29-Feb-2024: Sale-of-Illawarra-Metallurgical-Coal.PDF

South32 Chief Executive Officer, Graham Kerr said: “This Transaction will realise significant value for our shareholders and is consistent with our strategy to reshape our portfolio toward commodities critical in the transition to a low-carbon future. “

It will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc. 

“The Transaction will also simplify our business and reduce our capital intensity."

---end of excerpt ---

They had already exited thermal coal, now Met coal as well. Positive.  

Pity about their share price over recent months, but they'll come back. I hold S32 in my two largest real money portfolios but not here.

16th May 2023: South32 released this today: S32-Strategy-and-Business-Update-16-May-2023.PDF

Many companies are trying to do a bit of greenwashing these days, so look greener, cleaner, and more sustainable, and I guess the more cynical among us might think that's exactly what S32 are doing here with this Strategy and Business Update, however, I have seen them moving in this direction since soon after they were spun out of BHP, starting with announcing early that they intended to fully exit thermal (energy) coal, which they have now done. There is a lot to unpack with this presentation, but I will highlight just 4 slides that I found particularly interesting:

Their commodity split is shown above (right hand bottom corner of slide 8) - you may notice that they have no pink - Battery grade manganese - currently contributing to their revenue (in H1 of FY23) - however that will change when Hermosa Clark becomes operational (see below).

So while they are already producing plenty of Aluminium (Bauxite, Alumina and Aluminium), Nickel, Manganese ore, Copper, Zinc, Lead, Silver and Metallurgical (Met) Coal, as shown on slide 8, they also have plenty of growth projects in the works, as shown above on slide 9, which will include battery grade manganese (from Hermosa Clark).

Similarly to BHP, the management team at S32 are only interested in owning and running mines that are operating within the lowest quartile of the cost curve, so their mines are either firmly within that quartile already, or are heading down towards it. Running large scale mines that have some of the cheapest costs in the world gives S32 a couple of clear competitive advantages; one being economies of scale, and the second being that they will remain profitable at much lower commodity prices when many of their competitors will be underwater (losing money instead of making money at those prices). When mining companies start to go broke, the ones with the lowest costs will last the longest.

Another clear advantage I see with South32 compared to many other large and small miners is that they are very careful and sensible with their capital allocation. They do not engage in empire building - meaning getting bigger just to be bigger - they do not overpay for assets - they buy assets that are a strategic fit for them, and they look after their shareholders, as evidenced by the active on-market share buybacks they have done, and their generous dividend policy. And I like the metals that they produce. I like that mix, and I don't see it anywhere else within the one company.

It should be obvious, but I'll say it anyway. Disclosure: I hold S32 shares in real life in two portfolios (one is my SMSF) - although not here on SM at this point.

Home - South32

17-Jan-2022: Hermosa Project Update and Hermosa Project Presentation

[click on the announcement title above to read/view the announcement/presentation - there's a link to their announcement and also to their accompanying presentation]

South32 (S32) have today updated the market on their progress at their Hermosa Project in Arizona (USA) which contains a 138Mt zinc-lead-silver sulphide Mineral Resource at Taylor and a 55Mt zinc-manganese-silver oxide Mineral Resource at Clark.

The Taylor PFS demonstrates potential for a sustainable, low cost operation with 20+ year initial resource life with a FID (Final Investment Decision) on Taylor expected in mid CY23.

The Clark scoping study has confirmed the potential to produce battery-grade manganese into rapidly-growing markets. Manganese is listed as a critical mineral in the United States.

S32 is conducting studies to consider a potential integrated development of Taylor and Clark, unlocking operating and capital synergies.

Disclosure: I hold S32 (in RL), primarily for exposure to Alumina/Aluminium, Nickel, Silver, Manganese, Lead and Zinc.

What I like most about S32 is their management, their smart capital allocation decisions, their total lack of net debt, their commodity exposure (good collection of commodities), and that their mines are mostly in the lowest quartile of the global cost curve, and those that aren't are very close to it.

Hermosa - which contains Taylor and Clark plus a highly prospective land package that they continue to explore for further viable deposits - is a low carbon, low impact option in the first quartile of the industry’s cost curve, so more of the same for S32. Located in Arizona, USA, close to infrastructure, skilled service providers and supply chains, Taylor’s large Mineral Resource remains open, while activities to unlock value from Clark and their regional exploration are continuing.

