South32's Profit Plunges on Lower Coal Output, Prices — Commodity Comment

By Christian Moess Laursen

Perth-based mining major South32 reported a plummet in profit for the first half of its fiscal year to the end of June, mainly due to commodity price headwinds and lower volumes of steelmaking coal. It cut its midyear payout as a result, prompting a fall in its shares in London of 3.9%. Here is what the miner had to say on production, guidance and costs.

On production and guidance:

"Worsley Alumina [in Western Australia] saleable production increased by 1% to 1.934 million [metric] tons in 1H FY24. FY24 production guidance remains unchanged at 4.00 million tons."

"Brazil Alumina saleable production decreased by 7% to 640,000 tons in 1H FY24, as the refinery was impacted by third-party power outages and unplanned maintenance. FY24 and FY25 production guidance is set at 1.30 million tons and 1.35 million tons, respectively, reflecting these impacts and additional maintenance in FY25."

"Brazil Aluminium saleable production increased by 26,000 tons to 50,000 tons in 1H FY24 as the smelter continued to ramp up all three pot lines. Production is expected to be 100,000 tons in FY24 and increase a further 30% to 130,000 tons in FY25."

"Hillside Aluminium [in South Africa] saleable production decreased by 1% to 359,000 tons in 1H FY24 as the smelter continued to test its maximum technical capacity, despite the impact of elevated load-shedding. FY24 production guidance remains unchanged at 720,000 tons."

"Mozal Aluminium [in Mozambique] saleable production decreased by 9% to 166,000 tons in 1H FY24, as the smelter continued to implement its recovery plan following the fatal safety incident in 1H FY23, while managing the impact of elevated load-shedding. FY24 production guidance is set at 320,000 tons."

"Sierra Gorda [in Chile] payable copper-equivalent production decreased by 14% to 38,600 tons in 1H FY24, as higher plant throughput delivered by the plant de-bottlenecking project, was more than offset by lower planned copper grades, and a temporary outage of the molybdenum plant. FY24 production guidance has been set at 78,700 tons."

"Cannington [in North West Queensland, Australia] payable zinc-equivalent production increased by 13% to 147,200 tons in 1H FY24, as we mined a sequence of higher-grade stopes in 2Q FY24. FY24 production guidance is currently unchanged at 287,200 tons."

"Cerro Matoso [in Colombia] payable nickel production decreased by 10% to 18,300 tons in 1H FY24, while production improved by 20% in 2Q FY24 following planned maintenance and a temporary reduction in third-party gas supply. FY24 production guidance remains unchanged at 40,500 tons."

"Illawarra Metallurgical Coal [in New South Wales, Australia] saleable production decreased by 39% to 2.045 million tons in 1H FY24, as the operation completed two longwall moves, including a planned extended outage at the Dendrobium mine... FY24 production guidance is unchanged at 5.0 million tons with volumes remaining weighted to 2H FY24."

"Australia Manganese saleable production decreased by 9% to 1.679 million wet tons in 1H FY24, as [partial pressure of carbon dioxide] production declined due to lower yields, contributing 7% of total production. FY24 production guidance remains unchanged at 3.400 million wet tons."

"South Africa Manganese saleable production increased by 2% to 1.111 million wet tons in 1H FY24 as the operation achieved record production in 1Q FY24 and completed a planned maintenance shut at the Mamatwan mine in 2Q FY24. FY24 production guidance remains unchanged at 2.00 million wet tons."

On costs:

"1H FY24 operating unit costs were in line with or below prior guidance for the majority of our operations, as we continued our focus on delivering cost efficiencies and realized the benefit of lower raw material input prices."

"In 1H FY24, we completed a group-wide review focused on reducing our expenditure in FY24 and FY25. The review identified further cost efficiencies with respect to labour, contractors and consumables, that are expected to support a reduction in operating unit costs and mitigate inflationary pressures."

"FY24 operating unit cost guidance has been lowered or maintained across the majority of our operations, reflecting these cost efficiencies, and lower raw material input prices in our aluminum value chain."

"While operating unit cost guidance is not provided for our aluminum smelters, their cost profile will continue to be influenced by producer currencies, and the price of raw material inputs and energy."

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

February 15, 2024 06:09 ET (11:09 GMT)

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