Coal, Commodities, News, Production

South32 prepares for higher coal operating costs


South32 is anticipating that its operating costs for metallurgical coal will be “moderately higher” for the 2021 financial year than its guidance of $US83 ($113) per tonne.

The price hike is due to lower than expected coal volumes across its Illawarra metallurgical coal operations in New South Wales, which is South32’s sole metallurgical coal asset.

South32 produced 7.6 million tonnes of metallurgical coal, leaving it below a guidance of 8 million tonnes for the 2021 financial year.

The company’s coal production was impacted by challenging strata conditions at Illawarra’s Appin mine during the June 2021 quarter, which was met by a 15 per cent decrease in coal production.

Despite missing the target, South32 enjoyed a 9 per cent production increase at the Illawarra operations in the 2021 financial year.

This was achieved after returning Illawarra to a three longwall configuration that enhanced site efficiencies.

The company increased production at Worsley Alumina in Western Australia by 2 per cent to a record 3.9 million tonnes and sales by 6 per cent to 4 million tonnes in the 2021 financial year.

South32 owns an 86 per cent interest in Worsley, with the site operating above its nameplate capacity of 4.6 million tonnes per year.

Zinc production has also improved for South32. The company’s Cannington silver-lead mine in North West Queensland increased its zinc equivalent production by 14 per cent to 380,200 tonnes in the 2021 financial year.

This result was guided by strong underground mine performance, bolstered by a higher-grade mining sequence.

Cannington’s silver, lead and zinc sales increased by 51 per cent, 48 per cent and 34 per cent, respectively, in the June 2021 quarter.

South32 chief executive officer Graham Kerr said the company also maintained a strong financial position as it restructures its portfolio.

“Our strong financial position supported the return of $US346 million ($471 million) to shareholders via our on-market share buy-back during the year, bringing total returns under our capital management program to $US1.7 billion ($2.3 billion) over the past four years,” he said.

“We also made substantial progress reshaping our portfolio during the year, completing the divestments of South Africa Energy Coal and the TEMCO manganese alloy smelter, while progressing studies for our base metals development options at Hermosa and Ambler Metals.

“This, along with the release of our medium-term target to halve our operational emissions by 2035 position us well as the world transitions to a low carbon future.”

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