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Coal production falls at South32

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World Coal,

South32 recorded a fall in coal production from its South African and Australian coal assets in the six months to December 2015. The company also lowered its full year production forecast for its Illawarra Metallurgical Coal business in Australia for the full year to June 2016

In South Africa, the company recorded coal production down 1% to 16.4 million t in the half year to December and down 5% in the December quarter to 8.1 million t on the back of the Khutala opencast mine closure. Domestic sales were also down 1% at 9.1 million t for the half year, while export sales increased by 1% to 8 million t.

Operational efficiencies at the Khutala underground mine and Wolvekrans Middelburg Complex partially mitigated the impact of the Khutala opencase mine closure. Full year production guidance remained unchanged at 31.95 million t with 16.65 million t domestic sales and 15.3 million t for exports.

Illawarra Metallurgical Coal – which operates the companies Australian coal assets – recorded a steeper decline in coal production on the back of challenging geological conditions at the Appin and Dendrobium mines and a planned longwall move. With another two longwall moves schedule for 1Q16, the company has lowered its production forecast by 7% to 8.25 million t.

The company’s Illawarra metallurgical coal production fell 15% to 3.3 million t in 2H15 and by 40% in 4Q15, while thermal coal production fell by a quarter in 2H15 and by 34% in 4Q15.

On the financial side, the company achieved a reduction in net debt of US$300 million in 2H15 on the back of a “relentless focus on safety, volume, costs and capital expenditure,” said South32’s CEO, Graham Kerr. Its current estimate for net debt at the end of 2015 is US$115 million.

Kerr also highlighted to potential for further production cuts at its Souther African manganese and aluminium operations. “Further decisive action will be taken as we seek to maximize short-term cash flow, while preserving longer-term value,” said Kerr.

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