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KUMBA IRON ORE LIMITED - Audited preliminary summarised annual results for the year ended 31 December 2015

Release Date: 09/02/2016 07:05
Code(s): KIO     PDF:  
Wrap Text
Audited preliminary summarised annual results for the year ended 31 December 2015

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 
AUDITED PRELIMINARY SUMMARISED ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015

Kumba Iron Ore Limited (‘Kumba’ or ‘The Group’) announces its results for the year 
ended 31 December 2015

POSITIONING KUMBA FOR THE FUTURE

Norman Mbazima, chief executive of Kumba notes, “The sharp decline and volatility 
in the iron ore price over the past year, has been a significant factor for Kumba 
and the mining industry in general. We have responded decisively to position our 
business to withstand a longer period of lower iron ore prices. A shift in strategy 
from a volume to a value based strategy led to a reconfiguration of our mines to 
reduce the amount of waste and to save costs. Sishen’s pit was restructured to a 
lower cost shell, production at Kolomela was increased by ramping up low cost 
tonnes and optimising the waste profile, and mining at Thabazimbi was stopped.

In addition, strict capital discipline and significant structural changes to cost 
was achieved through savings on capital expenditure, overheads, study costs and 
headcount reduction. These measures are part of a key objective – to preserve 
cash, reduce debt and ultimately position our business to grow sustainable free 
cash flow and shareholder returns over the long term.”

KEY FEATURES

-  No loss of life in 2015
-  42% drop in average iron ore price to US$56/t severely impacted earnings
-  Total production decreased by 7% to 44.9 Mt 
-  Reorganisation and capital management delivered reduction of R4 billion in 
   controllable cost
-  HEPS 66% lower at R11.82 per share, R6 billion impairment
-  Net debt reduced by 42% to R4.6 billion

Kumba’s full year results reflected the challenging market conditions, with the 
realised FOB iron ore price declining 42% to $53/t largely resulting in a 66% 
decrease in headline earnings to R11.82 per share (2014: R34.32). Basic earnings 
per share were R1.46 (2014: R33.44) due to a significant impairment charge of 
R6 billion relating to Sishen mine as a consequence of the low price environment 
and actions taken to restructure the business. 

Total production declined 7% to 44.9 Mt due to operational challenges at Sishen 
mine.  Kolomela continued to perform well, and record export sales of 43.5 Mt were 
achieved by the company. 

Stringent cost management delivered a R4 billion reduction in controllable costs, 
while capital conservation measures and the suspension of the dividend helped to 
improve the Group’s net debt position to R4.6 billion, down 42%. The Group achieved 
an average cash breakeven price of $49/t for the year as lower realised lump 
premiums and reduced production partially offset cost savings. Towards the end of 
2015 Kumba was operating at a cash breakeven price of $41/t, well below the target 
of $45/t, aided by the weaker local currency and lower freight rates.

SAFETY 
Safety is a key priority for the Group and it is notable that no loss of life was 
reported for the 2015 year. 

It is with deep regret and sadness that we report the death of one of our 
colleagues, Graham Skansi, a drill operator, in an incident at Kolomela mine on 
27 January 2016.

The Group remains committed to zero harm and will continue to put greater emphasis 
on measures that prevent injuries and the loss of life.

Effective critical control monitoring triggered lifesaving responses to ensure that 
no one was harmed during the significant slope failure at Thabazimbi in June 2015. 
The total recordable case frequency rate (TRCFR), a measure of frequency of 
injuries, was 0.89 (2014: 0.87) and the lost-time injury frequency rate (LTIFR) 
remained at 0.23, although less injuries were recorded together with reduced 
severity.

The Group continues to focus on key safety improvement drivers, with the emphasis 
on re-enforcing the awareness of critical controls and greater operational 
discipline. 

ACTIONS TAKEN DURING THE YEAR
During the year the Group took significant steps to protect its balance sheet by 
preserving capital and reducing costs.  A key area of focus was moving from a 
volume to a value based strategy by reconfiguring the mines to reduce the amount of 
waste mined and to save costs in all operational areas.   

As a consequence, the Sishen pit was restructured to a lower cost shell, Kolomela 
increased production incrementally by ramping up low cost tonnes and the waste 
profile was optimised. Mining at Thabazimbi ceased in September 2015 and the mine 
remains on track to cease all operations by Q2 2016.

Despite growth in mining volumes and lower production at Sishen, on-mine cash 
costs reduced by R1.1 billion in 2015.

A second priority was assessing every item of proposed capital expenditure with a 
view to cancelling, reducing the cost or delaying the expenditure. For the year, 
capex was reduced by 20% to R6.8 billion (including deferred stripping).   

Thirdly, the company focused on savings on overheads, study costs and headcount 
rationalisation, delivering savings of R0.9 billion.  

On 28 January 2016, the company commenced a consultation process in terms of 
section 189 of the Labour Relations Act at Sishen. The restructuring of the mine 
will impact approximately 2,633 Kumba employees. Contractors at the mine have 
commenced with their restructuring process and approximately 1,300 contractors will 
be affected. Extensive consultations are being conducted with all stakeholders.

In line with the Group’s cash preservation strategy, the board has decided to 
maintain its suspension of the dividend.  

CONTINGENT LIABILITY
As at 30 June 2015, the Group advised that the South African Revenue Service (SARS) 
were in the process of reviewing certain of the Group’s tax matters. After the half 
year SARS issued the Group with a letter of findings relating to its tax audit 
covering the period 2006 to 2010, indicating potential adjustments to the Group’s 
taxable income for the period of R6.5 billion which would, if the company is 
finally assessed on this basis, result in additional tax of approximately 
R1.8 billion, excluding any potential interest and penalties. As at 31 December 
2015 the Group had responded to the letter of findings, strongly objecting to the 
basis for the proposed adjustments, including representations on why interest and 
penalties, if any, should not be raised. The Group is awaiting SARS’s response. 
These matters have been considered in consultation with external tax and legal 
advisors, who support the Group’s position set out in its objection. Furthermore, 
during 2015 SARS notified the Group of its intention to conduct a field audit 
covering the 2011 to 2013 years of assessment, which is in progress. The Group 
believes that these matters have been appropriately treated in the results for the 
year ended 31 December 2015. 

REGULATORY UPDATE
Sishen Iron Ore Company (Pty) Limited (SIOC) received notice from the Department of 
Mineral Resources (DMR) that the Director General of the DMR had consented to the 
amendment of SIOC’s existing mining right in respect of the Sishen mine, by the 
inclusion of the residual 21.4% undivided share of the mining right for the Sishen 
mine, subject to certain conditions (which are described by the DMR as 
“proposals”). The conditions contained in the Letter of Grant relate substantively 
to domestic supply, support for skills development, research & development, and 
procurement.

