REG - South32 Limited - Financial Results: Year Ended 30 June 2023
24/08/2023 07:15
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RNS Number : 3292K South32 Limited 24 August 2023
24 August 2023
South32 Limited
(Incorporated in Australia under the Corporations Act 2001)
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR: SOUHY
ISIN: AU000000S320
south32.net
SOUTH32 LIMITED
FINANCIAL RESULTS AND OUTLOOK
YEAR ENDED 30 June 2023
South32 delivers strong growth in commodities critical for a low-carbon future
"We continued our work to fundamentally shift our safety performance following
the devastating loss of two of our colleagues, Mr Cristovão Alberto Tonela
and Mr Alfredo Francisco Domingos João, in a fatal incident at Mozal
Aluminium in November 2022.
"We are working to enhance our safety culture through the use of our 'safety
guarantee' - an internal approach where each of us stop and ask ourselves
whether we can guarantee our own safety and that of our colleagues before
undertaking each task.
"During the year, we delivered strong production growth in commodities that
are critical for a low-carbon future. We set three annual production records
and realised the benefit of our recent portfolio improvements,
increasing aluminium production by 14 per cent, base metals by 17 per cent
and manganese by 4 per cent.
"This growth, coupled with our continued focus on cost efficiencies,
underpinned one of our largest underlying financial results, with Underlying
EBITDA of US$2.5 billion. This was achieved despite lower commodity prices and
industry-wide inflationary pressures.
"A record US$1.2 billion was returned to shareholders during the 2023
financial year and the Board has today resolved to pay a fully-franked
ordinary dividend of 3.2 cents per share or US$145 million in respect of the
June 2023 half year.
"Reflecting our disciplined approach to capital management, the Board has also
resolved to further expand our capital management program by US$50 million to
US$2.4 billion, leaving US$133 million to be returned by 1 March 2024.
"We invested to grow our future production of critical commodities and
achieved significant milestones at our Hermosa project in Arizona, the first
mining project added to the FAST-41 process. We are on-track to make a
final investment decision to develop Hermosa's Taylor base metals deposit in
FY24, and continue to progress the opportunity at Hermosa's Clark deposit to
supply battery-grade manganese for rapidly forming North American markets.
"Sierra Gorda continued work on its capital efficient plant de-bottlenecking
project and advanced studies for the fourth grinding line expansion, designed
to deliver a significant uplift in future copper production.
"We added further greenfield exploration options as we worked to discover our
next generation of base metals mines, consolidating our position in San Juan,
Argentina.
"We continue to execute our strategy and our portfolio is leveraged to the
increasing commodity demand required for the global energy transition."
Graham Kerr, South32 CEO
Financial Highlights
US$M FY23 FY22 % Change
Revenue 7,429 9,269 (20%)
Profit before tax and net finance income/(costs) 198 3,724 (95%)
Profit/(loss) after tax (173) 2,669 N/A
Basic earnings per share (US cents)((2)) (3.8) 57.4 N/A
Ordinary dividends per share (US cents)((3)) 8.1 22.7 (64%)
Special dividends per share (US cents) - 3.0 N/A
Other financial measures
Underlying revenue((4)) 9,050 10,630 (15%)
Underlying EBITDA((5)) 2,534 4,755 (47%)
Underlying EBITDA margin((6)) 29.4% 47.1% (17.7%)
Underlying EBIT((5)) 1,616 3,967 (59%)
Underlying EBIT margin((7)) 18.7% 39.4% (20.7%)
Underlying earnings((5)) 916 2,602 (65%)
Basic Underlying earnings per share (US cents)((2)) 20.0 56.0 (64%)
ROIC((8)) 10.0% 33.0% (23.0%)
Ordinary shares on issue (million) 4,545 4,628 (2%)
SAFETY
Tragically, two of our colleagues, Mr Cristovão Alberto Tonela and Mr Alfredo
Francisco Domingos João, lost their lives in a fatal incident at Mozal
Aluminium in November 2022. Our deepest sympathies remain with their families
and colleagues to whom we have provided support and counselling.
In response to the incident, we implemented additional controls including
exclusion zones and controlled access, to all other raising girders at Mozal
Aluminium and Hillside Aluminium. Learnings were shared across our business
with immediate action recommendations where relevant. We also commenced work
with the original equipment manufacturer to identify further safety
improvements which could be made, including replacing critical components in
all girders.
We use a range of leading and lagging indicators to assess our safety
performance. Total recordable injury frequency (TRIF)((9)(10)) for FY23 was
5.9 (FY22: 5.3), while lost time injury frequency (LTIF)((9)(11)) improved to
1.4 in FY23 (FY22: 2.0). Significant hazard frequency((12)) increased to 91.6
for FY23 (FY22: 72.0), indicating improved hazard awareness and a positive
reporting culture.
We continued to implement our multi-year Safety Improvement Program, launched
in FY22. The program aims to shift mindsets through leadership, empower our
people, reduce risks with effective controls, and improve systems and metrics.
Our investment in safety leadership includes our 'Lead Safely Every Day'
program which supports our leaders to engage their teams on our 'safety
guarantee', creating a sense of chronic unease to enhance our safety culture.
Lead Safely Every Day commenced in FY23 and will continue in FY24.
Contractors make up a large proportion of our workforce. In FY23, we continued
to implement our contractor management system of work which is designed to
support contractors to work safely through effective risk management,
capability building, and system and process improvement.
