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Feb 18, 2021

Silver price bonanza for Cannington balance sheet

Silver price bonanza for Cannington balance sheet

Rising silver and zinc prices helped drive a $130 million boost to Cannington mine’s pre-tax profits in the first half of this financial year.

Underlying EBIT for the North-West Queensland silver-lead-zinc operation increased by 191 per cent to almost $200 million ($US154 million) for the period.

Mine owner South32 said the bulk of the gains were due to a combination of higher average realised prices for its products and improved silver and lead sales volumes.

Those gains, however, were partially offset by a stronger Australian dollar.

Cannington saw a slight decrease in production for the half year following the completion of planned surface maintenance.

But South32 now expects to accelerate the extraction of a planned higher-grade mining sequence towards the end of this financial year.

As a result FY21 zinc equivalent production guidance has been increased by 5 per cent to 12,600koz for silver, 119.2kt for lead and 61.6kt for zinc.

It comes as South32 looks forward to a rebound in the market for key commodities within its portfolio.

Commodities produced across the group internationally include metallurgical coal, aluminium, nickel and manganese.

The Perth-based company recorded a statutory profit after tax of $US53 million in the first half of the financial year, a 46 per cent drop, due to weaker prices for key commodities.

But chief executive officer Graham Kerr said it was off to a strong start in 2021, as it continued to build on recent operating performance.

“Our net cash has increased from $US275 million on December 31 to $US452 million at the end of January, and we are now seeing a rebound in demand from markets outside of China for some of our key commodities, that is underpinning a recovery in prices,” he said.

“With this, our business is well placed to benefit as the global economy recovers, enabling us to deliver value for all our stakeholders.”

During the half-year period the company placed the Eagle Downs metallurgical coal project on hold, while assessing options for its joint venture interest.

South32 said this demonstrated a disciplined approach to allocating capital after the feasibility study did not meet its investment criteria.


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