South32 Ltd. recently announced the results of its South Africa Manganese strategic review and its intention to substantially reduce cash costs at a number of operations. Citing poor forecasts for commodity demand and prices, South32 said it expects to take a pre-tax, non-cash impairment of $1.7 billion when it reports its December 2015 half-year financial results. Most of that relates to the Australia Manganese and South Africa Energy Coal divisions—$900 million and $400 million, respectively.

In response to a sharp decline in manganese ore and alloy prices, South32 had suspended mining activity at the Hotazel manganese mines (Hotazel) in November. This removed about 700,000 metric tons (mt) of manganese ore production from the global supply chain and inventories at the Hotazel mines have declined substantially as a result.

South32 said it will restart Hotazel, but at a substantially reduced rate. The Hotazel mines will ramp up to a saleable production rate of 2.9 million mt/y, taking approximately 900,000 mt/y or 23% of saleable production out of the market for the foreseeable future.

South32 plans to eliminate 620 jobs across the Samancor joint venture, of which it is 60% owner and operator. It will accelerate the second phase of the Central Block development project at the Wessels mine, which will enable mining to relocate closer to critical infrastructure and reduce cycle times. Saleable production will be reduced by 36% at Wessels to 740,000 mt/y. Saleable production will be reduced by 18% to 2.2 million mt/y at Mamatwan. The company will operate only one of four furnaces at the Metalloys smelter, which is now generating free cash flow.

The Samancor Manganese joint venture is the world’s largest producer of manganese with operations in South Africa and Australia. The joint venture’s African operations include the HMM mines, Wessels and Mamatwan, located in the Kalahari Basin in South Africa’s Northern Cape Province.

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