Cape Town - In its production and sales report for the quarter to end-June released on Wednesday, Kumba Iron Ore [JSE:KIO] announced a production drop of 15% to 8.9 million tonnes, consistent with its revised Sishen mine plan.
Total sales were 9.7 million tonnes (0.8 million tonnes higher than production), a 26% drop as stock levels reduced further. Production and sales volumes referred to are 100% of Sishen Iron Ore Company.
Kumba explained that in order to position the company to withstand the significant fall in iron ore prices, it revised the Sishen mine plan and reconfigured the pit to a lower cost shell.
Implementing the plan had an impact on Sishen’s operations and effectively halved mining volumes, resulting in a 31% reduction in the number of permanent employees and contractors. As a result, production for the quarter dropped by 21% to 5.7 million tonnes (2015: 7.2 million tonnes) and waste mined by 47% to 31 million tonnes.
Run rates were affected by the significant restructuring process, which began in the first quarter and has now been substantially completed. Run rates were also affected by higher than normal levels of rainfall and safety incidences, including a fatal incident in May.
The successful restructuring increased mine flexibility and run rates on key operating parameters showed a marked improvement during June 2016. Total tonnes handled and ex-pit ore lifted by 28% and 38% respectively from May 2016 to June 2016, in support of the guided production level of 27 million tonnes for the full year.