Oct 23 (Reuters) – Australia’s South32 (S32.AX) posted a bigger-than-expected 18% drop in its first-quarter metallurgical coal output on Monday, hurt by production disruptions at its flagship Illawarra operations in New South Wales.
Shares of the diversified miner fell as much as 3.6% to A$3.250, their lowest since Sept. 28, and were among the top 10 losers in the ASX 200 benchmark index (.AXJO).
Production at the Perth-based company’s Dendrobium coal mine in Illawarra was affected by an extended planned longwall move.
Longwall configuration is a form of underground mining where a long wall of coal is mined in a single slice.
South32 has planned four longwall moves – switching from mining one longwall to another – over fiscal 2024.
As a result, production volumes at Illawarra operations are expected to be weighted to the second half of fiscal 2024, the miner said.
Regardless, South32 kept its forecast of 4.4 million metric tons of annual metallurgical coal output from Illawarra, down from last year’s 5.5 million tons.
“Despite lower production than we expected, South32 has not changed FY24 guidance. So, it is looking to make up met coal, zinc and nickel volumes over the balance of FY24,” analysts at Citi said in a note.
Production of metallurgical coal fell to 1.0 million tons in the three months to Sept. 30, from 1.3 million tons a year earlier. That was slightly lower than a consensus estimate of 1.1 million tons compiled by Visible Alpha.
The company’s net debt increased by $299 million to $782 million due to a temporary build in working capital of $250 million, an increase in high-value aluminium inventory and lower commodity prices, the miner said.
Meanwhile, the miner started a group-wide review that it expects will help reduce expenditure across operations and functions in fiscals 2024 and 2025.
“With macroeconomic conditions creating headwinds for many of our commodities, we remain focused on driving operating performance and cost efficiencies,” South32 CEO Graham Kerr said.
Reporting by John Biju and Roushni Nair in Bengaluru; Editing by Lisa Shumaker, Jamie Freed and Subhranshu Sahu
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