UPDATE 1-South32 flags $728 mln charge at Illawarra, quarterly met coal output drops

(Adds output details, impairment charge at Illawarra)

July 21 (Reuters) - Australia’s South32 on Wednesday flagged an impairment charge of $728 million at its Illawarra project and reported a 12% drop in its fourth-quarter metallurgical coal output hurt by changes in mining structures at its Appin mine.

The diversified miner said it expects to record the pre-tax charge in its full-year results after an Australian planning body blocked its application for a planned coal mine extension at Illawarra project in New South Wales in February.

In a separate statement, the miner said it encountered difficult geological conditions at the Appin mine in Illawarra project near Sydney during the quarter, and carried out a planned change to the longwall configuration at the mine.

The downtime while the changes were being carried out hurt its quarterly production of metallurgical coal, which fell to 1.34 million tonnes (mt) in the three months to June 30 from 1.52 mt a year earlier, missing Citi’s estimate of 1.58 mt.

Longwall configuration is a form of mining where a long wall of coal is mined in a single slice. South32 has seen its output rise at the Illawarra project after it returned to a three longwall configuration last year.

For the year, output of the steel-making commodity jumped 11% to 6.17 mt. (Reporting by Sameer Manekar and Savyata Mishra in Bengaluru; Editing by Krishna Chandra Eluri)