KIO - Kumba Iron Ore Limited - Reviewed Condensed24 Jul 2008
KIO
KIO                                                                             
KIO - Kumba Iron Ore Limited - Reviewed Condensed Consolidated Financial        
Report for the six months ended 30 June 2008 and interim cash dividend          
declaration                                                                     
KUMBA IRON ORE LIMITED                                                          
Company registration number: 2005/015852/06.                                    
Incorporated in the Republic of South Africa                                    
JSE code: KIO & ISIN: ZAE000085346                                              
REVIEWED CONDENSED CONSOLIDATED FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30    
JUNE 2008 AND INTERIM CASH DIVIDEND DECLARATION                                 
2008 Interim results                                                            
HIGHLIGHTS                                                                      
Operating profit up 78%                                                         
Interim cash dividend 800 cents per share                                       
Headline earnings up 76%                                                        
Commitment to zero harm LTIFR of 0,07                                           
COMMENTARY                                                                      
Highlights                                                                      
For the six months ended 30 June 2008 Kumba Iron Ore Limited ("Kumba")          
continued to deliver strong financial results. Revenue increased by 67% as a    
result of higher sales volumes, stronger iron ore prices and increased revenue  
from shipping services. Despite continued pressure on operating expenses,       
Kumba`s operating margin increased to 58% in 2008 (63% from mining              
activities), from 54% (57% from mining activities) in 2007. Profit for the six  
months ended 30 June 2008 was R3,5 billion, whilst headline earnings increased  
76% from R1,6 billion to R2,8 billion. Cash generated by operations for the     
period increased to R4,6 billion, up 52% compared to the R3,0 billion           
generated during the corresponding period in 2007.                              
Attributable and headline earnings for the six months were 890 cents per        
share, on which an interim cash dividend of 800 cents per share has been        
declared.                                                                       
Safety performance                                                              
Kumba`s commitment to zero harm is reflected in the safety achievements of the  
first six months of 2008 which have shown meaningful improvement when measured  
by lost time injuries ("LTI`s") as Kumba worked for three of the six months     
without a single LTI. Sishen Mine achieved a lost time injury frequency rate    
("LTIFR") of 0,08 which is the best ever performance in the history of the      
mine.                                                                           
Thabazimbi Mine achieved a LTIFR of zero for 2008 which was down from 0,12 in   
December 2007. Kumba achieved a LTIFR of 0,07 for the six months, recording     
only 4 LTI`s in the period. Notwithstanding this improvement, it is with        
regret that the group announce that it suffered one fatality for the period     
when Mr Kagiso Peace Leboa, a 42 year old truck operator was fatally injured    
at Sishen Mine during April 2008. The board expresses its deepest condolences   
to the family of Mr Kagiso Peace Leboa.                                         
Operating results                                                               
World crude steel production continued to increase during the six months ended  
30 June 2008, mostly fuelled by demand from China. Demand for iron ore, which   
is a critical input of the steel industry, has continued to increase. China`s   
imports of iron ore rose to over 200Mt in the first six months of 2008. This    
is expected to grow to 750Mtpa over the next five years.                        
Export sales for the first three months of 2008 were based on the 9,5%          
increase in the iron ore benchmark price for the 2007/2008 iron ore year.       
Final price settlement for the 2008/2009 iron ore year between Kumba and its    
customers is anticipated in the third quarter of 2008.                          
In preparing these financial results Kumba has used a prudent estimate of       
future prices. These price estimates (April to June 2008) are based on          
settlements announced by the three iron ore majors and take into account        
Kumba`s lump to fines ratio, its importance as a supplier to the Asian market   
and the physical characteristics of its products.                               
Strong financial and operational performance for the six months ended 30 June   
2008 was achieved, with revenue increasing 67% from R5,4 billion in 2007 to     
R9,0 billion. Operating profit increased by R2,3 billion or 78% from R2,9       
billion in 2007 to R5,2 billion, principally as a result of:                    
Average export price increases contributed R1,3 billion to operating profit.    
Improved sales volumes added R588 million.                                      
The weakening of the average exchange rate of the Rand to the US Dollar         
(average spot exchange rates - R7,65/US$1,00 in 2008 compared with              
R7,15/US$1,00 in 2007), which contributed R644 million to operating profit.     
