REG - South32 Limited - Financial Results & Outlook Half Year 31 Dec 2015 <Origin Href="QuoteRef">S32.AX</Origin> - Part 4
25/02/2016 07:12
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utilisation is no longer probable.
Brazil Alumina
The Brazil Alumina smelter impairment of US$97 million includes US$65 million for property, plant and equipment and US$32
million relating to smelter consumables and indirect tax assets (tax benefit of US$33 million). The recoverable amount of
the Brazil Alumina smelter cash generating unit was determined as -US$11 million based on its FVLCD. The valuation
specifically considered the likelihood of restarting smelting operations, taking into account the continued and indefinite
suspension of smelting operations.
Basis of fair value measurements
The above fair value measurements are categorised as Level 3 fair values based on the inputs in the valuation models. In
determining the FVLCD, a real post tax discount rate of 8.5%, and a country risk premium of up to 2%, were applied to the
post tax forecast cash flows expressed in real terms. The cash flows are forecast to the end of the life of operation and
include future projects which are risked for uncertainties. The key assumptions used for commodity prices are comparable to
market consensus forecasts at the date of testing, and foreign exchange rates are aligned with forward market rates.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
4. Segment information (continued)
(iii) Significant items
Significant items are those items, not separately identified in note 4(ii) Earnings adjustments, where their nature and
amount is considered material to the consolidated financial statements.
Half year ended 31 December 2015
US$M Gross Tax Net
Set-up costs(a) 60 (17) 43
Derecognition of deferred tax assets - 126 126
Adjustment to Australian tax balances post-demerger including reset of tax assets - (59) (59)
Brazil Alumina impairment - other items(b) 32 (11) 21
Total significant items 92 39 131
(a) The amount was recognised in "expenses excluding net finance cost" in the consolidated income statement.
(b) Refer to note 4(ii) Earnings adjustments
Half year ended 31 December 2014
US$M Gross Tax Net
Repeal of Minerals Resource Rent Tax Legislation - 96 96
Total significant items - 96 96
Set-up costs
Set-up costs related to the ongoing establishment of South32's corporate and regional offices following the demerger. The
costs primarily relate to transitionary contractor and consultant support, information technology infrastructure and system
support. The amount recognised is inclusive of US$30 million paid to BHP Billiton under an agreement for information
technology services. Those costs relate to all operating segments. All remaining set-up costs relate to group and
unallocated items within the segment note.
Derecognition of deferred tax assets
As a result of the significant and continued weakening of commodity markets, certain deferred tax assets associated with
provisions for restoration and rehabilitation were derecognised as utilisation is no longer probable.
Adjustment to Australian tax balances post-demerger including reset of tax assets
The tax basis of South32 wholly owned Australian operations was reset on demerger from BHP Billiton. The net increase to
tax assets is charged to income tax expense during the half year ended 31 December 2015.
Repeal of Minerals Resource Rent Tax Legislation
On 2 September 2014, legislation to repeal the Minerals Resource Rent Tax ("MRRT") in Australia received the support of
both Houses of Parliament. The repeal took effect on 30 September 2014 and as a result, the South32 Group derecognised a
MRRT deferred tax asset in relation to Illawarra Metallurgical Coal. The impact of this derecognition and all other MRRT
related amounts resulted in an income tax expense of US$96 million.
