South32 Ltd (ASX: S32) shares are on the move on Monday morning.
At the time of writing, the mining giant's shares are up 1.5% to $3.76.
This follows the release of the company's first quarter update before the market open.
South32 shares higher on Q1 update
For the three months ended 30 September, South32 reported production declines across most commodities compared to the previous quarter.
For example, alumina, lead, nickel, silver, and zinc production all fell quarter on quarter.
Alumina production was down 5% to 1,184kt, whereas nickel production fell 25% to 8.6kt. The latter fell short of the consensus estimate of 9kt for the quarter. This reflects lower planned nickel grades.
However, South32's aluminium production increased quarter on quarter by 5% to 298kt. This was ahead of the consensus estimate of 284kt. Management notes that Hillside Aluminium continued to test its maximum technical capacity, and low-carbon aluminium production from Brazil Aluminium and Mozal Aluminium increased by 12%.
Pleasingly, it was the same story for copper production, which lifted 15% to 17.6kt. This is ahead of the consensus estimate of 16.5kt for the period. This was driven by a 20% increase Sierra Gorda payable copper equivalent production due to higher planned copper grades and a significant increase in molybdenum recoveries as a result of improved ore quality.
More good news is that management has maintained its FY 2025 production guidance for all operations following the first quarter.
Management commentary
South32's CEO, Graham Kerr, was pleased with the quarter. He said:
We have maintained annual production guidance for all of our operations with a strong start to the year in aluminium and a 20 per cent uplift in copper equivalent volumes from Sierra Gorda.
Kerr also notes that a major milestone was achieved during the quarter. He adds:
Completing the sale of Illawarra Metallurgical Coal is a major milestone in our portfolio transformation which has unlocked significant value and streamlined our business toward commodities critical for a low-carbon future.
The sale has also lowered our sustaining capital intensity and strengthened our financial position, enabling us to self fund our growth in base metals and deliver returns to shareholders via our on-market share buy-back.
Looking to the future, the CEO is optimistic on its Hermosa project. Kerr said:
At Hermosa, construction of our large-scale, long-life Taylor zinc-lead-silver project is progressing as planned and we are continuing to unlock value across our broader land package. During the quarter, Hermosa was selected for a US$166 million award negotiation from the US Department of Energy, which recognises Clark's potential to supply battery-grade manganese for the emerging North American market.
Our transformed portfolio, focused on copper, zinc and our aluminium value chain, leaves us well placed to capitalise on the global energy transition and stronger market conditions to start the year.
