SYDNEY—South32 Ltd., the new global miner spun off by BHP
Billiton Ltd., on Wednesday flagged write-downs mostly against its
manganese operations that could be worth around 1.9 billion U.S.
dollars.
The company, carved out of BHP to house assets including
manganese mines and aluminum smelters, said it had been notified by
its former parent that pretax impairment charges totaling that
amount had been marked against the South32 assets in May, when the
new miner was spun off. South32 said it was conducting its own
review of the value of its assets, and would "keep the market
informed should there be a material difference to those figures
provided by BHP Billiton."
The demerger of South32, which is due to release its maiden
financial result next month, was one of the largest corporate
breakups in mining history.
The miner listed on the Australian stock market two months ago
with a market value of 11.3 billion Australian dollars (US$8.4
billion). But tumbling commodity prices-and, more broadly, an
aversion for risk among investors due to fears over the outlook for
China and Greece, have since dragged that lower to A$9.7
billion.
Prices for many commodities, including some industrial metals
and coal, have plunged to multiyear lows as a steep selloff in
China's stock market magnified investor concerns about weaker
demand from the world's largest consumer of many raw materials.
Their value has also been knocked by expectations the Federal
Reserve will raise borrowing costs in coming months, a move that
investors expect to further boost the dollar and pressure the
prices of commodities, which generally are priced in the U.S.
currency.
Some analysts worry the prospects for South32's industrial
commodities have deteriorated as China's economy slows.
South32 said BHP's assessment of impairments in May had included
a US$445 million charge against its Australia manganese business,
an US$882 million charge against its South Africa manganese
operations and a US$539 million charge against the Wolvekrans
Middelburg complex, in its South Africa energy coal unit.
Still, South32 highlighted the value of the manganese assets had
been lifted by US$2.1 billion earlier in the year.
Its Australian shares recently traded down 0.8% at A$1.81.
South32 was spun off with a balance sheet that included little
debt, which executives say will help the miner weather weak
commodity markets. On Wednesday, Chief Executive Graham Kerr
restated South32's commitment to investor returns.
"We have the right balance sheet for the times and intend to
distribute a minimum 40% of underlying earnings to our shareholders
from next year," Mr. Kerr said.
In an operational report for the three months through June, the
miner recorded a 1% on-quarter increase in alumina output, to 1.3
million metric tons, and a 23% jump in metallurgical coal
production to 2.0 million tons. Manganese alloy output was down
26%, however, at 81,000 tons, while thermal coal production fell 5%
to 8.9 million tons.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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