South32 (ASX:S32) is facing another loss-laden financial report next month after revealing a second round of significant write-downs in asset values.
The company disclosed in its June quarter and full-year production report on Monday that it would incur a total of $US818 million in impairments, or $A1.22 billion.
A year ago, the company reported $US1.3 billion in impairments. This brings the total for the years 2022 to 2024 to $US2.11 billion, or $A3.13 billion.
A year ago, the write-down was in the value of the Taylor deposit at its Hermosa project in the US. On Monday, the latest write-downs were $US554 million for Worsley Alumina in WA (or $A826 million) and around $US264 million for Cerro Matoso ($A394 million) in Colombia.
South32 explained the impairment at Worsley Alumina: the cuts to the carrying value of around $US2.027 billion "reflected increased uncertainty created by the Western Australian Environmental Protection Authority's recommended conditions for the Worsley Mine Development Project approval and associated challenging operating conditions."
Regarding the impairment at Cerro Matoso, the reduction in the carrying value to around $US54 million "reflects structural changes in the nickel market which are expected to continue to place pressure on nickel prices and discounts for our ferronickel product."
(This is a smaller impairment than the billions outlined this month by the likes of BHP in respect of WA Nickel and IGO for its WA nickel business, also for a second year.)
South32 said the company’s Groote Eylandt-based Australian Manganese mining business in the Gulf of Carpentaria “incurred around $US90 million of idle capacity and other remediation-related costs as a result of Tropical Cyclone Megan."
"These costs will be excluded from FY24 underlying earnings as an earnings adjustment.” South32 stated it invested $US30 million into Australian Manganese in the quarter.
"Australia Manganese progressed recovery plans following Tropical Cyclone Megan, while South Africa Manganese responded to stronger manganese prices, achieving record annual production,” the company added.
Production guidance has been revised lower for alumina (by 5%), Sierra Gorda payable copper equivalent (by 7%), and Cannington payable zinc equivalent (by 9%). South32 reported producing 60,800 tonnes of payable copper and 5.1 million tonnes of alumina in 2023-24, down 14% and 1%, respectively, from a year earlier. However, the June quarter saw a strong rebound with output higher by 10% for copper and 1% for alumina.
CEO Graham Kerr stated, “We delivered another quarter of improved operating performance, achieving sequentially higher volumes across the majority of our operations, and remaining on track to achieve FY24 operating unit cost guidance.
"Our performance enabled us to capitalize on stronger commodity prices, lift sales volumes, and release working capital, boosting cash generation in the quarter.
"The sale of Illawarra Metallurgical Coal is expected to be completed later this quarter, further strengthening our balance sheet, simplifying our business, reducing our capital intensity, and unlocking capital to invest in our high-quality development projects in zinc and copper,” the CEO added.
