REG - South32 Limited - Financial Results for Year Ending 30 June 2022
25/08/2022 07:00
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RNS Number : 1979X South32 Limited 25 August 2022
25 August 2022
South32 Limited
(Incorporated in Australia under the Corporations Act 2001)
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR: SOUHY
ISIN: AU000000S320
south32.net
SOUTH32 LIMITED
FINANCIAL RESULTS AND OUTLOOK YEAR ENDED 30 JUNE 2022
South32 accelerates portfolio transformation and delivers record earnings,
cash flow and shareholder returns
· Underlying earnings of US$2.6B and free cash flow from operations
(including EAI distributions) of US$2.6B
· Record shareholder returns in respect of FY22 of US$1.3B equal to 10% of
our market capitalisation(4)
· Group copper equivalent production(5) expected to increase by 14% in FY23
"We delivered record earnings and cash flow in FY22 as our stable operating
performance and recent portfolio improvements enabled us to capitalise on the
significant tailwind of commodity prices.
"We achieved record production at Worsley Alumina, while Hillside Aluminium
and Mozal Aluminium continued to test maximum technical capacity. At
Cannington we exceeded production guidance as we transitioned to a new mine
configuration, bringing forward higher-grade material and at Cerro Matoso we
achieved a 22% increase in nickel production.
"We made significant progress transforming our portfolio, increasing our
exposure to the metals critical to a low-carbon future. We added copper to our
portfolio through the acquisition of a 45 per cent interest in Sierra Gorda
and doubled our low-carbon aluminium capacity with an additional shareholding
in the hydro-powered Mozal Aluminium smelter and the restart of our 100%
renewable powered Brazil Aluminium smelter.
"At Hermosa, we completed a pre-feasibility study for the zinc-lead-silver
Taylor Deposit, which demonstrated its potential to be a globally significant
producer of base metals, and advanced our study of options for the
battery-grade manganese Clark Deposit.
"Reflecting our strong financial performance and disciplined approach to
capital management, the Board has resolved to pay a US$648 million
fully-franked final dividend in respect of H2 FY22 and a US$139 million
fully-franked special dividend, taking shareholder returns to a record US$1.3
billion in respect of the 2022 financial year. The Board has also resolved to
further expand our capital management program by US$156 million to US$2.3
billion, leaving US$250 million to be returned to shareholders by 1 September
2023.
"Looking forward, we are well positioned to navigate the current economic
uncertainty. We have a strong balance sheet with net cash of US$538 million
after funding our new investments during the year, while our ongoing focus
on cost management and an expected 14% increase in production will mitigate
industry-wide cost inflation. We have repositioned our portfolio toward metals
critical for a low-carbon future, having already established a pipeline of
high-quality development options."
Graham Kerr, South32 CEO
Financial Highlights((2)(6))
US$M FY22 FY21 % Change
Revenue 9,269 5,476 69%
Profit/(loss) before tax and net finance costs 3,724 (94) N/A
Profit/(loss) after tax 2,669 (195) N/A
Basic earnings per share (US cents)((7)) 57.4 (4.1) N/A
Ordinary dividends per share (US cents)((8)) 22.7 4.9 363%
Special dividends per share (US cents)((8)) 3.0 2.0 50%
Other financial measures
Underlying revenue((9)(10)) 10,630 7,323 45%
Underlying EBITDA((9)(11)) 4,755 1,856 156%
Underlying EBITDA margin((9)(12)) 47.1% 26.4% 20.7%
Underlying EBIT((9)(11)) 3,967 1,039 282%
Underlying EBIT margin((9)(13)) 39.4% 14.8% 24.6%
Underlying earnings((9)(11)) 2,602 489 432%
Basic Underlying earnings per share (US cents)((7)(9)) 56.0 10.3 444%
ROIC((9)(14)) 30.1% 6.2% 23.9%
Ordinary shares on issue (million) 4,628 4,675 (1%)
SAFETY
We are deeply saddened by the loss of one of our colleagues, Mr Desmin
Mienies, a contractor who was fatally injured while undertaking electrical
work at our Wessels Mine at South Africa Manganese on 30 November 2021. Our
deepest sympathies are with Mr Mienies' family, friends and colleagues. We
provided them with our support following the tragic incident and undertook a
detailed investigation to understand what happened. Learnings from the
investigation were shared across our organisation.
We recognise that we must continue to improve our safety performance. During
the first half of FY22, we partnered with a leading safety consultant to
undertake a review of our safety performance and identify areas for
improvement. This formed the foundation for our Safety Improvement Program, a
three-year global program of work designed to achieve a step-change in our
safety performance. Consistent with the review findings, in March 2022 we
published our revised internal safety standard - an important element in the
implementation of our Safety Improvement Program.
Contractors make up a significant proportion of our workforce and over the
last two years we have undertaken a substantial work program to improve
contractor safety. In FY22 we developed our internal contractor management
standard, which describes the end-to-end process, core components and related
performance requirements of our Contractor Management System of Work. It
defines the key phases of the contractor management value chain and outlines
the performance requirements for each phase, including how we support our
contractors to undertake work safely.
Our Total Recordable Injury Frequency (TRIF)((15)(16)) decreased by 12% to 5.3
per million hours worked in FY22 compared to the FY21 baseline((17)) of 6.0,
however we did not meet our target of a 20% reduction. Performance highlights
in FY22 included a 51% reduction in TRIF at Cerro Matoso and a 16% reduction
at Illawarra Metallurgical Coal.
OUR RESPONSE TO COVID-19
COVID-19 continued to affect our people, operations, projects and offices, and
we experienced periods of elevated case numbers and restrictions across all
our locations. We support the use of regulatory approved vaccines and actively
encourage vaccination for all our employees and contractors. Where possible we
have worked with local authorities for our employees and contractors, their
families and our communities to access vaccines.
BASIS OF UNDERLYING FINANCIAL RESULTS
The basis of the Group's underlying financial results has been updated from
FY22, with these changes also reflected in the FY21 comparative information.
There is no change to the Group's statutory reporting. Our material Equity
Accounted Investments (EAIs) are now included in our underlying financial
results on a proportional consolidation basis, consistent with how their
performance is assessed by the Group's Board and management, and reflecting
their increased contribution to the Group's financial results with the
acquisition of a 45% interest in Sierra Gorda((1)). In addition, South Africa
Manganese ore has been reported as a 54.6% interest (previously 60%) aligning
with our interest in Hotazel Manganese Mines((2)) and reflecting our Metalloys
manganese alloy smelter (60% interest) having been placed on care and
maintenance.
PERFORMANCE SUMMARY
The Group's statutory profit after tax increased by US$2,864M to a record
US$2,669M in FY22 as our stable operating performance and portfolio changes
that increased our exposure to higher margin businesses enabled us to
capitalise on the significant tailwind of commodity prices. Underlying
earnings increased by US$2,113M to a record US$2,602M in FY22. A
reconciliation of statutory to Underlying earnings is set out on page 6.
Underlying revenue increased by 45% to US$10,630M as we implemented innovative
logistics solutions to mitigate challenging freight and third-party port
performance to deliver volumes into favourable markets, capturing the benefit
of higher prices. This translated to a record operating margin of 47% (FY21:
26%), as we held increases in controllable costs to less than 2% of the
Group's total cost base for the year((18)). Underlying EBITDA increased by
US$2,899M to a record US$4,755M and Underlying EBIT increased by US$2,928M to
a record US$3,967M as the Group delivered a 30.1% Return on Invested Capital
(ROIC)((14)).
We generated record free cash flow from operations of US$2,561M, including
distributions from our manganese and Sierra Gorda EAIs. Our strong financial
performance supported our continued investment in our business and portfolio
changes, that have increased our exposure to metals critical for a low-carbon
future, while delivering record returns to shareholders. We finished the
period with net cash of US$538M having executed our inaugural US dollar bond
during the period, issuing US$700M in Senior Unsecured Notes (Notes) to
support the funding of our Sierra Gorda acquisition.
Specific highlights for FY22 included:
• Group copper equivalent production((5)) was 99% of guidance, as the majority
of operations delivered to revised plans, despite adverse impacts from weather
and labour availability caused by the COVID-19 pandemic;
• Worsley Alumina continued to operate above nameplate capacity, achieving
record annual production;
• Hillside Aluminium and Mozal Aluminium continued to test their maximum
technical capacity, despite the impact of higher load-shedding, capitalising
on strong aluminium prices to deliver record operating margins;
• Cannington transitioned to 100% truck haulage, while also beating our already
increased production guidance; and
• Cerro Matoso achieved a 22% increase in payable nickel production, benefitting
from improved plant availability following the prior period's furnace
refurbishment and higher-grades from our investment in the Q&P project.
We will return a record US$1,320M to our shareholders in respect of FY22
comprising:
• US$1,053M fully-franked ordinary dividends, including today's announced
US$648M fully-franked ordinary dividend in respect of H2 FY22; and
• US$267M as part of our ongoing capital management program, including today's
announced US$139M fully-franked special dividend in respect of H2 FY22 and
US$128M allocated to our on-market share buy-back across the financial year
(46M shares purchased at an average price of A$3.89 per share)
From day one we have established a successful track record for disciplined
capital allocation and returning excess cash to shareholders in both a timely
and efficient manner, buying back 13% of our shares on issue since commencing
our capital management program at an average price of A$2.93 per share.
Reflecting our strong financial position and disciplined approach to capital
management, the Board has today further expanded our capital management
program by US$156M to US$2,266M, leaving US$250M to be returned by 1 September
2023.
In FY22, we made substantial progress reshaping our portfolio toward metals
critical for a low-carbon future by:
• Adding copper exposure through the acquisition of a 45% interest in the Sierra
Gorda copper mine((1));
• Increasing our low-carbon aluminium production capacity by more than 100%,
acquiring an additional 16.6% shareholding in Mozal Aluminium((19)) and
participating in the restart of the Brazil Aluminium smelter((20));
• Acquiring an additional 18.2% interest in the Mineração Rio do Norte (MRN)
bauxite mine, taking our ownership to 33%((21)), and further aligning our
bauxite supply requirements within our Brazilian aluminium value chain;
• Completing a pre-feasibility study for the zinc-lead-silver Taylor Deposit,
confirming its potential to be the first development at our Hermosa
project((22));
• Advancing study work on our battery-grade manganese Clark Deposit at our
Hermosa project((22)); and
• Continuing our investment in greenfield exploration to discover our next
generation of base metals mines, spending US$26M across the Americas,
Australia and Europe, with plans to increase our investment to US$44M in FY23.
Subsequent to the end of the year we:
• Completed the sale of four non-core base metals royalties to Anglo Pacific
Group Plc for up to US$200M((23)), unlocking latent value in our portfolio;
• Acquired a 9.9% interest in Aldebaran Resources Inc., owner of the Altar
copper project in Suan Juan, Argentina, consistent with our focus on adding
options prospective for future base metal developments; and
• Announced that we would not proceed with an investment in the Dendrobium Next
Domain (DND) project((24)) at Illawarra Metallurgical Coal following our
consideration of recently completed study work and extensive analysis of
alternatives considered for the complex.
EARNINGS reconciliation
The Group's statutory profit after tax increased by US$2,864M from a loss of
US$195M to a record US$2,669M in FY22.
Consistent with our accounting policies, various items are excluded from the
Group's statutory profit/(loss) to derive Underlying earnings. The total
adjustments to derive Underlying EBIT (US$243M) shown in the table below
include the recognition of indirect tax assets following the restart of the
Brazil Aluminium smelter (US$77M pre-tax) and a net impairment loss of
non-financial assets (US$145M pre-tax) primarily related to our Eagle Downs
Metallurgical Coal development option (US$183M pre-tax), partially offset by
an impairment reversal for Brazil Aluminium (US$42M pre-tax). Further
information on these earnings adjustments is included on page 41.
The Group's Underlying EBITDA increased by US$2,899M (or 156%) to a record
US$4,755M as we benefitted from the significant tailwind of commodity prices
(US$3,666M) and we limited increases in our controllable costs (US$114M or 2%
of total our cost base((18))). Uncontrollable costs increased by US$839M with
significantly higher price-linked royalties and industry-wide inflation, most
notably in raw material prices and distribution costs. Portfolio changes,
including the divestment of lower returning businesses South Africa Energy
Coal and TEMCO, combined with the acquisition of our 45% interest in Sierra
Gorda and additional shareholding in Mozal Aluminium had a positive US$211M
impact on the result.
The Group also achieved record Underlying EBIT of US$3,967M in FY22,
increasing by US$2,928M (or 282%) on the prior year as Underlying depreciation
and amortisation reduced by US$29M to US$788M following the prior period
impairment at Illawarra Metallurgical Coal.
Profit/(loss) to Underlying EBITDA reconciliation((2)(6))
$USM FY22 FY21((9))
Profit/(loss) before tax and net finance costs 3,724 (94)
Adjustments to derive Underlying EBIT:
Significant items (77) (55)
Sierra Gorda joint venture adjustments 44 -
Manganese joint venture adjustments 216 210
(Gains)/losses on the consolidation or disposal of interests in operations (9) 159
Exchange rate (gains)/losses on the restatement of monetary items (50) 69
Net impairment loss of financial assets 26 -
Net impairment loss of non-financial assets 145 764
(Gains)/losses on non-trading derivative instruments, contingent consideration (52) (37)
and other investments measured at fair value through profit and loss
Major corporate restructures - 23
Total adjustments to derive Underlying EBIT 243 1,133
Underlying EBIT 3,967 1,039
Underlying depreciation and amortisation 788 817
Underlying EBITDA 4,755 1,856
Profit/(loss) to Underlying earnings reconciliation((2)(6))
US$M FY22 FY21((9))
Profit/(loss) after tax 2,669 (195)
Total adjustments to derive Underlying EBIT 243 1,133
Total adjustments to derive Underlying net finance costs (124) 34
Total adjustments to derive Underlying income tax expense (186) (483)
Underlying earnings 2,602 489
EARNINGS ANALYSIS
The following key factors influenced Underlying EBIT in FY22, relative to
FY21.
Reconciliation of movements in Underlying EBIT
(US$M)((2)(6)(9)(11)(25)(26)(27))
Earnings analysis US$M Commentary
FY21 Underlying EBIT 1,039
Change in sales price 3,666 Higher average realised prices for our commodities, including:
Metallurgical coal (+US$1,545M)
Aluminium (+US$1,027M)
Alumina (+US$386M)
Nickel (+US$313M)
Manganese ore (+US$279M)
Energy coal (+US$88M)
Zinc (+US$59M)
Lead (+US$23M)
Partially offset by a lower average realised price for silver (-US$54M)
Net impact of price-linked costs (728) Higher freight and distribution costs (-US$155M) also partially reflected in
Underlying revenue
Higher price-linked royalties (-US$148M)
Higher aluminium smelter raw material costs (-US$143M), including pitch and
coke
Higher caustic soda prices at Worsley Alumina (-US$113M) and Brazil Alumina
(-US$19M)
Higher coal, fuel oil and diesel prices (-US$76M), mostly at Brazil Alumina
and Worsley Alumina
Higher electricity prices (-US$21M) at Cerro Matoso and Illawarra
Metallurgical Coal
Change in exchange rates 56 Weaker Australian dollar (+US$56M), weaker Colombian peso (+US$18M) and
stronger South African rand (-US$11M)
Change in inflation (167) Inflation-linked indexation of our aluminium smelter electricity prices
(-US$40M)
General inflation across Australia, Southern Africa and South America
(-US$127M)
Change in sales volume (31) Lower volumes at: Illawarra Metallurgical Coal (-US$55M), Cannington
(-US$49M),
Australia Manganese (-US$28M), Brazil Alumina (-US$27M) and Worsley Alumina
(-US$22M). Partially offset by higher volumes at: Cerro Matoso (+US$122M),
South Africa Manganese (+US$18M) and Hillside Aluminium (+US$13M)
Controllable costs (114) Higher contractor and maintenance costs (-US$74M), including -US$39M at
Illawarra Metallurgical Coal to support the additional longwall changeouts and
maintenance activity
Higher port and demurrage costs (-US$19M) due to third-party logistics
constraints
Higher consumables costs (-US$14M)
Partially offset by lower labour costs (+US$17M), with headcount efficiencies
at some operations
Portfolio changes 211 Improved profitability, following the disposal of lower returning businesses
South Africa Energy Coal and TEMCO, the acquisitions of our Sierra Gorda
interest and additional shareholding in Mozal Aluminium, partially offset by
smelter restart costs at Brazil Aluminium
Other 35 Lower depreciation and amortisation at Illawarra Metallurgical Coal and the
recognition of historical tax credits at Brazil Alumina
FY22 Underlying EBIT 3,967
Net finance costs
The Group's FY22 Underlying net finance costs of US$155M comprise the
unwinding of the discount applied to our closure and rehabilitation provisions
(US$83M); interest on lease liabilities (US$54M) primarily at Worsley Alumina;
interest and transaction costs associated with the Notes issue and refinancing
of our revolving credit facility (US$14M) and our share of net finance costs
for the Sierra Gorda joint venture (US$6M).
Underlying net finance costs reconciliation((2)(6))
US$M FY22 FY21((9))
Unwind of discount applied to closure and rehabilitation provisions (83) (72)
Change in discount rate on closure and rehabilitation provisions 3 7
Interest on lease liabilities (54) (55)
Other (21) (7)
Discontinued operations - (43)
Underlying net finance costs (155) (170)
Add back earnings adjustment for exchange rate variations on net debt 40 (52)
Sierra Gorda joint venture adjustments((28)) 62 -
Manganese joint venture adjustments((28)) 22 18
Total adjustments to derive net finance costs 124 (34)
Net finance costs (31) (204)
Tax expense
The Group's FY22 Underlying income tax expense increased by US$830M to
US$1,210M for an Underlying ETR((29)) of 31.7%. Our FY22 Underlying ETR has
reduced significantly from the prior period's elevated rate (FY21: 43.3%),
following the derecognition of tax assets associated with the divestment of
South Africa Energy Coal in the prior period.
Our FY22 Underlying ETR reflects the corporate tax rates of the jurisdictions
in which we operate((30)), as well as the inclusion of the manganese business
and Sierra Gorda in Underlying earnings on a proportional consolidation basis
(including royalty related taxes for Australia Manganese and Sierra Gorda).
The Underlying ETR for our manganese business was 45.8% in FY22, including the
royalty related tax((31)) and the derecognition of certain deferred tax
assets.
Underlying income tax expense reconciliation and Underlying ETR((2)(6))
US$M FY22 FY21((9))
Underlying EBIT 3,967 1,039
Include: Underlying net finance income/(costs) (155) (170)
Remove: Share of (profit)/loss of equity accounted investments 2 9
Underlying profit/(loss) before taxation 3,814 878
Income tax expense/(benefit) 1,024 (103)
Tax effect of earnings adjustments to Underlying EBIT 32 247
Tax effect of earnings adjustments to net finance costs (13) (7)
Exchange rate variations on tax balances (20) 66
Tax effect of significant items (26) -
Sierra Gorda joint venture adjustment relating to income tax 1 -
Sierra Gorda joint venture adjustment relating to royalty related tax 4 -
Manganese joint venture adjustment relating to income tax 153 124
Manganese joint venture adjustment relating to royalty related tax 55 53
Total adjustments to derive Underlying income tax expense 186 483
Underlying income tax expense/(benefit) 1,210 380
Underlying ETR 31.7% 43.3%
Operating unit cost and operating margin performance
We achieved our updated FY22 Operating unit cost guidance at the majority of
our operations, despite the impact of industry-wide cost inflation, higher
price-linked royalties and a challenging operating environment influenced by
adverse weather and COVID-19 related labour restrictions. Group operating
margin increased to a record 47% (FY21: 26%) with our high operating leverage
and stronger commodity prices translating into higher margins for the majority
of our operations.
