Protests, dragline incident hit SA Energy Coal production

SOUTH32’S production at South Africa Energy Coal (SAEC) fell by 9 percent to 18.3 million tons (Mt) in the nine months to the end of March as a result of community protests and a slowerthan-expected ramp-up of activity at Klipspruit after a dragline outage.

However, the group said last week that production improved in the last quarter of the period, as domestic sales volumes benefited from a contract to sell lower-quality stockpiled product.

But the incident at Klipspruit resulted in lower-than-planned volumes in the quarter to end-March.

“The dragline incident at Klipspruit has been confirmed as an insurable event, and the volume and cost impact will be subject to an insurance claim,” the group said.

As a result, South32 now expected 2019 export production of 10.7Mt, compared with the previous guidance of 11.5Mt, and a larger decline in lower-margin domestic production to 15.5Mt, compared with the previous guidance of 17.5Mt.

Chief executive Graham Kerr said the company was planning to divest from SAEC, and the asset would be sold once a suitable bidder was found.

“The divestment of SAEC is on track, with binding bids expected in the June 2019 quarter. Once an acceptable bid is received and evaluated, we expect to reclassify the operation as held for sale on the balance sheet and a discontinued operation in the income statement,” Kerr said.

In Mozambique, Mozal Aluminium saleable production decreased by 1 percent to 201 kilotons (kt) in the nine months to end-March, as the smelter’s operating performance was impacted by an increase in the frequency of load shedding.

However, the group expected the 2019 production guidance to remain at 269kt, subject to load shedding.

South32’s Australia Manganese achieved record ore performance in the nine-month period, increasing saleable ore production by 4 percent.

“We achieved record year-to-date ore production at Australia Manganese, and increased production guidance at both our manganese ore operations for (full-year 2019) as we respond to favourable market conditions,” Kerr said.

The group said its net cash increased to $726 million (R10.22 billion), up by $48m in the quarter despite an increase in working capital and the allocation of a further $37m to its on-market share buy-back in the quarter.

The group bought back 286 million shares at an average price of AU$3.13 (R31.61) a share.

Towards the end of the quarter, South32 returned an additional $85m in the form of a special dividend, bringing the total returns under its approved $1bn capital management programme to $908m, with the remainder of the programme due for completion by September 5.