TIDMS32
RNS Number : 1629K
South32 Limited
20 April 2020
20 April 2020
South32 Limited
(Incorporated in Australia under the Corporations Act 2001
(Cth))
(ACN 093 732 597)
ASX, LSE, JSE Share Code: S32 ADR: SOUHY
ISIN: AU000000S320
South32 Limited
Quarterly Report March 2020
"We have responded to the COVID-19 pandemic by introducing a
number of measures aligned to our priorities of keeping our people
safe and well, maintaining reliable operations and supporting our
communities.
"We have acted to protect our strong financial position,
reducing capital and exploration expenditure, suspending our
on-market share buy-back and commencing a group wide review aimed
at delivering a reduction in controllable costs.
"At our operations, we have delivered a strong operating result
in the year to date, highlighted by record production at Brazil
Alumina and Hillside Aluminium.
"Despite market volatility, we continue our work to reshape and
improve our portfolio, forming the Ambler Metals Joint Venture,
progressing the sale of South Africa Energy Coal and maintaining
momentum at Hermosa. "
Graham Kerr, South32 CEO
-- Responded to market conditions to maintain the financial strength
of our business by suspending the remaining US$121M of our current
on-market share buy-back program and lowering FY20 sustaining capital
expenditure guidance, including equity accounted investments, to US$500M.
-- Initiated a Group wide review that is expected to deliver a reduction
in controllable costs across our operations from FY21.
-- Net cash declined by US$127M to US$150M during the quarter as we funded
our interim ordinary and special dividends (US$107M), made our subscription
payment for our 50% interest in the Ambler Metals Joint Venture (net,
US$73M) and bought back a further 53M shares through our on-market
share buy-back program (US$77M).
-- Removed guidance for our operations in South Africa and Colombia and
lowered FY20 production guidance at Australia Manganese by 5%, in
response to restrictions aimed at containing the spread of COVID-19.
-- Received government approval to undertake limited activity at our
South African manganese ore and export coal operations during the
national lockdown, remobilising at a reduced rate in April.
-- Maintained FY20 guidance for all other operations, where to date production
and sales have been unaffected by our response to COVID-19.
-- Increased Alumina production by 4% achieving record year to date production
at Brazil Alumina and maintaining higher rates of calciner availability
at Worsley Alumina as we deliver initiatives to sustainably increase
to nameplate capacity.
-- Delivered record year to date production at Hillside Aluminium, where
the smelter has a government exemption to maintain production during
the lockdown.
-- On-track to return to a three longwall configuration in the June 2020
quarter at Illawarra Metallurgical Coal, where study work to further
optimise production, sustaining capital and operating costs to maximise
long term value has been advanced following strong longwall performance.
Production summary
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
South32 share 9M YTD19 9M YTD20 YoY 3Q19 2Q20 3Q20 QoQ
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Alumina production
(kt) 3,743 3,911 4% 1,201 1,327 1,276 (4%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Aluminium production
(kt) 737 741 1% 242 248 245 (1%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Energy coal production
(kt) 19,239 18,472 (4%) 6,310 5,898 5,851 (1%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Metallurgical coal
production (kt) 4,072 4,026 (1%) 990 1,208 1,167 (3%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Manganese ore production
(kwmt) 4,246 4,120 (3%) 1,360 1,398 1,307 (7%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Manganese alloy production
(kt) 161 129 (20%) 52 47 38 (19%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Payable nickel production
(kt) 30.5 30.9 1% 9.4 10.0 10.3 3%
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Payable silver production
(koz) 8,948 8,597 (4%) 2,881 3,192 2,433 (24%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Payable lead production
(kt) 73.1 80.3 10% 24.8 28.8 25.0 (13%)
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Payable zinc production
(kt) 37.0 49.8 35% 10.7 14.1 17.3 23%
-------------------------------- ---------- ---------- ------- ------ ----- ----- -----
Unless otherwise noted: percentage variance relates to performance during the
nine months ended March 2020 compared with the nine months ended March 2019
(YoY) or the March 2020 quarter compared with the December 2019 quarter (QoQ);
production and sales volumes are reported on an attributable basis.
Corporate Update
-- Net cash (1) decreased by US$127M to US$150M during the March 2020
quarter with our interim and special fully franked dividend payments
(US$107M) funded during the quarter, ahead of distribution to shareholders
on 2 April. Our balance sheet remains strong with cash and cash equivalents
of US$1.2B, no term debt and an undrawn US$1.5B revolving credit facility.
-- Our manganese equity accounted investments (EAI) did not make net
distributions (2) to the Group in the March 2020 quarter and we have
seen additional cash build in our joint venture, despite paying royalties
of US$76M (100% share) in respect of the prior six month period. Excess
cash in the joint venture is expected to be distributed to partners
in the June 2020 quarter.
-- On 27 March, consistent with the prudent management of our strong
balance sheet, we suspended our on-market share buy-back program.
Following the allocation of a further US$77M to share purchases in
the March 2020 quarter (53M shares at an average price of A$2.21 per
share) and payment of a US$53M fully franked special dividend on 2
April, our US$1.43B capital management program was 92% complete with
US$121M of our now suspended on-market share buy-back program remaining
ahead of its extension or expiry on 4 September 2020 (3) .
