South32 cuts sustaining capex, reviews activities

Australia-based diversified resources firm South32 is cutting $160mn from its sustaining capital expenditure (capex) and exploration budget over the next 15 months to protect its financial position amid market uncertainty caused by the coronavirus.

"In addition, to prepare for a potentially extended period of low prices, we are reviewing activities across the group aimed at delivering a meaningful reduction in controllable costs," said chief executive Graham Kerr.

The cutbacks, $150mn on sustaining capex and $10mn on exploration, will be implemented between now and the end of June 2021. The company has also suspended the remaining $121mn of a share buy-back programme.

It expects to complete a pre-feasibility study on the Hermosa base metals project in the US in July-September. It is working with its joint-venture partner Chinese-owned Aquila Resources to preserve the value of the Eagle Downs metallurgical coal project in Australia beyond a investment decision due by the end of this year.

South32 has placed its manganese and coal export operations in South Africa on care and maintenance until mid-April because of the country's coronavirus lockdown. Its Cerro Matoso ferro-nickel plant in Colombia is operating at a reduced rate to comply with domestic restrictions. All of its other operations are unaffected.

South 32 has alumina, base metal, coal and manganese operations in Australia, manganese, coal and aluminium operations in South Africa, aluminium operations in Mozambique, alumina operations in Brazil and ferro-nickel operations in Colombia.

By Angus Macmillan