South32 to Take $818 Million in Alumina, Nickel Impairments — Update

By Stuart Condie and Rhiannon Hoyle

SYDNEY--South32 will record US$818 million in impairments in its fiscal 2024 results in response to challenges facing its majority owned Worsley Alumina business and pressure on global nickel prices.

The Australia-based metals and coal miner on Monday said that it would impair the value of Worsley Alumina by a pretax US$554 million and cut the unit's fiscal 2025 guidance after Australian environmental regulators recommended imposing additional conditions on the project.

The impairment will reduce the unit's carrying value to US$2.03 billion, reflecting what South32 said was increased uncertainty created by the recommendations and associated challenging operating conditions.

South32 will also log a US$264 million impairment against its Cerro Matoso project in Colombia, slashing its value to US$54 million amid a global nickel glut. It expects to announce the conclusions of a strategic review in the December half.

Producers including Glencore, BHP Group and First Quantum Minerals have suspended nickel mines amid a downturn in battery metal prices.

South32 said it produced less copper and steelmaking coal over the past year, with aluminum volumes flat. Total alumina production fell 1% to 5.06 million metric tons and South32 cut its fiscal 2025 guidance for volumes at Worsley Alumina by 6% to 3.75 million tons.

The Australia-based metals and coal miner said production of its various commodities was impacted by planned operational work, including maintenance at its alumina refinery in western Australia and a project to make a copper plant in northern Chile more efficient. Some operations experienced headwinds from heavy rainfall.

The company has been sharpening its focus on commodities such as copper and aluminum that it expects will be in high demand during a global energy transition. It expects to sell a metallurgical coal business in the first quarter of fiscal 2025 and is studying a number of potential metals projects in the U.S., Chile and elsewhere.

On Monday, the company said it produced 1.14 million tons of aluminum in the year through June, flat on 12 months ago.

South32's copper output fell by 14% over the same period, to 60,800 tons, as higher plant throughput was offset by lower than planned copper grades and molybdenum recoveries.

The miner said the metallurgical coal arm that it is selling in a deal worth up to US$1.65 billion produced 22% less coal than the 12 months earlier, with a total of about 4.3 million tons.

"The sale of Illawarra Metallurgical Coal is expected to be completed later this quarter, further strengthening our balance sheet, simplifying our business, reducing our capital intensity and unlocking capital to invest in our high-quality development projects in zinc and copper," Chief Executive Graham Kerr said.

Nickel production was flat on year at 40,600 tons.

South32 said it expects annual operating unit costs, to be published in the company's fiscal 2024 earnings result next month, to be mostly in line with estimates.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

July 21, 2024 19:43 ET (23:43 GMT)

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