South32 ready to resume coal exports after official nod
South32, the diversified mining company, said yesterday that while its domestic coal operations were considered essential for maintaining power generation, its export operations were placed on temporary care and maintenance at the start of the national lockdown. “We subsequently requested and received government approval to undertake limited activity during the lockdown period and have partially remobilised at a reduced rate,” it said in its quarterly production update for March.
The JSE and Australian-listed firm said, however, that export coal sales had declined by 7percent during the March quarter as the temporary closure of the Richards Bay Coal Terminal, caused by the national lockdown, had resulted in the deferral of shipments. The average realised price for domestic coal in the nine months ended March 2020 was $24 (R450) a ton.
“In the June 2019 quarter, we invoked a hardship clause in our contract to supply coal from the Wolvekrans-Middelburg complex to the Duvha power station, with a view to securing a long-term pricing tariff that supports the sustainability of the business,” said the company.
South32 said during the quarter under review it agreed to an interim pricing arrangement to ensure continuous supply, while Eskom undertook their review of the hardship claim.
Saleable production at South African Energy Coal fell by 5percent to 17.4 million tons in the period under review, after contractors were disbanded in response to market conditions and heavy rainfall experienced during the quarter more than offset a 12percent increase in export sales volumes, the company said.
South32 is selling the South Africa Energy Coal business to Seriti Resources and expects the transaction to be completed in December.
At Hillside Aluminium in Richards Bay, saleable production jumped by 1percent to a record 540000 tons in the period under review as the smelter continued to test its maximum technical capacity, despite the impact to production from load-shedding.
Last month South32 withdrew the 2020 production guidance for the Hillside Aluminium smelter over Covid-19 uncertainties. It also announced that it was suspending the remaining $121million of its current on-market share buy-back programme and lowering 2020 sustaining capital expenditure guidance, including equity accounted investments, to $500m to protect its balance sheet.
South32’s chief executive, Graham Kerr, said the company had responded to the Covid-19 pandemic by introducing a number of measures aligned to its priorities of keeping employees safe, maintaining reliable operations and supporting host communities.
“We have acted to protect our strong financial position, reducing capital and exploration expenditure, suspending our on-market share buyback and commencing a group-wide review aimed at delivering a reduction in controllable costs,” Kerr said.
South32's share price closed 4.06percent lower at R23.37 on the JSE yesterday.