As strong as iron

Thursday, 01 January 2009 10:17

At a time when world markets are looking bleak, Kumba is optimistic and ready for the challenges that await in 2009 Ready to brave the challenges of 2009

Chris Griffith, the chief executive officer (CEO) of JSE-listed Kumba Iron Ore (Kumba), is extremely laid-back, despite his tremendous leadership role at one of Africa’s foremost iron ore producers. Having taken over the helm in July 2008, Chris has a bright and positive outlook despite the current economic downturn. “All major projects are continuing as planned, so that when the economy swings, we will be ready. Our marketing teams are working hard to ensure sales, and are forging strong relationships with customers to better understand their needs,” he says. Cost will remain a strong focus area leading up to 2010 and beyond. Chris is a natural-born leader whose management capabilities shone through from an early age, when he took on the role of head boy at Milner High School and Hostel. When Chris completed his secondary schooling, he studied further and obtained an honours degree in mining engineering from the University of Pretoria. It was there where he met Coralyn, his wife of 19 years, and enjoys nothing more than spending quality time with her after a hard week at the office. At the age of 33, Chris became one of the youngest general managers in the history of Anglo Platinum, when he was appointed to run the group’s flagship mine, Amadelbult. With numerous accolades attached to his name, Chris confesses, “Marrying Coralyn was my greatest achievement. She has kept me grounded, and reminds me there is life after work.” Of work Chris says, “Kumba brings superior quality iron ore to the international market, while at the same time, enriching the lives of South Africans.” It is a good place to work, as borne out by the company winning the Deloitte Best Company to Work for in 2008 Award (mining division). The iron ore giant’s workforce of over 5 000 is based at its mines in Thabazimbi and Sishen, and its corporate office is based in Centurion. Owned by Anglo American plc, the Industrial Development Corporation and various minority shareholders, Kumba produces 81% of South Africa’s iron ore, and sells over 80% of its production to international clients. “Kumba is the fourth largest supplier of sea-borne iron ore, and the reserves of all our mines combined exceed one billion tons of high-quality iron ore,” he adds. Kumba’s corporate governance is driven by transparency, accountability, fairness and responsibility, while Chris is driven by the simple pleasures in life. He’s a bird-watcher and photographer, and also enjoys fly-fishing and travel. “I’m always up for a quiet meal and a good bottle of wine, and although I live in Johannesburg, I support the Blue Bulls,” he laughs. Besides winning the mining category of the Deloitte Best Company to Work for Award in 2008, Kumba has consistently featured in this competition for the past five years. “Kumba also has a fantastic safety performance record, as it is vital that we keep our employees safe,” says Chris. Last year, Kumba also received a National Good Practice Award from the Department of Labour, in recognition of its contribution over the past two years towards the National Skills Strategy. “We provided 355 internships. Of these, 280 people were trained for Kumba, and the rest for other mines that do not necessarily have the capacity to train these various skill sets,” explains Chris. “We also train bricklayers, plumbers, carpenters and other trades, thereby contributing to overall skills development within South Africa,” he adds. Kumba was also presented with the Financial Mail Top Empowerment Companies Award for Best Skills Development. One of Kumba’s major accomplishments in 2008 was the approval of its R8.5 billion investment in the Sishen South Mine. The mine is scheduled to start production in 2012, ramping up to full capacity in 2013. Kumba and Transnet also signed an agreement to expand the Sishen-Saldanha Iron Ore Export Channel. “This is a dedicated railway line, the expansion of which is crucial to the success of the Sishen South Project, as it will transport the iron ore to the Saldanha harbour by rail,” he adds. Challenging road ahead Due to a fall in the demand of iron ore, most steel mills have announced a cut in production. While this could place pressure on projects within Kumba, it is still a good margin business. “Due to the good quality of our iron ore, its good physical characteristics, Kumba sees greater demand. We have what’s known as the ‘Porsche’ of iron ore. The current economic crisis will see everyone becoming more cost conscious, and levels of performance will be raised,” says Chris. “Our clients are also geographically well spread in Europe, China, Japan, and Korea, and Kumba has forged and continues to focus on customer relationships,” he says. It’s easy to see why Chris is a successful businessman. He lives by the motto, “do the right things long enough”, and believes that persistence will always pay off, and hard work is the foundation of success. “It equates to 90% perspiration, and 10% inspiration,” he says. Financial highlights Despite the volatility in the global economy towards the end of 2008, Kumba Iron Ore Limited has delivered strong financial results for 2008. During April 2008, Kumba’s old order mining rights were converted and a new mining right granted for the Sishen South project. A significant step has been taken towards the next phase of growth for Kumba, with the approval of the Sishen South project during the third quarter of 2008. Attributable profit for the year of R7.2bn and headline earnings of R7.3bn more than doubled from R3.2bn and R3.1bn respectively in 2007. Revenue increased by 86% as a result of stronger iron ore prices, a weaker rand, increased revenue from shipping services and higher export sales volumes. Operating expenses remained under pressure as inflation in South Africa soared and fuel and other key commodity costs saw unprecedented increases during the year. Despite the increase in operating costs, Kumba’s operating margin improved to 63% in 2008, from 52% in 2007 (69% from mining activities and 56% from mining activities respectively). Cash generated from operations for the year increased to R14.5bn compared to the R5.8bn generated during 2007. Attributable earnings for the year was R22.80 per share, while headline earnings increased to R23.02 per share, on which a final cash dividend of R13.00 per share has been declared, bringing the total dividend for the year to R21.00 per share (2007 – R7.50 per share). Kumba backs its community to benefit the people Kumba’s employees and contractors reside in the settlement areas close to the mines. “Our sustainable development projects at Sishen mine work on the principles of good citizenship, promoting strong relationships with communities, and enhancing the communities that surround the mine,” says Chris. Within the Sishen community, the Boitirello Jewellery project employs women who have all completed an NQF3 qualification in jewellery production; artisans have been trained; textbooks were purchased for the pupils at Kathu Primary School; and having identified skills shortages as one of the key hindrances to economic growth in the area, they opened a training institution. Thabazimbi Mine employs about 3% of the local population. The Itireleng Skills Development Centre provides free training to locals, with the mine investing R800 000 in equipment, machinery and technical courses in plumbing, welding, carpentry, bricklaying and motor mechanics. Thabazimbi Mine also launched the Re Tlo Lwana community HIV/AIDS programme that provides transport for delivering food parcels to the community, caregivers and awareness campaigns. Bomme Itsoeng, meaning “women helping themselves”, was launched in Kuruman to enable Kumba to engage with communities in rural areas. “This initiative empowers women by giving them a voice in the community,” says Chris. The Sishen Iron Ore Company (SIOC) Community Development Trust, also known as the Super Trust, was formed in September 2006. It is the sole beneficiary of 3% of the ordinary shares of SIOC through a Special Purpose Vehicle (SPV) established to hold the shares on its behalf. It was originally estimated that all preference shares would be redeemed within 10 to 15 years, however, the company’s strong performance has reduced the estimated payback period to four years, with all SPV shares expected to be redeemed by 2010. “Communities around Sishen, Sishen South and Thabazimbi mines are eligible for support and benefits from the Super Trust, including education and development; conservation; land and housing; welfare and humanitarian organisations, and enterprise development,” he concludes.

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