Early days at Hermosa, however they have done significant work there already, and it's going to provide a growth option for future years, assuming they make a positive FID next year (which is a fairly safe assumption unless the bottom falls out of the zinc, lead, silver and manganese markets).

Further Reading/Info/Resources:

Investor centre (south32.net)

Our commodities (south32.net)

17-May-2021:  South Africa Energy Coal Divestment Unconditional

South32 Limited (S32) is pleased to provide the following update regarding the transfer of our 100% shareholding in South32 SA Coal Holdings Proprietary Limited (South Africa Energy Coal) to Seriti Resources Holdings Proprietary Limited (Seriti) and two trusts for the benefit of employees and communities (the Transaction).* Further to our release on 1 April 2021, we are pleased to confirm that all conditions precedent have now been fulfilled. Accordingly, the Transaction is unconditional and we expect to complete on 1 June 2021.

South32 Chief Executive Officer, Graham Kerr said “When we made the decision to exit South Africa Energy Coal, we recognised the business would continue to play an important role in supplying South Africa’s energy needs for years to come. With this in mind our vision was two-fold. First, we wanted to ensure that the business would be sustainable for the long-term, for the benefit of its employees, customers and local communities. Of equal importance was our objective for it to become a black-owned and operated business, consistent with South Africa’s transformation agenda. We believe Seriti is the right owner of South Africa Energy Coal and that the additional financial support package we have provided will underpin the future sustainability of the business.

“For South32, completion of the divestment is an important milestone that will see us significantly simplify our business, reduce our capital intensity and improve our underlying operating margins. Looking forward, we remain focussed on reshaping our portfolio with a bias to the base metals important for a low carbon future by advancing our development options in North America and continuing to invest in greenfield exploration.”

Further information

On completion of the divestment we expect to book a loss on sale of between US$125M and US$175M, while the Group’s net cash balance is expected to reduce by approximately US$180M to reflect the recognition of the vendor support package being provided to Seriti**. Notwithstanding, completion of the divestment will further strengthen our balance sheet and provide additional flexibility to the Group in respect of the future allocation of capital. Our capital management program remains on-going with US$116M remaining to be returned via our on-market share buy-back by 3 September 2021.

The loss on sale will be excluded from Underlying earnings and South Africa Energy Coal will be presented as a discontinued operation in our June 2021 full year results. Our Group Underlying effective tax rate is expected to remain elevated in a range between 35% and 45% (excluding EAI) in FY21, given the impact of losses incurred at South Africa Energy Coal. From FY22 we expect the rate to more closely reflect the corporate tax rates of the geographies where the Group operates.

Notes:

1. (*) Refer to the market announcement “Agreement to divest South Africa Energy Coal” dated 6 November 2019. Purchaser includes Thabong Coal Proprietary Limited, a wholly-owned subsidiary of Seriti and two trusts for the benefit of employees and communities.
2. (**) Refer to market announcement “South Africa Energy Coal Divestment Update” dated 1 April 2021 which includes details of the vendor support package to be provided.

[Disclosure: I hold S32 shares in my SMSF.  One of the reasons I like S32 ahead of BHP is I like their commodity mix - I just wish they also mined copper, but BHP kept the copper when they spun out S32.  Another reason is that both S32 and BHP have made commitments to exit thermal/energy coal, however only S32 seems serious about that promise, as evidenced by today's announcement.  It's taken 18 months, but they've finally closed this deal to divest their remaining thermal coal assets.  The only coal mining that S32 will be doing now - from July onwards (FY22) - is met (metallurgical) coal - which is a positive step forward, and a step that BHP have not yet taken, despite saying they would for the past couple of years.]

Further Reading:  https://theconversation.com/albanese-says-we-cant-replace-steelmaking-coal-but-we-already-have-green-alternatives-126599

https://ieefa.org/wp-content/uploads/2019/05/Conflating-Queenslands-Coking-and-Thermal-Coal-Industries_June-2019.pdf

https://www.thoughtco.com/what-is-metallurgical-coal-2340012

18-Feb-2021:  Financial Results & Outlook Half Year Ended 31 December 2020

Plus:  2021 Half Year Financial Results Presentation

South32 (S32) have reported a solid half year result given the circumstances. As a S32 shareholder however, I'm more interested in their Outlook and Guidance:

Outlook:  

Production  

The Group delivered another strong operating result, achieving production records at three operations and increasing our FY21 production guidance for Cerro Matoso [nickel], Cannington [silver, lead, zinc] and Illawarra Metallurgical Coal.  We have maintained guidance for our other operations, while providing Q3 FY21 production guidance for South Africa Energy Coal. 

