South32 share price falls after disappointing December update

The South32 Ltd (ASX: S32) share price is down 3% after the ASX mining share delivered its update for the period ending 31 December 2023, including its production numbers.

Production performance

South32 revealed how its production performed for all of its commodities in the second quarter of FY24 and the first half of FY24 (HY24).

Alumina production was 1,284kt in the second quarter, flat quarter over quarter. HY24 saw a 1% drop year over year in alumina production to 2,574kt.

Aluminium production was 287kt for the second quarter and flat quarter over quarter. In HY24, aluminium production of 575kt was up 1% year over year.

Payable copper production was 15.6kt in the FY24 second quarter, down 3% quarter over quarter. The HY24 copper production was 31.6kt, a drop of 17% year over year.

Payable silver production was 3,624kt for the FY24 second quarter, up 7% quarter over quarter. The HY24 silver production was 6,999k ounces, an increase of 20% year over year.

Payable lead production in the FY24 second quarter was 30.3kt, up 6% quarter over quarter. The HY24 lead production was 58.8kt, up 12% year over year.

Payable zinc production for the FY24 second quarter was 15.8kt, up 20% quarter over year. HY24 zinc production was down 5% year over year to 29kt.

Payable nickel production in the FY24 second quarter was 10kt, up 20% quarter over quarter. HY24 production of nickel amounted to 18.3kt, down 10% year over year.

Metallurgical coal production in the FY24 second quarter was 744kt, down 29% quarter over quarter. HY24 coal production of 1,787kt was down 35% year over year.

Manganese ore production for the FY24 first quarter was 1,272k wet metric tonnes (wmt), down 16% quarter over quarter. HY24 manganese ore production was 2,790k wmt, down 5% year over year.

Production (and guidance) can obviously have an impact on the South32 share price.

Guidance and costs

A highlight, or lowlight, of the update was that South32 reduced its FY24 group copper equivalent production guidance by 3%, reflecting “revised guidance for Brazil Alumina, Mozal Aluminium and molybdenum output from Sierra Gorda.”

However, it also said it’s well-positioned to capture the benefit of improved market conditions through expected production growth of 7% in the second half of FY24 and its ongoing focus on cost efficiencies.

South32 reported its FY24 first-half operating unit costs are expected to be “in line or below” FY24 guidance for the majority of its operations.

The business has been progressing with a group-wide review focused on “delivering a reduction in expenditure in FY24 and FY25 through cost efficiencies and capital prioritisation.”

Management comments

The South32 CEO Graham Kerr said:

As we enter the second half, strengthening market conditions for many of our commodities, our planned 7 per cent production growth and ongoing cost management focus, position us well to capture higher margins.

We continued to invest to increase our exposure to commodities critical to a low-carbon future. At our Hermosa project, we progressed critical path infrastructure and remain on track to make a final investment decision for the Taylor zinc-lead-silver deposit in the March 2024 quarter. Sierra Gorda also continued work on the fourth grinding line expansion project, which has the potential to sustainably increase copper production.

South32 share price snapshot

Over the last 12 months, South32 shares have dropped around 30%.

The post South32 share price falls after disappointing December update appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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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