Wrap Text
Provisional audited annual results for the year ended 31 December 2017 and final cash dividend declaration
KUMBA IRON ORE LIMITED
JSE code: KIO
ISIN: ZAE000085346
Company registration number: 2005/015852/06
Income tax number: 9586/481/15/3
Incorporated in the Republic of South Africa
("Kumba" or "the Company" or "the group')
PROVISIONAL AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017 AND FINAL CASH DIVIDEND DECLARATION
KEY FEATURES
- Material improvement in all key safety benchmarks and no fatal incidents
- Further operating performance gains
- Continued productivity gains with production of 45 Mt, an 8% increase and total sales of
44.9 Mt, an increase of 6%
- Strong financial performance
- EBITDA of R19.6 billion, a 6 % increase
- Attributable free cash flow of R12.3 billion, up 10%
- Headline earnings of R9.7 billion, R30.47 per share, a 12% increase
- An average realised FOB export price of $71/tonne
- Final cash dividend of R15 per share, with total dividend of R30.97 per share
COMMENTARY
SIGNIFICANT IMPROVEMENT IN SAFETY, PRODUCTIVITY AND EFFICIENCIES DELIVERED
Themba Mkhwanazi, Chief executive of Kumba, said, "I am pleased to report that Kumba has delivered
on our key objectives for 2017. Most importantly, our safety initiatives resulted in a fatality-free
year with material improvement across our key indicators. At Sishen, our focus on all aspects of the
value chain resulted in productivity gains by the fleet whilst we also delivered improved plant
efficiencies and higher yields. These factors contributed to production above guidance with an overall
increase of 8% to 45 Mt. Higher production, together with ongoing cost discipline, contained unit costs
below guidance.
Stronger operational performance has been our priority which, coupled with our focus on costs and
ongoing capital discipline, resulted in the delivery of attributable free cash flow of R12.3 billion.
Overall, whilst both the operational and financial delivery has been strong, there remains more that can
be done to realise the full potential of our assets and we remain committed to building on these gains
in 2018."
OVERVIEW
The focus on safety remains a key priority for the group. The continuous effort in our safety performance
included a focus on fatality elimination with an emphasis on leadership, operational risk management,
implementation of critical controls and learning from incidents. This has resulted in encouraging improvements
reflected in our leading indicator reporting. No fatalities were recorded during 2017. High potential incidents,
which are those that could have resulted in a fatal accident, have reduced by 46% in 2017. On the lagging
indicators, the total recordable case frequency rate, which is a measure of frequency of injuries, dropped 17%
to 0.65 (2016: 0.78) and the lost-time injury frequency rate (LTIFR) decreased 39% to 0.17 (2016: 0.28). Kumba
mined total tonnes of 271.3 Mt during 2017, an increase of 12%. Total production increased to 45 Mt due to
significant productivity improvements at Sishen, which achieved 31.1 Mt, and a continued solid performance at
Kolomela, delivering 13.9 Mt. Total export sales volumes increased by 7% to 41.6 Mt (2016: 39.1 Mt)
due to higher production, whilst total sales volumes increased by 6% to 44.9 Mt (2016: 42.5 Mt).
Kumba achieved an average cash breakeven price of US$40/tonne (62%Fe CFR China), an increase of US$11/tonne
from the average for the 2016 year. Controllable costs increased by US$1/tonne as mining related inflation and
higher mining volumes from a rising stripping ratio were partially offset by production gains and operating
efficiency improvements. Non-controllable costs rose by US$10/tonne as a result of lower market premiums
(US$1/tonne), higher freight rates (US$5/tonne), and a stronger currency which added US$4/tonne.
Headline earnings increased by 12% to R9.7 billion (2016: R8.7 billion), mainly as a result of an 11% increase
in the average realised iron ore export price to US$71/tonne (2016: US$64/tonne), and 6% higher total sales
volumes. Attributable and headline earnings for the year were R38.63 and R30.47 per share respectively
(2016: R26.98 and R27.30). The increase in attributable earnings is mainly due to the increase in revenue and
the reversal of the impairment charge recognised in 2015.
DIVIDEND
In accordance with the Board's policy of returning excess cash to shareholders whilst retaining a high level
of balance sheet flexibility, a discretionary approach continues to be applied. The Board has declared a final
cash dividend of R15 per share, which together with the interim dividend, results in a total dividend for the
year of R30.97 per share.
The Board will continue to assess the group's requirements at each interim and annual reporting period, taking
into account the prevailing risks and opportunities, as well as the future earnings outlook.
MARKET OVERVIEW
The Platts 62% Fe CFR index gained 22% year on year, averaging US$71/tonne during 2017, on the back of
improved demand conditions and slower iron ore supply growth. China's Fixed Asset Investment expanded 7.2% year
on year while stricter enforcement of environmental regulations saw around 200 Mt of obsolete steelmaking capacity
being taken offline through the year, increasing domestic steel prices by 60%. Amid record profitability levels,
Chinese mills sought to maximise productivity and consequently preferred premium quality ores, pushing product
premia and discounts to record highs. Consequently, the Platts 65/Platts 62 index differential rose to a record
US$25.20/dmt in October and averaged US$16.09/dmt for 2017, around two and a half times more compared to the
2016 level.
Seaborne iron ore supply growth slowed, with the traditional supply basins of Australia, Brazil and South Africa
adding a combined 41 million wet metric tonnes of iron ore supply to the seaborne market - the lowest level
since 2006. However, strengthening iron ore prices incentivised some high cost supply back into the market,
with shipments from marginal seaborne suppliers rising 11% year on year, primarily driven by India.
Lump premiums were volatile in 2017. The premium fell to an historic low of almost 2 US cents/dmtu in April
but then witnessed a sustained recovery to reach a new record high of almost 46 US cents/dmtu in September with
2017 averaging at 15 US cents/dmtu. The anti-pollution drive in China buoyed the demand for direct charge ores
including lumps.
OPERATIONAL PERFORMANCE
Production summary (unaudited)
December December
'000 tonnes 2017 2016 % change
Total 44,983 41,476 8
Lump 29,812 26,802 11
Fines 15,171 14,674 3
Mine production 44,983 41,476 8
Sishen mine 31,119 28,380 10
Kolomela mine 13,864 12,726 9
Thabazimbi mine - 370 (100)
Despite the challenging first quarter, the group produced a total of 45 Mt.
Sishen mine
The new mine plan and ongoing implementation of the Operating Model delivered further productivity gains,
including significant fleet productivity improvements, and were the main drivers of Sishen's strong performance.
The mine implemented increased operator training, changed shift patterns and introduced more accountability at
supervisory levels. Through these measures and higher attendance rates from a committed workforce, the mine has
been able to increase direct operating hours (DOH), adding extra production hours per day. In the pit, wider benches,
changed blast sizes and improved shovel productivity contributed to an increase in mining volumes.