[note: S32's "South African Energy Coal" is in the process of being sold to a majority black-owned corporation or organisation in South Africa, with the coal being used locally to generate electricity for South African communities.  They have stated on Slide 24 of their results presentation (link above) that they are targeting divestment of South African Energy Coal by 31-Mar-2021, i.e. next month.]

S32 have broken down the specific production, costs and expediture guidance for each of their operations on pages 10 to 13 of their "Financial Results" announcement - 1st link at the top.

I hold S32 shares because I think they have increasing-commodity-price tailwinds, lots of net cash (no net debt), are still buying back their own shares, and paying dividends, and I like their commodity mix.  I will like it a lot more once they dispose of their thermal (energy) coal assets (in South Africa), a process that has already begun and is well progressed.  Their Australian coal mines are all Met Coal, but I wouldn't complain if they exited coal altogether to be honest.  I think there are a lot of headwinds with coal, and tailwinds behind most of the other commodities that they produce. 

I prefer S32 to BHP (which is the company S32 were spun out of) because BHP are too reliant on Iron Ore, which I think will face some pricing headwinds when Brazil's Vale get back into full production post-COVID.  S32 have NO iron ore exposure, so coal is their biggest headwind - which BHP also shares - as BHP did not spin ALL of their coal assets out into S32, they kept a couple of coal mines on the east coast of Australia for themselves, which produce both types of coal.  BHP have not been as keen to offload their thermal/energy coal assets compared to S32 who have almost completed their own thermal/energy coal asset divestment.

Once that divestment has been completed, S32 will produce:  Bauxite, from which they make Alumina, from which they make Aluminium, plus Nickel, Silver, Lead, Zinc, Manganese and Metallurgical Coal.

S32's 100%-owned Cannington mine in Queensland is one of the world's largest silver producers, accounting for roughly 6% of the world's silver production annually, and their 99.9%-owned Cerro Matoso mine in Northern Columbia is one of the world's largest producers of nickel.  When thinking about nickel exposure via an ASX-listed company, S32 often gets overlooked, but they are currently the main way I choose to play nickel, which is a core battery ingredient, so will see increased future demand.

In their presentation (2nd link at the top of this straw), they do discuss the Manganese, Alumina and Met Coal markets (pages 28 to 30) and the outlooks for each of them.

--- click on the links above for more ---

[I hold S32 shares.]

05-Feb-2021:  https://www.australianmining.com.au/news/south32-coal-mine-extension-axed/

South32 coal mine extension axed, by Nickolas Zakharia @ www.australianmining.com.au

South32’s proposed mine life extension for the Dendrobium mine in New South Wales has been rejected by the New South Wales Government Independent Planning Commission (IPC).

The IPC found environmental impact risks are “likely to be irreversible” for the Dendrobium extension.

The extension proposed to mine coal from two new areas near Avon and Cordeaux Dams in Wollongong, extending the mine’s operations until the end of 2048 and with an additional 78 million tonnes of run-of-mine coal.

According to the IPC, expanding the two areas would threaten Greater Sydney and the Illawarra’s drinking water catchment.

However, a government assessment from the New South Wales Department of Planning, Industry and Environment previously determined the $956-million extension was “approvable” and “in the public’s interest”.

The IPC declared it did not meet its expectations for sustainability and did not meet the public’s interest.

“(After) careful examination of all the evidence and weighing all relevant considerations, the IPC has found that the longwall mine design put forward by South32 does not achieve a balance between maximising the recovery of a coal resource of state significance and managing, minimising or mitigating the impacts on the water resources and biodiversity and other environmental values of the metropolitan special area,” the IPC statement of reasons for decision read.

Other concerns about the mine design included its impact on Aboriginal cultural heritage, biodiversity, and greenhouse gas emissions.

According to the IPC, South32 did not address concerns about the proposed mine design.

“The applicant has made minor amendments; however, the impacts remain significant,” the IPC stated.