PERFORMANCE SUMMARY
The Group's statutory profit after tax decreased by US$2,842M to a loss of
US$173M in FY23, following the recognition of a non-cash impairment expense of
US$1,300M in relation to the Taylor deposit at our Hermosa project((13)).
We increased our supply of commodities critical for a low-carbon future,
recording strong production growth in aluminium (14%), base metals (17%)((14))
and manganese (4%), as we realised the benefit of recent portfolio
improvements and achieved annual production records at Hillside Aluminium,
Australia Manganese and South Africa Manganese.
Underlying earnings decreased by US$1,686M to US$916M as lower commodity
prices from record levels in many markets in the prior period, and higher
inflation and uncontrollable costs, more than offset higher production
volumes. A reconciliation of statutory profit to Underlying earnings is set
out on page 6.
Underlying EBITDA decreased by US$2,221M to US$2,534M in FY23, for a Group
operating margin((6)) of 29%. This represented one of our largest Underlying
EBITDA results, despite lower commodity prices and uncontrollable cost
impacts. Our investments in Sierra Gorda and increased ownership in Mozal
Aluminium contributed Underlying EBITDA of US$240M at an operating margin of
38%. Free cash flow from operations, including equity accounted investment
(EAI) distributions, was US$244M, impacted by a build in inventories and
one-off cash tax payments in relation to our Sierra Gorda acquisition and
non-core royalty sale((15)).
We returned a record US$1,225M to shareholders during FY23, with US$1,007M in
fully-franked ordinary and special dividends, and US$218M via our on-market
share buy-back. We have today announced a fully-franked final ordinary
dividend of US$145M (US 3.2 cents per share) in respect of H2 FY23, and
expanded our capital management program by US$50M leaving US$133M to be
returned by 1 March 2024((16)), reflective of our disciplined approach to
capital management.
We continue to prioritise a strong balance sheet and investment grade credit
rating through all cycles. We finished the period with net debt of US$483M,
following the return of record amounts to shareholders and our investments to
grow production volumes of commodities critical for a low-carbon future. This
strong platform and our disciplined approach to capital management provides us
with the flexibility to continue to return capital to shareholders in the most
efficient and value accretive manner, while investing in our high-quality
growth options.
Specific highlights for FY23 included:
· Record annual production at three operations;
· Embedded portfolio improvements in copper and low-carbon aluminium((17));
· 15% production growth((18)) in aluminium and base metals;
· Record US$1.2B returned to shareholders, equivalent to 11% of our current
market capitalisation((19));
· Advanced our portfolio of high-quality growth options, progressing work to
support planned investment decisions for the development of Hermosa's Taylor
zinc-lead-silver deposit and the Sierra Gorda copper expansion in FY24;
· Confirmed the opportunity to produce battery-grade manganese from Hermosa's
Clark deposit and signed multiple non-binding, non-exclusive memorandums of
understanding for future potential supply into North American markets;
· Consolidated our position in San Juan, Argentina, exercised our earn-in right
for a 50.1% interest in the Chita Valley copper prospect((20)) and acquired a
strategic interest((21)) in Aldebaran Resources Inc.;
· Advanced near-term decarbonisation programs to support our target((22)) to
halve operational greenhouse gas (GHG) emissions by 2035, with Worsley Alumina
on-track to convert its first onsite boiler from coal to natural gas in Q1
FY24;
· Sierra Gorda transitioned to cost efficient, 100% renewable electricity supply
from January 2023; and
· Progressed partnerships to address value chain emissions and expanded our
climate change goals((23)) to include net zero Scope 3 GHG emissions by 2050.
EARNINGS reconciliation
The Group's statutory profit after tax decreased by US$2,842M to a loss of
US$173M in FY23, including the US$1,300M non-cash impairment of Hermosa's
Taylor deposit, while Underlying earnings decreased by US$1,686M to US$916M.
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$1,418M), shown in the table below,
include:
· Net impairment loss of non-financial assets (+US$1,300M): non-cash impairment
expense of Hermosa's Taylor deposit, as announced on 24 July 2023((13)). The
impairment reflected the impact of delays due to COVID-19, significant
dewatering requirements, and current inflationary pressures;
· Significant items (-US$186M): gain on disposal of non-core base metal
royalties to Ecora Resources PLC((15)) (-US$189M pre-tax) and recognition of
other income in relation to the indemnity for Chilean mining tax changes((24))
negotiated as part of our acquisition of Sierra Gorda (-US$48M pre-tax),
partially offset by a non-cash asset write-off following our decision not to
proceed with the Dendrobium Next Domain (DND) project at Illawarra
Metallurgical Coal((25)) (+US$51M pre-tax);
· Sierra Gorda (+US$144M) and Manganese (+US$147M) joint venture adjustments:
adjustments to reconcile the statutory equity accounting position to a
proportional consolidation basis; and
· Net impairment loss of financial assets (+US$71M): periodic revaluation of the
shareholder loan receivable from Sierra Gorda reflecting copper price 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 40.
The Group's Underlying EBITDA decreased by US$2,221M (or 47%) to US$2,534M in
FY23, as lower commodity prices (-US$1,781M) and sales volumes (-US$539M),
together with higher inflation, raw material and energy costs (-US$445M), more
than offset the benefit of weaker producer currencies (+US$369M). Our recent
portfolio improvements in Sierra Gorda and an additional interest in Mozal
Aluminium added US$240M to Group Underlying EBITDA with a combined operating
margin of 38%. This was partially offset by Brazil Aluminium (-US$32M) as the
smelter continued to ramp-up, following the restart of all three potlines.
