South32 shares battered as company joins ranks of miners downgrading production guidance
South32 shares have been pummelled as the company became the latest miner to reduce guidance in the wake of wet weather and broader issues across its global operations.
South32 shares have been pummelled as the company became the latest miner to reduce guidance in the wake of wet weather and broader issues across its global operations, with the miner downgrading expectations at five of its operations.
Wet weather in Queensland in the March quarter washed out 29 Metals Capricorn copper operations for an extended period, and forced a six-week outage at Evolution Mining’s Ernest Henry mine.
The same flooding also forced a temporary suspension at South32’s Cannington base metals mine, slashing payable zinc equivalent production from the mine by 33 per cent compared to the first three months of 2022 and cutting zinc sales in half to 17,300 tonnes for the quarter.
The stoppages have forced the company to cut its annual production forecast by 6 per cent to about 196,900 tonnes of payable zinc equivalent production, or 60,500 tonnes of zinc, 102,000 tonnes of lead and 11 million ounces of silver.
South32 also slashed its annual guidance for its Mozal aluminium smelter in Mozambique, where production had already been ramped down in the December quarter after a fatality at the operation.
The company said local flooding prevented it from moving people and equipment to support its ramp-up, with about 35 per cent of its output failing to meet client specifications in the period, cutting sales in half as the company looked for buyers for the rejected material.
South32 cut 8 per cent from its expected production due to the problems, to 340,000 tonnes of aluminium.
The company also cut guidance at its Brazilian alumina operations by 4 per cent, at its Illawarra metallurgical coal mines in NSW by 7 per cent to 6.5 million tonnes due to “challenging” geological conditions, and by 7 per cent at its Cerro Matoso nickel mine in Colombia after local authorities temporarily restricted access to a part of the open pit on environmental grounds.
Only at its Australian manganese operations is South32 flagging that it will beat guidance, as the Northern Territory mines hit record production rates, with the company lifting annual output expectations by 3 per cent to 3.5 million tonnes.
Chief executive Graham Kerr said the company’s group-wide copper equivalent production had increased over the first nine months of the financial year, compared to the equivalent period the previous year.
“We remain well positioned to capitalise on improved market conditions, with higher production volumes expected to finish the 2023 financial year and operating unit cost and capital expenditure guidance held largely unchanged,” he said.
“We continue to reshape our portfolio towards commodities critical to a low-carbon future, progressing construction and development studies at Hermosa and adding the prospective Chita Valley copper project to our portfolio of greenfield options.”
South32 spent $176m on its Hermosa project in Arizona in the first nine months of the year, where the company has said it plans to make a final investment decision on mining its Taylor zinc-lead-silver deposit by the middle of the year.
South32 shares were battered on the poor quarterly report, with the company’s shares down as much as 11 per cent shortly after market open and closing down 7.4 per cent, or 33c, to $4.12.
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