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
5. Taxation
The major components of income tax expense in the income statement for the half year ended are:
US$M H1 FY16 H1 FY15
Current tax expense/(benefit) 36 29
Deferred tax expense/(benefit) 81 124
Total tax expense/(benefit) attributable to continuing operations 117 153
Australia (35) 121
Southern Africa 92 -
Rest of world 60 32
Total tax expense/(benefit) attributable to the geographical jurisdiction 117 153
Reconciliation of prima facie tax expense to income tax expense H1 FY16 H1 FY15
% US$M % US$M
Profit/(Loss) before taxation from continued operations (1,632) 63
Tax on profit/(loss) at standard rate of 30% (30.0) (490) 30.0 19
Tax rate differential on foreign income 0.6 10 (21.5) (14)
Exchange rate variations on tax balances 10.9 178 69.8 44
Tax effect of share of profit/(loss) of equity accounted investments 6.3 104 - -
Adjustment to Australian tax balances post-demerger (3.6) (59) - -
Non-deductible impairment expense 14.7 240 - -
Derecognition of future tax benefits 7.7 126 - -
Other 0.5 8 11.8 8
Income tax expense/(benefit) 7.1 117 90.1 57
Royalty-related taxation expense/(benefit) - - 152.1 96
Total tax expense/(benefit) 7.1 117 242.2 153
NOTES TO FINANCIAL STATEMENTS - RESULTS FOR THE PERIOD
6. Earnings per share
Basic earnings per share ("EPS") amounts are calculated based on profit attributable to ordinary equity holders of South32
Limited and the weighted average number of ordinary shares outstanding during the year.
Dilutive EPS amounts are calculated based on profit attributable to ordinary equity holders of South32 Limited and the
weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary
shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
Profit/(loss) attributable to ordinary equity holders
US$M H1 FY16 H1 FY15
Profit/(loss) attributable to ordinary equity holders of South32 Limited
Continuing operations (1,749) (90)
Discontinued operations - 7
Profit/(loss) attributable to ordinary equity holders of South32 Limited (basic) (1,749) (83)
Profit/(loss) attributable to ordinary equity holders of South32 Limited (diluted) (1,749) (83)
Weighted average number of shares
Million H1 FY16 H1 FY15
Basic earnings per ordinary share denominator(a)(c) 5,324 3,212
Shares and options contingently issuable under employee share ownership plans(b)(c) 4 -
Diluted earnings per ordinary share denominator 5,328 3,212
(b) The calculation of the number of ordinary shares used in the computation of basic earnings per share is the aggregate
of the weighted average number of ordinary shares of South32 Limited outstanding during the period.
(b) Included in the calculation of diluted earnings per share are shares contingently issuable under employee share
ownership plans.
(c) Due to the share split in May 2015, the number of ordinary shares outstanding during the half year ended 31 December
2014 was retrospectively adjusted.
Earnings per share
US cents H1 FY16 H1 FY15
Earnings per share - continuing operations
Basic earnings per ordinary share (32.9) (2.8)
Diluted earnings per ordinary share (32.9) (2.8)
Earnings per share - attributable to ordinary equity holders of South32 Limited
Basic earnings per ordinary share (32.9) (2.6)
Diluted earnings per ordinary share (32.9) (2.6)
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
7. Net finance cost
US$M H1 FY16 H1 FY15
Finance expenses
Interest on bank loans and overdrafts 1 -
Interest on all other borrowings 4 25
Finance lease interest 25 -
Discounting on provisions and other liabilities 49 3
Net interest expense on post-retirement employee benefits 4 -
Exchange rate variations on net debt (26) 6
57 34
Finance income
Interest income 12 10
Net finance cost 45 24
8. Financial assets and financial liabilities
The following table presents the financial assets and liabilities of the South32 Group by class at their carrying amounts
which approximates their fair value.
31 December 2015US$M Loans and receivables Available for sale securities Held at fair value through profit or loss Other financial assets and liabilities at amortised cost Total
Financial assets
Cash and cash equivalents 697 - - - 697
Trade and other receivables(a) 512 - 13 - 525
Derivative contracts - - 59 - 59
Loans to equity accounted investments 379 - - - 379
Interest bearing loans receivable 40 - - - 40
Shares - 180 - - 180
Other investments - 102 - - 102
Total 1,628 282 72 - 1,982
Financial liabilities
Trade and other payables(b) - - 5 590 595
Derivative contracts - - 24 - 24
Unsecured bank overdrafts - - - 4 4
Unsecured bank loans - - - 14 14
Finance leases - - - 595 595
Unsecured other - - - 200 200
Total - - 29 1,403 1,432
(a) Excludes input taxes of US$101 million included in other receivables.
