Wrap Text
Reviewed interim results for the six months ended 30 June 2018 and interim cash dividend declaration
KUMBA IRON ORE LIMITED
2005/015852/06
Incorporated in the Republic of South Africa
JSE code: KIO
ISIN: ZAE000085346
('Kumba' or 'the Company' or 'the group')
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018 AND INTERIM CASH DIVIDEND DECLARATION
KEY FEATURES
Safety performance improved:
- Remain fatality free
- High potential incidents reduced by 77%
Productivity and efficiency increases:
- Product quality at 64.5% Fe
- Production up by 3% to 22.4 Mt
- Realised cost savings of R415 million
- Break-even price of US$46/tonne
Well positioned to continue delivering sustainable shareholder returns:
- Headline earnings of R3 billion
- Strong balance sheet with net cash of R11.7 billion
- Interim cash dividend of R14.51 per share
Challenging operating environment:
- Iron Ore Export Channel derailments
- Market volatility
Commentary
CONTINUED SAFETY, PRODUCTIVITY AND EFFICIENCY GAINS
"Kumba's strategy of 'Transformation to full potential', called 'Tswelelopele', resulted in a solid operating
performance across the value chain and continued to deliver shareholder returns. Attributable free cash flow of
R2.8 billion and a strong opening cash position translated into an interim cash dividend of R4.7 billion,
despite the impact of a stronger rand and softer iron ore prices.
Total tonnes mined increased by 12%, while production increased by 3% with 11% more ex-pit waste moved. Continued
productivity and efficiency improvements on the back of the Operating Model have enabled the removal of more ex-pit
waste while containing unit costs.
Rail challenges have resulted in lost opportunities to achieve higher export sales volumes. This, coupled with a
stronger Rand and lower iron ore export prices, resulted in revenue of R19.5 billion. Our operational improvements,
coupled with strong cost discipline, led to cost savings of R415 million which contributed to headline earnings
of R3 billion. We ended the period with a strong net cash position of R11.7 billion.
The next six months will be focused on delivering further operational and financial gains through our strategy,
which comprises three horizons. Under Horizon 1, our focus is on margin enhancement through cost saving initiatives
and further productivity and efficiency improvements, and on the revenue side, maximising realised prices.
Alongside this, work is being done under Horizon 2 to leverage our endowment and we see further life of mine
extension opportunities through our resource development programme. We are primarily focused on Horizon 1 and 2
where value can be unlocked in the short to medium term while we are opportunistic about long-term growth options
under Horizon 3.
Based on the solid operating platform and strong balance sheet, the Board has approved a dividend policy which targets
a pay-out ratio range of 50 - 75% of headline earnings. The new policy reflects our commitment to shareholder returns
while balancing the capital requirements of sustaining and growing our business."
Themba Mkhwanazi
Chief executive
NEW DIVIDEND POLICY AND INTERIM CASH DIVIDEND DECLARED
Following the 2014 and 2015 iron ore market downturn, Kumba resumed dividend payments in 2017 by applying a
discretionary dividend policy as we sought to embed operational improvements and ensure a flexible balance sheet
was built which is resilient to market volatility while providing a base to address the growth and life extension
imperative.
The continued success of our strategy in driving operational improvement, our ability to generate cash, and a clearer
path to life extension have given us the platform to revise our dividend policy to a more definitive target payout
ratio demonstrating the prioritisation of sustainable shareholder returns through the cycle and disciplined capital
allocation.
The new dividend policy will target a base dividend range of between 50% and 75% of headline earnings. While we will
prioritise shareholder returns in allocating capital, our aim is to maintain a flexible capital structure and
continue to protect the balance sheet from market volatility, as well as to ensure an appropriate level of capital is
allocated to life extension projects.
The Board has approved a total cash dividend of R14.51 per share which is made up as follows:
- R6.98 per share representing 75% of headline earnings in accordance with the new dividend policy; and
- R7.53 per share being a once-off top-up cash dividend to reset the balance sheet net cash position given the
accumulation of cash since the recovery in the iron ore market in 2016.
MARKET OVERVIEW
The Platts 62% IODEX CFR China index averaged $70/dmt during the first half of 2018 ('the period'), down 7% or $5/dmt
relative to the first half of 2017 ('the comparative period'). A series of political events in Beijing and winter
production cuts in North China until mid-March hampered construction activity. This resulted in an inventory overhang
pushing steel prices lower by more than 10% through March. Since then, end user demand has staged an impressive
recovery with property investment up 10%. Consequently, steel stocks have fallen by 50% post the Chinese New Year
period - a new record. Steel mill margins are currently near record highs and 'flight to quality' remains the
pre-dominant theme among Chinese mills as high-grade iron ore maximises steel productivity. The Platts65/Platts62
differential has risen by 86% in the first half of the year to $27/dmtu at 30 June 2018 and averaged $18/dmtu
for the period.
While demand for iron ore has been buoyant, supply has increased. Iron ore port stocks rose by 9 Mt in the first
half of 2018 to 156 Mt at 45 ports in China. The combined iron ore shipments from Australia and Brazil are up 3.8%
year-on-year to an annualised 1.2 billion tonnes in the first half of the year. Widening discounts for low grade
ores and higher freight rates have raised the break-even price for higher cost suppliers.
The lump premium had a strong recovery, increasing from 7.9 US cents/dmtu at the start of the year to
32 US cents/dmtu at 30 June 2018, taking the average for the period to 18 US cents/dmtu or an equivalent of US$12/dmt.
Multiple sintering closures in Tangshan, Hebei and other northern provinces in China, and record demand for low alumina
ores have been the key drivers of the recent rally in the lump premium in China.
OPERATIONAL PERFORMANCE
Production summary (unreviewed)
Six months ended
June June % change
'000 tonnes 2018 2017
Total 22,427 21,854 3
Lump 15,133 14,483 4
Fines 7,294 7,371 (1)
Mine production 22,427 21,854 3
Sishen mine 15,255 15,551 (2)
Kolomela mine 7,172 6,303 14
OPERATIONAL REVIEW
The focus on safety remains a key priority for Kumba. Life saving rules called 'My Sacred Covenant' were launched
and included compulsory training for all employees. At both mines, a 'Stop for safety day' was held to reinforce
the importance of safe production. We remained fatality free during the period with improvements across key safety
metrics. The total recordable case frequency rate1, a measure of the frequency of recordable injuries, improved to
2.08 (1H17: 3.79), high potential incidents reduced to 3 (1H17: 13) and the lost-time injury frequency rate1
decreased to 0.99 (1H17: 1.35).