Operating unit cost((32)) and operating margin((12))
FY21 FY22 Change Operating unit cost commentary
Worsley Alumina
(US$/t) 214 265 24% Record volumes more than offset by a significant rise in caustic soda prices
(US$28/t) and elevated global freight rates (US$10/t)
Operating margin (%) 27% 35% 8%
Brazil Alumina (non-operated)
(US$/t) 203 288 42% Lower volumes and additional costs to recover from the bauxite ship unloader
outage (US$7/t), added to higher raw material (US$42/t) and energy costs
(US$13/t)
Operating margin (%) 29% 29% 0%
Hillside Aluminium
(US$/t) 1,631 2,137 31% A significant rise in raw material input costs including alumina, coke and
pitch (US$323/t), and energy cost inflation (US$45/t)
Operating margin (%) 24% 32% 8%
Mozal Aluminium
(US$/t) 1,702 2,243 32% A significant rise in raw material input costs including alumina, coke and
pitch (US$393/t), and energy cost inflation (US$29/t)
Operating margin (%) 23% 33% 10%
Sierra Gorda (non-operated)
(US$/t)((a)) n/a 14.6 n/a FY22 Operating unit costs reflect our first period of ownership (1 March to 30
June 2022)
(US$/lb CuEq)((33)) n/a 1.61 n/a
Operating margin (%) n/a 55% n/a
Cannington
(US$/t)((a)) 124 133 7% Impacted by planned lower throughput as we completed scheduled maintenance and
work to support the transition to 100% trucking
Operating margin (%) 55% 53% (2%)
Cerro Matoso
(US$/lb) 4.01 4.34 8% A significant increase in price-linked royalties (US$0.35/lb), energy prices
(US$0.18/lb) and costs to support processing of additional higher-grade
Q&P ore (US$0.15/lb). Partially offset by volume benefits (US$0.24/lb), a
weaker Colombian peso (US$0.19/lb) and the one-off benefit from the adjustment
of a royalty provision (US$0.14/lb)
Operating margin (%) 40% 57% 17%
Illawarra Metallurgical Coal
(US$/t) 87 126 45% A significant increase in price-linked royalties (US$15/t) and the impact of
reduced volumes (US$15/t), including our decision to cease sales of low-margin
coal wash material
Operating margin (%) 12% 64% 52%
Australia Manganese (FOB)
(US$/dmtu) 1.52 1.86 22% Lower volumes (US$0.12/dmtu) together with higher diesel prices (US$0.12/dmtu)
and consumable costs (US$0.04/dmtu)
Operating margin (%) 58% 58% 0%
South Africa Manganese (FOB)
(US$/dmtu) 2.48 2.73 10% Higher distribution and trucking costs to support increased sales volumes of
premium products (US$0.15/dmtu)
Operating margin (%) 25% 24% (1%)
(a) US dollar per tonne of ore processed. Periodic movements in
finished product inventory may impact Operating unit costs.
CASH FLOW
The Group generated record free cash flow from operations of US$2,240M and
received US$321M in (net) distributions((34)) from our manganese and Sierra
Gorda EAIs in FY22. Our record result benefited from the implementation of
innovative logistic solutions across multiple operations to mitigate the
impact of ongoing port congestion, which contributed to our strong sales
performance particularly during Q4 FY22. This reduced our inventory positions
by the end of the period, with the working capital benefit expected to be
realised in Group cash flow during Q1 FY23. Record profitability also gave
rise to a significant increase in income tax payments made during the period
(+US$705M to US$868M), excluding tax paid within our manganese and Sierra
Gorda EAIs.
Free cash flow from operations, excluding equity accounted investments
US$M FY22 FY21
Profit/(loss) from continuing and discontinued operations 3,724 (94)
Non-cash items 694 1,419
(Profit)/loss from equity accounted investments (272) (133)
(Profit)/loss on sale of operations - 159
Change in working capital (428) 61
Cash generated 3,718 1,412
Total capital expenditure, excluding EAI, including intangibles and (559) (566)
capitalised exploration
Operating cash flows before financing activities and tax, and after capital 3,159 846
expenditure
Interest (paid)/received((34)) (51) (44)
Income tax (paid)/received (868) (163)
Free cash flow from operations 2,240 639
The working capital build of US$428M was mainly attributable to:
• Trade and other receivables increasing by US$300M as we realised higher
commodity prices, and delivered a strong sales result in Q4 FY22, temporarily
increasing our receivables balance at the end of the period. Our debtor days
improved year-on-year to 21 days (FY21: 24 days);
• Inventory increasing by US$206M, mostly due to higher raw material input
prices;
• Provisions reducing by US$82M from a weaker Australian dollar and South
African rand; offset by
• Trade and other payables increasing by US$160M, due to the timing of raw
material purchases and the impact of higher price-linked royalties.
Working capital movement reconciliation
US$M Movement
Trade and other receivables (300)
Inventories (206)
Trade and other payables 160
Provisions and other liabilities (82)
Working capital movement (428)
Capital expenditure
The Group's capital expenditure((35)), excluding EAI, decreased by US$7M to
US$559M in FY22, following the divestment of South Africa Energy Coal (FY21:
US$76M) in June 2021:
• Safe and reliable capital expenditure increased by US$42M (or 13%) to US$367M
as we invested in longwall equipment and ventilation infrastructure at
Illawarra Metallurgical Coal, and bauxite residue capacity at our alumina
refineries;
• Improvement and life extension capital expenditure decreased by US$5M (or 8%)
to US$58M as our investment in aluminium smelter efficiency projects and the
Ore Sorting and Mechanical Ore Concentration (OSMOC) project at Cerro Matoso,
was more than offset by reduced activity on the DND project at Illawarra
Metallurgical Coal;
• Growth capital expenditure increased by US$25M (or 35%) to US$97M as we
invested in the construction of infrastructure to support orebody dewatering
for the Taylor Deposit at our Hermosa project; and
• Our spend on intangibles and capitalised exploration increased by US$7M (or
23%) to US$37M as we stepped-up our exploration activity at Hermosa and Ambler
Metals.
In addition, capital expenditure associated with our share of our manganese
and Sierra Gorda EAIs was US$164M with the inclusion of Sierra Gorda (US$81M)
and our ongoing investment in further tailings storage capacity at Australia
Manganese. Our spend at Sierra Gorda, following our acquisition of the 45%
interest on 22 February 2022, was primarily directed towards deferred
stripping activity and the continued execution of the plant's de-bottlenecking
project.
Capital expenditure (South32 share)((27)(35))
US$M FY22 FY21
Safe and reliable capital expenditure (367) (325)
Improvement and life extension capital expenditure (58) (63)
Growth capital expenditure (97) (72)
Intangibles and the capitalisation of exploration expenditure (37) (30)
Divested operation - South Africa Energy Coal - (76)
Total capital expenditure (excluding EAI) (559) (566)
EAI capital expenditure (164) (70)
EAI divested operation - TEMCO - (1)
Total capital expenditure (including EAI) (723) (637)
BALANCE SHEET, DIVIDENDS AND CAPITAL MANAGEMENT
The Group's net cash balance increased by US$132M to US$538M as we generated
record free cash flow from operations of US$2,240M, supporting our investment
in acquisitions (US$1,534M) that have increased our portfolio's exposure to
metals critical for a low-carbon future. We also returned US$788M to
shareholders by way of ordinary dividends (US$567M), special dividends
(US$93M) and our on-market share buy-back (US$128M, 46M shares across FY22).
Net cash/(debt)
US$M FY22 FY21
Cash and cash equivalents 2,365 1,613
Lease liabilities (650) (687)
Other interest bearing liabilities (1,177) (520)
Net cash/(debt) 538 406
Other interest bearing liabilities increased by US$657M to US$1,177M as we
executed our inaugural US dollar bond during the period, issuing US$700M in
Notes to support the funding of our Sierra Gorda acquisition. The Notes are
due in 2032 and will pay interest at a rate of 4.35% per annum((36)).
Consistent with our commitment to maintain an investment grade credit rating,
during the year both S&P Global Ratings and Moody's reaffirmed their
respective BBB+ and Baa1 credit ratings for the Group, and assigned the same
ratings to the Notes. We also retain access to significant liquidity, having
successfully executed the refinancing of our undrawn US$1.4B revolving credit
facility during the year as a Sustainability Linked Loan.
Our capital management framework is unchanged, and designed to promote
competition for capital through investment in high returning options or to
protect portfolio value, as well as to reward shareholders as our financial
performance improves. Demonstrating this, the Board has resolved to pay a
fully-franked ordinary dividend of US 14.0 cents per share (US$648M) in
respect of H2 FY22 in-line with our dividend policy to return a minimum 40% of
Underlying earnings every six months.
Having established a strong track record of returning excess cash to
shareholders, and reflecting our strong financial position and our confidence
in the outlook for the business, the Board has also resolved to pay a
fully-franked special dividend of US 3.0 cents per share (US$139M) and further
expanded our capital management program by US$156M to US$2.3B, leaving US$250M
to be returned by 1 September 2023.
Dividends announced
Period Dividend per share US$M Franking Pay-out ratio
(US cents)
H1 FY21 1.4 67 100% 49%
H2 FY21 3.5 164 100% 46%
August 2021 special dividend 2.0 93 100% N/A
H1 FY22 8.7 405 100% 40%
H2 FY22 14.0 648 100% 41%
August 2022 special dividend 3.0 139 100% N/A
South32 shareholders registered on the South African branch register will not
be able to dematerialise or rematerialise their shareholdings between 14 and
16 September 2022 (both dates inclusive), nor will transfers to/from the South
African branch register be permitted between 9 and 16 September 2022 (both
dates inclusive).
Details of the currency exchange rates applicable for the dividend will be
announced to the relevant stock exchanges. Further dividend information is
available on our website (www.south32.net (http://www.south32.net) ).
South32 American Depositary Receipts (ADRs) each represent five fully paid
ordinary shares in South32 and ADR holders will receive dividends accordingly,
subject to the terms of the Depositary Agreement.
Dividend timetable
Announce currency conversion into rand 12 September 2022
Last day to trade cum dividend on the Johannesburg Stock Exchange (JSE) 13 September 2022
Ex-dividend date on the JSE 14 September 2022
Ex-dividend date on the ASX and London Stock Exchange (LSE) 15 September 2022
Record date (including currency election date for ASX) 16 September 2022
Payment date 13 October 2022
OUTLOOK
PRODUCTION
The majority of our operations delivered to revised plans in FY22, despite
adverse impacts from weather and labour availability caused by the COVID-19
pandemic. While all guidance remains subject to further potential impacts from
COVID-19, we expect Group copper equivalent production((5)) to increase by 14%
in FY23 as we benefit from our investments in efficiency and improvement
projects and our acquisitions that will increase our production of metals
critical to a low-carbon future.
Production guidance (South32 share)((27))
FY22 FY23e((a)) FY24e((a)) Key guidance assumptions
Worsley Alumina
Alumina production (kt) 3,991 4,000 4,000 Expected to sustain above nameplate capacity in
FY23 and FY24
Brazil Alumina (non-operated)
Alumina production (kt) 1,297 1,395 1,400 Expected to increase by 8% in FY23 as the refinery returns to normalised
production rates, before creeping 5kt in FY24
Brazil Aluminium (non-operated)
Aluminium production (kt) 0.3 ↓100 179 Lowered in FY23 due to the slower ramp-up to nameplate capacity of all three
potlines (179ktpa, 40% basis)
Hillside Aluminium((37))
Aluminium production (kt) 714 720 720 Expected to test its maximum technical capacity
Mozal Aluminium((37))
Aluminium production (kt) 278 370 370 Expected to benefit from AP3XLE energy efficiency project and our increased
ownership interest
Sierra Gorda (non-operated)
Ore processed (Mt) 7.5 22.2 Throughput capacity expected to increase by 6% to ~50Mtpa (100% basis) by Q2
FY23 as the benefits of the plant de-bottlenecking project are realised
FY24 production guidance not provided
Payable copper equivalent production (kt)((38)) 30.6 89.0
Payable copper production (kt) 25.3 71.8
Payable molybdenum production (kt) 0.4 1.5
Payable gold production (koz) 9.6 29.9
Payable silver production (koz) 253 582
Cannington
Ore processed (kdmt) 2,618 2,850 2,700 Expected to benefit from the optimised mine configuration delivering earlier
access to higher-grade material. Recent strong production performance is
expected to continue into FY24
Payable zinc equivalent production (kt)((39)) 224.2 236.1 233.4
Payable silver production (koz) 12,946 13,500 13,500
Payable lead production (kt) 120.6 122.0 124.0
Payable zinc production (kt) 64.5 72.0 68.0
Cerro Matoso
Ore to kiln (kdmt) 2,703 2,850 2,850 Expected to increase by 4% from FY22 as plant availability returns to
normalised levels and the OSMOC project is commissioned, mitigating expected
grade decline
Payable nickel production (kt) 41.7 43.5 43.5
Illawarra Metallurgical Coal
Total coal production (kt) 6,509 7,400 5,300 Expected to increase by 14% in FY23 with fewer longwall moves and a recovery
from wet weather, subject to labour productivity as the operation is currently
negotiating the Appin Enterprise Agreements
Production expected to decline to 5.3Mt in FY24 as Dendrobium moves to a new
mining area, with an expected average run-rate of ~5.5Mtpa to FY28((40))
Metallurgical coal production (kt) 5,712 6,500 4,600
Energy coal production (kt) 797 900 700
Australia Manganese
Manganese ore production (kwmt) 3,363 3,400 3,400 Expected to recover from FY22's wet weather and
COVID-19 impacts, with the low-cost PC02 circuit expected to continue to
operate above nameplate capacity supporting higher volumes
South Africa Manganese
Manganese ore production (kwmt) 2,069 2,000 We expect to continue optimising production rates and our use of higher cost
trucking in response to market conditions
FY24 guidance subject to market demand and not provided
(a) The denotation (e) refers to an estimate or forecast year. All
guidance is subject to further potential impacts from COVID-19.
COSTS AND CAPITAL EXPENDITURE
Operating unit costs guidance
We continue to pursue cost efficiencies, having successfully delivered more
than US$50M of annualised savings across the Group through the simplification
of our functional structures and footprint (since FY20). This focus combined
with an improvement in planned volumes and lower producer currencies is
expected to provide partial relief from further upward pressure on our
Operating unit costs in FY23, despite continuing industry-wide inflation in
raw material input prices, labour and energy.
Operating unit cost((32)(41))
FY22 H1 FY22 H2 FY22 FY23e((a)(b)) Commentary FY23 key guidance assumptions
Worsley Alumina +8% from H2 FY22
(US$/t) 265 256 274 296 Significantly higher caustic soda prices and consumption, combined with
increased freight costs, partially offset by a weaker Australian dollar
Brazil Alumina (non-operated)
(US$/t) 288 262 312 Not provided Will continue to be influenced by energy and raw material input prices,
including caustic soda
Brazil Aluminium (non-operated)
(US$/t) n/a n/a n/a Not provided Will be influenced by the ramp-up profile for all three potlines and the price
of raw material inputs
Hillside Aluminium
(US$/t) 2,137 1,935 2,318 Not provided Will continue to be influenced by the price of raw material inputs, the South
African rand and inflation-linked energy costs
Mozal Aluminium
(US$/t) 2,243 2,008 2,429 Not provided Will continue to be influenced by the price of raw materials inputs, the South
African rand and inflation-linked energy costs
Sierra Gorda (non-operated) +1% from H2 FY22
(US$/t)((c)) 14.6 n/a 14.6 14.8 Efficiencies from the plant de-bottlenecking project, more than offset by
higher diesel prices and labour costs
Cannington -7% from H2 FY22
(US$/t)((c)) 133 128 139 129 Higher throughput from the optimised mine plan and a weaker Australian dollar,
to more than offset higher energy prices
Cerro Matoso +9% from H2 FY22
(US$/lb) 4.34 4.11 4.56 4.97 Higher price-linked royalties, energy prices and the impact of the prior
year's one-off royalty provision adjustment (US$0.13/lb), partially offset by
the benefit of additional volumes
Illawarra Metallurgical Coal -10% from H2 FY22
(US$/t) 126 123 129 116 Higher volumes and a weaker Australian dollar to more than offset labour and
energy cost inflation
Australia Manganese (FOB) +7% from H2 FY22
(US$/dmtu) 1.86 1.79 1.94 2.08 Higher labour and contractor costs associated with increased activity as the
strip ratio increases (FY23e: 5.9, FY22: 5.1), combined with higher diesel
prices, partially offset by a weaker Australian dollar
South Africa Manganese (FOB) -6% from H2 FY22
(US$/dmtu) 2.73 2.63 2.83 2.66 A draw down on previously built low-cost inventory from the barrier pillar
project and a weaker South African rand
(a) FY23e Operating unit cost guidance includes royalties (where
appropriate) and commodity price and foreign exchange rate forward curves or
our internal expectations (refer to footnote 41 on page 30).
(b) The denotation (e) refers to an estimate or forecast year. All
guidance is subject to further potential impacts from COVID-19.
(c) US dollar per tonne of ore processed. Periodic movements in
finished product inventory may impact Operating unit costs.
Capital expenditure guidance (excluding exploration and intangibles)
Group safe and reliable capital expenditure is expected to increase by US$312M
to US$785M in FY23 with a full year of spend from Sierra Gorda contributing
US$169M (or 54%) of the increase. We expect our investment at Illawarra
Metallurgical Coal to increase by US$86M to US$263M as we continue our work to
support the return to a single longwall configuration at Appin from
FY25((42)), including projects not executed in FY22 due to adverse weather and
COVID-19 related labour constraints.
Group improvement and life extension capital expenditure is expected to
increase by US$56M to US$170M in FY23 as we invest in plant de-bottlenecking
projects at Brazil Alumina and Sierra Gorda. At Worsley Alumina, we plan to
invest US$44M as we commence multi-year programs to open up new bauxite mining
areas, and advance decarbonisation projects at the refinery. At our manganese
business, we plan to invest in the Eastern Leases mine life extension project
(US$14M) for Australia Manganese and continue our mine and rail infrastructure
upgrades (US$28M) at South Africa Manganese.
FY23 growth capital expenditure is expected to increase by US$193M to US$290M
at our Hermosa project in Arizona as we invest in infrastructure to support
critical path dewatering and progress study work for the Taylor Deposit, ahead
of a planned final investment decision expected in mid CY23. Following the
decision by the United States Government to invoke the Defense Production Act,
supporting the production of critical metals including manganese, we are
looking at different options to potentially accelerate the pre-feasibility
study for the Clark Deposit.
Capital expenditure excluding exploration and intangibles (South32
share)((27))
US$M FY22 FY23e((a))
Worsley Alumina 47 45
Brazil Alumina 51 50
Brazil Aluminium 1 10
Hillside Aluminium 20 30
Mozal Aluminium 10 17
Cannington 43 60
Cerro Matoso 18 40
Illawarra Metallurgical Coal 177 263
Safe and reliable capital expenditure (excluding EAI) 367 515
Worsley Alumina 8 44
Brazil Alumina - 19
Cerro Matoso 19 4
Illawarra Metallurgical Coal 12 3
Other operations 19 15
Improvement and life extension capital expenditure (excluding EAI) 58 85
Hermosa 97 290
Growth capital expenditure 97 290
Total capital expenditure (excluding EAI) 522 890
Total capital expenditure (including EAI) 684 1,245
Capital expenditure for EAI excluding exploration and intangibles (South32
share)((27))
US$M FY22 FY23e((a))
Sierra Gorda 36 205
Australia Manganese 56 50
South Africa Manganese((2)) 14 15
Safe and reliable capital expenditure (EAI) 106 270
Sierra Gorda 45 43
Australia Manganese 6 14
South Africa Manganese((2)) 5 28
Improvement and life extension capital expenditure (EAI) 56 85
Total capital expenditure (EAI) 162 355
Capitalised exploration (South32 share)((27))
US$M FY22 FY23e((a))
Capitalised exploration (excluding EAI) 33 55
EAI capitalised exploration((2)) 2 8
Capitalised exploration (including EAI) 35 63
(a) The denotation (e) refers to an estimate or forecast year. All
guidance is subject to further potential impacts from COVID-19.
Other expenditure guidance
Underlying ETR is expected to reflect the composition of the corporate tax
rates and earnings from the jurisdictions in which we operate, including the
Australia Manganese and Sierra Gorda royalty related tax. All other
expenditure guidance is provided in the table below. These items are on a
proportional consolidation basis including our manganese and Sierra Gorda
EAIs.
Other expenditure guidance
FY22 FY23e((a)) Commentary FY23 key guidance assumptions
Group and unallocated Underlying EBIT (excluding greenfield exploration and
third party product and services EBIT)
(US$M) 82 100 One-off benefits recognised in H2 FY22
FY23 guidance reflects a normalised run-rate, including the effect of recent
portfolio changes
Underlying depreciation and amortisation
(US$M) 788 935 FY23 guidance includes the first full year of owning our interest in Sierra
Gorda (US$135M)
Underlying net finance costs
(US$M) 155 135 FY23 guidance is expected to reflect a normalised level of expenditure,
following one-off costs associated with the Sierra Gorda acquisition in FY22
Greenfield exploration
(US$M) 26 44 Increased activity as we advance our greenfield exploration programs targeting
base metals in the Americas, Australia and Europe
(a) The denotation (e) refers to an estimate or forecast year. All
guidance is subject to further potential impacts from COVID-19.
