South32 to book $156m charge

South32 will take a non-cash impairment charge of $US109 million ($156m) in its full year accounts against its manganese alloy smelters at Metalloys in South Africa and TEMCO in Tasmania.

It will also account for one-off, restructuring costs of $US7m at Metalloys, which has been put under temporary care and maintenance.

The diversified miner on Monday reported it had achieved full-year production guidance across the majority of its portfolio, with only metallurgical coal output falling short of expectations.

“We have continued to see good demand for our products, with sales exceeding production at the majority of our operations,” chief executive Graham Kerr said.

The world’s largest producer of manganese ore produced 1.23m wet metric tonnes of the commodity in the quarter ended June 30, compared with 1.29m wmt a year earlier.

While its Australian manganese output remained robust, ore output from South Africa operations fell 35 per cent in the quarter, as virus-prompted restrictions disrupted logistics.

Production at its Brazil Alumina and Cannington silver, lead and zinc operations exceeded its full-year forecasts.

However, metallurgical coal production at its Illawarra facility was slightly below guidance.

The company has felt the impact of a drop in commodity prices since the start of the COVID crisis.

The realised price for alumina from its WA operations fell 16 per cent from the first half, aluminium prices dropped 10 per cent from the first half, while the realised price for metallurgical coal was down 10 per cent.

“Looking forward we remain focused on reducing controllable costs, managing counter-party and supply chain risk and optimising working capital to ensure the business remains resilient during a potentially extended period of volatility and lower commodity prices,” Mr Kerr said.

South32 shares were down 1.6 per cent to $2.19 by 11am in a weak Australian market.

AAP