Increased operating profit from shipping operations of R444 million. Revenue    
from shipping operations increased by R1,1 billion to R1,4 billion in 2008,     
while shipping expenses increased by R713 million to R979 million during the    
same period.                                                                    
All of which was partially offset by a R608 million or 27% increase in          
operating expenses (excluding shipping expenses), mainly as a result of         
inflationary pressures, including the rising costs of fuels, lubricants and     
maintenance-related activities.                                                 
The group increased total sales volumes by 6% from 16,3Mt in 2007 to 17,3Mt.    
Export sales volumes from Sishen Mine for the six months increased by 13% from  
11,8Mt in 2007 to 13,3Mt. Sales volumes increased on the back of higher         
volumes from the Sishen Expansion Project ("SEP") jig plant and the sale of     
stock built up at the port towards the end of 2007. Volumes railed on the       
Sishen-Saldanha export channel increased by 11%, which is slightly below our    
commitment to Transnet. Kumba anticipates an increase in volumes railed as      
production volumes from the jig plant increase. Production at Thabazimbi Mine   
was stable.                                                                     
Total tonnes mined at Sishen Mine decreased slightly from 51,2Mt in 2007 to     
50,9Mt. During the period an additional 2,8Mt of B-grade material (with an      
iron content of between 55% and 60%) mined at Sishen Mine at a cost of R160     
million was stockpiled for use in the jig plant to bring the total B-grade      
material stockpiled to some 12Mt with a cost of R600 million. Sishen Mine`s     
unit cost increase of 17% from 31 December 2007 was contained at R93,39 per     
tonne compared to R79,90 per tonne at the end of 2007, despite inflationary     
pressures across the mining industry.                                           
South Africa`s power constraints have affected Kumba`s operations during the    
period. The direct impact on production volumes was limited to 24 000 tonnes    
during the period. However, the decision to periodically stop all electricity   
power-assisted trucking to reduce Sishen Mine`s energy usage has resulted in    
an increase in the use of diesel, at a time when fuel costs have reached        
record levels. Consequently Sishen Mine has seen an increase of 62% in fuel     
costs year-on-year.                                                             
Cash flows of R4,6 billion were generated from operations, an increase of 52%   
on the R3,0 billion generated in 2007. These cash flows were used to pay        
taxation of R1,6 billion and dividends of R1,3 billion during the period.       
Capital expenditure of R217 million was incurred to maintain operations and     
R589 million to expand operations. At 30 June 2008, the group had a gross debt  
position of R4,3 billion and cash on hand of R2,0 billion. Interest cover       
remained strong at 27 times (19 times at the                                    
end of 2007).                                                                   
Sishen Expansion Project                                                        
Production from the jig plant for the six month to 30 June 2008 was 1,3Mt.      
This production level was lower than anticipated and was impacted by several    
technical difficulties as well as the late commissioning of the crushing and    
sample plants. Through the dedication of the teams involved these technical     
issues have been systematically identified and are being addressed through      
redesign and re-engineering of certain of the design aspects. Whilst this       
process has taken longer than initially anticipated, good progress has been     
made with the crushers, which are performing at design capacity, and with       
bringing forward the commissioning of the 7`th and 8`th jig modules to the      
third quarter of 2008, these initiatives are expected to contribute to the      
continued ramp-up of production from the jig plant. It is anticipated that,     
based on the recent performance from the jig plants, production of some 5Mt     
should be achieved for 2008.                                                    
Sishen South Project                                                            
The project entails the development of a greenfield opencast mine on a group    
of iron ore bodies some 80km south of Sishen Mine. Kumba has been notified by   
the Department of Minerals and Energy that its application for new order        
mining rights for Sishen South has been granted. In addition, in June 2008,     
the Sishen South Project was issued with an integrated water-use licence for    
the proposed development at Sishen South. The conclusion of an agreement with   
Transnet is imminent in respect of the expansion of the Sishen-Saldanha export  
line. The R5,9 billion (real - January 2008) project is progressing through     
the final approval stages, whereafter an announcement will be made. Based on    
current forecasts it is anticipated that first production from the new 9Mtpa    
mine should be in 2012.                                                         
Stakeholder value creation                                                      
Exxaro Resources Limited holds a 20% interest in Sishen Iron Ore Company        
(Proprietary) Limited (`SIOC`) and the SIOC Community Development SPV           
(Proprietary) Limited and SIOC Employee Share Participation Scheme              
(`Envision`) each hold an interest of 3% in SIOC. Of the profit of R3,5         
billion, R729 million is attributable to minority interests in SIOC. In         
preparing the condensed consolidated financial report, SIOC Community           
Development SPV and Envision are considered special purpose entities and are    
consolidated for accounting purposes. Of the total shareholders` equity of      
R4,4 billion at 30 June 2008, R320 million is attributable to these entities    
through their interests in SIOC.                                                
Envision was formed in November 2006. A total of 4 456 employees who            
participate in the scheme, have received a total of R11 million in dividends    
since inception. A further R21 million will be paid to employee participants    
from the dividend declared by SIOC in July 2008. Since inception of the         
scheme, meaningful value has been created for employee participants through     
