South32 (S32.AX), an Australian company, reported a larger-than-anticipated 18% decline in metallurgical coal production during the first quarter on Monday due to production problems at its principal facilities in New South Wales, Illawarra.
The diversified miner’s shares dropped as much as 3.6% to A$3.250, the lowest level since September 28. They were among the top 10 losers in the benchmark ASX 200 index (.AXJO).
A prolonged longwall shift that was anticipated impacted production at the Dendrobium coal mine owned by the Perth-based firm in Illawarra. A long wall of coal is extracted in one piece using a longwall design in underground mining. Over the fiscal year 2024, South32 has scheduled four longwall migrations, including moving from one longwall to another.
As a result, the miner predicted that output quantities at the Illawarra operations would be skewed toward the second half of fiscal 2024. Despite this, South32 maintained its projection for Illawarra’s annual production of 4.4 million metric tons of metallurgical coal, a decrease from 5.5 million tons last year.
“Despite less output than anticipated, South32 hasn’t altered its projection for FY24. As a result, during FY24, it plans to make up lost met coal, zinc, and nickel volumes, according to Citi analysts.
In the three months ending on September 30, metallurgical coal production decreased to 1.0 million tons from 1.3 million tons a year earlier. That was slightly below Visible Alpha’s 1.1 million-ton consensus projection. Due to a temporary rise in working capital of $250 million, an increase in high-value aluminum inventory, and weaker commodity prices, the company’s net debt climbed by $299 million to $782 million, according to the miner.
Meanwhile, the miner began a group-wide evaluation, which it anticipates will contribute to a decrease in spending across operations and functions in the fiscal years 2024 and 2025. “With macroeconomic conditions creating headwinds for many of our commodities, we remain focused on driving operating performance and cost efficiencies,” Graham Kerr, CEO of South32, stated.
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