-- On 11 February, we formed a 50:50 Joint Venture with Trilogy Metals
Inc. for the Upper Kobuk Mineral Projects in northwest Alaska (Ambler
Metals JV). We subscribed for our 50% interest with a payment of US$145M
to the Ambler Metals JV, of which US$57.5M has been loaned back to
South32 (4) .
-- We progressed the sale of our shareholding in South Africa Energy
Coal to Seriti Resources Holdings Proprietary Limited (Seriti Resources),
submitting our filings for required regulatory and third party approvals.
Subject to a number of material conditions (5) being satisfied, the
transaction remains on track to be completed in the December 2020
half year.
-- While we progressed the review of options for our manganese alloy
smelters, the timeline to complete the review has been impacted by
government restrictions in response to COVID-19. On 27 March we placed
our South African manganese alloy smelter, Metalloys, on temporary
care and maintenance in response to the national lockdown.
-- As previously reported, we have initiated a Group wide review that
is expected to deliver a reduction in controllable costs across our
operations from FY21. Sustaining capital expenditure, including EAI,
is now expected to decline to approximately US$500M in FY20, as we
embed savings from reduced activity in response to market conditions
and reflect updated assumptions for our average exchange rates to
an AUD:USD of 0.67, USD:ZAR of 15.76 and USD:COP of 3,544.
-- Our geographical earnings mix will have a significant bearing on our
ETR given differing country tax rates (6) , while the impact of intragroup
agreements, exploration expenditure in foreign entities and other
permanent differences will continue to be magnified when margins are
compressed or losses are incurred in specific jurisdictions. Until
it is sold, South Africa Energy Coal is expected to have an ETR of
0%, with all tax assets de-recognised from 30 June 2019 and no benefit
to be recorded for losses made prior to sale. Whilst it is therefore
difficult to predict our ETR (excluding EAI), we do expect it to remain
elevated in H2 FY20 (H1 FY20: 75.0%).
Development and Exploration Update
-- We progressed our pre-feasibility study for the Taylor deposit at the
Hermosa project which we now expect to be completed in the September
2020 quarter. We also directed US$5M (all capitalised) to exploration
programs at newly identified regional targets and resource definition
drilling at the project. A Mineral Resource estimate for the Clark
deposit in accordance with JORC Code guidelines is expected to be released
in the June 2020 quarter (7) .
-- Subsequent to the end of the quarter we completed the remaining resource
quality drilling at Eagle Downs Metallurgical Coal, with the interpretation
of those results to support on-going feasibility study work. On 27
March, we reported that given current market uncertainty, we are prioritising
work with our joint venture partner to preserve the value of our investment
beyond the final investment decision scheduled for the end of this
calendar year.
-- Following the formation of the Ambler Metals JV in the March 2020 quarter,
we released Mineral Resource estimates for the Arctic and Bornite deposits
for the first time in accordance with JORC Code guidelines. During
the June 2020 quarter, the joint venture partners will review the impact
of COVID-19 restrictions on planned activities for the remainder of
the calendar year. We anticipate a reduction in the approved exploration
and study budget of US$22.8M due to reduced exploration activity.
-- Consistent with our strategy to partner with companies to fund early
stage greenfield exploration opportunities, we invested US$3M during
the March 2020 quarter (US$13M in the nine months ended March 2020).
Greenfield exploration activity has been impacted by COVID-19 restrictions
on the movement of people and equipment which limited the ability for
some of our partners to access exploration areas in certain jurisdictions.
Accordingly, FY20 greenfield exploration guidance has been reduced
by US$10M to US$20M with these restrictions expected to continue for
the remainder of the calendar year.
-- We directed US$12M towards exploration programs at our existing operations
(US$10M capitalised), including US$5M at Hermosa as noted above (all
capitalised).
