SAEC expected to be transferred to Seriti in H1 FY2021
Located near the towns of Witbank and Middelburg in the South African province of Mpumalanga, SAEC is 100 per cent owned and operated collieries by South32. The operation consists of Khutala colliery, Klipspruit colliery and the Wolvekrans Middelburg Complex (WMC) as well as three processing plants.
From April 2018, South32 have managed SAEC as a stand-alone business separately from the rest of the South32 Group. A binding conditional agreement for the sale of SAEC to Seriti Resources was signed in November 2019 that, subject to a number of material conditions being satisfied, is expected to close in H1 FY21.
SAEC PRODUCTION VOLUMES
SAEC saleable production decreased by nine per cent (or 2.3Mt) to 22.7Mt in FY20 with the operation closing loss-making pits in H1 FY20 to maximise margins, before COVID-19 restrictions further impacted activity during the June 2020 quarter.
SAEC OPERATING COSTS AND FINANCIAL PERFORMANCE
Operating unit costs increased by five per cent in FY20 to US$42/t as the impact of lower sales volumes and costs to support the Klipspruit dragline’s return to full utilisation, more than offset savings from reduced activity in loss-making pits and a weaker South African rand.
Underlying EBIT decreased by US$109 million in FY20 to a loss of US$155 million as lower average export realised prices (-US$156 million), lower sales volumes (-US$104 million), costs to support the increase in activity at Klipspruit (-US$49 million) and inventory movements (-US$45 million) more than offset savings from the closure of loss-making pits at the WMC (+US$90 million), higher average domestic realised prices (+US$78 million) and a weaker South African rand (+US$67 million).
CAPITAL EXPENDITURE
Sustaining capital expenditure decreased by US$48 million in FY20 to US$42 million as the company deferred expenditure at the WMC and reduced activity at Klipspruit following the completion of work to recover from the dragline outage in FY19.
South32 also invested US$122 million in major project capital expenditure in FY20 as it progresses the KPSX project towards completion.
