South Africa’s Kumba Iron Ore, part of Anglo-American plc, has positioned its business to “… to withstand a longer period of lower iron ore prices,” says ceo Norman Mbazima. The executive was commenting on his company’s 2015 results monitored by Kallanish. Kumba's profits plunged on-year as revenues and production volumes both tumbled.

The miner saw year-on-year production fall across the board with the exception of output at the Kolomela mine and a small rise at the now-shuttered Thabazimbi mine (see Kallanish 29 January). The fall in performance however was due primarily to the plunge in seaborne iron ore prices, Mbazima says. This is why the company has reconfigured its mines to “… reduce the amount of waste and to save costs,” he adds.

In terms of outlook, the group does not expect a significant recovery in the iron ore price over the medium term, it says. Its mine reconfiguration and other cost saving initiatives are anticipated to deliver around a $10/tonne reduction in controllable costs for 2016. As a result, Kumba’s cash breakeven price is anticipated to reduce to below $40/t in 2016, although the Group expects further volatility in freight and exchange rates.

Export sales are expected to be around 40 million tonnes in 2016 and domestic sales contracted to ArcelorMittal SA are 6.25mt. In 2015 the miner sent 20mt of iron ore to China and 9.9mt to the rest of Asia. Both of these volumes were significantly reduced from those in 2014.

Kumba’s realised FOB iron ore price declined -42% in 2015 to $53/t.

The Group’s total revenue of SAR 36.1 billion ($2.26 billion) in 2015 decreased -24% from R47.6 billion in 2014, it confirms. After-tax profit in 2015 fell even more heavily to just SAR 627 million from SAR 14.1 billion earned in the prior year.