REG - South32 Limited - Financial Results: Half Year Ended 31.12.2023
15/02/2024 07:00
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RNS Number : 2074D South32 Limited 15 February 2024
Please see the Full Audited Results in attached PDF
http://www.rns-pdf.londonstockexchange.com/rns/2074D_1-2024-2-14.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2074D_1-2024-2-14.pdf)
APPENDIX 4D
SOUTH32 LIMITED
(ABN 84 093 732 597)
RESULTS FOR ANNOUNCEMENT TO THE MARKET
This page and the accompanying 57 pages comprise the half year end financial
information given to the Australian Securities Exchange (ASX) under Listing
Rule 4.2A. This statement includes the unaudited consolidated results of the
South32 Group for the half year ended 31 December 2023 (H1 FY24) compared
with the half year ended 31 December 2022 (H1 FY23).
The half year report should be read in conjunction with the Financial Report
for the year ended 30 June 2023. Figures in italics indicate that an
adjustment has been made since the financial information was previously
reported.
US$M H1 FY24 H1 FY23 %
Underlying revenue 3,881 4,524 (14%)
Profit after tax 53 685 (92%)
Underlying earnings 40 560 (93%)
NET TANGIBLE ASSETS PER SHARE
Net tangible assets per ordinary share were US$1.99 as at 31 December 2023
(US$2.02 as at 30 June 2023)((1)).
DIVIDENDS
The Board has resolved to pay an interim dividend of US 0.4 cents per share
(fully-franked) for the half year ended 31 December 2023.
The record date for determining entitlements to dividends is 8 March 2024;
payment date is 4 April 2024.
FINANCIAL RESULTS AND OUTLOOK
HALF YEAR ENDED 31 DECEMBER 2023
ASX / LSE / JSE Share Code: S32; ADR: SOUHY
15 February 2024
South32 announces investment in Hermosa and is well positioned for second half
"We delivered Underlying EBITDA of US$708M, as record Group aluminium
production was offset by commodity price headwinds, and lower metallurgical
coal volumes as we completed planned longwall moves at Illawarra Metallurgical
Coal.
"We continued our rigorous focus on costs identifying further opportunities to
drive efficiencies. This supported FY24 Operating unit cost guidance being
lowered or held unchanged across the majority of our operations, along with
lower FY24 capital expenditure guidance at our operations through capital
efficiencies and the deferral of certain non-critical projects.
"Today we have taken the next step in our portfolio transformation by
announcing a US$2.16 billion investment in the Taylor zinc-lead-silver deposit
at our Hermosa project in Arizona, with first production expected in H2 FY27.
"This investment is a major milestone for our business, that further reshapes
our portfolio towards commodities critical to a low-carbon future. Taylor is
expected to deliver value for shareholders for decades to come and underpin
further growth phases at our regional scale Hermosa project, establishing it
as a globally significant producer of commodities critical for a low-carbon
future.
"In addition, we continue to invest to unlock value across our business. We
remain on track for a final investment decision for the fourth grinding line
expansion at Sierra Gorda during the fourth quarter of FY24 and continue to
progress more than 25 greenfield exploration options in base metals.
"Looking forward, we remain focused on driving operating performance and cost
efficiencies across our business. This focus, combined with our expected 7 per
cent production uplift in the second half, places us in a strong position to
capture higher margins as market conditions improve."
Graham Kerr, South32 CEO
Financial Highlights
US$M H1 FY24 H1 FY23 % Change
Revenue 3,133 3,696 (15%)
Profit before tax and net finance income/(costs) 75 871 (91%)
Profit after tax 53 685 (92%)
Basic earnings per share (US cents)((2)) 1.2 14.9 (92%)
Ordinary dividends per share (US cents)((3)) 0.4 4.9 (92%)
Other financial measures
Underlying revenue((4)) 3,881 4,524 (14%)
Underlying EBITDA((5)) 708 1,364 (48%)
Underlying EBITDA margin((6)) 19.0 % 31.5 % (12.5%)
Underlying EBIT((5)) 236 922 (74%)
Underlying EBIT margin((7)) 6.1 % 21.3 % (15.2%)
Underlying earnings((5)) 40 560 (93%)
Basic Underlying earnings per share (US cents)((2)) 0.9 12.2 (93%)
ROIC((8)) 1.3 % 12.0 % (10.7%)
Ordinary shares on issue (million) 4,529 4,572 (1%)
SAFETY
Nothing is more important than the health, safety and well-being of our
people. We continue to implement our Safety Improvement Program, a multi-year
global program of work launched in FY22, designed to enhance our safety
culture and achieve a step change in our safety performance. Our Safety
Improvement Program includes a significant investment in safety leadership
through our 'Lead Safely Every Day' program, which supports our leaders to
engage their teams on our 'safety guarantee', creating a sense of chronic
unease aiding a risk reduction mindset to be applied to daily activities. Our
Lead Safely Every Day program continued to be deployed across our leadership
teams during H1 FY24, and will be extended to our frontline workforce from H2
FY24.
We use a range of leading and lagging indicators to assess our safety
performance. Our leading indicator, significant hazard frequency((9)),
increased to 118.0 for H1 FY24 (FY23: 91.6), indicating improved hazard
awareness and a positive reporting culture. We expect the lagging indicators
of total recordable injury frequency (TRIF)((10)(11)) and lost time injury
frequency (LTIF)((10)(12)) to follow this positive trend over time. TRIF for
H1 FY24 reduced to 5.2 (FY23: 5.9), while LTIF increased to 2.0 in H1 FY24
(FY23: 1.4).
PERFORMANCE SUMMARY
The Group's statutory profit after tax decreased by US$632M to US$53M in H1
FY24, as record Group aluminium production and lower raw material input
prices, were more than offset by lower commodity prices and metallurgical coal
volumes as we completed two planned longwall moves at Illawarra Metallurgical
Coal. Underlying earnings decreased by US$520M to US$40M in H1 FY24.
A reconciliation of statutory profit to Underlying earnings is set out on
page 6.
Underlying EBITDA decreased by US$656M to US$708M, for a Group operating
margin((6)) of 19.0%, due to the aforementioned commodity price and volume
impacts. We maintained our focus on cost management, holding increases in
controllable costs to approximately 4% of the Group's cost base((13)), despite
broad inflationary pressures. We also realised the benefit of our portfolio
improvements in copper and low-carbon aluminium((14)), with Sierra Gorda
contributing Underlying EBITDA of US$117M at an operating margin of 36%, and
production from Brazil Aluminium more than doubled.
In H1 FY24, we completed a Group-wide review of expenditure that identified
further efficiencies and options to defer non-critical projects. This has
supported FY24 Operating unit cost guidance being lowered or maintained across
the majority of our operations, and a 6% reduction in FY24 Group safe and
reliable and improvement capital expenditure.
Looking forward, our expected production uplift of 7%((15)) in H2 FY24 and
continued focus on driving cost efficiencies, places us in a strong position
to capture higher margins as market conditions improve.
Free cash flow from operations, including distributions from our manganese and
Sierra Gorda equity accounted investments (EAIs), decreased by US$544M to an
outflow of US$417M. This reflected our continued investment in productivity,
improvement and growth projects, and a temporary build in our high value
aluminium inventory as third-party port congestion impacted the timing of
shipments. Looking forward, we expect to reduce our aluminium inventory
position in H2 FY24, adding to the Group's cash generation.
We returned US$180M to shareholders during H1 FY24, paying a US$145M
fully-franked ordinary dividend in respect of H2 FY23 and returning US$35M via
our on-market share buy-back. We have today announced a fully-franked ordinary
dividend of US$18M (US 0.4 cents per share) in respect of H1 FY24, consistent
with our policy to distribute a minimum 40% of Underlying earnings as ordinary
dividends in each six month period.
We continue to prioritise a strong balance sheet and investment grade credit
rating through all cycles, finishing the period with net debt of US$1.1B. Our
current investment grade credit ratings were re-affirmed in H1 FY24 and we
retain access to significant liquidity, having successfully extended our
undrawn sustainability-linked revolving credit facility.
To manage our financial position and ensure we retain the right balance of
flexibility, efficiency and prudence, we have taken the decision to cancel our
on-market share buy-back, which was due to expire on 1 March 2024((16)).
Consistent with our unchanged capital management framework and in the context
of our financial position, we will continue to assess opportunities to return
excess cash to shareholders in the most efficient and value accretive manner.
We have today announced((17)) the next step in our portfolio transformation,
approving a final investment decision to develop the Taylor zinc-lead-silver
deposit at our Hermosa project in Arizona, USA. With first production expected
in H2 FY27, Taylor has the potential to be one of the world's largest, lowest
cost zinc producers and deliver value for our shareholders for decades to
come.
Specific highlights for H1 FY24 included:
• Delivered record half-year Group aluminium production, and increased zinc and
nickel production by 20% in Q2 FY24;
• Finalised new industrial agreements at Illawarra Metallurgical Coal and
Cannington;
• Completed a Group-wide review of costs to deliver further efficiencies and
reduce expenditure;
• FY24 production guidance is unchanged and we expect to deliver a 7%((15))
increase in production volumes in H2 FY24;
• FY24 Operating unit cost guidance has been lowered or maintained across the
majority of our operations;
• Invested US$188M at Hermosa as we installed critical path infrastructure and
progressed study work and federal permitting for our Taylor and Clark
deposits;
• Progressed the feasibility study for the fourth grinding line expansion at
Sierra Gorda, ahead of a planned final investment decision in Q4 FY24;
• Continued our investment in greenfield exploration to discover our next
generation of base metal mines, spending US$19M in targeted prospective
regions; and
• Progressed decarbonisation programs to support our target((18)) to reduce
operational greenhouse gas (GHG) emissions by 50% by 2035, completing the
conversion of Worsley Alumina's first coal-fired boiler to natural gas.
Subsequent to the end of the period:
• Announced final investment approval for the Taylor deposit at our Hermosa
project, a major milestone aligned with our strategy to reshape our portfolio
toward commodities that are critical for a low-carbon future; and
• Entered into a binding agreement to divest our 50% interest in the Eagle Downs
metallurgical coal project to a subsidiary of Stanmore Resources Limited, for
upfront consideration of US$15 million, a contingent payment of US$20 million,
subject to the Eagle Downs project reaching metallurgical coal production of
100,000 tonnes, and a price-linked royalty of up to US$100 million. The
transaction is expected to be completed in the 2024 calendar year subject to
the satisfaction of conditions precedent including approval from Australia's
Foreign Investment Review Board and certain joint venture consents.
EARNINGS RECONCILIATION
The Group's statutory profit after tax decreased by US$632M to US$53M in H1
FY24, while Underlying earnings decreased by US$520M to US$40M.
Consistent with our accounting policies, various items are excluded from the
Group's statutory profit/(loss) to derive Underlying earnings. Total
adjustments to derive Underlying EBIT (US$161M), shown in the table below,
include:
• Sierra Gorda (+US$47M) and manganese (+US$71M) joint venture adjustments:
adjustments to reconcile the statutory equity accounting position to a
proportional consolidation basis; and
• Net impairment loss of financial assets (+US$48M): periodic revaluation of the
shareholder loan receivable from Sierra Gorda reflecting copper prices and
other macroeconomic assumptions. An offsetting amount is recorded in the
Sierra Gorda joint venture adjustments noted above.
Further information on these earnings adjustments is included on page 42.
Group Underlying revenue declined by 14% (or US$643M) as lower realised prices
(-US$396M), together with lower sales volumes at Illawarra Metallurgical Coal
(-US$267M) due to planned longwall moves, more than offset higher volumes from
Brazil Aluminium, Cannington, Australia Manganese and Worsley Alumina
(+US$148M). Group Underlying EBITDA decreased by US$656M (or 48%) to US$708M
for an operating margin((6)) of 19%. The Group's costs remained well
controlled, with controllable cost increases held to approximately 4% of the
Group's cost base((13)) (-US$131M) despite broad inflationary pressures, and
we benefited from a reduction in raw material input prices and other
price-linked costs (+US$231M).
The Group's Underlying EBIT decreased by US$686M (or 74%) to US$236M, as
Underlying depreciation and amortisation increased by US$30M (or 7%) to
US$472M, reflecting our continued investment in projects to improve
productivity and grow future volumes.
Profit to Underlying EBITDA reconciliation
US$M H1 FY24 H1 FY23
Profit before tax and net finance income/(costs) 75 871
Adjustments to derive Underlying EBIT:
Significant items - (138)
Sierra Gorda joint venture adjustments 47 (57)
Manganese joint venture adjustments 71 101
Exchange rate (gains)/losses on the restatement of monetary items 13 (48)
Net impairment loss/(reversal) of financial assets 48 214
Net impairment loss/(reversal) of non-financial assets - (4)
Gains on non-trading derivative instruments, contingent consideration and (18) (17)
other investments measured at fair value through profit and loss
Total adjustments to derive Underlying EBIT 161 51
Underlying EBIT 236 922
Underlying depreciation and amortisation 472 442
Underlying EBITDA 708 1,364
Profit/(loss) to Underlying earnings reconciliation
US$M H1 FY24 H1 FY23
Profit after tax 53 685
Total adjustments to derive Underlying EBIT 161 51
Total adjustments to derive Underlying net finance costs (109) (102)
Total adjustments to derive Underlying income and royalty related tax expense (65) (74)
Underlying earnings 40 560
EARNINGS ANALYSIS
The following key factors influenced Underlying EBIT in H1 FY24, relative to
H1 FY23.
Reconciliation of movements in Underlying EBIT (US$M)((5)(19)(20)(21))
Earnings Analysis US$M Commentary
H1 FY23 Underlying EBIT 922
Change in sales price (396) Lower average realised prices for our commodities, including:
Aluminium (-US$136M) and alumina (-US$33M)
Nickel (-US$121M)
Manganese (-US$102M)
Energy coal (-US$22M)
Partially offset by higher average realised prices for silver (+US$15M) and
copper (+US$8M)
Net impact of price-linked costs 231 Lower caustic soda prices at Worsley Alumina (+US$54M) and Brazil Alumina
(+US$11M)
Lower aluminium smelter raw material input prices (+US$60M), including pitch
and coke
Lower price-linked royalties (+US$30M)
Lower coal, fuel oil and diesel prices (+US$28M)
Lower freight and distribution costs (+US$25M)
Lower electricity prices at Illawarra Metallurgical and Brazil Aluminium,
partially offset by higher gas prices at Cannington (+US$13M)
Change in exchange rates 33 Weaker South African rand (+US$42M) and Australian dollar (+US$28M)
Partially offset by a stronger Colombian peso (-US$16M), Brazilian real
(-US$12M) and Chilean peso (-US$9M)
Change in inflation (116) Inflation-linked indexation of our Southern African aluminium smelter
electricity prices (-US$27M)
General inflation across Australia (-US$43M), South America (-US$29M) and
Southern Africa (-US$17M)
Change in sales volume (260) Lower volumes, mostly at Illawarra Metallurgical Coal (-US$267M) as well as
Sierra Gorda (-US$44M), Cerro Matoso (-US$36M) and Mozal Aluminium (-US$32M)
Partially offset by higher volumes at Brazil Aluminium (+US$50M), Cannington
(+US$44M), Australia Manganese (+US$34M) and Worsley Alumina (+US$20M)
Controllable costs (131) Inventory and volume related movements (-US$102M) including a planned drawdown
of finished goods at Australia Manganese to support higher sales volumes
Higher contractor and maintenance costs (-US$39M) including at Illawarra
Metallurgical Coal to support the two completed longwall moves and at
Australia Manganese to deliver planned mining activity
A planned workforce payment at Sierra Gorda (-US$20M), following the
finalisation of a new, three-year industrial agreement
Partially offset by lower energy costs at Sierra Gorda (+US$20M), following
the transition to cost efficient, 100% renewable energy supply
Other (47) Higher Group depreciation and amortisation, and our share of the loss from
Mineração Rio do Norte (MRN) due to lower bauxite prices
H1 FY24 Underlying EBIT 236
Net finance income/(costs)
The Group's H1 FY24 Underlying net finance costs of US$118M primarily comprise
the unwinding of the discount applied to our closure and rehabilitation
provisions (US$76M), interest on lease liabilities (US$28M) largely for our
multi-fuel co-generation facility at Worsley Alumina, and interest on our
US$700M of senior unsecured notes (US$16M) issued in H2 FY22 to partly fund
the Sierra Gorda acquisition.
