South32’s 2016 guidance on track following strong Q3

PERTH (miningweekly.com) – Diversified miner South32 said on Thursday that the company was on track to achieve its 2016 production guidance for all its operations, following a strong third quarter ended March.

The BHP Billiton spin-off produced 1.3-million tonnes of alumina during the three months under review, which was up 2% quarter-on-quarter, as well as 240 000 t of aluminium, which was on par with the previous quarter.

Energy coal production from South Africa declined by 5% to 7.9-million tonnes in the March quarter, while metallurgical coal production from Australian mines was up by 35% to 1.2-million tonnes during the same period.

South32 reported that the increase in metallurgical coal production was underpinned by the restart of longwall mining at the Dendrobium operation, at the Illawarra operations, as well as the ramp-up of the new Appin Area 9 longwall, following project completion, at a cost of $565-million.

Meanwhile, manganese production for the quarter was up by 33% on the previous quarter, to 1.2-million tonnes, while manganese alloy production declined by 27% to 48 000 t.

At the Australian manganese operations, South32 benefited from an increase in ore production on the back of optimised concentrator performance and drier weather conditions.

However, manganese alloy production at the Australian operations reflected a temporary suspension of two of the four furnaces in response to power shortages in Tasmania. The first of the furnaces was suspended in December, and the second one followed in March. The two remaining furnaces are currently operating at a reduced electricity load.

All four furnaces were expected to return to full production by the end of June.

At the South African manganese operations, South32 also reported an increase in manganese ore production, following the extended suspension of operations at the Wessels and Mamatwan mines, in November, in response to the challenging market conditions.

Following the completion of a strategic review, mining activities at the South African manganese operations resumed in the March quarter, with South32 saying that the reconfigured operation would have greater flexibility to respond to market demand, having ramped-up production to an optimised 2.9-million tonnes a year.

However, manganese alloy production from the South African operations also decreased during the three months to March, following the suspension of three of the four high-carbon ferromanganese furnaces in May last year. The one remaining furnace would remain operational until market conditions improved.

Furthermore, South32 on Thursday also reported that nickel production for the quarter was up 10%, to 9 700 t, while silver production declined by 20% to 4.4-million ounces, lead production was down 24% to 36 900 t and zinc production fell by 17% to 18 500 t.

Meanwhile, CEO Graham Kerr said that the company was on track to reduce its controllable cost by $300-million during the full 2016, with the restructuring of operations at Worsley Alumina, in Australia, as well as the Australian and South African manganese units largely complete.

The restructuring of the Cerro Matoso operation and the Illawarra metallurgical coal operations would be completed by the June quarter.

“We are making great progress on our cost-out programme across all operations and have continued to generate cash despite volatile commodity markets,” Kerr said.