SIOC believes that the Mineral & Petroleum Resources Development Act (MPRDA) does 
not provide for the imposition of such conditions as contained in the consent 
letter. 

Section 96 of the MPRDA allows for an internal appeal to the Minister of Mineral 
Resources. SIOC therefore submitted an internal appeal to the Minister, setting out 
the basis of its objections to the proposals, as required by the MPRDA. SIOC has 
not yet received a response to its appeal.

In the interim, SIOC continues to engage with the DMR in relation to the proposed 
conditions in order to achieve a mutually acceptable solution. Refer to note 16 in 
the summarised consolidated financial statements.

MARKET OVERVIEW
While supply growth has slowed somewhat, there is an ever more cautious outlook on 
China’s economic growth trajectory. China’s slowdown in investment expenditure has 
weighed particularly on prices for metals and minerals. As a result, 2015 marked a 
year of much weaker demand growth. Iron ore fundamentals deteriorated on the back 
of declining global demand and growth in low-cost supply, particularly from 
Australia.

Global crude steel production contracted 3%, with increased competition in export 
markets.  Chinese growth slowed despite record steel exports while Japan, Korea and 
Taiwan moderated on weak domestic demand and increased competition, particularly 
from Chinese exports, in seaborne steel markets.  Rising imports and capacity 
closures impacted European crude steel output.  

Global seaborne iron ore supply rose 3% in 2015 led by an increase of 7% in 
Australian exports with major infrastructure and capacity projects now reaching 
execution. The ramp-up of Minas-Rio and rising shipments to Malaysia supported an 
8% increase in Brazilian exports.  

The index iron ore price (CFR China 62% Fe) at the beginning of the financial year 
was US$71.75 per tonne, falling to a low of US$38.50 per tonne in December 2015, 
due to the strong growth in supply and slower crude steel production growth in 
China.  

OPERATIONAL PERFORMANCE

Production summary (unaudited)
                                                     ‘000 tonnes           % change 
                                              December        December
                                                  2015            2014
Total                                           44,878          48,197          (7) 
-  Lump                                         29,003          31,269          (7) 
-  Fines                                        15,875          16,928          (6) 
Mine production                                 44,878          48,197          (7) 
-  Sishen Mine                                  31,393          35,541         (12) 
DMS Plant                                       20,261          22,911         (12) 
Jig Plant                                       11,132          12,630         (12) 
-  Kolomela Mine                                12,054          11,568           4 
-  Thabazimbi Mine                               1,431           1,088          32 

Sishen mine
Sishen production of 31.4 Mt decreased 12% (2014: 35.5 Mt), with total tonnes mined 
rising to 261.4 Mt (2014: 229.9 Mt). The decline in production was mainly due to 
difficulties in providing the DMS plant with the correct quality feedstock because 
of a shortage of sufficient exposed high grade ore required for blending. In order 
to improve exposed ore levels and increase operational flexibility, it was 
necessary to mine more waste material, which increased by 19% to 222.2 Mt (2014: 
187.2 Mt). 

During the year the deteriorating price environment necessitated a further 
optimisation of the Sishen mine plan. It was decided to reconfigure the Sishen pit 
to a lower cost shell to safeguard the mine’s viability at lower prices.  

Waste movement is expected to be materially below previous guidance of ~230 Mt at 
~135 Mt and production guidance for 2016 is reduced from 36 Mt to ~27 Mt, with an 
average stripping ratio of 3.5 over the period 2016 to 2020. In the medium term, 
the mine will also be exploring further opportunities to utilise spare plant 
capacity, including the use of low grade stockpiles. It is expected that the life 
of mine will remain stable at ~15 years due to the lower production rates. This 
will be reviewed and finalised during 2016 in accordance with SAMREC code 
requirements.

This mining profile will require detailed planning and effective implementation of 
the Operating Model will be crucial. The mine has already seen a 24% improvement in 
efficiency in internal waste mining activity of the North Mine, where work 
management aspects of the Operating Model were introduced in August 2014. The 
Operating Model was implemented at pre-strip mining and heavy equipment activities 
at Sishen in July 2015 and is working well.  

Kolomela mine
Kolomela mine continued to perform well.  

Production of 12.1 Mt (2014: 11.6 Mt) increased 4%, as efficiencies and throughput 
in the plant continued to improve. Total tonnes mined were 14% lower at 60.6 Mt 
(2014: 70.4 Mt), including 45.7 Mt of waste (2014: 55.5 Mt), a decrease of 18%.  

During the year a new mine plan was implemented which included the ramping up of 
production to 13 Mtpa by 2017, and the cessation of mining at the third pit which 
was deferred to 2019. In order to maintain plant feed rates, waste mining was 
revised upwards from previously guided 35 Mt – 38 Mt to 46 Mt – 48 Mt. 

Despite the increased rate of production the life of mine has been extended to 
21 years (excluding inferred material) due to the conversion of the Kapstevel South 
mineral resource to ore reserves. The average LOM stripping ratio has increased 
from 3.3 to 3.9 with the stripping ratio in the medium term remaining at ~3.6.

Thabazimbi mine
Mining at Thabazimbi ceased in September 2015. Material mined previously was 
processed during the last quarter of the year and this will continue until the 
second quarter of 2016. Closure procedures are in progress and all activity at the 
mine is expected to cease at the end of 1H16.  

Logistics
Transnet’s good performance enabled the mines to rail 42.4 Mt to the port, a slight 
increase of 0.2Mt (2014: 42.2 Mt). This included 0.8 Mt purchased from third party 
producers. Kumba shipped 43.5 Mt from the Saldanha port for the export market, 
8% more than the 40.1 Mt in 2014. 

Sales summary (unaudited)
Sales summary               
                                                    ‘000 tonnes           % change 
                                              December        December
                                                  2015            2014
Total                                           47,837          45,288           6 
-  Export sales                                 43,560          40,468           8 
-  Domestic sales                                4,277           4,820         (11)
Sishen mine                                      2,966           3,853         (23)
Thabazimbi mine                                  1,311             967          36 

Sales
Total sales for Kumba were 6% higher at 47.8 Mt (2014: 45.3 Mt). Export sales 
increased by 8% underpinned by the availability of stock and increased shipments 
through the multi-purpose terminal (MPT) at Saldanha port of 3.4 Mt (2014: 0.7 Mt). 
China accounted for 63% (2014: 57%) of Kumba’s export sales portfolio and of this 
CFR sales accounted for 69%. The Group’s lump:fine ratio was 65:35 for the period 
(2014: 67:33), with lump products achieving an average premium of $6/t (2014: 
$14/t) as the shift in the focus of Chinese steel mills from productivity to cost 
led to reduced price differentials across iron ore grades.  