OPERATIONS ANALYSIS
A summary of the underlying performance of the Group's operations is presented
below and more detailed analysis is presented on pages 18 to 28. Unless
otherwise stated: all metrics reflect South32's share; Operating unit cost is
Underlying revenue less Underlying EBITDA excluding third party sales divided
by sales volumes; Operating cost is Underlying revenue less Underlying EBITDA
excluding third party sales; and Realised sales price is calculated as
Underlying revenue excluding third party sales divided by sales volume.
Operations table (South32 share)((6)(27))
Underlying revenue Underlying EBIT
US$M FY22 FY21 FY22 FY21
Worsley Alumina 1,625 1,173 386 143
Brazil Alumina 524 400 89 66
Brazil Aluminium - - (44) (3)
Hillside Aluminium 2,254 1,511 666 293
Mozal Aluminium 924 578 271 98
Sierra Gorda 241 - 75 -
Cannington 736 757 315 350
Hermosa - - (14) (8)
Cerro Matoso 929 493 463 122
Illawarra Metallurgical Coal 2,338 758 1,388 (103)
Australia Manganese 848 730 402 304
South Africa Manganese 419 337 58 48
Third party products and services((43)) 600 298 20 10
Inter-segment / Group and unallocated (808) (573) (108) (131)
South32 Group (excluding South Africa Energy Coal) 10,630 6,462 3,967 1,189
South Africa Energy Coal - 861 - (150)
South32 Group 10,630 7,323 3,967 1,039
Worsley alumina
(86% share)
Volumes
Worsley Alumina saleable production increased by 1% (or 28kt), to a record of 3,991kt in FY22, as the refinery delivered above its nameplate capacity (4.6Mtpa, 100% basis), realising the benefit of embedded improvements. The refinery is expected to sustain production above nameplate in FY23 and FY24 with 4,000kt per annum expected. Calciner maintenance is scheduled for Q1 and Q3 during FY23.
Operating costs
Operating unit costs increased by 24% (or US$51/t), to US$265/t, as the
benefit of record volumes was more than offset by a significant rise in
caustic soda prices (FY22: US$581/t, FY21: US$302/t) that accounted for more
than 60% of the increase, and elevated global freight rates.
We expect FY23 Operating unit costs to rise by 12%, to US$296/t, as
significantly higher caustic soda prices (an assumed 28% year-on-year
increase) and an increase in planned consumption (FY23e: 106 kg/t, FY22: 102
kg/t), more than offset the benefit of a weaker Australian dollar. While
global freight rates are expected to remain elevated, we will continue to also
capture the impact in our realised prices. The refinery sources its power from
a combination of coal and gas. While not currently expected to have an impact
on our FY23 Operating unit costs, we continue to monitor the performance of
our domestic third-party coal supply and our requirement to supplement it with
potentially higher cost energy. Exchange rate and price assumptions for FY23
Operating unit cost guidance are detailed on page 30, footnote 41.
Financial performance
Underlying EBIT increased by 170% (or US$243M), to US$386M, as higher average
realised alumina prices (+US$461M) more than offset higher caustic soda prices
(-US$113M), price-linked freight rates (-US$47M) and energy costs (-US$18M).
Capital expenditure
Safe and reliable capital expenditure was US$47M in FY22 and is expected to be
US$45M in FY23 as we continue our investment in additional bauxite residue
disposal capacity.
Improvement and life extension capital expenditure was US$8M in FY22. We
expect to spend US$44M in FY23 as we advance decarbonisation projects at the
refinery (US$26M) and progress our work to access new bauxite mining areas
(US$8M).
In FY23 our decarbonisation program is focused on completing a feasibility
study for the mud-washing project and progressing work on the conversion of
our first coal-fired boiler to gas. The mud-washing project is expected to
lower water and energy consumption at the refinery, with the goal of reducing
Worsley Alumina's operational greenhouse gas emissions by approximately
295,000 tonnes per annum (or ~7%) and water consumption by ~6%, from FY21
levels.
South32 share FY22 FY21
Alumina production (kt) 3,991 3,963
Alumina sales (kt) 3,974 4,004
Realised alumina sales price (US$/t) 409 293
Operating unit cost (US$/t) 265 214
South32 share (US$M) FY22 FY21
Revenue 1,625 1,173
Underlying EBITDA 571 318
Underlying EBIT 386 143
Net operating assets 2,571 2,667
Capital expenditure 55 55
Safe and reliable 47 51
Improvement and life extension 8 4
BRAZIL ALUMINA
(36% SHARE)
Volumes
Brazil Alumina saleable production decreased by 7% (or 101kt) to 1,297kt in
FY22 as the refinery returned to nameplate capacity (3.86Mtpa, 100% basis)
from October 2021, following an incident in July 2021 that damaged one of the
two bauxite ship unloaders at the operation.
Production is expected to increase by 8% to 1,395kt in FY23 as the refinery
returns to normalised production rates, ahead of creeping volumes to 1,400kt
in FY24.
Operating costs
Operating unit costs increased by 42% to US$288/t with lower volumes and
additional costs to recover from the bauxite ship unloader outage adding to
raw material and energy cost inflation that was particularly acute in H2 FY22.
While guidance is not provided for this non-operated facility, the refinery
will continue to be influenced by energy and raw material input prices,
including caustic soda.
Financial performance
Underlying EBIT increased by 35% (or US$23M), to US$89M, as higher average
realised alumina prices (+US$151M) more than offset higher raw material and
energy prices (-US$76M), lower sales volumes (-US$27M) and increased
maintenance costs (-US$7M) due to the bauxite ship unloader incident.
Capital expenditure
Safe and reliable capital expenditure increased by US$26M, to US$51M in FY22,
as we stepped-up our rate of investment in bauxite residue disposal capacity.
We expect to spend US$50M in FY23 as we continue this investment.
Improvement and life extension capital expenditure is expected to increase to
US$19M in FY23 as we commence work on the refinery's De-bottlenecking Phase
Two project. The project is expected to increase nameplate production rates by
approximately 4% to 1.45Mt from H1 FY26, with anticipated capital expenditure
of ~US$40M between FY23 and FY25.
Our acquisition of an additional 18.2% interest in MRN was completed on 29
April 2022. Our increased ownership of MRN secures and further aligns our
bauxite supply requirements within our Brazilian value chain, and is an
important step as we work with our partners to complete a pre-feasibility
study for the MRN life extension project. The pre-feasibility study is now
expected to be completed in late CY22.
South32 share FY22((a)) FY21
Alumina production (kt) 1,297 1,398
Alumina sales (kt) 1,299 1,391
Realised sales price (US$/t) 403 288
Operating unit cost (US$/t) 288 203
South32 share (US$M) FY22((a)) FY21
Revenue 524 400
Underlying EBITDA 150 117
Underlying EBIT 89 66
Net operating assets((b)) 696 570
Capital expenditure 51 25
Safe and reliable 51 25
Improvement and life extension - -
(a) The increase in ownership in MRN has triggered a change in
accounting treatment with the investment accounted for using the equity method
(formerly classified as an investment in an equity instrument designated as
fair value through other comprehensive income).
(b) Includes the recognition of indirect tax assets (US$103M
pre-tax) following the restart of the Brazil Aluminium smelter (formerly
reflected in the net operating assets of Brazil Aluminium as at 31 December
2021 (US$77M pre-tax)).
BRAZIL ALUMINIUM
(40% SHARE)
Volumes
Brazil Aluminium saleable production was 0.3kt in FY22 with first production achieved in Q4 FY22 following the successful restart of the smelter. With a slower than anticipated ramp-up associated with the need to stabilise the electrolytic bath, we have revised FY23 production guidance down by 29% to 100kt (40% basis) with nameplate capacity (179ktpa, 40% basis) now expected to be achieved in the Q4 FY23 (previously Q3 FY23). Production is then expected to increase to 179kt in FY24 as the smelter operates at nameplate capacity for the full year.
Operating costs
While cost guidance is not provided for this non-operated facility, we expect FY23 Operating unit costs to be influenced by the ramp-up profile for all three potlines and the price of raw material inputs. Once at nameplate capacity we expect the smelter to be in the second quartile of the global aluminium site cost curve, with our share of energy requirements secured under long-term, cost efficient, 100% renewable power contracts. Our alumina supply will be sourced from the co-located Brazil Alumina refinery with prices linked to the Platts index on a M-1 basis.
Financial performance
Underlying EBIT was a loss of US$44M as costs incurred to support the
smelter's restart were expensed. With first sales to domestic customers
completed in July 2022, no revenue was recognised in FY22.
Capital expenditure
Safe and reliable capital expenditure was US$1M in FY22. We expect to
capitalise a further ~US$10M of expenditure on restart activities in FY23.
South32 share FY22 FY21
Aluminium production (kt) 0.3 -
Aluminium sales (kt) - -
Realised sales price (US$/t) - -
Operating unit cost (US$/t) - -
South32 share (US$M) FY22 FY21
Revenue - -
Underlying EBITDA (43) (3)
Underlying EBIT (44) (3)
Net operating assets((a)) 46 1
Capital expenditure 1 -
Safe and reliable 1 -
Improvement and life extension - -
(a) Net operating assets as at 31 December 2021 reflected the
recognition of indirect tax assets following the restart of the smelter
(US$77M pre-tax). This item has been re-allocated to Brazil Alumina as at 30
June 2022.
hillside aluminium
(100% SHARE)
Volumes
Hillside Aluminium saleable production decreased by 3kt to 714kt in FY22 as
the smelter continued to test its maximum technical capacity, despite the
impact of increased load-shedding.
Production is expected to reach 720kt across both FY23 and FY24, subject to
load-shedding.
Operating costs
Operating unit costs increased by 31%, to US$2,137/t, as a significant rise in
raw material input costs created inflationary pressure across the aluminium
industry. Alumina, coke, pitch and electricity accounted for 77% of the
smelter's cost base in FY22 (FY21: 78%).
While Operating unit cost guidance is not provided, the cost profile of the
smelter will continue to be heavily influenced by the price of raw material
inputs, including alumina supplied by our Worsley Alumina refinery with prices
linked to the PAX on a M-1 basis, and other external factors including the
South African rand and inflation-linked energy costs.
Financial performance
Underlying EBIT increased by 127% (or US$373M), to US$666M, as stronger
aluminium prices (+US$731M) more than offset higher raw material input prices
(-US$234M), and power costs (-US$32M). While additional shipping costs
(-US$25M) from higher freight rates and extended demurrage due to poor
third-party port performance impacted earnings, the extent of those impacts
was mitigated as we established alternative discharge and shipping options.
162 pots were relined at a cost of US$274k per pot (FY21: 120 pots at US$244k
per pot) in FY22. Our first pots utilising the AP3XLE energy efficiency
technology were relined during Q4 FY22, with 99 pots scheduled to be relined
in FY23.
Capital expenditure
Capital expenditure increased by US$7M, to US$24M in FY22, and is expected to
increase a further US$6M to US$30M in FY23 as we continue investment in a
replacement trucking fleet for the transport of liquid hot metal and our
roll-out of the AP3XLE technology.
The AP3XLE energy efficiency project is expected to reduce the smelter's
energy consumption and in turn lower greenhouse gas emissions by approximately
150,000 to 200,000 tonnes per annum once fully deployed. Capital expenditure
of approximately US$18M is expected between FY23 to FY28.
South32 share FY22 FY21
Aluminium production (kt) 714 717
Aluminium sales (kt) 713 707
Realised sales price (US$/t) 3,161 2,137
Operating unit cost (US$/t) 2,137 1,631
South32 share (US$M) FY22 FY21
Revenue 2,254 1,511
Underlying EBITDA 730 358
Underlying EBIT 666 293
Net operating assets 927 733
Capital expenditure 24 17
Safe and reliable 20 17
Improvement and life extension 4 -
Mozal aluminium
(63.7% SHARE)((19))
Volumes
Mozal Aluminium saleable production increased by 5% (or 13kt) to 278kt in FY22
with the smelter benefitting from our roll-out of the AP3XLE energy efficiency
technology, which partially offset the impact of increased load-shedding. Our
equity share of production reflects the completion of our acquisition of an
additional 16.6% shareholding in the smelter on 31 May 2022, taking our
ownership to 63.7%.
Our share of production is expected to increase 33% to 370kt in FY23 and FY24
(subject to load-shedding), reflecting our new ownership and the volume
benefits of our investment in the AP3XLE technology.
Operating costs
Operating unit costs increased by 32%, to US$2,243/t, as a significant rise in
raw material input costs created inflationary pressure across the aluminium
industry. Alumina, coke, pitch and electricity accounted for 74% of the
smelter's cost base in FY22 (FY21: 73%).
While Operating unit cost guidance is not provided, the cost profile of the
smelter will continue to be heavily influenced by the price of raw material
inputs, including the price of alumina supplied by our Worsley Alumina
refinery, and other external factors including the South African rand and
inflation-linked energy costs.
Approximately 50% of the alumina supplied to the smelter is priced as a
percentage of the LME aluminium index under a legacy contract and the
remainder linked to the PAX on an M-1 basis, with caps and floors embedded
within specific contracts that reset each calendar year.
Financial performance
Underlying EBIT increased by 177% (or US$173M), to US$271M, as stronger
realised aluminium prices (+US$297M) and the benefit of our increased
ownership more than offset higher raw material input prices (-US$109M) and
freight related costs (-US$11M).
127((44)) pots were relined at a cost of US$266k per pot (FY21: 134((44)) pots
at US$252k per pot) in FY22. We expect 106((44)) pots to be relined in FY23 as
we continue our roll-out of the AP3XLE energy efficiency technology.
Capital expenditure
Capital expenditure of US$11M was unchanged in FY22 and is expected to
increase to US$19M in FY23 as we invest in plant upgrades and continue our
roll-out of the AP3XLE energy efficiency technology.
South32 share FY22((a)) FY21
Aluminium production (kt) 278 265
Aluminium sales (kt) 276 262
Realised sales price (US$/t) 3,348 2,206
Operating unit cost (US$/t) 2,243 1,702
South32 share (US$M) FY22((a)) FY21
Revenue 924 578
Underlying EBITDA 305 132
Underlying EBIT 271 98
Net operating assets 615 456
Capital expenditure 11 11
Safe and reliable 10 10
Improvement and life extension 1 1
(a) Our underlying results reflect the completion of our acquisition
of an additional 16.6% shareholding in the smelter on 31 May 2022, taking our
ownership to 63.7%. Prior period numbers have not been restated for this
change in ownership (presented on a 47.1% basis).
SIERRA GORDA
(45% SHARE)
Volumes
We completed our acquisition of a 45% interest in the Sierra Gorda copper mine
on 22 February 2022. Our share of copper equivalent production((38)) from the
date of acquisition was 29.5kt (25.3kt of copper, 0.4kt of molybdenum, 9.6koz
of gold and 253koz of silver).
Our FY23 production guidance of 89kt copper equivalent production((38))
(copper 71.8kt, molybdenum 1.5kt, gold 29.9koz and silver 582koz) reflects our
expectation for higher plant throughput as the benefits of the
de-bottlenecking project are realised. FY24 production guidance is not
provided for this non-operated mine.
Operating costs
Operating unit costs in our first period of ownership were US$14.6/t ore
processed or US$1.61/lb CuEq((33))((a)).
We expect FY23 Operating unit costs to be approximately US$14.8/t ore
processed, with volume efficiencies from the plant's de-bottlenecking project,
more than offset by higher diesel prices and labour costs. Exchange rate and
price assumptions for FY23 Operating unit cost guidance are detailed on page
30, footnote 41.
Financial performance
Underlying EBIT was US$75M for the period from 22 February 2022 to 30 June
2022 as we recorded US$241M of revenue from the sale of 27.7kt of copper,
0.6kt of molybdenum, 9.9koz of gold and 282koz of silver.
Capital expenditure
Our share of safe and reliable capital expenditure for the period from
acquisition to 30 June 2022 was US$36M. We expect our share to increase to
US$205M in FY23, as the operation increases its rate of deferred stripping
(US$114M) and invests in further tailings storage infrastructure (US$29M).
We also directed US$10M to improvement and life extension capital expenditure
for the plant de-bottlenecking project in FY22 and expect to invest a further
US$43M in FY23. The project remains on-track to sustainably lift throughput by
6% to ~50Mtpa (100% basis) by Q2 FY23.
Separately, FY22 improvement and life extension capital included US$35M paid
to compensate for expenditure incurred for the brownfield oxide project prior
to our acquisition. Our purchase price for Sierra Gorda was adjusted for this
amount.
South32 share FY22((a)) FY21
Ore mined (Mt) 13.7 -
Ore processed (Mt) 7.5 -
Ore grade processed (%, Cu) 0.42 -
Payable copper equivalent production (kt)((38)) 29.5 -
Payable copper production (kt) 25.3 -
Payable molybdenum production (kt) 0.4 -
Payable gold production (koz) 9.6 -
Payable silver production (koz) 253 -
Payable copper sales (kt) 27.7 -
Payable molybdenum sales (kt) 0.6 -
Payable gold sales (koz) 9.9 -
Payable silver sales (koz) 282 -
Realised copper sales price (US$/lb) 3.50 -
Realised molybdenum sales price (US$/lb) 18.48 -
Realised gold sales price (US$/oz) 1,934 -
Realised silver sales price (US$/oz) 23.5 -
Operating unit cost 14.6 -
(US$/t ore processed)((45))
Operating unit cost (US$/lb CuEq)((33)) 1.61 -
South32 share (US$M) FY22((a)) FY21
Revenue 241 -
Underlying EBITDA 133 -
Underlying EBIT 75 -
Net operating assets 1,402 -
Capital expenditure 81 -
Safe and reliable 36 -
Improvement and life extension 45 -
Exploration expenditure 2 -
Exploration expensed 1 -
(a) Realised sales prices and Operating unit costs presented in the
table above reflect the period 1 March 2022 to 30 June 2022. Whereas
production and sales numbers, and all Income Statement items reflect the
period from first ownership (22 February 2022). Operating unit costs of
US$1.42/lb CuEq and realised prices (copper of US$3.18/lb, molybdenum of
US$18.73/lb, gold of US$1,776/oz and silver of US$20.65/oz) reflect the period
from first ownership (22 February 2022).
CANNINGTON
(100% SHARE)
Volumes
Cannington payable zinc equivalent production((39)) decreased by 6% (or
19.7kt), to 299.3kt in FY22, as we completed planned maintenance and built run
of mine stocks during Q4 FY22 to support the operation's transition to 100%
truck haulage.
FY23 zinc equivalent production((39)) is expected to increase by 5% to 236.1kt
(silver 13,500koz, lead 122.0kt and zinc 72.0kt) with the benefit of higher
throughput across the year, despite reduced crushing capacity in H1 FY23 as we
move the underground crusher to the surface. The operation's recent strong
production performance is expected to continue into FY24 with zinc equivalent
production((39)) expected to be 233.4kt (silver 13,500koz, lead 124.0kt and
zinc 68.0kt).
Operating costs
Operating unit costs increased by 7% (or US$9/t), to US$133/t, as we lowered
volumes to complete scheduled maintenance and work to support the transition
to 100% truck haulage.
We expect FY23 Operating unit costs to decrease by 3%, to US$129/t, as the
benefit of higher throughput from the optimised mine plan and a weaker
Australian dollar, more than offset higher energy prices. Exchange rate and
price assumptions for FY23 Operating unit cost guidance are detailed on page
30, footnote 41.
Financial performance
Underlying EBIT decreased by 10% (or US$35M), to US$315M, as our reduced sales
volumes (-US$49M) and higher freight rates (-US$6M) more than offset higher
prices (+US$28M) and initiatives to reduce our spend on labour and consultant
activity (+US$9M).
Capital expenditure
Capital expenditure increased by US$2M to US$45M in FY22 as we invested to
support the operation's transition to 100% truck haulage. Capital expenditure
is expected to increase to US$62M in FY23 as we complete planned upgrades to
water and ventilation infrastructure and install additional tailings storage
capacity.
South32 share FY22 FY21
Ore mined (kwmt) 2,753 2,819
Ore processed (kdmt) 2,618 2,746
Ore grade processed (g/t, Ag) 180 185
Ore grade processed (%, Pb) 5.4 5.7
Ore grade processed (%, Zn) 3.5 3.5
Payable zinc equivalent production (kt)((39)) 299.3 319.0
Payable silver production (koz) 12,946 13,655
Payable lead production (kt) 120.6 131.8
Payable zinc production (kt) 64.5 67.7
Payable silver sales (koz) 12,898 13,736
Payable lead sales (kt) 122.2 131.7
Payable zinc sales (kt) 66.2 69.0
Realised silver sales price (US$/oz) 21.0 25.4
Realised lead sales price (US$/t) 2,046 1,862
Realised zinc sales price (US$/t) 3,248 2,357
Operating unit cost 133 124
(US$/t ore processed)((45))
South32 share (US$M) FY22 FY21
Revenue 736 757
Underlying EBITDA 388 416
Underlying EBIT 315 350
Net operating assets 141 195
Capital expenditure 45 43
Safe and reliable 43 41
Improvement and life extension 2 2
Exploration expenditure 3 2
Exploration expensed 2 2
cerro matoso
(99.9% SHARE)
Volumes
Cerro Matoso payable nickel production increased by 22% (or 7.6kt) to 41.7kt
in FY22 as throughput recovered following completion of a major furnace
refurbishment in FY21 and we added higher-grade ore from the Q&P pit,
increasing average nickel grades by 6% (FY22: 1.73%; FY21: 1.63%). We expect
production volumes to increase by a further 4%, to 43.5kt in FY23 and FY24,
with plant availability returning to normalised levels post unplanned
maintenance and weather-related impacts, and the commissioning of the OSMOC
project, which is expected to mitigate grade decline.
