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Most South32 operations meet, exceed guidance in maiden year

29th July 2016

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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Diversified major South32 says the completion of restructuring initiatives and the fact that production met or exceeded guidance for the 2016 financial year for the majority of its operations position the company well to achieve its unit cost guidance in the new financial year.

Despite a challenging market, the company, which was spun off from BHP Billiton, has built “a strong foundation” in its first full year of operation, CEO Graham Kerr said at the release of the company’s production results in July.

“We prioritised value over volume and took decisive action to restructure our operations, reduce controllable costs and improve efficiencies, while delivering two major projects on or ahead of schedule and under budget,” he added.

Previously announced restructuring initiatives at five operations – Worsley Alumina, Illawarra Metallurgical Coal, Australia Manganese, South Africa Manganese and Cerro Matoso – have been completed.

South32’s production results for the financial year ended June 30 were in line with production forecasts for the year.

South32 produced 963 000 t of aluminium in the year under review, down 4% on the just over one-million tonnes produced in the prior year.

Energy coal production decreased 8% year-on-year, from 35.74-million tonnes to 32.98-million tonnes, while metallurgical coal production was down 5% year-on-year, from 7.45-million tonnes to 7.05-million tonnes.

For the same period, manganese ore production was down 8%, from 5.2-million tonnes to 4.78-million tonnes, while manganese alloy production decreased 46% year-on-year, from 413 000 t to 224 000 t.

Payable nickel production totalled 36 800 t, compared with 40 400 t in the previous financial year. Payable silver production for the financial year totalled 21.39-million ounces, payable lead production 1.73-million tonnes and payable zinc production 79 000 t.

Africa Production
South African aluminium saleable production was largely unchanged for the 2016 financial year, at 697 000 t.

South32 reports that the impact of load-shedding has been less severe than expected, offset, however, by the previously announced suspension of production in 22 pots in September 2015.

Mozal Aluminium, in Mozambique, achieved a record yearly production of 266 000 t in the financial year under review, as a reduction in load- shedding complemented an increase in potline current efficiency.

However, South Africa Energy Coal saleable production decreased by 8%, or 2.6-million tonnes, to 31.7-million tonnes in the year under review, with lower production as a result of the planned closure of the opencast mine at Khutala, and a reduction in contractor activity at the Wolvekrans Middelburg Complex, in Mpumalanga. The company noted that this was consistent with its focus on value over volume.

South African manganese saleable ore production decreased by 25%, or 563 000 t, to 1.7-million tonnes in the year under review, following the decision in November 2015 to initially suspend and then restructure operations at Wessels and Mamatwan in response to challenging market conditions.

Mining restarted at both operations in the March 2016 quarter, ramping up to an optimised 2.9-million tonnes a year.

Sales of manganese ore, meanwhile, declined by 17%, as supply chain inventory was drawn down below normalised levels.

Saleable manganese alloy production decreased by 63%, from 246 000 t to 91 000 t, in the financial year, following the decision to suspend three of the four high-carbon ferromanganese furnaces at Metalloys – one of the largest manganese smelters in the world – in May 2015.

Metalloys will continue to operate one of four furnaces until market conditions improve, which is also consistent with South32’s focus on value over volume.

South32 also achieved record yearly production at Worsley Alumina, Brazil Alumina, Australia Manganese and Cannington, which produces silver, lead and zinc.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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