Underlying net finance costs reconciliation
US$M H1 FY24 H1 FY23
Unwind of discount applied to closure and rehabilitation provisions (76) (51)
Interest on lease liabilities (28) (28)
Interest on senior unsecured notes (16) (15)
Other 2 6
Underlying net finance costs (118) (88)
Add back earnings adjustment for exchange rate variations on net debt (1) 4
Sierra Gorda joint venture adjustments((22)) 91 85
Manganese joint venture adjustments((22)) 19 13
Total adjustments to derive Underlying net finance costs 109 102
Net finance income/(costs) (9) 14
Tax expense
The Group's Underlying income tax expense, which includes our material EAIs,
decreased by US$196M to US$78M in H1 FY24, for an Underlying effective tax
rate (ETR)((23)) of 60.5% (FY23: 36.1%). While this largely reflected the
corporate taxes of the jurisdictions in which we operate((24)) and our
geographical earnings mix, the Underlying ETR was elevated as permanent
differences, together with losses incurred at Mozal Aluminium((25)), had a
disproportionate effect when combined with compressed profit margins.
The Underlying ETR for our manganese business was 81.3% in H1 FY24, reflecting
royalty related tax at Australia Manganese((26)) and the derecognition of
certain deferred tax assets. The Underlying ETR for our Sierra Gorda EAI was
33.0% in H1 FY24, including royalty related tax((27))(,) and a one-off benefit
due to the recognition of deferred tax assets.
During the period, the Colombian Constitutional Court annulled a recent tax
law amendment that made royalty payments non-deductible for tax purposes from
1 January 2023. As a result of the Court's ruling, we have recognised a
receivable of US$39M in relation to the expected refund of prior tax paid,
also reducing our H1 FY24 income tax expense.
The Group's cash tax paid in H1 FY24, excluding EAIs, decreased by US$251M to
US$96M as cash tax normalised following one-off portfolio related payments in
the prior period.
Underlying income tax expense reconciliation and Underlying ETR
US$M H1 FY24 H1 FY23
Underlying EBIT 236 922
Include: Underlying net finance costs (118) (88)
Remove: Share of (profit)/loss of EAIs 11 (7)
Underlying profit before tax 129 827
Income tax expense 13 200
Tax effect of earnings adjustments to Underlying EBIT 4 1
Tax effect of earnings adjustments to Underlying net finance costs 1 (1)
Exchange rate variations on tax balances 20 (5)
Significant items - (23)
Sierra Gorda joint venture adjustment relating to income tax((22)) (6) 6
Sierra Gorda joint venture adjustment relating to royalty related tax((22)) 1 4
Manganese joint venture adjustment relating to income tax((22)) 24 56
Manganese joint venture adjustment relating to royalty related tax((22)) 21 36
Total adjustments to derive Underlying income tax expense 65 74
Underlying income tax expense 78 274
Underlying effective tax rate 60.5 % 33.1 %
CASH FLOW
Group free cash flow from operations declined by US$544M to an outflow of
US$477M, due to lower profitability, an increase in capital expenditure for
productivity, improvement and growth projects (-US$168M), and a build in
working capital in the period (-US$276M).
Separately, we received net distributions((28)) of US$42M from our manganese
EAI in H1 FY24 (H1 FY23: US$60M), following the payment of income tax (US$34M,
100% basis), and royalties at Australia Manganese (US$45M, 100% basis). We
also received US$18M from our Sierra Gorda EAI (H1 FY23: nil), as the
operation invested in the plant de-bottlenecking project and the feasibility
study for the fourth grinding line expansion project, designed to unlock
future copper volumes.
The increase in working capital in the period reflected an increase in
receivables due to the timing of sales, and a further increase in our high
value aluminium inventory position as Brazil Aluminium continued to ramp up
and three aluminium shipments slipped to January 2024 due to port congestion
at Richards Bay. We expect to drawdown our aluminium inventory during H2 FY24
as port congestion eases.
Free cash flow from operations excluding EAIs
US$M H1 FY24 H1 FY23
Profit from operations 75 871
Non-cash or non-operating items 421 377
Share of (profit)/loss from EAIs 9 (241)
Change in working capital (276) (152)
Cash generated from operations 229 855
Total capital expenditure, excluding EAIs, including intangibles and (584) (416)
capitalised exploration
Operating cash flows generated from operations after capital expenditure (355) 439
Net interest paid((29)) (26) (25)
Income tax paid (96) (347)
Free cash flow from operations (477) 67
Working capital movement
US$M H1 FY24 Commentary
Trade and other receivables (88) Timing of shipments weighted toward the end of the period
Inventories (84) Continued ramp up of Brazil Aluminium, and temporary shipping delays at
Hillside Aluminium due to port congestion at Richards Bay
Trade and other payables (84) Timing of raw material purchases
Provisions and other liabilities (20)
Total working capital movement (276)
Capital expenditure
The Group's capital expenditure((30)), excluding EAIs, increased by US$168M to
US$584M in H1 FY24 as we continued our investment in productivity, improvement
and growth projects:
• Safe and reliable capital expenditure increased by US$103M to US$335M,
reflecting elevated capital expenditure at Illawarra Metallurgical Coal as we
transition Appin to a more efficient single longwall configuration from
FY25((31)), and install additional ventilation capacity to enable mining in
Appin's Area 7 until at least 2039((31));
• Improvement and life extension capital expenditure increased by US$16M to
US$40M as we advanced decarbonisation projects at Worsley Alumina and the
De-bottlenecking Phase Two project at Brazil Alumina;
• Growth capital expenditure increased by US$92M to US$188M at Hermosa, as we
constructed critical path infrastructure and advanced studies for the Taylor
zinc-lead-silver and Clark battery-grade manganese deposits; and
• Intangibles and capitalised exploration expenditure was US$21M, as we
completed multiple exploration programs across our portfolio focused on base
metals.
Our share of capital expenditure for our material EAIs increased by US$39M to
US$170M in H1 FY24:
• Capital expenditure for our manganese EAIs increased by US$22M to US$66M, as
Australia Manganese progressed construction of the Eastern Lease South life
extension project, and South Africa Manganese continued work to access new
mining areas and improve rail efficiencies; and
• Capital expenditure for our Sierra Gorda EAI increased by US$17M to US$104M,
as the operation continued its investment in deferred stripping, additional
tailings storage infrastructure and the plant de-bottlenecking project,
together with the feasibility study for the fourth grinding line expansion
project.
Capital expenditure (South32 share)((21)(30))
US$M H1 FY24 H1 FY23
Safe and reliable capital expenditure (335) (232)
Improvement and life extension capital expenditure (40) (24)
Growth capital expenditure (188) (96)
Intangibles and the capitalisation of exploration expenditure (21) (64)((a))
Total capital expenditure (excluding EAIs) (584) (416)
EAIs capital expenditure (170) (131)
Total capital expenditure (including EAIs) (754) (547)
(a) Included a US$43M payment to the National Mining Agency of
Colombia as part of the 15-year extension of Cerro Matoso's mining contract to
2044.
BALANCE SHEET, DIVIDENDS AND CAPITAL MANAGEMENT
The Group finished the period with net debt of US$1,091M, due to lower
profitability, higher investment in our business to improve productivity and
grow future volumes, and a temporary build in working capital. We also
returned US$180M to shareholders during H1 FY24, paying a US$145M
fully-franked ordinary dividend in respect of H2 FY23, and a further US$35M
via our on-market share buy-back.
We continue to prioritise a strong balance sheet and investment grade credit
rating through all cycles. Our current BBB+/Baa1 credit ratings were
re-affirmed by S&P Global Ratings and Moody's, respectively, during H1
FY24. We also retain access to significant liquidity, having successfully
extended our undrawn sustainability-linked revolving credit facility of
US$1.4B to December 2027 and US$1.3B to December 2028.
To manage our financial position and ensure we retain the right balance of
flexibility, efficiency and prudence, we have taken the decision to cancel our
on-market share buy-back, which was due to expire on 1 March 2024((16)).
Consistent with our unchanged capital management framework and in the context
of our financial position, we will continue to assess opportunities to return
excess cash to shareholders in the most efficient and value accretive manner.
Net debt
US$M H1 FY24 FY23
Cash and cash equivalents 702 1,258
Lease liabilities (682) (674)
Other interest bearing liabilities (1,111) (1,067)
Net debt (1,091) (483)
Our unchanged capital management framework supports investment in our business
and is designed to reward shareholders as our financial performance improves.
Consistent with our policy to distribute a minimum 40% of Underlying earnings
as ordinary dividends, the Board has resolved to pay a fully-franked interim
ordinary dividend of US 0.4 cents per share (US$18M) in respect of H1 FY24,
representing 45% of Underlying earnings.
Dividends announced
Period Dividend per share US$M Franking Pay-out ratio
(US cents)
H1 FY22 8.7 405 100% 40%
H2 FY22 14.0 648 100% 41%
August 2022 special dividend 3.0 139 100% N/A
H1 FY23 4.9 224 100% 40%
H2 FY23 3.2 145 100% 41%
H1 FY24 0.4 18 100% 45%
South32 shareholders registered on the South African branch register will not
be able to dematerialise or rematerialise their shareholdings between 6 and 8
March 2024 (both dates inclusive), nor will transfers to/from the South
African branch register be permitted between 29 February and 8 March 2024
(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 Date
Announce currency conversion into rand 1 March 2024
Last day to trade cum dividend on the Johannesburg Stock Exchange (JSE) 5 March 2024
Ex-dividend date on the JSE 6 March 2024
Ex-dividend date on the ASX and London Stock Exchange (LSE) 7 March 2024
Record date (including currency election date for ASX) 8 March 2024
Payment date 4 April 2024
OUTLOOK
PRODUCTION
We expect to deliver a 7%((15)) increase in Group payable copper equivalent
production in H2 FY24 following the completion of planned longwall moves at
Illawarra Metallurgical Coal in H1 FY24, the continued ramp up of the Brazil
Aluminium smelter, and sequentially higher base metals volumes from Sierra
Gorda and Cerro Matoso.
Looking forward, we expect Group payable copper equivalent production growth
of 3%((32)) in FY25, as we continue to realise the benefit of our portfolio
improvements in copper and low-carbon aluminium((14)).
Production guidance (South32 share)((21))
FY23 H1 FY24 FY24e((a)) FY25e((a)) Key guidance assumptions
Worsley Alumina Guidance unchanged
Planned calciner maintenance completed in Q1 FY24 and scheduled for Q3 FY24
Alumina production (kt) 3,839 1,934 4,000 4,000
Brazil Alumina (non-operated) Guidance unchanged
Additional maintenance reflected in guidance, following third-party power
outages in H1 FY24
Alumina production (kt) 1,262 640 1,300 1,350
Brazil Aluminium (non-operated) Guidance unchanged
Expected to increase by 45% in FY24 and 30% in FY25, as the smelter ramps up
toward nameplate capacity (179ktpa, 40% basis) in H2 FY26
Aluminium production (kt) 69 50 100 130
Hillside Aluminium((33)) Guidance unchanged (subject to load-shedding)
Expected to test its maximum technical capacity
Aluminium production (kt) 719 359 720 720
Mozal Aluminium((33)) Guidance unchanged (subject to load-shedding)
Expected to progressively increase the number of pots in operation across CY24
Aluminium production (kt) 345 166 320 372
Sierra Gorda (non-operated) Guidance unchanged
Expected to continue to benefit from the plant de-bottlenecking project,
together with higher planned copper grades in H2 FY24 and FY25
Molybdenum plant performance and recoveries expected to improve from Q4 FY24
Ore processed (Mt) 21.2 10.9 21.8 21.8
Payable copper equivalent production (kt)((34)) 86.5 38.6 78.7 91.8
Payable copper production (kt) 70.7 31.6 67.0 71.0
Payable molybdenum production (kt) 1.2 0.5 0.8 2.2
Payable gold production (koz) 28.8 13.4 22.5 25.0
Payable silver production (koz) 630 295 550 550
Cannington Guidance unchanged
Improved plant throughput and higher planned silver and lead grades expected
in FY24
Further increase in plant throughput in FY25, offset by lower planned metal
grades
Ore processed (kdmt) 2,156 1,139 2,300 2,400
Payable zinc equivalent production (kt)((35)) 259.6 147.2 287.2 275.8
Payable silver production (koz) 11,183 6,704 12,500 12,000
Payable lead production (kt) 101.7 58.8 115.0 110.0
Payable zinc production (kt) 59.2 29.0 62.0 60.0
Cerro Matoso Guidance unchanged
Ore Sorting and Mechanical Ore Concentration (OSMOC) project expected to
partially offset natural grade decline
Ore processed (kdmt) 2,807 1,317 2,700 2,750
Payable nickel production (kt) 40.8 18.3 40.5 35.0
Illawarra Metallurgical Coal Guidance unchanged
Volumes remain weighted to H2 FY24 due to the timing and duration of planned
longwall moves
Total coal production (kt) 6,520 2,045 5,000 5,500
Metallurgical coal production (kt) 5,497 1,787 4,400 4,700
Energy coal production (kt) 1,023 258 600 800
Australia Manganese Guidance unchanged (subject to wet season)
Expected to continue strong primary output and return the PC02 circuit to
nameplate in Q4 FY24
Manganese ore production (kwmt) 3,545 1,679 3,400 3,400
South Africa Manganese Guidance unchanged (subject to demand)
We expect to continue to use higher cost trucking to optimise sales volumes
FY25 guidance is subject to market demand
Manganese ore production (kwmt) 2,108 1,111 2,000 Subject to demand
(a) The denotation (e) refers to an estimate or forecast year.
COSTS AND CAPITAL EXPENDITURE
Operating unit costs guidance
H1 FY24 Operating unit costs were in line with or below prior guidance for the
majority of our operations, as we continued our focus on delivering cost
efficiencies and realised the benefit of lower raw material input prices.
In H1 FY24, we completed a Group-wide review focused on reducing our
expenditure in FY24 and FY25. The review identified further cost efficiencies
with respect to labour, contractors and consumables, that are expected to
support a reduction in Operating unit costs and mitigate inflationary
pressures.
FY24 Operating unit cost guidance has been lowered or maintained across the
majority of our operations, reflecting these cost efficiencies, and lower raw
material input prices in our aluminium value chain.
While Operating unit cost guidance is not provided for our aluminium smelters,
their cost profile will continue to be influenced by producer currencies, and
the price of raw material inputs and energy.
