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South32’s South African operations deliver stable performance

25th August 2022

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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Diversified miner South32’s saleable manganese ore production remained largely unchanged at just over two-million tonnes for the financial year ended June 30, in spite of the miner having increased volumes of premium material from its Mamatwan mine, more than offsetting the impact of planned maintenance.

At a similar two-million-tonne production guidance for the 2023 financial year, South32 is confident that it will be able to continue using its higher-cost trucking to optimise sales volumes of its premium products.

“We continue to swing our production to meet demand and, accordingly, the 2024 financial year guidance is not provided, with volumes to be optimised subject to market conditions,” the miner said on August 25.

South32’s Metalloys manganese alloy smelter remains on care and maintenance as it continues to assess future options for the smelter. In March, the miner announced that the sale of the smelter would not proceed following a failure to satisfy certain commercial conditions to the agreement.

Operating unit costs, meanwhile, increased by 10%, to $2.73 per dry metric tonne unit (dmtu), as the operation increased its use of higher-cost trucking to deliver additional volumes of premium product and maximise cash flow.

Operating unit costs for the 2023 financial year are expected to decrease by 3% to $2.66/dmtu, as the miner realises the benefit of drawing down previously built up low-cost inventory from the barrier pillar project and a weaker South African rand.

The financial performance, meanwhile, saw the ore’s underlying earnings before interest and taxes (Ebit) increasing by 16% to $79-million as higher realised prices ($76-million) and sales volumes ($13-million) more than offset increased freight costs ($46-million) and a stock drawdown as the miner optimised sales mix of premium material.

“Our realised sales price was a premium of about 18% to the medium grade 37% manganese lump ore index, as we maximised our revenue by optimising our sales mix with additional volumes of our premium products,” the miner said.

Manganese alloy’s underlying Ebit was a loss of $21-million, as it recognised an adjustment to the closure and rehabilitation provision with the Metalloys smelter remaining on care and maintenance.

ALUMINIUM

Hillside Aluminium saleable production decreased by 3 000 t to 71 000 t in the year ended June 30 as the smelter continued to test its maximum technical capacity, despite the impact of increased load-shedding.

Production is expected to reach 72 000 t across both 2023 and 2024, subject to load-shedding.

Operating unit costs increased by 31% to $2 137/t, as a significant rise in raw material input costs created inflationary pressure across the aluminium industry.

Alumina, coke, pitch and electricity accounted for 77% of the smelter’s cost base in the year under review, South32 said, adding that, while the operating unit cost guidance was not provided this year, the cost profile of the smelter would “continue to be heavily influenced by the price of raw material inputs, including alumina supplied by Worsley Alumina refinery with prices linked to the PAX on a M-1 basis, and other external factors including the South African rand and inflation-linked energy costs”.

In terms of financial performance, aluminium’s underlying Ebit increased by 127% ($373-million), to $666-million, as stronger aluminium prices more than offset higher raw material input prices and power costs.

While additional shipping costs from higher freight rates and extended demurrage owing to poor third-party port performance impacted earnings, the extent of those impacts was mitigated as South32 established alternative discharge and shipping options, the miner stated.

Additionally, 162 pots were relined at a cost of $274 000 per pot in the year under review.

Capital expenditure, meanwhile, increased by $7-million, to $24-million, and is expected to increase by a further $6-million to $30-million in 2023 as South32 continues to invest in a replacement trucking fleet for the transport of liquid hot metal and the roll-out of the AP3XLE technology.

The AP3XLE energy efficiency project is expected to reduce the smelter’s energy consumption and, in turn, lower greenhouse-gas emissions by between 150 000 t/y and 200 000 t/y once fully deployed.

Capital expenditure for the AP3XLE energy efficiency project of about $18-million is expected from 2023 to 2028.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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