South32 lowers SA coal production forecast
Wet weather and subdued local demand means the company expects coal production in SA to be at the lower end of recent guidance
Diversified miner South32 said on Thursday it lowered its 2020 production guidance at its soon-to-be-sold SA coal business, citing wet weather and subdued local demand.
South32 said that combined with it’s near-term outlook for domestic demand, and the demobilisation of contractors operating the unprofitable pits, production was expected to be at the bottom end its recent guidance range, or 26-million tonnes.
The company had previously expected production of up to 28-million tonnes.
South32 CEO Graham Kerr said in a statement on Thursday the group had taken a “disciplined approach to capital”, adding that the company's financial position remained strong.
In November, South32 announced it had reached a deal to sell its SA coal asset to Mike Teke's Seriti Resources.
The deal will see Seriti make an upfront payment of R100m, while South32 will receive 49% of the free cash flow from the assets, capped at maximum of R1.5bn per annum. This would run from the completion date of the deal, until March 2024.
South32 said in a quarterly update to end-December 2019, the company's second, that the transaction was expected to close in its December 2020 half year.
South32's share price was up 4.36% to R40.93 in morning trade on Thursday.
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