Operating unit cost((36))
H1 FY23 H1 FY24 FY24 prior guidance((a)) FY24 new guidance((b)) H1 FY24 to H1 FY23 commentary
FY24e((c)) new guidance to FY24 prior guidance commentary
Worsley Alumina
(US$/t) 288 258 290 270 H1 FY24: decreased by 10%, with lower caustic soda prices
FY24e guidance lowered by 7%, with lower caustic prices
Brazil Alumina (non-operated)
(US$/t) 364 325 Not provided Not provided H1 FY24: decreased by 11%, with lower caustic soda, energy and bauxite prices
H2 FY24e: Expected to benefit from a further reduction in raw material input
prices
Brazil Aluminium (non-operated)
(US$/t) 5,876 4,025 Not provided Not provided H1 FY24: decreased by 32%, with higher volumes, and lower raw material input
and energy prices
H2 FY24e: Expected to benefit from higher volumes in H2 FY24 as the smelter
continues to ramp up
Hillside Aluminium
(US$/t) 2,276 2,135 Not provided Not provided H1 FY24: decreased by 6%, with lower raw material input prices and a weaker
South African rand, partially offset by higher energy prices
H2 FY24e: Will continue to be influenced by the price of raw material inputs,
the South African rand and inflation-linked energy costs
Mozal Aluminium
(US$/t) 2,237 2,461 Not provided Not provided H1 FY24: increased by 10%, due to lower volumes and higher maintenance costs
H2 FY24e: Expected to remain elevated, with the number of pots in operation to
progressively increase across CY24
Sierra Gorda (non-operated)
(US$/t)((d)) 16.6 18.8 16.0 17.0 H1 FY24: increased by 13%, with the benefit of cost efficient, 100% renewable
electricity, more than offset by a planned workforce payment following a new
three-year industrial agreement
FY24e guidance increased by 6%, with sequentially lower costs in H2 FY24
Cannington
(US$/t)((d)) 136 150 155 155 H1 FY24: increased by 10%, with higher planned contractor and energy costs
FY24e guidance is unchanged
Cerro Matoso
(US$/lb) 4.93 5.57 5.30 5.20 H1 FY24: increased by 13%, with a stronger Colombian peso and lower H1 FY24
volumes
FY24e guidance lowered by 2%, with further cost efficiencies and higher
volumes expected in H2 FY24
Illawarra Metallurgical Coal
(US$/t) 124 167 140 150 H1 FY24: increased by 35%, due to the volume impact of the two planned
longwall moves
FY24e guidance increased by 7%, due to higher price-linked royalties
Australia Manganese
(US$/dmtu, FOB) 1.76 2.15 2.15 2.15 H1 FY24: increased by 22%, due to increased mining activity and contractor
costs to deliver planned volumes
FY24e guidance is unchanged
South Africa Manganese
(US$/dmtu, FOB) 2.67 2.59 2.60 2.60 H1 FY24: decreased by 3%, with higher volumes, a weaker South African rand and
lower price-linked royalties
FY24e guidance is unchanged
(a) FY24 prior guidance Operating unit cost guidance includes
royalties (where appropriate) and commodity price and foreign exchange rate
forward curves or our internal expectations (refer to page 30 footnote 37).
(b) FY24 new guidance Operating unit cost guidance includes
royalties (where appropriate) and commodity price and foreign exchange rate
forward curves or our internal expectations (refer to page 30 footnote 38.
(c) The denotation (e) refers to an estimate or forecast year.
(d) 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)
FY24 Group safe and reliable and improvement and life extension capital
expenditure guidance (including EAIs) has been revised down by US$60M (or 6%)
to US$970M, following the Group-wide review, which identified further capital
efficiencies and resulted in the deferral of certain non-critical projects.
FY24 guidance for growth capital expenditure at our Hermosa project has been
set at US$390M, following final investment approval to develop the Taylor
zinc-lead-silver deposit. We expect to invest ~US$200M in H2 FY24 as we
construct critical path infrastructure for Taylor, advance the Clark
battery-grade manganese deposit, and continue work across the broader project.
Capitalised exploration at Hermosa is expected to be ~US$25M in FY24, as we
continue exploration programs at our Peake copper-lead-zinc-silver prospect
and our Flux zinc-lead-silver prospect((39)).
Capital expenditure excluding exploration and intangibles (South32
share)((21))
US$M H1 FY24 FY24e((a))
Worsley Alumina 34 70
Brazil Alumina 38 60
Brazil Aluminium 4 10
Hillside Aluminium 24 40
Mozal Aluminium 11 20
Cannington 23 40
Cerro Matoso 21 35
Illawarra Metallurgical Coal 180 310
Safe and reliable capital expenditure (excluding EAIs) 335 585
Worsley Alumina 24 45
Brazil Alumina 13 20
Other operations 3 5
Improvement and life extension capital expenditure (excluding EAIs) 40 70
Hermosa 188 390
Growth capital expenditure 188 390
Total capital expenditure (excluding EAIs) 563 1,045
Total capital expenditure (including EAIs) 727 1,360
Capital expenditure for EAIs excluding exploration and intangibles (South32
share)((21))
US$M H1 FY24 FY24e((a))
Sierra Gorda 83 160
Australia Manganese 24 55
South Africa Manganese 20 30
Safe and reliable capital expenditure (EAIs) 127 245
Sierra Gorda 15 30
Australia Manganese 16 30
South Africa Manganese 6 10
Improvement and life extension capital expenditure (EAIs) 37 70
Total capital expenditure (EAIs) 164 315
(a) The denotation (e) refers to an estimate or forecast year.
Exploration and intangibles guidance
FY24 Group capitalised exploration (including EAIs) has been revised to US$45M
(previously US$40M), as we continue base metals exploration programs across
our portfolio, including an expanded drilling program at Sierra Gorda's
Catabela Northeast copper porphyry exploration prospect.
Capitalised exploration (South32 share)((21))
US$M H1 FY24 FY24e((a))
Capitalised exploration (excluding EAIs) 21 35
EAIs capitalised exploration 6 10
Capitalised exploration (including EAIs) 27 45
(a) The denotation (e) refers to an estimate or forecast year.
Other expenditure guidance
Other expenditure items presented below are on a proportional consolidation
basis including our manganese and Sierra Gorda EAIs.
Other expenditure guidance
H1 FY24 FY24e((a)) Commentary
Group and unallocated expense in Underlying EBIT (excluding greenfield
exploration and third party products and services EBIT)
(US$M) 100 Guidance unchanged
39
H1 FY24 included non-core royalty receipts of US$5M
Underlying depreciation and amortisation
(US$M) 930 Guidance unchanged
472
Underlying net finance costs
(US$M) á 220 Guidance revised to US$220M (from US$200M)
118
Reflects balance sheet position as at H1 FY24
Greenfield exploration
(US$M) Guidance unchanged
19 30
Greenfield exploration activity targeting base metals in the Americas,
Australia and Europe, subject to the timing of programs
(a) The denotation (e) refers to an estimate or forecast year.
OPERATIONS ANALYSIS
A summary of the underlying performance of the Group's operations is presented
below and a 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 products and
services divided by sales volumes; Operating cost is Underlying revenue less
Underlying EBITDA excluding third party products and services; and Realised
sales price is calculated as Underlying revenue excluding third party products
and services divided by sales volume.
Operations table (South32 share)((21))
Underlying revenue Underlying EBIT
US$M H1 FY24 H1 FY23 H1 FY24 H1 FY23
Worsley Alumina 653 659 68 33
Brazil Alumina 234 247 (9) (19)
Brazil Aluminium 91 47 (74) (70)
Hillside Aluminium 758 861 27 62
Mozal Aluminium 397 482 (48) 65
Sierra Gorda 322 357 49 107
Cannington 318 272 109 82
Hermosa (9) (9)
- -
Cerro Matoso 238 395 (14) 154
Illawarra Metallurgical Coal 520 801 111 340
Australia Manganese 318 355 67 149
South Africa Manganese 152 175 25
3
Third party products and services((40)) 262 249 14 12
Inter-segment / Group and unallocated (382) (376) (58) (9)
South32 Group 3,881 4,524 236 922
WORSLEY ALUMINA
(86% SHARE)
Volumes
Worsley Alumina saleable production increased by 1% (or 12kt) to 1,934kt in H1
FY24. FY24 production guidance remains unchanged at 4,000kt, with the refinery
expected to operate at nameplate production rates (4.6Mtpa, 100% basis)
following planned calciner maintenance in Q3 FY24.
We continue to progress regulatory approvals for new mining areas, with
primary environmental approvals for our Worsley Mine Development project
expected in H1 FY25. While not currently expected to impact production
guidance, we continue to manage the delays experienced with respect to new
mining approvals.
Operating costs
Operating unit costs decreased by 10%, to US$258/t in H1 FY24, as the refinery
benefited from lower caustic soda prices (H1 FY24: US$460/t, H1 FY23:
US$714/t) and a weaker Australian dollar.
We have revised FY24 Operating unit cost guidance to US$270/t (previously
US$290/t), reflecting lower caustic soda prices. Exchange rate and price
assumptions for FY24 Operating unit cost guidance are detailed on page 30,
footnote 38.
Financial performance
Underlying EBIT increased by 106% (or US$35M), to US$68M in H1 FY24, as higher
sales volumes (+US$13M), lower caustic soda prices (+US$54M) and a weaker
Australian dollar (+US$9M), more than offset a 3% decrease in the average
realised price of alumina (-US$19M) and a drawdown of inventory (-US$22M).
Capital expenditure
Safe and reliable capital expenditure increased by US$10M to US$34M in H1 FY24
as we invested in infrastructure to enable access to new mining areas, and
additional bauxite residue disposal capacity. FY24 safe and reliable
expenditure guidance has been revised to US$70M (previously US$85M) as we
target further capital efficiencies.
Improvement and life extension capital expenditure increased by US$14M to
US$24M in H1 FY24 and is expected to be US$45M in FY24 as we advance
decarbonisation projects at the refinery. We completed the conversion of the
first coal-fired boiler to natural gas in H1 FY24 and expect to complete the
second in H2 FY24, improving the refinery's energy security and supporting the
transition to lower carbon((41)) energy.
South32 share H1 FY24 H1 FY23
Alumina production (kt) 1,934 1,922
Alumina sales (kt) 1,898 1,861
Realised alumina sales price (US$/t) 344 354
Operating unit cost (US$/t) 258 288
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 653 659
Underlying EBITDA 164 123
Underlying EBIT 68 33
Net operating assets((a)) 2,485 2,457
Capital expenditure 58 34
Safe and reliable 34 24
Improvement and life extension 24 10
(a) H1 FY23 reflects the balance as at 30 June 2023.
BRAZIL ALUMINA
(36% SHARE)
Volumes
Brazil Alumina saleable production decreased by 7% (or 51kt) to 640kt in H1
FY24, as the refinery was impacted by third-party power outages and unplanned
maintenance. FY24 and FY25 production guidance is set at 1,300kt and 1,350kt,
respectively, reflecting these impacts and additional maintenance in FY25.
Operating costs
Operating unit costs decreased by 11%, to US$325/t in H1 FY24, as lower
caustic soda prices (H1 FY24: US$541/t, H1 FY23: US$728/t), coal-linked energy
prices, and bauxite costs from MRN linked to alumina and aluminium prices on a
trailing basis, more than offset lower volumes due to the third-party power
outages.
While Operating unit cost guidance is not provided for this non-operated
facility, we expect Operating unit costs in H2 FY24 to benefit from a further
reduction in raw material input prices.
Financial performance
Underlying EBIT increased by US$10M, to a loss of US$9M in H1 FY24, as lower
prices for caustic soda (+US$11M), energy (+US$20M) and bauxite (+US$10M),
more than offset lower sales volumes (-US$11M).
Our share of earnings from MRN was a loss of US$9M in H1 FY24 (H1 FY23:
+US7M), due to lower bauxite prices.
Capital expenditure
Safe and reliable capital expenditure increased by US$9M to US$38M in H1 FY24
and is expected to be US$60M in FY24 as we continue our investment in
additional bauxite residue disposal capacity.
Improvement and life extension capital expenditure increased by US$7M to
US$13M in H1 FY24 and is expected to be US$20M in FY24 as the refinery
progresses work on the De-bottlenecking Phase Two project. The project is on
track to be completed in H1 FY26, and is expected to increase nameplate
capacity by ~4% to ~4.0Mt (100% basis).
South32 share H1 FY24 H1 FY23
Alumina production (kt) 640 691
Alumina sales (kt) 647 678
Realised sales price (US$/t) 362 364
Operating unit cost (US$/t)((a)) 325 364
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 234 247
Underlying EBITDA 15 7
Underlying EBIT (9) (19)
Net operating assets((b)) 788 738
Capital expenditure 51 35
Safe and reliable 38 29
Improvement and life extension 13 6
(a) Excludes the profit/(loss) from our equity interest in MRN.
(b) H1 FY23 reflects the balance as at 30 June 2023.
BRAZIL ALUMINIUM
(40% SHARE)
Volumes
Brazil Aluminium saleable production increased by 26kt to 50kt in H1 FY24 as
the smelter continued to ramp up all three potlines. Production is expected to
be 100kt in FY24 and increase a further 30% to 130kt in FY25. Nameplate
capacity (179ktpa, 40% basis) remains on track to be achieved during H2 FY26.
Operating costs
Operating unit costs decreased by 32%, to US$4,025/t in H1 FY24, with the
benefit of higher volumes as the smelter continued to ramp up, lower alumina
and smelter raw material input (including coke and pitch) and energy prices.
While Operating unit cost guidance is not provided for this non-operated
facility, we expect Operating unit costs in H2 FY24 to benefit from a further
increase in volumes as the smelter continues to ramp up.
Financial performance
Underlying EBIT was largely unchanged at a loss of US$74M in H1 FY24, as
higher sales volumes (+US$50M), combined with lower smelter raw material input
prices (+US$12M) and energy costs (+US$6M), was more than offset by a 6%
decline in the average realised price of aluminium (-US$6M) and production and
inventory related costs (-US$68M) ahead of the smelter's ramp up to nameplate
capacity.
Capital expenditure
Safe and reliable capital expenditure was US$4M in H1 FY24 and is expected to
be US$10M in FY24.
South32 share H1 FY24 H1 FY23
Aluminium production (kt) 50 24
Aluminium sales (kt) 40 19
Realised sales price (US$/t) 2,275 2,423
Operating unit cost (US$/t) 4,025 5,876
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 91 47
Underlying EBITDA (70) (67)
Underlying EBIT (74) (70)
Net operating assets((a)) 70 28
Capital expenditure 4 6
Safe and reliable 4 6
Improvement and life extension - -
(a) H1 FY23 reflects the balance as at 30 June 2023.
HILLSIDE ALUMINIUM
(100% SHARE)
Volumes
Hillside Aluminium saleable production decreased by 1% (or 3kt) to 359kt in H1
FY24 as the smelter continued to test its maximum technical capacity, despite
the impact of elevated load-shedding. FY24 production guidance remains
unchanged at 720kt((33)).
Operating costs
Operating unit costs decreased by 6%, to US$2,135/t in H1 FY24, as lower
alumina and smelter raw material input prices (including coke, pitch and
aluminium tri-fluoride) and a weaker South African rand, more than offset
inflation-linked indexation of energy costs.
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, and other
external factors including the South African rand and inflation-linked
indexation of energy costs.
The smelter's electricity is supplied by Eskom under a contract to 2031, with
a tariff that is South African rand based and a rate of escalation linked to
the South Africa Producer Price Index. We continue to work with Eskom and
other stakeholders in the South African energy sector on pathways to secure
lower carbon((41)) electricity supply.
Financial performance
Underlying EBIT decreased by 56% (or US$35M), to US$27M in H1 FY24, as lower
smelter raw material input prices (+US$54M) and a weaker South African rand
(+US$24M), was more than offset by a 9% reduction in the average realised
price of aluminium (-US$77M), higher energy prices (-US$14M), and lower sales
volumes (-US$26M) as port congestion at Richards Bay impacted the timing of
shipments.
Capital expenditure
Capital expenditure increased by US$15M to US$25M in H1 FY24 as the smelter
invested in upgrades to its pot tending assemblies. FY24 capital expenditure
guidance has been revised to US$43M (previously US$38M) to reflect this
activity.
South32 share H1 FY24 H1 FY23
Aluminium production (kt) 359 362
Aluminium sales (kt) 327 337
Realised sales price (US$/t) 2,318 2,555
Operating unit cost (US$/t) 2,135 2,276
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 758 861
Underlying EBITDA 60 94
Underlying EBIT 27 62
Net operating assets((a)) 854 845
Capital expenditure 25 10
Safe and reliable 24 9
Improvement and life extension 1 1
(a) H1 FY23 reflects the balance as at 30 June 2023.