The Group's Underlying EBIT decreased by US$2,351M (or 59%) to US$1,616M, as
Underlying depreciation and amortisation increased by US$130M to US$918M with
the inclusion of Sierra Gorda in our portfolio.
Profit to Underlying EBITDA reconciliation
$USM FY23 FY22
Profit before tax and net finance income/(costs) 198 3,724
Adjustments to derive Underlying EBIT:
Significant items (186) (77)
Sierra Gorda joint venture adjustments 144 44
Manganese joint venture adjustments 147 216
Gains on the consolidation or disposal of interests in operations - (9)
Exchange rate (gains)/losses on the restatement of monetary items (62) (50)
Net impairment loss/(reversal) of financial assets 71 26
Net impairment loss/(reversal) of non-financial assets 1,300 145
(Gains)/losses on non-trading derivative instruments, contingent consideration 4 (52)
and other investments measured at fair value through profit and loss
Total adjustments to derive Underlying EBIT 1,418 243
Underlying EBIT 1,616 3,967
Underlying depreciation and amortisation 918 788
Underlying EBITDA 2,534 4,755
Profit/(loss) to Underlying earnings reconciliation
US$M FY23 FY22
Profit/(loss) after tax (173) 2,669
Total adjustments to derive Underlying EBIT 1,418 243
Total adjustments to derive Underlying net finance costs (203) (124)
Total adjustments to derive Underlying income and royalty related tax expense (126) (186)
Underlying earnings 916 2,602
EARNINGS ANALYSIS
The following key factors influenced Underlying EBIT in FY23, relative to
FY22.
Reconciliation of movements in Underlying EBIT (US$M)((5)(26)(27)(28))
Earnings analysis US$M Commentary
FY22 Underlying EBIT 3,967
Change in sales price (1,781) Lower average realised prices for our commodities, including:
Aluminium (-US$631M) and alumina (-US$124M)
Metallurgical coal (-US$550M) and energy coal (-US$11M)
Nickel (-US$209M)
Manganese (-US$181M)
Zinc (-US$63M), lead (-US$13M) and silver (+US$1M)
Net impact of price-linked costs (174) Higher aluminium smelter raw material input prices (-US$115M), including pitch
and coke
Higher coal, fuel oil and diesel prices (-US$76M)
Higher caustic soda prices at Brazil Alumina (-US$36M) and Worsley Alumina
(-US$33M)
Higher electricity prices (-US$33M) at Cerro Matoso and Illawarra
Metallurgical Coal
Partially offset by lower freight and distribution costs (+US$93M) and lower
price-linked royalties (+US$16M)
Change in exchange rates 369 Weaker South African rand (+US$166M), Australian dollar (+US$157M) and
Colombian peso
(+US$48M)
Change in inflation (271) Inflation-linked indexation of our Southern African aluminium smelter
electricity prices
(-US$82M)
General inflation across Australia (-US$120M), Southern Africa (-US$36M) and
Colombia
(-US$24M)
Change in sales volume (539) Lower volumes, including Illawarra Metallurgical Coal (-US$133M), Cannington
(-US$119M), Worsley Alumina (-US$96M), Brazil Alumina (-US$83M) and Mozal
Aluminium (-US$48M), including the impact of adverse weather and other
temporary impacts
Controllable costs (28) Inventory and volume related movements (+US$137M) including a build in stocks
at Australia Manganese, and higher inventory levels at Illawarra Metallurgical
Coal
Higher contractor and maintenance costs (-US$112M) to support planned
maintenance at Worsley Alumina, at Australia Manganese to support higher
volumes, and at Cerro Matoso to deliver the OSMOC project
Higher labour costs (-US$48M) to support increased activity
Portfolio changes 113 Improved profitability following our first full year of ownership of Sierra
Gorda (+US$142M), partially offset by Brazil Aluminium (-US$38M) as the
smelter continued to ramp-up following the restart of all three potlines
Other (40) Higher profit from our equity interest in Mineração Rio do Norte (MRN), and
non-core royalties received, more than offset by higher depreciation and
amortisation primarily at Illawarra Metallurgical Coal and Australia Manganese
FY23 Underlying EBIT 1,616
Net finance income/(costs)
The Group's FY23 Underlying net finance costs of US$188M primarily comprise
the unwinding of the discount applied to our closure and rehabilitation
provisions (US$113M), interest on lease liabilities (US$56M) largely for our
multi-fuel co-generation facility at Worsley Alumina, and interest on our
US$700M of senior unsecured notes (US$31M) issued in H2 FY22 to partly fund
the Sierra Gorda acquisition.
Underlying net finance costs reconciliation
US$M FY23 FY22
Unwind of discount applied to closure and rehabilitation provisions (113) (83)
Interest on lease liabilities (56) (54)
Interest on senior unsecured notes (31) (7)
Change in discount rate on closure and rehabilitation provisions - 3
Other 12 (14)
Underlying net finance costs (188) (155)
Add back earnings adjustment for exchange rate variations on net cash/(debt) 8 40
Sierra Gorda joint venture adjustments((29)) 167 62
Manganese joint venture adjustments((29)) 28 22
Total adjustments to derive Underlying net finance costs 203 124
Net finance income/(costs) 15 (31)
Tax expense
The Group's Underlying income tax expense, which includes our material EAIs,
decreased by US$698M to US$512M in FY23, for an Underlying effective tax rate
(ETR)((30)) of 36.1%. Our Group Underlying ETR reflects our geographical
earnings mix and the corporate tax rates of the jurisdictions in which we
operate((31)). The impact of the recent changes in Colombian tax legislation,
with dividend withholding tax increasing from 10% to 20% and income tax
deductions no longer available for royalty payments((32)), has increased Cerro
Matoso's effective tax rate and is expected to increase the Group's Underlying
ETR in future periods.
