South Africa's Kumba Iron Ore to cut jobs and downsize flagship mine

JOHANNESBURG, Jan 28 (Reuters) - South Africa's Kumba Iron Ore on Thursday said it would scale back operations, cut costs and planned to reduce jobs at its Sishen mine, the largest iron ore operation in Africa, sending its shares 5 percent higher.

Sharp declines in iron ore prices due to oversupply and a slowing economic growth in China, the world's biggest metals consumer have hit companies like Kumba a subsdiary of global mining company Anglo American (LSE: AAL.L - news) hard.

The restructuring would impact 2,633 permanent employees and 1,300 contractors, Kumba said in a statement.

"This has been an extremely difficult decision but, after exhausting all other avenues and doing all we could have done to reduce costs, we have no choice but to take more significant steps to preserve the viability of the mine," Kumba's Chief Executive Officer, Norman Mbazima said.

Last week the National Union of Mineworkers (NUM) said it was bracing itself for job cuts at Sishen as the company was in "dire straights".

Job cuts are a sensitive topic in South Africa, where over a quarter of the population is unemployed and coupled with rising food prices could hurt the ruling African National Congress in the local government elections later this year.

Shares (Berlin: DI6.BE - news) in the company jumped more than 5 percent when the market opened and later traded up 5.30 percent at 33.87 rand by 0735 GMT, outpacing the All-Share (LSE: SHRE.L - news) index. (Reporting by Peroshni Govender; Editing by James Macharia)