South32 completes restructure to unlock potential
Diversified miner South32 has completed its restructuring programme, positioning the company to achieve its full-year 2017 unit cost guidance.
|||Johannesburg - Diversified producer South32 said yesterday that manganese ore production had increased to 1.23 million tons in the three months to end June, from 1.21 million tons in the previous three months.
Graham Kerr, the chief executive of South32, said: “We have built a strong foundation in our first full year of operation, despite the challenging market. We prioritised value over volume and took decisive action to restructure our operations, reduce controllable costs and improve efficiencies, while delivering two major projects on or ahead of schedule and under budget.”
South32 said it had completed its restructuring programme, positioning the company to achieve its full-year 2017 unit cost guidance.
The producer has cut costs and trimmed output across its alumina, metallurgical coal, nickel and manganese units in response to lower commodity prices.
“We continue to unlock our resource potential, having reached a landmark agreement with the Anindilyakwa Land Council to mine the eastern leases and explore the highly prospective southern areas at Gemco,” Kerr said.
“An option agreement at the Huckleberry property in Canada also marks our first investment in base and precious metals greenfields exploration, and aligns with our strategy to identify opportunities beyond our current portfolio,” he said.
South32 listed in 2015 after unbundling from BHP Billiton and is the world’s biggest manganese producer and a global producer of manganese alloy used in making steel and aluminium products.
Write-downs
In February, the company flagged write-downs of $1.7 billion (R24.3bn) amid an extended downturn in the commodities sector. It has axed more than 1 000 jobs globally, slashed manganese supply by a quarter and cut production at several high cost mines and smelters.
Percy Takunda, an analyst at Momentum SP Reid Securities, said: “Management believes that a strong foundation has been built, despite the challenging environment during the company’s first year of operation.
“Rationalisation of production volumes, in improving alumina market and significant cuts in non-essential expenditure has positioned the company for a strong recovery. Since listing the share price has not witnessed the same interest as its peers, but we believe there is a significant potential in this update to warrant a correction.”
Takunda anticipated that earnings before interest, tax, depreciation and amortisation would improve now that the company had announced that it had completed the restructuring .
“Management has announced that the restructuring initiatives at five operations: Worsley Alumina, Illawarra Metallurgical Coal, Australia Manganese, South Africa Manganese and Cerro Matoso are now complete.”
South32 shares were up 1.3 percent to close at R19.45 a share on the JSE yesterday.
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