South32 has stepped away from the Eagle Downs metallurgical coal project in Queensland after deciding it’s not financially viable.
The company completed a feasibility study at the site in the December quarter, which found potential for a long-life operation, but stated the returns were not in line with its capital management framework.
“…the expected returns do not currently support the allocation of capital in accordance with our capital management framework,” South32 stated.
The Eagle Downs coal project is a joint venture between South32 and Aquila Resources, which is a subsidiary of Chinese company BaoWu. Both companies hold a 50 per cent interest in the project.
South32 stated the project has been placed on hold while its partners assess alternative options that may include a divestment of the company’s interest.
South32’s decision follows recent trade tensions that have resulted in an Australian coal import ban in China
However, the company’s Illawarra metallurgical coal mine in New South Wales has increased production by 11 per cent in the December 2020 half year to 4.1 million tonnes.
South32 also achieved record production at its 86-per-cent-owned Worsley Alumina mine in Western Australia to 2.01 million tonnes of bauxite for the December 2020 half year.
Company chief executive officer Graham Kerr said the company is focussing on increasing its base metals exposure.
“During the quarter, we adjusted to the different phases of the COVID-19 pandemic in the regions where we operate, focussing on keeping our people safe and well, maintaining safe and reliable operations and supporting our communities,” he said.
“The ongoing transformation of our portfolio continues to gain momentum as we focus on exiting lower returning businesses and work towards increasing our base metals exposure.”