The Underlying ETR for our manganese business was 43.7% in FY23, including the
royalty related tax at Australia Manganese((33)).
The Underlying ETR for our Sierra Gorda EAI was 46.0% in FY23, including
royalty related tax((34)). As anticipated, reforms to the Chilean Mining Tax
were enacted in August 2023 and will be effective from 1 January 2024,
resulting in higher royalty related tax in future periods. Sierra Gorda has a
tax stability agreement to December 2028, and we have an indemnity from the
vendors of our Sierra Gorda acquisition for mining tax changes enacted prior
to December 2025, to mitigate the impact of these reforms. We have recorded a
receivable((24)) of US$48M in relation to the indemnity and expect to recover
this amount from the vendors in FY24.
The Group's cash tax paid in FY23, excluding EAIs, was US$818M. This reflected
the lagged effect of higher profitability in the prior period, as well as
one-off cash taxes paid in relation to our Sierra Gorda acquisition (US$115M)
and non-core royalty sale (US$32M).
Underlying income tax expense reconciliation and Underlying ETR
US$M FY23 FY22
Underlying EBIT 1,616 3,967
Include: Underlying net finance costs (188) (155)
Remove: Share of (profit)/loss of EAIs (11) 2
Underlying profit before tax 1,417 3,814
Income tax expense 386 1,024
Tax effect of earnings adjustments to Underlying EBIT (3) 32
Tax effect of earnings adjustments to Underlying net finance costs (3) (13)
Exchange rate variations on tax balances 4 (20)
Significant items (23) (26)
Sierra Gorda joint venture adjustment relating to income tax((29)) 11 1
Sierra Gorda joint venture adjustment relating to royalty related tax((29)) 12 4
Manganese joint venture adjustment relating to income tax((29)) 85 153
Manganese joint venture adjustment relating to royalty related tax((29)) 43 55
Total adjustments to derive Underlying income tax expense 126 186
Underlying income tax expense 512 1,210
Underlying ETR 36.1% 31.7%
CASH FLOW
The Group generated free cash flow from operations of US$57M and received net
distributions((35)) of US$187M from our EAIs in FY23. Group free cash flow
reflected higher expenditure on productivity, improvement and growth projects
(+US$335M) and one-off tax payments in relation to our Sierra Gorda
acquisition and non-core royalty sale (+US$147M).
Working capital was largely unchanged over the year, an improved position
following the working capital build of US$152M in H1 FY23. The increase in
inventories of US$126M in FY23 reflected a permanent increase related to the
restart of Brazil Aluminium, as well as temporary impacts at Mozal Aluminium.
Net distributions from our EAIs comprised US$173M from our manganese EAIs and
US$14M from our Sierra Gorda EAI. Our Sierra Gorda EAI invested in projects
to increase future potential copper production, implementing the plant
de-bottlenecking project, and progressing studies for the fourth grinding line
expansion to support a planned final investment decision in H2 FY24.
Free cash flow from operations excluding EAIs
US$M FY23 FY22
Profit from operations 198 3,724
Non-cash or non-operating items 1,852 694
Share of (profit)/loss from EAIs (246) (272)
Change in working capital 10 (428)
Cash generated from operations 1,814 3,718
Total capital expenditure, excluding EAIs, including intangibles and (894) (559)
capitalised exploration
Operating cash flows generated from operations after capital expenditure 920 3,159
Net interest paid((36)) (45) (51)
Income tax paid (818) (868)
Free cash flow from operations 57 2,240
Working capital movement
US$M FY23 Commentary
Trade and other receivables 178 Collection of receivables in Q4 FY23 and lower commodity prices
Inventories (126) Restart of Brazil Aluminium and temporary impacts at Mozal Aluminium
Trade and other payables (45) Timing of payments
Provisions and other liabilities 3
Total working capital movement 10
Capital expenditure
The Group's capital expenditure((37)), excluding EAIs, increased by US$335M to
US$894M in FY23 as we increased our investment in productivity, improvement
and growth activities across our portfolio:
· Safe and reliable capital expenditure increased by US$103M to US$470M as we
invested in Illawarra Metallurgical Coal's transition to a more efficient
single longwall configuration at Appin from FY25((25)), and additional
ventilation capacity to enable mining in Appin's Area 7 until at least
2039((25));
· Improvement and life extension capital expenditure increased by US$6M to
US$64M as we progressed productivity and decarbonisation projects primarily at
Worsley Alumina and Brazil Alumina;
· Growth capital expenditure increased by US$159M to US$256M at Hermosa as we
installed critical path dewatering infrastructure and advanced studies for
both Taylor and Clark; and
· Intangibles and capitalised exploration expenditure increased by US$67M to
US$104M, as we extended Cerro Matoso's mining contract to 2044, and completed
multiple exploration programs across our portfolio focused on base metals.
Our share of capital expenditure for our material EAIs increased by US$119M to
US$283M in FY23, reflecting the inclusion of Sierra Gorda in our portfolio.
Capital expenditure for our Sierra Gorda EAI was US$199M, as the operation
invested in deferred stripping and additional tailings storage infrastructure.
It also invested to grow future potential copper volumes, executing the plant
de-bottlenecking project and progressing study work for the fourth grinding
line expansion.