Total tonnes mined at Sishen increased by 12% to 199.5 Mt (2016: 178.3 Mt) with 39% fewer trucks. Consistent with the
mine plan, the stripping ratio increased to 4.3 compared to 3.3 in 2016. Consequently, the amount of waste mined also
increased, as planned, to 162 Mt (2016: 137 Mt). Sishen's production increased by 10% to 31.1 Mt (2016: 28.4 Mt) due
to increased plant throughput and higher plant yields.
The Dingleton project is substantially complete, with 496 homes relocated and continuing negotiations in progress with
the remaining 14 households still to be relocated.
Kolomela mine
Total tonnes mined increased by 12% to 71.8 Mt (2016: 64 Mt). Waste mined was 55.6 Mt (2016: 50.2 Mt), an increase of
11%, supporting higher production levels. Kolomela's production was 9% higher at 13.9 Mt (2016: 12.7 Mt), reflecting
productivity improvements. Productivity and efficiencies of the Kolomela drill fleet increased by 20% with the
introduction of automated drilling technology. The Kolomela modular plant delivered 0.5 Mt, although performance was
affected by delays in the ramp-up of the crushing plant.
Operating Model
The Operating Model ensures more stable operations, reduced variability and enhanced capability and efficiency,
providing a structured approach for continuous improvement.
Implementation at Sishen during 2017 focused on support and services work, which enables a fully integrated view of
all activities in the pit. The most visible and immediate impact was the reduction of unscheduled work by up to 40%
in some areas. This has a direct impact on safety, planned work, productivity, elimination of waste and improvement
in efficiencies. Scheduled compliance and scheduled work are two of the important leading indicators of stability in
the process.
At Kolomela a 7.6% improvement in Direct Shipping Ore plant throughput was achieved while Sishen has achieved an 84%
improvement in mine to plan compliance since 2015. The stabilised roll-outs at the Kolomela plant and Sishen shovel
maintenance areas continue to demonstrate benefits.
Logistics
Despite severe weather disruptions at port and rail in the early part of 2017, Kumba's higher production led to a 6%
increase in volumes railed on the Sishen-Saldanha Iron Ore Export Channel to 42 Mt (2016: 39.8 Mt).
Following a strong fourth quarter, Kumba shipped 41.6 Mt (2016: 38.7 Mt) from the Saldanha port destined for the
export market, an increase of 7%, including 1.4 Mt shipped through the multi-purpose terminal (MPT) at the
Saldanha port.
Sales summary (unaudited)
December December
'000 tonnes 2017 2016 % change
Total 44,892 42,484 6
Export sales 41,615 39,061 7
Domestic sales 3,277 3,423 (4)
Sishen mine 3,277 2,735 20
Thabazimbi mine - 688 (100)
Sales
Total export sales increased by 7% to 41.6 Mt (2016: 39.1 Mt), including 0.6 Mt sourced from third party producers,
whilst total sales were 44.9 Mt (2016: 42.5 Mt), consistent with higher production levels. CFR sales accounted for
69% of export sales volumes (2016: 70%). Finished product inventory held at the mines and ports increased from 3.5 Mt
to 4.3 Mt. China accounted for 63% (2016: 64%) of Kumba's export sales portfolio while the share of EU/MENA/Americas
region increased to 18%, as Kumba further diversified its customer portfolio in the region. The group's lump:fine
ratio was higher at 66:34 for the year (2016: 64:36).
FINANCIAL RESULTS
Revenue
Total revenue increased by 14% to R46.4 billion compared to R40.8 billion for 2016, mainly as a result of the 11%
increase in the average realised iron ore export price to US$71/tonne (2016: US$64/tonne), and 6% higher total sales
volumes. These gains were partially offset by the 9% strengthening of the average Rand/US$ exchange rate to R13.30/US$1
(2016: R14.69/US$1). Firmer freight rates resulted in a R1.7 billion increase in shipping revenue.
Kumba's average achieved FOB price improved by US$7/tonne compared to 2016, driven by stronger average iron ore index
prices and higher lump premiums, offsetting the impact of higher freight rates. The average 62% Platts index increased
by US$13/tonne, whilst the achieved lump premium increased by US$0.31/tonne and freight rates increased by US$5/tonne
compared to 2016.
Average Platts Index lump premiums largely stabilised at US$0.15/dmtu on the back of improved demand for direct
charge material.
Operating expenses
Operating expenses, excluding the reversal of the Sishen impairment, increased by 17% to R29.8 billion compared to
R25.4 billion in the prior year, principally as a result of the 12% increase in total mining volumes, together with
the 8% increase in production volumes and inflationary pressure on input costs. This was partially offset by savings
in mining costs from productivity measures, overhead reductions and less use of contractors. Selling and distribution
costs increased by 3% in real terms, driven by a 6% increase in sales volumes railed.
Higher freight costs of R1.4 billion were incurred due to the average Platts freight rate on the Saldanha-Qingdao
route increasing to US$12/tonne. Spot freight rates averaged US$11.54/tonne, a 66% increase from US$6.95/tonne in 2016.
Cost savings were achieved through comprehensive programmes aimed at reducing overheads and on-mine costs, which,
together with higher production, resulted in unit cash costs being lower than guidance.
Unit cash costs at Sishen decreased by 3% to R287/tonne (2016: R296/tonne). This was primarily a result of higher
production volumes and cost savings from the continued improvements in operating efficiencies, partially offset
by mining related cost escalations and the higher stripping ratio of 4.3 (2016: 3.3) which increased waste volumes
by 18%.
Kolomela mine incurred unit cash costs of R237/tonne (2016: R201/tonne), an 18% increase in line with expectations,
due to higher mining volumes, above inflationary pressures from higher fuel prices, and additional costs associated
with the modular plant. The modular plant costs will continue to be incurred in future.
Earnings before interest, tax, depreciation and amortisation (EBITDA)
EBITDA of R19.6 billion was 6% higher compared to R18.4 billion in the previous year, on the back of a 6%
improvement in total sales volumes and an 11% increase in the average realised FOB export iron ore price to
US$71/tonne (2016: US$64/tonne), partially offset by an increase in mining volumes and cost inflation, including higher
freight rates.
Kumba's EBITDA margin decreased by 3 percentage points to 42% (2016: 45%), mainly as a result of uncontrollable
factors such as the increase in freight rates. The group's mining operating margin decreased to 40% (2016: 41%),
excluding the net freight loss incurred on shipping operations, mainly as a result of long-term fixed price chartering
contracts. Net profit (after the impairment reversal) increased by 45% to R16.1 billion (2016: R11.1 billion).