In an ASX announcement, South32 stated it is reviewing the findings from the decision.

“We are reviewing its findings and will continue to engage with key stakeholders including the New South Wales Government, relevant agencies and the community in relation to the Dendrobium next domain project ahead of providing further updates,” South32 stated.

The Dendrobium mine produces 5.2 million tonnes per annum of run-of mine coal, which is used in local and international steelmaking.

South32 stated the project extension would support continued employment of its 90 per cent local workforce.

New South Wales Minerals Council chief executive officer Stephen Galilee has called on the state government to intervene in the decision.

“The refusal of this Project will cost 700 direct local jobs at the Dendrobium mine and put the jobs of thousands more people at risk, including local contractors and suppliers, as well as thousands of jobs at the BlueScope Steelworks dependent on coal from the mine,” he said.

“The NSW Government must intervene to ensure this project is approved and can proceed, as recommended by its own Department of Planning.

“To do anything less will demonstrate a willingness to throw away billions in investment and the jobs of thousands of people at a time of significant economic need.”

--- ends ---

I hold S32 shares in my SMSF.  They are down by around ~3% so far today on the back of this as well as the falling silver price (which I've discussed over in the "Gold an an investment" forum).  Their Cannington mine in north-west Queensland, 200km south east of Mount Isa, near the township of McKinlay, is the world's largest single silver producer, representing about 6% of the world’s primary silver production.  It's not all S32 produce of course - they also produce bauxite, alumina, aluminium, nickel, manganese, lead, zinc and both types of coal - met coal and thermal/energy coal.  I prefer S32 over BHP because S32 have been more on the front foot in terms of divesting their thermal/energy coal assets - which are located in South Africa.  However, the article above is about the NSW Government knocking back S32's application to extend one of their met (metallurgical) coal mines here in Australia.  Things are changing folks, and for the better I believe!  In this particular case, concerns relating to water resources, biodiversity and other environmental issues are being seen as more important than building a bigger coal mine.  The main issue is clearly the threat to the Greater Sydney and the Illawarra’s drinking water catchment area.  Coal miners are going to face more and more roadblocks and knock-backs going forwards.  It's a dying industry, and companies need to transition away from it and into areas and/or commodities that have strong tailwinds instead of headwinds.

19-Oct-2020:  Quarterly Report September 2020

[I hold S32 shares.]

20-Aug-2020:  Financial Results and Outlook Year Ended 30 June 2020   and   2020 Full Year Financial Results Presentation

Not a good year for S32, but I remain of the view that they are well poised to benefit from a rebound in the prices of Alumina/Aluminium, Nickel, Zinc, Manganese, Metallurgical Coal and Silver. 

S32's Cannington mine in NW Queensland is a major global producer of silver.

Mexican mines dominate the production of silver, particularly in the primary sector.

Mexico-based precious metals miner Fresnillo is the world’s leading silver producer and operates the world’s top producing silver mine, Saucito, as well as other leading mines, Fresnillo and San Julian.

Polymetal International operates the Dukat mine in Russia, where silver output falls just under Saucito’s production levels.

According to Geoscience Australia, Australia has the largest share of global economic silver resources, even outstripping Mexico, Canada and the US.

While almost all of Australia’s silver is produced as a by-product of underground lead-zinc or copper mines, South 32’s Cannington mine in Queensland is one of the few mines in which silver is a principal extracted commodity (along with lead).

Other major silver-producing mines in Australia include Mount Isa in Queensland and McArthur River in the Northern Territory, both owned by Swiss mining giant Glencore and which also produce zinc and lead.

With the silver price soaring as safe haven demand kicks in among investors comes the news that mine output is certainly going to be disrupted in 2020 due to the global pandemic — but no one knows how badly.

According to the Silver Institute’s World Silver Survey 2020, the situation as it relates to mining is evolving on a daily basis “so, accurate predictions are challenging”.

The institute has estimated mined output will be down 54.5 million ounces, or 1,694 tonnes, representing a 6.4% decline.

China will “undoubtedly” have had mining impacted by COVID-19 but by an unknown amount, as most of its silver production comes from lead-zinc operations, the report continued.

Other major silver producers, including Bolivia, Mexico and Peru, have implemented nationwide lockdowns resulting in temporary closures of silver mines. Canada has suspended mining operations in Quebec province although mines in other provinces remain open.

