South32 CEO Graham Kerr
PERTH (miningweekly.com) – Diversified miner South32 has reported a 1 847% increase in profits after tax for the half-year ended December, along with record operating margins.
Profits after tax for the first half of 2022 reached $1.03-billion, up from the $53-million reported in the first half of 2021, with underlying revenue increasing by 32% in the same period from $3.4-billion to $4.6-billion, while underlying earnings before interest, taxes, depreciation and amortasaition (Ebitda) increased by 138%, from $786-million to $1.8-billion.
The underlying Ebitda margin increased by 19.7% to 44%.
“We achieved a record operating margin of 44% and a significant improvement in our underlying earnings to $1-billion in the half, following a broad recovery in commodity prices, while also making substantial progress reshaping our portfolio,” said CEO Graham Kerr on Thursday.
“A number of our operations delivered strong production results during the half. We achieved record quarterly production at Brazil alumina and South Africa manganese during the period, while Worsley alumina continued to operate above nameplate capacity.
“Production guidance at Cannington has been revised higher by 5% as the operation prepares to transition to 100% truck haulage in the June 2022 quarter, which is expected to bring forward access to higher grade material.
“This performance, together with our strong financial position is enabling us to invest in our business, grow base metals production and substantially increase our returns to shareholders, with the board resolving to pay a record $405-million fully franked ordinary dividend in respect of the period. The board has also resolved to expand our capital management programme by $110-million to $2.1-billion, leaving $302-million to be returned.”
South32 told shareholders that following the divestment of its South Africa energy coal division in late 2021, the company has taken significant steps forward to increase its portfolio’s exposure to the metals critical for a low carbon future.
“Our business is in excellent financial health and we have continued to reshape our portfolio, with the planned acquisition of a 45% stake in the Sierra Gorda copper mine, and further investment in green aluminium,” said Kerr.
The company is also growing its green aluminium capacity through the agreed acquisition of an additional shareholding in Mozal aluminium and restart of the Brazil aluminium smelter, has reached an agreement to increase its interest in the Mineração Rio do Norte S.A bauxite mine, which is expected to complete in the second half of 2022 subject to the satisfaction of conditions, and has entered into an agreement to divest the Metalloys manganese alloy smelter, which remains subject to the satisfaction of conditions.
South32 is also finalising a prefeasibility study (PFS) for the zinc/lead/silver Taylor deposit, confirming its potential to be the first development option at its Hermosa project, and has completed a summer exploration season at its Ambler Metals joint venture and is progressing activity across its pipeline of greenfield exploration programmes.
“In January we also published a PFS for the zinc/lead/silver Taylor deposit, confirming its potential to be a sustainable and highly productive underground mine in the industry’s first cost quartile. We are excited to progress Taylor as the first development option at our Hermosa project, while continuing our work at other opportunities across our landholding, including exploration targeting copper, and studies to confirm the potential for the Clark deposit to develop a battery-grade manganese product,” said Kerr.
The miner on Thursday reported the Taylor deposit will progress to a feasibility study, including work streams designed to unlock additional value by optimising operating and capital costs, extending the life of the resource and further assessing options identified to target a carbon neutral operation.
Completion of the feasibility study and a final investment decision to construct Taylor are expected in mid 2023.
Separately, a scoping study for the spatially linked Clark deposit has confirmed the potential for a separate, integrated underground mining operation producing battery-grade manganese, as well as zinc and silver. Clark has the potential to underpin a second development stage at Hermosa, with future studies to consider the opportunity to integrate its development with Taylor, potentially unlocking further operating and capital efficiencies, the company said.
“The Taylor deposit provides an important first development option for our Hermosa project in Arizona. The project has the potential to sustainably produce the metals critical for a low carbon future across multiple decades from different deposits,” said Kerr.
“Completing the prefeasibility study for the Taylor deposit is an important milestone that demonstrates its potential to be a globally-significant and sustainable producer of base and precious metals in the industry’s first cost quartile. Beyond Taylor, Clark offers the potential to realise further value from our investment in Hermosa through the production of battery-grade manganese, a mineral designated as critical in the US.
“Additional exploration targets around Taylor and Clark are indicative of further upside while the broader land package contains highly prospective areas for polymetallic and copper mineralisation.
“We are designing the Taylor deposit to be our first ‘next generation mine’, using automation and technology to minimise our impact on the environment and to target a carbon neutral operation in line with our goal of achieving net-zero operational carbon emissions by 2050.
“The future development of Taylor provides a platform from which to realise Hermosa’s immense potential. It will further strengthen our portfolio and align with the already substantial growth in production of metals critical to a low carbon future that we have embedded in the portfolio over the past six months,” Kerr said.
Meanwhile, looking at the year ahead, Kerr noted that South32 was well positioned to capitalise on current market conditions as countries continue their economic recovery from Covid-19, and into the future as they invest in new infrastructure that is expected to see continued growth in demand for the metals critical for a low carbon future.
The miner is expected to spend $400-million in capital during the full 2022, down by $10-million on previous estimates, with lower spend expected at Illawarra as Covid-19 restrictions slow the completion of work.
Guidance for growth capital expenditure has been increased to $115-million from $45-million with the first time inclusion of the second half of 2022 expenditure at the Hermosa project, following the completion of the Taylor deposit PFS. This includes approximately $50-million for critical path items including construction and installation of infrastructure to support orebody dewatering in the second half of 2022.
In terms of production, South32 has downwardly revised the production expectations for its Australia manganese and the Illawarra metallurgical coal operations, reflecting the ongoing impacts of the pandemic. Separately, 2022 guidance for Cannington has been increased in anticipation of further strong underground mine performance and higher average grades.
For the full year, Worsley alumina is expected to produce 3.9-million tonnes, Brazil alumina will produce 1.3-million tonnes, while Hillside aluminium will contribute 720 000 t, and Mozal aluminium will contribute 273 000 t.
The Illawarra metallurgical coal operation is expected to produce 6.8-million tonnes during 2022, down from the 7.6-million tonnes produced last year, while Australia manganese production would fall to 3.2-million tonnes, down from the 3.5-million tonnes delivered in the last financial year. South African manganese production would reach 2-million tonnes in the full year.
Nickel production from Cerro Matoso will reach 43 800 t in the full year, while Cannington is targeted to produce 292 200 t of zinc equivalent, 12.2-million ounces of silver, 117 900 t of lead, and 66 700 t of zinc.