diluted weighted average 
number of ordinary shares           321,377,681     321,745,418        321,595,563

The adjustment of 632,394 at 30 June 2014 ( 30 June 2013: 595,620) shares to the 
weighted average number of ordinary shares is as a result of the vesting of share 
options previously granted under the various employee share incentive schemes.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL REPORT
for the six months ended 30 June 2014

1. CORPORATE INFORMATION
Kumba is a limited liability company incorporated and domiciled in South Africa. 
The main business of Kumba, its subsidiaries, joint ventures and associates is the 
exploration, extraction, beneficiation, marketing, sale, and shipping of iron ore. 
The group is listed on the JSE Limited (JSE).

The condensed consolidated financial report of Kumba and its subsidiaries for the 
six months ended 30 June 2014 was authorised for issue in accordance with a 
resolution of the directors on 18 July 2014.

2. BASIS OF PREPARATION
The condensed consolidated interim financial statements has been prepared, under 
the supervision of FT Kotzee CA(SA), chief financial officer, and in accordance 
with International Financial Reporting Standard, (IAS) 34 Interim Financial 
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting 
Practices Committee, Financial Pronouncements as issued by Financial Reporting 
Standards Council, and the requirements of the South African Companies Act No 71 
of 2008.

The condensed consolidated interim financial report has been prepared in accordance 
with the historical cost convention except for certain financial instruments, 
share-based payments and biological assets which are stated at fair value, and is 
presented in Rand, which is Kumba’s functional and presentation currency.

3. ACCOUNTING POLICIES
The accounting policies and methods of computation applied in the preparation of 
these interim financial statements are in terms of International Financial 
Reporting Standards and are consistent with those accounting policies applied in 
the preparation of the previous consolidated annual financial statements.

No new standards, amendments to published standards or interpretations which became 
effective for the year commencing on 1 January 2014 had an effect on the reported 
results or the group accounting policies. 

The group did not early adopt any new, revised or amended accounting standards or 
interpretations. The accounting standards, amendments to issued accounting 
standards and interpretations, which are relevant to the group but not yet 
effective at 30 June 2014, are being evaluated for the impact of these 
pronouncements.

4. CHANGE IN ESTIMATES
The life of mine plan on which accounting estimates are based, only includes proved 
and probable ore reserves as disclosed in Kumba’s 2013 annual ore reserves and 
mineral resources statement.

Management has revised the estimated rehabilitation and decommissioning provisions 
for the three mines. Management has also revised the Sishen and Thabazimbi life of 
mine used to calculate the mines’ provisions. This resulted in a decrease of the 
provisions, offset by the notional interest raised for the period.

The effect of this change is detailed below:  
Rand million                                                             Reviewed
                                                                     30 June 2014
Increase in environmental rehabilitation provision                            (13)
Decrease in decommissioning provision                                          (3)

The change in estimate in the environmental rehabilitation provision was applied 
prospectively from 1 January 2014 and resulted in a increase in attributable profit 
and basic, diluted and headline earnings per share for the period ended 
30 June 2014 of R13 million and 3 cents, respectively. The change in estimate in 
the decommissioning provision has been capitalised to the related property, plant 
and equipment.

The revised Sishen and Thabazimbi life of mine plans extended the useful lives of 
certain classes of fixed assets. The change was applied prospectively from the date 
on which the revised life of mine plans were approved.

5. PROPERTY, PLANT AND EQUIPMENT
                                        Reviewed       Reviewed            Audited  
Rand million                        30 June 2014   30 June 2013   31 December 2013
Capital expenditure                        3,281          2,322              6,453
  Expansion                                  438            451              1,132
  Stay in business (SIB)                   2,200          1,465              4,498
  Deferred stripping                         643            406                823

Transfers from assets under 
construction to property, 
plant and equipment                         893           2,074              5,864

Expansion capital expenditure comprised of the expenditure on the Dingleton 
project and the upgrade of the group’s financial systems. SIB capital expenditure 
to maintain operations was principally for the acquisition of heavy mining 
equipment, infrastructure and housing developments.

