Shares in South32 peaked for the day on Monday just after trading opened at $3.83, then slid as investors combed through its September quarter report – the first for the 2022-23 financial year – and gave it a mild negative reading.
The shares ended the day down 1.8% at $3.65 as analysts noted the downgrade in full year guidance for its coking coal business which took attention away from a solid start for its copper and manganese businesses.
South32 said it now expects to produce less coking (metallurgical coal) from its operations south of Sydney than previously forecast this fiscal year over the year to June 30, 2023 but that manganese output is ahead of production guidance after a strong three months to September
The miner revised down an output projection for its Illawarra Metallurgical Coal business by 5% to 7.0 million tonnes, citing an extended longwall move and the lingering impact of a worker strike at its Appin mine.
The company, which reported weaker first-quarter output of most of its commodities year-on-year, said it produced 1.27 million tons of metallurgical coal in the three months through September, down 19% on a year ago.
The weak coal performance in the first-quarter stood out in the production report as volumes of commodities including zinc, alumina and silver fell versus a year ago because of maintenance work and other planned disruptions.
“We had a strong start to the year in manganese, tracking ahead of our production guidance, as Gemco achieved higher primary production and our low-cost PC02 circuit continued to operate above design capacity,” the company said in commentary.
It reported first-quarter manganese ore output of 1.46 million wet tonnes, down 3% on the year-earlier period but ahead of expectations.
South32 stuck to full-year production guidance for its operations with the exception of Illawarra Metallurgical Coal. It said it expects a 13% increase in copper-equivalent production in fiscal 2023 as it saw an 11% rise in copper equivalent output at its Sierra Gordo mine in Chile thanks to higher copper grades in the ore processed.
The miner said it has finalised a new agreement with workers at the Appin coking coal; mining operation since the end of September.
South32 said it had also advanced productivity projects at its Cannington (Queensland silver) and Cerro Matoso (Colombian nickel) mines that it expects to result in increased volumes in the second half of fiscal 2023.
In Monday’s statement, South32 CEO, Graham Kerr: “Highlights during the September 2022 quarter included an 11 per cent increase in copper equivalent production at the Sierra Gorda copper mine in Chile, a nine per cent increase in aluminium production and a six per cent increase in manganese ore production at GEMCO. We maintain a strong outlook with 13 per cent production growth expected in FY23.
“During the quarter, we announced that we would not proceed with an investment in the Dendrobium Next Domain project at Illawarra Metallurgical Coal, increasing our capacity to direct capital towards other opportunities, including our world class development options in North America.
“We advanced development studies and critical path infrastructure at our Hermosa project in Arizona. We expect to complete the selection phase of the pre-feasibility study for the battery-grade manganese Clark deposit by the end of CY22 and make a final investment decision for the zinc-lead-silver Taylor deposit in mid CY23.
“We returned US$50M to shareholders via our on-market share buy-back and finished the quarter with a net cash position of US$446M, with a further US$784M returned in October 2022 via fully-franked ordinary and special dividends,” South32 added.
