The Anglo American unit which had enjoyed sky-high iron ore prices in the past now faces a decline in profits as the metal price drops.
Kumba Iron Ore, the Anglo American unit that owns Africa’s largest mine for the steelmaking ingredient, said first-half profit fell 16% after prices of the mineral dropped.
Profit excluding one-time items declined to R6.5-billion, or R20.28 a share, in the six months ended June 30 from R7.8-billion, or R24.13 a share a year earlier, the Pretoria-based company said in a statement on Tuesday. Iron-ore output increased 5% to 22.8-million metric tonnes, it said. Kumba declared a dividend of R15.61 a share.
Iron-ore producers, including Rio Tinto Group and BHP Billiton, are expanding supply, betting the increase will more than offset declining prices, which fell to the lowest since September 2012 last month. Kumba plans to almost double production by 2030, with new sites in western and central Africa potentially accounting for more than 20% of volumes.
“Iron-ore prices are expected to remain at current levels in the third quarter,” Kumba said. “Restocking by steel mills and a slowdown in Chinese domestic iron-ore production in their winter is expected to support prices towards the end of the year.”
The average price of benchmark ore with 62% iron content delivered to the Chinese port of Tianjin in the first half of 2014 was $111.87 a dry tonne, 18% lower than a year earlier.– Bloomberg