Total tonnes mined increased by 12% to 140.4 Mt while total production rose by 3% to 22.4 Mt with marginally
lower production at Sishen of 15.3 Mt (1H17: 15.6 Mt). Continued strong performance at Kolomela led to production
increasing by 14% to 7.2 Mt. Total sales volumes remained flat in relation to the first half of 2017 at 21.2 Mt.
1. Lost-time injury (LTI) frequency rate and total recordable case (TRC) frequency rate are now calculated based on
1,000,000 man hours. LTIFR calculated using LTI*1,000,000/total hours and TRCFR calculated using TRC*1,000,000/total hours.
Comparative numbers for 1H17 were restated accordingly.
Sishen mine
Total tonnes mined at Sishen increased by 12.2 Mt to 105.1 Mt (1H17: 92.9 Mt) of which waste mined was 86.6 Mt,
representing a 13% increase as a result of the improvement in primary equipment efficiencies.
Production decreased by 2% to 15.3 Mt (1H17: 15.6 Mt) due to a strategic decision to increase product quality and
the value of product railed to mitigate the impact of the rail constraints caused by derailments. With market
demand increasing for higher quality products, we improved the average quality of our products to 64.5% Fe and the
lump:fine ratio to 67:33 (1H17: 63:37), which contributed to lower production volumes.
Through the implementation of the Operating Model, Sishen not only stabilised its operations, but continued to
improve efficiencies in line with our strategy. Compared to the first half of 2017, total fleet productivity was
up 17%, supported by truck fleet productivity increasing by 38%. As a result of these improvements, Sishen was
able to park 11 trucks and achieve a 7% improvement in truck utilisation without negatively affecting production.
Additionally, primary shovel tempos improved by 19%.
Some of the key initiatives at Sishen include:
- Increasing double sided loading
- Larger blasts to reduce delays associated with frequent blasting
- Increasing the floor stock in front of the shovels.
Technology has become a key enabler of safe production and improved performance. As an example, 36 of the haul
trucks have been fitted with autobraking collision avoidance technology. Kumba is the first mining company to
successfully prove the autobraking technology. We also introduced an operator training programme which uses drone
technology to film the best shovel operators, in order to transfer knowledge to other operators.
Kolomela mine
Total tonnes mined increased by 10% to 35.3 Mt, (1H17: 32.2 Mt). Waste mined was 26.4 Mt (1H17: 25.4 Mt), an
increase of 4%, as planned. The mine produced 7.2 Mt of ore (1H17: 6.3 Mt), a 14% increase, from 32% more ex-pit
ore mined.
Kolomela's increased production was due to continued improvement of the Direct Shipping Ore (DSO) plant tempos and
increased throughput due to the ramp-up of the Dense Media Separation modular plant, as well as the successful
implementation of the Operating Model at the plant.
The Operating Model and advanced process control technology have resulted in Kolomela mine consistently improving
its DSO plant throughput and efficiency over the past few years, and the plant is now regarded as an industry
benchmark. Despite the high base, the productivity of the DSO plant improved by a further 2% in comparison to the
first half of 2017. Further to the plant performance, Kolomela mine has also improved its earthmoving equipment
efficiencies with primary shovel tempos increasing by 9% and truck productivity increasing by 6% during
the period.
Logistics
Transnet rail performance has been sub-optimal. Since the second half of 2017, there have been six derailments
on the Iron Ore Export Channel of which four occurred during the 2018 period. As a result of this, iron ore railed
to port remained similar to the comparative period at 20.8 Mt. The derailed wagons have been replaced and performance
is being monitored closely to secure delivery of our contractual capacity. Initiatives have been implemented to
mitigate the impact of derailments, which include reducing loading times and improving our turnaround times at
the mines.
Severe weather disruptions at Saldanha port have resulted in a number of vessels being delayed into July, impacting
shipments for the period which remained at similar levels of 19.5 Mt relative to the comparative period.
Sales summary (unreviewed)
Six months ended
'000 tonnes June 2018 June 2017 % change
Total 21,173 21,234 -
Export sales 19,506 19,477 -
Domestic sales 1,667 1,757 (5)
Sales
The challenges with the logistics performance resulted in 2.4 Mt of lost export sales opportunity in the period.
As a result, total and export sales remained flat at 21.2 Mt and 19.5 Mt, respectively, relative to the comparative
period, with domestic sales decreasing to 1.7 Mt (1H17: 1.8 Mt). Finished product inventory held at the mines
and ports increased to 6.2 Mt (1H17: 4.4 Mt) with a higher proportion of this at the mines.
CFR sales accounted for 65% of export sales volumes (1H17: 65%). Kumba further diversified its customer portfolio
and China's share of export sales reduced to 57% (1H17: 60%) of the export sales portfolio, while the share of
the EU/MENA/Americas region increased to 21% (1H17:20%). Product quality improved to 64.5% Fe and the total sales
lump:fine ratio to 67:33 (1H17: 63:37), allowing Kumba to benefit from the relatively stronger lump premium market.
FINANCIAL RESULTS
Kumba produced a resilient financial performance despite challenging logistics and export market conditions.
Proactive steps taken to reduce costs, improve operational efficiencies and increase iron ore quality to
maximise quality premia partly offset the full effects of the stronger Rand/US$ exchange rate and lower
average realised iron ore prices. In light of these headwinds, a strong and flexible balance sheet remains
an imperative as this enables the prioritisation of shareholder returns through our new dividend payout
policy of 50 - 75% of headline earnings while we continue to invest for growth.
Revenue
Total revenue decreased by 9% to R19.5 billion (1H17: R21.5 billion), largely driven by the following factors:
- Rand strengthening of 7% on average against the US dollar (1H18: R12.30/US$1 compared to 1H17: R13.21/US$1);
and
- Average realised iron ore export price decreasing 3% to US$69/tonne (1H17: US$71/tonne).
Kumba's average realised FOB prices decreased by US$2/tonne compared to 1H17, following a decrease in iron ore
prices of $5/tonne and higher freight rates of $2/tonne, which was partly offset by the average lump premium
increasing by US$5/tonne, given our relatively more competitive lump:fine ratio. Furthermore, our average product
quality increased from 64.1% Fe in 1H17 to 64.5% Fe in 1H18 which together with our marketing efforts helped to
increase the premium received for our high quality lump product.
Firmer freight rates translated into a 9% increase in shipping revenue to R1.9 billion (1H17: R1.7 billion).
Operating expenses
Operating expenses increased by 4% to R14.4 billion (1H17: R13.8 billion), following the 12% increase in mining
volumes to 140.4 Mt, along with the 3% increase in production volumes to 22.4 Mt. Cost savings of R415 million
as a result of optimisation and efficiency improvements helped to contain the increase in operating expenses.
