South32 says FY targets within reach despite challenging Dec quarter

PERTH (miningweekly.com) – Despite a challenging December quarter, diversified mining company South32 remains on track to achieve its production guidance for the majority of its operations.

The miner, which is the world’s biggest manganese ore producer, on Thursday reported higher manganese production, but said that its energy and metallurgical coal production had declined.

South32 boosted manganese ore production by 6% quarter-on-quarter to 1.25-million tonnes, driven by higher production from its South African operations. The South African manganese operations benefited from a drawdown of the Wessels concentrate stockpiles and the use of higher-cost trucking to access export opportunities.

“We have demonstrated the flexibility of our manganese business to respond to favourable market conditions by opportunistically increasing ore production,” CEO Graham Kerr said in a statement.

In the first half of the financial year, South32 produced 2.43-million tonnes of manganese ore. The group’s Australia manganese ore guidance for the financial year to end-June is 3.12-million tonnes. South32 has not given a guidance for the South African manganese operations, but stated that it would keep the Northern Cape mines’ ore production configured for an optimised rate of 2.9-million tonnes a year and that it would continue to act opportunistically when market fundamentals were supportive.

South32’s energy coal production for the quarter declined by 8%, to 7.52-million tonnes, and metallurgical coal production was down 3% to 1.39-million tonnes.

South32 noted that lower production at the South African energy coal operations reflected the prior closure of the North plant at the Wolvekrans-Middelburg complex, as well as scheduled maintenance and the repositioning of draglines.

Coal production from the Illawarra metallurgical coal operations, in Australia, also declined by 6%, on the back of challenging ground conditions at the Appin Area 9, and a moderation in mining rates at Appin Area 8, that ensured gas concentrations were maintained at safe levels.

South32 expects its South African energy coal operations to produce 17-million tonnes of domestic coal and 13.85-million tonnes of export coal in 2017. Its first half production was 8.85-million tonnes of domestic coal and 5.98-million tonnes of export coal.

The Illawarra operations’ metallurgical coal production guidance has been lowered to 6.36-million tonnes and its energy coal production guidance increased to 1.54-million tonnes. In the first half of the financial year, Illawarra produced 2.83-million tonnes of coking coal and 884 000 t of energy coal.

Kerr said that South32 had addressed a number of operational challenges at the Illawarra metallurgical coal operations and stated that its remediation activities were tracking to plan.

Meanwhile, South32 achieved record production from its alumina operations in Brazil during the three months to December, while the African aluminium smelter continued to operate at benchmark levels of current efficiency.

Alumina production for the quarter ended December was up 2% quarter-on-quarter, to 1.32-million tonnes, while aluminium production was also up by 2% quarter-on-quarter to 249 000 t.

Nickel production increased by 3% in the quarter, to 9 000 t, while silver production declined by 14%, to 4.04-million ounces, led production was down 8% to 35 500 t and zinc production rose 38%, to 24 400 t.