 Kumba Iron Ore (KIO), a subsidiary of Anglo American, reported its interim 2024 results. The company operates two mines, Sishen and Kolomela. Iron ore production reached 18.459mt in 1H24, down 1.5% YoY. This includes 13.207mt produced at Sishen, an increase of 3.3% YoY, and 5.252mt produced at Kolomela, down 11.9% YoY. Sales fell 4.5% YoY to 18.089mt in 1H24. The average realized FOB price was $99/dmt, an 8% YoY decrease, largely due to higher freight costs ($20/t vs $14/t a year ago), amidst stable pricing in China at $118/t. Chinese steel production declined by 1% YoY in 1H24, while reduced supply-side disruptions led to a 7% YoY increase in iron ore supply volumes. Kumba’s break-even price rose from $62/t last year to $76/t in 1H24, a 22.6% increase YoY. The company noted a negative timing effect on product pricing during the reporting period, as products are priced in a month after arrival, including pricing adjustments. Despite these challenges, Kumba maintained a relatively flat C1 cost of $38.5/wmt compared to $39/wmt last year. Due to lower realized prices and slightly reduced sales volumes, the company reported a 6.5% decrease in revenue to R35,802mn. Operating expenses increased by 10.2% YoY to R22,868mn, mostly due to higher shipping services rendered and net movements in inventories. Operating profit decreased by 26% YoY to R12,934mn with the operating margin shrinking from 45.8% in 1H23 to 36.1% in 1H24. Kumba decreased capex to R3.7bn compared to R4.4bn a year ago. Kumba Iron Ore’s EBITDA declined 21% YoY to R15,582mn in 1H24. The reported cash generated from operations reached R20,337mn, up 16% YoY. The company is going to pay an interim dividend of R6bn.  We update our model. The FY24 production guidance is set at 35-37mt, including 26mt at Sishen and 10mt at Kolomela. Kumba Iron Ore maintains its FY24 sales guidance at 36-38mt compared to 37.2mt in 2023. The projected unit cost is R520-550/dmt at Sishen and R410-440/dmt at Kolomela. The FY24 capex guidance is at R8.0-9.0bn, including R0.9-1.0bn allocated for the Kapstevel South expansion with the first ore production expected in June 2024. Although the flat price environment might persist, Kumba’s premium iron ore is expected to generate better margins in the medium to long term. The company has improved its C1 cost and is working towards greater operating efficiency. Logistical challenges and dependence on power suppliers are anticipated to become more manageable in the future. The FX and inflation have negatively impacted our forecast, alongside lower production volumes and prices. We updated our 12-month target price to R487, down from R614 previously. We change our rating from Hold to Buy.