Anglo’s South African iron ore unit says rail snags stabilize

Anglo American Plc’s South African iron ore unit said the state-owned logistics company which transports its output has stemmed a deterioration in performance that’s constrained the miner’s sales.

“Where we were previously seeing a significant decline in performance levels, we are now seeing more stability,” Kumba Iron Ore Ltd. chief executive Mpumi Zikalala said on Tuesday.

Logistics bottlenecks due to poor maintenance and theft of equipment have for years hobbled the operations of Transnet SOC Ltd., curbing shipments by South Africa’s coal and iron ore miners. Alongside gold and platinum-group metals, the two commodities – which use different rail lines – are the country’s biggest mineral exports.

The Anglo subsidiary and other miners that depend on Transnet are waiting for South Africa’s Department of Transport to evaluate dozens of submissions by private firms keen to be involved in running the infrastructure, Zikalala said. The government is expected to launch “a request for proposal phase” at the beginning of the fourth quarter, she said.

There has also been “a fundamental shift in speed” in discussions about “greater private sector partnership” in the operation of the freight railways and ports, the CEO said.

Johannesburg-listed Kumba said first-half profit was little changed at 7.1 billion rand ($396 million), while output from the firm’s two mines was flat at 18.2 million tons.

Sales, however, improved by 3% to 18.7 million tons. Iron ore produced by Kumba – which already works with Transnet on maintenance via an industry group – is transported along a 861-kilometer (535-mile) railway to the port of Saldanha on South Africa’s west coast.

There were two derailments on the iron ore line in the second quarter of the year. “There’s a lot of work that still needs to be done,” the Kumba CEO said.

(By William Clowes)