S32 South32 Limited

By Rhiannon Hoyle

South32 Ltd. on Monday downgraded annual production guidance for its Cannington and Brazil Aluminium operations, but said group output rose sharply in its fiscal first half and should rise further in the months ahead.

The mining company also estimated first-half operating unit costs to be in line with or below company forecasts at the majority of its sites, as cost-cutting measures and weaker currencies in some of the places it operates partly offset inflation pressures.

Perth-based South32 said output guidance for the Cannington mine in Australia's Queensland state, one of the world's biggest producers of silver and lead, has been cut by 11%, citing lower mill throughput and labor shortages.

"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 2H FY23 [second half of fiscal 2023] is expected to be constrained with near-term labor availability challenges expected to impact mining rates," the miner said.

South32 also said its guidance for the Brazil Aluminium business--which it owns in a joint venture with Alcoa Corp.--had been lowered by 25% due to a slower-than-expected ramp up to nameplate capacity. South32 announced a year ago it would participate in a restart the Alumar aluminum smelter in Brazil, which had been shuttered since 2015, after securing renewable power under long term contracts.

"During the December 2022 quarter, the smelter experienced temporary challenges with its alumina feeding systems and higher than expected pot failure rates," said the miner. "As a result, fewer pots are in operation than planned, and the ramp-up to nameplate capacity is delayed to the September 2023 quarter."

Still, South32 said first-half group copper-equivalent production increased by 12%. The company reported an increase in second-quarter output of most of its commodities, with the exception of copper, compared to the three months immediately prior.

"We are well positioned to capture the benefit of improved market conditions, with further expected production growth in 2H FY23 and our ongoing focus on cost management to mitigate inflationary pressures," the miner said.

In addition to first-half costs that are expected to mostly be in line or better than expected, South32 said second-half costs should enjoy some tailwinds.

"Operating unit costs in 2H FY23 are expected to benefit from higher production volumes as we realize the benefit of prior investments, embedded improvement projects and maintenance completed in 1H FY23," South32 said. The company expects to report production costs in its half-year fiscal report next month.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

January 22, 2023 18:30 ET (23:30 GMT)

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