Production Summary
Production guidance FY19 9M YTD20 FY20e Comments
(South32 share)
Worsley Alumina
-------------------------------------------- ------- --------- ------- -------------------------------------------
Alumina production (kt) 3,795 2,869 3,965 Assumes existing or additional COVID-19
restrictions or measures have no impact
-------------------------------------------- ------- --------- ------- -------------------------------------------
Brazil Alumina
-------------------------------------------- ------- --------- ------- -------------------------------------------
Alumina production (kt) 1,255 1,042 1,330 Assumes existing or additional COVID-19
restrictions or measures have no impact
-------------------------------------------- ------- --------- ------- -------------------------------------------
Hillside Aluminium
-------------------------------------------- ------- --------- ------- -------------------------------------------
Aluminium production (kt) 715 540 n/a Production guidance withdrawn
-------------------------------------------- ------- --------- ------- -------------------------------------------
Mozal Aluminium(8)
-------------------------------------------- ------- --------- ------- -------------------------------------------
Aluminium production (kt) 267 201 273 Assumes existing or additional COVID-19
restrictions or measures have no impact
-------------------------------------------- ------- --------- ------- -------------------------------------------
South Africa Energy Coal(9)
-------------------------------------------- ------- --------- ------- -------------------------------------------
Energy coal production (kt) 24,979 17,444 n/a Production guidance withdrawn
-------------------------------------------- ------- --------- ------- -------------------------------------------
Domestic coal production (kt) 14,978 9,510 n/a
-------------------------------------------- ------- --------- ------- -------------------------------------------
Export coal production (kt) 10,001 7,934 n/a
-------------------------------------------- ------- --------- ------- -------------------------------------------
Illawarra Metallurgical Coal
-------------------------------------------- ------- --------- ------- -------------------------------------------
Total coal production (kt) 6,647 5,054 7,000 Assumes existing or additional COVID-19
restrictions or measures have no impact
-------------------------------------------- ------- --------- ------- -------------------------------------------
Metallurgical coal production (kt) 5,350 4,026 5,800
-------------------------------------------- ------- --------- ------- -------------------------------------------
Energy coal production (kt) 1,297 1,028 1,200
-------------------------------------------- ------- --------- ------- -------------------------------------------
Australia Manganese
-------------------------------------------- ------- --------- ------- -------------------------------------------
Manganese ore production (kwmt) 3,349 2,616 3,375 Production guidance lowered 5%, reflecting
lower year to date throughput and reduced
productivity
expectations following temporary roster
changes made to respond to COVID-19.
Remains subject
to market demand
-------------------------------------------- ------- --------- ------- -------------------------------------------
South Africa Manganese
-------------------------------------------- ------- --------- ------- -------------------------------------------
Manganese ore production(10) (kwmt) 2,187 1,504 n/a Production guidance withdrawn
-------------------------------------------- ------- --------- ------- -------------------------------------------
Cerro Matoso
-------------------------------------------- ------- --------- ------- -------------------------------------------
Payable nickel production (kt) 41.1 30.9 n/a Production guidance withdrawn
-------------------------------------------- ------- --------- ------- -------------------------------------------
Cannington
-------------------------------------------- ------- --------- ------- -------------------------------------------
Payable zinc equivalent production(11) (kt) 218.2 174.5 221.0 Assumes existing or additional COVID-19
restrictions or measures have no impact
-------------------------------------------- ------- --------- ------- -------------------------------------------
Payable silver production (koz) 12,201 8,597 11,200
-------------------------------------------- ------- --------- ------- -------------------------------------------
Payable lead production (kt) 101.4 80.3 104.0
-------------------------------------------- ------- --------- -------
Payable zinc production (kt) 51.6 49.8 59.0
-------------------------------------------- ------- --------- ------- -------------------------------------------
The denotation (e) refers to an estimate or forecast year.
Worsley Alumina
(86% share)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Alumina production (kt) 2,799 2,869 3% 893 981 936 5% (5%)
======================== ====== ====== ==== ==== ==== ==== ===== =====
Alumina sales (kt) 2,821 2,751 (2%) 936 973 860 (8%) (12%)
======================== ====== ====== ==== ==== ==== ==== ===== =====
Worsley Alumina saleable production increased by 3% (or 70kt) to
2,869kt in the nine months ended March 2020 as the refinery
benefitted from improvement initiatives expected to support a
sustainable increase in production to nameplate capacity of 4.6Mt
(100% basis).
Sales declined by 12% during the March 2020 quarter as scheduled
calciner maintenance impacted production, and a shipment slipped to
the June 2020 quarter as a result of COVID-19 quarantine delays at
port. Subject to existing or additional COVID-19 restrictions or
measures having no impact during the remainder of the financial
year, FY20 production is expected to approach guidance of 3,965kt
with no further material calciner maintenance scheduled.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$13M (or 22%) to US$47M.
Brazil Alumina
(36% share)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Alumina production (kt) 944 1,042 10% 308 346 340 10% (2%)
======================== ====== ====== === ==== ==== ==== ===== =====
Alumina sales (kt) 866 1,014 17% 247 374 336 36% (10%)
======================== ====== ====== === ==== ==== ==== ===== =====
Brazil Alumina saleable production increased by 10% (or 98kt) to
a record 1,042kt in the nine months ended March 2020 as the
refinery benefitted from improved steam generation, enabling the
benefits of the De-bottlenecking Phase One project to be realised.
Subject to existing or additional COVID-19 restrictions or measures
having no impact during the remainder of the financial year, FY20
production guidance remains unchanged at 1,330kt with additional
maintenance scheduled for the June 2020 quarter.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
is unchanged at US$35M.
Hillside Aluminium
(100%)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Aluminium production (kt) 536 540 1% 176 181 178 1% (2%)
========================== ====== ====== === ==== ==== ==== ===== =====
Aluminium sales (kt) 516 524 2% 156 176 174 12% (1%)
========================== ====== ====== === ==== ==== ==== ===== =====
Hillside Aluminium saleable production increased by 1% (or 4kt)
to a record 540kt in the nine months ended March 2020 as the
smelter continued to test its maximum technical capacity, despite
the impact to production from load-shedding.