Capital expenditure for our manganese EAIs was US$84M as we invested in
additional mining equipment and completed the feasibility study for Australia
Manganese's Eastern Lease South life extension project.
Capital expenditure (South32 share)((28)(37))
US$M FY23 FY22
Safe and reliable capital expenditure (470) (367)
Improvement and life extension capital expenditure (64) (58)
Growth capital expenditure (256) (97)
Intangibles and the capitalisation of exploration expenditure (104) (37)
Total capital expenditure (excluding EAIs) (894) (559)
EAIs capital expenditure (283) (164)
Total capital expenditure (including EAIs) (1,177) (723)
BALANCE SHEET, DIVIDENDS AND CAPITAL MANAGEMENT
The Group finished the period with net debt of US$483M as we delivered a
record US$1,225M to shareholders during FY23, paying fully-franked ordinary
and special dividends of US$1,007M, and a further US$218M via our on-market
share buy-back.
Our unchanged capital management framework supports investment in our business
and rewards shareholders as our financial performance improves. Consistent
with our dividend policy, the Board has resolved to pay a fully-franked final
ordinary dividend of US 3.2 cents per share (US$145M) in respect of H2 FY23,
representing 41% of Underlying earnings. The Board has also today further
expanded our capital management program by US$50M, leaving US$133M to be
returned by 1 March 2024((16)).
Net cash/(debt)
US$M FY23 FY22
Cash and cash equivalents 1,258 2,365
Lease liabilities (674) (650)
Other interest bearing liabilities (1,067) (1,177)
Net cash/(debt) (483) 538
Our current BBB+/Baa1 credit ratings were re-affirmed by S&P Global
Ratings and Moody's, respectively. We also retain access to significant
liquidity, having successfully extended our undrawn sustainability-linked
revolving credit facility, with available capacity of US$1.4B to December
2026 and US$1.2B to December 2027.
Dividends announced
Period Dividend per share US$M Franking Pay-out ratio
(US cents)
H1 FY21 1.4 67 100% 49%
H2 FY21 3.5 164 100% 46%
August 2021 special dividend 2.0 93 100% N/A
H1 FY22 8.7 405 100% 40%
H2 FY22 14.0 648 100% 41%
August 2022 special dividend 3.0 139 100% N/A
H1 FY23 4.9 224 100% 40%
H2 FY23 3.2 145 100% 41%
South32 shareholders registered on the South African branch register will not
be able to dematerialise or rematerialise their shareholdings between 13 and
15 September 2023 (both dates inclusive), nor will transfers to/from the South
African branch register be permitted between 8 and 15 September 2023 (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 11 September 2023
Last day to trade cum dividend on the Johannesburg Stock Exchange (JSE) 12 September 2023
Ex-dividend date on the JSE 13 September 2023
Ex-dividend date on the ASX and London Stock Exchange (LSE) 14 September 2023
Record date (including currency election date for ASX) 15 September 2023
Payment date 12 October 2023
OUTLOOK
PRODUCTION
Our recent portfolio improvements delivered strong growth in aluminium and
base metals in FY23. Looking forward, these investments are expected to
underpin production growth in aluminium and copper of 4% in FY24 and 3% in
FY25((38)).
Production guidance (South32 share)((28))
FY23 FY24e((a)) FY25e((a)) Commentary key guidance assumptions
Worsley Alumina
Alumina production (kt) 3,839 4,000 4,000 Nameplate capacity in FY24 and FY25
Brazil Alumina (non-operated)
Alumina production (kt) 1,262 1,400 1,420 Expected to increase by 11% in FY24 as the refinery returns to nameplate
capacity, ahead of creeping volumes in FY25
Brazil Aluminium (non-operated)
Aluminium production (kt) 68.9 100 130 Expected to increase by 45% in FY24 and 30% in FY25
as the smelter ramps-up towards nameplate capacity (179ktpa, 40% basis) in H2
FY26
Hillside Aluminium((39))
Aluminium production (kt) 719 720 720 Expected to test its maximum technical capacity
Mozal Aluminium((39))
Aluminium production (kt) 345 365 372 Expected to increase by 6% in FY24, returning to nameplate capacity in Q2 FY24
AP3XLE to deliver higher volumes in FY25
Sierra Gorda (non-operated)
Ore processed (Mt) 21.2 21.8 21.8 Higher expected throughput following the plant
de-bottlenecking project and planned copper grades of 0.38% and 0.42% in FY24
and FY25, respectively
Payable copper equivalent production (kt)((40)) 86.5 89.0 91.8
Payable copper production (kt) 70.7 67.0 71.0
Payable molybdenum production (kt) 1.2 2.5 2.2
Payable gold production (koz) 28.8 22.5 25.0
Payable silver production (koz) 630 550 550
Cannington
Ore processed (kdmt) 2,156 2,300 2,400 Payable zinc equivalent production expected to increase by 11% in FY24 with
improved plant throughput and higher planned silver and lead grades
Further increase in plant throughput in FY25, offset by lower planned grades
in accordance with the mine plan
Payable zinc equivalent production (kt)((41)) 259.6 287.2 275.8
Payable silver production (koz) 11,183 12,500 12,000
Payable lead production (kt) 101.7 115.0 110.0
Payable zinc production (kt) 59.2 62.0 60.0
Cerro Matoso
Ore processed (kdmt) 2,807 2,700 2,750 OSMOC project expected to partially offset natural grade decline, with
expected processed nickel grade of 1.63% and 1.48% in FY24 and FY25,
respectively
Payable nickel production (kt) 40.8 40.5 35.0
Illawarra Metallurgical Coal
Total coal production (kt) 6,520 5,000 5,500 FY24 guidance reduced to 5.0Mt (from 5.3Mt), with the next longwall at
Dendrobium to commence in Q2 FY24
Production is expected to increase by 10% to 5.5Mt in FY25, consistent with
prior medium-term production guidance for the complex((25))
Metallurgical coal production (kt) 5,497 4,400 4,700
Energy coal production (kt) 1,023 600 800
Australia Manganese
Manganese ore production (kwmt) 3,545 3,400 3,400 Expected to continue its strong performance, subject to wet season impacts
South Africa Manganese
Manganese ore production (kwmt) 2,108 2,000 Subject to demand We expect to continue to use higher cost trucking to optimise sales volumes
FY25 guidance is subject to market demand
(a) The denotation (e) refers to an estimate or forecast year.