Unit cash costs at Sishen mine increased by 8% to R309 per tonne (FY17: R287 per tonne) primarily as a result of
higher mining volumes and above-inflation increases in fuel costs, partly offset by productivity and efficiency
improvements, as well as savings in overhead costs. Kolomela mine incurred unit cash costs of R232 per tonne
(FY17: R237 per tonne), a 2% decrease, as cost savings from optimisation and improved efficiencies outweighed the
impact of higher mining volumes and fuel prices.
Selling and distribution costs increased by 13% to R3 billion (1H17: R2.7 billion) on the back of contractual
tariff increases and higher demurrage. Shipping costs were R107 million higher due to the Platts freight rate
on the Saldanha - Qingdao route increasing to US$12.47/tonne, a 23% increase from US$10.12/tonne in 1H17.
Break-even price
Kumba achieved an average cash break-even price of US$46/tonne (62%Fe CFR China), an increase of US$6/tonne
from the average for the 2017 financial year. The increase in controllable costs was contained to US$1/tonne
as costs related to higher mining volumes and logistics, were partially offset by cost savings, productivity
gains and operating efficiency improvements. Non-controllable costs rose by US$5/tonne due to the stronger
Rand (US$4/tonne) and higher freight rates (US$1/tonne).
Earnings before interest, tax, depreciation and amortisation (EBITDA)
EBITDA of R7 billion (1H17: R9.1 billion) reflects a decrease of 24%. Underlying drivers included controllable
factors which delivered a 14% gain through higher sales premiums and cost savings. This helped offset the impact
from non-controllable factors such as the strengthening of the Rand by 7%, the 3% reduction in average
realised iron ore export price, and higher inflation-related costs. In addition, a net freight loss was
incurred on shipping operations from long-term fixed price chartering contracts. As a result of the above,
the EBITDA margin decreased to 36% (1H17: 43%).
Cash flow
The lower EBITDA resulted in cash flow generated from operations decreasing to R6.9 billion (1H17: R11.7 billion).
The group ended the period with a net cash position of R11.7 billion (1H17: R13.5 billion; 2H17: R13.9 billion)
after allowing for capital expenditure of R1.4 billion for the period and the final 2017 cash dividend payment
of R6.3 billion. Capital expenditure incurred related to stay-in-business (SIB) activities of R0.4 billion,
deferred stripping capitalisation of R0.9 billion and expansion activities of R0.2 billion which included
capital expenditure on Dingleton.
ORE RESERVES AND MINERAL RESOURCES
There have been no material changes to the ore reserves and mineral resources as disclosed in the 2017 Kumba
Integrated Report.
REGULATORY UPDATE
Sishen consolidated mining right granted
The application to extend the mining right of Sishen through the inclusion of the adjacent Prospecting Rights
was granted on 25 June 2017 and the grant was notarially executed on 29 June 2018. The grant allows Sishen
mine to expand its current mining operations within the adjacent Dingleton area.
The Mining Charter 2018
The publication of the draft 2018 Mining Charter by the Minister of Mineral Resources on 15 June 2018 has been noted.
All parties have until the end of August to respond to the draft, following the decision by the Minister of Mineral
Resources to extend the public consultation period. Kumba will participate in the process through its majority
shareholder, Anglo American, who is preparing a submission in respect of the draft 2018 Mining Charter.
Kumba shares the acknowledgment made by the Minerals Council that the draft 2018 Mining Charter is an improvement on
the draft 2017 Mining Charter. However, we have concerns surrounding several significant issues in the draft Mining
Charter that we believe may affect the sustainability of the mining industry in South Africa, should they not be
reconsidered.
Kumba has consistently affirmed its support for the Government's national transformation objectives in relation
to the mining industry and acknowledges its role in promoting transformation in South Africa. To this end, we have
a longstanding track record of driving and supporting transformation in the mining industry and beyond, while
contributing significantly to South Africa's economic growth and development.
Kumba believes that much more work needs to be done, in consultation with all stakeholders, to create a Mining
Charter that promotes both investment for the long term and transformation. We look forward to the ongoing
discussions with the Minister, the Department of Mineral Resources (DMR) and other industry stakeholders to work
towards these objectives.
The transfer of Thabazimbi to ArcelorMittal SA
As previously reported, Sishen Iron Ore Company Proprietary Limited (SIOC) and ArcelorMittal SA entered into an
agreement for the transfer of the Thabazimbi mine, together with the mining rights, to ArcelorMittal SA. The
agreement is expected to come into effect by 28 September 2018, subject to the fulfilment of certain conditions.
In the event that the conditions for transfer are not satisfied by 28 September 2018, the agreement will lapse
and SIOC will proceed with the closure of the mine.
On 10 July 2018, one of the key conditions precedent to the transfer was met as SIOC received the grant letter from
the DMR in respect of Section 11 of the MPRDA approving the transfer of the Thabazimbi
mining rights to ArcelorMittal SA. The employees, assets and liabilities of Thabazimbi mine will transfer to ArcelorMittal
SA at a nominal purchase consideration in addition to the assumed liabilities of which ArcelorMittal SA's contractual
liability are 97%. The Thabazimbi mine assets and related liabilities that will transfer have been presented separately
in the statement of financial position as assets and liabilities of the disposal group held for sale at 30 June 2018
(refer to note 10 in the condensed consolidated financial statements). Current operating expenses represent closure
activities.
EVENTS AFTER THE REPORTING PERIOD
At a Special General Meeting on 10 July 2018, shareholders approved a new employee share ownership plan, called Karolo,
for qualifying employees of SIOC. The qualifying employees will be allocated units that are equal to Kumba shares,
at no cost. This scheme replaces the Envision scheme which unwound in November 2016.
There were no further significant events that occurred from 30 June 2018 to the date of this report, not otherwise
dealt with in this report.
CHANGES IN DIRECTORATE
The following changes to the Board were announced during the first six months of the year:
- Allen Morgan stepped down as an independent non-executive director with effect from 11 May 2018.
- Terence Goodlace was appointed as lead independent non-executive director. Mr Goodlace stepped down as the
chairman of the Risk and Opportunities Committee and remains a member of the committee.
- Dolly Mokgatle was appointed as the chairman of the Risk and Opportunities Committee. Mrs Mokgatle stepped
down as the chairman of the Social, Ethics and Transformation Committee but remained a member of the committee.
- Buyelwa Sonjica was appointed as the chairman of the Social, Ethics and Transformation Committee.
- Ntombi Langa-Royds was appointed as chairman of the Human Resources and Remuneration Committee, following
Mr Morgan's retirement from the Board and as the chairman of the committee.
CHANGE IN MANAGEMENT
The Board announced the appointment of:
- Darrin Strange as Chief operating officer with effect from 1 May 2018.
