Kumba‚ which is 70% owned by Anglo American‚ reported in mid-October that production at Sishen had fallen by a third in the September quarter compared with the same period last year. It also warned that exports for this year would be lower than the targeted 40m tons as it has only sold 29.5m tons in the first nine months of the year.
"Sishen is my nightmare right now‚" Kumba's chief executive Norman Mbazima said. "It's that mine that keeps me awake at night. Sishen is my number one priority now," he added.
Kumba management‚ with assistance from Anglo American specialists‚ are formulating a plan to resolve the problems at Sishen and are developing a longer-term operating strategy. The plan and strategy should be ready by mid-December when Anglo presents the findings of a review of its global businesses.
The problems at Sishen stem from the enormous increase in waste material that has to be blasted and moved to expose the ore body‚ which lies ever deeper as the shallower portions have already been extracted.
The amount of waste has trebled to 180m tons a year from just 64m tons five years ago. There was also a strike at Sishen last year that had a harsh impact on production levels.
Mbazima says that fixing the problems that the Sishen mine currently faces is a huge undertaking. "I can't think of many other mines that have ever done something like this in such a short time. It's not easy to get to the ore," he said.
There was also a problem with the accuracy and extrapolation of geological data compiled in the 1970s on a lower-grade portion of the deposit.
"When we started mining we discovered that what we were expecting to find was not there‚" Mbazima said, adding that it took several years to correct the geological model with fresh drilling and re-sampling of cores extracted decades ago.
The amount of ore available to mine was limited. This meant that where there was a problem in one of the mining areas there was no flexibility to move to another pre-developed part of the mine.
Stockpiles at Kumba have run down to just 2m tons and, after the strike last year, Kumba was forced to adjust its contractual commitments for this year. "It's still tight but we are not in a position where we need to declare force majeure ‚" Mbazima said.
Kumba has been pushing its new Kolomela mine hard to fill the production gap but some analysts have raised concerns that such a push may not be sustainable.
Mbazima said Kolomela's management was fully aware of the problems at the Sishen mine‚ 80km away. As a result‚ it was giving extra attention to waste stripping to avoid running into the same problem. "Kolomela is currently running at a capacity of 9m tons a year‚" Mbazima said.
Referring to the settlement of a long-running and acrimonious dispute with ArcelorMittal SA‚ the country's largest steel manufacturer‚ over a pricing arrangement for ore, Mbazima said the agreement to supply of 6.25m tons of ore a year on a cost-plus-20% over the 18-year life of Sishen has brought comfort and certainty to both companies.
Mbazima says all outstanding disputes between Kumba and ArcelorMittal were resolved in the agreement announced last week although the future of the Thabazimbi mine‚ which is nearing the end of its life. is still uncertain.
Kumba has agreed to spend the next two years completing test work on technology to treat low-grade ore that is in the ground at Thabazimbi and in its dumps.
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