South32 says emissions targets required by the WA government are way above what’s needed

The miner has questioned the Western Australia government’s rationale for proposed emissions reductions at its Worsley expansion, which it says go way beyond national requirements.

South32 on Thursday delivered a better than expected profit result and reinstated its share buyback to the tune of $US200m.

South32 chief executive Graham Kerr has questioned the rationale for Western Australia’s environmental regulator to impose emissions reduction requirements on its proposed Worsley mine expansion that are “way, way above’’ what is needed, and has flagged that other developers should be on notice.

The company in July said the long-term viability of the integrated bauxite mining and alumina refining operations at Worsley were in doubt after a five-year environmental approvals process for the expansion resulted in what it said were “beyond reasonable’’ conditions.

The expansion would extend mining at Worsley into new bauxite deposits within state forests, giving the operation another 15 years of life.

Mr Kerr said on Thursday that WA’s Environmental Protection Agency (EPA) was pushing for emissions reduction requirements for the program that were unduly onerous and went well beyond what is envisaged under the federal Safeguard Mechanism.

“If the EPA is going above the national scheme and it impacts Worsley, surely it’s going to impact any other project that gets approved,’’ Mr Kerr said.

“What’s the rationale for the difference, I guess, would be my question, if that’s a benchmark they’re looking to set.

“The bigger issue is there’s a national scheme around the Safeguard Mechanism. They’re looking to create thresholds that are well in excess of that.’’

South32 chief executive Graham Kerr. Picture: NewsWire / Christian Gilles

Mr Kerr said the company was already committed to halving scope one and two emissions across the entire group by 2035, and at Worsley had been changing out coal boilers for gas to reduce emissions.

“We actually know the world moves forward … it needs to actually move forward,’’ he said.

“I think the problem we have here is they’re roping in some things that are outside of our control, and they’re things that are way, way above what Australia needs to actually meet its contribution to the reduction in carbon.

“We have lodged an appeal against several of the WA EPA’s proposed approval conditions, and we are working constructively with the WA government to secure approval with reasonable conditions by the end of the year.’’

Mr Kerr told The Australian that the WA government had told South32 it was confident of meeting that timeline.

“They understand our requirement that the timeline is critical,’’ he said.

“Based on that level of support, that level of disclosure from them we’d be disappointed if it did run over time.’’

South32 on Thursday delivered a better than expected profit result and reinstated its share buyback to the tune of $US200m, as the sale of its Illawarra coal operations also closed.

Earnings including the contribution from the Illawarra assets were 59 per cent lower at $US380m, on revenue of $US8.29bn, down 8 per cent.

Revenue from the company’s continuing operations, excluding Illawarra, was $US5.48bn, down 3 per cent, and the company made a net loss of $US203m, 17 per cent worse than the previous year.

Mr Kerr said the sale of the Illawarra coal assets simplified the portfolio, strengthened the balance sheet and unlocked capital to develop other projects.

“In the near term, these investments include the development of the Taylor deposit and projects to grow our copper production at Sierra Gorda,’’ he said.

“In addition, we are seeking to increase our base metals exposure over the longer-term by investing in a pipeline of growth options which are being advanced through study phases and a portfolio of exploration prospects in highly prospective regions.’’

The company said it expects to increase its low carbon aluminium output by 17 per cent this year as Brazil Aluminium continues to ramp up and Mozal Aluminium delivers its recovery plan, while copper production is expected to increase 15 per cent.

Mr Kerr told the Australian the company was keen on acquisitions in copper and zinc, however finding appropriate opportunities was challenging in a competitive market.

South32 finished the year with net debt of $US762m, down by $US329m.

South32 will pay a US3.1c dividend on October 17, compared with a $US3.2c dividend for the same period last year.

UBS said the underlying results were better than expected, as was the dividend.

Originally published as South32 says emissions targets required by the WA government are way above what’s needed