Hillside Aluminium is considered an essential business in South
Africa for the maintenance of power generation, given the role it
plays in the sustainability of Eskom's generation network. As a
result, the smelter continues to operate despite the nationwide
lockdown that is currently scheduled to expire on 30 April, having
commenced at midnight on 26 March.
As previously reported, FY20 production guidance has been
withdrawn due to the uncertain impact of measures or restrictions
that may be required to contain the spread of COVID-19.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$11M (or 48%) to US$12M.
Mozal Aluminium
(47.1% share)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Aluminium production (kt) 201 201 0% 66 67 67 2% 0%
========================== ====== ====== === ==== ==== ==== ===== =====
Aluminium sales (kt) 198 201 2% 69 72 65 (6%) (10%)
========================== ====== ====== === ==== ==== ==== ===== =====
Mozal Aluminium saleable production was unchanged at 201kt in
the nine months ended March 2020 as the smelter continued to test
its maximum technical capacity, despite the impact to production
from load-shedding. Subject to no impact from existing or
additional COVID-19 restrictions or measures during the remainder
of the financial year, FY20 production guidance8 remains unchanged
at 273kt.
The smelter sources all of its alumina from our Worsley Alumina
refinery with approximately 50% priced as a percentage of the LME
aluminium index under a legacy contract and the remainder linked to
the Platts alumina index on an M-1 basis, with caps and floors
embedded within specific contracts that reset every calendar year.
As a result the smelter's cost of alumina was a premium to the
index in the nine months ended March 2020.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$1M (or 8%) to US$11M.
South Africa Energy Coal
(100%)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Energy coal production (kt) 18,269 17,444 (5%) 6,098 5,493 5,659 (7%) 3%
============================ ====== ====== ====== ===== ===== ===== ===== =====
Domestic sales (kt) 11,699 9,632 (18%) 3,950 2,962 2,944 (25%) (1%)
============================ ====== ====== ====== ===== ===== ===== ===== =====
Export sales (kt) 6,753 7,535 12% 2,547 2,877 2,681 5% (7%)
============================ ====== ====== ====== ===== ===== ===== ===== =====
South African Energy Coal saleable production decreased by 5%
(or 825kt) to 17.4Mt in the nine months ended March 2020 as the
demobilisation of contractors in response to market conditions and
heavy rainfall experienced in the March 2020 quarter, more than
offset a 12% increase in export sales volumes. Higher export sales
volumes were achieved as a result of improved dragline availability
at Klipspruit and the diversion of lower calorific value coal to
the export market to take advantage of favourable market
conditions.
The diversion of lower calorific value coal has an impact on the
average price received for our export sales and accordingly we
realised a discount of approximately 20% to the API4 index12 in the
nine months ended March 2020. Notwithstanding the increased
tonnages in the nine months ended March 2020, export sales declined
7% during the quarter, as the temporary closure of the Richards Bay
Coal Terminal, caused by the national lockdown resulted in the
deferral of shipments.
Our average realised price for domestic coal in the nine months
ended March 2020 was US$24/t. In the June 2019 quarter, we invoked
a hardship clause in our contract to supply coal from the
Wolvekrans-Middelburg Complex to the Duvha power station with a
view to securing a long term pricing tariff that supports the
sustainability of the business. During the March 2020 quarter an
interim pricing arrangement has been agreed to ensure continuous
supply while Eskom undertakes their review of the hardship
claim.
As previously reported, FY20 production guidance has been
withdrawn following the nationwide lockdown in South Africa that is
currently scheduled to expire on 30 April, having commenced at
midnight on 26 March. While our domestic operations are considered
essential in South Africa for the maintenance of power generation
and are exempt from the lockdown, domestic demand is expected to be
impacted by lower total power generation during the June 2020
quarter. Our export operations were placed on temporary care and
maintenance at commencement of the lockdown. We subsequently
requested and received government approval to undertake limited
activity during the lockdown period and have partially remobilised
at a reduced rate.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$21M (or 32%) to US$44M.
Illawarra Metallurgical Coal
(100%)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Total coal production (kt) 5,042 5,054 0% 1,202 1,613 1,359 13% (16%)
----------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Total coal sales(13) (kt) 4,790 5,213 9% 1,531 1,771 1,594 4% (10%)
----------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Metallurgical coal production (kt) 4,072 4,026 (1%) 990 1,208 1,167 18% (3%)
----------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Metallurgical coal sales (kt) 3,783 4,198 11% 1,256 1,318 1,398 11% 6%
----------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Energy coal production (kt) 970 1,028 6% 212 405 192 (9%) (53%)
----------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Energy coal sales (kt) 1,007 1,015 1% 275 453 196 (29%) (57%)
----------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Illawarra Metallurgical Coal saleable production increased by
12kt to 5.1Mt in the nine months ended March 2020 as we completed a
longwall move at Dendrobium during the March 2020 quarter.
Notwithstanding both longwalls encountering challenging strata
conditions to commence the June 2020 quarter, FY20 guidance remains
unchanged at 7.0Mt, subject to no impact from existing or
additional COVID-19 restrictions or measures during the remainder
of the financial year.
