South32 posts record manganese output; prioritises financial performance

South32 achieved record production from its manganese assets in its 2015 financial year, it said in its full-year earnings report.

South32 achieved record production from its manganese assets in its 2015 financial year, it said in its full-year earnings report.

The company’s focus will, however, remain on “financial performance rather than tonnes”, it said in the report released on Monday August 19, as it seeks to maximise shareholder returns.

The total output of manganese ore from South32’s assets in Australia and South Africa was 4.62 million tonnes in the 12 months to June 30, a 4.43% year-on-year increase.

The decision to suspend production at Metalloys in South Africa in the second half reflected the recently demerged company’s “commitment to maximise financial performance per share, not volume”, the report said.

In production guidance issued for 2016, South32 estimates a 3.67% increase in manganese ore production in Australia to 3.05 million tonnes, while output in South Africa is expected to fall 1.9% year-on-year to 1.65 million tonnes.

However, the company is reviewing its manganese business to prioritise financial performance by ensuring it is appropriately structured for the current commodities pricing environment. The company has not ruled out further reductions to its planned alloy and ore production.

At a briefing following the release of the results, South32’s ceo Graham Kerr emphasised that the miner was not willing to run cash-negative operations, adding that it was a difficult time for manganese ore and manganese alloy prices.

Metal Bulletin’s index for manganese ore (37% manganese, fob Port Elizabeth) currently stands at $2.18 per tonne, down over 30% from the start of the year on weak demand and oversupply.

In production estimates for 2016 for the rest of its portfolio, South32 estimates a 3.43% increase in alumina production at its Worsley facility in Australia, and a 0.6% fall in alumina production in Brazil.

South32’s Worsley alumina refinery in Western Australia

Production of payable nickel at Cerro Matoso in Colombia is expected to fall to 36,500 tonnes in 2016, down 9.65% compared with 2015.

Guidance for payable lead output at Cannington, Australia, has been set at 175,000 tonnes for 2016, down 4.37% year-on-year, and falling to 168,000 tonnes in 2017.

Payable zinc production at Cannington is expected to increase 11.11% to 80,000 tonnes in 2016.

See also:
South32’s maiden annual results highlight asset optimisation, cost cuts
SPOTLIGHT: South32 faces cost-cutting pressure on price weakness
TIMELINE: The birth of South32 from BHP’s unwanted assets

Charlotte Radford
Twitter: @CRadford_MB