- Sam Martin as Executive Head: Strategy and business development with effect from 16 July 2018.
OUTLOOK
We will continue to drive our operations to reach their full potential through our 'Tswelelopele' strategy. Kumba is
a world-class operation, we have a resilient business, committed employees and a winning strategy to deliver superior
value through the cycle. Through our strategy, we are driving value over volume and targeting R800 million of cost savings
for the year. We have progressed our resource development plan and will continue to work on increasing the life of mine.
Most importantly, we are striving to remain fatality free and continue to create value for shareholders.
Due to the logistical challenges experienced in the first six months of the year, our full year total sales guidance
has been revised to 42 - 44 Mt from 44 - 45 Mt. Consequently, full year guidance for production was revised down to
43 - 44 Mt more closely aligned to rail supply levels as part of our integrated sales and operations planning drive
and focus on optimal efficiency. Sishen's production guidance has been revised to 29 - 30 Mt while waste guidance
remains unchanged at 170 - 180 Mt. Kolomela will continue to produce 14 Mt of product and 55 - 57 Mt of waste as
previously guided.
As a result of lower production at Sishen, the full year unit cash cost of Sishen was revised to R300 - R310 per tonne.
Kolomela's unit cash cost guidance remains unchanged at R240 - R250 per tonne.
Our current capital expenditure outlook for 2018 (including deferred stripping) is R3.7 - R3.9 billion. This was
revised slightly lower from the previous outlook of R3.9 - R4.1 billion, mainly due to revised SIB project scheduling.
The presentation of the Company's results for the six months ended 30 June 2018 will be available on the Company's
website www.angloamericankumba.com at 07:00 CAT and the webcast will be available from 11:00 CAT on 24 July 2018.
SALIENT FEATURES AND OPERATING STATISTICS
for the period ended
Unreviewed Unreviewed Unaudited
6 months 6 months 12 months
30 June 30 June 31 December
2018 2017 2017
Share statistics ('000)
Total shares in issue 322,086 322,086 322,086
Weighted average number of shares 319,640 319,219 319,303
Diluted weighted average number of shares 321,991 321,274 321,481
Treasury shares 2,334 2,882 2,627
Market information
Closing share price (Rand) 295 171 379
Market capitalisation (Rand million) 94,938 55,144 122,112
Market capitalisation (US$ million) 6,917 4,216 9,923
Net asset value attributable to owners of Kumba
(Rand per share) 103.22 100.51 107.95
Capital expenditure (Rand million)1
Incurred 1,429 1,071 3,074
Contracted 868 451 597
Authorised but not contracted 2,517 2,377 1,634
Operating commitments1
Operating lease commitments 696 75 794
Shipping services 5,923 6,850 5,260
Economic information
Average Rand/US Dollar exchange rate (ZAR/US$) 12.30 13.21 13.30
Closing Rand/US Dollar exchange rate (ZAR/US$) 13.73 13.08 12.31
Sishen mine FOR unit cost
Unit cost (Rand per tonne) 402.95 391.63 375.42
Cash cost (Rand per tonne) 309.45 311.40 287.33
Unit cost (US$ per tonne) 32.77 29.65 28.23
Cash cost (US$ per tonne) 25.17 23.57 21.60
Kolomela mine FOR unit cost
Unit cost (Rand per tonne) 342.55 346.28 336.67
Cash cost (Rand per tonne) 232.36 252.30 236.67
Unit cost (US$ per tonne) 27.86 26.21 25.31
Cash cost (US$ per tonne) 18.90 19.10 17.79
1 The capital expenditure and operating commitments amounts have been reviewed (the amount for the
31 December 2017 year was audited).
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million Notes 2018 2017 2017
Assets
Property, plant and equipment 3 36,375 31,651 36,833
Biological assets 3 3 3
Investments held by environmental trust 632 580 627
Long-term prepayments and other receivables 208 126 211
Deferred tax assets - - 72
Inventories 4 3,206 3,533 2,841
Non-current assets 40,424 35,893 40,587
Inventories 4 4,661 3,449 4,061
Trade and other receivables 2,099 2,579 2,709
Cash and cash equivalents 5 11,664 13,486 13,874
Current assets 18,424 19,514 20,644
Assets of disposal group classified
as held for sale 10 1,235 1,118 1,235
Total assets 60,083 56,525 62,466
Equity
Shareholders' equity 33,245 32,374 34,769
Non-controlling interests 10,287 10,081 10,777
Total equity 43,532 42,455 45,546
Liabilities
Provisions 2,028 2,051 1,860
Deferred tax liabilities 8,843 7,362 8,860
Non-current liabilities 10,871 9,413 10,720
Provisions 85 19 147
Trade and other payables 4,470 3,298 4,945
Current tax liabilities 77 353 59
Current liabilities 4,632 3,670 5,151
Liabilities of disposal group classified
as held for sale 10 1,048 987 1,049
Total liabilities 16,551 14,070 16,920
Total equity and liabilities 60,083 56,525 62,466
CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS
for the period ended
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million Notes 2018 2017 2017
Revenue 19,474 21,500 46,379
Operating expenses (14,342) (13,761) (24,989)
Operating profit 7 5,132 7,739 21,390
Finance income 269 321 637
Finance costs (80) (206) (339)
Profit before taxation 5,321 7,854 21,688
Taxation (1,420) (1,784) (5,481)
Profit for the year from continuing operations 3,901 6,070 16,207
Discontinued operation
Loss from discontinued operation 10 (48) (72) (74)
Profit for the year 3,853 5,998 16,133
Attributable to:
Owners of Kumba 2,943 4,586 12,335
Non-controlling interests 910 1,412 3,798
3,853 5,998 16,133
Basic earnings/(loss) per share
attributable to the ordinary equity
holders of Kumba (Rand per share)
From continuing operations 9.36 14.59 38.86
From discontinued operation (0.15) (0.22) (0.23)
Total basic earnings per share 9.21 14.37 38.63
Diluted earnings/(loss) per share
attributable to the ordinary equity
holders of Kumba (Rand per share)
From continuing operations 9.29 14.49 38.60
From discontinued operation (0.15) (0.22) (0.23)
Total diluted earnings per share 9.14 14.27 38.37
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the period ended
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Profit for the period 3,853 5,998 16,133
Other comprehensive profit/(loss) for the year 429 (70) (454)
Exchange differences on translation of foreign operations1 429 (70) (454)
Total comprehensive income for the year 4,282 5,928 15,679
Attributable to:
Owners of Kumba 3,271 4,533 11,989
Non-controlling interests 1,011 1,395 3,690
4,282 5,928 15,679
1 There is no tax attributable to items included in other comprehensive income and all items will be
subsequently reclassified to profit or loss.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Total equity at the beginning of the year 45,546 36,536 36,536
Changes in share capital and premium
Treasury shares issued to employees under
employee share incentive schemes 57 82 121
Purchase of treasury shares (14) (61) (61)
Changes in reserves
Equity-settled share-based payment 51 52 135
Vesting of shares under employee share
incentive schemes (57) (82) (121)
Total comprehensive income for the year 3,271 4,533 11,989
Dividends paid (4,831) - (5,144)
Changes in non-controlling interests
Total comprehensive income for the year 1,011 1,395 3,690
Dividends paid (1,502) - (1,599)
