South32 share price tumbles 9% on lower production and guidance downgrades

Female worker sitting desk with head in hand and looking fed upFemale worker sitting desk with head in hand and looking fed up

The South32 Ltd (ASX: S32) share price is plummeting on Monday after the company revealed a disappointing quarterly production and downgraded its guidance for numerous operations.

The stock in the diversified mining company is down 9.1% at the time of writing, trading at $4.045.

South32 share price falls on lower quarterly production

Here are the key takeaways from the S&P/ASX 200 Index (ASX: XJO) stock’s quarterly production update:

  • Payable copper production fell 18% quarter-on-quarter (QoQ)
  • Manganese and metallurgical coal production fell 15% and 16% respectively
  • Payable silver production dropped 19%
  • While payable production of lead and zinc saw the biggest falls, tumbling 24% and 23% respectively
  • Alumina and aluminium production also slumped 9% and 3% respectively
  • Finally, nickel production fell 6%

The company’s production was hampered by wet weather and other temporary impacts last quarter. Though, it notes improved market conditions supported higher prices across most commodities.

Other positives included its copper equivalent and aluminium production, which lifted 7% and 15% respectively in the financial year to date. The improvements were driven by previous investments in the company’s portfolio.

What else happened last quarter?

Weather took its toll on South32’s operations last quarter. Mozal Aluminium, Cannington, Sierra Gorda, and its South African Manganese operation were each impacted by flooding and wet weather.

Cannington was hit particularly hard, with mining operations temporarily suspended during the period.

Meanwhile, Australian Manganese achieved record production. Its Eastern Leases South extension was approved during the quarter, extending its operation’s life to at least financial year 2028.

The company also exercised its earn-in right to acquire a 50.1% interest in the Chita Valley copper exploration project.

What did management say?

South32 CEO Graham Kerr commented in the release driving the company’s share price lower today, saying:

We remain well positioned to capitalise on improved market conditions, with higher production volumes expected to finish the 2023 financial year and operating unit cost and capital expenditure guidance held largely unchanged.

We continue to reshape our portfolio towards commodities critical to a low-carbon future, progressing construction and development studies at Hermosa and adding the prospective Chita Valley copper project to our portfolio of greenfield options.

What’s next?

Production guidance downgrades at numerous operations are also likely weighing on the South32 share price today.

While much of its full-year guidance remains unchanged, it did downgrade its production forecast for its Mozal Aluminium and Cannington operations by 4% and 6% respectively.

Guidance also dropped 4% at Brazil Alumina on a conveyor outage, 7% at Cerra Matoso on less access to higher-grade iron ore, and 7% at Illawarra Metalogical Coal amid challenging strata conditions at its Appin mine.

It also upped its production guidance at its Australia Manganese operation by 3% on improved primary outputs.

Meanwhile, its operating unit cost guidance has been held steady, except at Cannington and Illawarra Metallurgical Coal, where it was increased due to lower planned volumes.

Finally, the company has revised its full-year underlying net finance costs guidance to US$190 million – up from US$150 million – as a reflection of its balance sheet at the end of the quarter.

South32 share price snapshot

Today’s fall included, the South32 share price has gained 3% so far this year. Though, it’s trading 8% lower than it was this time last year.

For comparison, the ASX 200 has risen 5% year to date and is trading flat year-on-year.

The post South32 share price tumbles 9% on lower production and guidance downgrades appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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