the appreciation in the Kumba share price from R110 from when Kumba Listed on   
the JSE Limited.                                                                
The SIOC Community Development SPV was founded to hold an investment in SIOC    
for the greater development of the communities in which SIOC operates. R11      
million of dividends have flowed to the SIOC Community Development Trust since  
its inception.                                                                  
Mineral resources and reserves                                                  
There have been no material changes to the resources and reserves as disclosed  
in the 2007 Kumba Annual Report.                                                
Prospects                                                                       
Kumba remains positive on the prospects for iron ore given continued strong     
Chinese demand for steel and upward pressure on iron ore prices, as supply and  
logistics constraints delay bringing on stream new production in response to    
increased demand. Final settlement of iron ore prices for the 2008/2009 iron    
ore year between Kumba and its customers is anticipated in the third quarter    
of 2008.                                                                        
Technical difficulties have impeded the ramp up of the SEP jig plant. Good      
progress is being made in identifying and addressing the remaining technical    
risks and as a result the ramp up of SEP production should escalate in the      
second half of 2008.                                                            
With significant increases in the costs of diesel, steel, explosives and        
electricity, as well as the power supply constraints, operating costs will      
remain under pressure. The anticipated benefits of a reduction in unit costs    
through the additional SEP jig plant volumes is anticipated only when full      
design capacity is reached.                                                     
Change in directorate                                                           
Ras Myburgh handed over the role of Chief Executive Officer of Kumba to Chris   
Griffith on 1 July 2008, when Ras began his secondment to South Africa`s        
national electricity supplier - Eskom. This forms part of Kumba`s efforts to    
continue to support Eskom in developing solutions to meet the country`s energy  
needs. The Board extends its sincere thanks to Ras for his leadership during    
the birth of our new company and wishes Ras well in his new important role.     
Production report                                                               
Production summary                                                              
Total iron ore production increased 12% in the second quarter from a year       
earlier to 8,87Mt. This was due mainly to the additional production delivered   
by the SEP jig plant and stable performance from the DMS plant.                 
Quarterly overview                                                              
                   Quarter ended                                                
                   30 June         30 June  %                                   
`000 tonnes         2008            2007      change                            
Iron ore            8 873           7 957    12                                 
- Lump              5 292           4 666    13                                 
- Fines             3 581           3 291    9                                  
Mine production     8 873           7 957    12                                 
- Sishen Mine       8 247           7 306    13                                 
- Thabazimbi Mine   626             651      (4)                                
Quarterly overview (continued)                                                  
                   Quarter ended                                                
31 March        31 March  %                                  
`000 tonnes         2008            2007       change                           
Iron ore            8 190           7 638     7                                 
- Lump              4 888           4 495     9                                 
- Fines             3 302           3 143     5                                 
Mine production     8 190           7 638     7                                 
- Sishen Mine       7 541           6 943     9                                 
- Thabazimbi Mine   649             695       (7)                               
Six-month overview                                                              
                   Year-to-date                                                 
                   30 June         30 June  %                                   
`000 tonnes         2008             2007     change                            
Iron ore            17 063          15 595   9                                  
- Lump              10 180          9 161    11                                 
- Fines             6 883           6 434    7                                  
Mine production     17 063          15 595   9                                  
- Sishen Mine       15 788          14 249   11                                 
- Thabazimbi Mine   1 275           1 346    (5)                                
CONDENSED GROUP BALANCE SHEET                                                   
as at                                                                           
Reviewed    Restated   Restated                
                                 30 June     30 June   31 Dec                   
                                2008        2007       2007                     
                                 Rm          Rm         Rm                      
Assets                                                                          
Non-current assets                6 605       5 111      6 085                  
Property, plant and equipment     6 359       4 948      5 889                  
Biological assets                 6           6          6                      
Investments in associates and     3           2          2                      
joint ventures                                                                  
Investment held by                188         155        165                    
environmental trust                                                             
Long-term prepayments             34         -           14                     
Deferred tax assets               15         -           9                      