Total equity at the end of the year 43,532 42,455 45,546
Comprising
Share capital and premium (net of treasury shares) (11) (93) (54)
Equity-settled share-based payment reserve 163 138 186
Foreign currency translation reserve 1,244 1,208 916
Retained earnings 31,849 31,121 33,721
Shareholders' equity 33,245 32,374 34,769
Non-controlling interests 10,287 10,081 10,777
Total equity 43,532 42,455 45,546
Dividend (Rand per share)
Interim1 14.51 15.97 15.97
Final n/a n/a 15.00
1 The interim dividend was declared after 30 June 2018 and has not been recognised as a liability in this
interim financial report. It will be recognised in shareholders' equity for the year ending 31 December 2018.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Cash generated from operations 6,874 11,726 22,432
Net finance income 237 130 461
Taxation paid (1,340) (3,334) (5,883)
Cash flows from operating activities 5,771 8,522 17,010
Additions to property, plant and equipment (1,429) (1,071) (3,074)
Proceeds from the disposal of property,
plant and equipment 1 21 27
Cash flows utilised in investing activities (1,428) (1,050) (3,047)
Purchase of treasury shares (14) (61) (61)
Dividends paid to owners of Kumba (4,831) - (5,144)
Dividends paid to non-controlling shareholders (1,502) - (1,599)
Net interest-bearing borrowings repaid - (4,500) (4,500)
Cash flows utilised in financing activities (6,347) (4,561) (11,304)
Net (decrease)/increase in cash and cash equivalents (2,004) 2,911 2,656
Cash and cash equivalents at beginning of year 13,874 10,665 10,665
Foreign currency exchange (losses)/gains
on cash and cash equivalents (206) (90) 550
Cash and cash equivalents at end of year 11,664 13,486 13,874
HEADLINE EARNINGS
for the period ended
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Reconciliation of headline earnings
Profit attributable to owners of Kumba 2,943 4,586 12,335
Impairment reversal - - (4,789)
Net loss on disposal and scrapping of property,
plant and equipment 62 32 63
3,005 4,618 7,609
Taxation effect of adjustments (17) (9) 1,309
Non-controlling interests in adjustments (11) (6) 810
Headline earnings 2,977 4,603 9,728
Headline earnings (Rand per share)
Basic 9.31 14.42 30.47
Diluted 9.25 14.33 30.26
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 319,639,752 319,218,877 319,302,962
Diluted weighted average number of ordinary shares 321,991,281 321,274,112 321,481,081
The dilution adjustment of 2,351,529 shares at 30 June 2018 (30 June 2017: 2,055,235 and 31 December 2017:
2,178,119) is a result of the vesting of share options previously granted under the various employee
share incentive schemes.
NORMALISED EARNINGS
for the period ended
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Reconciliation of normalised earnings
Headline earnings attributable to owners of Kumba 2,977 4,603 9,728
Net utilisation of deferred tax asset 72 - 14
3,049 4,603 9,742
Non-controlling interests in adjustments (17) - (3)
Normalised earnings 3,032 4,603 9,739
Normalised earnings (Rand per share)
Basic 9.49 14.42 30.50
Diluted 9.42 14.33 30.29
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 319,639,752 319,218,877 319,302,962
Diluted weighted average number of ordinary shares 321,991,281 321,274,112 321,481,081
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.
Normalised earnings 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 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2018
1. CORPORATE INFORMATION
Kumba is a limited liability company incorporated and domiciled in South Africa. The main business of Kumba,
its subsidiaries, joint ventures and associates is the exploration, extraction, beneficiation, marketing,
sale and shipping of iron ore. The group is listed on the JSE Limited (JSE).
The condensed consolidated interim financial statements of Kumba and its subsidiaries for the six months
ended 30 June 2018 were authorised for issue in accordance with a resolution of the directors on 20 July 2018.
2. BASIS OF PREPARATION
The condensed consolidated interim financial statements have been prepared under the supervision of
BA Mazarura CA(SA), Chief financial officer, in accordance with IAS 34 Interim Financial Reporting and the
South African Companies Act No 71 of 2008, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, the Financial Pronouncements as issued by Financial Reporting Standards Council and in
compliance with the JSE Listings Requirements for interim reports.
The condensed consolidated interim financial statements have been prepared in accordance with the historical
cost convention except for certain financial instruments, discontinued operations and disposal group held for
sale, share-based payments, and biological assets which are stated at fair value, and are presented in Rand,
which is Kumba's functional and presentation currency. All financial information presented in Rand has been
rounded off to the nearest million.
2.1. Going concern
In determining the appropriate basis of preparation of the condensed consolidated interim financial
statements, the directors are required to consider whether the group can continue in operational
existence for the foreseeable future. The financial performance of the group is dependent upon the
wider economic environment in which the group operates. Factors exist which are outside the control
of management which can have a significant impact on the business, specifically the volatility in
the Rand/US$ exchange rate and the iron ore price.
These condensed consolidated interim financial statements are prepared on a going concern basis. The Board
is satisfied that the group is sufficiently liquid and solvent to be able to support the current operations
for the next 12 months.
2.2. Accounting judgements, estimates and assumptions
In preparing these condensed consolidated interim financial statements, the significant judgements made by
management in applying the group's accounting policies and the key sources of estimation uncertainty are
consistent with those applied to the consolidated financial statements for the year ended 31 December 2017,
except as disclosed below.
2.3. Accounting policies
The accounting policies and methods of computation applied in the preparation of these condensed
consolidated interim financial statements are in terms of International Financial Reporting Standards
and are consistent with those accounting policies applied in the preparation of the previous
consolidated annual financial statements.
2.3.1. New standards effective for annual periods beginning on or after 1 January 2018
The following standards, amendments to published standards and interpretations which become
effective for the year commencing on 1 January 2018 were adopted by the group:
a. IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 and sets out the updated requirements for the recognition and measurement
of financial instruments. These requirements specifically deal with the classification and
measurement of financial instruments, measurement of impairment losses based on an expected
credit loss model and closer alignment between hedge accounting and risk management practices.
