Kumba's profit dips

Kumba Iron Ore reported a dip in operating profit in the first half of the year, held back by weaker iron ore prices and a slow recovery at its flagship Sishen mine after crippling strikes last year.

Kumba - controlled by Anglo American and a major profit generator for the group - said headline earnings per share, the main profit gauge in South Africa, increased in line with forecasts to R24.13 in the six months from R23.88.

But expected higher costs, flat first-half output and weaker export sales dragged down the operating profit, which slipped 4%.

Kumba's contribution to Anglo underlying profit decreased almost 9% to $579-million.

Last year, Kumba contributed almost half of Anglo's earnings.

This year, analysts expect the proportion to be roughly similar when Anglo reports on Friday - the first time it will do so under its new chief executive Mark Cutifani.

Kumba's Sishen mine in the Northern Cape continued to suffer from a low supply of high-grade material as it recovered from the disruptions caused by strikes.

About 300 workers downed tools in early October last year and the mine resumed production just over two weeks later, but intimidation remained rife and the full workforce was only able to return in December.

The mine is expected to produce 37million tons this year. In contrast, Kolomela, which began producing in 2011, will produce around 9million tons this year.

Kumba CEO Norman Mbazima said the company had conducted a technical and strategic review of Kolomela and Sishen, key assets in the Northern Cape, aiming to achieve "a balance between production and costs for both mines".

Mbazima, who said the focus was optimisation and not cuts, told reporters the review would be "firmed up" in the second half.

Kumba's fortunes in the first half contrast with those of larger iron ore producers Rio Tinto and BHP Billiton, which have both pumped up production despite cooler prices and fears of weakening steel demand, taking advantage of relatively low costs compared to their rivals.