CASE STUDY
Empowering Anglo American Kumba Iron Ore projects through financial analysis and business expertise
Company Overview:
Kumba Iron Ore Limited (“Kumba”), a member of the Anglo American plc group, is a world leading supplier of high-quality iron ore to the global steel industry. It is a publicly listed company in South Africa and majority owned by Anglo American – a global leading diversified mining company.
Our Partner at Kumba:
Johan Prins, Corporate Development & Strategic Projects
Anglo American Kumba Iron Ore
Johan, a Chartered accountant in South Africa and member of the accounting institution for over 20 years, has had several positions within Kumba, including interim CFO, and most recently took control of the analysis and financial and commercial support for implementation of some of the company’s most fundamental long-term projects. He is now responsible for providing direction, governance frameworks and commercial support for:
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long-term business development
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strategic projects
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energy transition to carbon neutrality
The Role of TriFidus:
We have been asked to provide support in the following areas across major strategic projects:
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Financial Planning & Analysis
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Corporate Finance
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Financial Modelling
We have been working with Kumba for almost two years. During this period, we have worked on two major projects and have a strong relationship with their strategic finance team.
Project 1: Capital Structure Optimisation – financial modelling
Overview:
Kumba needed to reassess its capital allocation and structure, particularly in the context of its iron ore business, which is exposed to a single global commodity price and fluctuating exchange rates.
The requirements:
Our task was to address these challenges and model the complexities involved, including foreign currency transactions and price risk management.
How TriFidus supported this project:
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We built a comprehensive model that allowed Kumba to assess different scenarios.
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We succinctly summarised outputs of different scenarios to demonstrate resilience during downturns in the commodity market.
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We proposed optimal capital structure and funding scenarios.
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Through this comprehensive process and analysis, we assisted the client to secure buy-in at board level.
The Results:
TriFidus created an effective capital allocation model that remains in use at Kumba today - more than two years after the completion of the project, which won approval from local management and the group company.
“TriFidus led the modelling, which enabled us to deal with the complexity.
They were able to quickly understand the business and interrogate the details with accuracy.
They then translated it in such a way that we were able to deal with different scenarios and make certain proposals to the governing bodies
in the company. Their management was always at the appropriate level, demonstrating the benefits of the different proposals in a
way that was relevant to each stakeholder.”
Project 2: Renewable Energy
Overview:
South Africa has an energy crisis.
Kumba called on our corporate finance expertise in support of an Anglo American group-wide renewable energy project in South Africa, where energy issues were contributing to operational challenges.
The requirements:
The project aimed to introduce renewable energy, reduce carbon emissions, and align with a global trend towards green production processes in the steel industry. Kumba tasked TriFidus with support on this project from a corporate finance perspective following the success of the capital structure optimisation project.
How TriFidus helped:
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We determined the optimal commercial solution for the company, considering the interests of several stakeholders within Kumba, as well as external parties.
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We optimised commercial considerations and sustainability goals.
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TriFidus played a crucial role in interpreting complex information, engaging with various parties and ensuring correct principles were applied from a corporate finance and modelling perspective.
The Results:
This project lasted for over 18 months and we evaluated the agreement and underpinning financial model for their commercial impact, to ensure that Kumba was aware of its financial risks and opportunities. This resulted in significant positive savings for Kumba.
The renewable energy project remains a fundamental part of the business strategy.
“TriFidus has the whole package. I've worked with many external corporate finance consultants across my career. There are not many that can match their ability to grasp the corporate finance principles and work with it as well as TriFidus.
It's the combined package of the functional skill, corporate finance knowledge and understanding of the modelling which is invaluable.
Also I would say they have incredible ability to utilise the output to engage with stakeholders.”
It was a pleasure for us to be given the opportunity to collaborate with Kumba on these strategic corporate finance projects. Working alongside the dedicated teams of many interested parties has been a rewarding experience for us as we were able to share our experience to help them achieve their desired outcome.
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