Domestic sales to ArcelorMittal SA amounted to 4.3 Mt. The two companies have 
reached  agreement to amend the supply contract from that of cost-based to price 
based on an export parity price. 

As a result of the higher sales and lower production, finished product stock 
reduced from the 6.5 Mt at the end of 2014 to 4.7 Mt at 31 December 2015.

FINANCIAL RESULTS

Revenue
The Group’s total revenue of R36.1 billion for the period decreased 24% from 
R47.6 billion in 2014, mainly as a result of the significant drop in average 
realised FOB iron ore prices (2015: US$53/tonne; 2014: US$91/tonne) offset to an 
extent by the weaker average ZAR/US$ exchange rate (2015: R12.76; 2014: R10.83), as 
well as 6% higher total sales volumes of 47.8 Mt. Capesize freight rates from 
Saldanha to China averaged $8/tonne for the year, down 45%, resulting in 
R482 million lower freight revenue.

Operating expenses
Operating expenses, excluding impairments, were 2% lower as a result of the 
stringent cash preservation measures implemented. Inflationary linked input cost 
pressure, higher non- cash cost items (depreciation and rehabilitation) and 
increased distribution costs from MPT throughput pushed operating expenses higher. 
This was offset by labour and overhead cost savings, lower fuel prices and freight 
rates, lower mineral royalties on the back of reduced profitability, and higher 
capitalisation of deferred stripping costs. 

The reconfiguration of the Sishen pit to a lower cost shell together with the 
significant impact of the weaker iron ore price outlook, has resulted in an 
impairment charge relating to Sishen mine of R6 billion (pre-tax).

Unit cash costs at Sishen mine were R311/tonne, 14% higher than the R272/tonne of 
2014, mainly driven by the 19% increase in waste mined. Lower production volumes 
added R36/tonne. Input cost pressures (R10/tonne), higher mining volumes 
(R23/tonne) and buffer stock utilisation (R23/tonne) were partially offset by 
overhead cost savings (R11/tonne) and deferred stripping (R42/tonne). Cost 
escalation was contained below inflation principally as a result of lower fuel 
prices. Going forward, the revised mining plan is expected to benefit unit cost 
through the reduction in mining volumes. Further benefits are expected from the 
reduction in oil prices, increasing productivity and the benefits of the Operating 
Model.

Kolomela mine incurred unit cash costs of R178/tonne (2014: R208/tonne), a 14% 
decrease. 

Lower mining volumes (R30/tonne) and higher production (R7/tonne) were the main 
contributors. Cost escalation was contained well below inflation at 3% (R7/tonne) 
mainly as a result of lower diesel prices and cost of blasting material. This was 
partially offset by higher mining contractor rates as a result of increased 
travelling distances. 

Operating profit
Operating profit of R8.6 billion (excluding the impairment) decreased by 56% 
(2014: R19.6 billion). Kumba’s operating profit margin decreased to 24% (2014: 
41%), 27% from mining activities (2014: 45%). The fall in iron ore prices outlined 
previously impacted profitability.

Cash flow
The Group’s cash generated from operations was down 36% from R21.8 billion in 2014 
to R13.8 billion. The cash was used to pay the 2014 final dividend of R3.3 billion 
(2014: R15.2 billion) and income tax of R0.6 billion (2014: R4.2 billion). At 
31 December 2015 the Group had a net debt position of R4.6 billion (2014: 
R7.9 billion). The Group’s working capital position remains healthy, although 
impacted by a decrease of R2.2 billion in trade and other receivables on the back 
of lower realised prices. 

Capital expenditure of R6.8 billion was incurred. Expansion capex of R0.9 billion 
focused on the Dingleton relocation project and R3 billion on stay-in-business 
(SIB) activities (including heavy mining equipment and infrastructure) and 
R2.9 billion deferred stripping. In light of the current pricing environment, the 
Group has reduced capital expenditure guidance (excluding deferred stripping) for 
2016 to 2018 from what was previously guided, and optimised our project portfolio 
resulting in the deferral of some of the capital spend to later years. For the 
Dingleton project the Group anticipates total spend of R2.7 billion versus the 
R4.2 billion as previously guided. As a result, the Group expects capital 
expenditure (excluding deferred stripping) for 2016 to be in the range of 
R2.4 billion to R2.6 billion, for 2017 to be between R2.9 billion and R3.1 billion, 
and 2018 to be between R3.5 billion and R3.7 billion (excluding unapproved 
projects).
 
Deferred stripping capital expenditure per mine estimates are shown in the table 
below. The decrease expected at Sishen mine is mainly as a result of higher 
stripping ratios excluded from the new pit design in certain areas of the pit.

R’ million                                             (unaudited)              
                              2015            2016           2017           2018
Sishen                       2,508         400-500    1,050-1,150    1,600-1,700
Kolomela                       344         300-400        250-350        100-200
Total                        2,852         700-900    1,300-1,500    1,700-1,900

ORE RESERVES AND MINERAL RESOURCES

The following changes are reported to the ore reserves and mineral resources as 
disclosed in the 2014 Kumba Integrated Report.

As of 31 December 2015, Kumba, from a 100% ownership reporting perspective, had 
access to ore reserves of 885.6 Mt (at 60.0% Fe) at its three mining operations 
(Sishen, Kolomela and Thabazimbi), a year-on-year decrease of 3%. The Thabazimbi 
ore reserve has been materially reduced by 9 Mt (93%) to 0.7 Mt due to the 
reclassification of ore reserves to mineral resources as a result of the mine 
closure. The remaining mineral resource of 8.4 Mt will be reclassified to mineral 
inventory once mine closure has been finalised.

Kumba’s estimated mineral resources, in addition to its ore reserves at these three 
operations and the Zandrivierspoort magnetite project, totalled 1.2 billion tonnes 
(at 50.4% Fe), a year-on-year decrease of 8%.

The net decrease of 3% in Kumba’s ore reserves in 2015 is primarily attributable to 
annual run-of-mine production of 47.8 Mt. The overall decrease in mineral resources 
of 8% was mainly due to the conversion of a portion of the Kapstevel South mineral 
resource at Kolomela to ore reserves. As a result the Kolomela reserve life has 
increased by two years to 21 years at the end of 2015 (including inferred 
material), despite the planned increase in annual production to 13 Mt from 2017.

It is expected that the 2016 Kumba ore reserves and mineral resources may decrease 
materially from those stated in 2015, pending the update of the long-term forward 
looking iron ore price and the reconfiguration of Sishen mine to a lower cost pit 
shell. Early indications are that the Sishen mine ore reserves will decrease by an 
estimated 23% (±150 Mt) but that the reserve life will remain stable at ~15 years 
due to the lower production rates. These figures are preliminary in nature and 
exclude 2016 depletion and other movements that may realise due to annual 
geological model updates and revised long-term economic parameter forecasts. A 
complete life-of-mine (LOM) will be finalised in 2016 for both operations to 
determine the impact on resources and reserves in accordance with SAMREC Code 
requirements. 

