By Peter Ker
Diversified miner South32 has beaten production guidance at most of its major assets in the June quarter and confirmed its taste for copper and base metals by farming into prospective acreage in Canada.
The Worsley Alumina refinery in WA did marginally better than the 3,950,000 tonnes that was forecast, while the 7 million tonnes of coking coal produced in the Illawarra region was 2 per cent better than guidance.
South32 chief executive Graham Kerr.Credit: Dominic K Lorrimer
The exception was the Cannington base metals mine in Queensland, where production was slightly behind guidance because of a mill outage.
But the slight miss won't worry South32 management, nor shareholders, given cutbacks to base metals production across the mining industry appear to have helped improve prices.
The commodities that Cannington produces โ silver, zinc and lead โ have enjoyed some pricing respite over the past six months, silver surging 45 per cent.
Zinc is also looking better than it did in October 2015 when Glencore announced it would suspend production at several of the mines that neighbour Cannington.
Guidance was also achieved at South32's manganese mines in the Northern Territory and at the Cerro Matoso nickel mine in Colombia.
South32 shares were fetching just 89ยข in January, but have more than doubled over the past six months and closed at $1.85 on Wednesday.
Shaw and Partners analyst Peter O'Connor said South32 was now trading "a tad ahead" of his price target for the stock.
The company said it had farmed into acreage in Canada's Quebec region that was prospective for copper, nickel and platinum group elements.
The farm-in deal with Northern Shield Resources should cost $C2.5million ($2.56 million) for a 50 per cent stake of the Huckleberry property, with the potential to increase the stake to 70 per cent.
There has been speculation that South32 may soon look to get involved in some merger and acquisition activity given its strong balance sheet.
Unlike most of its peers in the global mining sector, South32 is actually in a net cash position, and so would be well placed to take on a deal.
But chief executive Graham Kerr has stressed that the company will be patient, given mining asset prices have remained high.
He said on Thursday that the company had built a "strong foundation" in its first year of operation.
"We prioritised value over volume and took decisive action to restructure our operations, reduce controllable costs and improve efficiencies, whilst delivering two major projects on or ahead of schedule, and under budget."
In other mining news, the man who discovered several of Australia's best gold and precious metals deposits, Mark Bennett, may have hit the jackpot again, with shares in his new exploration vehicle, S2 Resources, surging by more than 42 per cent on Thursday.
The surge came after S2 reported exciting gold grades at the Monsoon project near Norseman in WA.
Meanwhile, Australia's second-largest gold miner by output, Evolution Mining, has reported record gold production, thanks to the addition of two new mines.
The company booked gold production of 216,644 ounces for the fourth quarter ended June 30 from a year earlier, and 803,476 ounces for the 12 months to June 30 from a year ago.
During the fourth quarter, Evolution revised its dividend policy, which doubles the payout rate to 4 per cent of revenue.
- With Reuters