Cannington the Shining Star in South32 Result

Even though the news for the three months to December from South32’s Cannington silver-lead mine in North West Queensland was solid – offsetting weaker news from its NSW coal business – the shares still lost ground on Monday.

The shares lost 3.6% to close at $3.94.

As was the case with today’s reports from Whitehaven Coal, Regis Resources and Adairs, a combination of wet weather and/or Covid-related factors impacted operations and plans in the December quarter and half year, putting a crimp on sales and in some cases, profits.

Cannington has recorded a 9% increase of payable zinc equivalent production in the December 2021 half year.

The increase brought the production to 152,500 tonnes for the half as higher grades across all products and strong underground performance supported metal production.

Payable zinc sales increased by 29% during the quarter as South32 drew down inventory at Cannington, while payable lead and silver sales jumped 50% and 47% respectively due to the timing of shipments, following wet weather in the September 2021 quarter.

Production guidance for the 2022 financial year has been revised to be 5% higher than previously expected, to reflect continued strong underground mine performance and higher average grades, making the updated targets 12.28 million ounces for silver, 117,900 tonnes for lead, and 292,200 tonnes of payable zinc equivalent production.

In NSW, the South32 Illawarra metallurgical coal operation south of Sydney saw a 23% fall in saleable production following an extended longwall move at the Dendrobium coal mine.

At Worsley Alumina in Western Australia, saleable production eased 2%.

However, the production guidance for the 2022 financial year remains unchanged with the ongoing focus of improving initiatives at the refinery expected to maintain production above nameplate capacity of 4.6 million tonnes.

The company also reported that payable nickel production at Cerro Matoso mine in northern Colombia “rose 26% with plant availability benefitting from completion of the furnace refurbishment in FY2.”

Wet weather and Covid related factors saw a 9% cut to Australia manganese production guidance, preventing the re-build of stockpiles ahead of the wet season and increased South Africa manganese production rose 7% in the December 2021 half year with higher output of premium material

“We achieved a number of strong production results across our portfolio and realised significantly higher commodity prices in the December 2021 half-year, lifting operating margins across the group,” South32 CEO Graham Kerr said in month’s report.

South 32 said a cost saving move at Cannington to transition to a 100% truck haulage operation from the June 2022 quarter remains as a low-cost capital option that has the potential to bring forward further higher-grade material from the 2023 financial year at current operating costs and throughput rates.

A trial of light battery electric vehicles is also expected to commence during the June 2022 half-year, testing their potential use in the vehicle fleet.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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