COSTS AND CAPITAL EXPENDITURE
Operating unit costs guidance
FY23 Operating unit costs were in-line with our updated guidance, as our
strong operating performance to finish the year and continued focus on cost
efficiencies, provided partial relief from industry-wide cost pressures.
A planned increase in production volumes across the majority of our operations
in FY24 and our ongoing focus on controllable cost initiatives is expected to
partly offset ongoing industry-wide inflationary pressures.
While Operating unit cost guidance is not provided for our aluminium smelters,
their cost profile will continue to be influenced by the price of raw material
inputs, which have started to moderate from elevated levels across the
industry in FY23.
Operating unit cost((42))
FY23 H1 FY23 H2 FY23 FY24e((a)(b)) Commentary key guidance assumptions
Worsley Alumina
(US$/t) 291 288 294 290 Largely unchanged with lower caustic soda prices and consumption, to offset
higher energy and labour costs
Brazil Alumina (non-operated)
(US$/t) 368 364 372 Not provided Will continue to be influenced by energy and the price of raw material inputs
Brazil Aluminium (non-operated)
(US$/t) 4,357 5,876 3,747 Not provided Will continue to be influenced by the smelter's ramp-up profile and the price
of raw material inputs and energy
Hillside Aluminium
(US$/t) 2,178 2,276 2,092 Not provided Will continue to be influenced by the price of raw material inputs, the South
African rand and inflation-linked energy costs
Mozal Aluminium
(US$/t) 2,329 2,237 2,433 Not provided Will continue to be influenced by the price of raw material inputs, the South
African rand and inflation-linked energy costs
Sierra Gorda (non-operated)
(US$/t)((c)) 15.4 16.6 14.1 16.0 Higher plant throughput and lower electricity prices, more than offset by
higher labour costs
Cannington
(US$/t)((c)) 153 136 172 155 Largely unchanged with improved throughput, more than offset by higher labour
costs
Cerro Matoso
(US$/lb) 5.03 4.93 5.14 5.30 Lower price-linked royalties, more than offset by a stronger Colombian peso
and higher labour costs
Illawarra Metallurgical Coal
(US$/t) 127 124 130 140 Lower volumes, with four planned longwall moves in FY24
Australia Manganese (FOB)
(US$/dmtu) 1.88 1.76 2.01 2.15 Increased mining activity and contractor costs to deliver planned volumes
South Africa Manganese (FOB)
(US$/dmtu) 2.64 2.67 2.61 2.60 Weaker South African rand and lower
price-linked royalties, to more than offset higher in-land logistics costs
(a) FY24e Operating unit cost guidance includes royalties (where
appropriate) and commodity price and foreign exchange rate forward curves or
our internal expectations (refer to page 29, footnote 43).
(b) The denotation (e) refers to an estimate or forecast year.
(c) US dollar per tonne of ore processed. Periodic movements in
finished product inventory may impact Operating unit costs.
Capital expenditure guidance (excluding exploration and intangibles)
FY24 Group capital expenditure guidance, excluding EAIs, is set at US$860M as
we prioritise safe and reliable operations and invest to improve productivity
and grow future volumes:
· Safe and reliable capital expenditure is expected to increase by US$145M to
US$615M, reflecting elevated capital expenditure at Illawarra Metallurgical
Coal as we transition Appin to a more efficient single longwall from FY25, and
install additional ventilation infrastructure to extend Appin's mine life in
Area 7 to at least 2039((25));
· Improvement and life extension capital expenditure is expected to increase by
US$11M to US$75M, as we advance decarbonisation projects at Worsley Alumina
and the De-bottlenecking Phase Two project at Brazil Alumina; and
· Growth capital expenditure at our Hermosa project is expected to be US$170M in
H1 FY24 as we complete critical path dewatering activity, invest in early
works, and progress studies for both Taylor and Clark. We expect to provide
FY24 guidance following a final investment decision for the development of the
Taylor deposit, planned for H1 FY24.
Our share of capital expenditure for our material EAIs is expected to increase
by US$61M to US$340M in FY24:
· Capital expenditure for our manganese EAI is expected to increase by US$47M to
US$130M as we continue Australia Manganese's Eastern Lease South life
extension project, with first production expected in FY25; and
· Capital expenditure for our Sierra Gorda EAI is expected to increase by US$14M
to US$210M, with safe and reliable capital expenditure of US$180M for deferred
stripping and additional tailings capacity. Improvement and life extension
capital expenditure is expected to be US$30M, including the plant
de-bottlenecking project and the feasibility study for the fourth grinding
line expansion. We expect to update FY24 capital expenditure guidance
following a final investment decision for the fourth grinding line expansion,
planned for H2 FY24.
