UPDATE 1-Australia's South32 Q3 coking coal output falls 37 pct on pvs qtr

(Adds details, manganese production, background)

April 18 (Reuters) - Australian miner South32 Ltd on Thursday reported a 37 percent fall in its third-quarter coking coal production compared to the second quarter, as its continues to focus on keeping down costs at its Illawarra operations.

Production of coking coal or metallurgical coal, a key steel-making ingredient, fell to 990,000 tonnes during the March quarter from 1.6 million tonnes in the second quarter, but still beat a Goldman Sachs estimate of 784,000 tonnes.

The Perth-based miner has struggled to keep down costs at its Appin mine to sustain operation of two longwalls. The mine is part of Illawarra Metallurgical Coal project which accounts nearly all of South32’s coking coal output.

Commenting on its Illawarra operations, the diversified miner said the “focus remains on achieving a substantial uplift in development rates at Appin.”

South32, which is the world’s largest manganese miner, also produced 1.36 million wet metric tonnes of the battery metal for the quarter ended March 31, down from the 1.44 million wmt output in the previous quarter.

It increased guidance for the full-year 2019 by 7 percent at its Australia Manganese operations, where it produces the manganese ore.

South32, which was spun off from global mining giant BHP Group in 2015, affirmed it was on track for the divestment of South Africa Energy Coal, with binding bids expected in the June 2019 quarter.

Its South Africa Energy Coal operations, consist of four coal mining operations and processing plants in the coalfields of the Mpumalanga province.

The company said it was on track to meet 2019 guidance for metallurgical coal production. (Reporting by Rashmi Ashok and Shreya Mariam Job in Bengaluru; editing by Richard Pullin)