The operation remains on track to return to a three longwall
configuration in the June 2020 quarter. With continued strong
longwall performance at both Dendrobium and Appin with a two
longwall configuration, we have commenced a review to optimise
production, sustaining capital and operating costs at Illawarra
Metallurgical Coal, to maximise long term value.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$2M (or 1%) to US$183M.
Australia Manganese
(60% share)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Manganese ore production (kwmt) 2,631 2,616 (1%) 820 907 841 3% (7%)
-------------------------------- ------ ------ ----- ---- ---- ---- ----- -----
Manganese ore sales (kwmt) 2,522 2,512 (0%) 782 885 775 (1%) (12%)
-------------------------------- ------ ------ ----- ---- ---- ---- ----- -----
Manganese alloy production (kt) 114 81 (29%) 38 29 24 (37%) (17%)
-------------------------------- ------ ------ ----- ---- ---- ---- ----- -----
Manganese alloy sales (kt) 105 89 (15%) 29 26 31 7% 19%
-------------------------------- ------ ------ ----- ---- ---- ---- ----- -----
Australia Manganese saleable ore production decreased by 1% (or
15kwmt) to 2,616kwmt in the nine months ended March 2020 as lower
primary circuit throughput, following heavy rain in late FY19, was
partially offset by an increase in demand for our low cost Premium
Concentrate Ore (PC02) product. We continued to operate the PC02
circuit above its design capacity, contributing 11% of total
production in the nine months ended March 2020 (10% in the prior
corresponding period). Manganese ore sales declined 12% during the
March 2020 quarter due to lower production and a shipment that
slipped to the June 2020 quarter as a result of quarantine delays
at port.
FY20 production guidance has been lowered by 5% to 3,375kwmt,
reflecting lower year to date throughput and reduced productivity
expectations to finish the year following temporary roster changes
made to respond to COVID-19. Guidance is subject to no further
impact from COVID-19 restrictions or measures during the remainder
of the financial year. We also continue to monitor the potential
impact of the wet season and market conditions on our adjusted FY20
production guidance.
Manganese alloy saleable production decreased by 29% (or 33kt)
to 81kt in the nine months ended March 2020 as one of the four
furnaces remained offline.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$1M (or 2%) to US$63M.
South Africa Manganese
(60% share)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Manganese ore production(10) (kwmt) 1,615 1,504 (7%) 540 491 466 (14%) (5%)
------------------------------------ ------ ------ ---- ---- ---- ---- ----- -----
Manganese ore sales(10) (kwmt) 1,540 1,549 1% 530 529 476 (10%) (10%)
------------------------------------ ------ ------ ---- ---- ---- ---- ----- -----
Manganese alloy production (kt) 47 48 2% 14 18 14 0% (22%)
------------------------------------ ------ ------ ---- ---- ---- ---- ----- -----
Manganese alloy sales (kt) 51 48 (6%) 16 15 20 25% 33%
------------------------------------ ------ ------ ---- ---- ---- ---- ----- -----
South Africa Manganese saleable ore production decreased by 7%
(or 111kwmt) to 1,504kwmt in the nine months ended March 2020 as we
reduced our use of higher cost trucking and undertook an extended
maintenance shut at our Wessels mine in the December quarter, in
response to market conditions.
As previously reported, FY20 production guidance has been
withdrawn following the nationwide lockdown in South Africa that is
currently scheduled to expire on 30 April, having commenced at
midnight on 26 March. Our manganese ore and alloy operations were
placed on temporary care and maintenance at commencement of the
lockdown. We subsequently requested and received government
approval to undertake limited activity during the lockdown period
and have partially remobilised our manganese ore operations to
resume production activities at a reduced rate across the June 2020
quarter.
Manganese alloy saleable production increased by 2% (or 1kt) to
48kt in the nine months ended March 2020. Our Metalloys smelter
remains on temporary care and maintenance.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$5M (or 19%) to US$21M.
Cerro Matoso
(99.9% share)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Payable nickel production (kt) 30.5 30.9 1% 9.4 10.0 10.3 10% 3%
------------------------------- ------ ------ --- ---- ---- ---- ----- -----
Payable nickel sales (kt) 30.4 30.6 1% 9.1 10.4 10.2 12% (2%)
------------------------------- ------ ------ --- ---- ---- ---- ----- -----
Cerro Matoso payable nickel production increased by 1% (or
0.4kt) to 30.9kt in the nine months ended March 2020 as we achieved
a higher rate of plant utilisation.
As previously reported, FY20 production guidance has been
withdrawn following the nationwide lockdown in Colombia that is
currently scheduled to expire on 27 April, having commenced at
midnight on 24 March. Despite the lockdown, Cerro Matoso continues
to operate with government approval, at a reduced rate, with FY20
production expected to benefit from the deferral of the major
furnace refurbishment previously scheduled for the June 2020
quarter.
Sales declined 2% during the March 2020 quarter. Our ferronickel
product sells with reference to the LME Nickel index price on a M
or M+1 basis and attracts product discounts that have widened in
the current market.
Following a review of activity in response to market conditions,
deferral of the furnace refurbishment to the September 2020 quarter
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$21M (or 38%) to US$34M.
