Anglo’s Kumba Iron Ore Expects Profit Cut on Prices, Strike

Anglo American Plc (AAL)’s Kumba Iron Ore unit said profit will drop at least 20 percent this year after prices of the steelmaking ingredient fell and a strike at its biggest mine in South Africa cut output.

Net income will decline from 17 billion rand ($1.9 billion) in the 12 months through December, the Centurion, South Africa- based company said in a statement today. Profit is estimated to drop 25 percent to 12.8 billion rand, according to the median estimate of 13 analysts in a Bloomberg survey.

“The decrease in earnings is largely attributable to a decrease in export iron-ore prices in the period as well as the impact on production following the illegal strike at Sishen Mine,” the company said. Earnings results will be released about Feb. 12, Kumba said.

Benchmark iron-ore prices have declined 12 percent this year as demand from China, which imports more of the material than the rest of the world combined, waned as economic growth slowed. Output was halted at Kumba’s Sishen mine after about 300 workers downed tools on Oct. 3 to demand higher pay as wildcat stoppages spread from the platinum industry to gold, chrome and iron-ore operations.

Output Loss

Police arrested miners at Sishen after Kumba brought criminal charges against them and production restarted Oct. 20., Kumba said. Output remains at reduced rates as lower worker attendance because of incidents of intimidation, . The company has lost 2.6 million metric tons of finished product as of Nov. 9, according to the statement.

Production losses could escalate depending on how long it takes for the intimidation to end, Clinton Duncan, a mining analyst at Avior Research Ltd., said by phone from Johannesburg.

A 20 percent cut in profit “is the best-case scenario,” he said.

Kumba, which is 70 percent owned by Anglo, fell the most since Oct. 3, losing 3 percent to 525.01 rand by 1:34 p.m. in Johannesburg.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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