Manganese Drives South32 North
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South32 did well in the year to June, even if there was some weakness in 4th quarter performance in some of its key commodities, according to its June quarter and year production and sales report yesterday.
On top of that the shares got more support yesterday as the turnaround in sentiment for zinc of the past week or so continued, boosting the world price to a year high.
A combination of that plus investor satisfaction with the 4th quarter and full year production and sales report saw the shares rise 2% to $3.65.
South32 said yesterday it had beaten its metallurgical coal output guidance for 2017-18, boosted by better than expected production at its troublesome Illawarra, NSW, mines even as fourth-quarter output dipped 24%
Output of metallurgical or coking coal, which is used in steel production, fell to 1.1 million tonnes in the June quarter from 1.4 million tonnes a year earlier, the company said in its production report.
The Appin colliery in the NSW Illawarra region was affected by an extended outage in the first half of 2017-18, cutting full-year saleable production by 40%.
However South32 posted full-year coking coal output of 3.2 million tonnes, above its forecast for 3 million tonnes, and with high world prices for top grade coking coal (the sort the company produces from its Illawarra mines) for the year, the company will reveal enjoy a nice surge in revenue and earnings from this commodity when the full year results are released on August 23.
On top of that the company, which is the leading global manganese producer posted a 2.1% rise in quarterly manganese ore production, while annual manganese output jumped 10% amid stronger demand and pricing.
The miner’s Mozal Aluminium business also revealed another record production result in the last financial year while payable nickel production from Cerro Matoso in Mexico improved 20%.
Quarter-on-quarter production rose for 9 of the 10 commodities it sells with zinc production seeing the biggest increase of 45% as its silver, lead and zinc Cannington mine performed better than management had expected in the three months to June.
And the company has finally separated its South Africa Energy Coal business and higher earnings are expected after the costs of that move are accounted for in 2017-18 accounts. But there will be around $US60 million in redundancies (from the Illawarra coal mines in April) and other one-off costs to come off the bottom line.
South32 is buying the 83% of Arizona Mining it doesn’t own (for $US1.3 billion) and a 50% stake in the Eagle Downs coal project (for $US106 million, plus up to $US107 million in possible future payments) in Queensland which will soak upmost of its cash pile.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.