Capital expenditure excluding exploration and intangibles (South32
share)((28))
US$M FY23 FY24e((a))
Worsley Alumina 49 85
Brazil Alumina 45 60
Brazil Aluminium 9 10
Hillside Aluminium 16 35
Mozal Aluminium 16 20
Cannington 60 40
Cerro Matoso 33 45
Illawarra Metallurgical Coal 242 320
Safe and reliable capital expenditure (excluding EAIs) 470 615
Worsley Alumina 33 45
Brazil Alumina 13 20
Cerro Matoso 5 -
Illawarra Metallurgical Coal 6 3
Other operations 7 7
Improvement and life extension capital expenditure (excluding EAIs) 64 75
Hermosa 256 170((b))
Growth capital expenditure 256 170
Total capital expenditure (excluding EAIs) 790 860
Total capital expenditure (including EAIs) 1,069 1,200
Capital expenditure for EAIs excluding exploration and intangibles (South32
share)((28))
US$M FY23 FY24e((a))
Sierra Gorda 151 180
Australia Manganese 41 55
South Africa Manganese 16 30
Safe and reliable capital expenditure (EAIs) 208 265
Sierra Gorda 45 30((b))
Australia Manganese 17 35
South Africa Manganese 9 10
Improvement and life extension capital expenditure (EAIs) 71 75
Total capital expenditure (EAIs) 279 340
(a) The denotation (e) refers to an estimate or forecast year.
(b) Guidance for Hermosa reflects H1 FY24, subject to a final
investment decision. Guidance for our Sierra Gorda EAI is subject to a final
investment decision for the fourth grinding line expansion.
Exploration and intangibles guidance
Capitalised exploration, including EAIs, is expected to be largely unchanged
at US$40M. This includes US$23M at our Hermosa project as we continue to test
high priority regional targets, including further drilling at the Peake
copper-lead-zinc-silver prospect((44)), and a first time drilling program
planned at the Flux prospect((45)).
Capitalised exploration (South32 share)((28))
US$M FY23 FY24e((a))
Capitalised exploration (excluding EAIs) 39 35
EAIs capitalised exploration 4 5
Capitalised exploration (including EAIs) 43 40
(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
FY23 FY24e((a)) Commentary
Group and unallocated expense in Underlying EBIT (excluding greenfield
exploration and third party products and services EBIT)
(US$M) 31 100 One-off benefits in H1 FY23
Normalised run-rate expected in FY24
Underlying depreciation and amortisation
(US$M) 918 930 Reflects higher depreciation and amortisation at Cannington and Australia
Manganese, following recent investments
Underlying net finance costs
(US$M) 188 200 Reflects balance sheet position as at FY23
Greenfield exploration
(US$M) 42 30 Targeted activity across our greenfield exploration programs focused on base
metals in the Americas, Australia and Europe
(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 17 to 27. 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)((28))
Underlying revenue Underlying EBIT
US$M FY23 FY22 FY23 FY22
Worsley Alumina 1,363 1,625 68 386
Brazil Alumina 456 524 (45) 89
Brazil Aluminium 166 - (136) (44)
Hillside Aluminium 1,823 2,254 191 666
Mozal Aluminium 886 924 56 271
Sierra Gorda 684 241 217 75
Cannington 542 736 142 315
Hermosa - - (19) (14)
Cerro Matoso 698 929 189 463
Illawarra Metallurgical Coal 1,643 2,338 692 1,388
Australia Manganese 688 848 266 402
South Africa Manganese 344 419 45 58
Third party products and services((46)) 539 600 23 20
Inter-segment / Group and unallocated (782) (808) (73) (108)
South32 Group 9,050 10,630 1,616 3,967
Worsley alumina
(86% share)
Volumes
Worsley Alumina saleable production decreased by 4% (or 152kt), from record levels in FY22, to 3,839kt in FY23. The refinery successfully managed short-term energy supply challenges and completed planned calciner maintenance in Q1 and Q3 FY23, finishing the year with production rates above nameplate capacity in Q4 FY23.
The refinery is expected to operate at nameplate capacity (4.6Mtpa, 100% basis) in FY24 and FY25, with 4,000kt expected. Calciner maintenance is scheduled for Q1 and Q3 during FY24.
We continue to progress regulatory approvals for new mining areas, with final
approvals for our Worsley Mine Development project now expected during 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 increased by 10% to US$291/t in FY23, 1% above guidance,
as the benefit of a weaker Australian dollar was more than offset by higher
uncontrollable costs including an increase in caustic soda (FY23: US$659/t,
FY22: US$581/t) and coal prices.
We expect FY24 Operating unit costs to be largely unchanged at US$290/t, with
the benefit of lower caustic soda prices (FY24e: ~US$600/t) and lower planned
caustic consumption (FY24e: 95kg/t, FY23: 107kg/t), to offset higher energy
and labour costs.
FY24 Operating unit cost guidance also assumes higher freight rates (+US$9/t
impact to Operating unit costs), which will also be reflected in our realised
prices. Exchange rate and price assumptions for FY24 Operating unit cost
guidance are detailed on page 29, footnote 43.
Financial performance
Underlying EBIT decreased by 82% (or US$318M), to US$68M in FY23, as a 13%
decrease in the average realised price of alumina (-US$198M), lower sales
volumes (-US$64M) and higher inflation and uncontrollable costs (-US$74M),
more than offset the benefit of a weaker Australian dollar (+US$50M). The
operation also incurred additional contractor costs (-US$18M) to deliver
planned maintenance activity.
