PERTH (miningweekly.com) – Diversified miner South32 has announced a $160-million cut to capital expenditure over the next 15 months, with the miner also announcing a number of operational changes in response to Covid-19.

In response to a 21-day lockdown in South Africa, South32’s manganese assets in that country, along with its export coal production from the South Africa Energy Coal operation have been placed on care and maintenance for a minimum of 21 days.

The Hillside aluminium smelter and domestic coal production from South Africa Energy Coal are considered businesses essential for the maintenance of power generation, and would continue to operate during the lockdown.

Meanwhile, in Colombia, the Cerro Matoso project continues to operate, at a reduced rate, after the President announced a 19-day nationwide lockdown, starting March 24.

To date, South32 was yet to experience Covid-19-related production interruptions from any of its other operations, but the company said that it would continue to monitor the impact of restrictions placed on the movement of people and goods across the world.

In the meantime, the miner has announced plans to cut $160-million in capital costs over the next 15 months to protect its financial position.

Sustaining capital expenditure would be cut by $150-million while exploration expenditure will be cut by $10-million.

CEO Graham Kerr said that the sustaining capital expenditure savings would be realised by a reduction in spend of 10% in the 2020 financial year and by 18% in 2021. In addition, to prepare for a potentially extended period of low prices, the company is also reviewing activity across the group, aimed at delivering a meaningful reduction in controllable costs, building on its strong operating unit costs performance during the first half of 2020.

“The prudent management of our strong balance sheet will continue through our disciplined allocation of capital consistent with our unchanged capital management framework. Since demerger, we have returned $2.9-billion to our shareholders by way of ordinary dividends and our capital management programme,” Kerr said on Friday.

“The disciplined approach we continue to take to capital allocation and our simple capital management framework ensures our shareholders will be rewarded as financial performance improves.”

Kerr said that South32 would continue to review the evolving environment to understand the impact on timelines for the company’s development options, and would take further action as required to prioritise long-term value across the group.

The prefeasibility study for the Hermosa project is now targeted for the September quarter of this year, and given the current market uncertainty, South32 is also working with its joint venture partner to preserve value at the Eagle Downs metallurgical coal investment beyond the investment decision scheduled for the end of this calendar year.

“Investing in exploration and our development options to create shareholder value also remains integral to the group’s strategy. Our financial priorities remain unchanged, and today’s actions, including the suspension of our on-market share buy-back, are a prudent response to the current exceptional circumstances and consistent with our commitment to maintain a strong financial position.”