In South America, the 99.9%-owned Cerro Matoso operation in Brazil delivered 19% less nickel at 8,300t due to planned plant maintenance and a temporary disruption to gas supply.

The non-operated Sierra Gorda operations in Chile delivered 8% less payable copper equivalent at 20,300t, but that was due to lower grade ore obscuring the benefits of higher throughput as the 45%-owned plant was further debottlenecked.

In Queensland, the giant Cannington mine saw zinc equivalent production dip 6% to 70,300t due to lower planned grades, but as the mining sequence improves the operation is expected to deliver 11% more metal for 287,000t on a full year basis.

Production from its Illawarra metallurgical coal operations in New South Wales fell by 33% to 1.16 million tonnes, but output is weighted to the second half due to planned longwall moves and the company still expects to reach 5Mt this financial year.

Star performers

The star performers were manganese at 1.5Mt with a solid 890,000t at its Australian operations and a quarterly record at the 54.6%-owned South Africa unit increasing output by 6% to 628,00t.

Total alumina production increased by 3% to 284,000t as the 86%-owned Worsley completed planned maintenance in Western Australia, and Hillside Aluminium continued to test its maximum technical capacity despite the impact of elevated load-shedding. Brazil Alumina recovered from temporary port infrastructure outages and increased production 34% to 318,000t.

Jefferies said South32's aluminium production of 288,000t slightly missed the group's forecast, by 3%, but expects volumes to increase throughout the year as the Mozal aluminium operation in Mozambique reaches nameplate capacity.

"Sales volumes should increase from Brazil alumina/ aluminium operations in the coming quarters as inventory positions are expected to normalise," Jefferies said.

South32C CEO Graham Kerr said the company's businesses were all tracking well to targets, and it is maintaining its guidance "despite macroeconomic headwinds" for many of its commodities.

Debt rises

The external issues, including lower commodity prices and a need for a working capital buffer saw South32 increase its net debt by US$299 million to $782 million.

The miner continues to invest in options to expand production with the aim of capturing higher margins as conditions improve, with the Taylor feasibility study expected to outline a path for zinc-lead-silver production growth at the Hermosa project in the USA later this quarter.

A final investment decision for Taylor is expected in the March 2024 quarter, while construction of an exploration decline at the nearby Clark manganese development is imminent.

Overall exploration spending was $21 million, including maiden drilling at the Roosevelt project in Alaska.

The stock has traded between A$3.19-4.87 (US$2.01-3.07) over the past year.

South32 shares were off 2% today at A$3.10, capitalising it at A$15 billion. 

In London, South32 closed trading last week at 173.40p (US$2.10).

"We reiterate our buy rating and 225p price target on shares of South32 despite the negative production report as the company should benefit from higher aluminium and copper prices over the long term," Jefferies said.