While silver producing mines in Australia, Russia and the United States are operating as normal, the Silver Institute believes there is a risk these countries could introduce COVID-19 measures where mining could be affected.

This comes on top of the 35Moz (or 1,091t) of silver that was “lost” in 2019, due mainly to industrial and community actions.

Blockades by truck drivers and landowners closed the Penasquito mine in Mexico for a total of 90 days while strikes occurred in Bolivia and Peru.

Two large mines (Fresnillo in Mexico and Pan American Silver in Argentina) experienced unexpected declines in grades.

Silver has been in surplus for seven out of 10 years

The structural surplus in silver continued in 2019 with supply exceeding demand by 31.3Moz (973t). The period from 2010 to 2019 saw silver market surpluses in seven of those 10 years.

But, that may not be as negative as it first appears: the Silver Institute said data collection in recent years has been better and it may be that previously unidentified inventories have shifted to vaults that report holdings.

Last year, silver bullion stocks held at London vaults rose by 24.5Moz (761t), while Comex inventories rose by 23.3Moz (724t).

“It is worth noting that the rise in Comex stocks was far smaller than the one we had seen in 2018, reflecting higher local demand,” the report said.

But lower grades have seen mined silver output fall

Global mined silver production in 2019 fell for the fourth consecutive year, down by 1.3% to 836.5Moz (26,019t).

This was the result of declining grades at large silver mines, lower silver output from copper mines and disruptions at some operations.

Production from primary silver mines fell by 3.8%, while silver sourced from lead-zinc mines rose by 2.3%.

Production in Australia grew 6.6% year on year to 42.9Moz (1,334t), driven by higher output from lead-zinc mines such as Mount Isa and the Century tailings project.

Australian focus now on primary silver plays

The Silver Institute notes the importance of silver as a by-product, with 71% of mined silver production in 2019 coming from lead-zinc, copper and gold mines.

But it would seem, from market action and media coverage, that there is growing focus on primary silver projects in Australia.

In recent weeks, Small Caps has been reporting on silver developments by Australian explorers.

Argent Minerals (ASX: ARD) is back on the ground after four years and now drilling at its Kempfield copper-gold-silver project located on New South Wales’ Lachlan Fold Belt.

Located 41km south of the Newcrest Mining (ASX: NCM) operation at Cadia, Kempfield is Argent’s’s flagship project, 100% owned % and a NSW-designated state significant development.

The Kempfield polymetallic project has, from previous exploration, a JORC resource of 52Moz of silver equivalent.

Silver Mines (ASX: SVL) is expanding its diamond drilling campaign at its Bowdens project in NSW to up to 10,000m as a fast-rising silver price will mean increased investor focus on potential new exploration projects.

The primary targets of the drilling campaign are the high-grade silver lying below the current proposed pit and “multiple” new targets to extend the existing mineral resource.

Drilling is expected to continue until “at least” the end of 2020.

Investigator Resources (ASX: IVR) has just raised $8 million to advance its Paris silver project located in pastoral country on South Australia’s Eyre Peninsula, the site 60km northwest of the town of Kimba.

Investigator has a resource of 9.3 million tonnes at an average 139 grams per tonne silver and 0.6% lead for a contained 42Moz of silver and 55,000t of lead.

Mithril Resources (ASX: MTH) has begun drilling its Copalquin silver project in Mexico; the fully funded program is expected to continue until the end of 2020.

Previous drilling there between 1998 and 2007 returned 17.7m at 45.16g/t gold and 118g/t silver, and 7.9m at 6.54g/t gold and 140g/t silver.

While Azure Minerals (ASX: AZS) has diverted its focus to projects in Western Australia due to COVID-19 inhibiting its work program in Mexico, the company has assured shareholders it is not abandoning its silver plans there.

Azure managing director Tony Rovira recently said the company made the move due to the severity of the COVID-19 pandemic in Mexico and the uncertainty of future field operations.

But, he stressed that Azure was not losing interest in that country.

“It’s important for our shareholders to understand that our projects in Mexico remain an important core business for the company,” Mr Rovira said.

