Kumba Iron Ore to Restructure Sishen, Cut Production 28% in 2016

  • Owner of Africa's biggest iron-ore mine combats falling prices
  • New plan targets costs of $30 a ton, iron ore at $39.06 a ton

Kumba Iron Ore Ltd., majority owned by Anglo American Plc, said it will restructure Africa’s biggest mine for the steelmaking ingredient, cutting output there by 28 percent to combat the plunging price of the raw material. The stock fell to the lowest on record.

The new plan for the Sishen operation will target free-on-board unit costs of about $30 a metric ton and a break-even price of about $40 a ton cost and freight, Centurion, South Africa-based Kumba said Tuesday in a statement. Output for 2016 will be about 26 million tons, compared with a previous plan to produce 36 million tons.

Iron ore with 62 percent metal content delivered to Qingdao fell 2.4 percent to $39.06 a dry ton yesterday, a record low in daily prices compiled by Metal Bulletin Ltd. dating back to May 2009. The metal has plunged 80 percent since its 2011 peak.

“Our industry is under tremendous pressure with the market now pricing in a more muted trend for the iron-ore price over the medium to longer term,” Chief Executive Officer Norman Mbazima said in the statement. “These circumstances have reinforced the need to make tough decisions for our business, that will enable it to withstand a longer period of much lower prices.”

Kumba declined as much as 11 percent to 35 rand, the lowest since November 2006, and traded 10 percent lower at 35.40 rand by 11:07 a.m. in Johannesburg.

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