(b) Excludes input taxes of US$35 million included in other payables.
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
8. Financial assets and financial liabilities (continued)
30 June 2015US$M Loans and receivables Available for sale securities Held at fair value through profit or loss Other financial assets and liabilities at amortised cost Total
Financial assets
Cash and cash equivalents 644 - - - 644
Trade and other receivables(a) 725 - 25 - 750
Derivative contracts - - 71 - 71
Loans to equity accounted investments 323 - - - 323
Interest bearing loans receivable 148 - - - 148
Shares - 229 - - 229
Other investments - 131 - - 131
Total 1,840 360 96 - 2,296
Financial liabilities
Trade and other payables(b) - - 9 918 927
Derivative contracts - - 4 - 4
Unsecured bank loans - - - 104 104
Finance leases - - - 631 631
Unsecured other - - - 311 311
Total - - 13 1,964 1,977
(a) Excludes input taxes of US$126 million included in other receivables.
(b) Excludes input taxes of US$24 million included in other payables.
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
8. Financial assets and financial liabilities (continued)
Measurement of fair value
The following table shows the South32 Group's financial assets and liabilities carried at fair value with reference to the
nature of valuation inputs used:
Level 1 - Valuation is based on unadjusted quoted prices in active markets for identical financial assets and
liabilities.
Level 2 - Valuation is based on inputs (other than quoted prices included in Level 1) that are observable for the
financial asset or liability, either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices).
Level 3 - Valuation is based on inputs that are not based on observable market data.
31 December 2015US$M Level 1 Level 2 Level 3 Total
Financial assets and liabilities
Trade and other receivables - 13 - 13
Trade and other payables - (5) - (5)
Derivative contracts - - 35 35
Investments - available for sale - 102 180 282
Total - 110 215 325
30 June 2015US$M Level 1 Level 2 Level 3 Total
Financial assets and liabilities
Trade and other receivables - 25 - 25
Trade and other payables - (9) - (9)
Derivative contracts - - 67 67
Investments - available for sale - 131 229 360
Total - 147 296 443
Level 3 financial assets and liabilities
The following table shows the movements in the South32 Group's Level 3 financial assets and liabilities:
US$M H1 FY16
As at 1 July 2015 296
Unrealised gains/(losses) recognised in the income statement(a) (65)
Unrealised gains/(losses) recognised in other comprehensive income(b) (16)
As at 31 December 2015 215
(a) Unrealised gains and losses recognised in "expenses excluding net finance cost" in the consolidated income statement.
(b) Unrealised gains and losses recognised in other comprehensive income are recorded in the "net gain/(loss) taken to
equity".
US$M H1 FY15
As at 1 July 2014 -
Acquisition of subsidiaries and operations as part of the demerger(a) 99
Unrealised gains/(losses) recognised in the income statement(b) (7)
As at 31 December 2014 92
(a) Refer to financial statements for the year ended 30 June 2015 for details.
(b) Unrealised gains and losses recognised in "expenses excluding net finance cost" in the consolidated income statement.
NOTES TO FINANCIAL STATEMENTS - CAPITAL STRUCTURE AND FINANCING
8. Financial assets and financial liabilities (continued)
Sensitivity analysis
The carrying amount of financial assets and liabilities that are valued using inputs other than observable market data are
calculated using appropriate valuation models, including discounted cash flow modelling, with inputs such as commodity
prices, foreign exchange rates and inflation. The potential effect of using reasonably possible alternative assumptions in
these models, based on a change in the most significant input by 10% while holding all other variables constant, is shown
in the following table.