Cash flow
Cash flow generated from operations increased by 30% to R22.4 billion (2016: R17.2 billion), driven by higher average
realised iron ore prices and increased sales volumes. The group ended the year with a net cash position of R13.9 billion
(2016: R6.2 billion). The group's working capital remains healthy. The decrease in trade and other receivables of
R2.5 billion is mainly due to an increase in collections in December 2017 compared to the prior year.
Capital expenditure of R3.1 billion was incurred: R1.3 billion on stay-in-business (SIB) activities, R1.2 billion on
deferred stripping, and R0.6 billion on expansions, which comprised R0.3 billion on the Dingleton project and
R0.3 billion on the Sishen modular plant. The relocation of the remaining houses in Dingleton is expected to be
completed during 2018.
Impairment review
Given the improved market conditions since the 2015 year end when an impairment charge of R6 billion was recognised
for Sishen, it was considered appropriate to re-assess the mine's recoverable amount at 31 December 2017. Sishen has
achieved improved levels of production and operating efficiencies. Additionally, whilst the long term outlook for
iron ore has remained broadly unchanged since 2015, the outlook for market conditions in the nearer term has improved.
These factors have resulted in an increase in the recoverable amount of the mine to above its previous carrying value.
In this context, the impairment charge previously recognised was reversed.
Refer to note 5 in the summarised consolidated financial statements which details the key assumptions applied.
ORE RESERVES AND MINERAL RESOURCES
The following changes were recorded for the 2017 Kumba Ore Reserves and Mineral Resources Statement.
Kumba's total ore reserves as at 31 December 2017 are estimated to be 676.4 Mt (at 59.6% Fe) at Sishen and Kolomela,
a net decrease of 9% from 744 Mt in 2016.
Sishen's ore reserves decreased 9% year-on-year, mainly attributable to the annual accelerated production on the back
of improved mining productivity, and more stringent resource-to-reserve modifications.
As a result of the productivity improvements built into the updated life of mine plan, Sishen's reserve life has
reduced from 17 years in 2016 to 13 years in 2017.
A more stringent resource-to-reserve conversion approach was adopted at Kolomela to ensure that the direct shipping
ore operation continues to deliver a niche high-grade product that will maintain Kumba's realised price. This is now
similar to the approach applied at Sishen mine and resulted in Kolomela's reserve life reducing from 18 years in 2016,
to 14 years in 2017. Kolomela's ore reserves decreased by 8% year-on-year due to annual production.
Kumba's estimated mineral resources, in addition to its ore reserves, totalled 1.2 billion tonnes (at 46.7% Fe), a
year-on-year increase of 9%.
REGULATORY UPDATE
The Reviewed Mining Charter (MCIII)
In June 2017, the South African Department of Mineral Resources (DMR) published its Reviewed Mining Charter 2017
(MCIII). Kumba expressed its concern that the MCIII was not concluded through agreement between the DMR and all
relevant stakeholders.
Kumba is supportive of the legal action followed by the Chamber of Mines, with the ultimate objective of arriving at a
negotiated solution that is practical to implement, and which preserves and enhances investment in what is a critically
important industry for South Africa. Kumba welcomed the DMR's written undertaking that the provisions of the 2017
Reviewed Mining Charter will not be implemented or applied in any way, pending judgment in the review application
brought by the Chamber of Mines. The hearing on the Chamber of Mine's Declarator on the "once empowered always empowered"
issue was heard in November 2017, with the outcome expected after 90 days. The hearing on the review of the Mining Charter
has been set for 19 to 21 February 2018.
Sishen consolidated mining right granted
Sishen's application to extend the mining right by the inclusion of the adjacent Prospecting Rights was granted on 6
July 2017 and the process to amend the Sishen mining right continues. Mining operations in this area will only commence
once the required environmental authorisation has been approved, which is expected soon. The grant allows Sishen mine to
expand its current mining operations within the adjacent Dingleton area.
Thabazimbi transfer to ArcelorMittal SA
Sishen Iron Ore Company Proprietary Limited (SIOC) and ArcelorMittal SA announced in 2016 that they had entered into
an agreement to transfer Thabazimbi mine to ArcelorMittal SA, subject to the fulfilment of certain conditions. As the
DMR has not yet issued the Section 11 the deadline has been extended to 31 March 2018. If the conditions are not satisfied
by this time and there is no agreement by the parties to extend it, the agreement will lapse and SIOC will proceed with
the closure of the mine.
The agreement is expected to become effective in the second half of 2018, at which time the employees, assets and
liabilities will transfer to ArcelorMittal SA at a nominal purchase consideration plus the assumed liabilities of
which 97% is already ArcelorMittal SA's contractual liability. The Thabazimbi mine assets and related liabilities
that will transfer have been presented separately in the balance sheet as assets and liabilities of the disposal
group held for sale at 31 December 2017 (refer to note 12 in the summarised consolidated financial statements).
EVENTS AFTER THE REPORTING PERIOD
There were no significant events from 31 December 2017 to the date of this report, not otherwise dealt with in this
report.
CHANGES IN DIRECTORATE
The following directors tendered their resignations from the Board during the 2017 financial year:
- Mr Andile Sangqu as a non-executive director, and shareholder representative of Anglo American, with effect
from 24 March 2017.
- Ms Natascha Viljoen as a non-executive director, and shareholder representative of Anglo American, with effect
from 24 March 2017.
- Ms Zarina Bassa as an independent non-executive director of the Board and chairperson of the Audit Committee,
with effect from 11 May 2017.
- Mr Frikkie Kotzee as executive director of the Board, following his resignation as Chief financial officer
of the group, with effect from 11 May 2017.
- Mr Fani Titi as an independent non-executive director and chairperson of the Board, with effect from
30 September 2017.
The Board thanked all the above listed directors for their contributions and guidance during their respective
tenures and wishes them all the best in their future endeavours.
The Board announced the following appointments to the Board:
- Mr Terence Goodlace as an independent non-executive director with effect from 24 March 2017.
- Mr Seamus French as a non-executive director and a shareholder representative of Anglo American with effect
from 24 March 2017.
- Mr Stephen Pearce as a non-executive director and a shareholder representative of Anglo American with effect
from 24 March 2017.
- Mr Sango Ntsaluba as an independent non-executive director of the Board and chairman of the Audit Committee,
with effect from 5 June 2017.
- Dr Mandla Gantsho as an independent non-executive director and chairman of the Board, with effect from
1 August 2017.
- Mr Bothwell Mazarura as Chief financial officer and executive director, effective 1 September 2017.
- Ms Mary Bomela as an independent non-executive director of the Board with effect from 1 December 2017.
- Ms Nomalizo Langa-Royds as an independent non-executive director of the Board with effect from 1 December 2017.
CHANGES IN MANAGEMENT
Mr Bothwell Mazarura replaced Mr Frikkie Kotzee as Chief financial officer on 1 September 2017.