The adoption of this new standard had no material impact on the group's earnings for the period.
b. IFRS 15 Revenue from contracts with customers
IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising
from contracts with customers. The standard requires an entity to recognise revenue in such a
manner as to depict the transfer of goods or services to customers at an amount representing
the consideration to which the entity expects to be entitled in exchange for those goods
or services.
The group's revenue is primarily derived from commodity sales for which the point of recognition
is dependent on the contract sales terms known as the International Commercial terms (Incoterms).
Under Incoterms (i.e. cost, insurance and freight (CIF) and cost and freight (CFR)), the seller
is required to contract, and pay, for the costs and freight necessary to bring the goods to a
named port of destination.
Consequently, the freight service on export commodity contracts with CIF/CFR Incoterms represents
a separate performance obligation as defined under IFRS 15 and as such, a portion of the revenue
earned under these contracts, representing the obligation to perform the freight service, is
deferred and recognised when this obligation has been fulfilled, along with the associated costs.
The impact of applying the standard in the period ended 30 June 2018 is:
- Net increase in profit of R6 million
- No material impact on opening retained earnings, therefore prior year figures were not restated
- Increase in current assets of R106 million
- Increase in current liabilities of R100 million
2.3.2. New standards, amendments to existing standards and interpretations that are not effective and have
not been early adopted
At the date of authorisation of these interim financial statements, the following standards, amendments
to existing standards and interpretations were in issue but not yet effective for the current year and
have not been early adopted.
These standards, amendments and interpretations will be effective for annual periods beginning after
the dates listed below:
IFRS 16 Leases effective for years commencing on or after 1 January 2019
IFRS 16 Leases will become effective for the group from 1 January 2019, replacing IAS 17 Leases. The group
has completed its impact assessment and is continuing to work on the necessary changes to internal
systems and processes.
The group has elected to adopt the modified retrospective transition approach and therefore the cumulative
effect of transition to IFRS 16 will be recognised in retained earnings and the comparative period will not
be restated. The principal impact of IFRS 16 will be to change the accounting treatment by lessees of
leases currently classified as operating leases. Lease agreements will give rise to the recognition by
the lessee of a right of use asset and a related liability for future lease payments.
The most significant expected impact of transitioning to IFRS 16 based upon our current contractual
arrangements is estimated to be recognising a lease liability of approximately R400 million to
R500 million and a right of use asset of approximately R300 million to R400 million, with the
balance representing an adjustment to retained earnings. The right of use asset will principally relate to
rental of properties and mining equipment.
Depreciation of the right of use asset and the finance charge representing the unwinding of the discount
on the lease liability will be recorded in the statement of profit and loss. The impact of the standard
on EBITDA and profit before tax following adoption is not expected to be significant although the
presentation of the cost of leases in the statement of profit and loss will change.
Management will continue to assess the implications of IFRS 16 on any new contracts or modifications
to existing contracts, which may cause the financial impact to differ from the estimates provided above.
2.4. 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 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 2017 annual ore reserves and mineral resources statement. The most
significant changes in the provision for 2018 arises from the change in the LoMP as well as the timing
of the expected cash flows for both Sishen and Kolomela mines.
The effect of the change in estimate of the rehabilitation and decommissioning provisions, which was applied
prospectively from 1 January 2018, is detailed below:
Rand million Reviewed Reviewed Audited
30 June 30 June 31 December
2018 2017 2017
Increase in environmental rehabilitation provision 137 120 77
Increase/(decrease) in decommissioning provision 27 1 (199)
(Decrease)/increase in profit after tax attributable
to the owners of Kumba (75) (66) 42
Rand per share
Effect on earnings per share attributable to
the owners of Kumba (0.24) 0.21 0.13
The change in estimate from 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.
3. PROPERTY, PLANT AND EQUIPMENT
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million 2018 2017 2017
Capital expenditure 1,429 1,071 3,074
Comprising:
Expansion 155 197 575
Stay-in-business (SIB) 369 218 1,305
Deferred stripping 905 656 1,194
Transfers from assets under construction to
property, plant and equipment 237 663 1,704
Expansion capital expenditure comprised mainly 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.
4. INVENTORY
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million 2018 2017 2017
Finished product 1,933 1,577 1,240
Work-in-progress 4,511 3,969 4,238
Plant spares and stores 1,423 1,436 1,424
Current inventory transferred to assets of
disposal group classified as held for sale - 2 -
Total inventories 7,867 6,984 6,902
Non-current portion of work-in-progress inventories 3,206 3,533 2,841
Total current inventories 4,661 3,451 4,061
Total inventories 7,867 6,984 6,902
During the period, the group wrote down inventory by R176 million (30 June 2017: Rnil and
31 December 2017: R954 million). 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.
5. NET CASH AND DEBT FACILITIES
Kumba's net cash position at the statement of financial position dates was as follows:
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million 2018 2017 2017
Net cash
Cash and cash equivalents 11,664 13,486 13,874
Movements in interest-bearing borrowings are analysed as follows:
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million 2018 2017 2017
Balance at beginning of period - 4,500 4,500
Interest-bearing borrowings repaid - (4,500) (4,500)
Balance at end of period - - -
The group's committed debt facilities consist of a R12 billion revolving credit facility which matures
in 2020. The group had undrawn committed facilities of R12 billion (30 June 2017: R12 billion and
31 December 2017: R12 billion) and undrawn uncommitted facilities of R8.3 billion (30 June 2017:
R8.3 billion and 31 December 2017: R8.3 billion).
6. SHARE CAPITAL AND SHARE PREMIUM
Reconciliation of share capital and share premium (net of treasury shares):
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million 2018 2017 2017
Balance at beginning of period (54) (114) (114)
Net movement in treasury shares under employee
share incentive schemes 43 21 60
Purchase of treasury shares (14) (61) (61)
Shares issued to employees 57 82 121
Balance at end of year (11) (93) (54)
Reconciliation of number of shares in issue:
Reviewed Reviewed Audited
30 June 30 June 31 December
2018 2017 2017
Balance at beginning and end of period 322,085,974 322,085,974 322,085,974
Reconciliation of treasury shares held:
Balance at beginning of period 2,626,977 2,797,627 2,797,627
Shares purchased 50,000 284,194 284,194
Shares issued to employees under the Long-Term
Incentive Plan and Kumba Bonus Share Plan (342,667) (200,194) (454,844)
Balance at end of period 2,334,310 2,881,627 2,626,977
All treasury shares are held as conditional awards under the Kumba Bonus Share Plan.