Operating costs
Operating unit costs increased by 8%, to US$4.34/lb, as a significant increase
in price-linked royalties and energy prices, along with costs to support
processing of additional higher-grade Q&P volumes, were partially offset
by volume benefits and a weaker Colombian peso. The operation also recognised
a one-off benefit related to the reversal of a royalty provision.
We expect FY23 Operating unit costs to increase by 15%, to US$4.97/lb, with
higher price-linked royalties and energy prices, together with the impact of
the prior year's one-off reversal of a royalty provision, to more than offset
the benefit of additional volumes. Exchange rate and price assumptions for
FY23 Operating unit cost guidance are detailed on page 30, footnote 41.
Financial performance
Underlying EBIT increased by 280% (or US$341M), to US$463M, as higher realised
nickel prices (+US$313M) and sales volumes (+US$122M) more than offset higher
price-linked royalties (-US$31M), energy costs (-US$17M) and additional
expenditure on labour and contractors to support mining from the Q&P pit
(-US$7M).
Capital expenditure
Safe and reliable capital expenditure decreased by US$12M, to US$18M in FY22,
following the prior period's completion of the major furnace refurbishment.
Spend is expected to increase by US$22M, to US$40M in FY23, as we continue
upgrades to the furnace and invest in the new mobile fleet.
Improvement and life extension capital expenditure increased by US$4M, to
US$19M in FY22, and is expected to decline to US$4M in FY23 as we commission
the OSMOC project. The OSMOC project is expected to maintain payable nickel
production by offsetting natural grade decline beyond FY23((46)). This is
expected to be achieved through expanded processing capacity and improvements
to the upgrading circuit.
We are working to extend the mining contract at Cerro Matoso by 15 years from
2029 to 2044 benefitting from the expanded processing capacity that is
delivered by the OSMOC project. As part of the contract extension, we expect
to make a payment of approximately US$44M to the National Mining Agency in Q3
FY23.
South32 share FY22 FY21
Ore mined (kwmt) 4,867 3,238
Ore processed (kdmt) 2,703 2,385
Ore grade processed (%, Ni) 1.73 1.63
Payable nickel production (kt) 41.7 34.1
Payable nickel sales (kt) 41.8 33.5
Realised nickel sales price (US$/lb)((47)) 10.08 6.68
Operating unit cost (US$/lb) 4.34 4.01
Operating unit cost (US$/t)((48)()) 148 124
South32 share (US$M) FY22 FY21
Revenue 929 493
Underlying EBITDA 529 197
Underlying EBIT 463 122
Net operating assets 349 405
Capital expenditure 37 45
Safe and reliable 18 30
Improvement and life extension 19 15
Exploration expenditure - -
Exploration expensed - -
ILLAWARRA METALLURGICAL COAL
(100% SHARE)
Volumes
Illawarra Metallurgical Coal saleable production decreased by 15% (or 1,136kt)
to 6,509kt in FY22 as we completed three longwall moves during the year and
ceased sales of low-margin coal wash material. The impact of adverse weather
and COVID-19 related labour restrictions also impacted the operation's ability
to maintain budgeted development rates during the period.
We expect FY23 production volumes to increase by 14% to 7.4Mt with only two longwall moves planned and a recovery from wet weather in the prior period. Guidance is subject to maintaining labour productivity as Illawarra Metallurgical Coal is currently negotiating the Appin Enterprise Agreements.
FY24 production is expected to decline to 5.3Mt as we move into a new mining area at Dendrobium, followed by an average run-rate of ~5.5Mtpa to FY28 across the complex((40)).
Operating costs
Operating unit costs increased by 45%, to US$126/t, with a significant
increase in price-linked royalties, due to higher prices, accounting for 38%
of the change. Lower volumes and increased contractor and maintenance
activities were the other main drivers.
We expect FY23 Operating unit costs to decline by 8%, to US$116/t, with higher
volumes and a weaker Australian dollar more than offsetting labour and energy
cost inflation. Exchange rate and price assumptions for FY23 Operating unit
cost guidance are detailed on page 30, footnote 41.
Financial performance
Underlying EBIT increased by US$1,491M, to US$1,388M, with higher realised
prices (+US$1,635M), partially offset by higher price-linked royalties
(-US$101M), lower sales volumes (-US$55M), and increased contractor and
maintenance activity (-US$39M) to support the additional longwall moves.
Depreciation decreased by US$78M, to US$119M, following a non-cash impairment
of the operation's carrying value in FY21.
Capital expenditure
Safe and reliable capital expenditure increased by US$26M, to US$177M in FY22,
as we invested in additional coal clearance and ventilation infrastructure to
support the transition to a single longwall at Appin. Notwithstanding the
increase, FY22 expenditure was US$38M below our original guidance as adverse
weather and COVID-19 related labour restrictions impacted the ability of the
operation to complete planned work. FY23 guidance is expected to increase by
US$86M to US$263M as we continue our investment at Appin((42)), including the
completion of delayed activity.
Improvement and life extension capital expenditure decreased by US$25M to
US$12M in FY22 as we scaled back activity on the DND project.
Subsequent to the end of the period, we announced that we would not proceed
with an investment in the DND project following our consideration of recently
completed study work and extensive analysis of alternatives considered for the
complex((40)).
South32 share FY22 FY21
Metallurgical coal production (kt) 5,712 6,170
Energy coal production (kt) 797 1,475
Metallurgical coal sales (kt) 5,823 6,074
Energy coal sales (kt) 783 1,542
Realised metallurgical coal sales price (US$/t) 381 115
Realised energy coal sales price (US$/t) 156 40
Operating unit cost (US$/t) 126 87
South32 share (US$M) FY22 FY21
Revenue((49)) 2,338 758
Underlying EBITDA 1,507 94
Underlying EBIT 1,388 (103)
Net operating assets 786 612
Capital expenditure 189 188
Safe and reliable 177 151
Improvement and life extension 12 37
Exploration expenditure 11 14
Exploration expensed 9 5
AUSTRALIA MANGANESE
(ORE 60% SHARE, ALLOY 60% SHARE DIVESTED)
Volumes
Australia Manganese saleable ore production decreased by 5% (or 166kwmt), to
3,363kwmt in FY22, as weather-related disruptions and COVID-19 workplace
restrictions prevented the re-build of stockpiles ahead of the wet season.
This contributed to adverse ore handling characteristics that resulted in a
lower yield at the primary concentrator.
Production is expected to increase to 3,400kwmt across FY23 and FY24 with an
improvement in yield at the primary concentrator, and the PC02 circuit
continuing to operate above nameplate capacity supporting the higher volumes.
Operating costs
Operating unit costs increased by 22%, to US$1.86/dmtu, due to the lower
volumes together with higher diesel prices and consumable costs.
We expect FY23 Operating unit costs to increase by 12%, to US$2.08/dmtu, with
higher labour and contractor costs associated with an increase in activity due
to a higher strip ratio (FY23e: 5.9, FY22: 5.1), combined with further
expectations for an increase in diesel prices, to offset the benefit of a
weaker Australian dollar. Exchange rate and price assumptions for FY23
Operating unit cost guidance are detailed on page 30, footnote 41.
Financial performance
Ore Underlying EBIT increased by 31% (or US$94M), to US$402M, as higher
realised prices (+US$203M) more than offset the impact of lower sales volumes
(-US$28M), higher freight rates (-US$35M), diesel prices (-US$13M) and
consumable costs (-US$9M).
Our FY22 realised price improved year-on-year as we benefitted from improved
market conditions and achieved the high grade 44% manganese lump ore
index((50)), despite our low-cost PC02 circuit operating above its design
capacity, contributing 11% of total production (FY21: 10%).
Capital expenditure
Safe and reliable capital expenditure increased by US$3M, to US$56M in FY22,
as we continued to invest in tailings storage capacity. FY23 capital
expenditure is expected to decline by US$6M to US$50M as we continue this
work.
Improvement and life extension capital expenditure increased by US$4M, to
US$6M in FY22, and is expected to step-up to US$14M in FY23 as we progress the
feasibility study for our Eastern Leases mine life extension project, ahead of
a planned final investment decision in Q2 FY23.
South32 share FY22 FY21
Manganese ore production (kwmt) 3,363 3,529
Manganese alloy production (kt) - 51
Manganese ore sales (kwmt) 3,372 3,621
External customers 3,372 3,506
TEMCO - 115
Manganese alloy sales (kt) - 59
Realised external manganese ore sales price (US$/dmtu, FOB)((51)(52)) 5.29 4.13
Ore operating unit cost (US$/dmtu)((52)(53)) 1.86 1.52
South32 share (US$M) FY22 FY21
Revenue 848 730
Manganese ore 848 685
Manganese alloy - 57
Intra-segment elimination - (12)
Underlying EBITDA 488 385
Manganese ore 488 389
Manganese alloy - (4)
Underlying EBIT 402 304
Manganese ore 402 308
Manganese alloy - (4)
Net operating assets 258 243
Manganese ore 258 243
Manganese alloy - -
Capital expenditure 62 55
Safe and reliable 56 53
Improvement and life extension 6 2
Exploration expenditure 1 2
Exploration expensed - 1
south africa manganese
(ORE 54.6% SHARE((2)), ALLOY 60% SHARE)
Volumes
South Africa Manganese saleable ore production was largely unchanged at
2,069kwmt in FY22 as we increased volumes of premium material from our
Mamatwan mine during the year, more than offsetting the impact of planned
maintenance.
FY23 production guidance of 2,000kwmt assumes we continue our use of higher
cost trucking to optimise sales volumes of our premium products. We continue
to swing our production to meet demand and accordingly FY24 guidance is not
provided with volumes to be optimised subject to market conditions.
Our Metalloys manganese alloy smelter remains on care and maintenance as we
assess future options for the smelter. On 7 March 2022, we announced that the
sale of the smelter would not proceed following a failure to satisfy certain
commercial conditions to the agreement((54)).
Operating costs
Operating unit costs increased by 10%, to US$2.73/dmtu, as the operation
increased its use of higher cost trucking (FY22: 35%, FY21: 31%) to deliver
additional volumes of premium product and maximise cash flow.
We expect FY23 Operating unit costs to decrease by 3%, to US$2.66/dmtu, as we
realise the benefit of drawing down previously built low-cost inventory from
the barrier pillar project and a weaker South African rand. Exchange rate and
price assumptions for FY23 Operating unit cost guidance are detailed on page
30, footnote 41.
Financial performance
Ore Underlying EBIT increased by 16% (or US$11M), to US$79M, as higher
realised prices (+US$76M) and sales volumes (+US$13M) more than offset
increased freight costs (-US$46M) and a stock drawdown as we optimised our
sales mix of premium material (-US$15M).
Our realised sales price was a premium of ~18% to the medium grade 37%
manganese lump ore index((55)), as we maximised our revenue by optimising our
sales mix with additional volumes of our premium products.
Manganese alloy Underlying EBIT was a loss of US$21M recognising an adjustment
to the closure and rehabilitation provision with the Metalloys smelter
remaining on care and maintenance.
Capital expenditure
Safe and reliable capital expenditure decreased by US$1M, to US$14M in FY22,
with capital expenditure expected to be largely unchanged at US$15M in FY23.
Improvement and life extension capital expenditure increased to US$5M in FY22,
and we expect a further step-up to US$28M in FY23 as we open up new mining
areas at Mamatwan and upgrade our rail infrastructure to maximise flexibility
in our logistics.
South32 share((2)) FY22 FY21
Manganese ore production (kwmt) 2,069 2,060
Manganese alloy production (kt) - -
Manganese ore sales (kwmt) 2,170 2,035
External customers 2,170 2,035
Metalloys - -
Manganese alloy sales (kt) - 11
Realised external manganese ore sales price (US$/dmtu, FOB)((56)(57)) 3.92 3.53
Ore operating unit cost (US$/dmtu)((53)(57)) 2.73 2.48
South32 share (US$M)((2)) FY22 FY21
Revenue 419 337
Manganese ore 419 330
Manganese alloy - 7
Underlying EBITDA 78 64
Manganese ore 99 84
Manganese alloy (21) (20)
Underlying EBIT 58 48
Manganese ore 79 68
Manganese alloy (21) (20)
Net operating assets/(liabilities) 135 152
Manganese ore 211 212
Manganese alloy (76) (60)
Capital expenditure 19 15
Safe and reliable 14 15
Improvement and life extension 5 -
Exploration expenditure 1 1
Exploration expensed 1 1
notes
(1) Refer to market release "South32 completes acquisition of 45% interest in
Sierra Gorda copper mine" dated 22 February 2022.
(2) South Africa Manganese ore has been reported as a 54.6% interest (previously
60%) reflecting our Metalloys manganese alloy smelter (60% interest) having
been placed on care and maintenance, and aligning with our interest in Hotazel
Manganese Mines (HMM). South32 has a 44.4% ownership interest in HMM. 26% of
HMM is owned by a B-BBEE consortium comprising Ntsimbintle Mining (9%), NCAB
Resources (7%), Iziko Mining (5%) and HMM Education Trust (5%). The interests
owned by NCAB Resources, Iziko Mining and HMM Education Trust were acquired
using vendor finance with the loans repayable via distributions attributable
to these parties, pro rata to their share in HMM. Until these loans are
repaid, South32's interest in HMM is accounted at 54.6%.
(3) Net tangible assets as at 30 June 2022 includes all right-of-use assets and
lease liabilities, in accordance with AASB 16 Leases.
(4) Market capitalisation as at 19 August 2022. Calculated as the number of shares
on issue (4,628 million), the South32 closing share price A$4.19, and an
AUD:USD exchange rate of 0.69.
(5) Group FY22 and FY23e copper equivalent production for all operations. Copper
equivalent production was calculated using FY22 realised prices for all
operations except for Brazil Aluminium which is based on FY22 average index
price for aluminium.
(6) During the current financial reporting period the internal reporting of the
Group's consolidated financial results was changed, with these changes also
reflected in the FY21 comparative information. The underlying information
reflects the Group's interest in material equity accounted investments and is
presented on a proportional consolidation basis, which is the measure used by
the Group's Board and management to assess their performance.
(7) FY22 basic earnings per share is calculated as Profit/(loss) after tax divided
by the weighted average number of shares for FY22 (4,647 million). FY22 basic
Underlying earnings per share is calculated as Underlying earnings divided by
the weighted average number of shares for FY22. FY21 basic earnings per share
is calculated as Profit/(loss) after tax divided by the weighted average
number of shares for FY21 (4,771 million). FY21 basic Underlying earnings per
share is calculated as Underlying earnings divided by the weighted average
number of shares for FY21
(8) FY22 ordinary dividends per share is calculated as H1 FY22 ordinary dividend
announced (US$405M) divided by the number of shares on issue at 31 December
2021 (4,650 million) plus H2 FY22 ordinary dividend announced (US$648M)
divided by the number of shares on issue at 30 June 2022 (4,628 million). FY22
special dividends per share is calculated as H2 FY22 special dividend
announced (US$139M) divided by the number of shares on issue at 30 June 2022
(4,628 million).
(9) FY21 includes TEMCO and discontinued operation South Africa Energy Coal.
(10) Underlying revenue includes revenue from third party products and services.
(11) The underlying information reflects the Group's interest in material equity
accounted joint ventures and is presented on a proportional consolidation
basis. Underlying EBIT is profit before net finance costs, tax and any
earnings adjustments, including impairments. Underlying EBITDA is Underlying
EBIT before underlying depreciation and amortisation. Underlying earnings is
Profit/(loss) after tax and earnings adjustment items. Underlying earnings is
the key measure that South32 uses to assess the performance of the South32
Group, make decisions on the allocation of resources and assess senior
management's performance. In addition, the performance of each of the South32
operations and operational management is assessed based on Underlying EBIT. In
order to calculate Underlying earnings, Underlying EBIT and Underlying EBITDA,
the following items are adjusted as applicable each period, irrespective of
materiality:
• Exchange rate (gains)/losses on restatement of monetary items;
• Impairment losses/(reversals);
• Net (gains)/losses on disposal and consolidation of interests in businesses;
• (Gains)/losses on non-trading derivative instruments, contingent consideration
and other investments measured at fair value through profit or loss;
• Major corporate restructures;
• Joint venture adjustments;
• Exchange rate variations on net debt;
• Tax effect of earnings adjustments; and the
• Exchange rate variations on tax balances
In addition, items that do not reflect the underlying operations of South32,
and are individually, or in combination with other related earnings
adjustments, significant to the financial statements, are excluded to
determine Underlying earnings. When applicable, significant items are detailed
in the Financial Information.
(12) Comprises Underlying EBITDA excluding third party product EBITDA, divided by
Underlying revenue excluding third party product revenue. Also referred to as
operating margin.
(13) Comprises Underlying EBIT excluding third party product EBIT, divided by
Underlying revenue excluding third party product revenue.
(14) Return on invested capital (ROIC) is a key measure that South32 uses to assess
performance. ROIC is calculated as Underlying EBIT less the discount on
rehabilitation provisions included in net finance costs, tax effected by the
Group's Underlying effective tax rate (ETR) including our material equity
accounted investments on a proportional consolidation basis, divided by the
sum of fixed assets (excluding any rehabilitation assets, the impairment of
Eagle Downs Metallurgical Coal and Illawarra Metallurgical Coal, the
impairment reversal of Brazil Aluminium, and unproductive capital associated
with Growth and Life Extension projects) and inventories.
(15) To ensure that incident classification definitions are applied uniformly
across our workforce, we have adopted the United States Government
Occupational Safety and Health Administration (OSHA) and the International
Council on Mining and Metals (ICMM) guidelines for the recording and reporting
of occupational injuries and illnesses.
(16) Total Recordable Injury Frequency (TRIF): (The sum of recordable injuries x
1,000,000) ÷ exposure hours. This is stated in units of per million hours
worked for employees and contractors.
(17) Our FY21 TRIF baseline was adjusted at end FY21 to account for the removal of
South Africa Energy Coal and TEMCO from the portfolio.
(18) The Group's total cost base of US$5,971M for FY22 includes EAI and excludes
Other income. It includes a US$96M adjustment for Other income and other
accounting related adjustments to reconcile to Underlying revenue minus
Underlying EBITDA.
(19) Refer to market release "South32 completes acquisition of additional
shareholding in Mozal Aluminium" dated 31 May 2022.
(20) Refer to market release "Restart of Brazil Aluminium using renewable power"
dated 6 January 2022.
(21) Refer to media release "South32 completes acquisition of additional interest
in Mineração Rio do Norte" dated 2 May 2022.
(22) Refer to market release "Hermosa project update" dated 17 January 2022.
(23) Refer to market release "South32 unlocks up to US$200M in value from non-core
royalty sale" dated 12 July 2022. Includes US$103M in cash payments, US$82M of
Anglo Pacific Group Plc shares issued on completion and contingent payments of
up to US$15M. The US$103M cash payment comprises US$48M paid on completion,
and US$55M payable in six equal quarterly instalments over the 18 months from
completion. The contingent payment is triggered if the West Musgrave project
achieves commercial production, and throughput and commodity price-related
conditions are met prior to an agreed expiry date.
(24) Refer to market release "Dendrobium Next Domain Update" dated 23 August 2022.
(25) Sales price variance reflects the revenue impact of changes in commodity
prices, based on the current period's sales volume. Price-linked costs
variance reflects the change in royalties together with the change in input
costs driven by changes in commodity prices or market traded consumables.
Foreign exchange reflects the impact of exchange rate movements on local
currency denominated costs and sales. Volume variance reflects the revenue
impact of sales volume changes, based on the comparative period's sales
prices. Controllable costs variance represents the impact from changes in the
Group's controllable local currency cost base, including the variable cost
impact of production volume changes on expenditure, and period-on-period
movements in inventories. The controllable cost variance excludes earnings
adjustments including significant items.
(26) Underlying net finance costs and Underlying income tax expense are actual FY22
results, not year-on-year variances.
