Anglo’s Kumba wants private investors to run key iron ore rail line

Anglo American’s South African iron ore business wants private investors to run a rail line that is crucial for shipments of the steelmaking ingredient to export markets, it said on Tuesday.

The 861-km (535-mile) rail line, owned and operated by struggling state company Transnet, runs from Kumba Iron Ore’s Sishen mine in South Africa’s Northern Cape province to Saldanha port.

However, it has been beset by derailments and Transnet’s balance sheet “constraints” mean it is unable to run the line efficiently, said Kumba CEO Mpumi Zikalala.

Africa’s top iron ore miner, Kumba has scaled down production after stockpiles rose to 7.5 million metric tons last year from 7.1 million the previous year.

“We believe the entire line could be concessioned to a player who will be able to purely focus on this line and that could make a massive impact,” Zikalala said on a media call after Kumba reported a slide of 45% in annual earnings.

In a move to open up South Africa’s rail network to third-party investment, Transnet issued a “final network statement” in December, outlining terms and conditions for private sector participation, in plans to restore declining freight volumes.

Kumba’s headline earnings dropped to 12.5 billion rand ($678.26 million) in 2024 from 22.7 billion previously, hit by lower prices and swelling stockpiles of iron ore caused by lack of rail capacity, the company said.

Its shares rose 5% in mid-morning trade after the company declared a final dividend of 19.90 rand, bringing the payout for the year to 38.67 rand, down 17% from 2023.

Kumba CFO Bothwell Mazarura said the total dividend payout, equivalent to 100% of headline earnings and above the miner’s payout ratio of 50% to 75%, followed “a good year from a cash generation perspective”, despite lower profitability.

($1=18.4294 rand)

(By Felix Njini and Nelson Banya; Editing by David Goodman and Clarence Fernandez)