The Kumba Iron Ore mine at Sishen in the Northern Cape. Picture: KEVIN SUTHERLAND/SUNDAY TIMES
The Kumba Iron Ore mine at Sishen in the Northern Cape. Picture: KEVIN SUTHERLAND/SUNDAY TIMES

KUMBA Iron Ore, SA’s largest producer of the crucial steel ingredient, is slashing the workforce at its flagship Sishen mine by nearly half to cope with weak iron ore prices.

The Sishen mine, the largest source of iron ore in SA for decades, has undergone a major change because of the enormous amount of waste that had to be moved to expose ore.

The change has not been quick enough and majority shareholder Anglo American told investors last month a decision had been taken to shift focus away from volumes and instead focus on cutting costs, reducing capital expenditure and boosting cash generation.

The production forecast was lowered to 26-million tonnes a year at a unit cash cost delivered on board ships in Saldanha port of less than $30 a tonne this year, giving a breakeven price of landing ore in China at below $40 a tonne.

As part of this new plan, the workforce would have to be cut, Kumba said yesterday. Of the 5,840 employees at Sishen, Kumba aims to reduce the number by 2,633 and cut 1,300 of 3,000 contractor jobs.

Kumba issued the unions a section 189 notice on Thursday, starting a 60-day process to reduce the workforce.

“This has been an extremely difficult decision but, after exhausting all other avenues and doing all we could have done to reduce costs, we have no choice but to take more significant steps to preserve the viability of the mine,” CEO Norman Mbazima said.

Sishen is the largest single source of jobs in Kumba, which employs 7,434 people after it stopped mining the Thabazimbi mine last year, removing 1,160 jobs. In July last year, Kumba told the unions it wanted to cut 175 jobs at its Northern Cape mines — Sishen and Kolomela.

“It cannot be correct that as and when the mining industry is under distress the first casualties are ordinary employees,” said Lucas Phiri, National Union of Mineworkers chief negotiator at Kumba.

The dramatic fall in the iron-ore price, which Bloomberg pegged at less than a quarter of its peak in 2011 — hovering at the $41 a tonne mark — has put pressure on the iron ore producer’s balance sheet.

Kumba on Thursday reported a 12% drop in its fourth-quarter output to 10.04-million tonnes, dragged down by poor performance at Sishen. For the year, its output was down 7% at 44.88-million tonnes.

The Sishen mine was moving to a lower-cost pit layout and there was not enough exposed ore as the transition was being made.

Sishen’s output in the fourth quarter fell 17% to 7.7-million tonnes.

Kumba’s exports sales fell 10% to 10.5-million tonnes in the quarter and the company had a 4.7-million tonne stockpile, down from 6.5-million tonnes at the end of 2014.