Ms Avanthi Parboosing resigned as Company secretary with effect from 30 June 2017. The Board thanked her for her
valued contribution to the Company. Ms Celeste Appollis was appointed Company secretary from 1 December 2017.
Mr Johan Prins, who was acting Chief financial officer from 11 May 2017 to 1 September 2017, and Mr Itumeleng Lebepe,
who was acting Company secretary from 1 July 2017 to 30 November 2017, were thanked for their services and handling
of dual roles during these periods.
Mr Philip Fourie was appointed Head of safety, health and environment on 1 May 2017 after the resignation of
Mr Alex Mgadzah who held the position from January 2011 until 30 April 2017. Mr Billy Mawasha, Executive head of
operations and integration from September 2013, resigned on 30 June 2017.
OUTLOOK
Full year production guidance for 2018 is between 44 to 45 Mt. Sishen is expected to produce between 30 to 31 Mt of
product and mine between 170 to 180 Mt of waste in 2018. Sishen's stripping ratio is expected to exceed 4 in 2018,
with the LoM average at ~4. Kolomela's production guidance for 2018 is around 14 Mt and waste of 55 to 57 Mt.
Kolomela's stripping ratio is expected to exceed 3.5 in 2018, with the LoM average at ~4.
Total sales volumes of 44 to 45 Mt are expected in 2018. Domestic sales volumes of up to 6.25 Mt are contracted to
ArcelorMittal SA in terms of the supply agreement, however, around 3 Mt is the expected volume for 2018.
Sishen unit costs are expected to be between R295/tonne and R305/tonne and Kolomela unit costs to be between R240/tonne
and R250/tonne in 2018.
Capital expenditure for 2018, including deferred stripping, is expected to be in the range of R3.9 billion to
R4.1 billion.
The group's performance remains sensitive to the volatility in iron ore export prices and the Rand/US$ exchange
rate.
Themba Mkhwanazi concluded, "Building on our strong results this year, we want to make sure we are taking the
right steps to ensure a sustainable long-term business for Kumba, in order to maximise value for all our
stakeholders.
We have structured our full potential transformation agenda around three horizons to improve the performance
of our current assets in the near term, to invest to grow our core business over the medium term and in the
longer term to consider expansion into attractive opportunities.
Our priority now is on driving operations to unlock their full potential, rationalising external expenditure,
reinforcing the integration of sales and operational planning and building a more effective organisation. In the
medium and longer term we will focus on development of new technologies to process lower grade material and life
extension projects. As we progress on this transformation journey, we will keep the market informed."
The presentation of the Company's results for the year ended 31 December 2017 will be available on the Company's
website http://www.angloamericankumba.com at 07:05 CAT and the webcast will be available from 11:30 CAT on
13 February 2018.
SALIENT FEATURES AND OPERATING STATISTICS
for the year ended
Unaudited Unaudited
31 December 31 December
2017 2016
Share statistics ('000)
Total shares in issue 322,086 322,086
Weighted average number of shares 319,303 319,521
Treasury shares 2,627 2,798
Market information
Closing share price (Rand) 379 159
Market capitalisation (Rand million) 122,112 51,212
Market capitalisation (US$ million) 9,923 3,730
Net asset value attributable to owners of Kumba (Rand per share) 107.95 86.47
Capital expenditure (Rand million)
Incurred 3,074 2,353
Contracted 597 644
Authorised but not contracted 1,634 2,208
Operating commitments
Operating lease commitments 794 89
Shipping services 5,260 8,692
Economic information
Average Rand/US Dollar exchange rate (ZAR/US$) 13.30 14.69
Closing Rand/US Dollar exchange rate (ZAR/US$) 12.31 13.73
Sishen mine FOR unit cost
Unit cost (Rand per tonne) 375.42 412.04
Cash cost (Rand per tonne) 287.33 296.19
Unit cost (US$ per tonne) 28.23 28.05
Cash cost (US$ per tonne) 21.60 20.16
Kolomela mine FOR unit cost
Unit cost (Rand per tonne) 336.67 283.42
Cash cost (Rand per tonne) 236.67 201.09
Unit cost (US$ per tonne) 25.31 19.29
Cash cost (US$ per tonne) 17.79 13.69
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at
Audited Audited
31 December 31 December
Rand million Notes 2017 2016
Assets
Property, plant and equipment 5 36,833 32,131
Biological assets 3 2
Investments held by environmental trust 627 559
Long-term prepayments and other receivables 211 84
Inventories 6 2,841 2,889
Deferred tax assets 72 87
Non-current assets 40,587 35,752
Inventories 6 4,061 4,604
Trade and other receivables 2,709 5,253
Cash and cash equivalents 8 13,874 10,665
Current assets 20,644 20,522
Assets of disposal group classified as held for sale 12 1,235 938
Total assets 62,466 57,212
Equity
Shareholders' equity 7 34,769 27,850
Non-controlling interests 10,777 8,686
Total equity 45,546 36,536
Liabilities
Interest-bearing borrowings 8 - 4,500
Provisions 1,860 1,967
Deferred tax liabilities 8,860 7,462
Non-current liabilities 10,720 13,929
Provisions 147 164
Trade and other payables 4,945 3,741
Current tax liabilities 59 1,906
Current liabilities 5,151 5,811
Liabilities of disposal group classified as held for sale 12 1,049 936
Total liabilities 16,920 20,676
Total equity and liabilities 62,466 57,212
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT AND LOSS
for the year ended
Audited Audited
31 December 31 December
Rand million Notes 2017 2016
Revenue 46,379 40,155
Operating expenses (24,989) (24,881)
Operating profit 9 21,390 15,274
Finance income 637 295
Finance costs (339) (496)
Share of profit of equity accounted joint venture - 2
Profit before taxation 21,688 15,075
Taxation (5,481) (3,934)
Profit for the year from continuing operations 16,207 11,141
Discontinued operation
(Loss)/profit from discontinued operation 12 (74) 3
Profit for the year 16,133 11,144
Attributable to:
Owners of Kumba 12,335 8,621
Non-controlling interests 3,798 2,523
16,133 11,144
Basic earnings/(loss) per share attributable to the
ordinary equity holders of Kumba (Rand per share)
From continuing operations 38.86 26.97
From discontinued operation (0.23) 0.01
Total basic earnings per share 38.63 26.98
Diluted earnings/(loss) per share attributable to the
ordinary equity holders of Kumba (Rand per share)
From continuing operations 38.60 26.83
From discontinued operation (0.23) 0.01
Total diluted earnings per share 38.37 26.84
SUMMARISED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the year ended
Audited Audited
31 December 31 December
Rand million 2017 2016
Profit for the year 16,133 11,144
Other comprehensive income for the year (454) (233)
Exchange differences on translation of foreign operations1 (454) (233)
Total comprehensive income for the year 15,679 10,911
Attributable to:
Owners of Kumba 11,989 8,442
Non-controlling interests 3,690 2,469
15,679 10,911
1 There is no tax attributable to items included in other comprehensive income and items subsequently
reclassified to profit or loss.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended
Audited Audited
31 December 31 December
Rand million 2017 2016
Total equity at the beginning of the year 36,536 25,167
Changes in share capital and premium
Treasury shares issued to employees under employee share
incentive schemes 121 197
Purchase of treasury shares1 (61) (180)
Changes in reserves
Equity-settled share-based payment 135 513
Vesting of shares under employee share incentive schemes (121) (197)
Total comprehensive income for the year 11,989 8,442
Dividends paid (5,144) -
Changes in non-controlling interests
Total comprehensive income for the year 3,690 2,469
Dividends paid (1,599) -
Equity-settled share-based payment - 125
Total equity at the end of the year 45,546 36,536
Comprising
Share capital and premium (net of treasury shares) (54) (114)
Equity-settled share-based payment reserve 186 172
Foreign currency translation reserve 916 1,262
Retained earnings 33,721 26,530
Shareholders' equity 34,769 27,850
Attributable to the owners of Kumba 34,769 27,850
Attributable to non-controlling interests - -
Non-controlling interests 10,777 8,686
Total equity 45,546 36,536
Dividend (Rand per share)
Interim 15.97 -
Final2 15.00 -
1 The average price paid for the purchase of the shares in 2017 was R214.77 per share
(2016: R83.90 per share).