CHANGES IN DIRECTORATE

The following directors tendered their resignations from the board:
-  Ms Khanyisile Kweyama with effect from 29 April 2015, following her resignation 
   as Executive Head of Anglo American South Africa.
-  Mr Gert Gouws with effect from 8 May 2015, having reached a tenure of nine years 
   as a non-executive director of the board.
-  Mr Tony O’Neill with effect from 5 February 2016.

The board thanks Ms Kweyama and Messrs Gouws and O’Neill for their contributions 
and guidance during their respective tenures and wishes them all the best in their 
future endeavours.

The company announced the following appointments to the board:
-  Mr Andile Sangqu as a non-executive director with effect from 29 June 2015. 
   Mr Sangqu is the Executive Head of Anglo American South Africa and was appointed 
   onto the company’s board as a shareholder representative of Anglo American, 
   following the resignation of Ms. Kweyama. 

-  Mrs Natascha Viljoen as a non-executive director of the board with effect from 
   8 February 2016, and in fulfilment of the vacancy left by the resignation of 
   Mr. Tony O’Neill. Mrs Viljoen is currently the Group Head of Processing for 
   Anglo American plc.

OUTLOOK

Rapidly changing market and economic fundamentals have resulted in the iron ore 
price falling faster and deeper than expected. The period ahead is likely to result 
in formidable changes for the industry with the market now pricing in a more muted 
trend for the iron ore price. As such the group does not expect a significant 
recovery in the iron ore price over the medium term. These circumstances have 
reinforced the need to make tough decisions for the business and to take necessary 
action to safeguard the viability of the operations.

Whilst significant progress has been made to protect the balance sheet, the Group 
is undertaking further actions to conserve cash in order to ensure that Kumba is 
robust enough to withstand a longer period of low prices. Further savings are 
anticipated to deliver ~$10/t reduction in controllable costs for 2016, largely 
from on-mine cash cost reductions through the implementation of the new mine plan 
for Sishen and ongoing cost initiatives including headcount rationalisation and 
salary freezes for senior and mid management. Further study cost optimisation is 
expected with continued focus on SIB capital reductions from curtailment of fleet 
procurement and other mine projects. The ongoing benefits from the continued 
implementation of the Operating Model is setting the mines up well for the 
execution of the revised plans. 

As a result, Kumba’s cash breakeven price is anticipated to reduce to below 
$40/t in 2016, however the Group expects further volatility in freight and exchange 
rates. At current spot indicators, though, the Group’s balance sheet should 
continue to deleverage.

Production at Sishen is expected to be ~27 Mt in 2016-2020. Waste volumes are 
targeted at ~135-150 Mt in 2016-2020. In the medium term, the mine will continue to 
explore opportunities to fill any spare plant capacity through the use of low grade 
stockpiles.

Kolomela will produce 12 Mt in 2016 increasing to 13 Mtpa by 2017. Waste mining is 
forecast to be 46-48 Mt in 2016-2020.

Export sales are expected to be ~40 Mt in 2016 and domestic sales contracted to 
ArcelorMittal SA are 6.25 Mt.

Profitability remains sensitive to iron ore export prices and the Rand/US$ exchange 
rate. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the company’s auditors.

The presentation in support of the company’s results for the year ended 31 December 
2015 will be available on the company’s website www.angloamericankumba.com at 
07h30 CAT and the webcast will be available from 11h30 CAT on 9 February 2016.

SUMMARISED CONSOLIDATED BALANCE SHEET
as at
                                                              Audited      Audited 
                                                Audited      Restated     Restated 
                                            31 December   31 December  31 December 
Rand million                          Notes        2015          2014         2013 
Assets   
Property, plant and equipment             5      32 671        35 170       29 922 
Biological assets                                    11             6            6 
Investments held by environmental 
trust                                               818           791          737 
Long-term prepayments and 
other receivables                                   581           555          605 
Inventories                               6       2 560         2 078        1 292 
Deferred tax assets                                   1           871          920 
Non-current assets                               36 642        39 471       33 482 
Inventories                               6       5 056         5 288        3 879 
Trade and other receivables                       3 212         4 476        6 124 
Cash and cash equivalents                         3 601         1 664        1 053 
Current assets                                   11 869        11 428       11 056 
Total assets                                     48 511        50 899       44 538 
Equity 
Shareholders' equity                      7      19 320        20 764       20 831 
Non-controlling interest                          5 847         6 237        6 353 
Total equity                                     25 167        27 001       27 184 
Liabilities 
Interest-bearing borrowings               8       8 000         4 000        2 234 
Provisions                                        2 717         1 964        1 809 
Deferred tax liabilities                          7 680         8 201        7 888 
Non-current liabilities                          18 397        14 165       11 931 
Interest-bearing borrowings               8         205         5 593          615 
Provisions                                          349            92          355 
Trade and other payables                          3 407         3 493        3 888 
Current tax liabilities                             986           555          565 
Current liabilities                               4 947         9 733        5 423 
Total liabilities                                23 344        23 898       17 354 
Total equity and liabilities                     48 511        50 899       44 538 

SUMMARISED CONSOLIDATED INCOME STATEMENT
for the year ended
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                            Notes            2015                 2014 
Revenue                                                36 138               47 597 
Operating expenses                                    (33 494)             (28 405)
Operating profit                            9           2 644               19 192 
Finance income                                            265                   84 
Finance costs                                            (876)                (519)
Gain/(loss) from equity accounted 
joint venture                                               6                   (5)
Profit before taxation                                  2 039               18 752 
Taxation                                               (1 412)              (4 604)
Profit for the year                                       627               14 148 

Attributable to: 
Owners of Kumba                                           469               10 724 
Non-controlling interest                                  158                3 424 
                                                          627               14 148 

Earnings per share for profit 
attributable to the owners of Kumba 
(Rand per share)
Basic                                                    1.46                33.44 
Diluted                                                  1.46                33.38 

SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Profit for the year                                       627               14 148 
Other comprehensive income for 
the year, net of tax                                      255                  318 
Exchange differences on translation 
of foreign operations                                     255                  352 
Reclassification of gain relating 
to exchange differences on translation 
of foreign operations                                       -                  (34)
Total comprehensive income for the year                   882               14 466 
Attributable to: 
Owners of Kumba                                           592               11 036 
Non-controlling interest                                  290                3 430 
                                                          882               14 466 

SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY  
for the year ended  
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Total equity at the beginning of the year              27 001               27 184 
Changes in share capital and premium
  Treasury shares issued to employees under 
  employee share incentive schemes                        180                   93 
  Purchase of treasury shares                               -                 (107)
Changes in reserves
  Equity-settled share-based payment                      469                  525 
  Vesting of shares under employee share 
  incentive schemes                                      (180)                 (93)
  Total comprehensive income for the year                 592               11 036 
  Dividends paid                                       (2 505)             (11 521)
Changes in non-controlling interest
  Total comprehensive income for the year                 290                3 430 
  Dividends paid                                         (796)              (3 657)
  Equity-settled share-based payment                      116                  111 
Total equity at the end of the year                    25 167               27 001 
Comprising  
Share capital and premium (net of treasury shares)       (131)                (311)
Equity-settled share-based payment reserve              2 021                1 685 
Foreign currency translation reserve                    1 453                1 256 
Fair value reserve                                          -                   74 
Retained earnings                                      15 977               18 060 
Shareholders' equity                                   19 320               20 764 
  Attributable to the owners of Kumba                  18 534               19 925 
  Attributable to non-controlling interest                786                  839 
Non-controlling interest                                5 847                6 237 
Total equity                                           25 167               27 001 
Dividend (Rand per share)
  Interim                                                   -                15.61 
  Final                                                     -                 7.73 

SUMMARISED CONSOLIDATED CASH FLOW STATEMENT 
for the year ended 
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Cash generated from operations                         13 841               21 769 
Net finance costs paid                                   (578)                (285)
Taxation paid                                            (594)              (4 165)
Cash flows from operating activities                   12 669               17 319 
Additions to property, plant and equipment             (6 752)              (8 477)
Loan repaid by/(granted to) joint venture                   5                   (5)
Proceeds from the disposal of property, plant 
and equipment                                             120                   78 
Cash flows from investing activities                   (6 627)              (8 404)
Purchase of treasury shares                                 -                 (107)
Dividends paid to owners of Kumba                      (2 490)             (11 450)
Dividends paid to non-controlling shareholders           (811)              (3 728)
Net interest-bearing borrowings (repaid)/raised        (1 388)               6 744 
Cash flows from financing activities                   (4 689)              (8 541)
Net increase in cash and cash equivalents               1 353                  374 
Cash and cash equivalents at beginning of year          1 664                1 053 
Foreign currency exchange gains on cash and 
cash equivalents                                          584                  237 
Cash and cash equivalents at end of year                3 601                1 664 

HEADLINE EARNINGS 
for the year ended 
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Reconciliation of headline earnings 
Profit attributable to owners of Kumba                    469               10 724 
Impairment charge                                       5 978                  439 
Net loss on disposal and scrapping of 
property, plant and equipment                               9                   91 
Reclassification of exchange differences on 
translation of foreign operations                           -                  (34)
Insurance proceeds received for items of 
property, plant and equipment written off in 
a prior period                                            (29)                   - 
                                                        6 427               11 220 
Taxation effect of adjustments                         (1 644)                (128)
Non-controlling interest in adjustments                  (991)                 (86)
Headline earnings                                       3 792               11 006 
Headline earnings (Rand per share)
Basic                                                   11.82                34.32 
Diluted                                                 11.82                34.26 

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      320 817 364          320 662 676 
  Diluted weighted average number of 
  ordinary shares                                 320 817 364          321 242 611 

There is no dilution adjustment at 
31 December 2015 (2014: 579 935).  
1,075,676 Share options previously granted 
under the various employee share incentive 
schemes had no dilutive impact. 

NORMALISED EARNINGS 
for the year ended 
                                                     Unaudited           Unaudited 
                                                     12 months           12 months 
                                                   31 December         31 December 
Rand million                                              2015                2014 
Reconciliation of normalised earnings
Headline earnings attributable to owners 
of Kumba                                                 3 792              11 006 
Gain on lease receivable                                  (418)                  - 
Derecognition of deferred tax asset                        801                   - 
                                                         4 175              11 006 
Taxation effect of adjustments                             117                   - 
Non-controlling interest in adjustments                   (115)                  - 
Normalised earnings                                      4 177              11 006 

Normalised earnings (Rand per share) 
Basic                                                    13.02               34.31 
Diluted                                                  13.02               34.26 

The calculation of basic and diluted 
normalised earnings per share is based on 
the weighted average number of ordinary 
shares in issue as follows:
  Weighted average number of ordinary shares        320 817 364        320 662 676 
  Diluted weighted average number of 
  ordinary shares                                   320 817 364        321 242 611 

This measure of earnings is specific to Kumba and is not required in terms of 
International Financial Reporting Standards or the JSE Listings Requirements. 
Normalised earnings represents earnings from the recurring activities of the group.  

This is determined by adjusting the headline earnings attributable to the owners of 
Kumba for non-recurring expense or income items incurred during the year. The 
derecognition of the deferred tax asset and a once-off gain realised on a lease 
receivable are non-recurring items and has therefore been adjusted in determining 
normalised earnings. 

SALIENT FEATURES AND OPERATING STATISTICS
for the year ended 
                                                    Unaudited            Unaudited 
                                                  31 December          31 December 
                                                         2015                 2014 
Share statistics ('000)
  Total shares in issue                               322 086              322 086 
  Weighted average number of shares                   320 817              320 663 
  Treasury shares                                       1 110                1 533 
Market information
  Closing share price (Rand)                               41                  240 
  Market capitalisation (Rand million)                 13 270               77 268 
  Market capitalisation (US$ million)                     858                6 677 
Net asset value attributable to owners 
of Kumba (Rand per share)                               59.98                64.47 
Capital expenditure (Rand million) 
  Incurred                                              6 752                8 477 
  Contracted                                            1 115                3 430 
  Authorised but not contracted                         1 553                3 040 
  Finance lease commitments                                 -                  232 
  Operating commitments 
    Operating lease commitments                           113                  148 
    Shipping services                                  10 430               11 353 
Economic information 
  Average Rand/US Dollar exchange rate (ZAR/US$)        12.76                10.83 
  Closing Rand/US Dollar exchange rate (ZAR/US$)        15.47                11.57 
Sishen mine FOR unit cost
  Unit cost (Rand per tonne)                           403.47               331.55 
  Cash cost (Rand per tonne)                           310.80               271.84 
  Unit cost (US$ per tonne)                             31.62                30.60 
  Cash cost (US$ per tonne)                             24.36                25.09 
Kolomela mine FOR unit cost 
  Unit cost (Rand per tonne)                           245.74               269.13 
  Cash cost (Rand per tonne)                           177.70               207.60 
  Unit cost (US$ per tonne)                             19.26                24.84 
  Cash cost (US$ per tonne)                             13.93                19.16 

NOTES TO THE AUDITED SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS 

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 audited summarised consolidated financial statements of Kumba and its 
subsidiaries for the year ended 31 December 2015 were authorised for issue in 
accordance with a resolution of the directors on 5 February 2016.

