South32 (ASX:S32) may have reaffirmed its 2023-24 production guidance, despite an 18% drop in coking coal production in the first quarter. However, this confidence has not deterred the miner from initiating cost-cutting measures.
In its September quarter production and sales report, the company disclosed that it had initiated a comprehensive cost review across the organization to counteract inflation pressures within the global mining industry. This move comes as the company reported mixed first-quarter output across its various commodities.
The cost-cutting initiative is also driven by a surge in debt during the quarter and budget preparations for the anticipated launch of its Hermosa renewable metals mining operation in Arizona next year.
South32 stated that the cost review began in the just-concluded first quarter of the 2024 financial year and expects to reduce spending across its operations and offices over the next two years.
CEO Graham Kerr commented on the quarterly report, stating, "With macroeconomic conditions creating headwinds for many of our commodities, we remain focused on driving operating performance and cost efficiencies. This focus, along with our production growth in commodities critical for a low-carbon future, positions us well to capture higher margins as market conditions improve."
South32 reported a net debt increase of $299 million, reaching $782 million during the quarter, primarily due to lower commodity prices and a temporary increase in working capital for higher stocks.
While the company saw increases in production for alumina, aluminum, manganese ore, and lead in the three months to September, output of copper, metallurgical coal, nickel, zinc, and silver was lower.
CEO Kerr added, "We have maintained annual production guidance for all of our operations, with a strong start to the year at our manganese operations, a 34% increase in production at Brazil Alumina, and continued growth in low-carbon aluminum volumes."
In the first quarter, South32 reported an 18% decrease in metallurgical coal output to 1.043 million tonnes, attributed to industrial action and disruptions at its coking coal mining operations south of Sydney. Operational challenges persist at the Illawarra Metallurgical Coal project, affecting production.
However, South32 anticipates a rebound in production during the second half of the financial year due to the completion of a longwall move, which is an efficient underground coal mining technique.
Elsewhere, manganese ore production increased by 4%, alumina production increased by 3%, and low-carbon aluminum production showed positive growth.
However, payable copper production decreased by 8% at the Sierra Gorda mine in Chile, while payable zinc equivalent production decreased by 6% at the Cannington mine in North Queensland.
Payable nickel production also declined by 19% at the Cerro Matoso operation in Colombia, impacted by planned plant maintenance and a temporary disruption to gas supply.
