South32 coal divestments in South Africa result in loss

South32 has reported that its South Africa Energy Coal saleable production decreased by 20% (or 4.6Mt) to 18.1Mt in FY21 as it completed the divestment of the operation on 1 June 2021 and booked an unaudited loss on sale of US$160M, which will be excluded from its underlying earnings.

While it will be presented as a discontinued operation, South32 also expects to report an underlying EBIT loss of US$150M including third-party products and services).

Separately, South32 invested US$23M in sustaining capital expenditure and US$53M in major project capital expenditure at the operation during FY21, prior to its divestment.

ILLAWARRA METALLURGICAL COAL (100%)

Illawarra Metallurgical Coal saleable production increased by 9% (or 639kt) to 7.6Mt in FY21 as the return to a three longwall configuration delivered greater efficiencies through the operation of alternate dual longwalls at the Appin mine and we monetised further low-margin coal wash material.

While this product attracts considerable grade and product-type discounts to the API5 (5,500Kcal) index for South32 energy coal sales, the incremental volume benefits its operating unit costs by eliminating coal waste emplacement.

Notwithstanding, FY21 Operating unit costs are expected to be moderately higher than the guidance of US$83/t as a result of lower than planned total coal volumes.

Metallurgical coal production decreased by 15% during the June 2021 quarter as South32 encountered challenging strata conditions and completed a planned longwall move at its Appin mine during the period. Three longwall moves are scheduled across FY22, including in the December 2021 quarter, March 2022 quarter, and June 2022 quarter.

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