Cannington
(100% share)
3Q20 3Q20
9M 9M vs vs
South32 share YTD19 YTD20 YoY 3Q19 2Q20 3Q20 3Q19 2Q20
Payable zinc equivalent production(11) (kt) 158.1 174.5 10% 50.7 59.6 54.4 7% (9%)
-------------------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Payable silver production (koz) 8,948 8,597 (4%) 2,881 3,192 2,433 (16%) (24%)
-------------------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Payable silver sales (koz) 8,160 8,538 5% 1,820 3,549 2,626 44% (26%)
-------------------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Payable lead production (kt) 73.1 80.3 10% 24.8 28.8 25.0 1% (13%)
-------------------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Payable lead sales (kt) 59.8 74.6 25% 12.7 31.2 22.8 80% (27%)
-------------------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Payable zinc production (kt) 37.0 49.8 35% 10.7 14.1 17.3 62% 23%
-------------------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Payable zinc sales (kt) 31.9 49.7 56% 7.2 16.4 14.4 100% (12%)
-------------------------------------------- ------ ------ ---- ----- ----- ----- ----- -----
Cannington payable zinc equivalent production increased by 10%
(or 16.4kt) to 174.5kt in the nine months ended March 2020 as the
operation drew down run of mine stocks to a normalised level and
recorded a higher average zinc grade, that more than offset lower
silver and lead grades across the period.
Subject to no impact from existing or additional COVID-19
restrictions or measures during the remainder of the financial
year, FY20 production guidance remains unchanged at 221.0kt payable
zinc equivalent with a lower average zinc grade expected in the
June 2020 quarter. Reduced sales in the March 2020 quarter reflect
lower silver and lead production and a return to normalised
inventory levels following elevated sales in the prior quarter. Our
lead and zinc sells with reference to the LME market on a M+2 or
M+3 basis and our realised prices are disclosed net of treatment
and refining charges that have widened in the current market.
Following a review of activity in response to market conditions
and an update to our assumptions for foreign exchange rates over
the remainder of FY20, guidance for sustaining capital expenditure
has been reduced by US$5M (or 9%) to US$50M.
Notes :
1. Net Cash number is unaudited and should not be considered as
an indication of or alternative to an IFRS measure of
profitability, financial performance or liquidity.
2. Net distributions from equity accounted investments includes
net debt movements and dividends, which are unaudited and should
not be considered as an indication of or alternative to an IFRS
measure of profitability, financial performance or liquidity.
3. Since inception, US$1.0B has been allocated to the on-market
share buy-back (477M shares at an average price of A$2.94 per
share).
4. South32 subscription payment of US$145M to form the Ambler
Metals JV. The JV has retained US$87.5M of the subscription payment
to fund its activities, exploration and a pre-feasibility study for
the Arctic deposit, and loaned US$57.5M back to South32. On a
proportionally consolidated basis the net effect on South32's net
cash is US$(72.5)M.
5. Refer to the market announcement "Agreement to Divest South
Africa Energy Coal" dated 6 November 2019.
6. The primary corporate tax rates applicable to the Group for
FY20 include: Australia 30%, South Africa 28%, Colombia 33%,
Mozambique 0% and Brazil 34%. The Colombian corporate tax rate is
32% in CY20 and will decrease on an annual basis by a percent each
year, stabilising at 30% from 1 January 2022. The Mozambique
operations are subject to a royalty on revenues instead of income
tax.
7. Information that relates to estimates of Mineral Resources
for the Clark Deposit (formally the Central Deposit) of the Hermosa
project are foreign estimates under ASX Listing Rules and are not
reported in accordance with the JORC Code. Reference should be made
to the clarifying statement on Mineral Resources in the market
announcement "South32 to acquire Arizona Mining in agreed all cash
offer" dated 18 June 2018, in accordance with ASX Listing Rule
5.12. South32 is not in possession of any new information or data
relating to the foreign estimate that materially impacts on the
reliability of the estimate or has the ability to verify the
foreign estimate as a Mineral Resource in accordance with the JORC
Code. South32 confirms that the supporting information contained in
the clarifying statement in the 18 June 2018 market announcement
continues to apply and has not materially changed. Competent
Persons have not done sufficient work to classify the foreign
estimates as Mineral Resources in accordance with JORC Code. It is
uncertain that following evaluation and further exploration that
the foreign estimates will be able to be reported as Mineral
Resources or Ore Reserves in accordance with the JORC Code. During
FY20 we have undertaken a work program aimed at increasing
confidence in the resource to ensure that resources are reported in
accordance with the JORC Code.
8. Production guidance for Mozal Aluminium does not assume any
load-shedding impact on production.
9. 8% of South Africa Energy Coal is owned by a Broad-Based
Black Economic Empowerment (B-BBEE) consortium. The interests owned
by the B-BBEE consortium were acquired using vendor finance, with
the loans repayable to South32 via distributions attributable to
these parties, pro rata to their share in South Africa Energy Coal.
Until these loans are repaid, South32's interest in South Africa
Energy Coal is accounted at 100%.
