After its first full year of operation, South32 posted a loss of $1.6 billion for fiscal year 2016. Undeterred South32 CEO Graham Kerr explained how a transition to a regional model and a series of restructuring initiatives delivered strong results.
“We set five production records and achieved guidance for the majority of our upstream operations, generated controllable cost savings of $386 million and reduced capital expenditure by $306 million,” Kerr said. “By optimizing our operations and maintaining a core focus on value, we generated free cash flow of $597 million and finished the year with net cash of $312 million.”
The company announced record annual production at Australia Manganese (ore), Worsley Alumina, Brazil Alumina, Mozal Aluminium and Cannington (payable zinc). South32 also completed the Appin Area 9 (Illawarra Metallurgical Coal) and Premium Concentrate Ore (Australia Manganese) projects on or ahead of schedule, and below budget. It entered into an option agreement with Northern Shield Resources to become a partner in the Huckleberry property in Northern Quebec, Canada, which it believes offers a low-cost entry into the Labrador Trough, a province identified as being highly prospective for copper, nickel and platinum group elements.
Production guidance for FY17 remains unchanged for the majority of its upstream operations, although a downward revision was noted for Cannington. “Looking to FY17, we have maintained production guidance for the majority of our upstream operations and will stretch performance to meet cost targets,” Kerr said. “Our functions are lean, with corporate costs now half the level envisaged at the time of listing.”