(27) South32's ownership shares of operations are presented as follows: Worsley
Alumina (86% share), Brazil Alumina (36% share), Brazil Aluminium (40% share),
Hillside Aluminium (100%), Mozal Aluminium (63.7% share, noting that the FY22
Income statement reflects only one month of our increased ownership at 63.7%
following the completion of the acquisition for an additional 16.6%
shareholding on 31 May 2022), Sierra Gorda (45% share), Cannington (100%),
Hermosa (100%), Cerro Matoso (99.9% share), Illawarra Metallurgical Coal
(100%), Australia Manganese (60% share), South Africa Manganese ore (54.6%
share) and South Africa Manganese alloy (60% share).
(28) The underlying information reflects the Group's interest in material equity
accounted joint ventures and is presented on a proportional consolidation
basis, which is the measure used by the Group's management to assess their
performance. The joint venture adjustments reconcile the proportional
consolidation to the equity accounting position included in the Group's
consolidated financial statements.
(29) Underlying ETR is Underlying income tax expense, including royalty related
tax, divided by Underlying profit subject to tax.
(30) The corporate tax rates of the geographies where the Group operates include:
Australia 30%, South Africa 28%, Colombia 35%, Mozambique 0%, Brazil 34% and
Chile 27%. The Colombian corporate tax rate increased to 35% from 1 January
2022. The South African corporate tax rate reduced to 27% from 1 July 2022.
The Mozambique operations are subject to a royalty on revenues instead of
income tax. Sierra Gorda is subject to a royalty related tax based on the
amount of copper sold and the mining operating margin, the rate is between 5%
and 14% for annual sales over 50kt of refined copper
(31) Australia Manganese is subject to a royalty related tax equal to 20% of
adjusted EBIT which is included in Underlying tax expense.
(32) Operating unit cost is Underlying revenue less Underlying EBITDA, excluding
third party sales, divided by sales volumes. Operating cost is Underlying
revenue less Underlying EBITDA excluding third party sales. Additional
manganese disclosures are included in footnotes 52 and 57.
(33) US dollar per pound of copper equivalent production. FY22 realised prices for
copper (US$3.50/lb), molybdenum (US$18.48/lb), gold (US$1,934/oz) and silver
(US$23.5/oz) have been used for FY22 Operating unit cost.
(34) FY22 net distributions from our material equity accounted joint ventures
comprises of dividends and capital returns (US$224M) and a net repayment of
shareholder loans (US$29M) from manganese and a distribution (US$68M) from
Sierra Gorda. The distribution from Sierra Gorda comprised US$21M of principal
repayments and US$47M of accrued interest.
(35) Total capital expenditure comprises Capital expenditure, evaluation
expenditure, the purchase of intangibles and capitalised exploration
expenditure. Capital expenditure comprises Safe and reliable capital
expenditure, Improvement and life extension capital expenditure, and Growth
(development of our current and future greenfield growth) capital expenditure.
(36) Refer to market release "South32 prices US$700M of Senior Notes" dated 8 April
2022.
(37) Production guidance for Hillside Aluminium and Mozal Aluminium does not assume
any load-shedding impact on production.
(38) Payable copper equivalent production (kt) was calculated by aggregating
revenues from copper, molybdenum, gold and silver, and dividing the total
Revenue by the price of copper. FY22 realised prices for copper (US$3.50/lb),
molybdenum (US$18.48/lb), gold (US$1,934/oz) and silver (US$23.5/oz) have been
used for FY22 and FY23e. FY21 index prices for copper (US$4.23/lb), molybdenum
(US$15.7/lb), gold (US$1,796/oz) and silver (US$25.2/oz) have been used for
FY22 on page 23.
(39) Payable zinc equivalent (kt) was calculated by aggregating revenues from
payable silver, lead and zinc, and dividing the total Revenue by the price of
zinc FY22 realised prices for zinc (US$3,248/t), lead (US$2,046/t) and silver
(US$21.0/oz) have been used for FY22, FY23e and FY24e. FY21 realised prices
for zinc (US$2,357/t), lead (US$1,862/t) and silver (US$25.4/oz) have been
used for FY21 and FY22 on page 24.
(40) Refer to market release "Dendrobium Next Domain Update" dated 23 August 2022.
Based on average between FY24 and FY28, 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. 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.
(41) FY23 Operating unit cost guidance includes royalties (where appropriate) and
the influence of exchange rates, and includes various assumptions for FY23,
including: an alumina price of US$364/t; an average blended coal price of
US$265/t for Illawarra Metallurgical Coal; a manganese ore price of
US$6.40/dmtu for 44% manganese product; a nickel price of US$9.94/lb; a silver
price of US$22.11/troy oz; a lead price of US$2,059/t (gross of treatment and
refining charges); a zinc price of US$3,480/t (gross of treatment and refining
charges); a copper price of US$4.07/lb (gross of treatment and refining
charges); a molybdenum price of US$16.95/lb (gross of treatment and refining
charges); a gold price of US$1,860/troy oz; an AUD:USD exchange rate of 0.69;
a USD:ZAR exchange rate of 16.62; a USD:COP exchange rate of 3,851; USD:CLP
exchange rate of 814; and a reference price for caustic soda; which reflect
forward markets as at June 2022 or our internal expectations.
(42) Refer to market release "Dendrobium Next Domain Update" dated 23 August 2022.
FY23 capital expenditure guidance includes planned work to install additional
ventilation capacity to enable mining in the current Area 7 until at least
2039, which remains subject to South32 Board approval.
(43) FY22 Third party products and services sold comprise US$110M for aluminium,
US$25M for alumina, US$115M for coal, US$145M for freight services US$165M for
raw materials and US$40M for manganese. Underlying EBIT on third party
products and services comprise US$8M for aluminium, US$8M for alumina, US$7M
for coal, (US$3M) for freight services, nil for raw materials and nil for
manganese. FY21 Third party products and services sold comprise US$43M for
aluminium, US$10M for alumina, US$23M for coal, US$95M for freight services,
US$92M for raw materials and US$35M for manganese. Underlying EBIT on third
party products and services comprise US$8M for aluminium, nil for alumina,
US$1M for coal, nil for freight services, US$1M for raw materials and nil for
manganese.
(44) Presented on a 100% basis.
(45) Sierra Gorda and Cannington Operating unit cost is Underlying revenue less
Underlying EBITDA divided by ore processed. Periodic movements in finished
product inventory may impact Operating unit costs as related marketing costs
may change.
(46) The information in this report that relates to the production target is based
on Proved and Probable Ore Reserves (87%), Measured (12%) and Indicated (1%)
Mineral Resources for Cerro Matoso. Mineral Resources and Ore Reserve
estimates for Cerro Matoso was declared as part of South32's Annual Resource
and Reserve declaration in the Annual Report 2021 (www.south32.net) issued on
3 September 2021 and prepared by I Espitia (MAusIMM) and N Monterroza
(MAusIMM) in accordance with the requirements of the JORC Code. South32
confirms that it is not aware of any new information or data that materially
affects the information included in the original announcement. All material
assumptions and technical parameters underpinning the estimates in the
relevant market announcement continue to apply and have not materially
changed. South32 confirms that the form and context in which the Competent
Person's findings are presented have not been materially modified from the
original market announcement. Payable nickel is calculated using long-term
consensus metal prices and relative metallurgical recoveries.
(47) Cerro Matoso realised nickel sales price is inclusive of by-products. Realised
sales price is calculated as sales Underlying revenue divided by sales volume.
(48) Cerro Matoso Operating unit cost per tonne is Underlying revenue less
Underlying EBITDA divided by ore processed. Periodic movements in finished
product inventory may impact Operating unit costs as related marketing costs
may change.
(49) Illawarra Metallurgical Coal revenue includes metallurgical coal and energy
coal sales revenue.
(50) The sales volume weighted average of the Metal Bulletin 44% manganese lump ore
index (CIF Tianjin, China) on the basis of M-1 was US$6.00/dmtu in FY22.
(51) Realised ore prices are calculated as external sales Underlying revenue less
freight and marketing costs, divided by external sales volume. Ore converted
to sinter and alloy, and sold externally, is eliminated as an intracompany
transaction.
(52) Manganese Australia FY22 average manganese content of external ore sales was
44.2% on a dry basis (FY21: 44.4%). 96% of FY22 external manganese ore sales
(FY21: 97%) were completed on a CIF basis. FY22 realised FOB ore prices and
Operating unit costs have been adjusted for freight and marketing costs of
US$96M (FY21: US$63M), consistent with our FOB cost guidance.
(53) FOB Ore operating unit cost is Underlying revenue less Underlying EBITDA,
freight and marketing costs, divided by ore sales volume.
(54) Refer to market release "Sale of Metalloys manganese alloy smelter will not
proceed" dated 7 March 2022.
(55) The sales volume weighted average of the Metal Bulletin 37% manganese lump ore
index (FOB Port Elizabeth, South Africa) on the basis of M-1 was US$3.33/dmtu
in FY22.
(56) Volumes and prices do not include any third party trading that may be
undertaken independently of equity production. Realised ore prices are
calculated as external sales Underlying Revenue less freight and marketing
costs, divided by external sales volume.
(57) Manganese South Africa FY22 average manganese content of external ore sales
was 39.7% on a dry basis (FY21: 39.9%). 75% of FY22 external manganese ore
sales (FY21: 76%) were completed on a CIF basis. FY22 realised FOB ore prices
and Operating unit costs have been adjusted for freight and marketing costs of
US$88M (FY21: US$50M), consistent with our FOB cost guidance
In addition, items that do not reflect the underlying operations of South32,
and are individually, or in combination with other related earnings
adjustments, significant to the financial statements, are excluded to
determine Underlying earnings. When applicable, significant items are detailed
in the Financial Information.
(12)
Comprises Underlying EBITDA excluding third party product EBITDA, divided by
Underlying revenue excluding third party product revenue. Also referred to as
operating margin.
(13)
Comprises Underlying EBIT excluding third party product EBIT, divided by
Underlying revenue excluding third party product revenue.
(14)
Return on invested capital (ROIC) is a key measure that South32 uses to assess
performance. ROIC is calculated as Underlying EBIT less the discount on
rehabilitation provisions included in net finance costs, tax effected by the
Group's Underlying effective tax rate (ETR) including our material equity
accounted investments on a proportional consolidation basis, divided by the
sum of fixed assets (excluding any rehabilitation assets, the impairment of
Eagle Downs Metallurgical Coal and Illawarra Metallurgical Coal, the
impairment reversal of Brazil Aluminium, and unproductive capital associated
with Growth and Life Extension projects) and inventories.
(15)
To ensure that incident classification definitions are applied uniformly
across our workforce, we have adopted the United States Government
Occupational Safety and Health Administration (OSHA) and the International
Council on Mining and Metals (ICMM) guidelines for the recording and reporting
of occupational injuries and illnesses.
(16)
Total Recordable Injury Frequency (TRIF): (The sum of recordable injuries x
1,000,000) ÷ exposure hours. This is stated in units of per million hours
worked for employees and contractors.
(17)
Our FY21 TRIF baseline was adjusted at end FY21 to account for the removal of
South Africa Energy Coal and TEMCO from the portfolio.
(18)
The Group's total cost base of US$5,971M for FY22 includes EAI and excludes
Other income. It includes a US$96M adjustment for Other income and other
accounting related adjustments to reconcile to Underlying revenue minus
Underlying EBITDA.
(19)
Refer to market release "South32 completes acquisition of additional
shareholding in Mozal Aluminium" dated 31 May 2022.
(20)
Refer to market release "Restart of Brazil Aluminium using renewable power"
dated 6 January 2022.
(21)
Refer to media release "South32 completes acquisition of additional interest
in Mineração Rio do Norte" dated 2 May 2022.
(22)
Refer to market release "Hermosa project update" dated 17 January 2022.
(23)
Refer to market release "South32 unlocks up to US$200M in value from non-core
royalty sale" dated 12 July 2022. Includes US$103M in cash payments, US$82M of
Anglo Pacific Group Plc shares issued on completion and contingent payments of
up to US$15M. The US$103M cash payment comprises US$48M paid on completion,
and US$55M payable in six equal quarterly instalments over the 18 months from
completion. The contingent payment is triggered if the West Musgrave project
achieves commercial production, and throughput and commodity price-related
conditions are met prior to an agreed expiry date.
(24)
Refer to market release "Dendrobium Next Domain Update" dated 23 August 2022.
(25)
Sales price variance reflects the revenue impact of changes in commodity
prices, based on the current period's sales volume. Price-linked costs
variance reflects the change in royalties together with the change in input
costs driven by changes in commodity prices or market traded consumables.
Foreign exchange reflects the impact of exchange rate movements on local
currency denominated costs and sales. Volume variance reflects the revenue
impact of sales volume changes, based on the comparative period's sales
prices. Controllable costs variance represents the impact from changes in the
Group's controllable local currency cost base, including the variable cost
impact of production volume changes on expenditure, and period-on-period
movements in inventories. The controllable cost variance excludes earnings
adjustments including significant items.
(26)
Underlying net finance costs and Underlying income tax expense are actual FY22
results, not year-on-year variances.
(27)
South32's ownership shares of operations are presented as follows: Worsley
Alumina (86% share), Brazil Alumina (36% share), Brazil Aluminium (40% share),
Hillside Aluminium (100%), Mozal Aluminium (63.7% share, noting that the FY22
Income statement reflects only one month of our increased ownership at 63.7%
following the completion of the acquisition for an additional 16.6%
shareholding on 31 May 2022), Sierra Gorda (45% share), Cannington (100%),
Hermosa (100%), Cerro Matoso (99.9% share), Illawarra Metallurgical Coal
(100%), Australia Manganese (60% share), South Africa Manganese ore (54.6%
share) and South Africa Manganese alloy (60% share).
(28)
The underlying information reflects the Group's interest in material equity
accounted joint ventures and is presented on a proportional consolidation
basis, which is the measure used by the Group's management to assess their
performance. The joint venture adjustments reconcile the proportional
consolidation to the equity accounting position included in the Group's
consolidated financial statements.
(29)
Underlying ETR is Underlying income tax expense, including royalty related
tax, divided by Underlying profit subject to tax.
(30)
The corporate tax rates of the geographies where the Group operates include:
Australia 30%, South Africa 28%, Colombia 35%, Mozambique 0%, Brazil 34% and
Chile 27%. The Colombian corporate tax rate increased to 35% from 1 January
2022. The South African corporate tax rate reduced to 27% from 1 July 2022.
The Mozambique operations are subject to a royalty on revenues instead of
income tax. Sierra Gorda is subject to a royalty related tax based on the
amount of copper sold and the mining operating margin, the rate is between 5%
and 14% for annual sales over 50kt of refined copper
(31)
Australia Manganese is subject to a royalty related tax equal to 20% of
adjusted EBIT which is included in Underlying tax expense.
(32)
Operating unit cost is Underlying revenue less Underlying EBITDA, excluding
third party sales, divided by sales volumes. Operating cost is Underlying
revenue less Underlying EBITDA excluding third party sales. Additional
manganese disclosures are included in footnotes 52 and 57.
(33)
US dollar per pound of copper equivalent production. FY22 realised prices for
copper (US$3.50/lb), molybdenum (US$18.48/lb), gold (US$1,934/oz) and silver
(US$23.5/oz) have been used for FY22 Operating unit cost.
(34)
FY22 net distributions from our material equity accounted joint ventures
comprises of dividends and capital returns (US$224M) and a net repayment of
shareholder loans (US$29M) from manganese and a distribution (US$68M) from
Sierra Gorda. The distribution from Sierra Gorda comprised US$21M of principal
repayments and US$47M of accrued interest.
(35)
Total capital expenditure comprises Capital expenditure, evaluation
expenditure, the purchase of intangibles and capitalised exploration
expenditure. Capital expenditure comprises Safe and reliable capital
expenditure, Improvement and life extension capital expenditure, and Growth
(development of our current and future greenfield growth) capital expenditure.
(36)
Refer to market release "South32 prices US$700M of Senior Notes" dated 8 April
2022.
(37)
Production guidance for Hillside Aluminium and Mozal Aluminium does not assume
any load-shedding impact on production.
(38)
Payable copper equivalent production (kt) was calculated by aggregating
revenues from copper, molybdenum, gold and silver, and dividing the total
Revenue by the price of copper. FY22 realised prices for copper (US$3.50/lb),
molybdenum (US$18.48/lb), gold (US$1,934/oz) and silver (US$23.5/oz) have been
used for FY22 and FY23e. FY21 index prices for copper (US$4.23/lb), molybdenum
(US$15.7/lb), gold (US$1,796/oz) and silver (US$25.2/oz) have been used for
FY22 on page 23.
(39)
Payable zinc equivalent (kt) was calculated by aggregating revenues from
payable silver, lead and zinc, and dividing the total Revenue by the price of
zinc FY22 realised prices for zinc (US$3,248/t), lead (US$2,046/t) and silver
(US$21.0/oz) have been used for FY22, FY23e and FY24e. FY21 realised prices
for zinc (US$2,357/t), lead (US$1,862/t) and silver (US$25.4/oz) have been
used for FY21 and FY22 on page 24.
(40)
Refer to market release "Dendrobium Next Domain Update" dated 23 August 2022.
Based on average between FY24 and FY28, 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. 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.
(41)
FY23 Operating unit cost guidance includes royalties (where appropriate) and
the influence of exchange rates, and includes various assumptions for FY23,
including: an alumina price of US$364/t; an average blended coal price of
US$265/t for Illawarra Metallurgical Coal; a manganese ore price of
US$6.40/dmtu for 44% manganese product; a nickel price of US$9.94/lb; a silver
price of US$22.11/troy oz; a lead price of US$2,059/t (gross of treatment and
refining charges); a zinc price of US$3,480/t (gross of treatment and refining
charges); a copper price of US$4.07/lb (gross of treatment and refining
charges); a molybdenum price of US$16.95/lb (gross of treatment and refining
charges); a gold price of US$1,860/troy oz; an AUD:USD exchange rate of 0.69;
a USD:ZAR exchange rate of 16.62; a USD:COP exchange rate of 3,851; USD:CLP
exchange rate of 814; and a reference price for caustic soda; which reflect
forward markets as at June 2022 or our internal expectations.
(42)
Refer to market release "Dendrobium Next Domain Update" dated 23 August 2022.
FY23 capital expenditure guidance includes planned work to install additional
ventilation capacity to enable mining in the current Area 7 until at least
2039, which remains subject to South32 Board approval.
(43)
FY22 Third party products and services sold comprise US$110M for aluminium,
US$25M for alumina, US$115M for coal, US$145M for freight services US$165M for
raw materials and US$40M for manganese. Underlying EBIT on third party
products and services comprise US$8M for aluminium, US$8M for alumina, US$7M
for coal, (US$3M) for freight services, nil for raw materials and nil for
manganese. FY21 Third party products and services sold comprise US$43M for
aluminium, US$10M for alumina, US$23M for coal, US$95M for freight services,
US$92M for raw materials and US$35M for manganese. Underlying EBIT on third
party products and services comprise US$8M for aluminium, nil for alumina,
US$1M for coal, nil for freight services, US$1M for raw materials and nil for
manganese.
(44)
Presented on a 100% basis.
(45)
Sierra Gorda and Cannington Operating unit cost is Underlying revenue less
Underlying EBITDA divided by ore processed. Periodic movements in finished
product inventory may impact Operating unit costs as related marketing costs
may change.
(46)
The information in this report that relates to the production target is based
on Proved and Probable Ore Reserves (87%), Measured (12%) and Indicated (1%)
Mineral Resources for Cerro Matoso. Mineral Resources and Ore Reserve
estimates for Cerro Matoso was declared as part of South32's Annual Resource
and Reserve declaration in the Annual Report 2021 (www.south32.net) issued on
3 September 2021 and prepared by I Espitia (MAusIMM) and N Monterroza
(MAusIMM) in accordance with the requirements of the JORC Code. South32
confirms that it is not aware of any new information or data that materially
affects the information included in the original announcement. All material
assumptions and technical parameters underpinning the estimates in the
relevant market announcement continue to apply and have not materially
changed. South32 confirms that the form and context in which the Competent
Person's findings are presented have not been materially modified from the
original market announcement. Payable nickel is calculated using long-term
consensus metal prices and relative metallurgical recoveries.
(47)
Cerro Matoso realised nickel sales price is inclusive of by-products. Realised
sales price is calculated as sales Underlying revenue divided by sales volume.
(48)
Cerro Matoso Operating unit cost per tonne is Underlying revenue less
Underlying EBITDA divided by ore processed. Periodic movements in finished
product inventory may impact Operating unit costs as related marketing costs
may change.
(49)
Illawarra Metallurgical Coal revenue includes metallurgical coal and energy
coal sales revenue.
