South32 in strategic deal
Miner has net cash of $1.5 billion for new opportunities
SOUTH32, a base metal and coal mining company based in Perth, has announced that it has entered into a strategic alliance in an effort to identify new opportunities through the drill bit.
The diversified mining company which was spun out of BHP Billiton in 2015, said it had a successful quarter to end March even though it encountered some operational challenges during the period.
Chief executive Graham Kerr said: “Despite several operational challenges during the quarter, we increased our net cash balance by $645 million (R8.6 billion) to $1.5billion.”
Kerr said the group had now achieved the right balance of strength and flexibility with the announcement of a $500m capital management programme and subsequently commenced an on-market share buy-back in April.
He said consistent with its strategy to identify new opportunities through the drill bit, South32 also entered into a strategic alliance with AusQuest.
“Under this agreement, we will pursue five early stage base metal opportunities in Australia and Peru. We have also entered into an option agreement with Trilogy covering the more advanced Upper Kobuk Mineral projects in Alaska and will initially test the extent of their high grade Bornite copper resource,” said Kerr.
In the quarterly report the group announced that coal production from its South African energy operations had been hit by heavy rainfall. The company said it dropped its production guidance for its financial year to end June as well as for financial 2018.
South Africa energy coal saleable production decreased by 11 percent to 21.5 million tons as compared to 24 million tons of the comparable period in the nine months to end March, with domestic sales dipping 1 percent, but export sales 25 percent down at 8.8 million tons.
The miner also downgraded full-year production guidance for its South African energy coal division to 30 million tons due to rain and a lack of mine development, and said the development issues were expected to lower annual production further to 27.5 million tons in fiscal 2018.
Kerr said the 2018 drop in output was because of the depletion of existing pits and the delayed development of new mining areas at the Wolvekrans Middelburg Complex. “While our budgeting process for financial year 2018 is currently under way, we do anticipate a significant increase in operating unit cost, including sustaining capital expenditure, as a result of the temporary reduction in production and rise in sustaining capital expenditure at the WMC,” he said.
The South African manganese, however, has performed better. The manganese rose by 23 percent to 1.5 million tons in the nine months to end March and Kerr said this was due to favourable market conditions.
South32 also reiterated lower silver, lead and zinc production guidance issued in early April after an underground fire at its Cannington operation, and revealed unit costs at the Queensland mine would increase to $155 a ton from previous guidance of $141 a ton.
Full-year unit cost guidance for other operations was unchanged.
South32 shares rose 1.63 percent on the JSE on Friday to close at R28.02.