(Reuters) – Anglo American’s (AAL.L) South African iron ore division said cooperation between private investors and the government could help solve a growing rail bottleneck that is forcing mines to stockpile iron ore.
Kumba Iron Ore (KIOJ.J) said its stockpiles had risen to 7.9 million tonnes from 7.8 million tonnes in December, forcing the company to cut its mining activity and lower its sales forecast.
Kumba CEO Mpumi Jikarala said greater cooperation with the government through the National Logistics Crisis Committee could help alleviate South Africa’s rail problems, including locomotive shortages and infrastructure sabotage.
Africa’s Largest Steel Raw Material Producer Transports Iron Ore on 861 Kilometers (535 Miles) of Railway line The railway runs from the huge Sishen mines in South Africa’s Northern Cape Province to the port of Saldanha.
On lines run by state-owned rail and port company Transnet (TRAN.UL), frequent disruptions by locust swarms have been exacerbated by theft and derailment of cables in recent days, forcing Kumba to stockpile iron ore at its mines.
Jikarara said on a conference call that Kumba is “feeling a growing challenge” on the iron ore line.
“We have been working with Transnet and have had some success with tamping, locust control and many other things,” Jikarara said.
“But at the same time we have other challenges. I talked about derailments and other breakdowns,” she added.
The iron ore line also transports manganese and other minerals to ports on the west coast of South Africa.
South Africa’s rail capacity shortage is also hurting the earnings of mining companies such as Tungera Resources (TGAJ.J) and Exalo Resources (EXXJ.J), which rely on Transnet’s network to transport coal to ports on the east coast.
The problem is also a headwind for bulk shippers who rely on domestic railroads to export their products, according to BofA Securities.
“We believe that South Africa’s rail network has complex and deep-seated problems, and that more permanent solutions may not come to fruition for some time yet,” BofA analysts said.
Kumba’s profits fell 17% in the six months to June due to rail problems and falling prices. Still, Kumba’s premium iron ore achieved a price 4% above the base price.
The company announced an interim dividend of R22.60 per share. The company’s shares were up 7.52% as of 0919 GMT.
($1 = Rand 17.6578)
Reported by Nelson Banya. Additional reporting by Felix Njini; Editing by Kim Coghill, Subhranshu Sahu, Jan Harvey
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