(50)
The sales volume weighted average of the Metal Bulletin 44% manganese lump ore
index (CIF Tianjin, China) on the basis of M-1 was US$6.00/dmtu in FY22.
(51)
Realised ore prices are calculated as external sales Underlying revenue less
freight and marketing costs, divided by external sales volume. Ore converted
to sinter and alloy, and sold externally, is eliminated as an intracompany
transaction.
(52)
Manganese Australia FY22 average manganese content of external ore sales was
44.2% on a dry basis (FY21: 44.4%). 96% of FY22 external manganese ore sales
(FY21: 97%) were completed on a CIF basis. FY22 realised FOB ore prices and
Operating unit costs have been adjusted for freight and marketing costs of
US$96M (FY21: US$63M), consistent with our FOB cost guidance.
(53)
FOB Ore operating unit cost is Underlying revenue less Underlying EBITDA,
freight and marketing costs, divided by ore sales volume.
(54)
Refer to market release "Sale of Metalloys manganese alloy smelter will not
proceed" dated 7 March 2022.
(55)
The sales volume weighted average of the Metal Bulletin 37% manganese lump ore
index (FOB Port Elizabeth, South Africa) on the basis of M-1 was US$3.33/dmtu
in FY22.
(56)
Volumes and prices do not include any third party trading that may be
undertaken independently of equity production. Realised ore prices are
calculated as external sales Underlying Revenue less freight and marketing
costs, divided by external sales volume.
(57)
Manganese South Africa FY22 average manganese content of external ore sales
was 39.7% on a dry basis (FY21: 39.9%). 75% of FY22 external manganese ore
sales (FY21: 76%) were completed on a CIF basis. FY22 realised FOB ore prices
and Operating unit costs have been adjusted for freight and marketing costs of
US$88M (FY21: US$50M), consistent with our FOB cost guidance
Figures in Italics indicate that an adjustment has been made since the figures
were previously reported. The denotation (e) refers to an estimate or forecast
year.
The following abbreviations may be used throughout this report: US$ million
(US$M); US$ billion (US$B); financial year 2022 (FY22); financial year (FY);
calendar year (CY); copper equivalent (CuEq); grams per tonne (g/t); tonnes
(t); thousand tonnes (kt); thousand tonnes per annum (ktpa); million tonnes
(Mt); million tonnes per annum (Mtpa); ounces (oz); thousand ounces (koz);
million ounces (Moz); thousand wet metric tonnes (kwmt); million wet metric
tonnes (Mwmt); thousand dry metric tonnes (kdmt);| dry metric tonne unit
(dmtu); pound (lb); megawatt (MW); Australian Securities Exchange (ASX);
London Stock Exchange (LSE); Johannesburg Stock Exchange (JSE); equity
accounted investments (EAI); and American Depositary Receipts (ADR).
south32 financial information
For the year ended 30 June 2022
BASIS OF PREPARATION
The financial information included in this document for the year ended 30 June
2022 is unaudited. The financial information does not constitute the South32
Group's (the Group's) full financial statements for the year ended 30 June
2022, which will be approved by the Board, reported on by the auditors, and
filed with the Australian Securities and Investments Commission. The Group's
full financial statements will be prepared in accordance with the requirements
of the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board.
The financial information set out on pages 33 to 52 for the year ended 30 June
2022 has been prepared on the basis of accounting policies and methods of
computation consistent with those applied in the 30 June 2021 financial
statements contained within the Annual Report of the Group. As required, and
unless otherwise stated, comparative financial information for the Group has
been presented.
All amounts are expressed in US dollars unless otherwise stated. The Group's
presentation currency (and the functional currency of the majority of its
operations) is US dollars as this is the principal currency of the economic
environment in which it operates.
Amounts in this financial information have, unless otherwise indicated, been
rounded to the nearest million dollars (US$M or US$ million).
consolidated income statement
for the year ended 30 June 2022
US$M FY22 FY21
Continuing operations
Revenue:
Group production 8,522 5,102
Third party products and services 747 374
9,269 5,476
Other income 183 157
Expenses excluding net finance costs (6,000) (5,571)
Share of profit/(loss) of equity accounted investments 272 141
Profit/(loss) from continuing operations 3,724 203
Comprising:
Group production 3,704 193
Third party products and services 20 10
Profit/(loss) from continuing operations 3,724 203
Finance expenses (110) (178)
Finance income 79 17
Net finance costs (31) (161)
Profit/(loss) before tax from continuing operations 3,693 42
Income tax (expense)/benefit (1,024) 100
Profit/(loss) after tax from continuing operations 2,669 142
Discontinued operation
Profit/(loss) after tax from a discontinued operation - (337)
Profit/(loss) for the year 2,669 (195)
Attributable to:
Equity holders of South32 Limited 2,669 (195)
Profit/(loss) from continuing operations for the year attributable to equity
holders of South32 Limited:
Basic earnings per share (cents) 57.4 3.0
Diluted earnings per share (cents) 57.0 3.0
Profit/(loss) for the year attributable to equity holders of South32 Limited:
Basic earnings per share (cents) 57.4 (4.1)
Diluted earnings per share (cents) 57.0 (4.1)
The accompanying notes form part of the financial information.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2022
US$M FY22 FY21
Profit/(loss) for the year 2,669 (195)
Other comprehensive income
Items that may be reclassified to the Consolidated Income Statement:
Equity accounted investments - share of other comprehensive income/(loss), net (4) -
of tax
Total items that may be reclassified to the Consolidated Income Statement (4) -
Items not to be reclassified to the Consolidated Income Statement:
Investments in equity instruments designated as fair value through other
comprehensive income (FVOCI):
Net fair value gains/(losses) (78) 47
Income tax (expense)/benefit 24 (15)
Equity accounted investments - share of other comprehensive income/(loss), net 1 (3)
of tax
Gains/(losses) on pension and medical schemes 3 1
Income tax (expense)/benefit recognised within other comprehensive income (1) -
Total items not to be reclassified to the Consolidated Income Statement (51) 30
Total other comprehensive income/(loss) (55) 30
Total comprehensive income/(loss) 2,614 (165)
Attributable to:
Equity holders of South32 Limited 2,614 (165)
The accompanying notes form part of the financial information.
CONSOLIDATED BALANCE SHEET
as at 30 June 2022
US$M FY22 FY21
ASSETS
Current assets
Cash and cash equivalents 2,365 1,613
Trade and other receivables 844 527
Other financial assets 1 15
Inventories 982 716
Current tax assets 4 13
Other 44 38
Total current assets 4,240 2,922
Non-current assets
Trade and other receivables 1,903 259
Other financial assets 64 121
Inventories 76 74
Property, plant and equipment 8,988 8,938
Intangible assets 186 189
Equity accounted investments 470 380
Deferred tax assets 394 348
Other 15 11
Total non-current assets 12,096 10,320
Total assets 16,336 13,242
LIABILITIES
Current liabilities
Trade and other payables 989 777
Interest bearing liabilities 402 408
Other financial liabilities 6 11
Current tax payables 308 27
Provisions 186 239
Deferred income 6 -
Total current liabilities 1,897 1,462
Non-current liabilities
Trade and other payables 8 2
Interest bearing liabilities 1,425 799
Other financial liabilities 84 -
Deferred tax liabilities 307 265
Provisions 1,835 1,759
Deferred income 1 1
Total non-current liabilities 3,660 2,826
Total liabilities 5,557 4,288
Net assets 10,779 8,954
EQUITY
Share capital 13,469 13,597
Treasury shares (32) (22)
Reserves (3,558) (3,567)
Retained earnings/(accumulated losses) 901 (1,053)
Total equity attributable to equity holders of South32 Limited 10,780 8,955
Non-controlling interests (1) (1)
Total equity 10,779 8,954
The accompanying notes form part of the financial information.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2022
US$M FY22 FY21
Operating activities
Profit/(loss) before tax from continuing operations 3,693 42
Profit/(loss) before tax from a discontinued operation - (340)
Adjustments for:
Non-cash or non-operating significant items (77) (55)
Depreciation and amortisation expense 624 720
Net impairment loss/(reversal) of financial assets 26 -
Net impairment loss/(reversal) of non-financial assets 145 772
Employee share awards expense 23 32
Net finance costs 31 204
Share of (profit)/loss of equity accounted investments (272) (133)
Loss on disposal of a discontinued operation - 159
(Gains)/losses on derivative instruments, contingent consideration and (29) (44)
other investments measured at fair value through profit or loss (FVTPL)
Other non-cash or non-operating items (18) (6)
Changes in assets and liabilities:
Trade and other receivables (300) (156)
Inventories (206) (142)
Trade and other payables 160 264
Provisions and other liabilities (82) 95
Cash generated from operations 3,718 1,412
Interest received 66 26
Interest paid (70) (70)
Income tax paid (868) (163)
Dividends received - 3
Dividends received from equity accounted investments 224 197
Net cash flows from operating activities 3,070 1,405
Investing activities
Purchases of property, plant and equipment (522) (536)
Exploration expenditure (70) (54)
Exploration expenditure expensed and included in operating cash flows 37 25
Purchase of intangibles (4) (1)
Investment in financial assets (222) (152)
Acquisition of subsidiaries and joint operations, net of their cash (114) -
Acquisition of equity accounted investments (1,430) -
Disposal of a discontinued operation, net of their cash - (70)
Cash outflows from investing activities (2,325) (788)
Proceeds from sale of property, plant and equipment and intangibles - 40
Proceeds from financial assets 230 140
Net cash flows from investing activities (2,095) (608)
Financing activities
Proceeds from interest bearing liabilities 1,527 12
Repayment of interest bearing liabilities (932) (52)
Purchase of shares by South32 Limited Employee Incentive Plan Trusts (ESOP (22) -
Trusts)
Share buy-back (128) (346)
Dividends paid (660) (115)
Net cash flows from financing activities (215) (501)
Net increase in cash and cash equivalents 760 296
Cash and cash equivalents, net of overdrafts, at the beginning of the 1,613 1,315
financial year
Foreign currency exchange rate changes on cash and cash equivalents (8) 2
Cash and cash equivalents, net of overdrafts, at the end of the financial year 2,365 1,613
The accompanying notes form part of the financial information.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2022
Attributable to equity holders of South32 Limited
US$M Share capital Treasury shares Financial assets reserve((1)) Employee share awards reserve((2)) Other reserves((3)) Retained earnings/ (accumulated losses) Total Non-controlling interests Total equity
Balance as at 1 July 2021 13,597 (22) (22) 48 (3,593) (1,053) 8,955 (1) 8,954
Profit/(loss) for the year - - - - - 2,669 2,669 - 2,669
Other comprehensive income/(loss) - - (54) - (4) 3 (55) - (55)
Total comprehensive income/(loss) - - (54) - (4) 2,672 2,614 - 2,614
Transactions with owners:
Dividends - - - - - (660) (660) - (660)
Shares bought back and cancelled (128) - - - - - (128) - (128)
Employee share entitlements for unvested awards, net of tax - - - 27 - - 27 - 27
Employee share awards vested and lapsed, net of tax - 12 - (30) - 12 (6) - (6)
Purchase of shares by ESOP Trusts - (22) - - - - (22) - (22)
Transfer of cumulative fair value loss on an investment in equity instruments - - 70 - - (70) - - -
designated as FVOCI((4))
Balance as at 30 June 2022 13,469 (32) (6) 45 (3,597) 901 10,780 (1) 10,779
Balance as at 1 July 2020 13,943 (49) (54) 81 (3,593) (765) 9,563 (1) 9,562
Profit/(loss) for the year - - - - - (195) (195) - (195)
Other comprehensive income/(loss) - - 32 - - (2) 30 - 30
Total comprehensive income/(loss) - - 32 - - (197) (165) - (165)
Transactions with owners:
Dividends - - - - - (115) (115) - (115)
Shares bought back and cancelled (346) - - - - - (346) - (346)
Employee share entitlements for unvested awards, net of tax - - - 26 - - 26 - 26
Employee share awards vested and lapsed, net of tax - 24 - (59) - 24 (11) - (11)
Sale of shares by ESOP Trusts - 3 - - - - 3 - 3
Balance as at 30 June 2021 13,597 (22) (22) 48 (3,593) (1,053) 8,955 (1) 8,954
(1) Represents the fair value movement in financial assets
designated as FVOCI.
(2) Represents the accrued employee entitlements to share awards
that have not yet vested.
(3) Primarily consists of the common control transaction reserve
of US$3,569 million, which reflects the difference between consideration paid
and the carrying value of assets and liabilities acquired, as well as the
gains/(losses) on disposal of entities as part of the demerger of the Group in
2015.
(4) Refer to Acquisition of equity accounted investments.
The accompanying notes form part of the financial information.
SEGMENT INFORMATIOn
(a) Description of segments
The operating segments (also referred to as operations) are organised and
managed separately according to the nature of products produced.
Certain members of the Lead Team (the chief operating decision makers) and the
Board of Directors monitor the segment results regularly for the purpose of
making decisions about resource allocation and performance assessment. During
the current financial reporting period the internal reporting of the Group's
consolidated financial results and performance to the chief operating decision
makers was changed. Consolidated financial results of the Group are reported
on a proportional consolidation basis, including material equity accounted
joint ventures, consistent with the reporting of the Group's operating
segments and includes non-IFRS financial measures. Due to the change in
reporting and presentation of the Group's consolidated results, the prior year
comparative disclosures, together with the required reconciliations, have been
updated.
The principal activities of each operating segment are summarised as follows:
Operating segment((1)) Principal activities
Worsley Alumina Integrated bauxite mine and alumina refinery in Australia
Brazil Alumina Integrated bauxite mine((2)) and alumina refinery in Brazil
Brazil Aluminium((3)) Aluminium smelter in Brazil
Hillside Aluminium Aluminium smelter in South Africa
Mozal Aluminium Aluminium smelter in Mozambique
Sierra Gorda((4)) Copper mine in Chile
Cannington Silver, lead and zinc mine in Australia
Hermosa Base metals exploration and development option in the United States
Cerro Matoso Integrated laterite ferronickel mining and smelting complex in Colombia
Illawarra Metallurgical Coal Metallurgical coal mines in Australia
Australia Manganese Manganese ore mine in Australia
South Africa Manganese Manganese ore mines in South Africa
South Africa Energy Coal (SAEC)((5)) Energy coal mines in South Africa
(1) The Eagle Downs Metallurgical Coal exploration and development
option is no longer considered a material operating segment and has been
reclassified to be included as part of Group and unallocated
items/eliminations.
(2) On 29 April 2022, the Group acquired a further 18 per cent
interest in Mineração Rio do Norte (MRN). Refer to Acquisition of equity
accounted investments.
(3) On 6 January 2022, the Group announced its decision to
participate in a restart of the Alumar aluminium smelter (Brazil Aluminium).
First production commenced in the June 2022 quarter and Brazil Aluminium is
considered a material operating segment.
(4) On 22 February 2022, the Group acquired a 45 per cent interest
in Sierra Gorda Sociedad Contractual Minera (Sierra Gorda). Refer to
Acquisition of equity accounted investments.
(5) On 1 June 2021, the Group completed the sale of its
shareholding in SAEC to a wholly-owned subsidiary of Seriti Resources Holdings
Pty Ltd (Seriti) and two trusts for the benefit of employees and communities.
Refer to Discontinued operation.
All operations are operated by the Group except Brazil Alumina and Brazil
Aluminium, which are operated by Alcoa Corporation, and Sierra Gorda which is
independently operated by a management team that is jointly overseen by the
Group and KGHM Polska Miedz.
(b) Segment results
Segment performance is measured by Underlying EBIT and Underlying EBITDA.
Underlying EBIT is profit before net finance costs, tax and other earnings
adjustment items including impairments. Underlying EBITDA is Underlying EBIT,
before depreciation and amortisation. A reconciliation of Underlying EBIT,
Underlying EBITDA and the Group's consolidated profit/(loss) after tax is set
out on the following pages.
In FY22, following the acquisition of the Sierra Gorda operation, the Group
has refined its definitions for Underlying EBIT and Underlying EBITDA to
exclude fair value gains/(losses) on contingent consideration payable related
to a business combination or an asset acquisition. There were no such
transactions recorded in the comparative period, and as such the comparative
period was not adjusted.
The Group separately discloses sales of group production from sales of third
party products and services because of the significant difference in profit
margin earned on these sales.
It is the Group's policy that inter-segment transactions are made on a
commercial basis.
Group and unallocated items/eliminations represent group centre functions and
consolidation adjustments. Group financing (including finance expenses and
finance income) and income taxes are managed on a Group basis and are not
allocated to continuing operating segments.
Total assets and liabilities for each operating segment represent operating
assets and liabilities which predominantly exclude the carrying amount of
non-material equity accounted investments, cash, interest bearing liabilities,
tax balances and certain other financial assets and liabilities.
FY22 SEGMENT INFORMATION
30 June 2022 Continuing operations
US$M Worsley Alumina Brazil Brazil Aluminium Hillside Aluminium Mozal Aluminium Sierra Cannington Hermosa Cerro Illawarra Metallurgical Coal Australia Manganese((1)) Group and unallocated items/ eliminations Group underlying results((1))
Alumina
Matoso
Gorda((1))
South Africa Manganese((1))
Revenue from customers 1,626 522 - 2,257 925 280 771 - 927 2,336 833 418 (205) 10,690
Other((2)) (1) 2 - (3) (1) (39) (35) - 2 2 15 1 (3) (60)
Total underlying revenue 1,625 524 - 2,254 924 241 736 - 929 2,338 848 419 (208) 10,630
Group production 818 523 - 2,254 924 241 736 - 929 2,338 848 419 - 10,030
Third party products and services((3)) - - - - - - - - - - - - 600 600
Inter-segment revenue 807 1 - - - - - - - - - - (808) -
Total underlying revenue 1,625 524 - 2,254 924 241 736 - 929 2,338 848 419 (208) 10,630
Underlying EBITDA 571 150 (43) 730 305 133 388 (12) 529 1,507 488 78 (69) 4,755
Underlying depreciation and amortisation (185) (61) (1) (64) (34) (58) (73) (2) (66) (119) (86) (20) (19) (788)
Underlying EBIT 386 89 (44) 666 271 75 315 (14) 463 1,388 402 58 (88) 3,967
Comprising:
Group production 386 92 (44) 666 271 76 317 (14) 463 1,396 402 59 (82) 3,988
Exploration expensed - - - - - (1) (2) - - (9) - (1) (26) (39)
Third party products and services((3)) - - - - - - - - - - - - 20 20
Share of profit/(loss) of equity accounted investments - (3) - - - - - - - 1 - - - (2)
Underlying EBIT 386 89 (44) 666 271 75 315 (14) 463 1,388 402 58 (88) 3,967
Underlying net finance costs (155)
Underlying income tax (expense)/benefit (1,151)
Underlying royalty related tax (expense)/benefit (59)
Underlying earnings 2,602
Total adjustments to profit/(loss)((4)) 67
Profit/(loss) for the year 2,669
Underlying exploration expenditure - - - - - 2 3 19 - 11 1 1 37 74
Underlying capital expenditure((5)) 55 51 1 24 11 81 45 97 37 189 62 19 12 684
Underlying equity accounted investments - 40 - - - - - - - 2 - - - 42
Total underlying assets((6)) 3,571 805 67 1,284 764 1,614 555 2,098 592 1,277 645 331 3,666 17,269
Total underlying liabilities((6)) 1,000 109 21 357 149 212 414 67 243 491 387 196 2,844 6,490
(1) The segment information reflects the Group's interest in material
equity accounted joint ventures and is presented on a proportional
consolidation basis, which is the measure used by the Group's management to
assess their performance. This includes the proportional elimination of
revenue and corresponding expenses relating to freight services provided by
the Group to these joint ventures of US$187 million and third party product
revenue of US$40 million included in Group and unallocated items/eliminations.
Refer to Underlying results reconciliation for the joint venture adjustments
that reconcile the underlying proportional consolidation to the statutory
equity accounting positions.
(2) Underlying other revenue predominantly relates to fair value
movements on provisionally priced contracts.
(3) Underlying revenue on third party products and services sold from
continuing operations comprised US$110 million for aluminium, US$25 million
for alumina, US$115 million for coal, US$40 million for manganese, US$145
million for freight services and US$165 million for raw materials. Underlying
EBIT on third party products and services sold from continuing operations
comprised US$8 million for aluminium, US$8 million for alumina, US$7 million
for coal and US$(3) million for freight services.
(4) Refer to Underlying results reconciliation for further details.
(5) Underlying capital expenditure excludes the purchase of intangibles
and capitalised exploration expenditure.
(6) Total underlying assets and liabilities for each operating segment
represent operating assets and liabilities which predominantly exclude the
carrying amount of non-material equity accounted investments, cash, interest
bearing liabilities, tax balances and certain other financial assets and
liabilities.
