South32 hurt by impact of lower prices
SOUTH32, the Australian-headquartered mining company, said yesterday that South African Energy Coal (Saec) continued to be loss-making during the nine months ended March 2021, given the impact of lower realised prices, lower volumes and a stronger rand. South32 said due to lower demand from Eskom, saleable production from Saec had fallen 14 percent in the reporting period to 15 million tons from 17.4 million tons a year earlier.
South32 said Saec’s export sales were down 13 percent to 6.5 million tons during the nine months ended March 2021 from 7.5 million tons a year earlier. Its third quarter export coal sales had fallen 30 percent to 1.8 million tons and it did not provide production guidance for Saec for the 2021 year given that it was the subject of a takeover by Seriti Resources.
“Export sales declined during the March 2021 quarter, impacted by disruptions to third party rail logistics and our decision to reduce activity in uneconomic pits to maximise margins,” South32 said. The divestment in its Saec remained conditional on approval from both Eskom and the National Treasury.
“Final material conditions include approval from Eskom Holdings for the transfer of our shareholding and amendments to the terms of the Duvha Coal Supply Agreement, with the latter also subject to National Treasury consent,” said South32.
Earlier this month, South32 said it would provide up to $250 million (R3.58 billion) for the smooth sale of Saec to Seriti Resources. Earlier this month, South32 also said it would provide $200m to fund the rehabilitation of Saec operations and a $50m facility that would primarily fund costs to be incurred for the restructure of certain loss-making mining areas.
South32 said South Africa manganese saleable ore production had increased by 11 percent in the nine months ended March 2021, as it increased volumes of higher quality premium material from the Mamatwan mine and lifted the use of opportunistic, higher cost trucking.
Ore production in the March 2021 quarter was 15 percent higher following completion of planned maintenance at the Mamatwan mine in the prior quarter.
“March 2021 quarter ore sales volumes declined by 15 percent, with third party rail logistics impacted by wet weather and shipments slipping into the June 2021 quarter following the declaration of force majeure by Transnet,” said South32. In terms of its financial position, South32 said its net cash had increased by $242m to $517m in the quarter ended March as it capitalised on its strong operating performance combined with improving commodity prices, partially offset by the continuation of our capital management program.
Chief executive Graham Kerr said South32 had set production records at Brazil Alumina and Australia Manganese. He also said the group had increased its production guidance for South African manganese as it continued to respond to market conditions and at Cannington, the silver and lead mine in Australia off the back of continued strong underground performance.
“We continue to reshape our portfolio, moving closer to the divestment of South Africa Energy Coal while progressing studies for our base metals development options. Looking ahead, we expect the global economic recovery combined with fiscal stimulus to continue, driving a rebound in metal demand and sustaining higher prices for many of our key commodities,” Kerr said.
South32’s share price closed 0.85 percent higher at R32.18 on the JSE yesterday