South32 seeking clarification on SA lockdown

SOUTH32 says its coal and aluminium operations in South Africa could be exempt from the mandatory 21-day shutdown in response to COVID-19.
South32 seeking clarification on SA lockdown South32 seeking clarification on SA lockdown South32 seeking clarification on SA lockdown South32 seeking clarification on SA lockdown South32 seeking clarification on SA lockdown

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The lockdown starts at midnight Thursday, but businesses essential for the maintenance of power generation are exempt.

South32 said it was working with government to determine the impact of the exemption on its South African Energy Coal and South African Aluminium divisions, given they play a role in Eskom's generation network.

The company has started planning for its South African Manganese business to move to care and maintenance.

South32 has withdrawn FY20 guidance for its South African operations.

"Our response to COVID-19 is built around three areas - keeping our people safe and well, maintaining safe and reliable operations, and supporting our communities, all of which are critical to the future of our business," South32 CEO Graham Kerr said.

"We have implemented a range of measures at all our locations to ensure the health and wellbeing of our people and communities, by reducing the risk of infection and the rate of spread, while maintaining day-to-day operations.

"To-date, we have not yet experienced production interruptions from COVID-19 at any other operations. We continue to monitor the impact of restrictions being placed on the movement of people and goods by governments across the world and will continue to update the market as appropriate."

RBC Capital Markets said, on its base case estimates, it would assess the FY20 impact on estimated EBITDA to be about 1.5%, or US$25 million.

"If SAEC were exempt from the lockdown, this impact would lessen to circa 1.2% (or $20 million)," it said.

"As such - and given S32's comfortable balance sheet position (circa $280 million net cash at 31 December 2019) - we would expect a fairly muted reaction to this announcement."

Shares in South32 rose 5.1% yesterday to A$1.75.