South32 records a dip in local coal sales in past six months
JOHANNESBURG - SOUTH32 yesterday recorded a 5 percent dip in domestic coal sales volumes during the six months ended December after demand from state-owned power utility Eskom softened and placed its metallurgical coal project in Australia on ice while it explored joint venture options.
South32 said South Africa Energy Coal (SAEC) saleable production fell in the December quarter following reduced demand from Eskom.
The Australian headquartered South32, which is selling SAEC to Seriti Resources, reported that saleable production had declined to 11.2 million tons in the December 2020 half year, down from 11.7 million tons a year earlier.
“Export sales were also lower, following the suspension of activity from loss-making pits in response to market conditions,” said the group.
South32 said operating unit costs were expected to be about 10 percent above the top end of its guidance range of $39 (R582) a ton in the December 2020 half-year following a strengthening of the rand.
The rand firmed to R14.81 against the dollar yesterday, amid optimism that the incoming administration of US President Joe Biden will move comprehensively to support the US and the world through the ongoing Covid-19 pandemic.
Chief executive Graham Kerr said the group was in a strong financial position and had resumed its on-market share buy-back program in October. “Our unchanged capital management framework and disciplined approach to capital allocation is designed to reward shareholders as supportive market conditions translate to financial performance,” adding that the group continued to focus on exiting lower returning businesses and was working towards increasing its base metals exposure.
In terms of the Eagle Downs Metallurgical Coal project in Queensland, Australia, South32 said it had determined not to proceed with development with the project.
The group completed a feasibility study in the December 2020 quarter and decided to walk away from the project for now.
“While the study indicated the potential for a long-life operation, the expected returns do not currently support the allocation of capital in accordance with our capital management framework,” said South32.
Eagle Downs coal project is a joint venture between South32 and Aquila Resources, which is a subsidiary of Chinese company BaoWu, with both companies holding a 50 percent interest in the asset. The decision reportedly followed recent trade tensions that had resulted in an Australian coal import ban in China.
Hillside Aluminium recorded a 1 000 ton decline in saleable production to 361 000 tons in the December 2020 half year.
South32 shares closed 0.59 percent lower at R30.32 on the JSE yesterday.