MOZAL ALUMINIUM
(63.7% SHARE)
Volumes
Mozal Aluminium saleable production decreased by 9% (or 16kt) to 166kt in H1
FY24, as the smelter continued to implement its recovery plan following the
fatal safety incident in H1 FY23, while managing the impact of elevated
load-shedding.
FY24 production guidance is set at 320kt((33)), reflecting the lower number of
pots currently in operation, as we complete additional work to deliver
improved process stability and complete upgrades to the girder infrastructure.
The number of pots in operation is expected to progressively increase over
CY24, with FY25 production guidance currently set at 372kt((33)).
Operating costs
Operating unit costs increased by 10%, to US$2,461/t in H1 FY24, as lower
prices for alumina and smelter raw material inputs prices (including, coke,
pitch and aluminium tri-fluoride) and a weaker South African rand, was more
than offset by lower volumes, higher maintenance costs and the
inflation-linked indexation of energy costs.
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, and other external factors including the South African rand
and inflation-linked indexation of energy costs. While guidance is not
provided, we expect Operating unit costs to remain elevated in H2 FY24 as the
number of pots in operation is progressively increased.
Electricity supplied to Mozal is generated by Hidroeléctrica de Cahora Bassa
(HCB), a hydro-electric power generator situated in the north-west of
Mozambique. The electricity is supplied via Eskom's South African grid under
an agreement with MOTRACO, a transmission joint venture between Eskom and the
national electricity utilities of Mozambique and Eswatini.
The current power supply agreement for Mozal expires in 2026. We continue to
work with Eskom and the Government of the Republic of Mozambique to extend the
smelter's hydro-electric power supply beyond 2026, as there are currently no
viable alternative suppliers of renewable energy at the required scale.
Financial performance
Underlying EBIT decreased by US$113M, to a loss of US$48M in H1 FY24, as lower
alumina and smelter raw material input prices (+US$30M) and a weaker South
African rand (+US$9M), was more than offset by a 13% decrease in the average
realised aluminium price (-US$53M), lower sales volumes (-US$32M) and higher
energy prices (-US$18M). Maintenance costs also increased with the girder
refurbishment program (-US$7M), and we recorded an inventory adjustment due to
higher production costs in the period (-US$16M).
Capital expenditure
Capital expenditure was US$11M in H1 FY24 and is expected to be US$21M in FY24
as we continue our investment in plant upgrades.
South32 share H1 FY24 H1 FY23
Aluminium production (kt) 166 182
Aluminium sales (kt) 167 177
Realised sales price (US$/t) 2,377 2,723
Operating unit cost (US$/t) 2,461 2,237
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 397 482
Underlying EBITDA (14) 86
Underlying EBIT (48) 65
Net operating assets((a)) 540 578
Capital expenditure 11 9
Safe and reliable 11 9
Improvement and life extension - -
(a) H1 FY23 reflects the balance as at 30 June 2023.
SIERRA GORDA
(45% SHARE)
Volumes
Sierra Gorda payable copper equivalent production((34)) decreased by 14% (or
6.2kt) to 38.6kt in H1 FY24, as higher plant throughput delivered by the plant
de-bottlenecking project, was more than offset by lower planned copper grades,
and a temporary outage of the molybdenum plant.
FY24 production guidance has been set at 78.7kt payable copper equivalent
production((34)) (copper 67.0kt, molybdenum 0.8kt, gold 22.5koz and silver
550koz), with molybdenum output expected to improve from Q4 FY24.
Production is expected to increase by 17% to 91.8kt in FY25 (copper 71.0kt,
molybdenum 2.2kt, gold 25.0koz and silver 550koz), with higher planned copper
grades in accordance with the mine plan, and higher molybdenum production.
Operating costs
Operating unit costs increased by 13%, to US$18.8/t ore processed in H1 FY24,
as the benefit of the transition to cost efficient, 100% renewable energy, was
more than offset by a planned workforce payment following the finalisation of
a new three-year industrial agreement, and higher maintenance costs.
FY24 Operating unit costs have been revised to US$17.0/t ore processed
(previously US$16.0/t), reflecting sequentially lower Operating unit costs
following the workforce payment in H1 FY24. Exchange rate and price
assumptions for FY24 Operating unit cost guidance are detailed on page 30,
footnote 38.
Financial performance
Underlying EBIT decreased by 54%, (or US$58M) to US$49M in H1 FY24, as higher
average realised metal prices (+US$9M) and the transition to lower cost, 100%
renewable electricity (+US$20M), was more than offset by lower sales volumes
(-US$44M), the one-off workforce payment (-US$20M), a stronger Chilean peso
(-US$9M) and higher maintenance costs (-US$6M).
Capital expenditure
Safe and reliable capital expenditure increased by US$18M to US$83M in H1
FY24. We have revised FY24 guidance to US$160M (previously US$180M) to reflect
expected deferred stripping activity and the timing of investment in
additional tailings storage capacity.
Improvement and life extension capital expenditure was US$15M in H1 FY24 and
is expected to be US$30M in FY24 as the operation continues the
de-bottlenecking project and completes the feasibility study for the fourth
grinding line expansion. The fourth grinding line has the potential to deliver
a ~18% increase in plant throughput to ~57Mtpa to 58Mtpa (100% basis), with a
final investment decision expected in Q4 FY24.
South32 share H1 FY24 H1 FY23
Ore mined (Mt) 11.9 15.4
Ore processed (Mt) 10.9 10.7
Ore grade processed (%, Cu) 0.37 0.45
Payable copper equivalent 38.6 44.8
production (kt)((34))
Payable copper production (kt) 31.6 37.9
Payable molybdenum production (kt) 0.5 0.4
Payable gold production (koz) 13.4 15.3
Payable silver production (koz) 295 338
Payable copper sales (kt) 32.5 38.4
Payable molybdenum sales (kt) 0.7 0.8
Payable gold sales (koz) 13.8 15.4
Payable silver sales (koz) 300 345
Realised copper sales price (US$/lb) 3.56 3.41
Realised molybdenum sales price 20.82 20.78
(US$/lb)
Realised gold sales price (US$/oz) 1,957 1,688
Realised silver sales price (US$/oz) 23.3 17.4
Operating unit cost 18.8 16.6
(US$/t ore processed)((42))
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 322 357
Underlying EBITDA 117 179
Underlying EBIT 49 107
Net operating assets((a)) 1,591 1,588
Capital expenditure 98 86
Safe and reliable 83 65
Improvement and life extension 15 21
Exploration expenditure 6 3
Exploration expensed - 2
(a) H1 FY23 reflects the balance as at 30 June 2023.
CANNINGTON
(100% SHARE)
Volumes
Cannington payable zinc equivalent production((35)) increased by 13% to
147.2kt in H1 FY24, as we mined a sequence of higher-grade stopes in Q2
FY24.
In January 2024, the operation experienced severe wet weather following
Tropical Cyclone Kirrily. While we continue to monitor the impact on the
operation, and regional logistics chains due to widespread flooding, FY24
production guidance is currently unchanged at 287.2kt payable zinc equivalent
production((35)) (silver 12,500koz, lead 115.0kt and zinc 62.0kt).
Operating costs
Operating unit costs increased by 10%, to US$150/t in H1 FY24, as the benefit
of a weaker Australian dollar was more than offset by higher local gas prices
and additional contractor costs to support a planned increase in underground
mining activity.
FY24 Operating unit cost guidance remains unchanged at US$155/t ore processed.
Exchange rate and price assumptions for FY24 Operating unit cost guidance are
detailed on page 30, footnote 38.
Financial performance
Underlying EBIT increased by 33% (or US$27M), to US$109M in H1 FY24, with
higher sales volumes (+US$44M) as a result of higher average metal grades,
partially offset by higher local gas prices (-US$7M) and contractor costs
(-US$4M).
Capital expenditure
Capital expenditure decreased by US$10M to US$23M in H1 FY24, following the
transition to 100% truck haulage in the prior period, and is expected to be
US$40M in FY24.
South32 share H1 FY24 H1 FY23
Ore mined (kwmt) 1,150 1,123
Ore processed (kdmt) 1,139 1,142
Ore grade processed (g/t, Ag) 211 175
Ore grade processed (%, Pb) 6.0 5.5
Ore grade processed (%, Zn) 3.4 3.6
Payable zinc equivalent production (kt)((35)) 147.2 130.8
Payable silver production (koz) 6,704 5,474
Payable lead production (kt) 58.8 52.4
Payable zinc production (kt) 29.0 30.4
Payable silver sales (koz) 6,529 5,083
Payable lead sales (kt) 56.6 51.3
Payable zinc sales (kt) 28.3 27.5
Realised silver sales price (US$/oz) 22.5 20.1
Realised lead sales price (US$/t) 1,979 2,008
Realised zinc sales price (US$/t) 2,085 2,436
Operating unit cost 150 136
(US$/t ore processed)((42))
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 318 272
Underlying EBITDA 147 117
Underlying EBIT 109 82
Net operating assets((a)) 183 172
Capital expenditure 23 33
Safe and reliable 23 32
Improvement and life extension - 1
Exploration expenditure 5 3
Exploration expensed 3 3
(a) H1 FY23 reflects the balance as at 30 June 2023.
CERRO MATOSO
(99.9% SHARE)
Volumes
Cerro Matoso payable nickel production decreased by 10% to 18.3kt in H1 FY24,
while production improved by 20% (or 1.7kt) in Q2 FY24 following planned
maintenance and a temporary reduction in third-party gas supply.
FY24 production guidance remains unchanged at 40.5kt, with the OSMOC project
expected to support higher nickel grades in H2 FY24.
Operating costs
Operating unit costs increased by 13%, to US$5.57/lb in H1 FY24, due to a
stronger Colombian peso and lower first half volumes.
We have revised FY24 Operating unit cost guidance to US$5.20/lb (previously
US$5.30/lb), reflecting lower contractor and consumables costs as we target
further cost efficiencies. Exchange rate and price assumptions for FY24
Operating unit cost guidance are detailed on page 30, footnote 38.
Financial performance
Underlying EBIT decreased by US$168M, to a loss of US$14M in H1 FY24, due to
a 34% decline in the average realised nickel price (-US$121M) as structural
challenges in the nickel market placed pressure on nickel prices and discounts
for our ferronickel product. This significant price impact together with lower
sales volumes (-US$36M) and a stronger Colombian peso (-US$16M), more than
offset maintenance efficiencies (+US$6M) and lower price-linked royalties
(+US$6M).
Capital expenditure
Safe and reliable capital expenditure increased by US$4M to US$21M in H1
FY24. FY24 guidance has been revised to US$35M (previously US$45M) as we
defer certain non-critical projects, in response to the current challenging
nickel market conditions.
As previously announced, we have commenced a strategic review of Cerro Matoso
to evaluate options to enhance the operation's competitive position.
South32 share H1 FY24 H1 FY23
Ore mined (kwmt) 2,183 2,752
Ore processed (kdmt) 1,317 1,392
Ore grade processed (%, Ni) 1.55 1.64
Payable nickel production (kt) 18.3 20.4
Payable nickel sales (kt) 18.0 19.8
Realised nickel sales price (US$/lb)((43)) 6.00 9.05
Operating unit cost (US$/lb) 5.57 4.93
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 238 395
Underlying EBITDA 17 180
Underlying EBIT (14) 154
Net operating assets((a)) 368 363
Capital expenditure 21 20
Safe and reliable 21 17
Improvement and life extension - 3
Exploration expenditure 1 -
Exploration expensed 1 -
(a) H1 FY23 reflects the balance as at 30 June 2023.
ILLAWARRA METALLURGICAL COAL
(100% SHARE)
Volumes
Illawarra Metallurgical Coal saleable production decreased by 39% (or 1,286kt)
to 2,045kt in H1 FY24, as the operation completed two longwall moves,
including a planned extended outage at the Dendrobium mine. A new four-year
industrial agreement covering deputies at the Appin mine was finalised in Q2
FY24.
FY24 production guidance is unchanged at 5.0Mt with volumes remaining weighted
to H2 FY24, reflecting the shorter duration of the two remaining longwall
moves to be completed during Q4 FY24.
Operating costs
Operating unit costs increased by 35%, to US$167/t in H1 FY24, as the volume
impact of the two planned longwall moves completed in Q2 FY24, more than
offset the benefit of a weaker Australian dollar, lower price-linked royalties
and local electricity prices.
We have revised our FY24 Operating unit cost guidance to US$150/t (previously
US$140/t), due to higher price-linked royalties, with Operating unit costs to
be sequentially lower in H2 FY24, benefitting from higher planned production
volumes. Exchange rate and price assumptions for FY24 Operating unit cost
guidance are detailed on page 30, footnote 38.
Financial performance
Underlying EBIT decreased by 67% (or US$229M), to US$111M in H1 FY24, as the
volume impact of the two planned longwall moves (-US$267M) more than offset
lower price-linked royalties (+US$21M), lower electricity prices (+US$13M),
and a weaker Australian dollar (+US$9M).
Capital expenditure
Capital expenditure increased by US$73M to US$181M in H1 FY24 as we continued
to invest in Appin's transition to a more efficient single longwall
configuration from H2 FY25, and additional ventilation capacity to enable
mining in the current Area 7 until at least 2039((31)). We expect to invest
US$311M in FY24 (previously US$323M) as we progress these significant
investments.
Our ~US$260M investment in additional ventilation capacity is expected to be
completed in FY26, with ~US$90M expected to be spent in both FY24 and FY25.
South32 share H1 FY24 H1 FY23
Metallurgical coal production (kt) 1,787 2,753
Energy coal production (kt) 258 578
Metallurgical coal sales (kt) 1,759 2,678
Energy coal sales (kt) 337 507
Realised metallurgical coal sales price (US$/t) 276 268
Realised energy coal sales price (US$/t) 101 164
Operating unit cost (US$/t) 167 124
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue((44)) 520 801
Underlying EBITDA 171 407
Underlying EBIT 111 340
Net operating assets((a)) 896 769
Capital expenditure 181 108
Safe and reliable 180 106
Improvement and life extension 1 2
Exploration expenditure 7 8
Exploration expensed 3 4
(a) H1 FY23 reflects the balance as at 30 June 2023.
AUSTRALIA MANGANESE
(60% SHARE)
Volumes
Australia Manganese saleable production decreased by 9% (or 165kwmt) to
1,679kwmt in H1 FY24, as PC02 production declined due to lower yields,
contributing 7% of total production (H1 FY23: 10%).
FY24 production guidance remains unchanged at 3,400kwmt as the operation
continues its strong primary output and is expected to return the PC02 circuit
to nameplate production rates during Q4 FY24.
Operating costs
Operating unit costs increased by 22%, to US$2.15/dmtu in H1 FY24, in line
with prior FY24 guidance, as a weaker Australian dollar was offset by
additional planned mining activity and contractor costs to deliver planned
volumes.
FY24 Operating unit cost guidance remains unchanged at US$2.15/dmtu. Exchange
rate and price assumptions for FY24 Operating unit cost guidance are detailed
on page 30, footnote 38.
Financial performance
Underlying EBIT decreased by 55% (or US$82M), to US$67M in H1 FY24, as a 17%
decline in average realised ore prices (-US$71M) and additional contractor and
labour costs (-US$11M), more than offset higher sales volumes (+US$34M)
following a planned drawdown of finished goods (-US$28M), lower diesel prices
(+US$5M) and a weaker Australian dollar (+US$4M).
Capital expenditure
Safe and reliable capital expenditure was US$24M in H1 FY24 and is expected to
be US$55M in FY24 as we continue our investment in additional mobile fleet and
mining equipment.
Improvement and life extension capital expenditure increased by US$9M to
US$16M in H1 FY24 and is expected to be US$30M in FY24 as we invest in the
Eastern Lease South life extension project, which remains on track to deliver
first production in FY25.
The Eastern Lease South Project is expected to sustain production to at least
FY28((45)), with further work underway across our existing operating footprint
and in the Southern Areas to potentially extend the operation's life into the
next decade.