--- most of the above is taken from the "Small Caps" articles that I have provided links to below ---

--- for more on S32 and their FY20 results and FY21 outlook click on the links at the top ---

[I hold S32, I like their commodity mix, including their silver production from Cannington, which is one of the world's top-10 silver producing mines.  I am not very interested in the small silver explorers and developers like AZS, MTH, IVR, SVL and ARD mentioned above, because of the high risk associated with such early stage companies, however I do appreciate that there is probably a trade in them for those who are bullish on silver from here.]

Further Reading:

https://smallcaps.com.au/silver-stocks-asx-ultimate-guide/

https://smallcaps.com.au/silver-mine-production-covid-19-global-output-drop-2020/

20-7-2020:  Quarterly Report June 2020

[I hold S32 shares]

20-Apr-2020:  Quarterly Report March 2020

27-Mar-2020:  South32 Acts in Response to Market Conditions

Excerpts, with some bolding added:

South32 CEO, Graham Kerr, said “As COVID-19 impacts people across the world including the countries in which we operate, we remain focussed on keeping our people safe and well, maintaining safe and reliable operations, and supporting our communities. At the same time, we are taking action to maintain the financial strength of our business in response to a rapidly evolving environment.

“Our business is well positioned to successfully navigate this period of uncertainty. The initiatives announced today are aimed at delivering approximately US$160M in lower expenditure over the next 15 months to protect our financial position. Our balance sheet remains strong, with reported net cash of US$277M at 31 December 2019, including cash and cash equivalents of US$1.4B, no term debt and an undrawn US$1.5B revolving credit facility.

“The prudent management of our strong balance sheet will continue through our disciplined allocation of capital consistent with our unchanged capital management framework. Since demerger, we have returned US$2.9B to our shareholders by way of ordinary dividends and our capital management program. The disciplined approach we continue to take to capital allocation and our simple capital management framework ensures our shareholders will be rewarded as financial performance improves.”

Lower expenditure comprises an expected reduction in Sustaining capital expenditure (US$150M) and exploration activity (US$10M). Sustaining capital expenditure savings will be realised by a reduction in spend of 10% in FY20 and 18% in FY212. In addition, to prepare for a potentially extended period of low prices, we are reviewing activity across the Group aimed at delivering a meaningful reduction in controllable costs, building on our strong Operating unit cost performance in H1 FY20. We expect to see the benefit of this work and lower producer currencies reflected in our FY21 Operating unit cost guidance.

Further to these initiatives, we have suspended the remaining US$121M of our current on-market share buy-back with the opportunity to review its extension ahead of its expiry on 4 Sept 2020.

We will continue to review the evolving environment, to understand the impact on timelines for our development options and will take further action as required to prioritise long term value across the Group. In this regard, the pre-feasibility study at Hermosa is now expected to be concluded in the Sept 2020 quarter. Separately, given the current market uncertainty, we are working with our JV partner to preserve the value of our Eagle Downs Metallurgical Coal investment beyond the investment decision scheduled for the end of this calendar year.

Mr Kerr said “Sustaining capital expenditure to maintain safe and reliable operations remains a priority, however the flexibility of our programs across the Group means that some activity is able to be deferred to future years in response to unexpected market conditions.

“Investing in exploration and our development options to create shareholder value also remains integral to the Group’s strategy. Our financial priorities remain unchanged, and today’s actions, including the suspension of our on-market share buy-back, are a prudent response to the current exceptional circumstances and consistent with our commitment to maintain a strong financial position.”

Update to operations:

The Group previously reported the withdrawal of FY20 guidance for our South African operations as a result of the government’s announcement of a 21 day nationwide lockdown, from midnight on Thurs 26 March.

In response to the government’s announcement, our South Africa Manganese operations, along with our export coal production from South Africa Energy Coal, have been placed on care and maintenance for a minimum of 21 days.

Our Hillside Aluminium smelter and domestic coal production from South Africa Energy Coal are considered businesses essential for the maintenance of power generation, given the role they play in the sustainability of Eskom’s generation network and will continue to operate during the lockdown.

In Colombia, because of the threat of COVID-19, the President announced a 19 day nationwide lockdown, commencing midnight on Tuesday 24 March. Our Cerro Matoso operation continues to operate with government approval at a reduced rate. As a result of the uncertain impact of the restrictions to production volumes, which are expected to be more than offset by a change in timing of our scheduled furnace refurbishment in the June 2020 quarter, we are withdrawing guidance and will update the market when further information becomes available.

