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South32 posts a mixed quarter

24th October 2022

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Diversified miner South32 has reported a mixed quarter for the three months to September, with aluminium and copper output rising, while all others fell.

The miner on Monday reported that aluminium production for the first quarter of the 2023 financial year had increased by 9%, quarter-on-quarter, to 279 000 t, as its Southern African smelters continued to test their maximum technical capacity and the Brazil Aluminium smelter was successfully restarted.

Payable copper production for the September quarter was up 12% on the previous quarter to 19 000 t, on the back of higher grades at the Sierra Gorda operation, in Chile, in line with the mine plan.

“Highlights during the September 2022 quarter included an 11% increase in copper equivalent production at the Sierra Gorda copper mine in Chile, a 9% increase in aluminium production and a 6% increase in manganese ore production at GEMCO. We maintain a strong outlook with 13% production growth expected in the 2023 financial year,” said CEO Graham Kerr.

Despite the uptick in copper and aluminium production, South32 reported a decline in production for the remainder of its commodities.

Alumina production fell by 8% quarter-on-quarter, to 1.25-million tonnes, as the company completed a planned calciner maintenance at its Worsley Alumina and Brazil Alumina operations.

Payable silver production fell by 3% to 2.7-million ounces, while payable lead production fell 5% to 24 600 t, and payable zinc production fell by 9% to 14 000 t. Payable nickel production for the first quarter of 2023 was also down 11% to 9 600 t.

Operations at Cannington were impacted by a planned reduction in the crushing capacity during the quarter under review, with South32 deploying temporary mobile crushers to enable the relocation of underground crushing infrastructure to surface, as part of the operation’s transition to 100% truck haulage. The new configuration is expected to bring higher-grade material forward in the mine plan.

Operations at Cerro Matoso were affected by a planned reduction in average nickel grades ahead of execution of the ore sorting and mechanical ore concentration (OSMOC) project. The OSMOC project is on-track to be completed during the December 2022 quarter, delivering additional volumes to mitigate natural grade decline through expanded processing capacity and improvements to the upgrading circuit.

Manganese production in the quarter was down 1% to 1.46-million tonnes, with higher output from the Australian Manganese assets being offset by declining production at the South African Manganese assets, which were impacted by reduced third-party rail and port availability.

Meanwhile, metallurgical coal production fell 8% to 1.27-million tonnes, with higher production from the Dendrobium mine during the September 2022 quarter mostly offset by lower production at the Appin mine as difficult strata conditions resulted in an extended longwall move.

Separately, workforce disruptions ahead of the successful negotiation of the new enterprise agreement at Appin resulted in reduced labour productivity during the September 2022 quarter. Following the end of the quarter, South32 finalised the new enterprise agreement at Appin, with a term of four years to 2026.

The company has revised production guidance down by 5% at Illawarra Metallurgical Coal to seven-million tonnes, following an extended longwall move and the impact of industrial action at the Appin mine during the September 2022 quarter.

“During the quarter, we announced that we would not proceed with an investment in the Dendrobium Next Domain (DND) project at Illawarra Metallurgical Coal, increasing our capacity to direct capital towards other opportunities, including our world class development options in North America,” Kerr said on Monday.

As a result of its decision not to invest in the DND project, South32 expected to record a non-cash asset write-off of approximately $50-million in relation to study- and other project-related costs. This charge will be excluded from underlying earnings in the financial results for the December 2022 half-year.

“We advanced development studies and critical path infrastructure at our Hermosa project in Arizona. We expect to complete the selection phase of the prefeasibility study for the battery-grade manganese Clark deposit by the end of 2022 and make a final investment decision for the zinc/lead/silver Taylor deposit in mid-2023,” said Kerr.

“We returned $50-million to shareholders via our on-market share buy-back and finished the quarter with a net cash position of $446-million, with a further $784-million returned in October 2022 via fully-franked ordinary and special dividends.

“Our strong balance sheet and disciplined approach to capital management enables us to continue to make returns to shareholders while investing in our portfolio of growth options focused on metals critical to a low-carbon future.”

Edited by Creamer Media Reporter

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