South32 lowers production guidance for 2024

Diversified miner South32 saw mixed production results in the December 2023 quarter resulting in lower guidance at several of its operations. However, the group still expects to see overall production growth of 7% for the 2024 financial year.

The company lowered its full-year production guidance for alumina, aluminium and molybdenum and indicated that while expected volumes from its manganese mines in SA remained unchanged for now, this was subject to demand and the continued use of higher cost trucking because of persistent problems with Transnet’s rail performance.

Revised guidance for Brazil Alumina, Mozal Aluminium in Mozambique and Sierra Gorda open pit copper and molybdenum mine in Chile contributed to an overall 3% reduction in production guidance for the year.

South32 said in its quarterly report published on Monday that it has completed planned maintenance at its SA-based manganese operations, comprising two manganese mines in the Northern Cape in which South32 holds a 44.4% stake. Nevertheless, the impact of the planned maintenance as well as lower yields at the group’s Australia Manganese operation resulted in a 5% decrease in manganese production for the six months to end-December. Production for the quarter was down 16% compared with the second quarter in the 2023 financial year.

The Perth-based miner is the world’s biggest producer of manganese.

Commodity prices were broadly lower in the December 2023 half year “reflecting a moderation in demand and sentiment”, South32 said.

This included manganese ore prices which were down between 15% and 17% for the six months to end-December as demand from steel and construction industries weakened.

“With some of our commodities facing headwinds in the half, we continued to focus on delivering cost efficiencies and expect first half operating unit costs to be below or in line with guidance for the majority of our operations,” said CEO Graham Kerr.

“As we enter the second half, strengthening market conditions for many of our commodities, our planned 7% production growth and ongoing cost management focus, position us well to capture higher margins,” Kerr said.

Highlights for the second quarter included a 20% increase in zinc and nickel, and a 7% rise in silver production.

The Hillside Aluminium smelter in Richards Bay performed well, however the group’s trade receivables increased partly because of inventory build-up due to port congestion in Richards Bay.

The port congestion resulted in sales from Hillside decreasing by 8% in the December 2023 quarter as three shipments totalling about 40 kilotons were delayed to January 2024.

“We expect to complete additional shipments from Hillside Aluminium and drawdown our aluminium inventory to normalised levels during the March 2024 quarter,” the company said.

erasmusd@businesslive.co.za