To-date, we have not yet experienced production interruptions from COVID-19 at any other operations. We continue to monitor the impact of restrictions placed on the movement of people and goods across the world and will continue to update the market as appropriate.

[click on link above for more]

22-Aug-2019:  South32 have reported this morning:

Financial Results and Outlook Year Ended 30 June 2019

2019 Full Year Financial Results Presentation

South Africa Energy Coal Divestment Update and Impairment

South32 (S32) FY18 Financial Results Presentation, 23 August 2018

Net Cash.  Low cost, diversified producer of alumina & aluminium, coal, manganese, nickel, silver, lead & zinc. 

[19-Feb-20 Update:  Have signed conditional agreement to sell their South African thermal/energy coal assets, and their manganese assets are currently being reviewed.  They will most likely sell their higher cost South African manganese assets and keep their very low cost (lowest costs in the world) Australian manganese assets.  After their SA thermal coal divestment, S32's only coal exposure will be via metallurgical (met) coal assets in eastern Australia - met coal is predominantly used in steel construction]

Good management.  Committed to return 81% of underlying earnings to shareholders.  [have also been paying special dividends and have commited to over $1 billion in on-market share buy-backs, most of which has already been completed]

The market liked the result today.  Companies that report well and rise on their report generally do well in the months after they report also.  [Their Feb 2020 report was not as positive, and the market wasn't as positive about it either, but S32 have held up OK]

Companies that are spun out of larger companies (as S32 have been out of BHP) often do better than the larger company they used to be part of for years after the spin-out.  [that hasn't been the case with S32, but it's still early years]

I like this commodity mix, and I like their management.  [yep, still do]

And this is a good report.

Disclosure:  I hold S32 shares.

19-Feb-19:  Addiitional:  S32 reported their H1FY19 results last week (on 14-Feb-19).  See here.  Also, their results presentation can be viewed here.  I still hold S32 shares.

19-Feb-20:  This is a good time to be accumulating S32 shares, in my opinion, if you like their commodity mix; they have some of the lowest costs in the world for the commodities that they produce, and they have proven to have very shareholder-return-focussed management.  I have bought more S32 shares.

A common question that is asked is why BHP chose to call their spin-off (the company formed by the demerger of their non-4-pillar-(core)-assets) "South32".  Here's what they said when they originally announced the name:

08 December 2014, 11:00 AM

BHP Billiton today announced that the new company it intends to create through its proposed demerger will be called South32.

The majority of South32’s selected assets are located in the southern hemisphere with its two regional centres – Australia and South Africa – linked by the thirty-second parallel south line of latitude. The company’s name represents this footprint and its regional approach to managing its operations.

Graham Kerr, Chief Executive Officer Elect of South32, said: “The naming of South32 is a major step in the setup of our company. Our heritage and the places in which we operate are an important part of our identity.  While South32 is grounded in the southern hemisphere, we will retain our global reach and ambition as we seek to exceed the expectations of a global shareholder base. The diversity of our employees, commodities, customers and communities will give the new company great strength, which is represented by the woven pattern of our logo.

“Many of our assets are among the most attractive in their respective commodities and all have benefited from BHP Billiton’s structured approach to improving safety and performance. As we move to a regional model and develop a fit-for-purpose strategy, we have the potential to further improve performance. This would enable South32’s assets to reach their full potential and benefit our shareholders, employees and communities.”

Mr Kerr said that a wide range of options had been considered when selecting a name for the company, including suggestions from employees across BHP Billiton.

“As we continue to build South32 we are keen to ensure the views of our people are woven through the foundations of the company. I am proud to say that a suggestion from one of the new company’s employees was the basis for the name we have selected as our identity.

“The demerger remains on track to be completed in the first half of the 2015 calendar year. Following the recent announcement of additional members of our experienced and high calibre senior executive team and the third party approvals already achieved at this stage, we are progressing well against plan,” he said.

South32’s head office will be in Perth, Australia, with a regional head office and global shared services centre located in Johannesburg, South Africa. South32 would be an Australian incorporated company but, reflecting our global shareholder base, is intended to have a primary listing on the Australian Securities Exchange, a secondary listing on the Johannesburg Stock Exchange and a standard listing in London.