Current assets                    6 115       3 337      3 793                  
Inventories                       1 433       966        1 310                  
Trade and other receivables       2 637       1 007      1 531                  
Current tax asset                 36         -          -                       
Cash and cash equivalents         2 009       1 364      952                    
Total assets                      12 720      8 448      9 878                  
Equity and liabilities                                                          
Shareholders` equity              4 444       2 247      2 736                  
Minority interest                 1 067       555        661                    
Total equity                      5 511       2 802      3 397                  
Non-current liabilities           4 809       4 156      2 869                  
Interest-bearing borrowings       2 840       2 840      1 040                  
Deferred tax liabilities          1 611       1 141      1 490                  
Provisions                        358         175        339                    
Current liabilities               2 400       1 490      3 612                  
Short-term interest-bearing       1 463       693        2 490                  
borrowings                                                                      
Short-term provisions             7          -          -                       
Trade and other payables          930         675        1 058                  
Current tax liabilities          -            122        64                     
Total equity and liabilities      12 720      8 448      9 878                  
CONDENSED GROUP INCOME STATEMENT                                                
for the period ended                                                            
                                Reviewed    Restated   Restated                 
                                6 months    6 months   12 months                
                                30 June     30 June   31 Dec                    
2008        2007       2007                      
                                Rm          Rm         Rm                       
Revenue                          9 048       5 431      11 497                  
Operating expenses               (3 802)     (2 482)    (5 519)                 
Operating profit                 5 246       2 949      5 978                   
Net finance costs                (51)        (104)      (168)                   
Profit before taxation           5 195       2 845      5 810                   
Taxation                         (1 650)     (827)      (1 807)                 
Profit                           3 545       2 018      4 003                   
Attributable to:                                                                
Equity holders of Kumba          2 816       1 605      3 181                   
Minority interests               729         413        822                     
3 545       2 018      4 003                     
Attributable earnings per                                                       
share (cents)                                                                   
Basic                            890         510        1 011                   
Diluted                          875         502        995                     
Dividend per share (cents)                                                      
Interim*                         800         350       350                      
Final                           -           -           400                     
*The interim dividend was declared subsequent to 30 June 2008 and is presented  
for information purposes.                                                       
HEADLINE EARNINGS                                                               
for the period ended                                                            
Reviewed      Restated     Restated                  
                           6 months      6 months     12 months                 
                           30 June       30 June     31 Dec                     
                          2008          2007         2007                       
Rm            Rm           Rm                        
Reconciliation of                                                               
headline earnings                                                               
Attributable profit         2 816         1 605        3 181                    
Net profit on disposal or  -              (4)          (14)                     
scrapping of property,                                                          
plant and equipment                                                             
Realisation of foreign     -             -             (34)                     
currency translation                                                            
reserve                                                                         
                           2 816         1 601        3 133                     
Taxation effect of         -              3            1                        
adjustments                                                                     
Minority interest in       -             -             9                        
adjustments                                                                     
Headline earnings           2 816         1 604        3 143                    
Headline earnings per                                                           
share (cents)                                                                   
Basic                       890           510          1 000                    
Diluted                     875           502          983                      
The calculation of basic and diluted earnings and headline                      
earnings per share is based on the weighted average number of                   
ordinary shares in issue as follows:                                            
Weighted average number    316 563 167   314 208 267  314 618 406               
of ordinary shares                                                              
Diluted weighted average   321 975 153   319 356 550  319 660 289               
number of ordinary shares                                                       
The adjustment of 5 411 986 shares to the weighted average number of ordinary   
shares is as a result of the expected vesting of share options already granted  
under the various share-based payment arrangements.                             