7. SIGNIFICANT ITEMS INCLUDED IN OPERATING PROFIT
Operating expenses is made up as follows:
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Production costs 9,608 8,200 17,824
Movement in inventories (653) 513 452
Finished products (380) 16 224
Work-in-progress (273) 497 228
Cost of goods sold 8,955 8,713 18,276
Impairment reversal - - (4,789)
Mineral royalty 532 648 1,239
Selling and distribution costs 3,006 2,659 5,815
Cost of services rendered - shipping 1,868 1,761 4,485
Sublease rent received (19) (20) (37)
Operating expenses 14,342 13,761 24,989
Operating profit has been derived after
taking into account the following items:
Employee expenses 2,262 1,796 4,030
Net restructuring cost - 8 8
Share-based payment expenses 59 55 146
Depreciation of property, plant and equipment 1,874 1,497 3,014
Deferred waste stripping costs (905) (656) (1,194)
Net loss on disposal and scrapping of
property, plant and equipment 62 32 63
Net finance (gains)/losses (18) 170 216
Unrealised losses/(gains) on derivative
financial instruments 5 42 (112)
Net foreign currency losses/(gains)
Realised 112 208 310
Unrealised (128) (51) 77
Net fair value gains on investments held by
the environmental trust (7) (29) (59)
8. TAXATION
The group's effective tax rate was 27% for the period (30 June 2017: 23% and 31 December 2017: 25%).
9. 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' comprise 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 statement of profit and loss. 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 business. 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
Sishen Kolomela Thabazimbi Shipping
Rand million mine mine mine Logistics2 operations Other Total3
Reviewed period ended
30 June 2018
Statement of profit and loss
Revenue from external customers 12,456 5,165 - - 1,853 - 19,474
EBITDA 7,295 3,095 (44) (3,001) (15) (371) 6,958
Significant items included
in statement of profit and loss:
Depreciation 1,290 563 - 5 - 16 1,874
Staff costs 1,450 490 - 26 - 355 2,321
Statement of financial position
Total segment assets 928 463 - 496 - 46 1,933
(refer to note 4)
Statement of cash flows
Additions to property, plant
and equipment
Expansion capex 155 - - - - - 155
Stay-in-business capex 209 159 - 1 - - 369
Deferred stripping 723 182 - - - - 905
Reviewed period ended
30 June 2017
Statement of profit and loss
Revenue from external customers 14,462 5,344 - - 1,694 - 21,500
EBITDA 8,883 3,352 (91) (2,654) (67) (278) 9,145
Significant items included in
statement of profit and loss:
Depreciation 950 488 1 5 - 54 1,498
Staff costs 1,146 383 - 18 - 312 1,859
Statement of financial position
Total segment assets 552 157 - - 807 61 1,577
(refer to note 4)
Statement of cash flows
Additions to property,
plant and equipment
Expansion capex 197 - - - - - 197
Stay-in-business capex 139 73 5 1 - - 218
Deferred stripping 550 106 - - - - 656
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
statement of profit and loss:
Depreciation 1,934 1,001 13 9 - 70 3,027
Staff costs 2,522 848 - 41 - 771 4,182
Impairment reversal (4,789) - - - - - (4,789)
Statement of financial position
Total segment assets 695 349 - 166 - 30 1,240
(refer to note 4)
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
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 by the mines.
3 The amounts in the total column are inclusive of Thabazimbi mine amounts. These amounts are not included
in each line item in the statement of profit and loss as the Thabazimbi mine is a discontinued operation
and is disclosed separately.
Geographical analysis of revenue and non-current assets
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million 2018 2017 2017
Total revenue from external customers 19,474 21,500 46,379
South Africa 1,233 1,431 2,714
Export 18,241 20,069 43,665
China 10,338 11,962 27,260
Rest of Asia 4,065 4,209 8,538
Europe 3,657 3,326 6,626
Middle East and North Africa 181 572 1,241
All non-current assets, excluding investments in associates and joint ventures, are located in South Africa.
10. DISCONTINUED OPERATION 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
period ended 30 June 2018 consistent with the periods ended 30 June 2017 and 31 December 2017.
Analysis of the result of the Thabazimbi mine is as follows:
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Operating expenses (48) (92) (69)
Operating loss (48) (92) (69)
Net finance (cost)/income (18) 1 (34)
Loss before tax (66) (91) (103)
Income tax credit 18 19 29
Loss after income tax (48) (72) (74)
Attributable to owners of Kumba (37) (55) (56)
Attributable to the non-controlling interests (11) (17) (18)
Loss from discontinued operation (48) (72) (74)
Cash flow utilised in discontinued operation
Net cash flow utilised in operating activities (67) (31) (128)
Net cash utilised in discontinued operation (67) (31) (128)
As previously reported, SIOC and ArcelorMittal SA entered into an agreement for the transfer of the
Thabazimbi mine, together with the mining rights, to ArcelorMittal SA. The agreement is expected to
come into effect by 28 September 2018, subject to certain conditions. If all conditions precedent have
not been satisfied by 28 September 2018, the agreement will lapse and SIOC will proceed with closure
of the mine. Current operating expenses represent closure activities.
On 10 July 2018, SIOC received the grant letter from the DMR in respect of Section 11 of the MPRDA
approving the transfer of the Thabazimbi mining rights to ArcelorMittal SA.
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 liabilities that will transfer to
ArcelorMittal SA have been presented as assets and liabilities held for sale as at 30 June 2018.
Assets and liabilities of disposal group held for sale at
Reviewed Reviewed Audited
30 June 30 June 31 December
Rand million 2018 2017 2017
Assets
Property, plant and equipment - 11 -
Biological assets 11 18 11
Investments held by environmental trust 329 308 325
Long-term prepayments and other receivables 496 559 459
Inventories - 2 -
Trade and other receivables 399 220 440
Total assets 1,235 1,118 1,235
Liabilities
Non-current provisions (850) (885) (812)
Current provisions (198) (102) (237)
Total liabilities (1,048) (987) (1,049)
Net carrying amount 187 131 186
11. RELATED PARTY TRANSACTIONS
During the period, Kumba, in the ordinary course of business, entered into various sale, purchase and
service transactions with associates, joint ventures, fellow subsidiaries, its holding company and
Exxaro Resources Limited. These transactions were subject to terms that are no less favourable than
those offered by third parties.