2.  Basis of preparation 
The audited summarised consolidated financial statements have been prepared, under 
the supervision of FT Kotzee CA(SA), chief financial officer, in accordance with 
the requirements of the JSE Limited Listings Requirements for preliminary reports, 
and the requirements of the South African Companies Act No 71 of 2008 applicable to 
summary financial statements. The Listings Requirements require preliminary reports 
to be prepared in accordance with the framework concepts and the measurement and 
recognition requirements of International Financial Reporting Standards (IFRS) and 
the SAICA Financial Reporting Guides as issued by the Accounting Practices 
Committee and Financial Pronouncements as issued by the Financial Reporting 
Standards Council and to also, as a minimum, contain the information required by 
IAS 34 Interim Financial Reporting. 

The audited summarised consolidated financial statements have 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 applied in the preparation of the consolidated financial 
statements from which the summary consolidated financial statements were derived 
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, except as disclosed below.

3.1  New standards, amendments to published standards and interpretations
     None of the standards, amendments to published standards and interpretations 
     which became effective for the year commencing on 1 January 2015 had an impact 
     on the group.

3.2  New standards, amendments to existing standards and interpretations that are 
     not yet effective and have not been early adopted
     In 2015 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 31 December 2015, are being evaluated for the impact of 
     these pronouncements.

3.3  Comparatives
     Comparative figures are restated in the event of a change in accounting policy 
     or reclassification of line items in the balance sheet. The inventory balance 
     was reclassified in the current year, please refer to note 6 for more 
     information.

4.  Change in estimates
The measurement of the environmental rehabilitation and decommissioning provisions 
are a key area where management's judgement is required. The closure provisions are 
measured at the present value of the expected future cash flows required to perform 
the rehabilitation and decommissioning. This calculation requires the use of 
certain estimates and assumptions when determining the amount and timing of the 
future cash flows and the discount rate. The closure provisions are updated at each 
balance sheet date for changes in these estimates. 

The LOM plan on which accounting estimates are based only includes proved and 
probable ore reserves as disclosed in Kumba’s annual ore reserves and mineral 
resources statement. Sishen’s rehabilitation provision increased by R305 million 
and Kolomela’s by R23 million in 2015. This increase relates to changes in the LOM 
at Sishen and Kolomela, normal inflationary adjustments as well as the 
incorporation of waste dump and infrastructure growth. Thabazimbi’s rehabilitation 
provision increased by R288 million in 2015. R114 million relates to a reduction in 
the LOM from 2023 to 2016 as a result of the closure decision. 

The effect of the change in estimate, which was applied prospectively from 
1 January 2015, is detailed below:
                                                                           Audited 
                                                                       31 December 
Rand million                                                                  2015 
Increase in environmental rehabilitation provision                             616 
Increase in decommissioning provision                                           66 
Decrease in profit attributable to the owners of Kumba                         342 
Rand per share  
Decrease in earnings per share attributable to the owners of Kumba            1.06 

The change in estimate in the decommissioning provision has been capitalised to the 
related property, plant and equipment and as a result had no effect on profit or 
earnings per share.

5.  Property, plant and equipment
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Capital expenditure                                     6,752                8,477 
Comprising:    
Expansion                                                 870                1,433 
Stay-in-business (SIB)                                  3,030                5,206 
Deferred stripping                                      2,852                1,838 
Transfers from assets under construction to 
property, plant and equipment                           3,419                5,163 

Expansion capital expenditure comprises mainly of the Dingleton Project, which 
would enable Sishen mine to extract ore resources between the mine and the town, 
made good progress in 2015. SIB capital expenditure to maintain operations was 
principally for the replacement and rebuild of the mining fleet, expansion of 
diesel storage capacity, mine dewatering and regulatory and standard compliance 
related projects.

6.  Inventory reclassification
                                                      Audited              Audited 
                                     Audited         Restated             Restated 
                                 31 December      31 December          31 December 
Rand million                            2015             2014                 2013 
Finished products                      1,852            2,410                1,194 
Work-in-progress                       4,156            3,770                3,104 
Plant spares and stores                1,608            1,186                  873 
Total inventories                      7,616            7,366                5,171 
Non-current portion of 
work-in-progress inventories           2,560            2,078                1,292 
Total current inventories              5,056            5,288                3,879 
Total inventories                      7,616            7,366                5,171 

As a result of the revision of the group's mine plans, the group reassessed the 
nature of its work-in-progress inventories. Previously all work-in-progress 
inventory balances were classified as current. After the reassessment, it was 
concluded that not all work-in-progress inventory will be processed within the next 
year.  Work-in-progress inventory balances which will not be processed within the 
next year are reclassified to non-current. This reassessment was applied 
retrospectively and as a result, comparative figures were reclassified.  

7.  Share capital and share premium
Reconciliation of share capital and share premium (net of treasury shares):
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Balance at beginning of year                             (311)                (297)
Net movement in treasury shares under 
employee share incentive schemes                          180                  (14)
Purchase of treasury shares                                 -                 (107)
Shares issued to employees                                180                   93 
                                                         (131)                (311)

Reconciliation of number of shares in issue:
                                                      Audited              Audited 
                                                  31 December          31 December 
Number of shares                                         2015                 2014 
Balance at beginning and end of year              322,085,974          322,085,974 
Reconciliation of treasury shares held:      
Balance at beginning of year                        1,533,346            1,444,526 
Shares purchased                                            -              299,600 
Shares issued to employees under the 
Long-Term Incentive Plan, 
Kumba Bonus Share Plan and 
Share Appreciation Rights Scheme                     (423,614)            (210,780)
Balance at end of year                              1,109,732            1,533,346 

All treasury shares are held as conditional awards under the Kumba Bonus Share 
Plan.

8.  Interest-bearing borrowings
Kumba’s net debt position at the balance sheet dates was as follows:
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Interest-bearing borrowings                             8,205                9,593 
Cash and cash equivalents                              (3,601)              (1,664)
Net debt                                                4,604                7,929 
Total equity                                           25,167               27,001 
Interest cover (times)                                      4                   44 

Movements in interest-bearing borrowings are analysed as follows:
                                                      Audited              Audited 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Balance at the beginning of the year                    9,593                2,849 
Interest-bearing borrowings raised                     10,400               14,891 
Interest-bearing borrowings repaid                    (11,556)              (8,098)
Finance lease repaid                                     (232)                 (49)
Balance at the end of the year                          8,205                9,593 

The group’s committed debt facilities of R16.5 billion (R4.5 billion term facility 
and R12 billion revolving facility) mature in 2020. At 31 December 2015, 
R8.0 billion of the committed facility had been drawn down. The group also had 
undrawn uncommitted facilities of R8.3 billion at 31 December 2015. SIOC was not in 
breach of any of its financial covenants during the year. 