6. SHARE CAPITAL AND SHARE PREMIUM
Reconciliation of share capital and share premium (net of treasury shares):
                                        Reviewed       Reviewed            Audited  
Rand million                        30 June 2014   30 June 2013   31 December 2013
Balance at beginning of period              (297)          (121)              (121)
Total shares issued for cash 
consideration                                  –              1                  2
  Shares issued – share premium                –              –                  2
  Net movement in shares held by 
  Kumba Iron Ore Management 
  Share Trust                                  –              1                  –
Net movement in treasury shares 
under employee share 
incentive schemes                             74             79               (178)
  Purchase of treasury shares                  –              –               (265)
  Shares issued to employees                  74             79                 87
Share capital and share premium             (223)           (41)              (297)

Reconciliation of number of shares in issue:
                                        Reviewed       Reviewed            Audited
Number of shares                    30 June 2014   30 June 2013   31 December 2013
Balance at beginning of period       322,085,974    322,058,624        322,058,624
Ordinary shares issued                         –         27,350             27,350
Balance at end of period             322,085,974    322,085,974        322,085,974

Reconciliation of treasury 
shares held:
Balance at beginning of period         1,444,526      1,064,531          1,064,531
Shares purchased                               -          8,573            660,923
Shares issued to employees under 
the Long-Term Incentive Plan, 
Kumba Bonus Share Plan and 
Share Appreciation Rights Scheme        (169,202)      (207,494)          (251,570)
Net movement in shares held by 
Kumba Iron Ore Management 
Share Trust                                    -          9,870            (29,358)
Balance at end of period               1,275,324        875,480          1,444,526

All treasury shares are held as conditional awards under the Kumba Bonus Share Plan 
(30 June 2013: 836,252 shares).

7. INTEREST-BEARING BORROWINGS
Kumba’s net debt/(cash) position at the balance sheet dates was as follows:
                                        Reviewed       Reviewed            Audited
                                        6 months       6 months          12 months
Rand million                        30 June 2014   30 June 2013   31 December 2013
Interest-bearing borrowings                3,726            358              2,849
Cash and cash equivalents                 (3,039)        (2,685)            (1,053)
Net debt/(cash)                              687         (2,327)             1,796
Total equity                              27,565         25,338             27,184
Interest cover (times)                        90            108                102

Movements in interest-bearing borrowings are analysed as follows:
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                        30 June 2014   30 June 2013   31 December 2013
Balance at the beginning 
of the period                              2,849          5,869              5,869
Interest-bearing borrowings 
raised                                     9,969          8,290              2,000
Interest-bearing borrowings 
Repaid                                    (9,068)       (14,121)            (5,332)
Finance lease (repaid)/raised                (24)           320                312
Balance at the end of the period           3,726            358              2,849

At 30 June 2014, R2.0 billion of the R10.9 billion long-term debt facility had been 
drawn down and R1.5 billion of the total short-term uncommitted facilities of 
R9.1 billion had been drawn down. Kumba was not in breach of any of its financial 
covenants during the period. The group had undrawn long-term borrowings and 
uncommitted short-term facilities of R16.5 billion (June 2013: R15 billion).

8. SIGNIFICANT ITEMS INCLUDED IN OPERATING PROFIT
Operating expenses is made up as follows:
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                        30 June 2014   30 June 2013   31 December 2013
Production costs                           8,396          6,914             15,411
Movement in inventories                      479            153                257
Finished products                            336            497              1,141
Work-in-progress                             143           (344)              (884)
Cost of goods sold                         8,875          7,067             15,668
Mineral royalty                              835            904              2,157
Selling and distribution costs             2,208          2,324              4,538
Cost of services rendered – 
shipping                                   2,222          1,681              3,747
Sublease rent received                       (16)           (16)               (34)
Operating expenses                        14,124         11,960             26,076

