South32 has raised concerns about the future of its Worsley Alumina operations in Western Australia, citing environmental permit requirements and announcing a significant $554 million charge related to the business. Following this news, the company’s shares dropped by over 10%.
The Worsley Alumina operations have been undergoing an environmental approval process with the Western Australia Environmental Protection Authority (WA EPA) since 2019, seeking permission to mine more bauxite in a native forest area south of Perth. Although the WA EPA approved the proposal in early July, it imposed numerous conditions that South32 believes could make the operations untenable, affecting over 2,000 jobs.
South32 plans to challenge these conditions, stating that if they remain unchanged, they would create significant operational challenges and jeopardize the long-term viability of Worsley Alumina. Additionally, the company announced a pre-tax impairment expense of $264 million for its Cerro Matoso nickel project in Colombia, alongside downgrades to production expectations for the current financial year.
Production guidance for Worsley has been cut by 6%, Sierra Gorda copper production by 7%, and zinc production at Cannington by 9%. Following the announcements, South32’s shares fell 12.9% to A$2.98.
Despite the negative outlook, analysts from Jefferies noted that the impending sale of South32’s Australian steel-making coal assets could provide necessary capital for its Hermosa project in the U.S. This sale is expected to be finalized in the first quarter of 2025, with a consortium led by Singapore’s Golden Energy and Resources set to acquire the assets for $850 million.
Additionally, South32’s fourth-quarter manganese ore production fell over 60% due to the temporary suspension of operations at its Groote Eylandt Mining Co (GEMCO) unit, which has been halted since mid-March due to a cyclone. Manganese output for the quarter ended June 30 dropped to 534,000 wet metric tons from 1,455,000 wet metric tons a year earlier.