Kumba Iron Ore Ltd. started moving more than 500 households as part of plans to raise output at Africa’s largest mine for the steelmaking ingredient as the Anglo American Plc unit announced a business review.
Kumba will move some homes from the west of the Sishen mine to a new precinct in the nearby town of Kathu in South Africa’s Northern Cape province by year-end, Public Affairs Head Yvonne Mfolo said today. The rest, as well as businesses, schools, clinics and churches, will be moved by the end of 2016 in the 4.2 billion-rand ($382 million) project. It’s reviewing all operations, spending plans and product portfolios after prices fell to a five-year low, spokesman Gert Schoeman said.
Kumba is expanding the Sishen pit as the price of iron ore, which has fallen 47 percent this year, dwindles, partly on concern China’s economic slowdown will weaken demand for the material. At the same time, BHP Billiton Ltd., Rio Tinto Plc and Vale SA have increased production to bolster their market shares, creating a glut and preventing a price rebound.
“Prices have moved to lower levels than we expected,” Schoeman told reporters at the site. The company will announce more details on London-based Anglo American’s investor day on Dec. 9, he said.
The commodity, which traded at $70.97 a metric ton at 12:39 p.m. in London, will fall to less than $60 in the third quarter of 2015, Citigroup Inc. said in a Nov. 11 report. Only BHP and Rio, the world’s two largest mining companies, and Pretoria- based Kumba produce profitably at that price, UBS AG analysts said in a Sept. 12 report.
Kumba wants to increase iron-ore output from the open-cast mine to 37 million metric tons by 2016. South Africa is the world’s fifth-largest producer of the seaborne variety of the material.
The expansion of Sishen “is already encroaching on the buffer zone of the community,” Mfolo said, referring to a 500- meter (1,640-foot) border between the pit and the settlement. “As it is they’re dealing with a lot of dust” from current mining, she said.
Owners of 17 homes and 54 municipal houses will be moved by the end of December, Mfolo said. Included in the relocation program are 24 businesses, schools and clinics, a police station and seven churches, she said.