10. Consistent with the presentation of South32's segment
information, South Africa Manganese ore production and sales have
been reported at 60%. The Group's financial statements will
continue to reflect a 54.6% interest in South Africa Manganese
ore.
11. Payable zinc equivalent (kt) was calculated by aggregating
Revenue from payable silver, lead and zinc, and dividing the total
Revenue by the price of zinc. FY19 realised prices for zinc
(US$2,122/t), lead (US$1,754/t) and silver (US$14.4/oz) have been
used for FY19, YTD FY20 and FY20e.
12. The sales volume weighted average of the API4 index on the
basis of a one month lag to published pricing (Month minus one or
"M-1") was US$72/t in the nine months ended March quarter 2020.
13. Illawarra Metallurgical Coal sales are adjusted for moisture
and will not reconcile directly to Illawarra Metallurgical Coal
production.
The following abbreviations have been used throughout this
report: US$ million (US$M); US$ billion (US$B); grams per tonne
(g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per annum
(ktpa); million tonnes (Mt); million tonnes per annum (Mtpa);
ounces (oz); thousand ounces (koz); million ounces (Moz); thousand
wet metric tonnes (kwmt); million wet metric tonnes (Mwmt); million
wet metric tonnes per annum (Mwmt pa); thousand dry metric tonnes
(kdmt).
Figures in Italics indicate that an adjustment has been made
since the figures were previously reported. The denotation (e)
refers to an estimate or forecast year.
Operating Performance
South32 share 9M YTD19 9M YTD20 3Q19 4Q19 1Q20 2Q20 3Q20
======================================= ======== ======== ===== ===== ===== ===== =====
Worsley Alumina (86% share)
======================================= ======== ======== ===== ===== ===== ===== =====
Alumina hydrate production (kt) 2,868 2,873 921 934 967 943 963
======================================= ======== ======== ===== ===== ===== ===== =====
Alumina production (kt) 2,799 2,869 893 996 952 981 936
======================================= ======== ======== ===== ===== ===== ===== =====
Alumina sales (kt) 2,821 2,751 936 1,036 918 973 860
======================================= ======== ======== ===== ===== ===== ===== =====
Brazil Alumina (36% share)
======================================= ======== ======== ===== ===== ===== ===== =====
Alumina production (kt) 944 1,042 308 311 356 346 340
======================================= ======== ======== ===== ===== ===== ===== =====
Alumina sales (kt) 866 1,014 247 374 304 374 336
======================================= ======== ======== ===== ===== ===== ===== =====
Hillside Aluminium (100%)
======================================= ======== ======== ===== ===== ===== ===== =====
Aluminium production (kt) 536 540 176 179 181 181 178
======================================= ======== ======== ===== ===== ===== ===== =====
Aluminium sales (kt) 516 524 156 191 174 176 174
======================================= ======== ======== ===== ===== ===== ===== =====
Mozal Aluminium (47.1% share)
======================================= ======== ======== ===== ===== ===== ===== =====
Aluminium production (kt) 201 201 66 66 67 67 67
======================================= ======== ======== ===== ===== ===== ===== =====
Aluminium sales (kt) 198 201 69 70 64 72 65
======================================= ======== ======== ===== ===== ===== ===== =====
South Africa Energy Coal (100%)
======================================= ======== ======== ===== ===== ===== ===== =====
Energy coal production (kt) 18,269 17,444 6,098 6,710 6,292 5,493 5,659
======================================= ======== ======== ===== ===== ===== ===== =====
Domestic sales (kt) 11,699 9,632 3,950 3,336 3,726 2,962 2,944
======================================= ======== ======== ===== ===== ===== ===== =====
Export sales (kt) 6,753 7,535 2,547 3,122 1,977 2,877 2,681
======================================= ======== ======== ===== ===== ===== ===== =====
Illawarra Metallurgical Coal (100%)
======================================= ======== ======== ===== ===== ===== ===== =====
Total coal production (kt) 5,042 5,054 1,202 1,605 2,082 1,613 1,359
======================================= ======== ======== ===== ===== ===== ===== =====
Total coal sales(13) (kt) 4,790 5,213 1,531 1,516 1,848 1,771 1,594
======================================= ======== ======== ===== ===== ===== ===== =====
Metallurgical coal production (kt) 4,072 4,026 990 1,278 1,651 1,208 1,167
======================================= ======== ======== ===== ===== ===== ===== =====
Metallurgical coal sales (kt) 3,783 4,198 1,256 1,261 1,482 1,318 1,398
======================================= ======== ======== ===== ===== ===== ===== =====
Energy coal production (kt) 970 1,028 212 327 431 405 192
======================================= ======== ======== ===== ===== ===== ===== =====
Energy coal sales (kt) 1,007 1,015 275 255 366 453 196
======================================= ======== ======== ===== ===== ===== ===== =====
Australia Manganese (60% share)
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese ore production (kwmt) 2,631 2,616 820 718 868 907 841
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese ore sales (kwmt) 2,522 2,512 782 916 852 885 775
======================================= ======== ======== ===== ===== ===== ===== =====
Ore grade sold (%, Mn) 45.9 44.8 45.8 46.0 45.6 44.4 44.4