2 The final dividend was declared after 31 December 2017 and has not been recognised as a liability
in this summarised financial report. It will be recognised in shareholders' equity for the 2018
financial year.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended
Audited Audited
31 December 31 December
Rand million 2017 2016
Cash generated from operations 22,432 17,218
Income from investments - 2
Net finance income/(cost) 461 (319)
Taxation paid (5,883) (3,363)
Cash flows from operating activities 17,010 13,538
Additions to property, plant and equipment (3,074) (2,353)
Proceeds from the disposal of property, plant and equipment 27 9
Cash flows utilised in investing activities (3,047) (2,344)
Purchase of treasury shares (61) (180)
Dividends paid to owners of Kumba (5,144) -
Dividends paid to non-controlling shareholders (1,599) -
Net interest-bearing borrowings repaid (4,500) (3,705)
Cash flows utilised in financing activities (11,304) (3,885)
Net increase in cash and cash equivalents 2,659 7,309
Cash and cash equivalents at beginning of year 10,665 3,601
Foreign currency exchange loss/(gain) on cash and cash equivalents 550 (245)
Cash and cash equivalents at end of year 13,874 10,665
HEADLINE EARNINGS
for the year ended
Audited Audited
31 December 31 December
Rand million 2017 2016
Reconciliation of headline earnings
Profit attributable to owners of Kumba 12,335 8,621
Impairment (reversal)/charge (4,789) 4
Net loss on disposal and scrapping of property,
plant and equipment 63 186
7,609 8,811
Taxation effect of adjustments 1,309 (54)
Non-controlling interests in adjustments 810 (33)
Headline earnings 9,728 8,724
Headline earnings (Rand per share)
Basic 30.47 27.30
Diluted 30.26 27.16
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 319,302,962 319,520,658
Diluted weighted average number of ordinary shares 321,481,081 321,163,523
The dilution adjustment of 2,178,119 shares at 31 December 2017 (2016: 1,642,865) is a result of the
vesting of share options previously granted under the various employee share incentive schemes.
NORMALISED EARNINGS
for the year ended
Audited Audited
31 December 31 December
Rand million 2017 2016
Reconciliation of normalised earnings
Headline earnings attributable to owners of Kumba 9,728 8,724
Net utilisation/(recognition) of deferred tax asset1 14 (87)
9,742 8,637
Taxation effect of adjustments - -
Non-controlling interests in adjustments (3) 21
Normalised earnings 9,739 8,658
Normalised earnings (Rand per share)
Basic 30.50 27.10
Diluted 30.29 26.96
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 319,302,962 319,520,658
Diluted weighted average number of ordinary shares 321,481,081 321,163,523
1 The 2017 amount includes the utilisation of prior year deferred tax asset of R86 million (2016: Rnil).
This measure of normalised 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 recognition and utilisation of the deferred tax asset
is a non-recurring item and has therefore been adjusted in determining normalised earnings.
NOTES TO THE AUDITED SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2017
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 2017 were authorised for issue in accordance with a resolution of the directors on 9 February 2018.
2. BASIS OF PREPARATION
The audited summarised consolidated financial statements have been prepared, under the supervision of
BA Mazarura CA(SA), Chief financial officer, in accordance with the requirements of the JSE Limited Listings
Requirements for provisional reports, and the requirements of the South African Companies Act No 71 of 2008
applicable to summary financial statements. The Listings Requirements require provisional 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 Financial Reporting Standards Council and to
also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The audited consolidated financial statements from which these summarised consolidated financial statements
were derived have been prepared in accordance with the historical cost convention except for certain financial
instruments, share-based payments, discontinued operation held for sale and biological assets which are stated
at fair value, and are presented in Rand, which is Kumba's functional and presentation currency.
3. ACCOUNTING POLICIES
The accounting policies and methods of computation applied in the preparation of these consolidated financial
statements from which the summarised 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 Amendments to published standards and interpretations
A number of amendments to accounting standards were effective for the first time for the financial year beginning
on or after 1 January 2017. Comparative information has not been presented.
3.2 New standards, amendments to existing standards and interpretations that are not yet effective and have not
been early adopted
In 2017 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 2017 are IFRS 9 Financial Instruments and IFRS 15 Revenue from contracts
with customers. Based on the preliminary assessment performed, the group does not anticipate a significant impact on
its consolidated financial statements.
4. CHANGES IN ESTIMATES
The measurement of the environmental rehabilitation and decommissioning provisions is 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 reporting period date, for changes in these estimates. The life of mine plan (LoMP)
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. The most significant changes in the provisions for 2017 arises from the
change in the LoMP as well as the timing of the expected cash flows for both Sishen and Kolomela. The effect of the
change in estimate of the rehabilitation and decommissioning provision, which was applied prospectively from
1 January 2017, is detailed below:
Audited Audited
31 December 31 December
Rand million 2017 2016
Increase/(decrease) in environmental rehabilitation provision 77 (6)
(Decrease)/increase in decommissioning provision (199) 9
Increase in profit after tax attributable to the owners of Kumba 42 3
Rand per share
Effect on earnings per share attributable to the owners of Kumba 0.13 -
The change in estimate of the decommissioning provision has been capitalised to the related property, plant and equipment
and as a result had an insignificant effect on profit or earnings per share.
