The result, which compares with a loss of $61 million in FY2016, came off a yearly revenue figure of $1.1 billion, almost twice what it booked in the previous corresponding period.
South32 CEO Graham Kerr said a review of the operating systems and practices at Illawarra Metallurgical Coal was continuing and the company was working towards a staged and controlled ramp-up of operations at Appin colliery, starting in September.
“Looking to the year ahead, we will continue to unlock value within our existing operations, embed future options where we see value and stretch performance in a sustainable way,” he said.
The deferral of the Illawarra Metallurgical Coal capital expenditure program, following the impact of operational outages, contributed to a $67 million reduction in capex to $316 million for the company.
“Following regulator intervention at Illawarra Metallurgical Coal we are reviewing our operating systems and practices, with a specific emphasis on gas drainage and ventilation at the Appin colliery,” the company said.
“A staged ramp-up of the Appin 707 longwall is expected to commence in early September.
“The reliability and predictability of its performance, and our associated gas management activities, will inform our future plans and ability to ramp-up to historical rates of production.”
A higher rate of sustaining capital expenditure of $430 million in FY2018 by the company includes additional underground development at Illawarra Metallurgical Coal to access two new longwall panels at its Dendrobium colliery in NSW.
Illawarra Metallurgical Coal total saleable production decreased 15% to 7.1 million tonnes in FY17, despite record run-of-mine performance at Dendrobium, as challenging ground conditions in the new Appin Area 901 longwall panel and two extended outages at the Appin colliery significantly impacted performance.
Metallurgical coal sales were 4% higher than production in FY17.
Operating unit costs increased 31% to $80/t in FY17 as lower production significantly impacted productivity.
Additional cost pressure stemmed from higher price-linked royalties and a stronger Australian dollar.
“Operating unit cost guidance for Illawarra Metallurgical Coal will be provided when we have finalised our operating plans for FY18,” the company said.
