PERTH (miningweekly.com) – Diversified spin-off South32 on Thursday reported that it was on track to meet production guidance for the majority of its upstream operations, despite reporting a drop in second-quarter and half-year output.

During the quarter ended December, South32 reported a 41% year-on-year decrease in metallurgical coal production to 1.2-million tonnes and a 4% year-on-year decrease in energy coal production to 241 000 t. Half-year metallurgical coal production decreased by 15% year-on-year to 3.30-million tonnes, while half-year energy coal output fell by 2% year-on-year to 17.04-million tonnes.

Second-quarter manganese ore production was down 37% year-on-year to 909 000 t, as the Wessels and Mamatwan operations, in South Africa, were suspended in November last year, while three of the four high-carbon manganese furnaces at Metalloys were suspended in May last year. Half-year manganese ore production fell by 14% to 2.35-million tonnes.

South32 reported a 5% reduction in alumina production, compared with the previous corresponding period, which reached 1.3-million tonnes in the second quarter.

December quarter silver production was down 11% on the corresponding quarter, to 5.6-million ounces.

Nickel production for the quarter increased by 1% compared with the previous corresponding period, to 8 800 t, while lead production increased by 13% to 22 200 t.

Despite maintaining its full-year production expectations for the majority of its upstream operations, the triple-listed South32 said on Thursday that the Illawarra metallurgical coal operation, in Australia, was expected to produce 7% below the previous guidance, after difficult geological conditions were encountered during the last quarter.  The operation was forecast to produce 6.9-million tonnes of metallurgical coal and 1.35-million tonnes of energy coal. This compares with 2015’s production of 7.46-million tonnes of metallurgical coal and 1.47-million tonnes of energy coal.

Its South African energy coal operations were forecast to produce 31.95-million tonnes in the 2016 financial year, of which 16.65-million tonnes would be for domestic consumption and 15.3-million tonnes for export markets. In 2015, domestic coal production from the South African coal mines was 18.12-million tonnes and export output was 16.15-million tonnes.

Furthermore, a review of the South African manganese operations was nearing completion. The review was aimed at defining the optimal configuration and production profile for the manganese mines and smelter, to ensure cash outflows were mitigated in the current pricing environment.

“In order to protect our strong financial position in the current challenging environment, we have already cut or suspended production at our South African manganese ore mines and Alumar, Metalloys, Temco and South Africa aluminium smelters,” said South32 CEO Graham Kerr.

“Further decisive action will be taken as we seek to maximise short-term cash flows while preserving long-term value.”

Meanwhile, South32 said on Thursday that the company would spend some $700-million on capital expenditure during the full 2016.