South 32 looks at wise distribution of cash after seeing profit in H2 2016

South 32, a spin off from mining giant BHP Billiton has started seeing brighter days after the charge of metal prices in the end of 2016.

The miner reported a net profit of $US620 million ($804 million) in H2 2016, from the $US1.7 billion loss in 2015, which was primarily due to asset write-downs. The company, however, has taken a wise decision to hang on to a large chunk of its cash for security. The company announced it will pay shareholders an US3.6¢ a share interim dividend. This will cost the company $US192 million, with net cash balance standing at $US859 million. 

Graham Kerr, CEO of South 32 said the company "will continue to manage our financial position to ensure we retain the right balance of flexibility and efficiency".

The company will use some part of the cash to finance the proposed $US200 million purchase of the Metropolitan Colliery, south of Sydney, which will strengthen the company's coking coal presence in the Illawarra. 

South 32 has restarted 22 pots at the South Africa Aluminium unit which had been idled in September 2015 considering the rise in metal prices. In the second half of 2016, revenues and earnings were driven by the sharply higher price for coking coal.

In the December half, the underlying EBITDA reached $US1.1 billion, up from $US542 million for the same period of in 2015, as higher metal prices offset lower volumes, with a tight control of costs lifting the operating margin to 37 per cent from 20 per cent.

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South 32 comprises of operating assets such as coal mines in NSW, alumina smelters and refineries in WA, South Africa, Brazil and Mozambique, the Cannington silver, lead and zinc mine in Queensland and manganese production in the Northern Territory, Tasmania and South Africa.

The miner has also flagged higher coal production at its Illawarra mines, rising to 9 million tonnes in fiscal 2018, from 8 million tonnes targeted for fiscal 2017.