The first five months on the market for South32 chief executive Graham Kerr’s new company have been underwhelming. Photo: Philip GostelowSouth32 is set to make good on itspromise to take significant costs out of the business, revealing on Thursday that it will shave 25 per cent of its group costs this financial year.
The cutscame with a pledge to reduce capital spending by more than the 9 per cent that was previously promised, and ispart of South32’s plan to reduce costs by $US350 million ($483million)by the end of financial year 2018.
The lower cost structurewasannounced in the young company’s September-quarter results, which included very strong performance from the company’s Australian assets but continued problems in South Africa.
Closure is looking increasingly possible forSouth32’s South Africanmanganese assets.
The company has also suspended 3 per cent of aluminium production in South Africa on the back of weak market conditions and problems with electricity supply.
By contrast,production of alumina at Worsley in Western Australia rose 11 per cent as the division bouncedback from maintenance.
Silver production from the Cannington mine in Queensland has been forecast to slide for the next two years, but the September quarter proved an exception with production of silver rising 20 per cent compared to the previous quarter.
The 6.28 million ounces of silver produced in the quarter puts South32 well ahead of the pace required to achieve full year guidance of 21.65 million ounces, but South32 cautioned that the strong performance was likely to be temporary.
Lead and zinc production from Cannington was steady, but sales of Zinc surged19per cent higher than the previous quarter and 27 per higher than the same time last year.
South32 gave scarse explanation for the rise, only saying that port outages slowed sales in the June quarter.
Zinc and lead sales will be increasingly watched during the December quarter in the wake of Glencore’s decision to cut zinc production, and the fact that MMG’sCentury mine has reachedthe end of its working life.
A similar story played out on Groote Eylandtin the Northern Territory, where manganese production was much better than expected. But the looming wet season and plans formaintenance have stopped South32 from improving guidance.
The Illawarra Coking Coal business produced 5 per cent more than in the June quarter,despite a week-long strike at the Dendrobium mineduring August.