South32 to resolve Dendrobium setback

Illawarra Metallurgical Coal. Image: South32

South32 has withdrawn its guidance for the Dendrobium coal mine extension in New South Wales after the state’s Independent Planning Commission blocked the extension project earlier this month.

The extension was aimed to extend the Dendrobium mine life to 2048 and produce an additional 78 million tonnes of run-of-mine (ROM) coal.

The company had previously planned to make its final investment decision in the first half of this year.

South32 is now assessing the impact of the IPC’s decision on its coal supply agreement and cost estimates.

Despite the regulatory roadblock, South32 has lifted its production guidance at Illawarra Metallurgical Coal.

This follows an 11 per cent production increase at the operation during the second half of last year as it returns to a three longwall configuration.

South32 delivered nearly 4.1 million tonnes of coal in the half-year period and expects to produce a total of eight million tonnes by the end of the 2021 fiscal year.

The revised guidance is attributed to rising energy coal production to 300,000 tonnes to meet coal wash material sales volumes.

“We are off to a strong start in 2021 as we continue to build on our recent operating performance,” South32 chief executive Graham Kerr said.

“… We are now seeing a rebound in demand from markets outside of China for some of our key commodities that is underpinning a recovery in prices.

“With this, our business is well placed to benefit as the global economy recovers…”

South32 has continued to solidify its base metals portfolio as the company exits its “lower returning businesses”.

Kerr said the company’s South Africa Energy Coal divestment was progressing towards completion.

“Subsequent to the end of the period, we also completed the sale of the TEMCO alloy smelter (in Tasmania) and a portfolio of non-core precious metals royalties,” he said.

South32 achieved a production record at the Worsley Alumina operation in Western Australia and Australia Manganese in Queensland.

It continues to put the Eagle Downs metallurgical coal project in Queensland on hold while it reviews its joint venture interest.

South32 stated that this reflected its disciplined approach to capital allocation after the feasibility study did not meet its investment criteria.

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