SOUTH32 posted strong production numbers at its South African and Australian manganese operations and record alumina production from its Worsley refinery in Western Australia in the June quarter, but present and past coal assets proved a headache.
The group reported a 3% higher production of manganese ore from its 60%-owned South African mines (60% higher year-on-year) coming in at 580,000 tons for the quarter. This took full year production to 2,26 million tons – 21% higher year-on-year.
Sales were 20% higher year-on-year despite publicised railing difficulties experienced by South Africa’s state-owned freight and logistics company, Transnet. South32 said that it saw “… an increase in our use of opportunistic, higher cost trucking” which lifted quarter on quarter sales 28%.
Transnet has come in for some heavy criticism from South African mining firms lately, especially from Exxaro Resources which has had trouble export coal through Richards Bay. Transnet is currently investigating sabotage involving employees and contractors used to restore trains following derailments.
The cause of the write-down was the uncertainty stemming from the rejection of its Dendrobium extension project at Illawarra by the New South Wales Independent Planning Commission which would affect the economics of the broader Illawarra mining complex.
South32 warned earlier this year that 2200 jobs are at risk if it cannot get approval to extend the life of Dendrobium to 2048, said the AFR. It is seeking a judicial review in the NSW Land and Environment Court of the commission’s decision to reject the extension proposal based on concerns about the impact on water quantity and quality, it added.
South32 completed the sale of its South African coal assets held in the 91% owned South African Energy Coal (SAEC), but the retraced deal with Seriti Resources will have significant financial complications for South32 when it reports its year-end numbers.
It is expected to report a $160m loss on the South African sale although this would be excluded from underlying earnings in its full-year results.
South32 also agreed to a $200m mine rehabilitation fund and a $50m restructure facility will come off South32’s net cash balance.
Despite these issues, South32 returned $346m to shareholders via the existing buy-back program in 2020-21. That takes total returns through on-market buybacks to $US1.7bn in the last four years.
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