FY21 SEGMENT INFORMATION
30 June 2021 Restated((1)(2)(3)(4)) Continuing operations Discontinued
operation((5))
US$M Worsley Alumina Brazil Brazil Aluminium Hillside Aluminium Mozal Aluminium Cannington Hermosa Cerro Matoso Illawarra Metallurgical Coal Australia Manganese((2)) Group and unallocated items/ eliminations Group underlying results from continuing operations South Africa Group underlying results((2))
Alumina
Energy Coal
South Africa Manganese((2))
Revenue from customers 1,174 400 - 1,507 577 746 - 479 748 729 337 (275) 6,422 862 7,284
Other((6)) (1) - - 4 1 11 - 14 10 1 - - 40 (1) 39
Total underlying revenue 1,173 400 - 1,511 578 757 - 493 758 730 337 (275) 6,462 861 7,323
Group production 605 400 - 1,511 578 757 - 493 758 730 332 - 6,164 735 6,899
Third party products and services((7)) - - - - - - - - - - - 298 298 126 424
Inter-segment revenue 568 - - - - - - - - - 5 (573) - - -
Total underlying revenue 1,173 400 - 1,511 578 757 - 493 758 730 337 (275) 6,462 861 7,323
Underlying EBITDA 318 117 (3) 358 132 416 (6) 197 94 385 64 (93) 1,979 (123) 1,856
Underlying depreciation and amortisation (175) (51) - (65) (34) (66) (2) (75) (197) (81) (16) (28) (790) (27) (817)
Underlying EBIT 143 66 (3) 293 98 350 (8) 122 (103) 304 48 (121) 1,189 (150) 1,039
Comprising:
Group production 143 66 (3) 293 98 352 (8) 122 (97) 305 49 (113) 1,207 (153) 1,054
Exploration expensed - - - - - (2) - - (5) (1) (1) (18) (27) - (27)
Third party products and services((7)) - - - - - - - - - - - 10 10 11 21
Share of profit/(loss) of equity accounted investments - - - - - - - - (1) - - - (1) (8) (9)
Underlying EBIT 143 66 (3) 293 98 350 (8) 122 (103) 304 48 (121) 1,189 (150) 1,039
Underlying net finance costs (127) (43) (170)
Underlying income tax (expense)/benefit (326) (1) (327)
Underlying royalty related tax (expense)/benefit (53) - (53)
Underlying earnings 683 (194) 489
Total adjustments to profit/(loss)((8)) (541) (143) (684)
Profit/(loss) for the year 142 (337) (195)
Underlying exploration expenditure - - - - - 2 16 - 14 2 1 22 57 - 57
Underlying capital expenditure((9)) 55 25 - 17 11 43 64 45 188 55 15 12 530 76 606
Underlying equity accounted investments - - - - - - - - 2 - - - 2 - 2
Total underlying assets((10)) 3,674 639 8 1,156 579 510 1,972 629 997 604 337 2,549 13,654 - 13,654
Total underlying liabilities((10)) 1,007 69 7 423 123 315 47 224 385 361 185 1,554 4,700 - 4,700
(1) The Brazil Alumina operating segment has been reclassified to
separate Brazil Aluminium for consistency with the current year's
presentation.
(2) During the current financial reporting period the internal reporting
of the Group's consolidated financial results was changed. The segment
information reflects the Group's interest in material equity accounted joint
ventures and is presented on a proportional consolidation basis, which is the
measure used by the Group's management to assess their performance. This
includes the proportional elimination of revenue and corresponding expenses
relating to freight services provided by the Group to these joint ventures of
US$111 million and third party product revenue of US$35 million included in
Group and unallocated items/eliminations. Refer to Underlying results
reconciliation for the joint venture adjustments that reconcile the underlying
proportional consolidation to the statutory equity accounting positions.
(3) The Eagle Downs operating segment has been reclassified to be
included as part of Group and unallocated items/eliminations for consistency
with the current year's presentation.
(4) Underlying income tax (expense)/benefit has been reclassified to
separate underlying royalty related tax (expense)/benefit for consistency with
the current year's presentation.
(5) Refer to Discontinued operation.
(6) Underlying other revenue predominantly relates to fair value
movements on provisionally priced contracts.
(7) Underlying revenue on third party products and services sold from
continuing operations comprised US$43 million for aluminium, US$10 million for
alumina, US$23 million for coal, US$35 million for manganese, US$95 million
for freight services and US$92 million for raw materials. Underlying EBIT on
third party products and services sold from continuing operations comprised
US$8 million for aluminium, US$1 million for coal and US$1 million for raw
materials.
(8) Refer to Underlying results reconciliation for further details.
(9) Underlying capital expenditure excludes the purchase of intangibles
and capitalised exploration expenditure.
(10) Total underlying assets and liabilities for each operating segment
represent operating assets and liabilities which predominantly exclude the
carrying amount of non-material equity accounted investments, cash, interest
bearing liabilities, tax balances and certain other financial assets and
liabilities.
UNDERLYING RESULTS RECONCILIATION
The following tables reconcile the underlying segment information to the
statutory financial information:
Year ended 30 June 2022
US$M Continuing operations
Underlying EBIT 3,967
Significant items((1)) 77
Sierra Gorda joint venture adjustments((2)(3)) (44)
Manganese joint venture adjustments((2)(4)) (216)
Gains/(losses) on the consolidation of interests in operations((5)) 9
Exchange rate gains/(losses) on restatement of monetary items((6)) 50
Net impairment (loss)/reversal of financial assets((6)(7)) (26)
Net impairment (loss)/reversal of non-financial assets((6)(7)) (145)
Gains/(losses) on non-trading derivative instruments, contingent consideration 52
and other investments measured at FVTPL((6)(8))
Profit/(loss) from operations 3,724
Underlying net finance costs (155)
Sierra Gorda joint venture adjustments((2)) 62
Manganese joint venture adjustments((2)) 22
Exchange rate variations on net debt 40
Net finance costs (31)
Underlying income tax (expense)/benefit (1,151)
Underlying royalty related tax (expense)/benefit (59)
Tax effect of significant items((1)) (26)
Sierra Gorda joint venture adjustments relating to income tax 1
(expense)/benefit((2))
Sierra Gorda joint venture adjustments relating to royalty related tax 4
(expense)/benefit((2))
Manganese joint venture adjustments relating to income tax 153
(expense)/benefit((2))
Manganese joint venture adjustments relating to royalty related tax 55
(expense)/benefit((2))
Tax effect of other adjustments to Underlying EBIT 32
Tax effect of other adjustments to Underlying net finance costs (13)
Exchange rate variations on tax balances (20)
Income tax (expense)/benefit (1,024)
(1) Refer to Significant items.
(2) The segment information reflects the Group's interest in material
equity accounted joint ventures and is presented on a proportional
consolidation basis, which is the measure used by the Group's management to
assess their performance. Joint venture adjustments reconcile the proportional
consolidation to the statutory equity accounting positions, recognised in
share of profit/(loss) of equity accounted investments in the Consolidated
Income Statement.
(3) The Group's investment in the Sierra Gorda operation is represented by
the carrying value of the equity accounted investment of US$30 million, refer
to Equity accounted investments, and the carrying value of a non-current
credit-impaired receivable of US$1,648 million that is classified as a loan to
an equity accounted investment, recognised within trade and other receivables
in the Consolidated Balance Sheet. The earnings adjustments include a
revaluation gain of US$26 million relating to the shareholder loan payable
that was eliminated from the Group's Underlying EBIT upon proportional
consolidation.
(4) Includes earnings adjustments of US$6 million included in the
Australia Manganese segment and US$8 million included in the South Africa
Manganese segment.
(5) Relates to a gain on the acquisition of an additional 16.6 per cent
shareholding and related rights in Mozal Aluminium, recognised in other income
in the Consolidated Income Statement. Refer to Acquisition of subsidiaries and
joint operations.
(6) Recognised in expenses excluding net finance costs in the Consolidated
Income Statement.
(7) Refer to Impairments recognised.
(8) Includes a US$48 million remeasurement of contingent consideration
payable related to the acquisition of Sierra Gorda included in Group and
unallocated items/eliminations.
UNDERLYING RESULTS RECONCILIATION (continued)
30 June 2022
Group underlying results from continuing operations Group statutory results from continuing operations
Sierra Gorda joint venture adjustments((1)) Manganese joint venture adjustments((1))
US$M
Total revenue 10,630 (241) (1,120) 9,269
Depreciation and amortisation 788 (58) (106) 624
Share of profit/(loss) of equity accounted investments (2) 30 244 272
Exploration expenditure 74 (2) (2) 70
Capital expenditure 684 (81) (81) 522
Equity accounted investments 42 30 398 470
Total assets 17,269 (452) (481) 16,336
Total liabilities 6,490 (452) (481) 5,557
(1) The segment information reflects the Group's interest in material
equity accounted joint ventures and is presented on a proportional
consolidation basis, which is the measure used by the Group's management to
assess their performance. Joint venture adjustments reconcile the proportional
consolidation to the statutory equity accounting positions.
Year ended 30 June 2021
US$M Continuing operations Discontinued operation((1)) Total
Underlying EBIT 1,189 (150) 1,039
Significant items((2)) 55 - 55
Manganese joint venture adjustments((3)(4)) (210) - (210)
Gains/(losses) on the disposal of interests in operations - (159) (159)
Exchange rate gains/(losses) on restatement of monetary items((5)) (35) (34) (69)
Net impairment (loss)/reversal of non-financial assets((5)(6)) (764) - (764)
Gains/(losses) on non-trading derivative instruments, contingent consideration (9) 46 37
and other investments measured at FVTPL((5)(7))
Major corporate restructures((5)(8)) (23) - (23)
Profit/(loss) from operations 203 (297) (94)
Underlying net finance costs (127) (43) (170)
Manganese joint venture adjustments((3)) 18 - 18
Exchange rate variations on net debt (52) - (52)
Net finance costs (161) (43) (204)
Underlying income tax (expense)/benefit (326) (1) (327)
Underlying royalty related tax (expense)/benefit (53) - (53)
Manganese joint venture adjustments relating to income tax 124 - 124
(expense)/benefit((3))
Manganese joint venture adjustments relating to royalty related tax 53 - 53
(expense)/benefit((3))
Tax effect of other earnings adjustments to Underlying EBIT 247 - 247
Tax effect of other earnings adjustments to Underlying net finance costs (7) - (7)
Exchange rate variations on tax balances 62 4 66
Income tax (expense)/benefit 100 3 103
(1) Refer to Discontinued operation.
(2) Refer to Significant items.
(3) The segment information reflects the Group's interest in material
equity accounted joint ventures and is presented on a proportional
consolidation basis, which is the measure used by the Group's management to
assess their performance. Joint venture adjustments reconcile the proportional
consolidation to the statutory equity accounting positions, recognised in
share of profit/(loss) of equity accounted investments in the Consolidated
Income Statement.
(4) Includes earnings adjustments of US$(5) million included in the
Australia Manganese segment and US$(10) million included in the South Africa
Manganese segment.
(5) Recognised in expenses excluding net finance costs in the
Consolidated Income Statement.
(6) Refer to Impairments recognised.
(7) Primarily relates to US$(8) million included in the Hillside
Aluminium segment.
(8) The major corporate restructure costs primarily relate to the
simplification of the Group's functional structures and office footprint and
are included in Group and unallocated items/eliminations.
UNDERLYING RESULTS RECONCILIATION (CONTINUED)
30 June 2021
Group underlying results from continuing operations Group statutory results from continuing operations
Manganese joint venture adjustments((1))
Total revenue 6,462 (986) 5,476
Depreciation and amortisation 790 (97) 693
Share of profit/(loss) of equity accounted investments (1) 142 141
Exploration expenditure 57 (3) 54
Capital expenditure 530 (70) 460
Equity accounted investments 2 378 380
Total assets 13,654 (412) 13,242
Total liabilities 4,700 (412) 4,288
(1) The segment information reflects the Group's interest in material
equity accounted joint ventures and is presented on a proportional
consolidation basis, which is the measure used by the Group's management to
assess their performance. Joint venture adjustments reconcile the proportional
consolidation to the statutory equity accounting positions.
Significant items
Significant items are those items, not separately identified in the Underlying
results reconciliation, where their nature and amount are considered material
to the consolidated financial statements.
Year ended 30 June 2022
US$M Gross Tax Net
Recognition of indirect tax assets 77 (26) 51
Total significant items 77 (26) 51
Following the Group's decision to participate in a restart of Brazil
Aluminium, the Group recognised indirect tax assets of US$77 million that were
expensed subsequent to the smelter being placed on care and maintenance in
2015. The recognition of the indirect tax assets has resulted in a significant
one-off amount of US$77 million (US$51 million post tax) recorded as other
income in the Consolidated Income Statement.
Year ended 30 June 2021
US$M Gross Tax Net
Disposal of royalties 55 - 55
Total significant items 55 - 55
The Group divested four royalties to a wholly owned subsidiary of the
Elemental Royalties Corporation for US$55 million, which comprised US$40
million in upfront cash and US$15 million in equity. These royalties were
recognised as intangible assets with a US$nil carrying value. The transaction
completed on 9 February 2021 and the Group recognised other income of US$55
million (US$55 million post tax) in the Consolidated Income Statement and was
included in Group and unallocated items/eliminations.
Impairments recognised
The Group recognised the following net impairments for the year ended 30 June
2022:
US$M FY22 FY21
Financial assets
Loans to equity accounted investments((1)) (26) -
Total net impairment of financial assets (26) -
Non-financial assets
Property, plant and equipment((2)) (134) (728)
Right-of-use lease assets((2)(3)) (7) (8)
Intangible assets((4)) (4) (36)
Total net impairment of non-financial assets (145) (772)
Total net impairment (171) (772)
(1) Relates to a US$26 million impairment of the purchased
credit-impaired receivable from Sierra Gorda.
(2) Relates to a US$183 million impairment included in Group and
unallocated items/eliminations in respect of Eagle Downs and a US$42 million
impairment reversal included in the Brazil Aluminium segment. In relation to
the Eagle Downs impairment, this includes a US$176 million impairment of
property, plant and equipment and a US$7 million impairment of right-of-use
lease assets. FY21 relates to a US$728 million impairment included in the
Illawarra Metallurgical Coal segment.
(3) In FY21, an impairment of right-of-use lease assets was included in
the major corporate restructures earnings adjustment. Refer to Underlying
results reconciliation.
(4) Relates to a US$4 million (FY21: US$36 million) impairment included
in Group and unallocated items/eliminations.
UNDERLYING RESULTS RECONCILIATION (CONTINUED)
Impairments recognised (continued)
Sierra Gorda
The Group's investment in the Sierra Gorda operation is represented by the
carrying value of the equity accounted investment of US$30 million and the
carrying value of a non-current purchased credit-impaired receivable of
US$1,648 million, classified as a loan to an equity accounted investment and
included within Trade and other receivables. The Group's equity accounted
investment in Sierra Gorda is considered a separate cash generating unit (CGU)
and is also a reporting segment.
The loan has a contractual interest rate of 8 per cent and the repayment of
the loan by the Sierra Gorda operation is dependent on its financial
performance. At 30 June 2022, the Group updated its estimated timing of the
loan repayments and as a result recognised an impairment of US$26 million
which is included in expenses excluding net finance costs in the Consolidated
Income Statement. The net present value of the expected future cash flows of
the loan was determined as US$1,648 million using a measurement methodology
consistent with a Level 3 fair value based on the inputs in the valuation
technique.
In determining the net present value, an effective interest rate of 9 per cent
was applied to discount the future loan repayments. The rate was determined on
the date of acquisition of the Group's interest in Sierra Gorda and was
informed by a production profile based on mineral resources and mineral
reserves that are qualifying foreign estimates under the ASX Listing Rules and
costs based on the most recent Sierra Gorda budget.
For further information on the qualifying foreign estimates, refer to the
market release "South32 to acquire a 45 per cent interest in the Sierra Gorda
copper mine" dated 14 October 2021 (Market Announcement). A Competent Person
has not done sufficient work to classify foreign estimates as Mineral
Resources or Ore Reserves in accordance with the JORC Code. It is also
uncertain that following evaluation and/or further work that the foreign
estimates will be reported as Mineral Resources or Ore Reserves in accordance
with the JORC Code. The information that relates to production targets are
based on proven and probable mineral reserves of the foreign estimate and the
material assumptions are included as Annexure B of the Market Announcement.
The Group is not in possession of any new information or data relating to the
foreign estimate that materially impacts on the reliability of the estimates
and confirms that the information contained in the clarifying statement in the
Market Announcement continues to apply and has not materially changed.
The table below shows the key assumptions used in the net present value
determinations:
Assumptions used
Copper (US$/lb) 2.70 to 4.08
Foreign exchange rates (US$ to CLP) 635 to 827
The key assumptions for copper prices are comparable to market consensus
forecasts and foreign exchange rates are aligned with forward market rates in
the short-run and thereafter are within the range published by market
commentators. The potential effect of using reasonably possible alternative
assumptions in determining the net present value of the loan, based on changes
in the most significant inputs by 10 per cent while holding all other
variables constant, is shown in the following table:
Impact on profit/(loss) after tax
Carrying value 10% increase in input 10% decrease in input
US$M Face value
Trade and other receivables
Loans to equity accounted investments((1)) 2,073 1,648 63 (157)
Total 2,073 1,648 63 (157)
(1) Sensitivity analysis is performed assuming all inputs are either
directionally moving unfavourably or favourably.
Eagle Downs
In October 2021, the Group announced the commencement of a process to
investigate the potential divestment of our interest in the Eagle Downs
Metallurgical Coal development option. In December 2021, as part of the
negotiation for sale, the Group received non-binding offers from external
parties which, in combination with the long-term market outlook for
metallurgical coal demand and prices, resulted in the recognition of an
impairment of US$79 million for the Eagle Downs CGU.
In April 2022, a preferred bidder withdrew from the negotiations and the Group
has since revised its recoverable amount of the Eagle Downs CGU to US$nil,
bringing the total impairment recognised for the Eagle Downs CGU in FY22 to
US$183 million. The Group continues to investigate the potential divestment of
our interest in Eagle Downs.
UNDERLYING RESULTS RECONCILIATION (CONTINUED)
Impairments recognised (continued)
The long-run metallurgical coal prices and exchange rates used as part of the
Group's fair value less cost of disposal (FVLCD) determinations at 30 June
2022 were within the following ranges as published by market commentators:
Assumptions used
Metallurgical coal (US$/t) 135 to 175
Foreign exchange rates (AU$ to US$) 0.71 to 0.80
The fair value measurement was categorised as a Level 3 fair value based on
the inputs in the discounted cashflow valuation model in combination with the
use of the market approach. In determining the FVLCD, a real US$ post tax
discount rate range of between 6 and 8 per cent was applied to the post tax
forecast cash flows expressed in real terms.
In addition to an impairment of right-of-use lease assets of US$7 million, the
impairment of US$176 million for property, plant and equipment of Eagle Downs
includes US$3 million recognised in land and buildings, US$7 million
recognised in plant and equipment, US$102 million recognised in other mineral
assets, US$51 million recognised in assets under construction, and US$13
million recognised in exploration and evaluation.
Brazil Aluminium
On 6 January 2022, the Group announced its decision to participate in a
restart of the Brazil Aluminium smelter. The Group has assessed the
implications of the restart decision and reviewed the impact on the carrying
value of the Brazil Aluminium CGU as at 31 December 2021.
At 31 December 2021, the Group reversed the full impairment that was
recognised when the smelter was placed on care and maintenance in 2015,
limited to the carrying amount that would have been determined (net of
amortisation and depreciation) had no impairment loss been recognised at such
time. The recoverable amount remains significantly higher than the carrying
amount recorded.
The recoverable amount was based on the smelter's FVLCD and was informed by
the Group's production profile and cost profile which were consistent with the
Group's commitments to long-term power agreements. The key assumptions used
for commodity prices were comparable to market consensus forecasts and foreign
exchange rates were aligned with forward market rates.
The fair value measurement was categorised as a Level 3 fair value based on
the inputs in the discounted cashflow valuation model. In determining the
FVLCD, a real US$ post tax discount rate range of between 6 and 8 per cent,
and a country risk premium of 2 per cent, was applied to the post tax forecast
cash flows expressed in real terms.
The impairment reversal of US$42 million includes US$18 million recognised in
land and buildings and US$24 million recognised in plant and equipment, both
within property, plant and equipment. In addition, the Group recognised
indirect tax assets of US$77 million that had been expensed since the smelter
was placed on care and maintenance in 2015. Refer to Significant items.