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY                                  
for the period ended                                                            
Reviewed    Restated   Restated                 
                                6 months    6 months   12 months                
                                30 June     30 June   31 Dec                    
                               2008        2007       2007                      
Rm          Rm         Rm                       
Total equity at the beginning    3 397       1 055      1 055                   
of the period - as previously                                                   
disclosed                                                                       
Change in accounting policy -   -            1          1                       
borrowing costs                                                                 
Total equity at the beginning   3 397       1 056      1 056                    
of the period - as restated                                                     
Changes in share capital and                                                    
premium                                                                         
Shares (including treasury       25          26         53                      
shares) issued during the                                                       
period                                                                          
Changes in reserves                                                             
Equity-settled share-based       35          28         73                      
payment                                                                         
Profit for period                2 816       1 605      3 181                   
Foreign currency translation     103         (3)       (51)                     
differences                                                                     
Movement in the revaluation of  -            2          2                       
financial instruments                                                           
Dividends paid                   (1 271)     (251)      (1 362)                 
Changes in minority interest                                                    
Profit for period                729         413        822                     
Dividends paid                   (358)       (77)       (383)                   
Movement in minority interest    35          3          6                       
in reserves                                                                     
Total equity at the end of the   5 511       2 802      3 397                   
period                                                                          
Comprising                                                                      
Share capital and premium        81          29         56                      
Equity-settled share-based       290         210        255                     
payment reserve                                                                 
Foreign currency translation     104         20         2                       
reserve                                                                         
Cash flow hedge accounting      -            (3)       -                        
reserve                                                                         
At acquisition reserves         -            371       -                        
Retained earnings                3 969       1 620      2 423                   
Shareholders` equity             4 444       2 247      2 736                   
- attributable equity holders    4 124       2 080      2 538                   
of Kumba Iron Ore                                                               
- attributable to the minority   320         167        198                     
interest in SIOC                                                                
Minority interest                1 067       555        661                     
Total equity                     5 511       2 802      3 397                   
CONDENSED GROUP CASH FLOW STATEMENT                                             
for the period ended                                                            
Reviewed    Reviewed   Audited                  
                                6 months    6 months   12 months                
                                30 June     30 June   31 Dec                    
                               2008        2007       2007                      
Rm         Rm          Rm                       
Cash flows from operating        1 494       1 953      2 750                   
activities                                                                      
Cash generated from operations   4 581       3 017      5 805                   
Net finance costs paid           (185)       (147)      (301)                   
Taxation paid                    (1 639)     (666)      (1 401)                 
Dividends paid                   (1 263)     (251)      (1 353)                 
Cash flows from investing        (869)       (1 155)    (2 064)                 
activities                                                                      
Capital expenditure              (806)       (1 177)    (2 119)                 
Proceeds from the disposal of    1           13         26                      
non-current assets                                                              
Acquisition of investments       (1)         (2)        (2)                     
Other                            (63)        11         31                      
Cash flows from financing        432         (528)      (828)                   
activities                                                                      
Share capital issued             25          26         53                      
Dividends paid to minority       (365)       (77)       (392)                   
shareholders                                                                    
Interest-bearing borrowings      772         (477)      (489)                   
raised/(repaid)                                                                 
Increase/(decrease) in cash      1 057       270        (142)                   
and cash equivalents                                                            
Cash and cash equivalents at     952         1 094      1 094                   
beginning of the period                                                         
Cash and cash equivalents at     2 009       1 364      952                     
end of the period                                                               
SALIENT FEATURES AND OPERATING STATISTICS                                       
for the period ended                                                            
                                Unaudited   Unaudited  Unaudited                
                                6 months    6 months   12 months                
                                 30 June     30 June   31 Dec                   
2008        2007       2007                     
Share statistics (`000)                                                         
Total shares in issue             317 104     313 594    317 104                
Treasury shares                   900         742        1 766                  
Treasury shares (Rand million)    18          29         43                     
Market information                                                              
Closing share price (Rand)        315         185        285                    
Market capitalisation (Rand       99 888      58 220     90 374                 
million)                                                                        
Market capitalisation (US$        12 636      8 223      13 281                 
million)                                                                        