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rand million 2018 2017 2017
Short-term deposits held with Anglo American
SA Finance Limited1 (AASAF) 6,250 9,628 6,899
- Weighted average interest rate (%) 6.99 7.17 7.17
Interest earned on short-term deposits with
AASAF during the period 227 299 577
Short-term deposit held with Anglo American
Capital plc1 4,021 2,910 4,907
Interest earned on facility during the period 25 11 32
Trade payable owing to Anglo American
Marketing Limited1 (AAML) 350 374 635
Shipping services provided by AAML 1,868 1,788 4,462
Dividends paid to Anglo South Africa Capital
Proprietary Limited2 3,368 - 3,586
Dividends paid to Exxaro Resources Limited3 1,306 - 1,390
1 Subsidiaries of the ultimate holding company.
2 Holding company.
3 Exxaro Resources Limited is SIOC's 20.62% (30 June and 31 December 2017: 20.62%) Black Economic Empowerment
shareholder.
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.
The table below presents the group's assets and liabilities that are measured at fair value:
Rand million Level 11 Level 22 Level 33
Reviewed 6 months - 30 June 2018
Investments held by the environmental trust4 961 - -
Derivative financial instruments classified
as cash and cash equivalents - (70) -
961 (70) -
Reviewed 6 months - 30 June 2017
Investments held by the environmental trust4 888 - -
Derivative financial instruments classified
as cash and cash equivalents - (15) -
888 (15) -
Audited 12 months - 31 December 2017
Investments held by the environmental trust4 952 - -
Derivative financial instruments classified
as cash and cash equivalents - 244 -
952 244 -
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 prices).
3 Level 3 fair value measurements are derived from valuation techniques that include inputs that are not
based on observable market data.
4 Includes Thabazimbi mine's investment disclosed as asset held for sale in note 10.
13. CONTINGENT LIABILITIES
On 29 June 2018, the South African Revenue Service (SARS) issued the group with additional income tax assessments
relating to a tax audit on the deductibility of certain expenditure incurred, covering the 2012 - 2014 years of
assessment. The group is in the process of preparing an objection to these assessments after consultation with
external tax and legal advisers. The group believes that these matters have been appropriately treated in the
results for the period ended 30 June 2018.
14. GUARANTEES
The total guarantees issued in favour of the DMR in respect of the group's environmental closure liabilities at
30 June 2018 were R2.9 billion (30 June 2017: R2.8 billion and 31 December 2017: R2.8 billion). Included in
this amount are financial guarantees for the environmental rehabilitation and decommissioning obligations of
the group to the DMR in respect of Thabazimbi mine of R438 million (30 June 2017: R438 million and
31 December 2017: R438 million). ArcelorMittal SA 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 shortfall of R202 million arose. Guarantees in respect
of the shortfall will be issued in due course.
15. REGULATORY UPDATE
Mining Charter
The publication of the draft 2018 Mining Charter by the Minister of Mineral Resources on 15 June 2018 has been
noted. All parties have until the end of August to respond to the draft, following the decision by the Minister
of Mineral Resources to extend the public consultation period. Kumba will participate in the process through its
majority shareholder, Anglo American, who is preparing its submission in respect of the draft 2018 Mining Charter.
Kumba shares the acknowledgment made by the Minerals Council that the draft 2018 Mining Charter is an improvement
on the draft 2017 Mining Charter. However, we have concerns surrounding several significant issues in the draft
Mining Charter that we believe may affect the sustainability of the mining industry in South Africa, should they
not be reconsidered.
Kumba has consistently affirmed its support for the Government's national transformation objectives
in relation to the mining industry and acknowledges its role in promoting transformation in South Africa.
To this end, we have a longstanding track record of driving and supporting transformation in
the mining industry and beyond, while contributing significantly to South Africa's economic growth and
development.
Kumba believes that more work needs to be done, in consultation with all stakeholders, to create a
Mining Charter that promotes both investment for the long term and transformation. We look forward to the
ongoing discussions with the Minister, the DMR and other industry stakeholders to work towards these objectives.
16. CORPORATE GOVERNANCE
The group subscribes to the Code of Good Corporate Practices and Conduct and complies with the recommendations
of the King IVTM* Report. The Board charter is aligned with the provisions of all relevant statutory and regulatory
requirements including among others, King IVTM*. Full disclosure of the group's compliance is contained in the
2017 Integrated Report.
*Copyright and trademarks are owned by the Institute of Directors in Southern Africa NPC and all of its rights
are reserved.
17. EVENTS AFTER THE REPORTING PERIOD
At a Special General Meeting on 10 July 2018, shareholders approved a new employee share ownership plan, called
Karolo, for qualifying employees of SIOC. The qualifying employees will be allocated units that are equal
to Kumba shares, at no cost. This scheme replaces the Envision scheme which unwound in November 2016.
There have been no other material events subsequent to 30 June 2018, not otherwise dealt with in this report.
18. INDEPENDENT AUDITORS' REVIEW REPORT
The auditors, Deloitte & Touche, have issued their unmodified review report on the condensed consolidated
interim financial statements for the six months ended 30 June 2018. The review was conducted in accordance
with ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity.
A copy of the auditor's report on the condensed consolidated interim financial statements is available for
inspection at the Company's registered office.
The auditor's report does not necessarily report on all the information contained in the financial results.
Shareholders are therefore advised that in order to obtain a full understanding of the review engagement,
they should obtain a copy of the auditor's report, together with the accompanying financial information
from the registered office.
Any reference to future financial performance included in this announcement has not been reviewed or
reported on by the Company's auditors.
On behalf of the Board
MSV Gantsho TM Mkhwanazi
Chairman Chief executive
20 July 2018
Pretoria
NOTICE OF INTERIM CASH DIVIDEND
At its Board meeting on 20 July 2018, the directors approved a gross interim cash dividend of 1,451 cents
per share on the ordinary shares from profits accrued during the period ended 30 June 2018. 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 after withholding
tax at a rate of 20% amounts to 1,160.80000 cents per share.
The issued share capital at the declaration date is 322,085,974 ordinary shares.
The salient dates are as follows:
Declaration date Tuesday, 24 July 2018
Last day for trading in order to participate in
the interim dividend (and change of address or dividend instructions) Tuesday, 14 August 2018
Trading ex-dividend commences Wednesday, 15 August 2018
Record date Friday, 17 August 2018
Dividend payment date Monday, 20 August 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 15 August 2018 and
Friday, 17 August 2018, both days inclusive.
By order of the Board
CD Appollis
Company secretary
24 July 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), MS Bomela, DD Mokgatle, NS Dlamini,
SG French (Irish), TP Goodlace (British/South African), NB Langa-Royds, SS Ntsaluba,
ST Pearce (Australian), BP Sonjica
Executive: TM Mkhwanazi (Chief executive), BA Mazarura (Chief financial officer)
COMPANY SECRETARY
CD Appollis
COMPANY REGISTRATION NUMBER
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')
24 July 2018
www.angloamericankumba.com
A member of the Anglo American plc group
www.angloamerican.com
Date: 24/07/2018 07:07:00 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 