The Group did not identify any impairment indicator as at 30 June 2022.
income tax expense
US$M FY22 FY21
Current income tax (expense)/benefit (1,006) (196)
Deferred income tax (expense)/benefit (18) 299
Total income tax (expense)/benefit (1,024) 103
Income tax expense is attributable to:
Continuing operations (1,024) 100
Discontinued operation((1)) - 3
Total income tax (expense)/benefit (1,024) 103
(1) Refer to Discontinued operation.
DIVIDENDS
US$M FY22 FY21
Prior year final dividend((1)) 163 48.5
Prior year special dividend((1)) 93 -
Interim dividend((2)) 404 66.5
Total dividends declared and paid during the year 660 115
(1) On 19 August 2021, the Directors resolved to pay a fully-franked
final dividend of US 3.5 cents per share (US$164 million) and a fully-franked
special dividend of US 2.0 cents per share (US$93 million) in respect of the
2021 financial year. The dividends were paid on 7 October 2021. In addition to
the ESOP Trusts receiving dividends from South32 Limited, a total of 9,736,166
shares were bought back between the declaration and the ex-dividend dates,
therefore reducing the dividends paid externally to US$256 million.
(2) On 17 February 2022, the Directors resolved to pay a fully-franked
interim dividend of US 8.7 cents per share (US$405 million) in respect of the
2022 financial half year. The dividend was paid on 7 April 2022. In addition
to the ESOP Trusts receiving dividends from South32 Limited, a total of
2,691,419 shares were bought back between the declaration and the ex-dividend
dates, therefore reducing the dividend paid externally to US$404 million.
EARNINGS PER SHARE
Basic earnings per share (EPS) amounts are calculated based on profit or loss
attributable to equity holders of South32 Limited and the weighted average
number of shares outstanding during the year.
Dilutive EPS amounts are calculated based on profit or loss attributable to
equity holders of South32 Limited and the weighted average number of shares
outstanding after adjustment for the effects of all dilutive potential shares.
The following reflects the profit/(loss) and share data used in the basic and
diluted EPS computations:
Profit/(loss) attributable to equity holders
US$M FY22 FY21
Continuing operations 2,669 142
Discontinued operation((1)) - (337)
Profit/(loss) attributable to equity holders of South32 Limited (basic) 2,669 (195)
Profit/(loss) attributable to equity holders of South32 Limited (diluted) 2,669 (195)
(1) Refer to Discontinued operation.
Weighted average number of shares
Million FY22 FY21
Basic EPS denominator((1)) 4,647 4,771
Shares contingently issuable under employee share ownership plans 32 14
Diluted EPS denominator 4,679 4,785
(1) The basic EPS denominator is the aggregate of the weighted average
number of shares after deduction of the weighted average number of treasury
shares outstanding and shares permanently cancelled through the on-market
share buy-back program.
Earnings per share
US cents FY22 FY21
Continuing operations
Basic EPS 57.4 3.0
Diluted EPS 57.0 3.0
Attributable to ordinary equity holders of South32 Limited
Basic EPS 57.4 (4.1)
Diluted EPS 57.0 (4.1)
NET FINANCE COSTS
US$M FY22 FY21
Finance expenses
Interest on borrowings (31) (15)
Interest on lease liabilities (53) (55)
Discounting on provisions and other liabilities (65) (59)
Change in discount rate on closure and rehabilitation provisions 2 6
Net interest expense on post-retirement employee benefits (3) (3)
Exchange rate variations on net debt 40 (52)
(110) (178)
Finance income
Interest on loans to equity accounted investments 63 8
Other interest income 16 9
79 17
Net finance costs (31) (161)
equity accounted investments
The Group's interest in equity accounted investments with the most significant
contribution to the Group's net profit/(loss) or net assets, are as follows:
Significant joint ventures Country of incorporation Principal activity Reporting date Acquisition date Ownership interest %
FY22 FY21
Australia Manganese((1)) Australia Manganese ore mine 30 June 2022 8 May 2015 60 60
South Africa Manganese((2)) South Africa Manganese ore mines 30 June 2022 3 February 2015 60 60
Sierra Gorda((3)) Chile Copper mine 31 December 2022((3)) 22 February 2022((4)) 45 -
(1) Australia Manganese consists of an investment in Groote
Eylandt Mining Company Pty Ltd (GEMCO).
(2) The Group holds a 60 per cent interest in Samancor Holdings
(Pty) Ltd (Samancor). Samancor indirectly owns 74 per cent of Hotazel
Manganese Mines (Pty) Ltd (HMM), which gives the Group its indirect legal
ownership interest of 44.4 per cent. The remaining 26 per cent of HMM is owned
by B-BBEE entities, of which 17 per cent of the interests were acquired using
vendor finance, with the loans repayable via distributions attributable to
these parties, pro rata to their share in HMM. Until these loans are repaid,
the Group's interest in HMM is accounted for at 54.6 per cent.
(3) Sierra Gorda consists of an investment in Sierra Gorda
Sociedad Contractual Minera. The reporting date differs to that of the Group
and is consistent with common practice in its country of incorporation.
(4) Refer to Acquisition of equity accounted investments.
Share of profit/(loss) of equity accounted investments FY22 FY21
US$M
Australia Manganese 211 115
South Africa Manganese 31 20
Sierra Gorda 30 -
Individually immaterial((1)) - (2)
Total 272 133
(1) Individually immaterial consists of investments in Samancor
Marketing Pte Ltd (60 per cent) of US$2 million, MRN (33 per cent) of US$(3)
million and Port Kembla Coal Terminal Ltd (16.7 per cent) of US$1 million in
FY22 and Samancor Marketing Pte Ltd (60 per cent) of US$7 million, Port Kembla
Coal Terminal Ltd (16.7 per cent) of US$(1) million and Richards Bay Coal
Terminal Pty Ltd (21.1 per cent) of US$(8) million in FY21. The share of
profit/(loss) from Richards Bay Coal Terminal Pty Ltd in FY21 was included in
the disposal of a discontinued operation. Refer to Discontinued operation.
interests in joint operations
Significant joint operations of the Group, which are those with the most
significant contribution to the Group's net profit/(loss) or net assets, are
as follows:
Significant joint operations Country of operation Principal activity Acquisition date Effective interest %
FY22 FY21
Ambler Metals United States Base metals exploration and development option 11 February 2020 50 50
Brazil Alumina Brazil Integrated bauxite mine and alumina refinery 3 July 2014 36 36
Brazil Aluminium Brazil Aluminium smelter 3 July 2014 40 40
Eagle Downs Metallurgical Coal Australia Metallurgical coal exploration and development option 14 September 2018 50 50
Mozal Aluminium((1)) Mozambique Aluminium smelter 27 March 2015((2)) 63.7 47.1
Worsley Alumina((1)) Australia Integrated bauxite mine and alumina refinery 8 May 2015 86 86
(1) While the Group holds a greater than 50 per cent interest in
Worsley Alumina and Mozal Aluminium, participants jointly approve certain
matters and are entitled to receive their share of output from the
arrangement.
(2) The Group initially acquired a 47.1 per cent interest on 27
March 2015 and subsequently acquired a further 16.6 per cent interest on 31
May 2022. Refer to Acquisition of subsidiaries and joint operations.
Acquisition of subsidiaries and joint operations
Acquisition of additional interest in Mozal Aluminium
On 31 May 2022, the Group acquired an additional 16.6 per cent shareholding
and related rights in Mozal Aluminium from its joint operating partner, MCA
Metals Holding GmbH (Mitsubishi), through the exercise of its pre-emptive
rights in the Mozal Aluminium joint operation. The transaction was completed
for a total consideration of US$200 million of which US$175 million was paid
on completion and US$25 million was paid in July 2022. The additional interest
increases the Group's shareholding in the Mozal Aluminium joint operation to
63.7 per cent.
The Group acquired the additional interest in Mozal Aluminium in order to
access additional outputs from the joint operation. Mozal Aluminium continues
to be accounted for as a joint operation subsequent to the acquisition as the
relevant decisions in relation to Mozal Aluminium are governed by unanimous
consent of the joint operation participants, which includes South32 Investment
1 B.V. and the Industrial Development Corporation of South Africa. The
acquisition was treated as a business combination.
The fair values of the consideration transferred and additional 16.6 per cent
interest in the acquired identifiable assets and liabilities of Mozal
Aluminium as at the date of the acquisition were as follows:
US$M FY22
Purchase consideration
Cash 175
Deferred consideration((1)) 25
Total consideration 200
Assets acquired and liabilities assumed
Assets
Cash and cash equivalents 62
Trade and other receivables 4
Inventories 62
Property, plant and equipment 123
Intangible assets 2
Liabilities
Trade and other payables (25)
Provisions (19)
Total identifiable net assets at fair value 209
Gain on bargain purchase((2)) (9)
Purchase consideration transferred 200
Cash outflow on acquisition
Direct costs relating to the acquisition((3)) 176
Net cash acquired (62)
Net consolidated cash outflow((4)) 114
(1) The second and final instalment post completion adjustments
was settled during July 2022.
(2) Recognised in other income in the Consolidated Income
Statement.
(3) Inclusive of acquisition related transaction costs and other
directly attributable costs of US$1 million which are recognised in expenses
excluding net finance costs in the Consolidated Income Statement.
(4) Cash outflow is presented as 'Acquisition of subsidiaries and
joint operations, net of their cash' within the Consolidated Cash Flow
Statement.
From the date of acquisition, the additional 16.6 per cent interest in Mozal
Aluminium contributed an additional US$39 million of revenue and US$11 million
of profit before tax to the Group. If the transaction had taken place at the
beginning of the year, the additional 16.6 per cent interest would have
contributed, for the full year, an additional US$295 million of revenue and
US$82 million of profit before tax to the Group. The gain on bargain purchase
of US$9 million is mainly attributable to fluctuations in short-term commodity
prices.
Acquisition of equity accounted investments
Acquisition of interest in Sierra Gorda
On 22 February 2022, the Group completed its acquisition of a 45 per cent
interest in Sierra Gorda. The Group acquired, through a newly incorporated
wholly owned subsidiary, South32 Chile Copper Holdings Pty Ltd, 100 per cent
of the share capital in five holding companies which indirectly hold a 45 per
cent interest in, and provide funding for, the Sierra Gorda operation. The
transaction was completed for an upfront payment of US$1,408 million,
inclusive of purchase price adjustments, and contingent consideration with a
fair value on acquisition date of US$116 million. Contingent consideration is
price linked, with up to US$500 million payable over four years at threshold
copper production rates and prices.
The upfront consideration was funded from a combination of cash on hand and a
dedicated acquisition bridge facility. On 14 April 2022, the Group completed
the issuance of US$700 million of senior unsecured notes, with the Group
utilising those cash proceeds, together with cash on hand, to fully repay
amounts drawn down under the acquisition bridge facility.
The joint arrangement is classified as a joint venture as the activities are
primarily designed to provide joint venture parties with rights to the net
assets of the arrangement. The assets acquired include purchased
credit-impaired loan receivables accounted for under AASB 9 Financial
Instruments and an equity accounted investment accounted for under AASB 128
Investments in associates and joint ventures.
US$M FY22
Purchase consideration
Direct cash costs relating to the acquisition((1)) 1,421
Contingent consideration payable((2)) 116
Total consideration 1,537
Net assets
Loans to equity accounted investments 1,687
Equity accounted investments -
Current tax payable (151)
Other 1
Net assets acquired 1,537
Cash outflow on acquisition
Direct costs relating to the acquisition((1)) 1,421
Net cash acquired (1)
Net consolidated cash outflow((3)) 1,420
(1) Inclusive of acquisition related transaction costs and other
directly attributable costs of US$13 million.
(2) Contingent consideration recognised represents the present
value of expected future cash flows payable. The payment is contingent on the
average realised copper price and production levels for the first 4 years post
acquisition. If the production thresholds are met, the consideration payable
in that year is calculated as 50 per cent of the Group's 45 per cent share in
Sierra Gorda's operating revenue, multiplied by the percentage amount in which
the average realised copper price exceeds the specified copper price
thresholds. The maximum undiscounted value of the contingent consideration
payable is US$500 million and the minimum value is US$nil.
(3) Cash outflow is presented as 'Acquisition of equity accounted
investments' within the Consolidated Cash Flow Statement.
Acquisition of additional interest in MRN
On 29 April 2022, the Group acquired an additional 18.2 per cent shareholding
and related rights in MRN from Alcoa Corporation. The transaction was
completed for an upfront payment of US$10 million and contingent consideration
with a fair value on acquisition date of US$16 million.
The additional interest increases the Group's shareholding to 33 per cent, and
as a result the Group has significant influence over MRN and the investment is
considered an associate which is equity accounted.
The Group's existing 14.8 per cent interest, which was previously classified
as an investment in equity instruments designated as FVOCI, was derecognised
and the fair value of US$19 million was transferred to form part of the equity
accounted investment.
Acquisition of equity accounted investments (Continued)
Acquisition of additional interest in MRN (continued)
US$M FY22
Purchase consideration
Direct cash costs relating to the acquisition 10
Contingent consideration payable((1)) 16
Total consideration 26
Net assets
Investment in equity accounted investments 45
Derecognition of other financial assets((2)) (19)
Net assets acquired 26
Cash outflow on acquisition
Direct costs relating to the acquisition 10
Net consolidated cash outflow((3)) 10
(1) Contingent consideration recognised represents the present
value of a fixed amount with a probability factor applied. The maximum
undiscounted value of the contingent consideration is US$30 million and the
minimum value is US$nil. The amount becomes payable by the Group if agreed
expansion milestones are met.
(2) The Group's existing 14.8 per cent interest, which was
previously classified as an investment in equity instruments designated as
FVOCI, was de-recognised.
(3) Cash outflow is presented as 'Acquisition of equity accounted
investments' within the Consolidated Cash Flow Statement.
Discontinued operation
A discontinued operation is a component of the Group's business that
represents a separate major line of business or geographical area of
operations that has been disposed of or is held for sale. Classification as a
discontinued operation occurs upon disposal or when the operation meets the
criteria to be classified as held for sale, if earlier. When an operation is
classified as discontinued, the comparative income statement is restated as if
the operation had been discontinued from the start of the comparative period.
On 6 November 2019, the Group announced a binding conditional agreement for
the sale of its shareholding in SAEC to a wholly-owned subsidiary of Seriti
and two trusts which will acquire and hold equity on behalf of employees and
communities.
The transaction was subject to a number of material conditions which precluded
the classification of SAEC as held for sale until the conditions were
satisfied on 15 May 2021. On 1 June 2021, the Group completed the sale of its
shareholding in SAEC to Seriti and two trusts for the benefit of employees and
communities.
The discontinued operation represents the entire SAEC operating segment which
consists of: the Khutala colliery, the Klipspruit colliery, the Wolvekrans
Middelburg Complex and other SAEC corporate assets.
Discontinued operation (continued)
Results of the discontinued operation
US$M FY21
Revenue
Group production 735
Third party products and services 126
861
Other income 58
Expenses excluding net finance costs (1,049)
Loss on disposal of the discontinued operation (159)
Share of profit/(loss) of equity accounted investments (8)
Profit/(loss) from the discontinued operation (297)
Finance expenses (52)
Finance income 9
Net finance costs (43)
Profit/(loss) before tax from the discontinued operation (340)
Income tax (expense)/benefit 3
Profit/(loss) after tax from the discontinued operation (337)
Total comprehensive income/(loss) from the discontinued operation attributable (337)
to the equity holders of South32 Limited
Basic EPS (cents) (7.1)
Diluted EPS (cents) (7.1)
Cash flows from the discontinued operation
US$M FY21
Net cash flows from operating activities (180)
Net cash flows from investment activities (149)
Net cash flows from financing activities (3)
Net decrease in cash and cash equivalents (332)
Contingent assets and liabilities
Contingent assets and liabilities not otherwise provided for in the
consolidated financial statements are categorised as arising from:
US$M FY22 FY21
Actual or potential litigation 427 427
Total contingent liabilities 427 427
Actual or potential litigation 156 -
Total contingent assets 156 -
Actual or potential litigation liabilities primarily relate to numerous tax
assessments or matters relating to transactions in prior years in Colombia and
Brazil. Additionally, there are a number of legal claims or potential claims
against the Group, the outcome of which cannot be foreseen at present, and for
which no amounts have been disclosed.
Actual or potential litigation assets primarily relate to potential recovery
of pre-closing tax liabilities in respect of the Sierra Gorda acquisition,
with allocation of liability for these pre-closing tax liabilities being
disputed with the vendors.
The Group has entered into various counter-indemnities of bank and performance
guarantees related to its own future performance which are in the normal
course of business. Additionally, the Group has provided indemnities against
certain liabilities as part of agreements for the disposal of business
operations. Having taken appropriate legal advice, the Group believes that a
material liability arising from the indemnities provided is remote.
SUBSEQUENT EVENTS
Non-core royalty sale
On 19 July 2022, the Group completed the sale of a package of four non-core
base metal royalties to Anglo Pacific Group Plc (Anglo Pacific) in exchange
for consideration comprising both cash and shares. The Group recognised a gain
on the sale of US$192 million (US$134 million post tax) in the 2023 financial
year. Following completion, the Group holds a 16.7% interest in Anglo Pacific.
Dendrobium Next Domain (DND) life extension project
During the year ended 30 June 2021, the New South Wales Independent Planning
Commission (IPC) refused the application for the DND life extension project at
Illawarra Metallurgical Coal (IMC). The decision by the IPC introduced
uncertainty over the future of the DND project's value contribution to the IMC
CGU recoverable amount assessment. The Group assessed the potential
implications of the IPC decision and as a result recognised an impairment of
the IMC CGU of US$728 million during the 2021 financial year.
On 23 August 2022, the Group announced that it will not proceed with the
investment in the DND life extension project following its consideration of
recently completed study work and extensive analysis of alternatives
considered for the complex. With this decision, the Group will focus on
continuing to optimise Dendrobium and the broader IMC complex to extend the
mine life within approved domains. In light of the impairment that was
recognised during the 2021 financial year, the decision not to proceed with
the investment in the DND project has not resulted in an additional impairment
charge and the carrying value for the IMC complex remains appropriate as at 30
June 2022.
Capital management
On 25 August 2022, the Directors resolved to pay a fully-franked final
dividend of US 14.0 cents per share (US$648 million) and a fully-franked
special dividend of US 3.0 cents per share (US$139 million) in respect of the
2022 financial year. The dividends will be paid on 13 October 2022. The
dividends have not been provided for in the consolidated financial statements
and will be recognised in the 2023 financial year.
On 25 August 2022, the Group also announced an increase to the existing
capital management program, announced in March 2017, of US$156 million to a
total of US$2.3 billion. This leaves US$250 million expected to be returned by
1 September 2023.
No other matters or circumstances have arisen since the end of the financial
year that have significantly affected, or may significantly affect, the
operations, results of operations or state of affairs of the Group in
subsequent accounting periods.
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 operations; 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.
NON-IFRS FINANCIAL INFORMATION
This release includes certain non-IFRS financial measures, including
Underlying earnings, Underlying EBIT and Underlying EBITDA, Underlying
revenue, Underlying net finance costs, Underlying depreciation and
amortisation, Underlying operating costs, Underlying income tax expense,
Underlying royalty related tax expense, Basic Underlying earnings per share,
Underlying effective tax rate, Underlying EBIT margin, Underlying EBITDA
margin, Underlying return on capital, Free cash flow, net debt, net operating
assets and ROIC. These measures are used internally by management to assess
the performance of our business, make decisions on the allocation of our
resources and assess operational management. Non-IFRS measures have not been
subject to audit or review and should not be considered as an indication of or
alternative to an IFRS measure of profitability, financial performance or
liquidity.
NO OFFER OF SECURITIES
Nothing in this release should be read or understood as an offer or
recommendation to buy or sell South32 securities, or be treated or relied upon
as a recommendation or advice by South32.
NO FINANCIAL OR INVESTMENT ADVICE - SOUTH AFRICA
South32 does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
further information
INVESTOR RELATIONS MEDIA RELATIONS
Ben Baker Jamie Macdonald Miles Godfrey
M +61 403 763 086
M +61 408 925 140
M +61 415 325 906
E Ben.Baker@south32.net E Jamie.Macdonald@south32.net E Miles.Godrey@south32.net
Further information on South32 can be found at www.south32.net
(http://www.south32.net) .
South32 Limited (ABN 84 093 732 597)
Registered in Australia
(Incorporated in Australia under the Corporations Act 2001)
Registered Office: Level 35, 108 St Georges Terrace
Perth Western Australia 6000 Australia
ISIN: AU000000S320
Approved for release by Graham Kerr, Chief Executive Officer
JSE Sponsor: The Standard Bank of South Africa Limited
25 August 2022
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