(Alliance News) - South32 Ltd on Thursday cut its dividend steeply after annual profit nosedived due in part to lower commodity prices and a massive impairment charge linked to its Arizona, US-based Hermosa project.

The Perth-based diversified mining group took a USD1.30 billion impairment charge for the financial year that ended June 30, compared to just USD145 million in the same period last year.

The miner was required to separately assess the Taylor zinc-lead-silver deposit, Clark zinc-lead-silver deposit and regional exploration land package. These are part of the Hermosa project, which is located in Arizona, US.

Shares in South32 fell 2.2% to ZAR44.13 on Thursday morning in Johannesburg, and were down 1.8% to 186.74 pence in London.

The huge Taylor impairment drove the pretax profit over the 12 months to USD213.0 million, crashing 94% from USD3.69 billion.

Revenue fell by 20% to USD7.43 billion from USD9.27 billion as a result of lower commodity prices. Underlying earnings before interest, taxes, depreciation and amortisation slumped by 47% to USD2.53 billion from USD4.76 billion, reflecting lower commodity prices.

South32 also battled against higher inflation and "uncontrollable" costs.

The group slashed its final dividend to 3.2 US cents from 14.5 cents, dragging the total payout for the year to 8.1 cents from 22.7 cents.

For the full year, it reported a loss per share of 3.8 cents, swinging from earnings per share of 57.4 cents.

South32 said Sierra Gorda's first time mineral resource estimate had confirmed a large scale, long life copper deposit with significant growth potential. South32 acquired a 45% interest in Chile-based Sierra Gorda in February 2022. Joint control partner KGHM Polska Miedz owns 55%.

The mineral resource estimate for Sierra Gorda is 6.81 million tonnes of copper, 296,000 tonnes of molybdenum and 3.58 million ounces of gold.

South32 boosted its capital expenditure for the year by 60% to USD894 million from USD559 million as it increased its investment in productivity, improvement and growth activities across its portfolio of commodities.

Going forward, South32 guides for alumina production at Worsley of 4.00 million tonnes in 2024, from 3.83 million tonnes in the 2023 financial year. The 2025 forecast is also at 4.00 million tonnes. In 2022, output was 3.99 million tonnes.

Brazil Alumina production is estimated at 1.40 million tonnes in 2024 and 1.42 million tonnes in 2025 from 1.26 million tonnes in 2023. Production was 1.29 million tonnes in 2022.

Hillside aluminium production rose to 719,000 tonnes in 2023 from 714,000 tonnes in 2022. Output is forecast to be 720,000 tonnes in both 2024 and 2025. Mozal aluminium output climbed to 345,000 tonnes in 2023 from 278,000 tonnes in 2022. It is guided to rise to 365,000 in 2024 and 372,000 tonnes in 2025.

Payable copper production is expected to drop to 67,000 tonnes in 2024 before rising to 71,000 tonnes in 2025. Copper output was 70,700 tones in 2023, up sharply from 25,300 tonnes in 2022.

Total coal production was 6.52 million tonnes in 2023, slightly higher from 6.50 million tonnes in 2022. Output is expected to amount to 5.00 million tonnes in both 2024 and 2025.

Metallurgical coal production is likely to drop from 5.49 million tonnes in 2023, to an estimated 4.40 million tonnes in 2024 and 4.70 million tonnes in 2025. In 2022, production was 5.71 million tonnes.

Manganese ore production is estimated at 2.0 million wet tonnes in 2024. Output rose to 2.1 million wet tonnes in 2023 from 2.0 million wet tonnes in 2022.

By Artwell Dlamini, Alliance News reporter

Comments and questions to newsroom@alliancenews.com

Copyright 2023 Alliance News Ltd. All Rights Reserved.