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese alloy production (kt) 114 81 38 40 28 29 24
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese alloy sales (kt) 105 89 29 46 32 26 31
======================================= ======== ======== ===== ===== ===== ===== =====
South Africa Manganese (60% share)
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese ore production(10) (kwmt) 1,615 1,504 540 572 547 491 466
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese ore sales(10) (kwmt) 1,540 1,549 530 573 544 529 476
======================================= ======== ======== ===== ===== ===== ===== =====
Ore grade sold (%, Mn) 40.1 39.9 39.7 41.7 40.4 39.6 39.8
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese alloy production (kt) 47 48 14 22 16 18 14
======================================= ======== ======== ===== ===== ===== ===== =====
Manganese alloy sales (kt) 51 48 16 22 13 15 20
======================================= ======== ======== ===== ===== ===== ===== =====
Cerro Matoso (99.9% share)
======================================= ======== ======== ===== ===== ===== ===== =====
Ore mined (kwmt) 1,854 2,041 645 424 668 732 641
======================================= ======== ======== ===== ===== ===== ===== =====
Ore processed (kdmt) 2,035 2,082 634 703 712 677 693
======================================= ======== ======== ===== ===== ===== ===== =====
Ore grade processed (%, Ni) 1.67 1.66 1.63 1.65 1.65 1.67 1.67
======================================= ======== ======== ===== ===== ===== ===== =====
Payable nickel production (kt) 30.5 30.9 9.4 10.6 10.6 10.0 10.3
======================================= ======== ======== ===== ===== ===== ===== =====
Payable nickel sales (kt) 30.4 30.6 9.1 10.8 10.0 10.4 10.2
======================================= ======== ======== ===== ===== ===== ===== =====
Cannington (100%)
======================================= ======== ======== ===== ===== ===== ===== =====
Ore mined (kwmt) 1,954 2,066 648 771 694 666 706
======================================= ======== ======== ===== ===== ===== ===== =====
Ore processed (kdmt) 1,791 2,095 547 704 656 738 701
======================================= ======== ======== ===== ===== ===== ===== =====
Silver ore grade processed (g/t,
Ag) 188 155 202 172 168 162 134
======================================= ======== ======== ===== ===== ===== ===== =====
Lead ore grade processed (%, Pb) 5.0 4.7 5.6 4.8 4.9 4.8 4.5
======================================= ======== ======== ===== ===== ===== ===== =====
Zinc ore grade processed (%, Zn) 3.0 3.4 3.0 3.0 3.8 2.8 3.6
======================================= ======== ======== ===== ===== ===== ===== =====
Payable Zinc equivalent production(11)
(kt) 158.1 174.5 50.7 60.1 60.5 59.6 54.4
======================================= ======== ======== ===== ===== ===== ===== =====
Payable silver production (koz) 8,948 8,597 2,881 3,253 2,972 3,192 2,433
======================================= ======== ======== ===== ===== ===== ===== =====
Payable silver sales (koz) 8,160 8,538 1,820 4,874 2,363 3,549 2,626
======================================= ======== ======== ===== ===== ===== ===== =====
Payable lead production (kt) 73.1 80.3 24.8 28.3 26.5 28.8 25.0
======================================= ======== ======== ===== ===== ===== ===== =====
Payable lead sales (kt) 59.8 74.6 12.7 41.7 20.6 31.2 22.8
======================================= ======== ======== ===== ===== ===== ===== =====
Payable zinc production (kt) 37.0 49.8 10.7 14.6 18.4 14.1 17.3
======================================= ======== ======== ===== ===== ===== ===== =====
Payable zinc sales (kt) 31.9 49.7 7.2 15.7 18.9 16.4 14.4
======================================= ======== ======== ===== ===== ===== ===== =====
Forward-looking statements
This release contains forward-looking statements, including
statements about trends in commodity prices and currency exchange
rates; demand for commodities; production forecasts; plans,
strategies and objectives of management; capital costs and
scheduling; operating costs; anticipated productive lives of
projects, mines and facilities; and provisions and contingent
liabilities. These forward-looking statements reflect expectations
at the date of this release, however they are not guarantees or
predictions of future performance. They involve known and unknown
risks, uncertainties and other factors, many of which are beyond
our control, and which may cause actual results to differ
materially from those expressed in the statements contained in this
release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws
or regulations, the South32 Group does not undertake to publicly
update or review any forward-looking statements, whether as a
result of new information or future events. Past performance cannot
be relied on as a guide to future performance.
Further information
Investor Relations Media Relations
Alex Volante Rebecca Keenan Jenny White
T +61 8 9324 9029 T +61 8 9324 9364 T +44 20 7798 1773
M +61 403 328 408 M +61 402 087 055 M +44 7900 046 758
E Alex.Volante@south32.net E Rebecca.Keenan@south32.net E Jenny.White@south32.net
20 April 2020
JSE Sponsor: UBS South Africa (Pty) Ltd
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
DRLKKKBNPBKKFQB
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April 20, 2020 02:00 ET (06:00 GMT)
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