South32 misses output estimates, puts Colombia nickel unit under review

The miner on Monday posted a near 50% drop in second-quarter metallurgical coal output as it completed major work at an underground mine at its Illawarra operation, while its quarterly manganese production also missed estimates.

Its shares fell as much as 5.3% after the production report was released then recouped some losses to trade down 2.3%, underperforming the broader market, which was up 0.5%.

The Perth-headquartered miner said production of metallurgical coal, used to make steel, fell to 744,000 metric tons in the three months to December, from 1.5 million tons a year earlier. This is below the estimates of around 1.0 million tons by Macquarie and Morgan Stanley.

South32, the world’s biggest producer of manganese, which is used to strengthen steel and increasingly in batteries, reported a nearly 14% drop in quarterly manganese ore output at 1,272 thousand wet metric tons (kwmt), below Macquarie’s estimate of 1,312 kwmt.

Output fell due to lower yields at its Australia Manganese unit, while its South Africa Manganese operation completed planned maintenance.

South32 said it still expects to achieve annual total coal production at the Illawarra operations of 5.0 million tons.

However, it cut the production forecast for Brazil Alumina by 7% due to third-party power outages and maintenance and also lowered annual production guidance for Mozal Aluminium by 12%, where it is cutting output as part of a recovery plan.

South32 said it had also commenced a strategic review of its nickel operation Cerro Matoso in Columbia to evaluate options to improve its competitive position amid a sharp downturn in the nickel market.

Nickel prices have slumped 40% over the past year following a surge in supply from Indonesia, which has led to a string of restructures and writedowns at nickel mines across Australia.

“With some of our commodities facing headwinds in the half, we continued to focus on delivering cost efficiencies and expect first half operating unit costs to be below or in line with guidance for the majority of our operations,” South32 CEO Graham Kerr said.

South32 said it remains on track to make a final investment decision for the Taylor zinc-lead-silver deposit in Arizona in the March quarter.