Coal news and updates

South32 takes $US1.9b writedown on manganese, coal

Newly-listed miner South32 has flagged a $US1.9 billion ($2.6 billion) writedown on manganese in South Africa and Australia and South African coal, as it posted a big jump in coal production on Wednesday. It largely offsets  previous fair value uplift of $US2.1 billion recognised for its two manganese businesses.

The update came as part of South32's production report for the June quarter, its first since its spin-off from mining giant BHP and subsequent sharemarket listing in mid-May.

Of the $US1.9 billion pre-tax impairment, $US1.3 billion is to be taken on manganese.

South32's main exposure is to aluminium-alumina, coal and manganese, prices for all of which are languishing at five-year lows amid oversupply.

But South32 has suspended some capacity at South African manganese operation, Metalloys, to "prioritise higher value manganese ore production".

Metallurgical coal and manganese provided most of the growth for the year, with metallurgical coal up 25 per cent in the year to June, and thermal coal up 12 per cent, as the miner, like its former parent BHP, pushed hard for productivity gains.

UBS analysts said the report was "not bad for a first outing, with coal the stand-out".

Aluminium production was 14 per cent lower, mainly because one of the miner's three main smelters in the South Africa region, Bayside, was shuttered in June 2014.

Despite the electricity crisis in South Africa, South32's aluminium production at its remaining smelters in the region, Hillside and Mozal, "was broadly unchanged (down 2 per cent) as efficiency gains offset a significant increase in load-shedding events during the year".

Analysts and investors will be waiting until South32 reports its full-year results in August for production guidance, cost-out targets and clarity on the strategy South32 management is taken.

South32's earnings are highly sensitive to currency and commodity price movements. The heavy falls in the Australian dollar has been a good start for them.

THe miner also spent $US4 million in exploration in the months of May and June 2015, on metallurgical coal and silver in Australia, and nickel in Colombia.

source: http://www.smh.com.au