South32 CEO Graham Kerr
Photo by: South32
PERTH (miningweekly.com) – Diversified miner South32’s main focus was not on increasing production volumes from its existing assets, but rather to focus on increasing shareholder return and maintaining safe operations, chairperson David Crawford told shareholders on Wednesday at the company’s first annual general meeting.
“We have adopted a simple approach to capital management, with well-defined priorities for cash flow. We also start with a commitment to maintain safe and reliable operations and an investment-grade credit rating through the business cycle,” Crawford said at the meeting in Perth.
The company made its market debut in May, after BHP Billiton shareholders agreed to the divestment of South32, which comprises the aluminium, coal, manganese, nickel and silver assets previously held in the BHP portfolio.
CEO Graham Kerr said on Wednesday that despite the significant progress made at the company’s operations to date, three fatalities at the South32 operations were reported in the previous financial year, and a further two for this financial year.
“A single fatality is unacceptable and not what South32 is about,” Kerr told shareholders from Perth.
He noted that in order to make a step change in the company’s safety performance, South32 was focusing on having the right leadership capability at all levels, supporting a safety culture in the business, and engaging and developing staff to ensure that the workforce had a deep functional expertise.
South32 would also focus on ensuring fit-for-purpose systems and structures were in place, driving the design, planning, execution and improvement of work.
Meanwhile, Crawford told shareholders that market uncertainties would likely persist for some time, adding that South32 was responding to the global challenges through a targeted programme of reducing operational and capital expenditure (capex), and changing the way the company did business.
Kerr had previously flagged that the company would reduce its costs by at least A$350-million a year by the end of 2018, and would reduce sustaining capex by 9%, to A$650-million by 2016.
“At the time of the demerger, we recognised that a fresh approach to managing our operations was required, with a focus on improving our return on invested capital, addressing resource and grade decline, and building stronger shareholder relationships, particularly in South Africa and Colombia,” Kerr said.
The company would aim to achieve these cost saving targets by reducing the layers of management, aggregating functional support at the regions, changing the capability and structure of the procurement function and implementing resource development plans, with a view to optimise performance and growth opportunities.
While South32 would not turn away merger and acquisition opportunities, Kerr said that 95% of the company’s focus would be on optimising its own assets.
“We are very disciplined, but our focus is on the assets that we have. We have a lot of resources in the ground that have never been converted to reserves. So we will look at [acquisition] opportunities, but it's not the primary focus.”
“Looking ahead, despite the challenging market conditions, I can assure you that we have the right strategy, the right balance sheet strength and management commitment to deliver sector leading returns,” Kerr said.