JOHANNESBURG (miningweekly.com) – Being a premier base metals-focused business with strong growth potential is the vision for South32 of new CEO Matt Daley.

“We've got around 55% production growth over the next handful of years in the commodities that we particularly feel are strongly structurally positioned for really strong years ahead, those being zinc, lead, silver, and copper,” said an upbeat Daley who spoke to Mining Weekly after taking over the reins of South32 from outgoing Graham Kerr on July 1.

Daley had a hyperactive first day in office amid the company’s major aluminium asset disposal announcement as well as a copper growth announcement.

“Exciting time today and pretty honoured to step into the role of CEO,” Daley commented amid Alcoa agreeing to buy South32’s aluminium value chain assets for up to $5.6-billion and South32 highlighting its participation in the Sierra Gorda copper growth project in northern Chile.

“The strategy for us is really clear, and we've been articulating it today around running what is going to be a premier base metals-focused business with really strong growth potential,” Daley reiterated.

The ASX-, LSE- and JSE-listed South32's targeted 55% base metals uplift involves optimising existing assets and pursuing high-margin developments in Tier 1 jurisdictions.

“We've got a portfolio that spans Australia, South America, North America, with exploration everywhere from Chile to Southern Africa and back to Australia.

“With the Alcoa transaction, we crystallise one of those future cash flows from the aluminium value chain right here and now and pick up some of the synergies that exist in the South West between the neighbouring Alcoa and South32 refineries and position us really well to invest in those growth base metals projects.

“My big focus is around strategic planning and operational excellence, and that goes hand in hand with safety performance for me as well. So, excited to step into the role, and I think some great days ahead for the company.”

Questioned on manganese, Daley clarified that manganese is not an area of growth for South32.

What is positive for manganese is that South Africa’s Wessels and Mamatwan manganese mines are performing to plan this year but higher diesel prices are impacting movement of material by road. “We’re certainly working through some of those challenges and we've had quite a good year on rail again,” said Daley, who regularly visited South Africa when working for Anglo American. “I was in South Africa almost every month and deeply love the place and the people.”

Exceptionally high rainfalls and cyclones have dealt a significant blow to South32’s manganese operation in Australia’s Northern Territory.

“The site's really focused on managing water at the moment, which has had an impact on production, and we re-guided the market at the end of Q3 around that reduction as a result of the water.”

On capital investment prospects for manganese, Daley said: “Manganese is not an area of growth for South32 so we're really investing growth capex into our zinc and copper businesses, so that's kind of the focus, but for us running the manganese business on plan is really important, as well as ensuring it's safe and stable.”

The combined manganese output from South32’s South African and Australian operations was 1.09-million tons in the March quarter, up from 476 000 t a year earlier.

South32’s South African manganese mines are found in the manganese-rich Kalahari basin, in the Northern Cape, which is home to 80% of the world's manganese orebody.

Its two mines are part of the Hotazel Manganese Mines consortium, in which it holds a 44.4 % interest.

The Wessels mine has vertical and incline shafts and uses the mechanised bord and pillar mining method, while Mamatwan deploys the terrace mining method.

Manganese is an important alloy that is used to improve the quality and strength of steel or aluminium.

STRATEGIC ADVISOR

Kerr is continuing as a strategic advisor to support engagements related to the Alcoa transaction.

With Mozambique’s Mozal aluminium smelter on care-and-maintenance, only 25% of the alumina produced by South32’s Worsley now goes to a smelter compared with 50% of Sout32’s product when Mozal was still running and the other 50% went to the market.

That Alcoa would want more smelting capacity for its South West business puts Hillside in a good position.

Also, it appears that those who took part in Alcoa’s technical reviewer visit to Hillside were super impressed by Hillside, and why wouldn't they be amid the Hillside team having had a sustained performance of operating above nameplate capacity.

It is also important that energy-heavy industries continue to buy power off Eskom against the background of Mozal no longer buying power from Eskom.

Should Mozambique’s Cahora Bassa hydropower come back on, Eskom will still have to buy that power while Hillside, through its interrupt ability, provides the benefit of being something of a backup battery.

Beneficially, Eskom and the operators of Hillside are well connected, which is reflected in the work being undertaken together around looking into renewable energy, or a combination of renewables and conventional power being introduced.

Ongoing support for downstream beneficiation of Hillside’s aluminium is also important and Bayside, which is part of the transaction, has had a part of it recommissioned to take some of the liquid metal. As has been reported by Mining Weekly, Bingelela Alloys receives some of that liquid aluminium, which is manufactured into a rim alloy product at its semi-fabrication facility at the former Bayside Casthouse. 

Bingelela supplies products to Maxion Wheels and Borbet, ultimately reaching six of South Africa’s seven original-equipment manufacturers, including BMW and Toyota.

Hillside has partnered with the Automotive Industry Transformation Fund and the Department of Trade, Industry and Competition to provide about R200-million in concessional financing to support Bingelela’s continued production of rim alloys in Richards Bay. This has enabled Bingelela to buy two new furnaces and relocate the rim alloy casting line, improving production and supporting growth and sustainability of the downstream aluminium industry. 

Hillside operations VP Calvin Mkhabela made it clear in the Mining Weekly report that South Africa’s only producer of primary aluminium would continue to help South Africa’s downstream aluminium industry to grow and a pipeline of potential opportunities for the downstream aluminium industry in Richards Bay is being assessed.