South32 will not proceed with the proposed expansion of the Dendrobium mine in a blow for workers but a win for the environment.
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South32 chief executive officer Graham Kerr said the company was refocusing on critical minerals in its operations in North America and around the globe and moving away from coal.
"Over the past 18 months we have made significant progress actively reshaping our portfolio and this decision increases our capacity to direct capital towards other opportunities," South32 chief executive officer Graham Kerr said.
The move puts the future of thousands of workers' jobs at risk, said Bob Timbs, Mining and Energy Union south western district Vice President.
"Our members at Dendrobium are just hearing the news today," he said. "It will come as a blow to workers and their families, causing them a lot of worry and apprehension about the future."
Environmental groups have welcomed the announcement after campaigning against the expansion which would have threatened the catchment that provides drinking water to Wollongong and Sydney.
"This is a terrific outcome for all those who spent many hours working to stop what was a clearly unacceptable proposal from the very beginning," said Protect Our Water Catchment Illawarra and Sydney secretary Deidre Stuart.
Wollongong Councillor Mithra Cox said the commercial decision by South32 to walk away from the expansion project was a wake up call for carbon-reliant industries in the Illawarra.
"It really underlines the need for us in Australia, and specifically in Wollongong, to have a really good transition plan, because if we don't, this is what it looks like," she said.
"It means new industries and new job opportunities going elsewhere, rather than that transition being an integral part of our community, and those jobs staying here."
This is the company's complete statement:
"South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) announces today that we will not proceed with an investment in the Dendrobium Next Domain (DND) project at Illawarra Metallurgical Coal following our consideration of recently completed study work and extensive analysis of alternatives.
"While our work on the project demonstrated the potential to meaningfully extend the life of the Dendrobium mine, expected returns from the $US$700m up-front capital expenditure estimate are not sufficient to support an investment relative to alternatives considered for the complex.
"With this decision, we will now focus on continuing to optimise Dendrobium and the broader Illawarra Metallurgical Coal complex to extend the mine life within approved domains.
"This work includes existing plans for Appin, where we have been investing to support its transition to a single longwall from FY25, bringing further operating and capital efficiencies.
"Looking forward, our investments at Appin include planned work to install additional ventilation capacity to enable mining in the current Area 7 until at least 2039. Although this $US$260m investment remains subject to South32 Board approval, it has been incorporated in our previously announced FY23 and FY24 Safe and reliable capital expenditure guidance.
"Average annual saleable production of ~5.5Mt with Operating unit costs of $US$105/t to US$120/t is expected from the current configuration beyond FY234, with further improvements to be targeted to sustainably bring unit costs to the bottom of the range.
"Our decision today follows an extensive analysis of the alternatives for Dendrobium together with the anticipated returns from the up-front capital investment which would be required."
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