Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
South32 Ltd. shares fell sharply on Monday after the Australian miner reported $818 million of impairment charges.
The company’s shares tumbled as much as 12.9% in Sydney, the biggest intraday decline since March 2020. It announced a pre-tax writedown of $554 million on the value of its Worsley alumina asset, while the value of its Cerro Matoso nickel project in Colombia was reduced by $264 million.
Worsley includes the Boddington bauxite mining and alumina refining project southwest of Perth. While two weeks ago South32 received environmental approval to expand its life for a further 15 years, the Western Australia government imposed conditions that the company has described as creating “significant operating challenges” which could impact the future of refinery.
The conditions came after environmentalists raised concerns about mining in Western Australia’s Jarrah forests and the impact operations would have on wildlife. South32 is appealing the restrictions.
South32’s writedown of Worsley may exacerbate concerns global alumina supplies will tighten. Earlier this year, Alcoa Corp. announced it was shuttering its Kwinana alumina refinery — with an annual capacity of 2.2 million tons — in Western Australia, while Rio Tinto Group declared force majeure on cargoes in Queensland state because of regional gas shortages.
In its quarterly operations statement on Monday, South32 said copper production for the three months to June 30 fell 14% from the year before to 608,000 tons.
Alumina output in the period was also lower than expected due to maintenance of a conveyor belt transporting ore to the refining plant. Guidance for the 12 months starting July 1 was lowered 6% to 3.75 million tons as a result of further maintenance.
The main risk to South32’s profitability will be price volatility for its commodities, Citigroup Inc. analysts including Paul McTaggart said in a note Monday. Still, the company’s diversification into other minerals including silver, manganese and coal had the potential to mitigate this risk, they said.
South32 shares were trading 12.7% lower to A$2.985 a share at 11:50 a.m. Sydney time.
(By Paul-Alain Hunt)
Comments
John
Wait until investors find out what is really going on at S32 operations elsewhere. This will pail by comparison.