South32 announces major restructuring plans
The company, which was spun out of BHP Billiton last May, said that as a result of its write-downs of forecast commodity demand and prices, it now expects to book pre-tax, non-cash charges of approximately $1.7bn in the half-year to December 2015.
South32 shares gained 13.5 cents, or 14.21 per cent, to $1.085.
Mining giant BHP Billiton’s South32 spin-off Thursday announced 1.7 billion in asset writedowns and said it would axe hundreds of jobs at a South African facility and slash costs and production as commodity prices dive.
“When combined with the restructuring initiatives that are now being finalised at many operations across our portfolio, we expect to further strengthen our financial position and increase our cash generating capacity through the cycle”, Kerr announced.
The pretax, non-cash charge of USD1.70 billion will be booked in the six months ended December 31. South32 is the world’s largest producer of manganese ore, used in stainless steel.
The company said mining activity would restart with immediate effect, but “at a substantially reduced rate and with greater flexibility”.
South32 and Anglo agreed to halt mining at the Hotazel manganese mines in South Africa in November in response to low commodity prices, a move that removed around 700,000 metric tons of manganese ore from global supply.
It would also reduce production at its Wessels and Mamatwan mines by 36% and 18% to 740 000 tpa and 2.2 Mtpa, respectively. Job losses and cost cuts will be “hard to swallow if you are an employee, but it’s a positive step”, he said.
The Perth-based firm said 620 employees will lose their jobs at the Samancor mines, with restructuring and redundancy costs estimated at $US10 million.
“This strategy to maximise value rather than volume, our high quality operations and well-defined financial policies underpin our resilience at current commodity prices and we remain exceptionally well positioned for any improvement in industry fundamentals”, said Kerr.
“Our teams are now finalising plans that will deliver a meaningful reduction in costs at Illawarra metallurgical coal, Cerro Matoso, Worsley Alumina and Australian Manganese”, said the company in a statement.