REG - South32 Limited - Dendrobium Next Domain Update

South32Announcement

23/08/2022 07:16

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RNS Number : 8922W  South32 Limited  23 August 2022

 South32 Limited

 (Incorporated in Australia under the Corporations Act 2001 (Cth))

 (ACN 093 732 597)

 ASX / LSE / JSE Share Code: S32; ADR: SOUHY

 ISIN:  AU000000S320

 south32.net

23 August 2022

 

 

 

DENDROBIUM NEXT DOMAIN UPDATE

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) announces today
that we will not proceed with an investment in the Dendrobium Next Domain
(DND) project at Illawarra Metallurgical Coal following our consideration of
recently completed study work and extensive analysis of alternatives.

While our work on the project demonstrated the potential to meaningfully
extend the life of the Dendrobium mine, expected returns from the ~US$700M
up-front capital expenditure estimate are not sufficient to support an
investment relative to alternatives considered for the complex.

With this decision, we will now focus on continuing to optimise Dendrobium and
the broader Illawarra Metallurgical Coal complex to extend the mine life
within approved domains. This work includes existing plans for Appin, where we
have been investing to support its transition to a single longwall from FY25,
bringing further operating and capital efficiencies. Looking forward, our
investments at Appin include planned work to install additional ventilation
capacity to enable mining in the current Area 7 until at least 2039 1 .
Although this ~US$260M 2  investment remains subject to South32 Board
approval, it has been incorporated in our previously announced FY23 and FY24
Safe and reliable capital expenditure guidance 3 .

Average annual saleable production of ~5.5Mt with Operating unit costs of
~US$105/t to US$120/t is expected from the current configuration beyond
FY23 4 , with further improvements to be targeted to sustainably bring unit
costs to the bottom of the range.

South32 Chief Executive Officer, Graham Kerr said: "Our decision today follows
an extensive analysis of the alternatives for Dendrobium together with the
anticipated returns from the up-front capital investment which would be
required.

"Over the past 18 months we have made significant progress actively reshaping
our portfolio and this decision increases our capacity to direct capital
towards other opportunities. This includes our world class development options
in North America that have the potential to underpin a significant growth
profile to produce metals critical to a low carbon future, servicing
strategically important supply chains."

 

About us

South32 is a globally diversified mining and metals company. Our purpose is to
make a difference by developing natural resources, improving people's lives
now and for generations to come. We are trusted by our owners and partners to
realise the potential of their resources. We produce commodities including
bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical
coal and manganese from our operations in Australia, Southern Africa and South
America. With a focus on growing our base metals exposure, we also have two
development options in North America and several partnerships with junior
explorers around the world.

Production Target cautionary statement

The Coal Resources and Coal Reserves estimates underpinning the Production
Target have been prepared by Competent Persons and reported in accordance with
the JORC Code. The Coal Resources and Coal Reserves estimates are available to
view in South32's FY21 Annual Report (http://www.south32.net) published on
3 September 2021. The stated Production Target is based on South32's current
expectations of future results or events and should not be solely relied upon
by investors when making investment decisions. Further evaluation work and
appropriate studies are required to establish sufficient confidence that this
target will be met.

Forward-looking statements

This release contains forward-looking statements, including statements about
trends in commodity prices and currency exchange rates; demand for
commodities; production forecasts; plans, strategies and objectives of
management; capital costs and scheduling; operating costs; anticipated
productive lives of projects, mines and facilities; and provisions and
contingent liabilities. These forward-looking statements reflect expectations
at the date of this release, however they are not guarantees or predictions of
future performance. They involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, and which may cause
actual results to differ materially from those expressed in the statements
contained in this release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws or
regulations, the South32 Group does not undertake to publicly update or review
any forward-looking statements, whether as a result of new information or
future events. Past performance cannot be relied on as a guide to future
performance. South32 cautions against reliance on any forward-looking
statements or guidance, particularly in light of the current economic climate
and the significant volatility, uncertainty and disruption arising in
connection with COVID-19.

 Investor Relations
 Ben Baker

T         +61 8 9324 9363

M        +61 403 763 086

E         Ben.Baker@south32.net
 Media Relations
 Jamie Macdonald                                  Miles Godfrey

T         +61 8 9324 9000                       T         +61 8 9324 9000

M +61 408 925 140                               M        +61 415 325 906

E         Jamie.Macdonald@south32.net
E         Miles.Godfrey@south32.net

Further information on South32 can be found at www.south32.net
(http://www.south32.net) .

Approved for release by Graham Kerr, Chief Executive Officer

JSE Sponsor:  The Standard Bank of South Africa Limited

23 August 2022

 1  The information in this announcement that refers to the Production Target
and forecast financial information for the Appin mine at Illawarra
Metallurgical Coal is based on Proved (11%) and Probable (89%) Coal Reserves
from Bulli. Material assumptions for the Production Target and forecast
financial information are included in the Production Target cautionary
statement on Page 2.

 2  Includes ~US$60M in FY23 and ~US$80M in FY24, based on an AUD:USD exchange
rate of 0.69.

 3  Refer to the market announcement "Strategy and Business Update" dated 17
May 2022.

 4  Based on average between FY24 and FY28, on a real basis with a AUD:USD
exchange rate of 0.69, with outcomes to vary depending on the timing of
longwall moves. The information in this announcement that relates to the
Production Target for Illawarra Metallurgical Coal (FY24 to FY28) is based on
23% Proved and 52% Probable Coal Reserves, and 20% Measured and 5% Indicated
Coal Resources from Wongawilli, and 11% Proved and 89% Probable Coal Reserves
from Bulli. Material assumptions for the Production Target and forecast
financial information for FY24 to FY28 are included in the Production Target
cautionary statement on Page 2.

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