South32 share H1 FY24 H1 FY23
Manganese ore production (kwmt) 1,679 1,844
Manganese ore sales (kwmt) 1,864 1,652
Realised external manganese ore sales price (US$/dmtu, FOB)((46)(47)) 3.79 4.57
Ore operating unit cost (US$/dmtu, FOB)((47)(48)) 2.15 1.76
South32 share (US$M) H1 FY24 H1 FY23
Underlying revenue 318 355
Underlying EBITDA 125 197
Underlying EBIT 67 149
Net operating assets((a)) 212 239
Capital expenditure 40 32
Safe and reliable 24 25
Improvement and life extension 16 7
Exploration expenditure - 1
Exploration expensed - -
(a) H1 FY23 reflects the balance as at 30 June 2023.
SOUTH AFRICA MANGANESE
(ORE 54.6% SHARE, ALLOY 60% SHARE)
Volumes
South Africa Manganese saleable production increased by 2% (or 18kwmt) to
1,111kwmt in H1 FY24 as the operation achieved record production in Q1 FY24
and completed a planned maintenance shut at the Mamatwan mine in Q2 FY24.
FY24 production guidance remains unchanged at 2,000kwmt, subject to our
continued use of higher cost trucking to optimise sales volumes of our premium
products.
Operating costs
Operating unit costs decreased by 3% to US$2.59/dmtu in H1 FY24, in line with
prior guidance, as the benefit of higher volumes, a weaker South African rand
and lower price-linked royalties, more than offset higher in-land logistics
costs.
FY24 Operating unit costs remain unchanged at US$2.60/dmtu. Exchange rate and
price assumptions for FY24 Operating unit cost guidance are detailed on page
30, footnote 38.
Financial performance
Ore Underlying EBIT decreased by 77% (or US$20M), to US$6M in H1 FY24, as
the benefit of higher sales volumes (+US$8M), a weaker South African rand
(+US$8M) and lower price-linked royalties (+US$4M), was more than offset by a
15% decline in average realised manganese ore prices (-US$31M) and higher
in-land logistics costs (-US$6M).
Capital expenditure
Safe and reliable capital expenditure increased by US$13M to US$20M in H1 FY24
and is expected to be US$30M in FY24 as we upgrade our rail infrastructure to
improve efficiencies.
Improvement and life extension capital expenditure was US$6M in H1 FY24 and is
expected to be US$10M in FY24 as we advance work to access new mining areas at
our high-grade underground Wessels mine.
South32 share((a)) H1 FY24 H1 FY23
Manganese ore production (kwmt) 1,111 1,093
Manganese ore sales (kwmt) 1,082 1,032
Realised external manganese ore sales price (US$/dmtu, FOB)((46)(49)) 3.03 3.57
Ore operating unit cost (US$/dmtu, FOB)((48)(49)) 2.59 2.67
South32 share (US$M)((a)) H1 FY24 H1 FY23
Underlying revenue 152 175
Manganese ore 152 175
Manganese alloy - -
Underlying EBITDA 14 35
Manganese ore 17 36
Manganese alloy (3) (1)
Underlying EBIT 3 25
Manganese ore 6 26
Manganese alloy (3) (1)
Net operating assets/(liabilities)((b)) 159 143
Manganese ore 224 195
Manganese alloy (65) (52)
Capital expenditure 26 11
Safe and reliable 20 7
Improvement and life extension 6 4
Exploration expenditure - 1
Exploration expensed - 1
(a) The Metalloys manganese alloy smelter remains on care and
maintenance.
(b) H1 FY23 reflects the balance as at 30 June 2023.
NOTES
(1) Net tangible assets as at 31 December 2023 includes all right-of-use assets
and lease liabilities, in accordance with AASB 16 Leases.
(2) H1 FY24 basic earnings per share is calculated as Profit after tax divided by
the weighted average number of shares for H1 FY24 (4,523 million). H1 FY24
basic Underlying earnings per share is calculated as Underlying earnings
divided by the weighted average number of shares for H1 FY24. H1 FY23 basic
earnings per share is calculated as Profit after tax divided by the weighted
average number of shares for H1 FY23 (4,596 million). H1 FY23 basic Underlying
earnings per share is calculated as Underlying earnings divided by the
weighted average number of shares for H1 FY23.
(3) H1 FY24 ordinary dividends per share is calculated as H1 FY24 ordinary
dividend announced (US$18M) divided by the number of shares on issue at
31 December 2023 (4,529 million).
(4) Underlying revenue includes revenue from third party products and services.
(5) 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 income/(costs), tax and
any earnings adjustments, including impairments. Underlying EBITDA is
Underlying EBIT before Underlying depreciation and amortisation. Underlying
earnings is Profit 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 operations;
• (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 cash/(debt);
• Tax effect of earnings adjustments; and
• 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.
(6) Comprises Underlying EBITDA excluding third party products and services
EBITDA, divided by Underlying revenue excluding third party products and
services revenue. Also referred to as operating margin.
(7) Comprises Underlying EBIT excluding third party products and services EBIT,
divided by Underlying revenue excluding third party products and services
revenue.
(8) 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 Underlying 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
impact of any impairments or impairment reversals, and unproductive capital)
and inventories.
(9) Significant hazards frequency: (The sum of significant hazards x 1,000,000) ÷
exposure hours. This is stated in units of per million hours worked for
employees and contractors. A significant hazard is something that has the
potential to cause harm, ill health or injury, or damage to property, plant or
the environment.
(10) 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.
(11) 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.
(12) Lost Time Injury Frequency (LTIF): (The sum of lost time injuries x 1,000,000)
÷ exposure hours. This is stated in units of per million hours worked for
employees and contractors.
(13) Calculated by taking the increase in controllable costs from H1 FY23 to H1
FY24 divided by the Group's underlying H1 FY23 cost base excluding third party
product costs.
(14) Refers to aluminium produced using renewable power.
(15) Group payable copper equivalent production in H2 FY24e, compared to H1 FY24,
calculated by applying FY23 realised prices for all operations.
(16) US$98M was remaining to be returned under our current capital management
program. Since inception, US$1.7B has been returned via the on-market share
buy-back (795M shares at an average price of A$3.05 per share) and US$525M
returned in the form of special dividends.
(17) Refer to market release "Final Investment Approval to Develop Hermosa's Taylor
Deposit" dated 15 February 2024.
(18) Target is defined as an intended outcome in relation to which we have
identified one or more pathways for delivery of that outcome, subject to
certain assumptions or conditions. Our medium-term target is to halve our
operational greenhouse gas (GHG) emissions by 2035 compared to our FY21
baseline. FY21 baseline adjusted to exclude GHG emissions from South Africa
Energy Coal and TEMCO, which were divested in FY21.
(19) 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. 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.
(20) Underlying net finance costs and Underlying income tax expense are actual H1
FY24 results, not half-on-half variances.
(21) 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), 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).
(22) 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.
(23) Underlying ETR is Underlying income tax expense, including royalty related
tax, divided by Underlying profit subject to tax.
(24) The corporate tax rates of the geographies where the Group operates include:
Australia 30%, South Africa 27%, Colombia 35%, Mozambique 0%, Brazil 34% and
Chile 27%.
(25) Mozal Aluminium is subject to a royalty on revenues instead of income tax
which is included in Operating costs.
(26) Australia Manganese is subject to a royalty related tax equal to 20% of
adjusted EBIT which is included in Underlying tax expense.
(27) 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. This royalty is included in
Underlying tax expense.
(28) H1 FY24 net distributions from our material equity accounted joint ventures
comprises of dividends (US$76M), a net drawdown of shareholder loans (US$34M)
from manganese and a distribution (US$18M) from Sierra Gorda. The distribution
from Sierra Gorda comprised a repayment of US$18M of accrued interest.
(29) Net interest paid excludes distributions from material equity accounted
investments.
(30) Total capital expenditure comprises Capital expenditure, capitalised
exploration and evaluation expenditure and the purchase of intangibles.
Capital expenditure comprises safe and reliable capital expenditure,
improvement and life extension capital expenditure (including
decarbonisation), and growth capital expenditure.
(31) The information in this announcement that relates to the Production Target for
Illawarra Metallurgical Coal is based on 21% Proved and 79% Probable Coal
Reserves from Bulli (Appin) and was originally disclosed in "September 2023
Quarterly Report" dated 23 October 2023. The 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 FY23 Annual Report
published on 8 September 2023 and is available to view on www.south32.net.
South32 confirms that all the material assumptions underpinning the Production
Target in the initial public report continue to apply and have not materially
changed. 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.
(32) Group payable copper equivalent production in FY25e, compared to FY24e,
calculated by applying FY23 realised prices for all operations. FY25e assumes
South Africa Manganese production of 2,000kwmt, which is subject to market
conditions and our continued use of higher cost trucking.
(33) Production guidance for Hillside Aluminium and Mozal Aluminium does not assume
any load-shedding impact on production.
(34) 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. FY23 realised prices for copper (US$3.51/lb),
molybdenum (US$21.28/lb), gold (US$1,821/oz) and silver (US$21.9/oz) have been
used for FY23, H1 FY24, FY24e and FY25e.
(35) 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. FY23 realised prices for zinc (US$2,151/t), lead (US$1,919/t) and
silver (US$21.1/oz) have been used for FY23, H1 FY24, FY24e and FY25e.
(36) Operating unit cost is Underlying revenue less Underlying EBITDA, excluding
third party products and services, divided by sales volumes. Operating cost is
Underlying revenue less Underlying EBITDA excluding third party products and
services. Additional manganese disclosures are included in footnotes 47 and
49.
(37) FY24 prior Operating unit cost guidance includes royalties (where appropriate)
and the influence of exchange rates, and includes various assumptions for
FY24, including: an alumina price of US$349/t; an average blended coal price
of US$210/t for Illawarra Metallurgical Coal; a manganese ore price of
US$4.85/dmtu for 44% manganese product; a nickel price of US$8.90/lb; a silver
price of US$24.5/troy oz; a lead price of US$2,131/t (gross of treatment and
refining charges); a zinc price of US$2,446/t (gross of treatment and refining
charges); a copper price of US$3.87/lb (gross of treatment and refining
charges); a molybdenum price of US$22.5/lb (gross of treatment and refining
charges); a gold price of US$1,984/troy oz; an AUD:USD exchange rate of 0.65;
a USD:ZAR exchange rate of 18.98; a USD:COP exchange rate of 4,033; USD:CLP
exchange rate of 876; and a reference price for caustic soda; which reflect
forward markets as at July 2023 or our internal expectations.
(38) FY24 new Operating unit cost guidance includes royalties (where appropriate)
and the influence of exchange rates, and includes various assumptions for
FY24, including: an alumina price of US$340/t; an average blended coal price
of US$296/t for Illawarra Metallurgical Coal; a manganese ore price of
US$4.58/dmtu for 44% manganese product; a nickel price of US$8.67/lb; a silver
price of US$22.7/troy oz; a lead price of US$2,105/t (gross of treatment and
refining charges); a zinc price of US$2,446/t (gross of treatment and refining
charges); a copper price of US$3.67/lb (gross of treatment and refining
charges); a molybdenum price of US$19.22/lb (gross of treatment and refining
charges); a gold price of US$1,892/troy oz; an AUD:USD exchange rate of 0.64;
a USD:ZAR exchange rate of 19.12; a USD:COP exchange rate of 4,050; USD:CLP
exchange rate of 924; and a reference price for caustic soda; which reflect
forward markets as at January 2024 or our internal expectations.
(39) Exploration Results and Exploration Targets: The information in this
announcement that relates to the Exploration Results and Targets for Taylor,
Clark, Peake and Flux is extracted from the announcement entitled (Final
Investment Approval to Develop Hermosa's Taylor Deposit) published on 15
February 2024 and is available to view on www.south32.net. The information was
prepared by D Bertuch, Competent Person 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 market
announcement. South32 confirms that the form and context in which the
Competent Person's findings are presented have not been materially changed
from the original market announcement.
(40) H1 FY24 Third party products and services sold comprise US$42M for aluminium,
US$3M for alumina, US$106M for coal, US$43M for freight services,
US$53M for raw materials and US$15M for manganese. Underlying EBIT on third
party products and services comprise nil for aluminium, US$2M for alumina,
US$14M for coal, US$(2)M for freight services, nil for raw materials and nil
for manganese. H1 FY23 Third party products and services sold comprise US$30M
for aluminium, US$2M for alumina, US$60M for coal, US$63M for freight
services, US$78M for raw materials and US$16M for manganese. Underlying EBIT
on third party products and services comprise US$(1)M for aluminium, US$8M for
alumina, US$6M for coal, US$(1)M for freight services, nil for raw materials
and nil for manganese.
(41) Refers to lower levels of GHG emissions when compared to the current state.
Where used in relation to South32's products or portfolio, it refers to
enhancement of existing methods, practices and technologies to substantially
lower the level of embodied GHG emissions as compared to the current state.
(42) 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.
(43) Cerro Matoso realised nickel sales price is inclusive of by-products.
(44) Illawarra Metallurgical Coal revenue includes metallurgical coal and energy
coal sales revenue.
(45) Australia Manganese: The information in this announcement that refers to
Production Target and forecast financial information is based on Proved (62%)
and Probable (38%) Ore Reserves. Production Target cautionary statement - The
Mineral Resources and Ore Reserves underpinning the Production Target have
been prepared by Competent Persons and reported in accordance with the JORC
Code. The Resources and Reserves estimates are available to view in
South32's FY23 Annual Report (http://www.south32.net) published on 8 September
2023. 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.
(46) 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.
(47) Manganese Australia H1 FY24 average manganese content of external ore sales
was 42.5% on a dry basis (H1 FY23: 44.2%). 97% of H1 FY24 external manganese
ore sales (H1 FY23: 95%) were completed on a CIF basis. H1 FY24 realised FOB
ore prices and Operating unit costs have been adjusted for freight and
marketing costs of US$30M (H1 FY23: US$36M), consistent with our FOB cost
guidance.
(48) FOB Ore Operating unit cost is Underlying revenue less Underlying EBITDA,
freight and marketing costs, divided by ore sales volume.
(49) Manganese South Africa H1 FY24 average manganese content of external ore sales
was 38.7% on a dry basis (H1 FY23: 39.2%). 90% of H1 FY24 external manganese
ore sales (H1 FY23: 86%) were completed on a CIF basis. H1 FY24 realised FOB
ore prices and Operating unit costs have been adjusted for freight and
marketing costs of US$28M (H1 FY23: US$32M), consistent with our FOB cost
guidance.
Figures in Italics indicate that an adjustment has been made since the figures
were previously reported. The denotation (e) refers to an estimate or forecast
year.
The following abbreviations may be used throughout this report: US$ million
(US$M); US$ billion (US$B); December half year (H1 FY24); financial year 2024
(FY24); financial year (FY); calendar year (CY); copper equivalent (CuEq);
grams per tonne (g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per
annum (ktpa); million tonnes (Mt); million tonnes per annum (Mtpa); ounces
(oz); thousand ounces (koz); million ounces (Moz); thousand wet metric tonnes
(kwmt); million wet metric tonnes (Mwmt); thousand dry metric tonnes (kdmt);
dry metric tonne unit (dmtu); pound (lb); megawatt (MW); Australian
Securities Exchange (ASX); London Stock Exchange (LSE); Johannesburg Stock
Exchange (JSE); equity accounted investment (EAI); and American Depositary
Receipts (ADR).
