JOHANNESBURG: A spike in iron ore prices lifted Kumba Iron Ore's full-year profit, with the company saying it expected prices to remain firm this year.
Chief executive Chris Griffith said on Thursday 2011 export prices, which rose on average 92 percent last year, would be supported by higher demand on the back of an at least 5 percent rise in crude steel production in China.
"We are not expecting any major projects to come on stream and expect the supply-demand balance to remain fairly tight," he said.
Kumba said China's demand may ease due to the Asian giant's move to improve energy efficiency.
"This is where they (Kumba) may be coming in as a little bit over-cautious," said Paul Theron, an analyst at Vestact.
Kumba, Africa's largest iron ore producer and 10th globally, said higher prices would help offset the impact of a strong rand which has gained nearly 24 percent since the start of 2009.
Kumba said each 1 percent move in the currency was impacting its profit line by 300 million rand ($41.37 million).
Its shares rose more than 1 percent in early trading but were down 0.11 percent at 463.13 rand by 0836 GMT. Kumba shares are up over 9 percent this year, compared with a 3.4 percent rise in Johannesburg's Top-40 index of blue chips.
The company, a unit of Anglo American, said production and export volumes were expected to remain flat this year, although there may be an option to boost exports by up to a million tonnes if logistics group Transnet manages to improve capacity on the rail lines leading to the export terminal.
Production of the steel-making ingredient rose 3 percent to 43.3 million tonnes last year, while export sales were up 6 percent to 36.1 million tonnes.
LOGISTICS WOES
Griffith said Transnet, Kumba and other mining firms were exploring the options of further upgrades to the rail infrastructure, which could raise capacity on the iron ore and manganese line to 90 million tonnes per year. Transnet's current plan is to raise the line's capacity to 60 million by 2012.
Kumba said the first iron ore from its 8.5 billion rand Kolomela project, meant to lift the group's total annual output by 9 million tonnes per year, would be delivered by the end of the first half of next year. The project would then gradually ramp up to full production by 2013.
In terms of further expansion, Griffith said the company would focus first on boosting its production in South Africa to 70 million tonnes by 2019 before looking beyond.
Kumba said full-year basic headline earnings per share, the main profit gauge in South Africa which strips out certain one-time items, rose to 44.67 rand from 21.87 rand a year ago.
Kumba declared a final cash dividend of 21 rand per share.
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