5. PROPERTY, PLANT AND EQUIPMENT
Audited Audited
31 December 31 December
Rand million 2017 2016
Capital expenditure 3,074 2,520
Comprising:
Expansion 575 856
Stay in business (SIB) 1,305 1,343
Deferred stripping 1,194 321
Transfers from assets under construction to property, plant and equipment 1,704 2,392
Expansion capital expenditure comprises mainly of the expenditure on the Dingleton relocation project and Sishen's
second modular plant. SIB capital expenditure to maintain operations was principally related to infrastructure to
support mining and plant operations.
The increase in the deferred stripping costs is mainly attributable to the increase in the actual stripping ratio of
the Sishen mine components to which the capitalisation relates.
Impairment reversal
Kumba produces iron ore at Sishen and Kolomela mines in the Northern Cape Province. The two mines are treated as
separate cash generating units (CGUs). The Sishen CGU consists of the Sishen mining assets located in the Northern Cape
and an allocation of corporate assets.
At 31 December 2015, the Sishen CGU was impaired by R6 billion, with an associated deferred tax credit of
R1.7 billion as a result of a deterioration in the long-term outlook for iron ore prices, which led to a
reconfiguration of the Sishen pit shell to improve cash flows. The carrying amount of the Sishen CGU, consisting of
property, plant and equipment, at 31 December 2017 was R19.4 billion. The remaining balance of the impairment, after
deducting notional depreciation, was R4.8 billion, including the remaining balance of the associated deferred tax of
R1.3 billion. Kolomela was never impaired.
During 2017, Sishen mine achieved improved levels of production and operating efficiencies. Additionally, whilst the
long-term outlook for the iron ore price has remained broadly unchanged since 2015, the outlook for market conditions
in the nearer term has improved. Consequently, the recoverable amount of Sishen mine has been assessed and the previous
impairment reversed. The revised carrying value is now R24.2 billion and was increased by R4.8 billion (R2.6 billion
after tax and non-controlling interests).
The recoverable amount, based on discounted cash flows, is sensitive to changes in input assumptions particularly
in relation to future iron ore prices and Rand/US$ foreign exchange rates. For example, a US$5/tonne increase or
decrease in the long-term price forecast for iron ore equates to a R3.2 billion increase or R3.5 billion decrease
in the recoverable amount. The recoverable amount has been assessed under a range of valuation scenarios,
incorporating downside adjustments to both operating and economic assumptions, all of which indicate headroom over
the revised carrying value of R24.2 billion. For example, under the most conservative long-term downside case, the
headroom is R6.7 billion.
Cash flow projections were determined for the life of the Sishen mine. Inputs into the discounted cash flow model
were based on economic assumptions and forecast trading conditions drawn up by management. To the extent that
specific risk factors were not incorporated into the discount rate, adjustments were made to the cash flow
projections.
Of this reversal, R368 million has been recorded against land and buildings, R347 million against buildings and
infrastructure, R2.3 billion against machinery, plant and equipment, R812 million against site preparation and
development, R910 million against assets under construction and R61 million against mineral rights.
Sensitivity analyses were performed to determine whether a reasonable possible change in any of the key assumptions
would result in an additional impairment, partial reversal or no reversal of the previous impairment. Reasonable
downward changes in any of the key assumptions would still provide sufficient headroom to support full reversal
of the impairment recognised in 2015.
6. INVENTORY
Audited Audited
31 December 31 December
Rand million 2017 2016
Finished product 1,240 1,478
Work-in-progress 4,238 4,466
Plant spares and stores 1,424 1,554
Current inventory transferred to assets of disposal
group classified as held for sale - (5)
Total inventories 6,902 7,493
Non-current portion of work-in-progress inventories 2,841 2,889
Total current inventories 4,061 4,604
Total inventories 6,902 7,493
During the year, the group wrote down inventory of R726 million. R228 million (2016: R8 million) of inventory was
written off to a zero carrying amount. No inventories were encumbered during the year.
Work-in-progress inventory balances which will not be processed within the next 12 months are presented as non-current.
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 2017 2016
Balance at beginning of year (114) (131)
Net movement in treasury shares under employee
share incentive schemes 60 17
Purchase of treasury shares (61) (180)
Share issued to employees 121 197
Balance at the end of the year (54) (114)
Reconciliation of number of shares in issue:
Number of shares Audited Audited
31 December 31 December
2017 2016
Balance at beginning and end of year 322,085,974 322,085,974
Reconciliation of treasury shares held:
Balance at beginning of year 2,797,627 1,109,732
Shares purchased 284,194 2,140,891
Shares issued to employees under the Long-Term
Incentive Plan and Kumba Bonus Share Plan (454,844) (452,996)
Balance at the end of the year 2,626,977 2,797,627
All treasury shares are held as conditional awards under the Kumba Bonus Share Plan.
8. INTEREST-BEARING BORROWINGS
Kumba's net cash position at the statement of financial position dates was as follows:
Audited Audited
31 December 31 December
Rand million 2017 2016
Interest-bearing borrowings - (4,500)
Cash and cash equivalents 13,874 10,665
Net cash 13,874 6,165
Total equity 45,546 36,536
Interest cover (times) - 36
Movements in interest-bearing borrowings are analysed as follows:
Audited Audited
31 December 31 December
Rand million 2017 2016
Balance at the beginning of the year 4,500 8,205
Interest-bearing borrowings raised - 30
Interest-bearing borrowings repaid (4,500) (3,735)
Balance at the end of the year - 4,500
The group's committed debt facilities of R12 billion (revolving facility) mature in 2020. The group had undrawn
committed facilities of R12 billion (31 December 2016: R12 billion) and uncommitted facilities of R8.3 billion
(31 December 2016: R8.3 billion).
9. SIGNIFICANT ITEMS INCLUDED IN OPERATING PROFIT
Operating expenses is made up as follows:
Audited Audited
31 December 31 December
Rand million 2017 2016
Production costs 17,824 15,819
Movement in inventories 452 (368)
Finished products 224 84
Work-in-progress 228 (452)
Cost of goods sold 18,276 15,451
Impairment reversal1 (4,789) -
Mineral royalty 1,239 963
Selling and distribution costs 5,815 5,379
Cost of services rendered - shipping 4,485 3,115
Sublease rent received (37) (27)
Operating expenses 24,989 24,881
Operating profit has been derived after taking into account the following items:
Employee expenses 4,030 3,498
Net restructuring costs 8 384
Share-based payment expenses 146 647
Depreciation of property, plant and equipment 3,014 3,089
Deferred waste stripping costs (1,194) (321)
Net loss on disposal and scrapping of property, plant and equipment 63 191
Gain on lease receivable - (164)
Net finance losses/(gains) 216 (657)
Net gains on derivative financial instruments
Realised2 - (420)
Unrealised (112) (570)
Net foreign currency losses
Realised 310 286
Unrealised 77 69
Fair value gains on investments held by the environmental trust (59) (22)
1 Refer to note 5 for details.
2 The realised gains/losses on derivative financial instruments have been reclassified from operating expenses to
revenue in the current year. The prior year impact is not considered to be material and therefore the prior year
amounts have not been reclassified.