Operating profit has been derived 
after taking into account the 
following items:
Employee expenses                          1,754          1,454              3,039
Share-based payment expenses                 276            303                635
Depreciation of property, plant 
and equipment                              1,134            918              2,039
Deferred waste stripping costs 
Capitalised                                 (643)          (406)              (823)
Net profit on disposal and 
scrapping of property, plant 
and equipment                                 (3)           (13)                (2)
Net profit on disposal of 
investment                                     –              –                 (5)
Finance gains                               (228)          (562)              (830)

9. RELATED PARTY TRANSACTIONS
During the period, Kumba, in the ordinary course of business, entered into various 
sale, purchase and service transactions with associates, joint ventures, fellow 
subsidiaries, its holding company and Exxaro Resources Limited. These transactions 
were subject to terms that are no less favourable than those offered by third 
parties.

                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                        30 June 2014   30 June 2013   31 December 2013
Interest earned on short-term 
deposits 1 with Anglo American 
SA Finance Limited 2 (AASAF) 
during the period                             27             20                 96
Weighted average interest rate              5.37%          4.94%              4.96%
Short-term deposit held with 
Anglo American Capital plc 2               2,447          2,200                572
Interest earned on facility 
during the period                              *              *                  *
Interest-bearing borrowing 
from AASAF                                 1,469             49                568
Interest paid on borrowings 
during the period                              5             77                204
Weighted average interest rate              6.34%          6.51%              6.63%
Trade payable owing to Anglo 
American Marketing Limited 2 (AAML)          242             88                356
Shipping services provided by AAML         2,277          1,779              4,058
Dividends paid to Exxaro Resources 
Limited                                    1,736            914              1,750
1) There were no short-term deposits placed with AASAF on the reporting dates for 
   all periods presented.
2) Subsidiaries of the ultimate holding company.
* Interest earned on the deposit is insignificant and is earned at prevailing 
market rates.

10. SEGMENTAL REPORTING
The total reported segment revenue is measured in a manner consistent with that 
disclosed in the income statement. The performance of the operating segments are 
assessed based on a measure of earnings before interest and taxation (EBIT), which 
is measured in a manner consistent with ‘Operating profit’ in the financial 
statements. Finance income and finance costs are not allocated to segments, as 
treasury activity is managed on a central group basis.

Total segment assets comprise finished goods inventory only, which is allocated 
based on the operations of the segment and the physical location of the assets.
‘Other segments’ comprise corporate, administration and other expenditure not 
allocated to the reported segments.

                                  Products 1              Services
                                      Thaba-            Shipping     
                     Sishen Kolomela   zimbi   Logis-     opera-    
Rand million           mine     mine    mine     tics      tions   Other     Total 
Reviewed six 
months ended
30 June 2014
Income statement
Revenue from 
external customers   18,744    4,790     777        –      2,118       –    26,429
EBIT 2               12,237    3,080     (77)  (2,208)      (104)   (623)   12,305
Significant items 
included in EBIT:
Depreciation            813      303       3        3          –      12      1,134
Staff costs           1,175      274     200       13          –     368      2,030
Balance sheet
Total segment 
assets                  183      214     130      422          –     226      1,175
Cash flow statement
Additions to 
property, plant and 
equipment
  Expansion capex 3     261       62       –        –          –     115        438
  Stay-in-business 
  capex 4             1,798      372       –        1          –      29      2,200
  Deferred stripping    335       92     216        –          –       –        643