31 December 2015 Profit before taxation Equity
US$M Carrying amount Significant input 10% increase in input 10% decrease in input 10% increase in input 10% decrease in input
Financial assets and liabilities
Derivative contracts 35 Aluminium price as quoted on the LME (123) 121 (88) 86
Investments - available for sale(a) 180 Aluminium price as quoted on the LMEForeign exchange rate - (2) 43 (45)
Total 215 (123) 119 (45) 41
(a) To the extent that available for sale investments have been impaired, any further losses are recognised in the
consolidated income statement.
30 June 2015 Profit before taxation Equity
US$M Carrying amount Significant input 10% increase in input 10% decrease in input 10% increase in input 10% decrease in input
Financial assets and liabilities
Derivative contracts 67 Aluminium price as quoted on the LME (64) 64 (43) 43
Investments - available for sale 229 Aluminium price as quoted on the LMEForeign exchange rate - - 60 (69)
Total 296 (64) 64 17 (26)
NOTES TO FINANCIAL STATEMENTS - OTHER NOTES
9. Employee share ownership plans
The South32 Group established new employee long term incentive plans during the half year ended 31 December 2015.
Awards were granted to Executive Committee members on 4 December 2015 under the following plans:
· the FY16 Long Term Incentive Plan (LTI)
· the FY15 Deferred Short Term Incentive Plan (STI) and
· the FY16 Transitional Award Plan (TSP)
Awards were granted to eligible employees on 30 October 2015 under the following plans:
· the FY16 Management Share Plan (MSP)
· the FY16 Advance Award Plan (AAP)
· the FY16 Transition Award Plan (TAP)
· the FY15 Deferred Shares Plan (GSTIP)
· the FY15 MAP Replacement Plan (MAP) and
· the 2015 AllShare Plan (ASP)
Description of general share-based payment conditions
Awards take the form of rights to receive one ordinary share in South32 Ltd for each right granted, subject to performance
(LTI, TSP, MSP, AAP and TAP awards) and service conditions being met. A portion of the 2015 AllShare Plan awards
(participants located in Colombia and Mozambique) take the form of rights to receive a cash payment equivalent to the value
of South32 Ltd ordinary shares at the time of payment.
Performance rights fair value are measured using a Monte Carlo methodology and retention rights are measured using a Black
Scholes methodology.
Performance conditions are based on the South32 Group's Total Shareholder Return (TSR) measured separately against two
comparator indexes over the performance period as follows:
· One third of performance rights are measured against the Morgan Stanley Capital Index World and
· Two thirds of performance rights are measured against the Euromoney Global Mining Index (constrained by company and
sector).
Performance rights vest when South32's TSR equals or outperforms the comparator index. Full vesting of performance rights
occur if South32's TSR outperforms both indexes by at least 5.5% per annum. To the extent that the performance conditions
are not met, awards are forfeited and no retesting is performed.
Awards do not confer any dividend or voting rights until they convert into ordinary shares at vesting. In addition, the
awards do not confer any rights to participate in a share issue, however, there is discretion under the plans to adjust the
awards in response to a variation in South32 Ltd's share capital.
Further detail of each award is provided below. Details of other incentive plans established by South32 subsequent to
demerger can be found in the South32 Group 2015 Annual Report.
Description of recurring share-based payment arrangements
The awards listed below are subject to the general conditions noted above and may be granted annually subject to approval
by shareholders at the annual general meeting for awards to the CEO and by the board of directors for all other awards.
FY16 Long Term Incentive Plan (LTI)
The LTI is South32's long term incentive plan for Executive Committee members. Awards have a four year performance period
from 1 July 2015 to 30 June 2019.
FY15 Deferred Short Term Incentive Plan (STI)
The STI is South32's short term incentive plan for Executive Committee members. Awards vest on 30 June 2017 provided
participants remain employed by South32.
FY16 Management Share Plan (MSP)
The MSP is South32's long term incentive plan for eligible employees below the Executive Committee. The MSP comprises two
elements:
· Retention Rights vesting on 30 June 2018 provided participants remain employed by South32 and
· Performance Rights vesting on 30 June 2019 subject to performance conditions.
