Monsters of Rock: One year wait to revive manganese for South32 and Base becomes Ace

South32 runs higher as it maintains guidance, but it faces a long and expensive clean up job at GEMCO
Ramelius ups gold guidance, plans to have $500m+ cash pile by June 30
Base pivot on monazite draws premium rare earths takeover

South32 (ASX:S32) shares charged 6% higher despite revealing it will take a year to resume sales from a high grade manganese mine in the Northern Territory hammered by Tropical Cyclone Megan last month.

The wharf outage at the Groote Eylandt manganese operation, known as GEMCO, could take until the March quarter of 2025 to resolve, with S32 pulling its production and sales guidance for FY24.

GEMCO delivered 645,000t of product and 709,000t of sales in the March quarter before 681mm of rain and the second strongest winds in 20 year smashed the mine on March 16 and 17.

Saleable production fell 13% to 2.324Mt for the first nine months of the financial year.

RBC’s Kaan Peker said in a note the patch up job will likely cost $200m, with a six month disruption to shipments expected (transhipping could fill the gap until the wharf is completely fixed).

But Peker saw the market outlook as being positive thanks to strong grades at the Cannington silver, lead and zinc mine in North Queensland, where zinc equivalent production is up 15% YoY to 212,000t and silver output is up 23% to 9.6Moz.

The third quarter saw 19% more zinc equivalent tonnes (64,800t) and 24% more silver (2.9Moz) produced than a year earlier.

Met coal output rose 67% in the quarter at Illawarra to 1.244Mt, with full year output down 24% so far to 3.031Mt.

Overall manganese output is down just 6% YTD to 3.965Mt and 8% YoY in the quarter to 1.175Mt, with record year to date tonnes in South Africa making up for the GEMCO issues.

Peker said those could be offset by higher manganese prices, which will be impacted by the absence of a major producer.

While met coal was up it was a miss against consensus estimates. But FY24 guidance for met coal and all operations outside GEMCO has been maintained.

South32 (ASX:S32) share price today

Ramelius lifts guidance

After walking away from a proposed merger with Karora Resources (its boots amply filled by Westgold Resources (ASX:WGX)) Ramelius Resources (ASX:RMS) plans to be cashed up by the end of the June quarter after upping its guidance today.

RMS produced a previously disclosed 86,928oz at an all in sustaining cost of $1344/oz in the March quarter in a massive overperformance, which has seen the gold miner lift its FY24 forecast to 285,000-295,000oz at $1550-1650/oz.

With $407.1m in the bank, Ramelius, which printed a record $125.3m of free cash in the March quarter, now thinks it could have well over $500m in its coffers by June 30.

That’s certainly been helped by record gold prices, with bullion fetching around $3700/oz ATM.

On an all in cost basis, RMS would be making around $1400 on every ounce it produces at the moment.

Ramelius Resources (ASX:RMS) share price today

Base the Ace

Base Resources (ASX:BSE) shares rose 124% as the Kenyan mineral sands producer revealed a near 200% premium takeover worth 30.5c a share from uranium and rare earths producer Energy Fuels.

The US-listed stock wants the monazite which will be produced from Base’s Toliara mineral sands project in Madagascar from 2027 to feed an expansion into rare earths separation.

It previously announced a non-binding MoU to jointly develop the Donald mineral sands project in Victoria with ASX-listed Astron Corporatiom (ASX:ATR).

The deal, supported by Base’s two largest shareholders and board, is pitched at a 188% premium and includes Energy Fuels shares plus a 6.5c unfranked special dividend on the completion of the merger.

“We’ve always been aware of monazite in the project. In our original DFS we were looking more at monazite as being a bit of a complexity and something that was going to need to be managed and the original concept was to blend it back into the pit,” Base Resources MD Tim Carstens said on a call today.

“But then obviously the world’s changed and that’s why over a two year period, we worked up the pre feasibility study component of monazite, released that in December last year and that was all happening long before we spoke to Energy Fuels.”

Mineral sands players have been reinvented in recent times as rare earths hopefuls, with the previously waste product of monazite now viewed as a potential source of the new energy metals.

That link is the foundation of Iluka Resources’ (ILU) $1.8b Eneabba refinery in WA, where it plans to process monazite from a billion dollar stockpile accumulated over decades onsite, its own deposits on the east coast and from third parties.