South32’s South African manganese and aluminium mines raised production in the quarter to June, 2024 although the company yesterday said its cost profile for the country was highly dependent on rand fluctuations, which have an impact on raw material pricing as well as electricity supply dynamics.
Despite an improvement in electricity supply over the past three months, South African companies are still suffering from logistical constrains, especially the bulk miners and those that produce large amounts of ore.
In spite of this, South32’s manganese and aluminium mines in SA raised output during the June, 2024 quarter as they “responded to stronger manganese prices” to achieve “record” annual production.
Its Hillside Aluminium also “achieved record production”.
Nonetheless, South32 stocks on the JSE dipped by 12.26% to R36.50 per share in afternoon trade yesterday, while it was also down by 6.18% in the past 30 days.
South32’s saleable production of manganese from SA increased by 67 000 wet metric tons or by 3% – a record high of 2.1 million tons in the full year to June, 2024.
This helped the company exceed its production guidance for the year under review by 9% “as the operation delivered improved mining performance and lifted output of secondary products to capitalise on stronger” prices of the commodity.
In the fourth quarter, South32’s South African manganese production uplifted 9% to 534 000 tons.
Its aluminium production from the Hillside operation met guidance-levels for the full year, rising by 1% compared to the previous year to 720 000 tons. This has been attributed to the Hillside smelter continuing “to test its maximum technical capacity, despite the impact of load-shedding” under Eskom.
However, South32 is expecting the 2025 guidance for Hillside Aluminium to remain unchanged at 720 000 tons. It explained though that the cost profile of its SA aluminium smelters was “heavily influenced by the rand, and the price of raw materials” and energy.
In the full year to June, 2024 operating unit costs for Hillside Aluminium are expected to remain consistent with levels attained for the half-year period to June at around $2 135 (R39 010) per ton.
Graham Kerr, CEO of South32, said the company had “delivered another quarter of improved operating performance, achieving sequentially higher volumes across the majority of our operations, and remaining on track to achieve FY24 operating unit cost” guidance.
“Our performance enabled us to capitalise on stronger commodity prices, lift sales volumes and release working capital, boosting cash generation in the quarter,” he said.
South32 is expecting the sale of Illawarra Metallurgical Coal in New South Wales, Australia, to be completed before September. The disposal was set to further strengthen the company’s balance sheet, help simplify its business and reduce capital intensity, as well as unlock capital to invest in high-quality zinc and copper development projects.
South32’s saleable manganese production in Australia however decreased by 34% to 2.3m wet metric tons during the year under review, after it temporarily suspended operations in March, 2024 due to the impacts of Tropical Cyclone Megan.
After commencing environmental approval processes for the Worsley Alumina project in 2019, South32 has said that the Western Australian Environmental Protection Authority has imposed conditions for development of the mine.
South32 said yesterday that if “imposed in their current form, several conditions recommended by the WA EPA create significant operating challenges for Worsley Alumina”, and impact its long-term viability.
“In Worsley Alumina’s view, several of the recommended conditions go beyond reasonable measures for managing environmental risks of the proposal based on scientific assessment and decades of operating experience,” said the company,“ Kerr said.
“Worsley Alumina aims to secure environmental approvals for the proposal by the end of 2024,” he added.
As a result of this, the company has provisioned for an impairment expense of $389m post-tax under for Worsley Alumina under its 2024 full-year financials.
BUSINESS REPORT