Kumba Iron Ore will invest R8.5bn in its new Sishen South iron ore mine as part of parent Anglo American’s surging capital expenditure programme.

Releasing the group’s interims results for the six months to end-June, CEO Cynthia Carroll said Anglo’s pipeline of approved capital projects now stood at US$15bn compared with $12bn at the end of February this year.

Anglo’s total project pipeline has now grown to US$45bn and Carroll said the group was pushing ahead with its expansion programme despite current global economic uncertainty.

She commented, “the global macro-economic outlook continues to be uncertain with US economic activity expected to be weak in the near-term. It is also clear that the constraints in the credit markets are far from resolved and risk rates have not yet returned to normalised or long-term levels.

“However, in emerging markets, the Chinese economy in particular continues to develop and is expected to grow at around 10% in 2008/09.

“This growth is relatively resilient, being driven primarily by the secular domestic trend of urbanisation and development.

“Furthermore, this growth is driving an increasing intensity of use for the commodities that China requires to build its infrastructure, such that China now represents the largest regional consumer of many key commodities and is the dominant driver of demand growth.”

Kumba’s new mine is scheduled to start production in the first half of 2012 and will ramp up to full capacity of 9Mt/year in 2013. The mine will have an economic life of more than 20 years.

Sishen South is a key part of Kumba’s expansion programme to grow iron export volumes to 44Mt/year by 2013 on top of domestic sales of 9Mt/year. According to Kumba CEO Chris Griffith the company’s project pipeline has the potential to deliver 70Mt/year by 2015.

Other projects highlighted by Carroll included the expansion of Los Bronces in Chile which remains on schedule for completion in 2011 and will increase copper production by around 170,000t/year to more than 400,000t/year.

Anglo’s results for the first half of its 2008 financial year show a record group operating profit of $6.2bn and group profit for the period attributable to equity shareholders up 27% at $4.3bn.

Anglo has increased its interim dividend 14% to 44c from the previous comparable interim payout of 38c.

Carroll is expecting an even better performance from Anglo in the second of the current financial year because of increasing production volumes across the group’s operations combined with commodity prices that are expected to remain strong.

She commented that operational challenges across the industry, such as power availability in a number of countries as well as infrastructure bottlenecks and weather-related shortages, had led to near-term supply being lower than anticipated.

Carroll added, “In the longer-term the mining industry is adjusting to the higher demand environment. It seems likely that the industry will be working hard for some years to keep pace with this sustained higher level of demand and that higher-than-inflation cost pressures will remain.

“Consequently, the balance of supply and demand should sustain strong prices for many of Anglo American’s key commodities despite the current challenges in the developed economies.” – Miningmx.com