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South32 hikes Illawarra guidance, posts 17% jump in H1 profit

14th February 2019

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Diversified miner South32 has reported a solid first half for the six months ending December, with increases in revenue, profit and underlying earnings before interest, taxes, depreciation and amortisation (Ebitda).

South32 on Thursday reported that revenue for the first half of 2018 was up 9% on the previous corresponding period, to $3.8-billion, while profit after tax was up by 17%, to $635-million.

The underlying Ebitda for the same period was up by 20%, to $1.3-billion.

“Record production at Australia Manganese, strong operating performance more broadly, and higher commodity prices delivered a 17% increase in profit after tax for the half-year, while underlying earnings per share grew by 20% as we continued to benefit from our on-market share buy-back programme,” said South32 CEO Graham Kerr.

“Our strong start to the year means that our production guidance is unchanged for all of our operations with the exception of Illawarra Metallurgical Coal, where we have upgraded guidance by 7%. We have also lowered our unit cost guidance as we have maintained operating discipline and benefitted from a stronger US dollar.”

South32 reported a 106% increase in production from the Illawarra Metallurgical Coal operation, as the Appin colliery continued to ramp up towards historical rates, while record ore production was also reported at Australia Manganese, as the primary circuit maintained high utilisation rates and the premium concentrate ore circuit operated at 120% of its design capacity.

Meanwhile, the miner noted that the start of several improvement initiatives at the Worsley Alumina operation, were expected to support a sustainable increase in production to a nameplate capacity of 4.6-million tonnes a year, ahead a future de-bottlenecking activities.

“We continued to reshape our portfolio by acquiring the high-grade Hermosa resource and a 50% interest in and operatorship of the Eagle Downs metallurgical coal project during the period. We are also progressing our early-stage exploration projects and remain on track to divest South Africa Energy Coal with binding bids expected by June 30,” Kerr told shareholders.

At Eagle Downs, South32 is progressing a feasibility study on an underground project at the 1.1-billion-tonne project, with a final investment decision expected in the second half of the 2020 financial year, Kerr said.

Meanwhile, South32 has lowered its full-year guidance for sustaining capital expenditure (capex) by some $30-million to $545-million, reflecting the appreciation of the US dollar, the lower rate of underground development at the Illawarra Metallurgical Coal operation in the fist half of the year, and the additional expenditure incurred to recover from and mitigate the impact of the Klipspruit dragline incident at the South African Energy Coal operation.

The company has also lowered its major project capex guidance for the full year by $48-million to $217-million, reflecting the re-classification of $20-million of expenditure to capitalise exploration at Hermosa, the timing of activity at South Africa Energy Coal’s Klipspruit life extension project, and the appreciation of the US dollar.

Kerr noted that the company was well positioned for the second half of the year, with a net cash balance of $678-million and an improving outlook for production and costs.

“This strong position allows us to return $511-million to shareholders in respect of the period with the declaration of a $258-million fully franked interim dividend and a $86-million fully franked special dividend.”

Kerr said that having established a strong track record, South32 would continue to return any excess capital to shareholders by monitoring its financial position within the context of the prevailing macroeconomic environment and its capital management framework.

“This will involve the continuation of our existing $1-billion capital management programme and the restart of our on-market share buy-back, following release of our financial results.”

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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