9.  Significant items included in operating profit
Operating expenses comprise:
                                                      Audited              Audited 
                                                    12 months            12 months 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Production costs                                       17,260               18,979 
Movement in inventories                                   936                 (904)
  Finished products                                     1,322                 (237)
  Work-in-progress                                       (386)                (667)
Cost of goods sold                                     18,196               18,075 
Impairment charge1                                      5,978                  439 
Mineral royalty                                           191                1,176 
Selling and distribution costs                          5,506                4,548 
Cost of services rendered – shipping                    3,657                4,203 
Sublease rent received                                    (34)                 (36)
Operating expenses                                     33,494               28,405 
Operating profit was derived after taking 
into account the following items:     
Employee expenses                                       4,039                3,869 
Net restructuring costs                                    34                   68 
  Restructuring costs                                     384                   68 
  Reimbursement of restructuring costs 
  from third party                                       (350)                   - 
Share-based payment expenses                              593                  643 
Depreciation of property, plant and equipment           3,323                2,636 
Deferred waste stripping costs capitalised             (2,852)              (1,838)
Net loss on disposal and scrapping of 
property, plant and equipment                               9                   91 
(Gain)/loss on lease receivable                          (476)                  86 
Insurance proceeds received on items of 
property, plant and equipment written off 
in prior periods                                          (29)                   - 
Finance gains                                            (822)                (443)

1 This impairment charge relates to Sishen mine.  The impairment charge in 2014 
  relates to Thabazimbi mine’s deferred stripping asset. 

10.  Impairment of assets
Kumba produces iron ore at Sishen and Kolomela mines in the Northern Cape Province. 
The two mines are treated as separate cash-generating units (CGU’s). Each CGU 
consists of its respective mining assets located in the Northern Cape. Given the 
low iron ore price environment, as well as supply and demand pressure, an 
impairment test was performed. This was based on the fair value less costs of 
disposal of the CGU.  The carrying value of Kolomela is recoverable and therefore 
no impairment charge was recorded. The valuation of Sishen at 31 December 2015, 
determined on a discounted cash flow (DCF) basis, is R20.5 billion. Consequently 
an impairment charge of R6 billion (before tax) was recorded against the carrying 
value of Sishen with an associated deferred tax credit of R1.7 billion. The post-
tax impairment charge is R4.3 billion.  

The valuation is sensitive to the iron ore price and further deterioration in long-
term prices may result in additional impairment. The DCF model is most sensitive to 
forecasted iron ore prices and the ZAR/USD exchange rate. The table below sets out 
the impact of an increase or decrease of 5% in the forecasted iron ore price and 
ZAR/USD exchange rate assumptions on operating profit or loss. 

R billion                                +5%                           -5%
Assumption                      Increase/(decrease)            Increase/(decrease)
                                in operating profit            in operating profit
                                      or loss                        or loss
Forecasted iron ore prices               5.5                          (5.7)
ZAR/USD exchange rate                    5.8                            (6)

11.  Segmental reporting
                                        Sishen    Kolomela   Thabazimbi                   Shipping     
Rand million                              mine        mine         mine    Logistics    operations     Other      Total 
Audited year ended 31 December 2015 
Income statement
Revenue from external customers         23,869       7,980          878            -         3,411         -     36,138 
Depreciation                             2,428         732            -            6             -       157      3,323 
Staff costs                              3,048         642          429           30             -       517      4,666 
Impairment charge                        5,978           -            -            -             -         -      5,978 
EBIT1                                    4,273       4,423          (52)      (5,506)         (247)     (247)     2,644 
Balance sheet
Total segment assets                       651         198          224          510             -       269      1,852 
Cash flow statement
Additions to property, plant and 
equipment
Expansion capex                            857           -            -            -             -        13        870 
Stay-in-business capex                   2,350         498            -            4             -       178      3,030 
Deferred stripping                       2,508         344            -            -             -         -      2,852 

                                        Sishen    Kolomela   Thabazimbi                   Shipping     
Rand million                              mine        mine         mine    Logistics    operations     Other      Total 
Audited year ended 31 December 2014 
Income statement
Revenue from external customers         33,094       9,437        1,172            -         3,894         -     47,597 
Depreciation                             1,858         643           36            6             -        93      2,636 
Staff costs                              2,605         572          420           26             -       957      4,580 
Impairment charge                            -           -          439            -             -         -        439 
EBIT1                                   20,423       5,906         (706)1     (4,548)         (309)   (1,574)    19,192 
Balance sheet

Total segment assets                       740         243          124        1,061             -       242      2,410 
Cash flow statement              
Additions to property, plant and 
equipment
Expansion capex                            826         370            -            -             -       237      1,433 
Stay-in-business capex                   4,281         915            -           10             -         -      5,206 
Deferred stripping                       1,025         351          462            -             -         -      1,838 

1)  After impairment charge

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.

Geographical analysis of revenue:
                                                      Audited              Audited 
                                                    12 months            12 months 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Total revenue from external customers                  36,138               47,597 
South Africa                                            3,155                3,764 
Export                                                 32,983               43,833 
China                                                  19,974               24,906 
Rest of Asia                                            9,879               14,958 
Europe                                                  3,130                3,687 
Middle East and Africa                                      -                  282 

12.  Fair value estimation
The carrying value of financial instruments not carried at fair value approximates 
fair value because of the short period to maturity or as a result of market related 
variable interest rates.  Investments held by the environmental trust amounting to 
R818 million (2014: R791 million) are carried at fair value. The fair value 
measurements are classified as level 1.

13.  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.

                                                      Audited              Audited 
                                                    12 months            12 months 
                                                  31 December          31 December 
Rand million                                             2015                 2014 
Short-term deposit held with 
Anglo American SA Finance Limited1 (AASAF)                839                    - 
-  Deposit 1                                              205                    - 
-  Weighted average interest rate                        6.48%                   - 
-  Deposit 2                                              634                    - 
-  Weighted average interest rate                        5.96%                5.37%
Interest earned on short-term 
deposits with AASAF during the year                       120                   28 
Short-term deposit held with 
Anglo American Capital plc1                             2,059                1,092 
Interest earned on facility during the year                 *                    * 
Interest-bearing borrowing from AASAF                     205                5,361 
Interest paid on borrowings during the year                67                  134 
Weighted average interest rate                           7.05%                6.70%
Trade payable owing to 
Anglo American Marketing Limited1 (AAML)                  433                  405 
Shipping services provided by AAML                      3,642                4,152 
Dividends paid to Exxaro Resources Limited                673                3,095 

1 Subsidiaries of the ultimate holding company.
* Interest earned on the deposit is insignificant and is earned at prevailing 
  market rates.

