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Anglo Kumba Unit cuts off 3,900 jobs: iron ore demand drops

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January 29
11:24 PM 2016

Anglo Kumba iron ore which is the largest South African steel ingredient provider cuts over 3900 jobs. The South African mining industry has suffered price drop of almost 40% last year.

As the iron ore commodity prices crashed, this has forced miners to reduce workforce. Kumba has decided to restructure the Sishen mines to become a low cost pit configuration. According to Bloomberg, the Pretoria-based company said in a statement that around 2,633 employees and 1,300 contractors will be affected. Also, the company reported increased copper output, boosting Kumba shares and sending Anglo to a three-week high.

The chief executive officer of Anglo Kumba, Norman Mbazima said in a statement that, "This has been an extremely difficult decision." He added saying, "After exhausting all other avenues and doing all we could have done to reduce costs, we have no choice but to take more significant steps to preserve the viability of the mine."

Telegraph said that, the cuts will affect pressure on South African government where around 440,000 are employed in the mining industry. Also the country is currently battling an unemployment rate of 25 pc. The shares of the company rose up to 5.8% and traded 5.7% higher in Johannesburg.

South African mining minister Mosebenzi Zwane said that, "We're going to do everything possible in our power to try and control the situation until the price of commodities improves." He also said that the government will mitigate the impact by transferring the workers to other mines or by retraining them.

Business Day Live reported that, Kumba witnessed a 12% drop in its fourth quarter output, dragged down by lower performance at Sishen. Kumba produced around 10.9 million tonnes of ore by the end of December bringing last year's output to 44.9 million tonnes.

"These results may remind the market of some of the better quality assets within the company's portfolio," SP Angel analysts said in a note. 

Anglo American also said it was revising its production strategy for Brazil's Minas-Rio mine to ensure lower operating costs, without given further details. Minas-Rio had been plagued by delays and cost overruns since Anglo bought it for $5.5 billion in two stages in 2007-2008. 

Although Anglo's copper production crept up in the last quarter, the output of copper and iron ore fell by 5 pc and 4 pc respectively. For miners, the decision of cutting the workforce runs the risk of losing market share and thus many companies prefer to cut costs instead of production. Apart from Anglo Kumba, platinum producer Lonmin has also shed 5,077 workers since December 2015.

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