Net asset value per share         1 401       714        1 039                  
(cents)                                                                         
Capital expenditure (Rand                                                       
million)                                                                        
Incurred                          806         1 166      2 119                  
Contracted                        1 271       461        589                    
Authorised but not contracted     1 989       1 937      1 185                  
Capital expenditure relating to                                                 
Thabazimbi Mine to be financed                                                  
by ArcelorMittal (Rand million)                                                 
Contracted                        1           2          2                      
Authorised but not contracted     40          12         2                      
Operating commitments                                                           
Operating lease commitments       49          67         56                     
Shipping services                 600        -           698                    
Economic information                                                            
Average Rand/US dollar exchange   7,65        7,15       7,03                   
rate (Rand/US$)                                                                 
Closing Rand/US dollar exchange   7,91        7,08       6,81                   
rate (Rand/US$)                                                                 
Operating statistics (Mt)                                                       
Production                        17,1        15,6       32,4                   
Sales                             17,3        16,3       32,9                   
- export                          13,3        11,8       24,0                   
- domestic                        4,0         4,5        8,9                    
Sishen Mine unit cost (Rand per   93,39       77,11      79,90                  
tonne)                                                                          
Sishen Mine cash cost (Rand per   86,14       69,37      74,32                  
tonne)                                                                          
Sishen Mine unit cost (US$ per    12,21       10,78      11,37                  
tonne)                                                                          
Sishen Mine cash cost (US$ per    11,18       9,70       10,57                  
tonne)                                                                          
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL REPORT                            
Corporate information                                                           
Kumba is a limited liability company incorporated and domiciled in South        
Africa.                                                                         
The main business of Kumba, its subsidiaries, joint ventures and associates is  
the exploration, extraction, beneficiation and marketing and sale of iron ore.  
The group has its primary listing on the JSE Limited.                           
The condensed consolidated financial report of Kumba and its subsidiaries for   
the six months ended 30 June 2008 was authorised for issue in accordance with   
a resolution of the directors on 23 July 2008.                                  
Basis of preparation and accounting policies                                    
The condensed consolidated financial report for the six months ended 30 June    
2008 has been prepared in compliance with the South African Companies Act No    
61 of 1973, as amended, the Listings Requirements of the JSE Limited and        
International Accounting Standard 34, Interim Financial Reporting.              
The condensed consolidated financial report has been prepared in accordance     
with the historical cost convention except for certain financial instruments,   
share-based payments and biological assets which are stated at fair value, and  
is presented in Rand, which is Kumba`s functional and presentation currency.    
Except as disclosed below, the accounting policies and methods of computation   
applied in the preparation of the condensed consolidated interim financial      
report are consistent with those applied for the period ended 31 December       
2007, which comply with International Financial Reporting Standards (IFRS).     
Kumba has effected the early adoption of IAS 23 Borrowing costs before its      
effective date, with effect from 1 January 2008. IAS 23 requires the            
capitalisation of borrowing costs that relate to assets that take a             
substantial period of time to get ready for use or sale. The requirements of    
the standard have been applied retrospectively from the date when borrowing     
costs were first incurred in 2006. The effect on earnings and headline          
earnings per share is an increase of 26 cents and 8 cents for the six months    
ended 30 June 2008 and 2007 respectively. The effect on equity is disclosed in  
the table below.                                                                
6 months   6 months  12 months                
                                  30 June    30 June   31 Dec                   
                                   2008      2007      2007                     
                                  Rm          Rm        Rm                      
Increase in opening balance        82         1         1                       
Increase in profit before                                                       
taxation                                                                        
for the period                     140        46        140                     
Taxation                           (39)       (13)      (39)                    
Increase in equity attributable    183        34        102                     
to equity holders of Kumba                                                      
Minority interest                  (20)       (7)       (20)                    
Increase in shareholders` equity   163        27        82                      
IFRIC 12, Service Concession Arrangements and IFRIC 14, IAS 19 limit on         
defined benefit asset, which are effective from 1 January 2008, have no impact  
on the financial position, results or cash flow information of the group for    
the period under review.                                                        
Net debt                                                                        
Kumba`s net debt position at balance sheet dates is as follows:                 
                                       30 June   30 June  31 Dec                
2008     2007     2007                  
                                        Rm        Rm       Rm                   
Long-term interest-bearing borrowings   2 840     2 840    1 040                
Short-term interest-bearing borrowings  1 463     693      2 490                
Total                                   4 303     3 533    3 530                
Cash and cash equivalents               (2 009)   (1 364)  (952)                
Net debt                                2 294     2 169    2 578                
Total equity                            5 511     2 802    3 397                
Interest cover (times)                  27        20       19                   
It is the intention of management to fund Kumba`s capital expansion projects    
through debt financing. At 31 December 2007 Kumba was revolving certain of its  
debt facilities and, for this reason, a significant portion of the interest-    
bearing borrowings were considered short-term. However, as debt is used to      
finance Kumba`s expansion, the debt profile is returning to a longer-term       
profile. The maximum net debt in terms of current covenants is R4,5 billion.    
