South32 sees shipping delays tying up money in inventory By Reuters
© Reuters. FILE PHOTO: The logo of Australian miner South32 can be seen at the venue of a news conference in Perth, Western Australia November 18, 2015. REUTERS/David Gray/File Photo
MELBOURNE (Reuters) – Australian diversified miner South32 (OTC:) Ltd reported production of key commodities on Monday that largely met expectations, but noted that shipping issues had led to inventory buildup, affecting working capital.
In its quarterly report, South32 met coal, aluminum and forecasts and slightly beat analysts’ estimates for production of manganese ore, of which it is the world’s largest producer. The shares rose 1.3%.
“While production was online, sales were impacted resulting in weaker than expected cash generation,” said analyst Glyn Lawcock of Barrenjoey in Sydney.
Delayed shipments of inventory — mostly aluminum — tied up an additional $100 million of working capital in the December half.
“This impact is most acute in our aluminum value chain in Southern Africa due to ongoing shipment delays.”
South32 reported a 24.4% increase in metallurgical coal production in the second quarter, helped by improved volumes and labor productivity at its Appin mine in Australia’s New -South Wales, following strikes by workers and a prolonged move.
In October, South32 finalized a new company agreement at the mine lasting four years until 2026 to deal with the continued strike by workers over wage increases.
For the second quarter, it posted metallurgical coal production of 1.5 million tonnes (Mt), up from 1.2 Mt produced a year earlier and in line with a consensus estimate of 1.5 Mt , according to Goldman Sachs (NYSE:).
South32, however, cut its full-year production forecast for its Brazilian aluminum operations by 25% as the smelter’s ramp-up to nameplate capacity was delayed until the September quarter.
It also cut its forecast for its Cannington silver-zinc mine by 11%, in part due to lower labor availability.
South32 experienced two fatalities at its Mozal Aluminum plant in November after an incident during maintenance work.
In manganese ore, South32 reported production of 1,477 kilotonnes (kt), ahead of an RBC estimate by 7%. It produced 18.9 kt of copper, slightly ahead of RBC’s estimate of 18 kt.
The Perth-based miner added that despite inflationary pressures, it expects to report operating unit costs for the first half of fiscal 2023 in line with or below its current forecast for the majority of its operations.
