South32 investments in copper delivered strong growth
South32 has reported in its quarterly report, ending December 2022, that group copper equivalent production increased by 12% in H1 FY23, as its recent investments in copper and low-carbon aluminium capacity delivered strong growth.
SIERRA GORDA (45% SHARE)
Sierra Gorda payable copper equivalent production was 44.9kt in the December 2022 half year, as the operation realised sequentially higher average copper grades (H1 FY23: 0.45%, H2 FY22: 0.42%) and delivered plant throughput at an annualised rate of ~48Mt (100% basis). FY23 payable copper equivalent production guidance of 89.0kt remains unchanged (copper 71.8kt, molybdenum 1.5kt, gold 29.9koz and silver 582koz).
Sierra Gorda progressed work on the plant de-bottlenecking project during the December 2022 quarter, completing planned conveyor upgrades, while commissioning of the third tailings thickener is delayed to the March 2023 quarter. Based on recent performance of the grinding circuit, we now expect annual plant throughput to be in a range of 48 to 49Mtpa (100% basis) following the completion of de-bottlenecking work. In parallel, feasibility study work continues on a potential fourth grinding line, designed to sustainably lift plant throughput above 50Mtpa (100% basis).
The feasibility study is expected to be completed in H1 FY24.
CANNINGTON (100% SHARE)
Cannington payable zinc equivalent production[15] decreased by 13% (or 15.2kt) to 98.8kt in the December 2022 half year with mill throughput below plan due to lower than expected performance of temporary mobile crushers deployed to support the transition to truck haulage. Ore mined volumes also declined with lower operator availability due to skilled labour shortages and further COVID-19 absenteeism.
While the transition to truck haulage was completed at the end of the December 2022 quarter and is expected to bring forward higher-grade material in the mine plan, the ability to recover production volumes in H2 FY23 is expected to be constrained with near-term labour availability challenges expected to impact mining rates.
Accordingly, the company reduced FY23 production guidance by 11% to 209.4kt payable zinc equivalent[15] (ore processed 2,450kdmt, silver 12,000koz, lead 108.5kt and zinc 63.5kt).
Sales volumes in the December 2022 quarter reflected the timing of shipments, including carry-over shipments of silver and lead from the prior quarter.
The realised zinc price of US$2,436/t in the December 2022 half year is net of treatment and refining charges that have widened in the current market.
CERRO MATOSO (99.9% SHARE)
Cerro Matoso payable nickel production was largely unchanged at 20.4kt in the December 2022 half year.
Production improved by 13% (or 1.2kt) in the December 2022 quarter as mill throughput returned to normalised rates following the completion of a planned shut, while the OSMOC project was commissioned. FY23 production guidance remains unchanged at 43.5kt, with the OSMOC project expected to support higher production volumes in H2 FY23.
Sales increased by 20% in the December 2022 quarter, which reflected improved product availability.
South32 ferronickel product typically attracts a discount to the LME Nickel price index on a volume weighted M or M+1 basis, with this discount further widening to 16% in the December 2022 half year (H2 FY22: 8%).
Following a change in tax legislation, South32 expects Cerro Matoso’s effective tax rate to increase in future periods, with the Colombian dividend withholding tax increasing from 10% to 20% and income tax deductions no longer available for royalty payments[22] from January 2023.
