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Johannesburg - Kumba will have to get its act together without delay if Anglo American [JSE:AGL] wants to keep its net debt position under control.
Mark Cutifani, CEO of Anglo, said in terms of current estimates Anglo's net debt will be about $16bn next year - considerably more than the $14bn promised earlier.
"If we want to turn around at a net debt of $14bn, we would have to correct issues at Kumba very quickly. There is work to be done at Kumba - it will be difficult, " he said in an interview with Sake24.
Kumba shocked the market a couple of weeks ago with a production report that showed that in the quarter ended September it had produced 24% less iron ore than in the corresponding quarter of last year.
Production problems at its mine in Sishen were the cause and analysts are worried that the mine's richest ore has been mined too fast during the past three or four years.
"The results of Kumba's quarterly report was disappointing. Our mining people are now working closely with Kumba's CEO Norman Mbhazima to solve it.
"We have already set the strategy for this, but we are now working on an implementation plan. We will announce details about how we plan to solve it in December," he said.
The review of all of the Anglo-group's assets, which was started in April, will be completed by the end of November and Cutifani intends to disclose the results in December.
Part of the asset review includes plans to double production at Mogalakwena, the group's huge, lucrative platinum mine near Makhado in Limpopo.
This will include replacing the production capacity of the shafts being closed at Rustenburg locked in the controversial revision of Anglo American Platinum [JSE:AMS] (Amplats).
"Mogalakwena has a reserve of 80 million fine ounces - it gives a life expectancy of 240 years to the mine. I do not know if we will still be using platinum in about 240 year's time. Let's rather see if we can reach 50 years.
"The key point is the complexity of the mine. The ore structure is of such a nature that production of nickel and copper will be increased as well. We must, therefore, ensure that we have the processing capacity for base metals," said Cutifani.
He anticipates giving a time scale for the Mogalakwena plans in December.
"We might have to change the mining methods there too, but it's still too early to connect all the dots," he said.
Brazil
His turnaround strategy for Anglo, which he announced at the interim results in July, firstly involves an additional after-tax earnings (Ebitda) of $1.4bn by ensuring that the Minas Rio iron ore project in Brazil starts to produce by the end of next year.
Cutifani recently visited Minas Rio twice. He provided more support to the project team by appointing additional project experts.
Tony O'Neil, Anglo's new mining chief brought from AngloGold Ashanti by Cutifani, is working with the project team at Minas Rio to find ways in which ore could be delivered earlier.
Platinum strategy issues are settled, but the time scale will change slightly.
"It's still the same strategy, but with a new time scale. It's something we continuously discuss with the government."
He undertook to cut a further $1.3bn from the organisational structure and remove value leaks from the system.
The integration of De Beers has to bring about savings of $100m a year. He has already completed half of that.
Cutifani said he also has plans to create savings of $100m in Anglo's supply chain as well as save $400m in the group's operating divisions.
(The author has shares in Anglo American.)
* For more business news in Afrikaans, see Sake24.
Mark Cutifani, CEO of Anglo, said in terms of current estimates Anglo's net debt will be about $16bn next year - considerably more than the $14bn promised earlier.
"If we want to turn around at a net debt of $14bn, we would have to correct issues at Kumba very quickly. There is work to be done at Kumba - it will be difficult, " he said in an interview with Sake24.
Kumba shocked the market a couple of weeks ago with a production report that showed that in the quarter ended September it had produced 24% less iron ore than in the corresponding quarter of last year.
Production problems at its mine in Sishen were the cause and analysts are worried that the mine's richest ore has been mined too fast during the past three or four years.
"The results of Kumba's quarterly report was disappointing. Our mining people are now working closely with Kumba's CEO Norman Mbhazima to solve it.
"We have already set the strategy for this, but we are now working on an implementation plan. We will announce details about how we plan to solve it in December," he said.
The review of all of the Anglo-group's assets, which was started in April, will be completed by the end of November and Cutifani intends to disclose the results in December.
Part of the asset review includes plans to double production at Mogalakwena, the group's huge, lucrative platinum mine near Makhado in Limpopo.
This will include replacing the production capacity of the shafts being closed at Rustenburg locked in the controversial revision of Anglo American Platinum [JSE:AMS] (Amplats).
"Mogalakwena has a reserve of 80 million fine ounces - it gives a life expectancy of 240 years to the mine. I do not know if we will still be using platinum in about 240 year's time. Let's rather see if we can reach 50 years.
"The key point is the complexity of the mine. The ore structure is of such a nature that production of nickel and copper will be increased as well. We must, therefore, ensure that we have the processing capacity for base metals," said Cutifani.
He anticipates giving a time scale for the Mogalakwena plans in December.
"We might have to change the mining methods there too, but it's still too early to connect all the dots," he said.
Brazil
His turnaround strategy for Anglo, which he announced at the interim results in July, firstly involves an additional after-tax earnings (Ebitda) of $1.4bn by ensuring that the Minas Rio iron ore project in Brazil starts to produce by the end of next year.
Cutifani recently visited Minas Rio twice. He provided more support to the project team by appointing additional project experts.
Tony O'Neil, Anglo's new mining chief brought from AngloGold Ashanti by Cutifani, is working with the project team at Minas Rio to find ways in which ore could be delivered earlier.
Platinum strategy issues are settled, but the time scale will change slightly.
"It's still the same strategy, but with a new time scale. It's something we continuously discuss with the government."
He undertook to cut a further $1.3bn from the organisational structure and remove value leaks from the system.
The integration of De Beers has to bring about savings of $100m a year. He has already completed half of that.
Cutifani said he also has plans to create savings of $100m in Anglo's supply chain as well as save $400m in the group's operating divisions.
(The author has shares in Anglo American.)
* For more business news in Afrikaans, see Sake24.