SOUTH32 FINANCIAL INFORMATION
For the half year ended 31 December 2023
CONTENTS
CONSOLIDATED INCOME STATEMENT 33
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 34
CONSOLIDATED BALANCE SHEET 35
CONSOLIDATED CASH FLOW STATEMENT 36
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 37
NOTES TO FINANCIAL STATEMENTS
1. Reporting entity 38
2. Basis of preparation 38
3. Segment information 39
4. Dividends 45
5. Earnings per share 45
6. Interest bearing liabilities 46
7. Net finance income/(costs) 46
8. Financial assets and financial liabilities 47
9. Equity accounted investments 50
10. Subsequent events 50
DIRECTORS' DECLARATION 51
DIRECTORS' REPORT 52
LEAD AUDITOR'S INDEPENDENCE DECLARATION 54
INDEPENDENT AUDITOR'S REVIEW REPORT 55
CONSOLIDATED INCOME STATEMENT
for the half year ended 31 December 2023
US$M Note H1 FY24 H1 FY23
Revenue:
Group production 2,827 3,388
Third party products and services 306 308
3 3,133 3,696
Other income 61 242
Expenses excluding finance costs (3,110) (3,308)
Share of profit/(loss) of equity accounted investments 9 (9) 241
Profit from operations 75 871
Comprising:
Group production 61 859
Third party products and services 14 12
Profit from operations 75 871
Finance income 116 111
Finance costs (125) (97)
Net finance income/(costs) 7 (9) 14
Profit before tax 66 885
Income tax expense (13) (200)
Profit for the period 53 685
Attributable to:
Equity holders of South32 Limited 53 685
Profit for the period attributable to equity holders of South32 Limited:
Basic earnings per share (cents) 5 1.2 14.9
Diluted earnings per share (cents) 5 1.2 14.8
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year ended 31 December 2023
US$M H1 FY24 H1 FY23
Profit for the period 53 685
Other comprehensive income
Items that will not be reclassified to the Consolidated Income Statement:
Investments in equity instruments designated as fair value through other
comprehensive income (FVOCI):
Net fair value gains/(losses) (19) (3)
Income tax (expense)/benefit (1) 1
Share of other comprehensive income/(loss) of equity accounted investments - 1
Gains/(losses) on pension and medical schemes - 2
Income tax (expense)/benefit recognised within other comprehensive income - (1)
Total items that will not be reclassified to the Consolidated Income Statement (20) -
Total other comprehensive income/(loss) (20) -
Total comprehensive income 33 685
Attributable to:
Equity holders of South32 Limited 33 685
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED BALANCE SHEET
as at 31 December 2023
US$M Note H1 FY24 FY23
ASSETS
Current assets
Cash and cash equivalents 702 1,258
Trade and other receivables 656 778
Other financial assets 8 1 1
Inventories 1,196 1,102
Current tax assets 118 54
Other assets 33 46
Total current assets 2,706 3,239
Non-current assets
Trade and other receivables 2,134 1,923
Other financial assets 8 107 118
Inventories 72 82
Property, plant and equipment 8,352 8,050
Intangible assets 237 242
Equity accounted investments 414 499
Deferred tax assets 355 390
Other assets 21 21
Total non-current assets 11,692 11,325
Total assets 14,398 14,564
LIABILITIES
Current liabilities
Trade and other payables 840 985
Interest bearing liabilities 6 435 365
Current tax payables 9 10
Provisions 182 194
Deferred income 6 6
Total current liabilities 1,472 1,560
Non-current liabilities
Trade and other payables 20 19
Interest bearing liabilities 6 1,358 1,376
Other financial liabilities 8 18 37
Deferred tax liabilities 162 210
Provisions 2,141 1,986
Deferred income 1 1
Total non-current liabilities 3,700 3,629
Total liabilities 5,172 5,189
Net assets 9,226 9,375
EQUITY
Share capital 13,216 13,251
Treasury shares (40) (51)
Reserves (3,579) (3,553)
Accumulated losses (370) (271)
Total equity attributable to equity holders of South32 Limited 9,227 9,376
Non-controlling interests (1) (1)
Total equity 9,226 9,375
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 31 December 2023
US$M Note H1 FY24 H1 FY23
Operating activities
Profit before tax 66 885
Adjustments for:
Non-cash or non-operating significant items 48 (138)
Depreciation and amortisation expense 335 312
Net impairment loss/(reversal) of financial assets 3 48 214
Net impairment loss/(reversal) of non-financial assets - (4)
Employee share awards expense 12 13
Net finance (income)/costs 9 (14)
Share of (profit)/loss of equity accounted investments 9 (241)
(Gains)/losses on derivative instruments, contingent consideration and other (17) (19)
investments measured at fair value through profit or loss (FVTPL)
Other non-cash or non-operating items (5) (1)
Changes in assets and liabilities:
Trade and other receivables (88) 88
Inventories (84) (134)
Trade and other payables (84) (81)
Provisions and other liabilities (20) (25)
Cash generated from operations 229 855
Interest received 49 29
Interest paid (57) (54)
Income tax paid (96) (347)
Dividends received 2 1
Dividends received from equity accounted investments 76 108
Net cash flows from operating activities 203 592
Investing activities
Purchases of property, plant and equipment (563) (352)
Exploration expenditure (47) (44)
Exploration expenditure expensed and included in operating cash flows 26 26
Purchase of intangibles - (46)
Investment in financial assets (84) (116)
Proceeds from financial assets 42 61
Payments related to the acquisition of subsidiaries and joint operations, net (3) (25)
of their cash
Proceeds from sale of intangibles 18 55
Net cash flows from investing activities (611) (441)
Financing activities
Proceeds from interest bearing liabilities 149 28
Repayment of interest bearing liabilities (110) (42)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts (8) (13)
Share buy-back (35) (143)
Dividends paid 4 (145) (784)
Net cash flows from financing activities (149) (954)
Net decrease in cash and cash equivalents (557) (803)
Cash and cash equivalents, net of overdrafts, at the beginning of the period 1,258 2,365
Effect of foreign exchange rate changes on cash and cash equivalents 1 (2)
Cash and cash equivalents, net of overdrafts, at the end of the period 702 1,560
The accompanying notes form part of the half year consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year ended 31 December 2023
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)) Accumulated losses Total Non-controlling interests Total equity
Balance as at 1 July 2023 13,251 (51) (14) 52 (3,591) (271) 9,376 (1) 9,375
Profit for the period - - - - - 53 53 - 53
Other comprehensive income/(loss) - - (20) - - - (20) - (20)
Total comprehensive income/(loss) - - (20) - - 53 33 - 33
Transactions with owners:
Dividends - - - - - (145) (145) - (145)
Shares bought back and cancelled (35) - - - - - (35) - (35)
Employee share entitlements for unvested awards, net of - - - 14 - - 14 - 14
tax
Employee share awards vested and lapsed, net of tax - 19 - (20) - (7) (8) - (8)
Purchase of shares by ESOP Trusts - (8) - - - - (8) - (8)
Balance as at 31 December 2023 13,216 (40) (34) 46 (3,591) (370) 9,227 (1) 9,226
Balance as at 1 July 2022 13,469 (32) (6) 45 (3,597) 901 10,780 (1) 10,779
Profit for the period - - - - - 685 685 - 685
Other comprehensive income/(loss) - - (2) - - 2 - - -
Total comprehensive income/(loss) - - (2) - - 687 685 - 685
Transactions with owners:
Dividends - - - - - (784) (784) - (784)
Shares bought back and cancelled (143) - - - - - (143) - (143)
Employee share entitlements for unvested awards, net of - - - 14 - - 14 - 14
tax
Employee share awards vested and lapsed, net of tax - 13 - (21) - 3 (5) - (5)
Purchase of shares by ESOP Trusts - (13) - - - - (13) - (13)
Balance as at 31 December 2022 13,326 (32) (8) 38 (3,597) 807 10,534 (1) 10,533
(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$3,569 million, which reflects the difference between consideration paid
and the carrying value of assets and liabilities acquired, as well as the
gains/losses on disposal of entities as part of the demerger of the Group in
2015.
The accompanying notes form part of the half year consolidated financial
statements.
NOTES TO FINANCIAL STATEMENTS - BASIS OF PREPARATION
The consolidated financial statements of South32 Limited (referred to as the
Company) and its subsidiaries and joint arrangements (collectively, the Group)
for the half year ended 31 December 2023 were authorised for issue in
accordance with a resolution of the Directors on 15 February 2024.
1. REPORTING ENTITY
South32 Limited is a for-profit company limited by shares incorporated in
Australia with a primary listing on the Australian Securities Exchange (ASX),
a standard listing on the London Stock Exchange (LSE) and a secondary listing
on the Johannesburg Stock Exchange (JSE).
The nature of the operations and principal activities of the Group are
described in note 3 Segment information.
2. BASIS OF PREPARATION
The half year consolidated financial statements are general purpose condensed
financial statements which:
• Have been prepared in accordance with AASB 134 Interim Financial Reporting,
IAS 34 Interim Financial Reporting and the Corporations Act 2001;
• Have been prepared on a historical cost basis, except for post-retirement
assets and obligations, derivative financial instruments and certain other
financial assets and liabilities which are required to be measured at fair
value;
• Are presented in US dollars, which is the functional currency of the majority
of the Group's operations, and all values are rounded to the nearest million
dollars (US$M or US$ million) unless otherwise stated, in accordance with ASIC
Corporations Instrument 2016/191; and
• Have been prepared on the basis of accounting policies and methods of
computation consistent with those applied in the consolidated financial
statements for the year ended 30 June 2023.
The preparation of the half year consolidated financial statements has
required management to apply accounting policies and methodologies that are
based on complex and subjective estimates, assumptions and judgements.
Management based its estimates and judgements on historical experience and
assumptions it believes to be reasonable and realistic based on the current
environment. Actual results may differ from those reported in these statements
due to the uncertainties that characterise the assumptions and conditions on
which the estimates are based. The significant judgements made by management
in applying the Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated financial
statements for the year ended 30 June 2023.
For a full understanding of the financial performance and financial position
of the Group, it is recommended that the half year consolidated financial
statements be read in conjunction with the consolidated financial statements
for the year ended 30 June 2023.
3. 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.
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 assessing performance.
The principal activities of each operating segment are summarised as follows:
Operating segment Principal activities
Worsley Alumina Integrated bauxite mine and alumina refinery in Australia
Brazil Alumina Integrated bauxite mine and alumina refinery in Brazil
Brazil Aluminium Aluminium smelter in Brazil
Hillside Aluminium Aluminium smelter in South Africa
Mozal Aluminium Aluminium smelter in Mozambique
Sierra Gorda Copper mine in Chile
Cannington Silver, lead and zinc mine in Australia
Hermosa Base metals exploration and development project in the United States
Cerro Matoso Integrated laterite ferronickel mine 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
All operations are operated by the Group except Brazil Alumina, Brazil
Aluminium and Sierra Gorda.
(b) Segment results
The segment information reflects the Group's interest in subsidiaries and
joint operations, as well as material equity accounted joint ventures on a
proportional consolidation basis. The segment information includes non-IFRS
financial measures.
Segment performance is measured by Underlying EBIT and Underlying EBITDA.
Underlying EBIT is profit for the period before net finance income/(costs),
income tax expense and other earnings adjustment items. Underlying EBITDA is
Underlying EBIT before depreciation and amortisation.
Reconciliations of the underlying segment information to the statutory
information included in the Group's consolidated financial statements is set
out on the following pages, including joint venture adjustments which
reconcile the proportional consolidation of the material equity accounted
joint ventures back to their statutory equity accounting positions. The
Group's material equity accounted joint ventures are Sierra Gorda, Australia
Manganese and South Africa Manganese.
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 an arm's
length basis.
Group and unallocated items/eliminations represent group centre functions and
consolidation adjustments. Group financing and income taxes are primarily
managed on a Group basis and are not allocated to 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.
3. SEGMENT INFORMATION (CONTINUED)
(b) Segment results (continued)
H1 FY24 Worsley Alumina Brazil Alumina Brazil Aluminium Hillside Aluminium Mozal Aluminium Sierra Gorda((1)) Cannington Hermosa Cerro Matoso Illawarra Metallurgical Coal Australia Manganese((1)) Group and unallocated items/ eliminations Group underlying results((1))
South Africa Manganese((1))
US$M
Revenue from customers 653 234 91 757 397 319 313 - 238 522 328 158 (118) 3,892
Other((2)) - - - 1 - 3 5 - - (2) (10) (6) (2) (11)
Total underlying revenue 653 234 91 758 397 322 318 - 238 520 318 152 (120) 3,881
Comprising:
Group production 318 187 91 758 397 322 318 - 238 520 318 152 - 3,619
Third party products and services((3)) - - - - - - - - - - - - 262 262
Inter-segment revenue 335 47 - - - - - - - - - - (382) -
Total underlying revenue 653 234 91 758 397 322 318 - 238 520 318 152 (120) 3,881
Underlying EBITDA 164 15 (70) 60 (14) 117 147 (7) 17 171 125 14 (31) 708
Underlying depreciation and amortisation (96) (24) (4) (33) (34) (68) (38) (2) (31) (60) (58) (11) (13) (472)
Underlying EBIT 68 (9) (74) 27 (48) 49 109 (9) (14) 111 67 3 (44) 236
Comprising:
Group production 68 - (74) 27 (48) 49 112 (9) (13) 116 67 3 (39) 259
Exploration expensed - - - - - - (3) - (1) (3) - - (19) (26)
Third party products and services((3)) - - - - - - - - - - - - 14 14
Share of profit/(loss) of equity accounted - (9) - - - - - - - (2) - - - (11)
investments
Underlying EBIT 68 (9) (74) 27 (48) 49 109 (9) (14) 111 67 3 (44) 236
Underlying net finance costs (118)
Underlying income tax expense (56)
Underlying royalty related tax expense (22)
Underlying earnings 40
Total adjustments to profit((4)) 13
Profit for the period 53
Underlying exploration expenditure - - - - - 6 5 14 1 7 - - 20 53
Underlying capital expenditure((5)) 58 51 4 25 11 98 23 188 21 181 40 26 1 727
Underlying equity accounted investments((6)) - 42 - - - - - - - 5 - - - 47
Total underlying assets((6)) 3,648 956 135 1,168 729 1,790 601 1,298 568 1,355 641 341 2,160 15,390
Total underlying liabilities((6)) 1,163 168 65 314 189 199 418 102 200 459 429 182 2,276 6,164
(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. The Group's underlying results includes the
proportional elimination of revenue and corresponding expenses relating to
freight services provided by the Group to material joint ventures of US$59
million and third party product revenue of US$15 million included in Group and
unallocated items/eliminations. Refer to note 3(b)(i) Underlying results
reconciliation for the joint venture adjustments that reconcile the underlying
proportional consolidation to the statutory financial information.
(2) Underlying other revenue relates to fair value movements on
provisionally priced contracts.
(3) Underlying revenue on third party products and services sold
comprises US$42 million for aluminium, US$3 million for alumina, US$106
million for coal, US$15 million for manganese, US$43 million for freight
services and US$53 million for raw materials. Underlying EBIT on third party
products and services sold comprises US$2 million for alumina, US$14 million
for coal and US$(2) million for freight services.
(4) Represents the total of all adjustments made to Profit from
operations, Net finance income/(costs) and Income tax expense. Refer to note
3(b)(i) 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.
