South32 faces $109m in impairment
South32 is expecting to book $109 million (R1.82 billion) in non-cash impairment charges in the 2020 financial year on its manganese alloys smelters in South Africa and Australia.
The Perth headquartered company reported yesterday that the write-down came after considering the future economic viability and continuing review of its Metalloys in Meyerton smelter in Johannesburg and Tasmanian Electro Metallurgical Company (Temo) in Australia. South32 said it also expected $7m to fund the costs of restructuring at Metalloys.
“One-off, pre-tax restructuring costs, including redundancies, at Metalloys of approximately $7m are also anticipated. These charges will be recorded in the group’s share of profit of estimated annual income and excluded from underlying earnings in 2020,” said the company.
South 32, which was spun off BHP in 2015, said it had temporarily placed Metalloys in care and maintenance.
“After consideration of the future economic viability of Metalloys, we decided with our joint venture partner to place the smelter on temporary care and maintenance,” the company said.
Metalloys has grappled with the cost of power and has also been hit with the volatility of the manganese price environment.
South 32 had long been considering its options for both Metalloys and Temo smelters. The company had previously said it was either going to permanently mothball the assets until the price rebounds, close them permanently or place them in someone else’s hands.
South32 said manganese saleable ore production in South Africa fell 14 percent in 2020, compared to 2019.
It said the lower saleable output came as it responded to weaker market conditions in the 2019 half-year, reducing its use of higher-cost trucking and undertaking an extended maintenance shut at its underground Wessels mine.
The company also placed both the open pit Mamatwan and underground Wessels mines on temporary care and maintenance during the nationwide Covid-19 lockdown in the June 2020 quarter. It subsequently returned to full capacity with lockdown restrictions lifted.
South32 said that manganese sales were down 34 percent during the June 2020 quarter, as volumes were also impacted by Covid-19 related disruptions to their shared logistics infrastructure.
“Notwithstanding the lifting of restrictions, we continue to respond to the evolving environment and its potential to further impact our operations and logistics chain,” said the company.
In terms of aluminium, the Hillside Aluminium saleable production increased by 3 000 tons in the 2020 financial year, as the smelter continued to test its maximum technical capacity, despite the impact on production from increased load-shedding.
South32 said it had progressed the sale of its shareholding in South Africa Energy Coal to Seriti Resources, acquiring the 8percent interest previously owned by its empowerment consortium partner and receiving approval for the transaction from the Richards Bay Coal Terminal during June 2020.
“Subject to a number of material conditions being satisfied, the transaction remains on track to be completed in the December 2020 half-year,” said the company.
South32 shares declined 1.53percent on the JSE yesterday to close at R25.15.