South32 Ltd (ASX: S32) is experiencing a notable drop in its share price, which has fallen 10% to $3.09 as of Monday morning. This decline follows the release of the company's fourth quarter and full year update.
Fourth Quarter Performance
In the quarter ending June 30, South32, an ASX mining stock, reported a 10% increase in copper production, reaching 15.3 kilotonnes (kt). This performance brought the company to 98% of its full-year FY 2024 copper equivalent production guidance, totaling 60.8 kt for the year. Management has indicated that it remains on track to meet its operating unit costs guidance for copper operations.
Aluminum production remained relatively stable year on year. The Hillside Aluminium operation achieved record output, Brazil Aluminium continued its ramp-up, and Mozal Aluminium made progress in its recovery plan. Similarly, alumina production was consistent with the previous year. Improved plant availability at Brazil Alumina helped offset a temporary bauxite conveyor outage at Worsley Alumina.
Additionally, Cannington's payable zinc equivalent production saw a 10% increase for FY 2024, despite adverse weather conditions. This rise was attributed to higher average metal grades realized during the period.
Downgraded Guidance for FY 2025
The recent update included a downgrade in production guidance for FY 2025. The company has revised its forecasts, reducing alumina production guidance by 5%, Sierra Gorda payable copper equivalent by 7%, and Cannington payable zinc equivalent by 9%.
South32 has also announced pre-tax impairment expenses: approximately US$554 million for Worsley Alumina and around US$264 million for Cerro Matoso. These impairments will be recognized in the FY 2024 results.
CEO’s Remarks and Future Outlook
Despite the challenges, South32's CEO, Graham Kerr, expressed satisfaction with the fourth quarter's performance. The company achieved higher volumes across most operations and remained on track to meet its operating unit cost guidance for FY 2024. Stronger commodity prices allowed the company to increase sales volumes and improve cash generation.
Looking ahead, the sale of Illawarra Metallurgical Coal is expected to be completed later this quarter. This transaction is anticipated to strengthen the company’s balance sheet, simplify its business operations, and reduce capital intensity. It will also unlock capital for investment in high-quality development projects, particularly in zinc and copper. Progress at the Taylor zinc-lead-silver deposit at Hermosa is proceeding as planned, representing a significant opportunity to supply critical commodities for the global energy transition.
Over the past year, South32’s share price has declined by 16%.