Diversified miner South32 [ASX:S32] released its September quarterly report on Monday.
S32 reported an improvement in production across all mining segments, including a 9% quarter-on-quarter increase in aluminium production and an 11% increase in copper production.
S32 shares are down 10% year to date:
Source: Tradingview.com
South32’s September stats and highlights
Let’s first take a look at S32’s production highlights:
- There was a 9% quarter-on-quarter increase in aluminium production (1,361kt to 1,257kt) due to increasing smelter activity.
- 12% increase in payable copper production (from 16.0kt to 19.0kt) — thanks to higher copper grades.
- Manganese was ‘strong’, tracking ahead of guidance, yet increased only 1% (totalling 1,460kwmt, though GEMCO production was higher, and low-cost PC-2 circuit went above expectations).
- Production guidance was lowered by 5% for Illawarra Metallurgical Coal to 7.0Mt due to a longwall move and recent industrial action at the Appin mine.
- The rest of the production guidance has not changed; copper equivalent production is expected to grow 13% in FY23.
Source: South32
Developments:
- Cannington and the Ore Sorting and Mechanical Ore Concentration project (Cerro Matoso) have undergone a 100% truck haulage transition, with volume expectations to increase H2 FY23.
- Industrial agreements have been completed for the Appin mine at Illawarra Metallurgical Coal and Hillside Aluminium.
- Taylor Deposit’s DFS is on track for an FID mid-FY23, Clark’s pre-feasibility study is due in late CY22, and plant production from mid-CY23.
- US$15 million was invested in exploration programs for existing operations and development options.
Corporate:
- Net cash decreased by US$92 million to US$446 million, due to a US$50 million share buyback and tax payments of US$243 million, including US$111 million spent on acquiring Sierra Gorda.
- US$54 million has been received in net distributions after income tax of US$54 million and US$84 million in royalties.
- The US$2.3 billion capital management program is now 91% complete.
- US$784 million in fully-franked ordinary and special dividends were returned to investors, and US$200 million more is to be returned via an upcoming capital management program.
- S32 won’t be investing in the Dendrobium Next Domain project but will instead optimise existing approved mining areas, saving US$50 million for studies and other project costs.
- South also noted its sale of non-core royalties (US$200 million) and purchase of 9.9% equity in Aldebaran Resources for US$8 million.
South32’s CEO, Graham Kerr, commented:
‘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.
‘Our strong balance sheet and disciplined approach to capital management enables us to continue to make returns to shareholders while investing in our portfolio of growth options focused on metals critical to a low-carbon future.’
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Regards,
Kiryll Prakapenka,
For Money Morning
