South32 reported a 44% drop in first-half underlying earnings for the six months ended December 31, 2022, reports yesterday emerged that the diversified miner is in discussions with Eskom regarding buying nuclear power for Hillside Aluminium.
Hillside Aluminium is state-owned Eskom’s largest industrial customer.
South32 for several years has aired its energy concerns around Hillside, saying it must get a green energy supply in line with its carbon reducing targets.
In July 2021 a 10-year power supply agreement was signed between Eskom and South32’s Hillside aluminium smelter, which secures energy supply until 2031 for the Hillside smelter under a rand-based tariff with escalations linked to South Africa’s producer price index.
Specialist publication, Miningmx, yesterday reported that the Perth-headquartered group could become uncompetitive if the talks failed.
“We have a view that ultimately Europe will not take aluminium that is not green which potentially makes Hillside uncompetitive,” said Graham Kerr, CEO of South32. It was critical the firm, Eskom, and other stakeholders came to an agreement, he said.
Business Report was unable to get comment form South32 by the time of going to print.
Yesterday the miner in its 2023 half-year financial results reported a 44% drop to $560 million (R9.6 billion), compared with $1bn in the previous corresponding period, and slashed its dividends due to easing prices for its key commodities and higher inflationary pressures.
The Perth-based miner, which was spun off from mining giant BHP Group in 2015, declared an interim dividend of 4.9 US cents for the six months to end-December, down 43.7% year on year, representing 40% of underlying earnings.
“A combination of a decline in commodity prices from record levels in many markets, and higher inflation and uncontrollable costs, more than offset the benefit of our strong operational performance,” the group said.
Kerr said: “Commodity markets have strengthened, leaving us well placed to capitalise on planned production growth and lower operating unit costs expected across the majority of our operations in the second half of the 2023 financial year.”
The miner reported that production grew 12% after its recent investments in copper and low-carbon aluminium capacity.
South Africa's manganese saleable production increased by 4% to 1 093 kilowatt metric tonnes in the first half of the 2023 financial year, as improved mining performance was partially offset by planned maintenance completed in the second quarter of the 2023 financial year.
Group copper equivalent production increased by 12% due to the benefit of its investments in Sierra Gorda.
South32 expected to increase production by a further 6% in the second half of financial year 2023 supported by embedded improvement projects and the ramp-up of the Brazil Aluminium smelter to nameplate capacity.
Kerr said in the Hermosa project in Arizona, South32 was on track to make a final investment decision on the Taylor deposit in the middle of this calendar year.
"We have also confirmed the opportunity for Hermosa’s Clark deposit to supply battery-grade manganese into the growing North American electric vehicle supply chain,“ Kerr said.
South32 production guidance for the full financial year remained unchanged and expects volumes to increase by 6% in the second half.
Looking ahead, Kerr said: “The long-term outlook for our business is positive as a result of our portfolio investments and high-quality development options in the metals critical for a low-carbon future.”
The group also announced that chief financial officer Katie Tovich would become the chief human resources and a commercial officer from April 1, and vice-president of finance Sandy Sibenaler would step in as the financial head.
BUSINESS REPORT