PERTH (miningweekly.com) – Diversified miner South32 has reported a 84% fall in profits for the half-year ended December, as well as a 16% fall in revenue, compared with the previous corresponding period, as commodity prices tumbled and on the back of a temporary increase in the company’s underlying effective tax rate.
Profit after tax for the six months under review reached $99-million, down from the $635-million reported in the previous corresponding period, as revenues declined from $3.8-billion to $3.2-billion in the same period.
Underlying earnings before interest, taxes, depreciation and amortization for the half-year also fell by 48%, from $1.3-billion to $678-million.
South32 told shareholders on Thursday that the lower prices for its key commodities, and the temporary increase in the underlying effective tax rate associated with the sale of its South African Energy Coal assets, more than offset weaker producer currencies and initiatives that delivered lower operating unit costs for the majority of South32’s operations.
“Against a challenging backdrop for our key commodities, we delivered another strong operating result with production for the majority of our operations tracking on or ahead of schedule,” said South32 CEO Graham Kerr.
“Our operating costs trended down in the half and we have lowered our cost guidance across most of our operations. We have delivered record production at Brazil Alumina and maintained higher output rates at Worsley Alumina. We responded to lower manganese prices at South Africa Manganese, cutting higher cost trucking.”
The miner on Thursday said that it remained on track to deliver $50-million in annual operating cost savings from lower functional support costs, following the simplification of its support structures, and realising the benefits from its labour, energy and material usage.
South32 had set aside $30-million for greenfield exploration expenditure, with $10-million already spent in the first half of the 2020 financial year, while a higher rate of exploration spend is expected across exploration partnerships, including that with Ambler Metals.
“Investing in exploration to create shareholder value is integral to our group’s strategy as we work to reshape and improve our portfolio. We have continued to embed high quality development options, including the Ambler Metals joint venture, in Alaska, while investing in our portfolio of more than 20 exploration projects targeting base metals in prospective jurisdictions,” Kerr said.
“We also entered into a binding conditional agreement for the sale of our South African Energy Coal business and progressed the review of our manganese alloy smelters. We advanced our prefeasibility study at Hermosa and increased exploration across the broader land package.”
During the interim period under review, South32 also advanced the study of development options for its Hermosa base metals project, in Arizona, with a prefeasibility study due for completion in the second half of the year, while a final investment decision on the Eagle Downs metallurgical coal project, in Queensland, is expected in the first half of 2021.