Kumba Iron Ore
Saldanha

We will continue to build on the momentum gained in the first six months of the year. Kumba's strategic objectives are clear - Themba Mkhwanazi, CE of Kumba Iron Ore.

He goes on to state:

“Kumba delivered an exceptional financial performance in the first half of 2019 by focusing on safe, responsible and efficient production, while achieving optimal value for our premium quality products.

"Most importantly, we marked three years of fatality-free mining by combining local excellence and global expertise to transform productivity and safety at Sishen and Kolomela.

"Our “value over volume” strategy has met customer demand and delivered a more than threefold increase in EBITDA to R20.1 billion. With a very strong opening cash position and attributable free cash flow of R12.7 billion, the board has declared an interim cash dividend of R9.9 billion or R30.79 per share.

"This represents a payout ratio of 98% of headline earnings, above our target range of 50% to 75% of headline earnings.

"By integrating our sales and operational strategy, Kumba achieved a 57% increase in our average realised FOB iron ore price. This reflects the strengthening of iron ore prices and quality premia, as well as the marketing and beneficiating capability of our team, which ensured that our premium product portfolio remains competitive and that we continue to create customer value.

"We are progressing at a pace towards our margin enhancement target of US$10/tonne. Our operational efficiency increased to 67%, which, together with our focus on cost optimisation, delivered savings of R460 million,
underpinning our EBITDA margin of 58% and our break-even price of US$32/tonne.

"Operationally, Kumba experienced a challenging first half which saw production volumes decreasing by 11% to 20.1 Mt largely due to unscheduled plant maintenance in Q1 2019.

"We have made good progress in Q2 2019 with production increasing by 12% to 10.5 Mt from the first quarter. We remain cautious and production guidance for the year was revised down to 42 Mt to 43 Mt.

"Pleasingly, our logistical performance has improved significantly, supporting growth in export sales of 2% and our full year sales guidance which remains at 43 Mt to 44 Mt.

"For the second half of the year we aim to improve our safety performance, increase production volumes and deliver on our full year R700 million cost-savings target while continuing to achieve optimal market premia.

"Our strategy to extend the life of our mines to over 20 years remains on track, thus providing a more sustainable future for our communities which depend on us.

"Our commitment to disciplined capital allocation and sustainable
shareholder returns, together with our flexible and resilient balance sheet, ensures that we remain well-positioned to deliver sustainable returns.

"Looking ahead, we will continue to build on the momentum gained in the first six months of the year. Kumba's strategic objectives are clear - we are targeting a US$10/tonne margin enhancement and a 20-year life of asset. This will allow us to maximise value and shareholder returns while maintaining financial discipline.

"To date in 2019, we have extended our fatality-free safety performance track record, delivered strong financial results and will be paying R13 billion of cash to our shareholders in dividends.

"Our aim in the second half, is to further improve on our safety performance, increase production volumes and deliver on our cost-savings target of R700 million, in addition to continuing to achieve maximum market premia.

"We are working hard to further progress our resource development plan and the feasibility study on our UHDMS technology, which will add to the life of Sishen mine is 80% complete. At Kolomela, we are unlocking the 85 Mt of resources under study and drilling activities are on schedule.

Due to the operational challenges experienced over the first few months of the year, our full year total production guidance has been revised to 42 Mt to 43 Mt from 43 Mt to 44 Mt. Full year guidance for sales remained constant at 43 Mt to 44 Mt as we continue to optimise our integrated sales and operations planning.

"Sishen's production guidance has been revised to between 29 Mt and 30 Mt, while waste guidance remains unchanged at 170 Mt to 180 Mt. Due to the infrastructure upgrade of the DMS plant, we have revised Kolomela's production guidance to ~13 Mt, while waste guidance of 55 Mt to 60 Mt
was maintained as previously guided.

"In line with the revised production guidance at Sishen, the full year unit cash cost guidance of the mine was increased to between R325/tonne and R335/tonne. Kolomela's unit cash cost guidance was revised down to between R255/tonne and R265/tonne.

"Our capital expenditure for 2019, including deferred stripping, was revised slightly higher to R4.9 billion to R5.1 billion, from the previous range of R4.6 billion to R4.8 billion, due to an increase in deferred stripping and capital spares aimed at improving the performance and efficiency of our primary equipment and production plants."