South32 Ltd on Monday warned it expects to take a $554 million hit due to regulatory uncertainty around its alumina refining operation in Western Australia, as it reported production results for its recently completed financial year.
The Perth-based mining group has hit a regulatory snag as it seeks approvals for new mining areas at Worsley Alumina.
The miner said Worsley Alumina intends to lodge an appeal against the Western Australian Environmental Protection Authority.
Two weeks ago, the regulator made several conditions that create ‘significant operating challenges’ for Worsley Alumina and harm its long-term viability, South32 said.
South32 said it had undertaken a carrying value assessment of Worsley Alumina against the backdrop of the increased uncertainty created by the regulator’s recommended conditions, planning as a result to take an impairment expense of around $554 million.
The impairment reduces Worsley Alumina’s carrying value to $2.03 billion.
In a quarterly report, South32 said it expects underlying depreciation and amortisation to be around $915 million.
For the financial year that ended June 30, South32 said alumina production was down 0.8% to 5.06 million tonnes from 5.10 million a year before.
Aluminium production was flat at 1.13 million tonnes, while copper output declined 14% to 60,800 tonnes from 70,700.
Manganese ore production slumped 20% to 4.49 million wet tonnes from 5.65 million.
Metallurgical coal production fell 22% to 4.31 million tonnes from 5.49 million.
South32 expects the sale of Illawarra Metallurgical Coal to be completed later this quarter. It is selling the business to an entity owned by Golden Energy & Resources Pte Ltd and M Resources Pty Ltd.
South32 also said construction and permitting are tracking to plan at the Taylor zinc-lead-silver deposit at Hermosa.
In the recent financial year, silver production rose 12% to 13,273 ounces from 11,813 ounces. Lead production was up 11% to 112,400 tonnes from 101,700 tonnes, while zinc output inched higher 3% to 60,700 tonnes from 59,200 tonnes.
Nickel production was unchanged at 40,600 tonnes.
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