Kumba to put R1,7bn payout into expansion
Siseko Njobeni
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Trade and Industry Correspondent
DIVERSIFIED metals and mining group Kumba Resources would direct the A$231,4m payment for its stake in the Hope Downs iron-ore project to its existing growth projects in SA and Senegal, the company said on Friday.
Australian Hancock Prospecting on Friday exercised its option to buy out Kumba, its 49% partner, from the project.
HancockÆs decision has thwarted the South African miner and its parent company Anglo AmericanÆs aspirations to get into one of the worldÆs largest iron-ore projects.
Anglo CE Tony Trahar has previously said the group viewed Kumba as a core investment and critical to its iron-ore ambitions.
The project, a joint venture between Kumba and Hancock, would have been a substantial boost for Kumba, adding about 50% to its annual 30-million tons a year of iron-ore production and giving it an estimated R5bn in revenue.
The project is well positioned to take advantage of ChinaÆs iron-ore demands. ChinaÆs iron-ore imports increased tenfold between 1990 and 2003, according to figures of the Minerals Council of Australia.
Global resources group Rio Tinto said on Friday it had reached an agreement with Hancock to buy a 50% interest in the project.
KumbaÆs exit from the project followed HancockÆs successful challenge of Anglo AmericanÆs acquisition of Kumba two years ago. Hancock said the company had not been informed of the change in KumbaÆs ownership, as required by the projectÆs agreement.
Kumba investor relations manager Trevor Arran said the company was disappointed not to be part of the project, but that it had definite plans for the payment, which is about R1,7bn.
ôThis is a big project, and we are obviously disappointed that we will not be part of it. But we are happy with the payout, and will direct the funds to our existing projects,ö Arran said. He said Kumba would continue to pursue growth opportunities in iron ore with the Sishen expansion project in Northern Cape and the Faleme project in Senegal, west Africa.
The Sishen project entails increasing the mineÆs output by 10-million tons to 38-million tons by 2009. Kumba has said the project is scheduled for commissioning in July 2007, with full production expected by mid-2008.
Kumba last year signed an agreement with SenegalÆs project development company to conduct a prefeasibility study on the project. Arran said the project would include a mine, a 741km railway line and a new deep-water port for iron-ore exports. ôWork on the feasibility of the Faleme project is progressing well,ö Arran said.
He said none of the money would go towards dividend payments for Kumba shareholders.
Anglo American spokesman Daniel Ngwepe on Friday said that despite the setback the company was happy with KumbaÆs financial performance.
ôWe believe that Kumba has attractive long-term expansion prospects,ö Ngwepe said.
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