South32 Manganese Ore Output Rises 2% to Beat Estimates

  • Producer agreed investment in Canada base metals project
  • Company says is on track to meet full-year cost guidance

South32 Ltd., the world’s biggest manganese producer, said fourth-quarter output of the steelmaking ingredient rose 2 percent on record annual output in Australia.

Manganese ore production rose to 1.23 million metric tons in the three months to June 30, from 1.205 million tons in the previous three months, Perth-based South32 said Thursday in a statement. That beat a 1.15 million ton median estimate among three analysts surveyed by Bloomberg.

South32 said it had completed its restructuring program, positioning the company to achieve its full-year 2017 unit cost guidance. The producer has cut costs and trimmed output across its alumina, metallurgical coal, nickel and manganese units in response to lower commodity prices as it also targets the reduction of about 2,000 jobs.

The producer is benefiting as materials it produces including zinc, silver and metallurgical coal post gains in 2016, according to Romano Sala Tenna, a Perth-based portfolio manager at Katana Asset Management Ltd. South32 fell 0.5 percent to A$1.84 in Sydney at 10:09 a.m. local time.

“All of these unsexy commodities are having their day in the sun, and South32 is heavily leveraged to them,” Sala Tenna said by phone from Perth, before the report was released. “You have got tier-one assets in tier-two commodities, and they are grossly under appreciated in terms of the value in those assets.”

South32, listed in May last year after BHP Billiton Ltd. completed a spinoff of unwanted assets, reported record annual production at its Australia Manganese, Worsley Alumina, Brazil Alumina, Mozal Aluminium and Cannington payable zinc operations.

The company has made its first investment in greenfields base metal exploration, entering into an option agreement with Ottawa-based Northern Shield Resources Inc. on its Huckleberry copper, nickel and platinum group elements prospect in Canada’s Labrador Trough. South32 has also won consent for potential expansions at its GEMCO manganese operations in Australia, it said.

“We have built a strong foundation in our first full year of operation, despite the challenging market,” Chief Executive Officer Graham Kerr said in the statement. The company took decisive action to restructure operations, reduce controllable costs and improve efficiencies, he said. Raw material prices are likely to decline over the next six months as a first-half rally stoked by restocking and China’s commitments to support growth begins to peter out, Kerr said in a June interview.

Metallurgical coal production jumped 29 percent on the previous quarter as silver output surged 12 percent, the producer said in the statement.

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