Diversified miner South32 flagged that it expected to record an increase of $100 million (R1.7bn) in working capital in the December 2022 half year due to South African shipping delays, which led to an increase in inventories.
“This impact is most acute in our aluminium value chain in Southern Africa due to ongoing shipping delays,” the group said in its quarterly report, released yesterday.
The Australian-headquartered South32 also said it continued to truck South African manganese ore from its Northern Cape operations despite road transport being more expensive than rail.
"A weaker South African rand partially offset by the use of higher cost trucking," it said
Many companies in South Africa have turned to trucks instead of rail to move their goods as state-owned Transnet Freight Rail struggles to perform due to theft and vandalism, among other factors.
Despite this, South32 reported that manganese ore production during the six months came to over one million tons, an increase of 4% year-on-year.
South African manganese sales increased by 18% in the December 2022 quarter as third-party rail and port availability progressively improved after Transnet’s industrial action was resolved in October last year.
"Notwithstanding this strong quarterly performance, we did see a build in working capital during the December 2022 half-year as a result of this disruption," it said.
The operations were on target for full-year production of two million tons, subject to market conditions and the continued use of higher-cost trucking, it said.
Meanwhile, South 32 said group copper equivalent production increased by 12% in the reported period, as its recent investments in copper and low-carbon aluminium capacity delivered strong growth.
Aluminium production increased by 15% in the December 2022 half-year, with a 50% uplift in low-carbon aluminium, following its acquisition of an additional shareholding in Mozal Aluminium and restart of the Brazil Aluminium smelter.
The JSE- and Perth-listed miner reported that Australia Manganese achieved record half-year production, supporting a 7% increase in total manganese production.
"Illawarra Metallurgical Coal delivered a 17% increase in quarterly metallurgical coal production, with improved volumes and labour productivity as we finalised a new industrial agreement at Appin," it said.
South32 said commodity prices were broadly lower in the December 2022 half-year as it saw a moderation in demand and sentiment following record conditions for many markets in the prior period.
South32 chief executive officer Graham Kerr said: "Group copper equivalent production increased by 12% in the December half year, as we benefited from transactions that have repositioned our portfolio toward metals critical for a low-carbon future. Australia Manganese also achieved record half-year production, while Cerro Matoso successfully commissioned the Ore Sorting and Mechanical Ore Concentration Project, underpinning a 15-year extension to the mining contract.
“Despite industry-wide inflationary pressures, we expect operating unit costs for the first half to be in line with or below guidance for the 2023 financial year at the majority of our operations. We remain focused on delivering safe and stable operational performance, and efficiencies to mitigate cost pressures and capture higher margins as markets improve.
“We returned $927m to shareholders during the period, paying record fully-franked dividends in respect of the June 2022 half-year and continuing our on-market share buy-back.
"We have returned $2.2 billion under our capital management programme since inception, with US$108 million remaining to be returned to shareholders ahead of its extension or expiry in September 2023.“
Looking ahead, Kerr said South32's capital management framework and disciplined approach to capital allocation were designed to reward shareholders as it grew its production and realised the benefits of improving market conditions.
"At the same time, we continue to reshape our portfolio toward metals critical for a low-carbon future, advancing construction work, studies and exploration of our high-quality development options," he said.
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