3. SEGMENT INFORMATION (CONTINUED)
(b) Segment results (continued)
H1 FY23 Worsley Alumina Brazil Alumina Brazil Aluminium Hillside Aluminium Mozal Aluminium Sierra Gorda((1)) Cannington Hermosa Cerro Matoso Illawarra Metallurgical Coal Australia Manganese((1)) Group and unallocated items/ eliminations Group underlying results((1))
South Africa Manganese((1))
US$M
Revenue from customers 661 247 47 859 485 349 271 - 356 803 383 190 (127) 4,524
Other((2)) (2) - - 2 (3) 8 1 - 39 (2) (28) (15) - -
Total underlying revenue 659 247 47 861 482 357 272 - 395 801 355 175 (127) 4,524
Comprising:
Group production 302 228 47 861 482 357 272 - 395 801 355 175 - 4,275
Third party products and services((3)) - - - - - - - - - - - - 249 249
Inter-segment revenue 357 19 - - - - - - - - - - (376) -
Total underlying revenue 659 247 47 861 482 357 272 - 395 801 355 175 (127) 4,524
Underlying EBITDA 123 7 (67) 94 86 179 117 (7) 180 407 197 35 13 1,364
Underlying depreciation and amortisation (90) (26) (3) (32) (21) (72) (35) (2) (26) (67) (48) (10) (10) (442)
Underlying EBIT 33 (19) (70) 62 65 107 82 (9) 154 340 149 25 3 922
Comprising:
Group production 33 (26) (70) 62 65 109 85 (9) 154 344 149 26 10 932
Exploration expensed - - - - - (2) (3) - - (4) - (1) (19) (29)
Third party products and services((3)) - - - - - - - - - - - - 12 12
Share of profit/(loss) of equity accounted - 7 - - - - - - - - - - - 7
investments
Underlying EBIT 33 (19) (70) 62 65 107 82 (9) 154 340 149 25 3 922
Underlying net finance costs (88)
Underlying income tax expense (234)
Underlying royalty related tax expense (40)
Underlying earnings 560
Total adjustments to profit((4)) 125
Profit for the period 685
Underlying exploration expenditure - - - - - 3 3 6 - 8 1 1 27 49
Underlying capital expenditure((5)) 34 35 6 10 9 86 33 96 20 108 32 11 1 481
Underlying equity accounted investments((6)) - 51 - - - - - - - 7 - - - 58
Total underlying assets((6)) 3,578 880 91 1,156 778 1,811 575 1,095 581 1,275 660 326 2,709 15,515
Total underlying liabilities((6)) 1,121 142 63 311 200 223 403 96 218 506 421 183 2,253 6,140
(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. The Group's underlying results includes the
proportional elimination of revenue and corresponding expenses relating to
freight services provided by the Group to material joint ventures of US$75
million and third party product revenue of US$16 million included in Group and
unallocated items/eliminations. Refer to note 3(b)(i) Underlying results
reconciliation for the joint venture adjustments that reconcile the underlying
proportional consolidation to the statutory financial information.
(2) Underlying other revenue relates to fair value movements on
provisionally priced contracts.
(3) Underlying revenue on third party products and services sold
comprises US$30 million for aluminium, US$2 million for alumina, US$60 million
for coal, US$16 million for manganese, US$63 million for freight services and
US$78 million for raw materials. Underlying EBIT on third party products and
services sold comprises US$(1) million for aluminium, US$8 million for
alumina, US$6 million for coal and US$(1) million for freight services.
(4) Represents the total of all adjustments made to Profit from
operations, Net finance income/(costs) and Income tax expense. Refer to note
3(b)(i) Underlying results reconciliation for further details.
(5) Underlying capital expenditure excludes the purchase of
intangibles and capitalised exploration expenditure.
(6) Underlying equity accounted investments, total assets and
total liabilities for each operating segment are as at 30 June 2023. 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.
3. SEGMENT INFORMATION (CONTINUED)
(b) Segment results (continued)
(i) Underlying results reconciliation
The following tables reconcile the underlying segment information to the
statutory information included in the Group's half year consolidated financial
statements:
US$M H1 FY24 H1 FY23
Underlying EBIT 236 922
Significant items((1)) - 138
Sierra Gorda joint venture adjustments((2)(3)) (47) 57
Manganese joint venture adjustments((2)(4)) (71) (101)
Exchange rate gains/(losses) on restatement of monetary items((5)) (13) 48
Net impairment (loss)/reversal of financial assets((5)(6)) (48) (214)
Net impairment (loss)/reversal of non-financial assets((5)) - 4
Gains/(losses) on non-trading derivative instruments, contingent consideration 18 17
and other investments measured at FVTPL((5))
Profit from operations 75 871
Underlying net finance costs (118) (88)
Sierra Gorda joint venture adjustments((2)) 91 85
Manganese joint venture adjustments((2)) 19 13
Exchange rate variations on net debt (1) 4
Net finance income/(costs) (9) 14
Underlying income tax expense (56) (234)
Underlying royalty related tax expense (22) (40)
Tax effect of significant items((1)) - (23)
Sierra Gorda joint venture adjustments relating to income tax expense((2)) (6) 6
Sierra Gorda joint venture adjustments relating to royalty related tax 1 4
expense((2))
Manganese joint venture adjustments relating to income tax expense((2)) 24 56
Manganese joint venture adjustments relating to royalty related tax 21 36
expense((2))
Tax effect of other adjustments to Underlying EBIT 4 1
Tax effect of other adjustments to Underlying net finance costs 1 (1)
Exchange rate variations on tax balances 20 (5)
Income tax expense (13) (200)
Underlying earnings 40 560
Total adjustments to profit 13 125
Profit for the period 53 685
(1) Refer to 3(b)(ii) 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 an equity accounted investment of US$103
million (FY23: US$161 million), and the carrying value of a purchased
credit-impaired receivable of US$1,725 million (FY23: US$1,711 million)
classified as a loan to an equity accounted investment within trade and other
receivables on the Consolidated Balance Sheet. The earnings adjustments
include a revaluation gain of US$48 million (H1 FY23: gain of US$214 million)
relating to the shareholder loan payable that was eliminated from the Group's
Underlying EBIT upon proportional consolidation.
(4) Includes earnings adjustments of nil (H1 FY23: nil) included
in the Australia Manganese segment and US$(7) million (H1 FY23: US$4 million)
included in the South Africa Manganese segment.
(5) Recognised in expenses excluding finance costs in the
Consolidated Income Statement.
(6) Refer to 3(b)(iii) Impairment of financial assets.
3. SEGMENT INFORMATION (CONTINUED)
(b) Segment results (continued)
(i) Underlying results reconciliation (continued)
H1 FY24
US$M Group underlying results Sierra Gorda joint venture adjustments Manganese joint venture adjustments Group statutory results
Total revenue 3,881 (322) (426) 3,133
Depreciation and amortisation 472 (68) (69) 335
Share of profit/(loss) of equity accounted investments (11) 3 (1) (9)
Exploration expenditure 53 (6) - 47
Capital expenditure 727 (98) (66) 563
Equity accounted investments 47 103 264 414
Total assets 15,390 (453) (539) 14,398
Total liabilities 6,164 (453) (539) 5,172
H1 FY23
US$M Group underlying results Sierra Gorda joint venture adjustments Manganese joint venture adjustments Group statutory results
Total revenue 4,524 (357) (471) 3,696
Depreciation and amortisation 442 (72) (58) 312
Share of profit/(loss) of equity accounted investments 161 73 241
7
Exploration expenditure 49 (3) (2) 44
Capital expenditure 481 (86) (43) 352
Equity accounted investments((1)) 58 101 340 499
Total assets((1)) 15,515 (450) (501) 14,564
Total liabilities((1)) 6,140 (450) (501) 5,189
(1) Equity accounted investments, total assets and total
liabilities are as at 30 June 2023.
(ii) Significant items
Significant items are those items, not separately identified in note 3(b)(i)
Underlying results reconciliation, whose nature and amount are considered
material to the Group's consolidated half year financial statements. There
were no such items included within the Group's consolidated financial
statements for the half year ended 31 December 2023 (H1 FY23: US$115M after
tax).
H1 FY23
US$M Gross Tax Net
Disposal of royalties 189 133
(56)
Assets write-off
(51) 16 (35)
Tax adjustments relating to the Sierra Gorda acquisition
- 17 17
Total significant items 138 115
(23)
Disposal of royalties
On 19 July 2022, the Group divested four royalties to Ecora Resources PLC
(formerly known as Anglo Pacific Group PLC) in exchange for consideration
comprising an upfront cash payment of US$48 million, deferred cash
consideration of US$55 million, US$78 million in equity and a variable
consideration receivable valued at US$10 million. The equity in Ecora
Resources PLC has been recognised as an investment in equity instruments
designated at FVOCI. The variable consideration is payable if certain
production and price-linked conditions are met prior to 2032, up to a maximum
of US$15 million.
The royalties were recognised as intangible assets with a nominal carrying
value. On completion the Group recognised other income, net of transaction
costs, of US$189 million (US$133 million post-tax) in the Consolidated Income
Statement and was included in Group and unallocated items.
3. SEGMENT INFORMATION (CONTINUED)
(b) Segment results (continued)
(ii) Significant items (continued)
Assets write-off
On 23 August 2022, the Group announced that it would not proceed with an
investment in the Dendrobium Next Domain project at Illawarra Metallurgical
Coal following its consideration of recently completed study work and
extensive analysis of alternatives considered for the complex. As a result of
the decision in August 2022, the Group wrote off US$51 million (US$35 million
post-tax) of costs previously capitalised in relation to the project which
were recognised within expenses excluding finance costs in the Consolidated
Income Statement. The write-off related to capitalised exploration and
evaluation assets previously included in property, plant and equipment on the
Consolidated Balance Sheet.
Tax adjustments relating to the Sierra Gorda acquisition
During H1 FY23, the Group recognised an income tax benefit of US$31 million
relating to tax liabilities recognised on the acquisition of Sierra Gorda
during H1 FY23. The US$31 million benefit comprised a reassessment of US$17
million and foreign exchange gain of US$14 million which was separately
reported as part of exchange variations of tax balances. The tax adjustments
relating to the Sierra Gorda acquisition have been excluded from the Group's
Underlying income tax expense on the basis that they do not relate to
assessable income earned during its ownership.
(iii) Impairment of financial assets
The Group recognised the following net impairment of financial assets:
US$M H1 FY24 H1 FY23
Trade and other receivables 48 214
Net impairment of financial assets((1)) 48 214
(1) Relates to the purchased credit impaired receivable from
Sierra Gorda.
Shareholder loan receivable from Sierra Gorda
The loan has a contractual interest rate of 8 per cent and the repayment of
the loan by Sierra Gorda is dependent on its financial performance. At
31 December 2023, the Group updated its estimated timing of the loan
repayments and as a result recognised an impairment of US$48 million (H1 FY23:
impairment of US$214 million) which is included in expenses excluding finance
costs in the Consolidated Income Statement. The net present value of the
expected future cash flows of the loan is most sensitive to the Group's copper
price assumption, with a range of US$3.28/lb to US$4.59/lb used, in real
terms. The future loan repayments were informed by a production profile and
costs based on management's planning processes. An effective interest rate of
9 per cent, as determined on the date of acquisition, was applied to discount
the future loan repayments.
4. DIVIDENDS
US$M H1 FY24 H1 FY23
Prior year final dividend 145 646
Prior year special dividend - 138
Total dividends declared and paid during the period((1)) 145 784
(1) On 24 August 2023, the Directors resolved to pay a fully
franked final dividend of US 3.2 cents per share (US$145 million) in respect
of the 2023 financial year. The dividends were paid on 12 October 2023
5. EARNINGS PER SHARE
Basic earnings per share (EPS) amounts are calculated based on profit
attributable to equity holders of South32 Limited and the weighted average
number of shares outstanding during the year.
Diluted EPS amounts are calculated based on profit attributable to equity
holders of South32 Limited and the weighted average number of shares
outstanding after adjustment for the effects of all dilutive potential shares.
The following reflects the profit and share data used in the basic and diluted
EPS computations:
Profit attributable to equity holders
US$M H1 FY24 H1 FY23
Profit attributable to equity holders of South32 Limited (basic) 53 685
Profit attributable to equity holders of South32 Limited (diluted) 53 685
Weighted average number of shares
Million H1 FY24 H1 FY23
Basic EPS denominator((1)) 4,523 4,596
Shares contingently issuable under employee share ownership plans 14 30
Diluted EPS denominator 4,537 4,626
(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 H1 FY24 H1 FY23
Basic EPS 1.2 14.9
Diluted EPS 1.2 14.8
6. INTEREST BEARING LIABILITIES
US$M H1 FY24 FY23
Current
Lease liabilities 51 51
Unsecured loans from equity accounted investments 208 287
Unsecured other((1)) 176 27
Total current interest bearing liabilities 435 365
Non-current
Lease liabilities 631 623
Senior unsecured notes 691 690
Unsecured other 36 63
Total non-current interest bearing liabilities 1,358 1,376
Unsecured other interest bearing liabilities includes US$149 million of
short-term commercial paper issued in December 2023 via the Group's US
commercial paper program.
7. NET FINANCE INCOME/(COSTS)
US$M H1 FY24 H1 FY23
Finance income
Interest on loans to equity accounted investments 91 83
Other interest income 25 28
Total finance income 116 111
Finance costs
Interest on borrowings (35) (31)
Interest on lease liabilities (26) (26)
Discounting on provisions and other liabilities (62) (42)
Net interest expense on post-retirement employee benefits (1) (2)
Exchange rate variations on net debt (1) 4
Total finance costs (125) (97)
Net finance income/(costs) (9) 14
8. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The following table presents the financial assets and liabilities by class at
their carrying amounts:
H1 FY24 Held at FVTPL Designated as FVOCI Amortised cost Total
US$M
Financial assets
Cash and cash equivalents 702 702
- -
Trade and other receivables((1)(2)) 108 446 554
-
Other financial assets:
Derivative contracts
1 - - 1
Total current financial assets 109 1,148 1,257
-
Trade and other receivables((1)(2)) 1,954 1,954
- -
Other financial assets:
Investments in equity instruments designated as FVOCI 97 97
- -
Contingent consideration receivable 10 10
- -
Total non-current financial assets 10 97 1,954 2,061
Total financial assets 119 97 3,102 3,318
Financial liabilities
Trade and other payables((3)) 822 825
3 -
Interest bearing liabilities 435 435
- -
Total current financial liabilities 1,257 1,260
3 -
Trade and other payables((3)) 19 19
- -
Interest bearing liabilities 1,358 1,358
- -
Other financial liabilities:
Contingent consideration payable 18 18
- -
Total non-current financial liabilities 18 1,377 1,395
-
Total financial liabilities 21 2,634 2,655
-
(1) Includes current loans to equity accounted investments of
US$6 million and non-current loans to equity accounted investments of
US$1,944 million.
(2) Excludes current input taxes of US$102 million and non-current
input and other taxes of US$180 million included in other receivables.
(3) Excludes current input taxes of US$15 million and non-current
input and other taxes of US$1 million included in other payables.
8. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
FY23 Held at FVTPL Designated as FVOCI Amortised cost Total
US$M
Financial assets
Cash and cash equivalents 1,258 1,258
- -
Trade and other receivables((1)(2)) 105 532 637
-
Other financial assets:
Derivative contracts
1 - - 1
Total current financial assets 106 1,790 1,896
-
Trade and other receivables((1)(2)) 1,802 1,802
- -
Other financial assets:
Investments in equity instruments designated as FVOCI 108 108
- -
Contingent consideration receivable 10 10
- -
Total non-current financial assets 10 108 1,802 1,920
Total financial assets 116 108 3,592 3,816
Financial liabilities
Trade and other payables((3)) 962 968
6 -
Interest bearing liabilities 365 365
- -
Total current financial liabilities 1,327 1,333
6 -
Trade and other payables((3)) 18 18
- -
Interest bearing liabilities 1,376 1,376
- -
Other financial liabilities:
Contingent consideration payable 37 37
- -
Total non-current financial liabilities 37 1,394 1,431
-
Total financial liabilities 43 2,721 2,764
-
(1) Includes current loans to equity accounted investments of
US$114 million and non-current loans to equity accounted investments of
US$1,790 million.
(2) Excludes current input taxes of US$141 million and non-current
input and other taxes of US$121 million included in other receivables.
(3) Excludes current input taxes of US$17 million and non-current
input and other taxes of US$1 million included in other payables.
