Kumba Iron Ore Analysis 10/15/24
DISCLOSURE: As of 10/15/24 I have no open positions in Kumba Iron Ore JSE: KIO
Introduction:
Kumba Iron Ore is a South African Iron Ore mining company. They operate 3 mines in South Africa, all of which are quality assets operating profitably at current Iron Ore prices. The second business segment is logistics, or the transport of minerals across South Africa and internationally.
Fundamentals:
Looking at the 3 mines and their average costs the company is profitable at any Iron Ore prices about 40/metric ton. Well below the current prices. The return on the company's assets is very high and debt is negligible. The mine's have a long runway of 20+ years before they are at risk of running dry. With a long runway, profitable mines, the company looks attractive on a fundamentals basis.
Iron Ore spot price:
Current Iron prices are around 100/metric ton. Iron being a commodity tied to the general economy could see a drop in an economic downturn. $50 Iron could be possible atleast in the short term with an upside of 200/metric ton in a good economic environment for Iron.
tradingeconomics.com/commodity/iron-ore
Valuations:
Kumba Iron Ore is currently trading at a P/CF and a P/E of 3.67 and 5.69 respectively. By both metrics the company is very cheap relative to the fundamentals. With a dividend yield of 11% easily covered by the company's cash flows Kumba Iron Ore looks very attractive for a long term investor bullish on Iron Ore.
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Introduction:
Kumba Iron Ore is a South African Iron Ore mining company. They operate 3 mines in South Africa, all of which are quality assets operating profitably at current Iron Ore prices. The second business segment is logistics, or the transport of minerals across South Africa and internationally.
Fundamentals:
Looking at the 3 mines and their average costs the company is profitable at any Iron Ore prices about 40/metric ton. Well below the current prices. The return on the company's assets is very high and debt is negligible. The mine's have a long runway of 20+ years before they are at risk of running dry. With a long runway, profitable mines, the company looks attractive on a fundamentals basis.
Iron Ore spot price:
Current Iron prices are around 100/metric ton. Iron being a commodity tied to the general economy could see a drop in an economic downturn. $50 Iron could be possible atleast in the short term with an upside of 200/metric ton in a good economic environment for Iron.
tradingeconomics.com/commodity/iron-ore
Valuations:
Kumba Iron Ore is currently trading at a P/CF and a P/E of 3.67 and 5.69 respectively. By both metrics the company is very cheap relative to the fundamentals. With a dividend yield of 11% easily covered by the company's cash flows Kumba Iron Ore looks very attractive for a long term investor bullish on Iron Ore.
If you enjoyed this report follow for more!
PM for consulting, portfolio analysis, and research requests.
Penafian
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