Gas issues impact Appin
Ongoing safety inspections are hitting South32’s share price.
BHP spinoff South32 has announced its Appin coal mine in NSW will remain closed for an “extended” period due to a safety review.
The coal mine has ground to a halt after concerns about a build up of methane were raised, and now a formal review will be undertaken to ensure it can continue safely and reliably.
“Given the scope of this review, an extended outage is now anticipated before production at Illawarra Metallurgical Coal can be restored to historic levels,” South32 said in a statement to the ASX.
South32 shares fell in response, making it one of the weakest players in an already underperforming resource market.
Although the company telegraphed the delay last month, analysts say the market will still probably view the news negatively.
“Whilst we remain constructive on S32 overall due to the strength of the balance sheet and potential for shareholder returns, we appreciate that investors may be starting to lose patience with the company's recent operational issues,” Royal Bank of Canada analyst Paul Hissey said in a statement.
South32 says it withdrew its workforce at the Appin mine as a precautionary measure and notified the relevant NSW departments on June 30.
The company claims not to have breached gas limits at the site, but the regulator did issue a prohibition notice.
The regulator is also concerned about broader operating policies at the Illawarra Metallurgical Coal operation.
Production slowed in late 2016 due to longwall roofing problems at the Appin mine, before methane gas issues forced temporary suspensions in early 2017.