Kumba remained within its covenants during the year. A process is currently     
underway to increase Kumba`s debt capacity.                                     
Segmental reporting                                                             
Kumba`s single business segment is the mining, extraction and production of     
iron ore. The financial disclosures of the business segment are presented in    
the condensed consolidated financial report.                                    
Kumba generated its revenue through the sale of iron ore to customers in the    
following geographical regions:                                                 
                          6 months   6 months  12 months                        
30 June    30 June   31 Dec                           
                           2008      2007      2007                             
                          Rm          Rm       Rm                               
Domestic - South Africa    603      634         1 349                           
Export                     8 445    4 797       10 148                          
Europe                     2 207    1 557       2 999                           
China                      4 482    1 877       4 284                           
Rest of Asia               1 756    1 363       2 865                           
Significant items included in operating profit                                  
Operating expenses                                                              
Operating expenses is made up as follows:                                       
                                6 months    6 months   12 months                
30 June     30 June    31 Dec                   
                                 2008       2007       2007                     
                                Rm           Rm        Rm                       
Production costs                 1 864       1 701      3 740                   
Movement in inventories          97          (73)       (402)                   
Finished products                219         148        7                       
Work-in-progress                 (122)       (221)      (409)                   
                                                                                
Cost of goods sold               1 961       1 628      3 338                   
Selling and distribution costs   865         590        1 300                   
Cost of services rendered -      979         267        887                     
shipping                                                                        
Sublease rent received           (3)         (3)        (6)                     
Operating expenditure            3 802       2 482      5 519                   
Operating profit has been derived after taking into account the following       
items:                                                                          
6 months    6 months   12 months                
                                30 June     30 June    31 Dec                   
                                 2008       2007       2007                     
                                Rm           Rm        Rm                       
Staff costs                      601         467        1 017                   
Share-based payment expenses     54          48         122                     
Depreciation of property, plant                                                 
and equipment                    134         129        228                     
Profit on disposal and                                                          
scrapping                                                                       
of property, plant and           -           (4)        (14)                    
equipment                                                                       
Finance gains                    (159)       (38)       (40)                    
Operating profit/(loss)          352         (42)       (93)                    
capitalised (jig plant)                                                         
- Revenue                        574         -          -                       
- Expenses                       (222)       (42)       (93)                    
Share-based payment expenses                                                    
The increase in the share-based payment expense for the six months ended 30     
June 2008 is due to additional grants that were awarded to employees during     
March 2008 on the Long-Term Incentive Plan ("LTIP") and the Share Appreciation  
Rights Scheme ("SARS"). In addition to this a further 613 929 share options     
were awarded to participants of the Envision scheme during the period.          
Operating profit capitalised (jig plant)                                        
The capitalisation of operating profit for the six months ended 30 June 2008    
relates to operating costs (production cost of R165 million and distribution    
costs of R57 million) incurred on 0,9Mt of ore from the jig plant that has      
been capitalised to property, plant and equipment as part of the directly       
attributable cost of bringing the jig plant to the location and condition       
necessary for it to be capable of operating in the manner intended by           
management. The related revenue of R574 million from the sale of ore from the   
jig plant earned during this development stage was also capitalised.            
On 1 June 2008 the capitalisation of the revenue and expenses was ceased as     
substantially all the activities for bringing the jig plant in the location     
and condition necessary for it to be capable of operating in the manner         
intended by management had been completed.                                      
Property, plant and equipment                                                   
Capital expenditure on property, plant and equipment was R806 million for the   
six months ended 30 June 2008. This includes the R352 million capitalised       
operating profit as discussed above.                                            
Related party transactions                                                      
During the six months Kumba, in the ordinary course of business, entered into   
various sale and purchase transactions with associates and joint ventures.      
