SOUTH32’s South African manganese operations, held in joint venture with Anglo American, recorded a strong finish to the firm’s 2022 financial year as sales were 17% higher quarter-on-quarter owing to higher freight volumes.
Production totalled 625,000 tons – a 60% quarter-on-quarter increase, and representing a quarterly record despite maintanence in the previous period. This was a result of a strong performance from the Mamatwan mine. But the improvement in sales is significant as it came from “… the partial improvement in third party rail and port performance”.
Transnet, the government-owned rail and ports utility, has fallen under harsh criticism for failing to maintain volumes of export commodities such as manganese and coal. South32 has turned to road transport for its manganese exports which is an affordable option because the manganese ore price has been so high.
The Australian firm said today it achieved a premium of about 18% to the medium grade 37% manganese lump ore index in 2022.
Inventory of manganese ore is “very low”, said Morgan Stanley in a report in mid-June, adding that pricing for the mineral was currently high owing to “some delays out of Gabon in particular”. It added the market was opaque and “many other factors may be a play”. South32’s manganese ore sales of 2.17 million tons for the year are 7% higher compared to the 2021 financial year.
Of the $321m in net distributions received by South32 from its manganese and Sierra Gorda equity accounted investments during the financial year, some $115m was received from South African manganese in the fourth quarter alone.
During the quarter South32 was released from a loan guarantee provided to Seriti Resources, the South African company that last year bought South32’s 91% stake in South African Energy Coal (SAEC). That sale agreement was originally for a nominal fee with Seriti taking on the environmental rehabilitation liabilities, but South32 later modified it to pay $200m in ten installments.
As part of the new agreement, South32 underwrote a $50m loan to Seriti Resources. The derecognition of this agreement resulted in a $12m benefit to South32 in the quarter.
Commenting on the quarterly performance, Graham Kerr, CEO of South32 said the company continued to “reshape” its portfolio. This included exercising an option over shares in Mozal, aluminium facilities in Mozambique, from Mitsubishi.
For $200m, South32 increased its share in Mozal to 63.7% which is worth attributable production of about 370,000 tons of aluminium next year compare to 281,000 tons in 2022. South32’s share of aluminium production grew 5% in the quarter.