A crash in the price of manganese alloy over the last five months has taken its toll on South32 Ltd's (ASX: S32) Metalloys operation in South Africa, which is one of the largest manganese smelters in the world.
South32, which listed on the ASX last month after it was spun-off from BHP Billiton Limited (ASX: BHP), is the manager of the Samancor Manganese joint venture with a 60% stake of what is the world's largest producer of manganese (Anglo American owns the remaining 40%). Manganese is the fourth-largest metal in terms of global consumption, behind iron, aluminium and copper, and is predominantly used in steel production.
In its capacity as the manager of the joint venture, South32 said that high-carbon ferromanganese (HCFeMn) prices had tumbled approximately 20% since the beginning of 2015. In order to satisfy its commitment to maximising per share financial performance rather than volume, it has decided to delay the restart of three of its four HCFeMn furnaces at the smelter. As the delay is only temporary, no permanent employees will be retrenched from their positions.
The miner also said that it has initiated a review of the fair value of its interest in the joint venture, saying that "the process is expected to have implications for the fair value adjustment that is required pursuant to the conclusion of the Amended and Restated Umbrella Agreement governing the joint venture."
Although the news is certainly a setback for South32, investors should still consider starting a position in the freshly-listed miner, whose shares have fallen 2.3% this morning to trade at $2.09.