These transactions were subject to terms that are no less favourable than       
those offered by third parties.                                                 
Included in short-term interest-bearing borrowings at 30 June 2008 is a         
facility from Anglo South Africa (Pty) Limited of R750 million.  Included in    
cash and cash equivalents at 30 June 2008 is a short-term deposit facility      
placed with Anglo American SA Finance Limited of R1 490 million.                
Changes in contingent liabilities since 31 December 2007                        
There have been no significant changes in the contingent liabilities disclosed  
at 31 December 2007 that arise from the guarantees provided for environmental   
rehabilitation and decommissioning obligations of the Kumba Rehabilitation      
Trust Fund.                                                                     
Legal proceedings                                                               
Lithos Corporation (Pty) Limited ("Lithos")                                     
Kumba continues to defend the merits of the claim and is of the view, and has   
been so advised, that the basis of the claim and the quantification thereof is  
fundamentally flawed. A trial date is awaited. No liability has been raised     
for this matter.                                                                
Miferso - Faleme                                                                
Kumba has initiated arbitration proceedings against La Societe Des Mines De     
Fer Du Senegal Oriental and the Republic of Senegal under the Rules of          
Arbitration of the International Chamber of Commerce. This process is           
confidential in nature.                                                         
Sishen Supply Agreement                                                         
Kumba and ArcelorMittal have agreed to an arbitration process to resolve key    
differences of interpretation of the Sishen Supply Agreement. Arbitration       
proceedings were initiated in 2007 by Kumba. These proceedings are              
confidential in nature.                                                         
During 2007 ArcelorMittal paid an amount of R60 million in respect of the       
export parity pricing element for 0,2Mt acquired during the period, the price   
of which it still disputes. This matter may potentially be subject to further   
arbitration.                                                                    
Post-balance sheet date events                                                  
The directors are not aware of any matter or circumstance arising since the     
end of the period and up to the date of this report, not otherwise dealt with   
in this report.                                                                 
Corporate governance                                                            
The group subscribes to the Code of Good Corporate Practices and Conduct as     
contained in the King II Report on corporate governance and the board has       
satisfied itself that Kumba has complied throughout the period under review in  
all material aspects with the code.                                             
Independent review opinion                                                      
The auditors, Deloitte & Touche have issued their unmodified review opinion on  
the condensed consolidated financial report for the six months ended 30 June    
2008. A copy of their unmodified review opinion is available for inspection at  
the company`s registered office.                                                
On behalf of the board                                                          
PL Zim               CI Griffith                23 July 2008                    
Chairman            Chief Executive Officer     Pretoria                        
Notice of interim cash dividend                                                 
At its board meeting on 23 July 2008 the directors declared an interim cash     
dividend of 800 cents per share on the ordinary shares from profits accrued     
during the year ending 31 December 2008. The salient dates are as follows:      
Last day for trading to qualify and participate in the interim dividend (and    
change of address or dividend                                                   
instructions)                      Friday, 15 August 2008                       
Trading ex dividend commences      Monday, 18 August 2008                       
Record date                        Friday, 22 August 2008                       
Dividend payment date              Monday, 25 August 2008                       
Share certificates may not be dematerialised or rematerialised between Monday,  
18 August 2008 and Friday, 22 August 2008, both days inclusive.                 
By order of the board                                                           
VF Malie                    23 July 2008                                        
Company secretary           Pretoria                                            
Registered office: Lakefield Office Park, Corner West and Lenchen Roads,        
Centurion, Pretoria, 0046. Republic of South Africa.                            
Tel: +27 12 683 7000     Fax: +27 12 683 7009                                   
With effect from 24 July 2008 the registered address of Kumba will be as        
follows:                                                                        
Centurion Gate, Building 2B, 124 Akkerboom Road, Centurion, 0157. Republic of   
South Africa                                                                    
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70         
Marshall Street. Republic of South Africa. PO Box 61051, Marshalltown, 2107     
Directors: Non-executive - PL Zim (Chairman), PM Baum, GS Gouws, PB Matlare,    
DD Mokgatle, AJ Morgan, N Moyo                                                  
Executive - CI Griffith (Chief Executive Officer), VP Uren (Chief Financial     
Officer)                                                                        
Company secretary: VF Malie                                                     
Date: 24/07/2008 08:00:02 Produced by the JSE SENS Department.                  
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