S.Africa's Kumba in talks with unions over Thabazimbi mine closure

* Closure to lead to nearly 1,200 job losses

* Quarterly output down 9 pct (Adds union comment)

JOHANNESBURG, July 16 (Reuters) - South Africa's Kumba Iron Ore is in talks with unions about closing its Thabazimbi mine, which could lead to nearly 1,200 job losses, as the Anglo American (LSE: AAL.L - news) unit battles weak commodities prices.

The fate of loss-making Thabazimbi in northern South Africa has been in doubt in recent months as iron ore prices tumbled to levels many analysts have said would make it difficult for smaller players to make money.

The benchmark iron ore spot price fell to $44.10 a tonne last week, its lowest since late 2008, on concerns about over-supply and tumbling equity markets in China.

"We have looked at all options to further sustain the mine, having already extended its life several times in recent years, and have come to the inevitable conclusion that this mine has now come to the end of its life," CEO Norman Mbazima said in a statement on Thursday.

One such attempt was made less than two years ago, when Kumba took over the mine's financial and operational risks from ArcelorMittal South Africa.

Kumba, which reported a 9 percent decline in quarterly output on Thursday, said there was no longer any commercial logic to keeping the more than 80-year-old mine running.

The Thabazimbi operation, the smallest of the company's three mines, employs about 800 permanent staff and 360 contractors.

The Solidarity union said there was little Kumba could do to keep the mining running but jobs losses could be avoided by investigating the possibility of re-hiring Thabazimbi workers within the Anglo American group.

"Solidarity will meet with the employer as soon as possible to discuss alternatives to retrenchments," the union said in a statement.

Shares (Frankfurt: DI6.F - news) in Kumba slumped as much as 7 percent before recouping some of the losses to trade 4 percent lower at 127.76 rand by 1355 GMT.

Kumba said its total production for the quarter to the end of June fell 9 percent to 10.4 million tonnes, with Thabazimbi contributing 328,000 tonnes.

(Reporting by Tiisetso Motsoeneng; Editing by David Goodman and Mark Potter)