South32 Limited Illawarra Metallurgical Coal Update (0506S)

TIDMS32

RNS Number : 0506S

South32 Limited

16 December 2016

16 December 2016

ILLAWARRA METALLURGICAL COAL UPDATE

South32 Limited (ASX, JSE, LSE: S32) (South32) advises that saleable coal production of 7.9Mt is anticipated at its Illawarra Metallurgical Coal operation in FY17, including 3.6Mt in H1 FY17. While ground conditions at the Appin Area 9 longwall have stabilised, additional work is being undertaken to recondition the maingate roadway to ensure the safe extraction of the 901 panel. At Appin Area 7, production continues to be progressively ramped-up to ensure safe levels of gas are maintained.

As a result, Illawarra Metallurgical Coal sales of 8.1Mt are now anticipated in FY17, while our average realised hard coking coal sales price will continue to reflect the premium low volatile index on a Month -1 (prior month) basis.

On the basis of unchanged assumptions for foreign exchange rates and coal prices, an average Operating unit cost (including Sustaining capital expenditure)(1) of approximately US$86/t is now anticipated for Illawarra Metallurgical Coal in H1 FY17 (previously US$75/t). This cost is forecast to decline towards US$80/t in H2 FY17 (previously US$71/t) for an average Operating unit cost (including Sustaining capital expenditure) of US$83/t in FY17.

 
 Illawarra Metallurgical           FY16   H1 FY17e   H2 FY17e   FY17e 
  Coal 
  Revised guidance 
 Metallurgical coal production 
  (kt)                            7,059      2,740      3,620   6,360 
===============================  ======  =========  =========  ====== 
 Metallurgical coal sales 
  (kt)                            6,984      2,780      3,750   6,530 
===============================  ======  =========  =========  ====== 
 Energy coal production 
  (kt)                            1,307        900        640   1,540 
===============================  ======  =========  =========  ====== 
 Energy coal sales (kt)           1,333        950        610   1,560 
===============================  ======  =========  =========  ====== 
 Total coal production 
  (kt)                            8,366      3,640      4,260   7,900 
===============================  ======  =========  =========  ====== 
 Total coal sales (kt)            8,317      3,730      4,360   8,090 
===============================  ======  =========  =========  ====== 
 Operating unit cost, 
  incl. Sustaining capital 
  expenditure (US$/t)(1)             80         86         80      83 
===============================  ======  =========  =========  ====== 
 

With the completion of the 901 panel and the associated release of ground stresses, a strong improvement in longwall availability and cutting rates is anticipated in FY18 with total saleable production forecast to exceed 9.0Mt. Consequently, Operating unit costs (including Sustaining capital expenditure)(1) are forecast to decline towards approximately US$77/t given the operation's high fixed cost base.

Restated FY17 production guidance incorporates a longwall move for each of the March and June 2017 quarters. To allow comparison to prior guidance, the various unit cost estimates do not take account of currently elevated coal prices, which increase royalty rates, and changes in the Australian dollar to US dollar rate, which has remained persistently above 0.72. FY17 Operating unit cost, including Sustaining capital expenditure, guidance for our upstream operations will be updated when we report H1 FY17 financial results and will incorporate revised foreign exchange rate and price assumptions.

Notes:

1. Operating unit costs, including Sustaining capital expenditure, include royalties and the influence of exchange rate assumptions, and are based on: an average blended coal price of US$83/t for Illawarra Metallurgical Coal; and an AUD:USD exchange rate of 0.72.

About South32

South32 is a globally diversified mining and metals company with high quality operations in Australia, Southern Africa and South America. Our purpose is to make a difference by developing natural resources, improving people's lives now and for generations to come. We are trusted by our owners and partners to realise the potential of their resources. We have a simple strategy to maximise the potential of our assets and shareholder returns by optimising our existing operations, unlocking their potential and identifying new opportunities to compete for capital.

Forward-looking statements

This release contains forward-looking statements, including statements about currency exchange rates, commodity prices, production forecasts, plans, exploration and capital expenditure. These forward-looking statements reflect expectations at the date of this release; however, they are not guarantees or predictions of future performance. They involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. Readers are cautioned not to put undue reliance on forward-looking statements. Except as required by applicable laws or regulations, South32 Limited does not undertake to publicly update or review any forward looking statements, whether as a result of new information or future events. Past performance cannot be relied on as a guide to future performance.

Further information

 
 INVESTOR RELATIONS 
 Alex Volante                  Rob Ward 
  T [phone]             T [phone] 
  M [phone]                 M [phone] 
  408                           831 
  E [e-mail]    E [e-mail] 
 MEDIA RELATIONS 
 Diana Wearing                 James Clothier 
  Smith                         T +61 8 9324 
  T [phone]             9697 
  M [phone]                 M [phone] 
  290                           031 
  E [e-mail]     E [e-mail] 
 

Further information on South32 can be found at www.south32.net.

JSE Sponsor: UBS South Africa (Pty) Ltd

16 December 2016

This information is provided by RNS

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