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South32's current assets are located in Australia (Worsley Alumina [WA], Illawarra [NSW] & Eagle Downs [Qld] Metallurgical Coal, TEMCO in Tas, GEMCO in the NT, & Cannington in Qld), South Africa (South Africa Manganese, Hillside Aluminium & South Africa Energy Coal), Mozambique (Mozal Aluminium), Northern Columbia (Cerro Matoso Nickel Mine & Smelter), Brazil (Brazil Alumina), and the Hermosa project in Arizona, USA.

In summary:  Their assets are predominantly located in the southern hemisphere, and they are run out of Australia and South Africa, two countries that are linked by the thirty-second parallel south line of latitude.

I talked about Worsley Alumina (where I once worked) in a different straw and South32 is mostly known as a good exposure to Bauxite/Alumina/Aluminium, Manganese and Coal, as they have a number of assets focussed on each of those commodities, but they also produce nickel (at Cerro Matoso in Columbia), and their large Cannington mine in Queensland is one of the world's largest producers of silver and lead - see here - now producing seven per cent of the world’s lead and six per cent of the world’s silver.  It's been operational for over 20 years now, and the mine produces about 3 million tonnes annually, employing ~850 people.  They also produce zinc at Cannington.

I like their commodity exposure, and I also like the history of similar demergers over the past 20 years where "non-core" assets are demerged into a new listed company and go on to thrive under new management that are focussed only on those assets, rather than management who were primarilly focussed on other assets under the previous structure.  With focussed management who don't have those distractions, we usually see those assets shine, and the new company does very well, often better than the old company they were demerged from.  Time will tell if that also happens here with S32 vs BHP.  

The demerger of DuluxGroup from Orica was an example I remember well.  Orora from Amcor was another.  Further reading.

South 32 March 2019 Quarterly Report

Highlights: [in their words]

• Net cash increased US$48M to US$726M despite an increase in working capital and the allocation of a further US$37M to our on-market share buy-back in the quarter.
• Maintained FY19 Operating unit cost guidance for all our operations.
• Achieved record year to date ore production at Australia Manganese and increased FY19 production guidance by 4% at both our manganese ore operations as we continue to respond to favourable market conditions.
• Lowered FY19 production guidance at Worsley Alumina by 4% as we deliver initiatives to support a sustainable increase to nameplate capacity from FY20 and Brazil Alumina by 5% as we improve steam generation, enabling the realisation of the full benefits of the De-bottlenecking Phase One project.
• Reduced FY19 production guidance at South Africa Energy Coal, including low margin domestic production by 2Mt and export production by 0.8Mt following community protests and a slower than expected ramp-up of activity at Klipspruit after an insurable dragline outage.
• Remain on track to achieve FY19 production guidance at Illawarra Metallurgical Coal having completed longwall moves at Appin and Dendrobium following the end of the quarter and successfully renegotiated the remaining labour agreements.
• Maintained production guidance at Cannington, having commenced temporary road haulage during the quarter to mitigate the loss of rail following floods in North Queensland.
• Maintained production guidance at Hillside Aluminium and Mozal Aluminium despite an increase in the frequency of load-shedding events. 

Disclosure:  I hold South 32 (S32) shares in my SMSF and also in my main trading portfolio (as well as on my Strawman scorecard).  I also used to work at Worsley Alumina, now owned by South 32, but they were still called BHP back when I worked at and around Worsley for around 9 years, ending about 23 years ago.  Worsley Alumina is a JV with BHP (and now S32) as the senior partners and operators.  The make-up of the other JV partners has changed somewhat over the years, but the majority has always been owned by BHP/S32.  I mostly worked on their overland conveyors, the longest continuous conveyor system in the southern hemisphere.  It was the world's longest conveyor until some dude in Texas built one a few metres longer.  Not even sure if he needed to - just wanted to own the record most probably.  More reading:  http://www.south32.net/what-we-do/places-we-work/worsley-alumina

and http://www.bhp.com/~/media/bhp/documents/investors/reports/2003/worsleyalumina13sep03.pdf?la=en

That last one was a site visit presentation prepared back in 2003.  A lot has changed at Worsley since 2003.

Good exposure to Alumina (/Aluminium) / Manganese / Coal / Nickel / Silver / Lead / Zinc;  see here:  http://www.south32.net/who-we-are