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
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, 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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