10. TAXATION
The group's effective tax rate was 25% for the year (2016: 26%).
11. SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker (CODM). The CODM, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Kumba Executive Committee.
The Kumba Executive Committee considers the business principally according to the nature of the products and
services provided, with the identified segments each representing a strategic business unit. "Other segments"
compromise corporate, administration and other expenditure not allocated to the reported segments.
The total reported segment revenue comprises revenue from external customers, and is measured in a manner consistent
with that disclosed in the income statement. During the year, the group changed the basis of assessing the
performance of the operating segments. The performance of the operating segments is assessed based on earnings
before tax, interest, depreciation and amortisation (EBITDA), which is considered a more appropriate measure of
profitability for the group's businesses. In the prior year, the performance of operating segment was assessed based
on earnings before interest and tax (EBIT). The prior year numbers have been reclassified to show the new performance
measurement. 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 asset.
Depreciation, staff costs, impairment of assets and additions to property, plant and equipment are not reported to
the CODM per segment, but are significant items which are included in EBITDA and/or reported on for the group as
a whole.
Products1 Services Other Total3
Rand million Sishen Kolomela Thabazimbi Logistics2 Shipping
mine mine mine operations
Audited year ended
31 December 2017
Statement of
profit and loss
Revenue from external
customers 30,252 11,723 - - 4,404 - 46,379
EBITDA 18,842 7,481 (56) (5,806) (83) (820) 19,558
Significant items
included in the
statement of profit
and loss:
Depreciation 1,934 1,001 13 9 - 70 3,027
Impairment reversal (4,789) - - - - - (4,789)
Staff costs 2,523 849 - 41 - 771 4,184
Statement of
financial position
Total segment assets 695 349 - 166 - 30 1,240
Statement of
cash flows
Additions to property,
plant and equipment
Expansion capex 575 - - - - - 575
Stay-in business capex 684 446 - 2 - 173 1,305
Deferred stripping 942 252 - - - - 1,194
Products1 Services Other Total3
Rand million Sishen Kolomela Thabazimbi Logistics2 Shipping
mine mine mine operations
Audited year ended
31 December 2016
Statement of
profit and loss
Revenue from
external customers 26,644 10,764 612 - 2,747 - 40,767
EBITDA 16,186 7,481 47 (5,370) (370) 436 18,410
Significant items
included in the
statement of profit
and loss:
Depreciation 1,992 943 2 9 - 145 3,091
Staff costs 3,045 738 62 29 - 717 4,591
Impairment charge - - 4 - - - 4
Statement of
financial position
Total segment assets 606 163 - 651 - 58 1,478
Statement of
cash flows
Additions to property,
plant and equipment
Expansion capex 735 110 - - - 11 856
Stay-in business capex 729 259 - 1 - 187 1,176
Deferred stripping 88 233 - - - - 321
1 Derived from extraction, production and selling of iron ore.
2 No revenue is reported for this segment as its performance is reviewed with reference to volumes
railed and rail tariffs achieved.
3 The amounts in the total column are inclusive of the Thabazimbi mine amounts. These amounts are
not included in each line item on the statement of profit and loss as the Thabazimbi mine is a
discontinued operation and disclosed separately.
Geographical analysis of revenue and non-current assets:
Audited Audited
31 December 31 December
Rand million 2017 2016
Total revenue from external customers 46,379 40,767
South Africa 2,714 2,862
Export 43,665 37,905
China 27,260 25,054
Rest of Asia 8,538 7,730
Europe 6,626 4,846
Middle East and Africa 1,241 275
All non-current assets, excluding investments in associates and joint ventures, are located in South Africa, with
the exception of R14 million in the 2016 financial year relating to prepayments, which was located in Singapore.
12. DISCONTINUED OPERATIONS AND DISPOSAL GROUP HELD FOR SALE
All remaining plant operations at the Thabazimbi mine ceased in 2016 following the decision taken in 2015 to
close the mine. The Thabazimbi operation continues to be classified as a discontinued operation for the year ended
31 December 2017, consistent with the prior year. Analysis of the result of the Thabazimbi mine is as follows:
Audited Audited
31 December 31 December
Rand million 2017 2016
Revenue - 612
Operating expenses (69) (571)
Operating (loss)/profit (69) 41
Net finance (cost)/income1 (34) 4
(Loss)/profit before tax (103) 45
Income tax expense 29 (42)
(Loss)/profit after income tax of discontinued operation (74) 3
Attributable to owners of the parent (56) 2
Attributable to the non-controlling interests (18) 1
(Loss)/profit from discontinued operation (74) 3
Cash flow (utilised in)/from discontinued operation
Net cash flows (utilised in)/from operating activities (128) 279
Net cash (utilised in)/from discontinued operation (128) 279
1 This amount relates to discounting of the rehabilitation provision.
As previously reported, SIOC and ArcelorMittal SA entered into an agreement for the transfer of Thabazimbi mine,
together with the mining right to ArcelorMittal SA. The agreement is expected to become effective in 2018, subject
to certain conditions. The identified assets and liabilities of Thabazimbi mine (as indicated in the disclosure below)
will be transferred at a nominal purchase consideration plus the assumed liabilities. If all conditions precedent
have not been satisfied by 31 March 2018 (or a later date agreed to between the parties), the agreement will lapse
and SIOC will proceed with closure of the mine.
The requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations have been considered and
as a result, the Thabazimbi mine assets and related liabilities that will transfer to ArcelorMittal SA have been
presented as assets and liabilities held for sale as at 31 December 2017.
Assets and liabilities of disposal group held for sale at:
Audited Audited
31 December 31 December
Rand million 2017 2016
ASSETS
Property, plant and equipment - 8
Biological assets 11 18
Investments held by environmental trust 325 296
Long-term prepayments and other receivables 459 515
Inventories - 5
Trade and other receivables 440 96
Total assets 1,235 938
LIABILITIES
Non-current provisions (812) (822)
Current provisions (237) (114)
Total liabilities (1,049) (936)
Net carrying amount sold 186 2
13. 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.
The table below presents the group's assets and liabilities that are measured at fair value:
Rand million Level 11 Level 22 Level 33
Audited 12 months - 31 December 2017
Investments held by the environmental trust4 952 - -
Cash and cash equivalent
- Derivative financial assets - 393 -
- Derivative financial liabilities - (149) -
952 244 -
Audited 12 months - 31 December 2016
Investments held by the environmental trust4 855 - -
Cash and cash equivalent
- Derivative financial assets - 615 -
- Derivative financial liabilities - (28) -
855 587 -
1 Level 1 fair value measurements are derived from unadjusted quoted prices in active markets for identical assets
or liabilities.
