Skip to main content

South32 writes down South African coal business

Published by , Editor
World Coal,


BHP Billiton spin-off, South32, will book a significant writedown of its thermal coal, manganese and alumina businesses in its latest half year results, the company has said in a statement, blaming a downward revision to commodity demand and prices.

“We will continue to focus on the things that we can control […] as we seek to optimise the performance of our operations,” said Graham Kerr, CEO of South32. “We are no however immune to external influences and the significant change in the outlook for commodity prices is expected to results in non-cash charges of approximately US$1.7 billion when we report our December 2015 half year financial results. ”

While the company’s manganese assets in Australia and South Africa provide the bulk of the impairment charge – US$1 billion in total – South32 is also writing down the value of its thermal coal assets in South Africa by US$400 million.

The company is also currently finalising cost reduction plans its Illawarra metallurgical coal assets, among others, with these initiatives expected to result in a “substantial reduction in employee numbers during the remainder of FY16,” which runs to the end of June this year.

Further details of the plans will be released with the company’s half year results on 25 February.

The company has, however, already outlined its restructure plans for its South African Samancor manganese joint ventures, announcing the loss of 620 jobs across the business and a reduction in saleable volumes by 36% at the Wessels mine and 18% at the Mamatwan mine.

The market reacted positively to the news with the company’s share price bouncing 10% after it was announced. Similar initiatives at the company’s coal assets would see South32 follow Glencore in cutting its coal production in an effort to deal with current oversupplies in both thermal and metallurgical coal markets - a move that's highly likely, according to Mitchell Hugers at BMi Research.

"I do believe that these cuts [to South32's manganese business] are only the beginning," Hugers told World Coal in an emailed statement. "We’ll see further production cuts/job losses at the firm’s coal operations in South African and Australia."

Edited by .

Read the article online at: https://www.worldcoal.com/coal/05022016/south32-writes-down-south-african-coal-business-/

You might also like

EMI

Electrification in Mining virtual conference

Join us on 16 April 2024 for Global Mining Review's first Electrification in Mining event is an interactive virtual conference, focusing on electrification as the future of sustainable mining and exploring the innovative approaches and technologies being developed to facilitate its implementation.

Register for FREE »

 
 
 

Embed article link: (copy the HTML code below):