(i) Measurement of fair value
The carrying values of the Group's financial assets and liabilities measured
at amortised cost are equal to or approximate their respective fair values,
except for senior unsecured notes, which have a fair value of US$633 million
(FY23: US$617 million), and lease liabilities, for which a fair value has not
been determined. The fair value of the Group's senior unsecured notes is
estimated based on quoted market prices at the reporting date and are
classified as Level 1 on the fair value hierarchy as shown below. Refer to
note 6 Interest bearing liabilities for the carrying values of senior
unsecured notes and lease liabilities.
For financial assets and liabilities measured at fair value, the Group uses
quoted marked prices in active markets for identical assets where available.
Where no price information is available from a quoted market source,
alternative market mechanisms or recent comparable transactions, the fair
value is estimated based on the Group's views on relevant future prices, net
of valuation allowances to accommodate liquidity, modelling, credit and other
risks implicit in such estimates.
The following table shows the Group's financial assets and liabilities carried
at fair value with reference to the nature of valuation inputs
used:
Level 1 Valuation is based on unadjusted quoted prices in active markets for identical
financial assets and liabilities.
Level 2 Valuation is based on inputs (other than quoted prices included in Level 1)
that are observable for the financial asset or liability, either directly
(i.e. as unquoted prices) or indirectly (i.e. derived from prices).
Level 3 Valuation includes inputs that are not based on observable market data.
8. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
(i) Measurement of fair value (continued)
H1 FY24
US$M Level 1 Level 2 Level 3 Total
Financial assets and liabilities
Trade and other receivables 108 108
- -
Trade and other payables (3) (3)
- -
Derivative contract assets
1 - - 1
Investments in equity instruments designated as FVOCI 90 97
- 7
Contingent consideration receivable 10 10
- -
Contingent consideration payable (18) (18)
- -
Total 91 105 (1) 195
FY23
US$M Level 1 Level 2 Level 3 Total
Financial assets and liabilities
Trade and other receivables 105 105
- -
Trade and other payables (6) (6)
- -
Derivative contract assets
1 - - 1
Investments in equity instruments designated as FVOCI 101 108
- 7
Contingent consideration receivable 10 10
- -
Contingent consideration payable (37) (37)
- -
Total 102 99 (20) 181
(ii) Level 3 financial assets and liabilities
The following table shows the movements in the Group's Level 3 financial
assets and liabilities:
US$M H1 FY24 H1 FY23
At the beginning of the period (20) (45)
Addition of financial assets - 10
Reclassification of financial asset from level 3 to level 2((1)) - (39)
Unrealised gains recognised in the Consolidated Income Statement((2)) 19 68
At the end of the period (1) (6)
(1) The valuation of the vendor loan facility provided to Seriti
as part of the Group's divestment of South Africa Energy Coal no longer
included inputs that were based on unobservable market data. This financial
asset was settled in H2 FY23 through agreement with the vendor to offset this
facility against the related rehabilitation fund liability, recognised within
unsecured other interest bearing liabilities.
(2) Recognised in expenses excluding finance costs in the
Consolidated Income Statement.
(iii) Standby arrangements and credit facilities
The entities in the Group are funded by a combination of cash generated by the
Group's operations, working capital facilities and intercompany loans provided
by the Group. Intercompany loans may be funded by a combination of cash,
short-term and long-term debt. Details of the Group's major standby
arrangement are as follows:
H1 FY24
US$M Available Used Unused
Revolving credit facility((1)) 1,400 - 1,400
(1) The Group has an undrawn revolving credit facility which
expires in December 2028, with the size of the facility in the final year
reducing to US$1,300 million.
9. EQUITY ACCOUNTED INVESTMENTS
The Group's interests in equity accounted investments with the most
significant contribution to the Group's net profit after tax or net assets are
as follows:
Country of incorporation Ownership interest %
Significant joint ventures Principal activity Acquisition date H1 FY24 FY23
Australia Manganese((1)(2)) Australia Manganese ore mine 8 May 2015 60 60
South Africa Manganese((1)(3)) South Africa Manganese ore mines 3 February 2015 60 60
Sierra Gorda((4)) Chile Copper mine 22 February 2022 45 45
(1) Joint control is contractually achieved as joint venture
parties unanimously consent on decisions over the joint venture's relevant
activities.
(2) Australia Manganese consists of an investment in Groote
Eylandt Mining Company Pty Ltd (GEMCO).
(3) The Group holds a 60 per cent interest in Samancor Holdings
(Pty) Ltd (Samancor). Samancor indirectly owns 74 per cent of Hotazel
Manganese Mines (Pty) Ltd (HMM), which gives the Group its indirect legal
ownership interest of 44.4 per cent. The remaining 26 per cent of HMM is owned
by B-BBEE entities, of which 17 per cent of the interests were acquired using
vendor finance, with the loans repayable via distributions attributable to
these parties, pro rata to their share in HMM. Until these loans are repaid,
the Group's interest in HMM is accounted for at 54.6 per cent.
(4) Sierra Gorda consists of an investment in Sierra Gorda
Sociedad Contractual Minera.
The Group's share of profit/(loss) of equity accounted investments, are as
follows:
Share of profit/(loss) of equity accounted investments
US$M H1 FY24 H1 FY23
Australia Manganese 7 52
South Africa Manganese (12) 16
Sierra Gorda 3 161
Individually immaterial((1)) (7) 12
Total (9) 241
(1) Individually immaterial consists of investments in Samancor
Marketing Pte Ltd (60 per cent), Mineração Rio do Norte (33 per cent) and
Port Kembla Coal Terminal Ltd (16.7 per cent).
10. SUBSEQUENT EVENTS
Agreement to divest interest in Eagle Downs
On 10 February 2024, the Group entered into a binding agreement to divest its
50 percent interest in the Eagle Downs metallurgical coal project to Boomerang
QLD Coal Pty Ltd, a subsidiary of Stanmore Resources Limited. The
consideration comprises US$15 million payable at completion; a contingent
payment of US$20 million, subject to the Eagle Downs project reaching
metallurgical coal production of 100,000 tonnes; and a royalty of up to US$100
million based on certain metallurgical coal price-linked conditions. The
transaction is expected to complete in the 2024 calendar year, subject to
satisfaction of conditions precedent, which include approval from Australia's
Foreign Investment Review Board and certain consents required under the Eagle
Downs joint venture agreement.
Capital management
On 15 February 2024, the Directors resolved to pay a fully-franked interim
dividend of US 0.4 cents per share (US$18 million) in respect of the 2024
financial half year. The dividend will be paid on 4 April 2024. The dividend
has not been provided for in the half year consolidated financial statements
and will be recognised in the second half of the 2024 financial year.
To manage the Group's financial position and ensure it retains the right
balance of flexibility, efficiency and prudence, the Directors have taken the
decision to cancel the on-market share buy-back program, which was due to
expire on 1 March 2024. Consistent with its unchanged capital management
framework, the Group will continue to assess options to return excess cash to
shareholders in the most efficient and value accretive manner.
Final investment approval to develop the Taylor deposit
On 15 February 2024, the Directors approved a final investment decision for
the development of the Group's Taylor zinc-lead silver deposit within the
Hermosa project in Arizona, United States. The Directors have approved direct
and indirect capital expenditure of US$2,160 million, in real terms, with
construction expected to be funded primarily from the Group's operating cash
flows.
No other matters or circumstances have arisen since the end of the period that
have significantly affected, or may significantly affect, the operations,
results of operations or state of affairs of the Group in subsequent
accounting periods.
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of the Company, we state
that:
In the opinion of the Directors:
(a) The consolidated financial statements and notes that are set out on
pages 33 to 50 for the half year ended 31 December 2023 are in accordance
with the Corporations Act, including:
(i) Giving a true and fair view of the Group's financial position as at
31 December 2023 and of its performance for the half year ended on that date;
and
(ii) Complying with Australian Accounting Standard AASB 134 Interim
Financial Reporting and Corporations Regulations 2001.
(b) There are reasonable grounds to believe that the Company will be able
to pay its debts as and when they become due and payable.
Signed in accordance with a resolution of the Board of Directors.
Karen Wood
Chair
Graham Kerr
Chief Executive Officer and Managing Director
Dated 15 February 2024
DIRECTORS' REPORT
The Directors of the Group present the consolidated financial statements for
the half year ended 31 December 2023 and the auditor's review report thereon.
Directors
The Directors of the Company, both during and since the end of the period,
are:
Ms Karen Wood
Mr Graham Kerr
Mr Frank Cooper AO
Dr Xiaoling Liu
Mr Carlos Mesquita
Dr Ntombifuthi (Futhi) Mtoba
Ms Jane Nelson
Mr Wayne Osborn
Mr Keith Rumble
Ms Sharon Warburton
The company secretary of the Company, both during and since the end of the
period, is Claire Tolcon.
Review and results of operations
A review of the operations of the consolidated entity during the period and of
the results of those operations is contained on pages 3 to 30.
Strategic risks and uncertainties
Due to the international scope of the Group's operations and the industries in
which it is engaged, there are a number of risk factors and uncertainties
which could have an effect on the Group's results and operations over the next
six months.
The following information outlines the most significant strategic exposures
identified across the Group. The risks are not listed in any particular order:
• Keeping our people safe and well
• Portfolio reshaping
• Predictable operational performance
• Climate change and environment
• Maintaining, realising or enhancing the value of our Mineral
Resources and Ore Reserves
• Major external events or natural catastrophes
• Maintaining competitiveness through innovation and technology
• Delivering our project portfolio
• Security of supply of logistics chains, and critical goods and
services
• Shaping our culture and managing diverse talent
• Evolving societal expectations
• Political risks, actions by government and/or authorities
• Global economic uncertainty and liquidity
Further information on these risks and how they are managed can be found on
pages 28 to 37 of the Annual Report for the year ended 30 June 2023, a copy
of which is available on the Group's website at www.south32.net.
DIRECTORS' REPORT (CONTINUED)
Events subsequent to the balance sheet date
Agreement to divest interest in Eagle Downs
On 10 February 2024, the Group entered into a binding agreement to divest its
50 percent interest in the Eagle Downs metallurgical coal project to Boomerang
QLD Coal Pty Ltd, a subsidiary of Stanmore Resources Limited. The
consideration comprises US$15 million payable at completion; a contingent
payment of US$20 million, subject to the Eagle Downs project reaching
metallurgical coal production of 100,000 tonnes; and a royalty of up to US$100
million based on certain metallurgical coal price-linked conditions. The
transaction is expected to complete in the 2024 calendar year, subject to
satisfaction of conditions precedent, which include approval from Australia's
Foreign Investment Review Board and certain consents required under the Eagle
Downs joint venture agreement.
Capital management
On 15 February 2024, the Directors resolved to pay a fully-franked interim
dividend of US 0.4 cents per share (US$18 million) in respect of the 2024
financial half year. The dividend will be paid on 4 April 2024. The dividend
has not been provided for in the half year consolidated financial statements
and will be recognised in the second half of the 2024 financial year.
To manage the Group's financial position and ensure it retains the right
balance of flexibility, efficiency and prudence, the Directors have taken the
decision to cancel the on-market share buy-back program, which was due to
expire on 1 March 2024. Consistent with its unchanged capital management
framework, the Group will continue to assess options to return excess cash to
shareholders in the most efficient and value accretive manner.
Final investment approval to develop the Taylor deposit
On 15 February 2024, the Directors approved a final investment decision for
the development of the Group's Taylor zinc-lead silver deposit within the
Hermosa project in Arizona, United States. The Directors have approved direct
and indirect capital expenditure of US$2,160 million, in real terms, with
construction expected to be funded primarily from the Group's operating cash
flows.
No other matters or circumstances have arisen since the end of the period that
have significantly affected, or may significantly affect, the operations,
results of operations or state of affairs of the Group in subsequent
accounting periods.
UK responsibility statements
The Directors state that to the best of their knowledge the Financial Results
and Outlook on pages 3 to 30 is compliant with DTR 4.2.7R and DTR 4.2.8R of
the Disclosure Guidance and Transparency Rules in the United Kingdom, namely:
(a) includes an indication of important events that have occurred during
the first six months of the financial year, and their impact on the condensed
set of financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
(b) disclosure has been made for related party transactions that have
taken place in the first six months of the current financial year and that
have materially affected the financial position or performance of the
enterprise during that period, and any changes in the related party
transactions described in the last annual report that could have a material
effect on the financial position or performance of the enterprise in the first
six months of the current financial year.
Lead Auditor's Independence Declaration
A copy of the lead auditor's independence declaration as required under
Section 307C of the Corporations Act is set out on page 54.
Rounding of amounts
The Australian Securities and Investments Commission (ASIC) Corporations
(Rounding in Financial/Directors' Reports) Instrument 2016/191 applies to the
Group and amounts in the half year consolidated financial statements and this
Directors' Report have been rounded in accordance with this instrument to the
nearest million US dollars, unless stated otherwise.
This Directors' Report is made in accordance with a resolution of the Board.
Karen
Wood
Graham Kerr
Chair
Chief Executive Officer and Managing Director
Date: 15 February 2024
Lead Auditor's Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of South32 Limited
I declare that, to the best of my knowledge and belief, in relation to the
review of South32 Limited for the half year ended 31 December 2023 there have
been:
(a) no contraventions of the auditor independence requirements as set out
in the Corporations Act 2001 in relation to the review; and
(b) no contraventions of any applicable code of professional conduct in
relation to the review.
KPMG Graham Hogg
Partner
Perth
15 February 2024
Independent Auditor's Review Report
To the shareholders of South32 Limited
Conclusion
We have reviewed the accompanying Half-year Consolidated Financial Statements The Half-year Consolidated Financial Statements comprises:
of South32 Limited.
(a) Consolidated balance sheet as at 31 December 2023;
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the Half-year Consolidated Financial (b) Consolidated income statement, Consolidated statement of comprehensive
Statements of South32 Limited does not comply with the Corporations Act 2001, income, Consolidated statement of changes in equity and Consolidated cash flow
including: statement for the Half-year ended on that date;
(a) giving a true and fair view of the Group's financial position as at (c) Notes 1 to 10 comprising a summary of material accounting policies and
31 December 2023 and of its performance for the Half-year ended on that other explanatory information; and
date; and
(d) The Directors' Declaration.
(b) complying with Australian Accounting Standard AASB 134 Interim
Financial Reporting and the Corporations Regulations 2001 The Group comprises South32 Limited (the Company) and the entities it
controlled at the Half year's end or from time to time during the Half-year.
Basis for Conclusion
We conducted our review in accordance with ASRE 2410 Review of a Financial
Report Performed by the Independent Auditor of the Entity and ISRE 2410 Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity. Our responsibilities are further described in the Auditor's
Responsibilities for the Review of the Financial Report section of our report.
We are independent of the Group in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code)
that are relevant to our audit of the annual financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with
these requirements.
Responsibilities of the Directors for the Half-year Consolidated Financial
Statements
The Directors of the Company are responsible for:
(a) the preparation of the Half-year Consolidated Financial Statements
that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001; and
(b) such internal control as the Directors determine is necessary to
enable the preparation of the Half-year Consolidated Financial Statements that
gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
Auditor's Responsibilities for the Review of the Half-year Consolidated
Financial Statements
Our responsibility is to express a conclusion on the Half-year Consolidated
Financial Statements based on our review. ASRE 2410 and ISRE 2410 require us
to conclude whether we have become aware of any matter that makes us believe
that the Half-year Consolidated Financial Statements does not comply with the
Corporations Act 2001 including giving a true and fair view of the Group's
financial position as at 31 December 2023 and its performance for the
Half-Year ended on that date, and complying with Australian Accounting
Standard AASB 134 Interim Financial Reporting and the Corporations Regulations
2001.
A review of Half-year Consolidated Financial Statements consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
Australian Auditing Standards and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
KPMG Graham Hogg
Partner
Perth
15 February 2024
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.
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
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Ben Baker Jamie Macdonald Miles Godfrey
M +61 403 763 086
M +61 408 925 140
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E Ben.Baker@south32.net E Jamie.Macdonald@south32.net E Miles.Godfrey@south32.net
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