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South32 expects further production growth in H2; flags $100m build in working capital

South32 CEO Graham Kerr

South32 CEO Graham Kerr

Photo by Bloomberg

23rd January 2023

By: Darren Parker

Creamer Media Contributing Editor Online

     

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Diversified miner South32 achieved a 12% year-on-year increase in group copper equivalent production for the first half of the 2023 financial year on the back of recent investments in copper and low-carbon aluminium capacity.

"Group copper equivalent production increased . . . as we benefitted from transactions that have repositioned our portfolio toward metals critical for a low-carbon future.

“Australia Manganese also achieved record half-year production, while Cerro Matoso successfully commissioned the Ore Sorting and Mechanical Ore Concentration project, underpinning a 15-year extension to the mining contract,” comments CEO Graham Kerr.

However, the group also reports that it expects to record a build in working capital of about $100-million for the six months ended December 31, 2022, mainly as a result of an increase in inventories.

“This impact is most acute in our aluminium value chain in Southern Africa due to ongoing shipping delays,” it notes.

South32’s Hillside Aluminium operation, in South Africa, increased production by 1% to 362 000 t for the six months under review, with the smelter having continued to test its maximum technical capacity, despite the impact of increased loadshedding – rolling blackouts implemented by South African State-owned power utility Eskom.

The operation’s full-year production guidance remains unchanged at 720 000 t.

The group notes, however, that, while the operation’s aluminium sales had increased by 8% in the three months to December 31, inventory remained above target, as two shipments had to be delayed to January this year owing to shipping delays at Richards Bay.

Further, Mozal Aluminium, in which South32 holds a 63.7% interest, produced 182 000 t of aluminium in the six months ended December 31. This was 2% lower year-on-year, as operations in Potroom A were suspended in November owing to a fatality.

The operation’s full-year production guidance of 370 000 t, however, remains unchanged.

Looking ahead, South32 says it is well positioned to capture the benefit of improved market conditions, with further expected production growth in the second half of the 2023 financial year and an ongoing focus on cost management to mitigate inflationary pressures.

"Despite industry wide inflationary pressures, we expect operating unit costs for the first half to be in line with or below guidance for the 2023 financial year at the majority of our operations. We remain focused on delivering safe and stable operational performance, and efficiencies to mitigate cost pressures and capture higher margins as markets improve,” says Kerr.

OPERATIONAL REVIEW
South32 reported an 8% increase in quarterly alumina volumes as Worsley Alumina, in Australia, and Brazil Alumina operated above nameplate capacity.

Meanwhile, over the half-year to December, a 15% increase was recorded in aluminium production overall, with a 50% uplift in low-carbon aluminium following the company’s acquisition of an additional shareholding in Mozal Aluminium, in Mozambique, and the restart of the Brazil Aluminium smelter.

Copper production at Sierra Gorda, in Chile, also increased over the half-year, delivering 45 000 t of payable copper equivalent production.

Further, the Cerro Matoso operation in Columbia commissioned an ore sorting and mechanical ore concentration project, which is expected to support higher nickel production in the second half of the 2023 financial year.

In Australia, Australia Manganese achieved record half-year production, supporting a 7% increase in total manganese production, while Illawarra Metallurgical Coal delivered a 17% increase in quarterly metallurgical coal production, with improved volumes and labour productivity as South32 finalised a new industrial agreement at the Appin mine.

Despite these successes, the production guidance at the company's Cannington operation, in Australia, has been revised lower by 11% owing to lower mill throughput and labour availability impacting mining rates, while production guidance at Brazil Aluminium has been reduced by 25 000 t, or 25%, owing to a slower ramp-up to nameplate capacity.

However, South32 said that its recent work on the prefeasibility study of Hermosa's Clark selection phase in the US has confirmed the potential to produce high-purity manganese sulphate monohydrate for the growing North American electric vehicle supply chain.

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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