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Revenue was down 16%, profits were down 84% and underlying earnings were down 80% to US$131 million as the multi-commodity producer saw falls in prices for alumina, manganese and coal, with nickel being the single bright spot.

 

Despite the falls, South32 kept the faith with its shareholders, declaring further interim and special dividends totalling $104 million, increasing its shareholder returns for the half to almost $300 million.

 

COVID-19 continues to plague the market, and Kerr said the impact was uncertain, but would likely be deeper than that of the SARS epidemic 15 years ago, when China was much less important to global commodities.

 

South32 had looked forward to early 2020 with optimism: the US-China trade tensions had eased, the manganese price had started to recover, and the company was "pretty happy" it had a good handle on the things it could control: costs and production.

 

"The things we can control, production and costs, are on track. We delivered record production at Brazil Alumina and maintained higher output rates at Worsley Alumina. We responded to lower manganese prices at South Africa Manganese, cutting higher cost trucking.

 

"We are looking to development and exploration, and need a strong balance sheet and financial discipline."

 

But it was a tough half in terms of commodity prices, and the uncertainty will continue.

 

COVID-19 was a wildcard, and it won't be some time until the full impact on South32 will become clear given it was unfortunately timed with the Chinese New Year break, and China has decided to delay production restarts and movements in logistics in country.

 

Kerr believes bulk commodities will likely to be impacted in the first half of calendar 2020, but should recover later in the year if the Chinese government decides to inject stimulus into the market, which could drive up  steel demand, and thus bauxite, manganese and metallurgical coal imports. 

 

Kerr is confident as there is no replacement for manganese, and no real competition for Australia's higher-quality coking coal.

 

"There's more upside in met coal than what other people talk about," he said.

 

Beyond the bulks, Kerr said there were no sacred cows in the South32 portfolio as it works to reshape the company with a bias to base metal projects, and higher quality projects.

 

It is selling to sell its South African coal business, and may shut or divest its downstream smelters if they don't provide the right returns, but ultimately nothing is off the table for sale "at the right price".

 

The company has net cash of $277 million and is confident it can schedule its development projects, with the Eagle Downs metallurgical coal project in Queensland the most advanced with a final investment decision planned later this year.

 

That could be followed for FID for the 100%-owned Hermosa lead-zinc-silver project in Arizona given the prefeasibility for the Taylor deposit and initial JORC resource for the Clark deposit are being finalised. 

 

Yesterday, it also finalised the $145 million Ambler Metals JV after three years of an exploration partnership with Trilogy Metals.

 

"We have structured subscriptions essentially for three value equations: Arctic polymetallic project, where Trilogy has completed what they call a PFS, but not to the South32 standard; the Bornite copper deposit that needs more drilling; and the regional upside," Kerr said.

 

The Arctic deposit will move into a 12-18 month PFS later this year. 

 

The aim is to support development of a regional processing hub, while examining the potential of the VMS belt, which "lights up like a Christmas tree" with targets.

 

Kerr said South32 was in a good position to pursue its developments given there would be a limited overlap of capital. 

 

"Compared to where we were 2-4 years ago, when we had no options, we are now in a much better position, but each option needs to compete with capital returns to holders and against the other development options," he said.

 

South32 shares were steady at A$2.56, valuing the company at $12.5 billion.