South32 share price higher on solid Q4 update

South32 shares are rising on Monday…

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Key points

  • South32 had a solid fourth quarter
  • This has helped it achieve guidance for some of its operations
  • The company's costs guidance is expected to be achieved across most commodities

The South32 Ltd (ASX: S32) share price is pushing higher on Monday following the release of the miner's production update.

In morning trade, the mining giant's shares are up 2.5% to $3.62.

South32 share price higher on Q4 and full year update

Here's a summary of its performance in the fourth quarter:

  • Alumina production up 3% quarter on quarter to 1,361kt
  • Aluminium production up 5% to 255kt
  • Copper production up 101% to 16.9kt
  • Manganese production up 22% to 1,469 kwmt
  • Metallurgical coal down 12% to 1,380kt
  • Nickel production up 2% to 10.8kt
  • Zinc production down 6% to 15.4kt

What happened in FY 2022?

This solid fourth-quarter led to South32 reporting record annual production at Worsley Alumina, guidance-beating zinc production at Cannington, and 99% of its copper guidance. The latter was despite impacts from weather and labour availability caused by the COVID-19 pandemic.

Management notes that its stable operating performance has allowed the company to capitalise on record conditions for a number of its commodities, with strong sales in the June 2022 quarter capturing the benefit of high prices.

Another positive is that the company is expecting to report FY 2022 operating unit costs in-line with its previously updated guidance at the majority of its operations. This is thanks to lower than anticipated producer currencies providing a benefit in the June 2022 quarter and helping to offset cost inflation.

Looking ahead, higher volumes at some of its operations and the tailwind of lower producer currencies are expected to provide partial relief from the ongoing effect of industry wide labour, raw material, and energy cost inflation that impacted its cost base in FY 2022.

Management commentary

South32's CEO, Graham Kerr, was pleased with the fourth quarter. Particularly given the challenges the company faced during the three months. He said:

Our teams delivered another strong operating performance in the June quarter, despite challenges that included extreme weather, supply chain disruptions and reduced labour availability caused by the COVID-19 pandemic.

Record annual production at Worsley Alumina, along with record quarterly production at South Africa Manganese and a strong sales result in June, capturing the benefit of high prices, capped another year of substantial progress for South32.

We achieved further significant milestones as we reshape our portfolio towards the metals critical for a low carbon future. In May, we completed the acquisition of an additional shareholding in the hydro-powered Mozal Aluminium smelter. We also completed our acquisition of an additional interest in the MRN bauxite mine and delivered first production from the restart of our Brazil Aluminium smelter, powered by 100 per cent cost efficient renewable power.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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