                                  Products 1              Services
                                      Thaba-            Shipping     
                     Sishen Kolomela   zimbi   Logis-     opera-    
Rand million           mine     mine    mine     tics      tions   Other     Total 
Reviewed six 
months ended
30 June 2013
Income statement
Revenue from 
external customers   18,124    6,091     522        –      1,562       –     26,299
EBIT                 13,598    4,493      82   (2,324)      (119)      –     15,730
Significant items 
included in EBIT:
Depreciation            631      273       1        2          –      11        918
Staff costs             996      226     174        –          3     358      1,757
Balance sheet
Total segment 
assets                  135       80     106      574          –     216      1,111
Cash flow statement
Additions to property, 
plant and equipment
Expansion capex 3        54      208       –      106          –      83        451
Stay-in-business 
capex                 1,375       66       –        –          –      24      1,465
Deferred stripping      323       83       –        –          –       –        406
Audited year ended
31 December 2013
Income statement
Revenue from 
external customers   36,685   13,022   1,079        –      3,675       –     54,461
EBIT                 24,888    9,296     301   (4,538)       (72) (1,490)    28,835
Significant items 
included in EBIT:
Depreciation          1,441      570       1        5          –      22      2,039
Staff costs           2,121      482     364       20          5     682      3,674
Balance sheet
Total segment 
assets                  177       66      75        –        398     478      1,194
Cash flow statement
Additions to property, 
plant and equipment
Expansion capex 3       484      285       8      108          –     247      1,132
Stay-in-business 
capex                 3,933      564       1        –          –       –      4,498
Deferred stripping      637      186       –        –          –       –        823

1) Derived from extraction, production and selling of iron ore.
2) 0.7Mt of Sishen ore sold to ArcelorMittal S.A. was priced at a Thabazimbi Floor 
Price (TFP) stipulated in the Supply Agreement. This resulted in R139 million of 
additional revenue for the segment, when compared to the revenue that it would have 
earned on these tonnes if sold at the Sishen price applied to the balance of the 
domestic sales.
3) The capital expenditure allocated to the ‘Other’ segment is in respect of an 
information management systems upgrade rolled out groupwide. This 
expenditure has not been allocated to the various segments.
4) Thabazimbi mine’s stay-in-business and expansion capex is derecognised, as these 
assets are deemed to be leased to ArcelorMittal S.A. based on the terms of the 
Supply Agreement (IFRIC 4 adjustment).

                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                        30 June 2014   30 June 2013   31 December 2013
Reconciliation of 
segments’ assets to 
total inventory:
Segment assets                             1,175          1,111              1,194
WIP inventory, plant 
spares and stores                          3,953          3,353              3,977
Inventory per balance sheet                5,128          4,464              5,171

Geographical analysis of revenue and non-current assets:

Total revenue from external customers
                                        Reviewed       Reviewed            Audited  
                                        6 months       6 months          12 months
Rand million                        30 June 2014   30 June 2013   31 December 2013
South 
Africa                                     2,424          1,641              3,672
China                                     15,485         17,006             35,154
Rest of 
Asia                                       6,046          5,080             10,587
Europe                                     2,359          2,456              4,926
MENA                                         115            116                122
Total revenue from external customers     26,429         26,299             54,461

Non-current assets
All non-current assets, excluding prepayments, investments in associates and joint 
ventures and deferred tax assets, are located in South Africa, with the exception 
of R2 million located in Singapore (June 2013: R2 million).

11. CONTINGENT ASSET
Kumba initiated arbitration proceedings against La Société des Mines de Fer du 
Sénégal Oriental (Miferso) and the State of Senegal under the rules of the 
Arbitration of the International Chamber of Commerce in 2007, in relation to the 
Falémé Project.

Following the arbitration award rendered in July 2010, a mutually agreed settlement 
was concluded between the parties. The settlement agreement was revised in June 
2013. The parties agreed that the precise terms of the settlement agreement will 
remain confidential. The terms of the agreement are continued to be met and the 
amount is no longer material.

12. GUARANTEES
During the period ended 30 June 2014, the group negotiated additional financial 
guarantee facilities of R88 million for the group’s environmental rehabilitation 
and decommissioning obligations to the DMR with Rand Merchant Bank.

The total guarantees issued for environmental closure liabilities at 30 June 2014 
are R2.1 billion (June 2013: R986 million; December 2013: R2.1 billion). Included 
in this amount are financial guarantees for the environmental rehabilitation and 
decommissioning obligations of the group to the DMR in respect of Thabazimbi mine 
of R419 million (2013: R’nil). ArcelorMittal S.A. has guaranteed this full amount 
by means of bank guarantees issued in favour of SIOC.

13. LEGAL PROCEEDINGS
There have been no significant changes to the legal matters reported on for the 
year ended 31 December 2013. SIOC has not yet been awarded the 21.4% Sishen mining 
right, which it applied for following the Constitutional Court judgment on the 
matter in December 2013.

