South32, which is investing $15 million (R273.4m) into new mining areas for its South African manganese operations has received approval for the disposal of its Illawarra Metallurgical Coal business in Australia.
The Illawarra coal mine is being disposed of for $2.5 billion to entity owned by Golden Energy and Resources (GEAR) and M Resources, established participants in the Australian metallurgical coal industry.
For South32, the disposal of Illawarra “will significantly reduce the company’s capital intensity, with Illawarra Metallurgical Coal currently comprising 35%” of its capital expenditure.
On Friday, South32 said it had now received approval for the disposal.
Shares in South32 fell 3.3% on the JSE on Friday, closing the day’s trade session at R46.79 per share while its stock was down by 2.2% in the past 30 days.
This comes at a time the company is placing increased focus on metals critical for global decarbonisation efforts.
“South32 advises that the sale of Illawarra Metallurgical Coal to an entity owned by Golden Energy and Resources and M Resources has received Australian Foreign Investment Review Board approval,” said the company.
It added that the transaction to dispose of Illawarra was “now expected to be completed in Q1 FY25, subject to the receipt of the remaining foreign merger” clearances.
Saleable production from Illawarra Metallurgical Coal decreased by 28% to 3.4 million tons in the nine months ended March 2024.
However, in the quarter to March 2024, saleable production from the operation had increased by 60% to 1.4m tons “as the operation completed two planned longwall moves in the prior quarter and delivered improved longwall performance” at the Appin mine.
This had offset challenging strata conditions experienced at the Dendrobium mine during the March quarter period under review.
“Our investments in high-quality zinc and copper development projects have the potential to underpin 45% growth in base metals volumes,” South32 CEO Graham Kerr said in May.
“Our liquidity position remains strong, with $0.9bn cash and an undrawn $1.4bn sustainability-linked revolving credit facility.”
As at end-March 2024, South32’s debt position long dated, including $700m in senior secured notes due in 2032, and a $554m Worsley Alumina co-generation lease expiring in 2039.
The company’s net debt had fallen by $154m in the March 2024 quarter as it benefited from improved operating performance, and a partial unwind in working capital.
In South Africa, South32 is currently “studying options to unlock logistics capacity and expand Wessels” manganese operations, Kerr said.
The company is also making progress with “options to improve logistics and increase volumes” for its South Africa manganese operations.
To this end, South32 is sinking capital expenditure of $15m for “new mining areas” at its South Africa operations.
The stronger SA manganese production covered for low output in Australia where operations were impacted by Cyclone Megan.
South32 is now working on “recovery plans to enable safe return to operations” and exports of ore.
BUSINESS REPORT