Kumba Iron Ore reports fall in FY profit

South Africa's largest iron ore producer Kumba Iron Ore on Tuesday posted a 28 percent drop in full-year earnings.

Kumba said net profit for the year ended December 31 totalled R12.3 billion, down from R17.3 billion the year before, hit by lower export prices, rising costs and a strike at its flagship Sishen mine, which is not back to full production after it was shut for two weeks in October.

Despite the fall in profits, production of iron ore actually increased during the year to 43.1 million tons from 41.3 million tons the year before and export sales rose seven percent to 39.7 million tons.

"We are pleased with another year of solid growth," Kumba CEO Norman Mbazima said in a statement. "We have delivered a healthy profit, declaring a R4 billion final cash dividend for shareholders, while continuing to invest in our long-term strategy and vision, despite a challenging mining environment and falling iron ore prices.

"This was another year of strong operational performance. We achieved record production of 43.1Mt, aided by the excellent performance at Kolomela mine, despite the unprotected strike at Sishen mine in the fourth quarter. Kolomela mine, which significantly exceeded its production ramp up schedule produced 8.5Mt. Record export sales of 39.7Mt achieved is particularly noteworthy and directly related to the continued demand from Asian markets, mainly China."

On outlook for 2013, Mbazima added: "Despite the challenges of 2012, I believe that we are well placed to continue delivering to all our stakeholders. Our strategy of optimising the value of current operations, capturing value across the value chain and achieving the group's growth aspirations, has again been validated by the Group's performance. This ability to mitigate potential negative impacts and ensure growth bodes well for the sustainable delivery of shareholder value into the future."

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