South32 has withdrawn its 2020 financial year guidance for its South African operations after the government declared a 21-day nationwide lockdown from March 26 due to the coronavirus.
The Perth-headquartered company will continue to operate its Hillside aluminium smelter at Richards Bay and domestic coal production from South Africa Energy Coal, as they are considered essential for the maintenance of power generation.
In Colombia, South32 is still operating its Cerro Matoso nickel mine at a reduced rate with government approval, despite the 19-day nationwide lockdown which started on Tuesday.
South32 has confirmed that none of its other operations have been impacted by the coronavirus at this stage.
The company is also taking financial measures to counter interruptions by the virus, by cutting spending and reducing exploration activities.
South32 chief executive officer Graham Kerr said the company was aiming to lower its capital expenditure by $US160 million ($264 million) over the next 15 months. It will also pull back on exploration activities to save a further $US10 million.
“Our business is well positioned to successfully navigate this period of uncertainty. Our balance sheet remains strong, with reported net cash of $US277 million at 31 December 2019,” Kerr said.
“The disciplined approach we continue to take to capital allocation and our simple capital management framework ensures our shareholders will be rewarded as financial performance improves.”
South32 is working with its joint venture partner Aquila Resources to preserve the value of the Eagle Downs metallurgical coal investment in Queensland, with an investment decision expected for the end of the 2020 calendar year.
The company’s pre-feasibility study at the Hermosa base metals project in Arizona, United States is now expected to be completed in the September quarter.
While cutting back is essential in maintaining financial strength, Kerr said South32 would still commit to investing in exploration.
“Investing in exploration and our development options to create shareholder value remains integral to the group’s strategy,” he said.
“The flexibility of our programs means that some activity is able to be deferred to future years in response to unexpected market conditions.”