Singapore - South32, the world’s largest manganese supplier, said first-quarter output dropped 4 percent after halting some mine work in South Africa.
Production fell to 1.18 million metric tons in the three months to September 30, from 1.23 million in the previous quarter, the Perth-based company said on Thursday in a statement. That’s below a 1.22 million median estimate among three analysts surveyed by Bloomberg.
Manganese ore output from South African operations dropped 15 percent. South32 said its mines in the region are now operating at an optimised rate after a decision to stop work at Wessels following a fatality in June. It boosted net cash by almost 80 percent to $551 million during the quarter and kept production and unit cost guidance unchanged for most of its operations, with the exception of a cut to coal.
The net-cash increase may appeal to shareholders as the lack of identifiable growth options, including asset purchases, suggests the miner could pay a higher dividend, Paul Hissey, an analyst at RBC Capital Markets in Melbourne, said in a note. “We remain constructive on South32 given the relatively quick read-through of higher commodity prices to the company’s financial results, as evidenced by the increase in cash in the first quarter.”
Commodities rebound
South32’s shares have more than doubled in Sydney this year as commodities gained, including metallurgical coal and zinc. The stock traded 1.7 percent lower at A$2.545 at 11.19am local time.
“Stronger commodity prices and cost-saving initiatives delivered a further $239 million increase in our net cash position,” Chief Executive Officer Graham Kerr said in the statement. That’s been achieved “despite the impact of annual payments that followed year-end and the typical lag in commodity pricing”, he said.
Metallurgical coal production slumped 32 percent to 1.44 million tons, trailing the median forecast of 2 million tons in a Bloomberg survey. South32 cut its Illawarra full-year guidance to 9 million tons from 9.5 million, and forecast it’d achieve its unit cost target of $71 in the second half instead of the first.
Metallurgical coal has tripled this year as China cut output to help lift prices for struggling miners and curb pollution, making the world’s biggest consumer more reliant on imports to feed steel mills. Spot hard coking coal jumped 3.6 percent to $240.90 a ton on Wednesday, according to The Steel Index, a record for the data that started in 2013.
* With assistance from David Stringer
BLOOMBERG