NOTES TO FINANCIAL STATEMENTS - OTHER NOTES
9. Employee share ownership plans (continued)
2015 AllShare Plan (ASP)
The ASP is South32's employee share plan for employees not eligible to participate in the other employee share plans.
Awards will vest provided participants remain employed by South32. The vesting period depends on the participants' location
at the grant date:
· Participants in Africa: August 2018 and
· Participants elsewhere: August 2017.
Awards to the value of at least US$1,250 per employee will be granted annually.
Description of transitional share-based payment arrangements
The awards listed below are subject to the general conditions noted above and will not be granted on an ongoing basis.
FY16 Transitional Award Plan (TSP)
The TSP is a one-off grant made to Executive Committee members in recognition of their adjustment from a three year LTI
plan under the BHP Billiton incentive structure to a four year LTI Plan at South32. Awards have a three year performance
period from 1 July 2015 to 30 June 2018.
FY16 Advance Award Plan (AAP)
The AAP is a one-off grant made to all MSP participants in recognition of the different vesting periods under the MSP
retention rights and MSP performance rights. The awards have a three year performance period from 1 July 2015 to 30 June
2018.
FY16 Transition Award Plan (TAP)
The TAP is a grant made to certain eligible employees to bridge the gap between their total target reward at BHP Billiton
and their total target reward at South32. Transition Awards will be made for a maximum of five years post demerger
(FY2020).
The TAP has the same conditions as the MSP and comprises both service and performance conditions.
FY15 Deferred Shares Plan (GSTIP)
The GSTIP is a one-off grant made to individuals who were participating in the BHP Billiton Group Short Term Incentive Plan
(GSTIP) prior to demerger. Since the BHP Billiton STI plan was in place for FY2015, the STI outcomes for participants who
have joined South32 have been delivered in accordance with the BHP Billiton plan (i.e. 50% of the outcome in cash, 50% in
share awards) except the awards are rights to South32 Ltd ordinary shares, not BHP Billiton ordinary shares.
There are no performance conditions attached to the GSTIP awards. Awards vest on 30 June 2017 provided participants remain
employed by South32.
FY15 MAP Replacement Plan (MAP)
The MAP is a one-off grant which has been made to eligible employees to replace the BHP Billiton MAP award they would have
received in March 2015 had they remained employed by BHP Billiton. Awards are made at an equivalent value, on equivalent
terms and conditions and with the same vesting date as for the BHP Billiton MAP Award. There are no performance conditions
attached to the awards. Awards will vest at the end of the vesting period (three years from grant of the original BHP
Billiton award) provided participants remain employed by South32.
NOTES TO FINANCIAL STATEMENTS - OTHER NOTES
9. Employee share ownership plans (continued)
Measurement of fair values
The fair value at grant date of equity-settled share awards is charged to the income statement over the period for which
the benefits of employee services are expected to be derived. The corresponding accrued employee entitlement is recorded in
the employee share awards reserve.
Fair value at grant date (US$) Share price at grant date (US$) (weighted average) Expected volatility(a) Expected life (weighted-average in years) Risk-free interest rate based on
(weighted average) government bonds (weighted average)
Recurring plans
Long Term Incentive Plan 0.41 0.86 40% 4.00 2.45%
Short Term Incentive Plan 0.83 0.86 40% 2.00 n/a
Management Share Plan - Retention Rights 0.99 1.06 40% 2.68 n/a
Management Share Plan - Performance Rights 0.57 1.06 40% 4.00 3.36%
AllShare Plan 1.03 1.05 40% 2.68 n/a
Transitional plans
Transitional Plans - Performance Rights (TSP, AAP, TAP) 0.55 1.04 40% 3.21 3.56%
Transitional Plans - Retention Rights (TAP, GSTIP, MAP) 1.01 1.06 40% 2.46 n/a
(a) Expected volatility is based on the historical South32 share price volatility at the grant date.
