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“We have scaled back activity on the DND (Dendrobium) project while we consider alternative options following the IPC decision,” South32 said.
It is also considering an alternate mining plan which it could submit to the NSW government with the aim of having the project assessed under State Significant Infrastructure status.
Five-year process
The Graham Kerr-led South32 is wary of submitting a new mine plan given it has spent five years going through the approval process with the existing $1 billion Dendrobium proposal.
However, gaining State Significant Infrastructure status would streamline the process and represent a significant breakthrough.
Mr Kerr, who revealed in March that Premier Gladys Berejiklian and Planning Minister Rob Stokes had declined urgent meeting requests to discuss the future of the Illawarra operations, declined to comment on the approval impasse or any subsequent talks with the government.
A South32 spokesman said the company was now in regular contact with the NSW government and other stakeholders on the future of Illawarra, where the Dendrobium mine is slated to reach the end of its life in 2024 unless an extension plan is approved.
South32 recently shed its South African energy coal business and is pinning much of its future on a bias towards base metals and projects in North America.
The company said on Wednesday that it expected to report a $US160 million loss on the South African sale that would be excluded from underlying earnings in its full-year results.
Guidance warning
Other commitments around the sale related to a $US200 million mine rehabilitation fund and $US50 million restructure facility will come off South32’s net cash balance.
Although production at Illawarra increased 9 per cent on the previous year to 7.6 million tonnes in 2020-21, South32 warned it was likely to miss cost guidance because volumes were lower than planned.
South32 achieved record annual production at its Worsley alumina refinery in Western Australia and at its Brazil alumina operations, and beat production guidance with its manganese operations in Australia and South Africa.
The Perth-headquartered company became the latest resources company to cite emerging skill shortages in WA, warning of higher operating costs at Worsley over the next year based on input price rises and local labour cost pressures.
South32 was due to complete a pre-feasibility study on mining the Taylor deposit at its Hermosa base metals project in Arizona by the end of June, but said it had been delayed because of COVID-19.
An update of the mineral resource estimate for Taylor increased the average grades for zinc, lead and silver but tonnages were reduced.
In a note to clients, Royal Bank of Canada said it expected South32 to buy back about $US500 million in shares each year over the next two to three years in an extension of its capital management program.
Mr Kerr said the company’s strong financial position had seen it return $US346 million to shareholders via the existing buy-back program in 2020-21, bringing total returns through on-market buybacks to $US1.7 billion over the past four years.
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