South32, spun out of BHP Billiton in 2015, has increased its cash position to R22.7bn.Photo: Supplied
South32, spun out of BHP Billiton in 2015, has increased its cash position to R22.7bn.Photo: Supplied
South32, spun out of BHP Billiton in 2015, has increased its cash position to R22.7bn.Photo: Supplied
South32, spun out of BHP Billiton in 2015, has increased its cash position to R22.7bn.Photo: Supplied
JOHANNESBURG - Dual-listed South32 has increased manganese ore production guidance in South Africa and Australia for the 2018 financial year on the back of strong prices as it grappled with problems at its operations.

The strong commodity price environment helped the cash position increase by $477m to $1.9billion (R22.7bn), management said.

“We have increased our 2018 financial year production guidance by 5percent to 2150 wet metric tons (wmt) despite planned major maintenance at the Wessels underground mine in the June 2018 quarter,” the company said yesterday during its quarterly report to March.

Local manganese saleable ore production soared 11percent to 1668wmt in the nine months to March compared to the corresponding period last year as the company said it utilised higher cost trucking and sells lower quality fine product to take advantage of favourable market conditions.

But South32, which was spun out of BHP Billiton in 2015, said Australian manganese saleable ore production rose by 14percent in the nine months to March 2018.

Manganese is alloyed with steel to improve hardness, which is important in the manufacturing of construction materials. Manganese was selling for $7.20 per dry metric ton unit (dmtu) to China in March from $3/dmtu in 2015.

Australia’s Illawarra Metallurgical Coal, whose saleable production decreased by 44percent to 3Mt in the nine months ended as the Appin colliery continued to ramp-up production following an extended outage.

SA Energy Coal, which will be managed as a separate business by June, reported a 6percent decline in saleable production to 20.2Mt in the nine months ended March 2018.

Australian-based Cannington silver, lead and zinc payable production decreased by 33percent, 31percent and 50percent, respectively, in the nine months ended March 2018.

Seleho Tsatsi, an investment analyst at Anchor Capital Markets, said South32 experienced operational difficulties at some of its assets.

“The average life of mines across the company's portfolio is short and the production profile for these assets is declining at quite a meaningful rate.

"Those challenges are reflected in the production update. Production was weak at Cannington.”

Tsatsi also said alumina and aluminium production was also below expectations. “Having said that, output at the manganese and nickel assets was strong,” Tsatsi said.

South32 rose 1.18percent on the JSE yesterday to close at R35.96.

Tsatsi said South32 was “the most exposed of the diversified miners to aluminium. About a third of the 2017 financial year operating profit was from its aluminium division.”

- BUSINESS REPORT