Reconciliation of outstanding share awards
The following table details the total movement in awards granted by South32 Ltd during the period ended 31 December 2015:
Rights at beginning of period Granted during the period Vested during the period Forfeited during the period Rights at end of the period Vesting at 30 June 2016
Recurring plans
Long Term Incentive Plan - 7,220,731 - - 7,220,731 -
Short Term Incentive Plan - 2,415,867 - - 2,415,867 -
Management Share Plan - Retention Rights - 5,300,101 - - 5,300,101 -
Management Share Plan - Performance Rights - 13,250,383 - - 13,250,383 -
AllShare Plan - 17,487,600 (462,000) (110,400) 16,915,200 -
Transitional plans
Transitional Plans - Performance Rights (TSP, AAP, TAP) - 18,642,012 - (17,607) 18,624,405 -
Transitional Plans - Retention Rights (TAP, GSTIP, MAP) - 6,158,326 (8,057) - 6,150,269 -
NOTES TO FINANCIAL STATEMENTS - OTHER NOTES
10. Subsequent events
On 4 February 2016 the Group announced that it had completed a strategic review of the Samancor Manganese Joint Venture
following the suspension of mining activity at the Hotazel Manganese Mines in November 2015. As a result, mining activity
restarted at South Africa Manganese, but at a substantially reduced rate and with greater flexibility, with optimised mine
plans, redundancies and other restructuring initiatives being undertaken. One of four furnaces will continue to operate at
the Metalloys smelter.
On 25 February 2016 the Group announced major restructuring initiatives that will reset the cost base of its Worsley
Alumina, Illawarra Metallurgical Coal, Australia Manganese and Cerro Matoso operations.
11. Contingent liabilities
There have been no material change to the Group's contingent liabilities as reported in the annual financial statements for
the year ended 30 June 2015.
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of the South32 Group, we state that:
In the opinion of the directors:
(a) The consolidated financial statements and notes that are set out for the half year ended 31 December 2015 are in
accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of the South32 Group's financial position as at 31 December 2015 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 South32 Group 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.
David Crawford AO
Chairman
Graham Kerr
Chief Executive Officer
Dated 25 February 2016
DIRECTORS' REPORT
The directors of the South32 Group present the consolidated financial report for the half year ended 31 December 2015 and
the auditor's review report thereon.
Directors
The directors of the Company during or since the end of the half year are:
David Crawford AO
Graham Kerr
Frank Cooper AO
Peter Kukielski
Xolani Mkhwanazi (appointed 2 July 2015)
Ntombifuthi (Futhi) Mtoba
Wayne Osborn
Keith Rumble
The office of the company secretary is held by Nicole Duncan and Sue Wilson.
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
in this report.
Principal Risks and Uncertainties
Due to the international scope of South32'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 South32's results and operations for the remaining six months of
the financial year.
Significant external, operational, sustainability and financial risks that could impact South32's performance include:
· Fluctuations in commodity prices, interest rates, currencies and ongoing global economic volatility;
· Actions by governments, political events or tax authorities;
· Breaches of information technology security processes;
· Cost inflation of production inputs and labour;
· Failure to access third party infrastructure required for operations;
· Failure to access water and power resources for operations;
· Unexpected operational or natural catastrophes;
· Failure of our commercial counterparties to meet their obligations;
· Fraud and corruption;
· Failure to retain and attract employees with the right expertise;
· Failure to maintain, realise or enhance existing reserves;
· Deterioration in liquidity and cash flow;
· Changes to government regulations on dividends or capital extraction;
· Health and safety impacts in respect of South32's activities;
· Environmental impacts in respect of South32's activities including those related to water and waste water;
· Dissatisfied communities in which our businesses are located; and
· Climate change and greenhouse gas regulations adversely impacting operations.
