Anglo American Plc’s South African iron ore unit said it plans to spend R3.6 billion ($246 million) to extend the life of its giant Sishen open pit operation to 2040 through the use of new technology.
The sprawling Sishen operation in South Africa’s Northern Cape province would continue to mine for the next two decades as the company improves efficiency and deploys new technology through its high-density media separation project, Themba Mkhwanazi, chief executive officer of Kumba Iron Ore Ltd., said in a statement Tuesday. Kumba had initially planned to mine at Sishen for the next 13 years.
“It means that the mine will obviously continue to operate for a lot longer,” Mkhwanazi said on a conference call as the company announced full-year results. “As we improve the efficiencies, the economics of the pit become more favourable.”
Kumba is also developing the Kapstevel South mine and Kolomela as prices for the steelmaking raw material surge. The current broad rally in metals prices has prompted some analysts to suggest commodities could be entering a supercyle of sustained, abnormally strong demand growth that producers struggle to match.
While Kumba sees demand for iron ore, underpinned by China, as likely to remain robust due to supply constraints, prices at current levels aren’t sustainable, Timo Smit, the miner’s head of marketing, said during the conference call. Kumba realised an average price of $115 per ton last year, as prices climbed.
“We have a very positive view of the market, but prices are unlikely to be sustained at these levels,” Smit said. “Supply still looks fairly constrained, but prices are likely to start coming down.”
Kumba joins precious metals producers Sibanye Stillwater Ltd. and Anglo American Platinum Ltd. among South African miners that have outlined plans to spend more to boost output for their metals and extend the life of operations.
Kumba’s shares rose 1.6% as of 9:18 a.m. in Johannesburg, taking this year’s gains to 9%. Parent Anglo American was 1.3% higher. The benchmark FTSE/JSE Africa All Share Index was 0.3% higher, on course for a record close.
Kumba increased its final dividend payout to 86% of headline earnings from 75% a year earlier. Net income for 2020 rose even as Covid-19 disruptions reduced iron-ore production, the company said.