14. OTHER
As at 30 June 2014, the South African tax authorities were in the process of 
reviewing certain of the group’s tax matters. The board believes that these matters 
have been appropriately treated in the results for the period ended 30 June 2014.

15. CORPORATE GOVERNANCE
The group subscribes to the Code of Good Corporate Practices and Conduct and 
complies with the recommendations of the King III Report. Full disclosure of the 
group’s compliance is contained in the 2013 Integrated Report.

16. EVENTS AFTER THE REPORTING PERIOD
No further material events have occurred between the end of the reporting period 
and the date of the release of these reviewed condensed consolidated financial 
statements.

17. INDEPENDENT AUDITORS’ REVIEW REPORT
The auditors, Deloitte & Touche, have issued their unmodified review report on the 
condensed consolidated interim financial report for the six months ended 
30 June 2014. The review was conducted in accordance with ISRE 2410 Review of 
Interim Financial Information Performed by the Independent Auditor of the Entity. 
A copy of their unmodified review report is available for inspection at the 
company’s registered office.

Any reference to future financial performance included in this announcement has not 
been reviewed or reported on by the company’s auditors.

On behalf of the board
F Titi                      NB Mbazima
Chairman                    Chief executive

18 July 2014
Pretoria


NOTICE OF INTERIM CASH DIVIDEND

At its Board meeting on 18 July 2014 the directors approved a gross interim cash 
dividend of 1 561 cents per share on the ordinary shares from profits accrued 
during the period ended 30 June 2014. The dividend has been declared from income 
reserves.

The dividend will be subject to a dividend withholding tax of 15% for all 
shareholders who are not exempt from or do not qualify for a reduced rate of 
withholding tax. The net dividend payable to shareholders subject to withholding 
tax at a rate of 15% amounts to 1 326.85000 cents per share.

The issued share capital at the declaration date is 322,085,974 ordinary shares.
The salient dates are as follows:
-  Date of declaration                                     Tuesday, 22 July 2014
-  Last day for trading to qualify and participate 
   in the interim dividend (and change of address or
   dividend instructions)                                   Friday, 8 August 2014
-  Trading ex-dividend commences                           Monday, 11 August 2014
-  Record date                                             Friday, 15 August 2014
-  Dividend payment date                                   Monday, 18 August 2014

Share certificates may not be dematerialised or rematerialised between Monday, 
11 August 2014 and Friday, 15 August 2014, both days inclusive.

By order of the Board

KN Lester
Acting company secretary

18 July 2014
Pretoria


REGISTERED OFFICE:
Centurion Gate, Building 2B
124 Akkerboom Road
Centurion, Pretoria, 0157
Republic of South Africa
Tel: +27 12 683 7000
Fax: +27 12 683 7009

TRANSFER SECRETARIES:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street
Republic of South Africa
PO Box 61051, Marshalltown, 2107

SPONSOR TO KUMBA:
RAND MERCHANT BANK (a division of FirstRand Bank Limited)

DIRECTORS:
Non-executive – F Titi (chairman), ZBM Bassa, GS Gouws, KT Kweyama, DD Mokgatle, 
AJ Morgan, LM Nyhonyha, AM O’Neill, BP Sonjica
Executive – NB Mbazima (chief executive), FT Kotzee (chief financial officer)

ACTING COMPANY SECRETARY:
KN Lester

COMPANY REGISTRATION NUMBER:
No 2005/015852/06
Incorporated in the Republic of South Africa

INCOME TAX NUMBER:
9586/481/15/3
JSE code: KIO ISIN: ZAE000085346
(‘Kumba’ or ‘the company’ or ‘the group’)

Kumba Iron Ore
Centurion Gate, Building 2B
124 Akkerboom Road
Centurion, Pretoria
Republic of South Africa
0157

www.angloamericankumba.com
A member of the Anglo American plc Group
www.angloamerican.com

22 July 2014
Date: 22/07/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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