14.  Contingent liability 
a)  As at 30 June 2015, the group advised that the South African Revenue Service 
   (SARS) were in the process of reviewing certain of the group’s tax matters. 
    After the half year SARS issued the group with a letter of findings relating to 
    its tax audit covering the period 2006 to 2010, indicating potential 
    adjustments to the group’s taxable income for the period of R6.5 billion which 
    would, if the company is finally assessed on this basis, result in additional 
    tax of approximately R1.8 billion, excluding any potential interest and 
    penalties. As at 31 December 2015 the group had responded to the letter of 
    findings, strongly objecting to the basis for the proposed adjustments, 
    including representations on why interest and penalties, if any, should not be 
    raised. The group is awaiting SARS’s response. These matters have been 
    considered in consultation with external tax and legal advisors, who support 
    the group’s position set out in its objection. Furthermore, during 2015 SARS 
    notified the group of its intention to conduct a field audit covering the 2011 
    to 2013 years of assessment, which is in progress. The group believes that 
    these matters have been appropriately treated in the results for the year ended 
    31 December 2015.

b)  Rates and taxes levied by the Municipality at Sishen effective from 1 June 2014 
    reflected a significant increase amounting to R437 million. Management objected 
    to the higher valuation of the relevant land and the Municipality appointed a 
    valuator who is reviewing the objections lodged. Management is of the view that 
    the municipal valuation is fundamentally flawed and acknowledges its obligation 
    for rates and taxes based on a reasonable valuation.

15.  Guarantees
The group has issued financial guarantees in favour of the DMR in respect of its 
environmental rehabilitation and decommissioning obligations to the value of 
R2.3 billion (2014: R2.3 billion). Included in this amount are financial guarantees 
for the environmental rehabilitation and decommissioning obligations of the group 
in respect of Thabazimbi mine of R438 million (2014: R438 million). ArcelorMittal 
S.A. has guaranteed R429 million of this amount by means of bank guarantees issued 
in favour of SIOC. As a result of the annual revision of closure costs a further 
shortfall of R861 million arose (of which R318 million relates to 
ArcelorMittal SA). Guarantees for the shortfall will be issued in due course.

16.  Regulatory update
21.4% undivided share of the Sishen mine mineral rights

In December 2013 the Constitutional Court ruled that SIOC held a 78.6% undivided 
share of the Sishen mining right and that, based on the provisions of the MPRDA, 
only SIOC can apply for, and be granted, the residual 21.4% share of the mining 
right at the Sishen mine. The grant of the mining right may be made subject to such 
conditions considered by the Minister to be appropriate. SIOC applied for the 
residual right early in 2014. 

SIOC received notice from the Department of Mineral Resources (DMR) that the 
Director General of the DMR had consented to the amendment of SIOC’s existing 
mining right in respect of the Sishen Mine, by the inclusion of the residual 
21.4% undivided share of the mining right for the Sishen mine, subject to certain 
conditions (which are described by the DMR as “proposals”). The conditions 
contained in the Letter of Grant relate substantively to domestic supply, support 
for skills development, research & development, and procurement.

SIOC believes that the MPRDA does not provide for the imposition of such conditions 
as contained in the consent letter, and further that certain of the conditions, 
described as “proposals”, are not practically implementable and lack sufficient 
detail to provide the company with legal certainty as to the requirements for 
compliance. SIOC therefore believes that the proposals are incapable of being 
unilaterally complied with. The most significant of these proposals include the 
reversion to the lapsed 2001 cost based supply agreement with ArcelorMittal SA, as 
well as the establishment of a supplier park to provide the mining industry with a 
significant portion of its capital goods in support of local procurement.

Until the legal and practical implications of the proposed conditions have been 
clarified with the DMR, SIOC is unable to accept the conditions. 

Section 96 of the MPRDA allows for an internal appeal to the Minister of Mineral 
Resources. SIOC therefore submitted an internal appeal to the Minister, setting out 
the basis of its objections to the proposals, as required by the MPRDA. SIOC has 
not yet received a response to its appeal.

In the interim, SIOC continues to engage with the DMR in relation to the proposed 
conditions in order to achieve a mutually acceptable solution.

17.  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 will be contained in the 2015 Integrated Report.

18.  Events after the reporting period
On 28 January 2016 SIOC commenced with a consultation process in terms of section 
189 of the Labour Relations Act at its Sishen mine in the Northern Cape. SIOC’s 
decision to commence a section 189 process follows the reconfiguration of the 
Sishen pit to a lower cost shell due to the continued low iron ore price 
environment. 

The new configuration reduced the waste and production profiles of the mine to 
~135 Mt and ~27 Mt respectively. The reduction in planned mining and production 
activities resulted in a re-evaluation of the on-mine equipment and the workforce 
required to support this reduced profile. Subject to consultation, it is currently 
estimated that c. 2,633 employees and 1,300 contractors may be affected. 

The group is in the process of determining the impact of this decision on the Ore 
Reserves and Mineral Resources as declared in the 2014 Kumba Integrated Report. 
Early indications are that the Sishen Mine ore reserves will decrease by an 
estimated 23% (±150 Mt) without reducing the life of the mine. These figures are 
preliminary in nature and exclude 2016 depletion and other movements that may 
realise due to annual geological model updates and revised long-term economic 
parameter forecasts. A complete life-of-mine will be finalised in 2016 for both 
operations to determine the impact on resources and reserves in accordance with 
SAMREC Code requirements. 

No further material events have occurred between the end of the reporting period 
and the date of the release of these audited summarised consolidated financial 
statements, not otherwise dealt with in this report.

19.  Independent auditors’ report
These summarised consolidated financial statements for the year ended 31 December 
2015 have been audited by Deloitte & Touche, who expressed an unmodified opinion 
thereon. The auditor also expressed an unmodified opinion on the annual financial 
statements from which these summarised consolidated financial statements were 
derived.

A copy of the auditor’s report on the annual consolidated financial statements is 
available for inspection at the company’s registered office, together with the 
financial statements identified in the respective auditor’s reports.

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

5 February 2016
Pretoria



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124 Akkerboom Road
Centurion, Pretoria, 0157
Republic of South Africa
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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, DD Mokgatle, AJ Morgan, LM Nyhonyha, 
BP Sonjica, AH Sangqu, N Viljoen
Executive – NB Mbazima (chief executive), FT Kotzee (chief financial officer)

COMPANY SECRETARY:
A Parboosing

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

9 February 2016

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