Australia's South32 mulls Eagle Downs stake sale after halting development

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Jan 21 (Reuters) - Diversified miner South32 Ltd (S32.AX) said on Thursday it was considering a possible divestment of its 50% interest in the Eagle Downs metallurgical coal project in Queensland, after deciding to put its development on hold.

The company, which owns the project along with Chinese steelmaking giant China BaoWu Steel Group Corp, said development was halted as "expected returns (from the project) do not currently support the allocation of capital."

China BaoWu Steel did not immediately respond to a Reuters request for comment.

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South32 also reported an about 16% rise in second-quarter coking coal output, as its flagship Illawara operation continued to benefit from a return to a longwall configuration - a form of mining where a long wall of coal is mined in a single slice.

The world's largest manganese ore producer said output of the commodity reached about 1.5 million wet metric tonnes (wmt) in the December quarter, compared with about 1.4 million wmt a year earlier.

South32, which was spun off from mining giant BHP Group (BHP.AX) in 2015, also increased the production outlook for its Cannington project in Queensland state and its Cerro Matoso project in Colombia, citing accelerated extraction and approval for a new project, respectively.

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Reporting by Soumyajit Saha in Bengaluru; Editing by Devika Syamnath

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