SOUTH AFRICA’s largest iron ore company, Kumba Iron Ore, warned on Wednesday of a roughly 30% drop in profit for the year to December 31 2012 because of lower prices for its offshore sales as well as reduced production after a wildcat strike.
Kumba, which is majority owned by Anglo American, said its headline earnings per share would be between R36.30 and R38.80 each compared to R53.13 a year earlier.
"The decrease in earnings is largely attributable to a decrease in export iron ore prices in the period and the impact on production following the illegal strike at Sishen Mine," Kumba said on Wednesday.
Kumba’s shares closed down 0.78% at R582.
The iron ore price fell by 24% last year to $130 a ton compared to $170 in 2011, SBG Securities analyst, Heidi Sternberg, said.
If Chinese gross domestic product grows or Chinese steel production grows by 3% or more this should be positive for iron ore demand and prices for the steel feedstock this year, she said in a note.
Citi said iron ore imports by China, the world’s largest steel maker, had grown by nearly 11% in December to 70.9-million tons as production improved.
The iron ore price is currently around $155 a ton. This is for ore with a 62% iron content.
Much like most major companies in South African mining, particularly platinum and gold, is showing the results of lower production due to labour unrest that swept through the sector late last year.
Kumba’s Sishen mine, the largest open pit operation in Africa, was brought to a halt in October when 300 workers embarked on an unprotected strike.
The workers seized heavy earthmoving equipment, threatening to damage it if their demands for higher wages were not met.
Kumba reckons it lost 2.2-million tons of iron ore in the strike.
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