Australia’s third biggest miner, South32, the BHP Billiton spin-off, continued to hunker down in the March quarter, eliminating all of its debt and moving to a positive cash position of $US18 million ($23 million) by the end of March.
That’s despite a weak production report for the quarter, with falls across most of its key commodities in the March quarter, and weak prices.
South32 shares rose 8% to end at $1.75 on the ASX yesterday as the company continues to ride the recovery in commodity prices, and slash its cost base at the same time.
The shares are up nearly 84% in the past three months (and 63% since the start of January).
South32, which mines coal, alumina and manganese across Australia and South Africa, said production for the nine months to the end of March fell in aluminium (down 5%), energy coal (down 7%), metallurgical coal (down 10% ) and manganese ore (which was down 10%).
There were also small falls in silver, lead and nickel production. Production rose slightly in alumina and zinc.
CEO Graham Kerr again stressed the company was focused on “value, not volume” and would deliver on its promised $US300 million of cost cuts for the 2015-16 financial year.
“We are making great progress on our cost-out program across all operations and have continued to generate cash despite volatile commodity markets,” he said in yesterday’s report.
"Restructuring at Worsley Alumina, South Africa Manganese and the Australia Manganese mining operation is largely complete. Restructuring at Cerro Matoso and Illawarra Metallurgical Coal is expected to be completed in the June 2016 quarter.”
When South32 was spun out by BHP in May last year, it listed with $US675 million in net debt, but that was cut to just $US36 million at the end of January and have now trimmed it to net cash position of $US18 million, with $US134 million paid down during the March quarter.
“We continue to strengthen our balance sheet by focusing on value, not volume,” Mr Kerr said yesterday.
“Our strong balance sheet remains a key point of difference and we are firmly committed to an investment grade credit rating. In the period Moody’s6 confirmed our credit rating at Baa1 and S&P confirmed that no rating actions were warranted (S&P rating is stable at BBB+). "
The company is in the midst of drastic cost cutting, reducing its headcount, including contractors, by 4,500 workers by the end of the 2017 financial year,