2 Level 2 fair value measurements are derived from inputs other than quoted prices included within level 1 that
are observable either directly or indirectly (i.e. derived from market-related prices).
3 Level 3 fair value measurements are derived from valuation techniques that include inputs that are not based
on observable market data.
4 Including Thabazimbi mine's investments disclosed as held for sale in note 12.
14. RELATED PARTY TRANSACTIONS
During the year, 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
Limited3. These transactions were subject to terms that are no less favourable than those offered by
third parties.
Audited Audited
31 December 31 December
Rand million 2017 2016
Short-term deposit held with Anglo American
SA Finance Limited1 (AASAF) 6,899 7,430
- Deposit 6,899 7,430
- Weighted average interest rate (%) 7.17 7.02
Interest earned on short-term deposits with AASAF during the year 577 262
Short-term deposit held with Anglo American Capital plc1 4,907 1,991
Interest earned on facility during the year2 32 -
Interest paid on borrowings during the year - 7
- Weighted average interest rate (%) - 8.16
- Trade payable owing to Anglo American Marketing Limited1 (AAML) 635 195
- Shipping services provided by AAML 4,462 3,107
Dividends paid to Exxaro Resources Limited3 1,390 -
1 Subsidiaries of the ultimate holding company.
2 Interest earned on the deposit was earned at prevailing market rates. The interest earned on the deposit was
insignificant in the prior year.
3 Exxaro Resources Limited is SIOC's 20.62% (2016: 20.62%) Black Economic Empowerment shareholder.
15. CONTINGENT LIABILITIES
The two matters which were reported as contingent liabilities at 31 December 2016, being the South African
Revenue Service matter and the matter regarding the Sishen municipal rates and taxes, were resolved during the year.
There were no contingent liabilities at 31 December 2017.
16. REGULATORY UPDATE
The Reviewed Mining Charter (MCIII)
On 15 June 2017, the DMR published its Reviewed Mining Charter 2017 (MCIII). Kumba expressed its concern that the
MCIII was not concluded through agreement between the DMR and all relevant stakeholders, including the mining industry,
despite the best efforts of those stakeholders over the preceding year.
Kumba is supportive of the legal action followed by the Chamber of Mines, with the ultimate objective of arriving
at a negotiated solution that is practical to implement, and that preserves and enhances investment in what is a
critically important industry for South Africa. Kumba welcomed the DMR's written undertaking that the provisions of
the 2017 Reviewed Mining Charter will not be implemented or applied in any way, pending judgment in application brought
by the Chamber of Mines. Kumba will continue to engage through the Chamber of Mines. The hearing on the Chamber of Mines
Declarator on the "once empowered always empowered' issue was heard in November, with the outcome expected
after 90 days. The hearing on the review of the Mining Charter has been set for 19 to 21 February 2018.
17. CORPORATE GOVERNANCE
The group subscribes to the Code of Good Corporate Practices and Conduct and complies with the recommendations
of the King IV Report. In November 2016, the Board charter was aligned with the provisions of all relevant
statutory and regulatory requirements including amongst others King IV. Full disclosure of the group's compliance
will be contained in the 2017 Integrated Report.
18. EVENTS AFTER THE REPORTING PERIOD
There have been no material events subsequent to 31 December 2017, not otherwise dealt with in this report.
19. INDEPENDENT AUDITOR'S REPORT
These summarised consolidated financial statements for the year ended 31 December 2017 have been audited by
Deloitte & Touche, who expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion
on the consolidated financial statements from which these summarised consolidated financial statements were
derived.
A copy of the auditor's reports on the consolidated financial statements and the summarised consolidated
financial statements are available for inspection at the Company's registered office, together with the
financial statements identified in the respective auditor's reports.
The auditor's report does not necessarily report on all of the information contained in these financial results.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's
engagement they should obtain a copy of the auditor's report together with the accompanying financial information
from the issuer's registered office.
Any reference to future financial performance included in this announcement has not been audited or reported
on by the Company's auditors.
20. RESOURCES AND RESERVE
All Resources and Reserve related information listed is derived from the 2017 Kumba Iron Ore Reserve and
Resources statement (to be published on 11 April 2018) as reported under the "The South African Code for the
Reporting of Exploration Results, Mineral Resources and Mineral Reserves" (the SAMREC Code of 2016) by
Competent Persons who are employed by SIOC and have the required qualifications and experience to qualify as
Competent Persons for Mineral Resources or Mineral Reserves under the SAMREC Code.
On behalf of the Board
MSV Gantsho TM Mkhwanazi
Chairman Chief executive
9 February 2018
Pretoria
NOTICE OF FINAL CASH DIVIDEND
At its Board meeting on 9 February 2018, the directors approved a gross final cash dividend of 1,500 cents
per share on the ordinary shares from profits accrued during the period ended 31 December 2017. The dividend
has been declared from income reserves.
The dividend will be subject to a dividend withholding tax of 20% for all shareholders who are not exempt
from or do not qualify for a reduced rate of withholding tax. The net dividend payable to shareholders
subject to withholding tax at a rate of 20% amounts to 1,200.00000 cents per share.
The issued share capital at the declaration date is 322,085,974 ordinary shares.
The salient dates are as follows:
- Publication of declaration data Tuesday, 13 February 2018
- Last day for trading to qualify and
participate in the final dividend Tuesday, 6 March 2018
- Trading ex-dividend commences Wednesday, 7 March 2018
- Record date Friday, 9 March 2018
- Dividend payment date Monday, 12 March 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 7 March 2018 and
Friday, 9 March 2018 both days inclusive. Any change of address or dividend instructions must be
provided by the last day for trading.
By order of the Board
CD Appollis
Company secretary
13 February 2018
ADMINISTRATION
REGISTERED OFFICE
Centurion Gate
Building 2B
124 Akkerboom Road
Centurion, 0157
Republic of South Africa
Tel: +27 12 683 7000
Fax: +27 12 683 7009
TRANSFER SECRETARIES
Computershare Investor Services (Proprietary) Limited
Rosebank Towers, 15 Biermann Avenue
Rosebank, 2196, South Africa
PO Box 61051, Marshalltown, 2107
SPONSOR TO KUMBA
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
DIRECTORS
Non-executive: MSV Gantsho (Chairman), DD Mokgatle, AJ Morgan, BP Sonjica,
TP Goodlace (British/South African), SG French (Irish), NS Dlamini, SS Ntsaluba,
ST Pearce (Australian), MS Bomela, NB Langa-Royds
Executive: TM Mkhwanazi (Chief executive), BA Mazarura (Chief financial officer)
COMPANY SECRETARY
CD Appollis
13 February 2018
A member of the Anglo American plc group
www.angloamerican.com
Our website provides more information on our Company and its performance: www.angloamericankumba.com
Date: 13/02/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
