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Australian mining company South32 reported an unexpected 18% decline in its first-quarter metallurgical coal production on October 23, due to production disruptions at its key Illawarra operations in New South Wales, Australia, according to a Reuters report.
Production at South32's Dendrobium coal mine in Illawarra was hindered due to an extended planned longwall move. Longwall configuration is a method of underground mining where a long wall of coal is extracted in a single slice.
South32 had planned four longwall moves, involving the transition from mining one longwall to another, throughout fiscal 2024. Consequently, production volumes at Illawarra operations are anticipated to be skewed towards the latter half of fiscal 2024.
However, South32 has not revised its forecast of 4.4 million tonnes of annual metallurgical coal output from Illawarra, which is down from the 5.5 million tonnes achieved in the previous year.
Analysts at Citi noted despite lower production than we expected, South32 has not changed FY24 guidance. So, it is looking to make up met coal, zinc, and nickel volumes over the balance of FY24.
During the three months ending on September 30, metallurgical coal production dropped to 1.0 million tonmes from 1.3 million tonnes in the same period a year earlier. This was slightly below the consensus estimate of 1.1 million tonnes compiled by Visible Alpha.
South32 reported an increase in net debt by $299 million, reaching $782 million. This was attributed to a temporary buildup in working capital of $250 million, an increase in high-value aluminum inventory, and lower commodity prices.
In response to macroeconomic challenges impacting many of its commodities, South32 initiated a group-wide review that is expected to reduce expenditure across operations and functions during fiscal years 2024 and 2025.
Despite macroeconomic conditions creating headwinds for many of the commodities, the company remains focused on driving operating performance and cost efficiencies, South32 CEO Graham Kerr said.
(Writing by Alex Guo Editing by Emma Yang)
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