Further information on these risks and how they are managed can be found in the Annual Report for the year ended 30 June
2015, a copy of which is available on South32's website at www.south32.net.
Events subsequent to the balance date
On 4 February 2016 the Group announced that it had completed a strategic review of the Samancor Manganese Joint Venture
following the suspension of mining activity at the Hotazel Manganese Mines in November 2015. As a result, mining activity
restarted at South Africa Manganese, but at a substantially reduced rate and with greater flexibility, with optimised mine
plans, redundancies and other restructuring initiatives being undertaken. One of four furnaces will continue to operate at
the Metalloys smelter.
On 25 February 2016 the Group announced major restructuring initiatives that will reset the cost base of its Worsley
Alumina, Illawarra Metallurgical Coal, Australia Manganese and Cerro Matoso operations.
DIRECTORS' REPORT
UK Responsibility Statements
The Directors state that to the best of their knowledge:
· The Financial Results and Outlook, includes a fair review of important events during the first six months of the
current financial year and their impact on the half year financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the year; and
· That 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 South32 Group during
that period, and any changes in the related party transactions described in the last annual report that could have such a
material effect.
Lead Auditor's Independence Declaration
A copy of the lead auditor's independence declaration as required under Section 307C of the Corporations Act 2001 is set
out on in this report.
Rounding
The amounts shown in this report and in the financial statements have been rounded to the nearest million dollars (US$M or
US$ million) unless otherwise stated, in accordance with ASIC Class Order 98/100 dated 10 July 1998.
Signed in accordance with a resolution of the Board of Directors.
David Crawford AO
Chairman
Graham Kerr
Chief Executive Officer
Dated 25 February 2016
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 for the half year ended 31 December 2015
there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to
the review; and
(ii) no contraventions of any applicable code of professional conduct in relation to the review.
KPMG
Denise McComish
Partner
Perth
25 February 2016
KPMG, an Australian partnership and member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.
INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF SOUTH32 LIMITED
We have reviewed the accompanying condensed half year financial report of South32 Limited (the Company), which comprises
the consolidated balance sheet as at 31 December 2015, consolidated statement of comprehensive income, consolidated income
statement, consolidated statement of changes in equity and consolidated cash flow statement for the half year period ended
on that date, notes 1 to 11 comprising a summary of significant accounting policies and other explanatory information and
the directors' declaration of the Group comprising the company and the entities it controlled at the half year's end or
from time to time during the half year period.
Directors' responsibility for the half year financial report
The directors of the company are responsible for the preparation of the half year financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as
the directors determine is necessary to enable the preparation of the half year financial report that is free from material
misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express a conclusion on the half year financial report based on our review. We conducted our
review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the
Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become
aware of any matter that makes us believe that the half year financial report is not in accordance with the Corporations
Act 2001 including: giving a true and fair view of the Group's financial position as at 31 December 2015 and its
performance for the half year period ended on that date; and complying with Australian Accounting Standard AASB 134 Interim
Financial Reporting and the Corporations Regulations 2001. As auditor of South32 Limited, ASRE 2410 requires that we comply
with the ethical requirements relevant to the audit of the annual financial report.
A review of a half year financial report 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.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.
INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF SOUTH32 LIMITED
Conclusion
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
financial report of South32 Limited is not in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 31 December 2015 and of its performance for the
half year period ended on that date; and
(b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations
2001.
KPMG
Denise McComish
Partner
Perth
25 February 2016
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The company news service from the London Stock ExchangeRecent news on South32
See all newsREG - South32 Limited - Mozal Aluminium Placed on Care & Maintenance
AnnouncementREG - South32 Limited - Update to Notification of Dividend
AnnouncementREG - South32 Limited - 2026 Interim Dividend Currency Exchange Rates
AnnouncementREG - South32 Limited - South32: Chair Succession
AnnouncementREG - South32 Limited - Appendix 3Z: Final Director's Interest Notice
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