South Africa: South32 is cutting back on its outlook for SA Energy Coal

South32, the Perth headquartered diversified mining company, yesterday said that it had revised its outlook for South Africa Energy Coal after reducing contractors operating in unprofitable pits as the group reported mixed output in the December 2019 quarter. “We now expect the 2020 financial year production to be at the bottom end of our guidance range of 26 million tons,” the company said in a quarterly production update released yesterday.

South32 said the South Africa Energy Coal saleable production decreased by 3percent to 11.8million tons in the December 2019 half-year, as the operation demobilised contractors in response to market conditions. In November South32 entered into a binding conditional agreement for the sale of its shareholding in South Africa Energy Coal to black-owned Seriti Resources. The sale is subject to a number of material conditions and is expected to close in the December 2020 half-year.

In terms of South African Manganese output fell to 1038 tons in the December 2019 half-year after market conditions necessitated the reduction of high cost trucking. The company also extended the maintenance shut-down at its Wessels mine in the December 2019 quarter, in response to market conditions. Last year the group moved to review options of its manganese alloy smelters in South Africa, which hosts about 75percent of the world’s identified manganese resources, and Australia citing that changes in market dynamics had reduced the attractiveness of its exposure. South 32 is expected to update the market in the March 2020 quarter. Despite the decrease in coal and manganese production in South Africa, the group increased alumina production by 4 percent, delivering a record year at Brazil Alumina. Graham Kerr, South32’s chief executive, said the company delivered record year-to-date production at Brazil Alumina and maintained production guidance across the majority of its operations.

“We have acted decisively during the quarter in response to market conditions, reducing contractor activity at South Africa Energy Coal and higher cost trucking at our South Africa manganese business,” said Kerr. He said the company’s disciplined approach to capital allocation had enabled it to maintain its strong financial position.