Capital expenditure
Safe and reliable capital expenditure was US$49M in FY23 and is expected to
increase to US$85M in FY24 as we invest in infrastructure to enable access to
new mining areas, and additional bauxite residue disposal capacity.
Improvement and life extension capital expenditure was US$33M in FY23 and is
expected to increase to US$45M in FY24 as we advance decarbonisation projects
at the refinery. We expect to complete the conversion of the first coal fired
boiler to natural gas in Q1 FY24 and the second boiler in Q3 FY24, improving
the refinery's energy security and supporting the transition to lower carbon
energy. We also continue to progress study work for the mud-washing efficiency
project.
South32 share FY23 FY22
Alumina production (kt) 3,839 3,991
Alumina sales (kt) 3,817 3,974
Realised alumina sales price (US$/t) 357 409
Operating unit cost (US$/t) 291 265
South32 share (US$M) FY23 FY22
Underlying revenue 1,363 1,625
Underlying EBITDA 251 571
Underlying EBIT 68 386
Net operating assets 2,457 2,571
Capital expenditure 82 55
Safe and reliable 49 47
Improvement and life extension 33 8
BRAZIL ALUMINA
(36% SHARE)
Volumes
Brazil Alumina saleable production decreased by 3% (or 35kt) to 1,262kt in FY23 as the refinery reduced output in Q4 FY23 to manage temporary port infrastructure outages. The refinery has returned to nameplate capacity (3.86Mtpa, 100% basis) and FY24 production guidance remains unchanged at 1,400kt, ahead of creeping volumes to 1,420kt in FY25.
Operating costs
Operating unit costs increased by 28% to US$368/t in FY23, with a significant
rise in uncontrollable costs accounting for more than 70% of this increase,
together with one-off costs associated with the port infrastructure outages.
Uncontrollable cost inflation, including higher caustic soda prices (FY23:
US$722/t, FY22: US$425/t), coal-linked energy prices, and bauxite costs linked
to alumina and aluminium prices on a trailing basis, was most acute in
H1 FY23, with these input prices all trending lower in H2 FY23.
While Operating unit cost guidance is not provided for this non-operated
facility, the refinery will continue to be influenced by energy and raw
material input prices.
Financial performance
Underlying EBIT decreased by US$134M, to a loss of US$45M in FY23, as a 8%
decrease in the average realised price of alumina (-US$38M), lower sales
volumes (-US$30M) and higher uncontrollable costs (-US$72M), more than offset
higher profit from our equity interest in MRN (+US$10M).
Capital expenditure
Safe and reliable capital expenditure decreased by US$6M to US$45M in FY23 and
is expected to be US$60M in FY24 with further investment in bauxite residue
disposal capacity.
Improvement and life extension capital expenditure was US$13M in FY23 and is
expected to be US$20M in FY24 as the refinery progresses work on the
De-bottlenecking Phase Two project. The project is expected to be completed in
H1 FY26, increasing nameplate capacity by ~4% to ~4.0Mt (100% basis).
South32 share FY23 FY22((a))
Alumina production (kt) 1,262 1,297
Alumina sales (kt) 1,237 1,299
Realised sales price (US$/t) 369 403
Operating unit cost (US$/t)((b)) 368 288
South32 share (US$M) FY23 FY22((a))
Underlying revenue 456 524
Underlying EBITDA 7 150
Underlying EBIT (45) 89
Net operating assets 738 696
Capital expenditure 58 51
Safe and reliable 45 51
Improvement and life extension 13 -
(a) The increase in ownership in MRN, effective from 29 April 2022,
has triggered a change in accounting treatment with the investment accounted
for using the equity method (formerly classified as an investment in an equity
instrument designated as fair value through other comprehensive income).
(b) Excludes the profit from our equity interest in MRN.
BRAZIL ALUMINIUM
(40% SHARE)
Volumes
Brazil Aluminium saleable production was 68.9kt in FY23 following the restart of all three potlines at the smelter, below guidance of 75kt, as lower overhead crane availability in Q4 FY23 delayed pot restart activities and metal production.
Production is expected to increase by 45% to 100kt in FY24 and a further 30%
to 130kt in FY25, as the smelter delivers to a revised ramp-up profile.
Nameplate capacity (179ktpa, 40% basis) is now expected to be achieved during
H2 FY26.
Operating costs
Operating unit cost guidance is not provided for this non-operated facility. The cost profile of the smelter will continue to be influenced by the ramp-up of all three potlines and the price of raw material inputs and energy.
Financial performance
Underlying EBIT was a loss of US$136M in FY23, as sales revenue (+US$166M) was
more than offset by costs to support the smelter's restart and ramp-up of all
three potlines (-US$258M).
Capital expenditure
Safe and reliable capital expenditure was US$9M in FY23 and is expected to be
US$10M in FY24.
South32 share FY23 FY22
Aluminium production (kt) 68.9 0.3
Aluminium sales (kt) 67.7 -
Realised sales price (US$/t) 2,452 -
Operating unit cost (US$/t) 4,357 -
South32 share (US$M) FY23 FY22
Underlying revenue 166 -
Underlying EBITDA (129) (43)
Underlying EBIT (136) (44)
Net operating assets 28 46
Capital expenditure 9 1
Safe and reliable 9 1
Improvement and life extension - -
hillside aluminium
(100% SHARE)
Volumes
Hillside Aluminium saleable production increased by 1% (or 5kt) to a record
719kt in FY23 as the smelter continued to test its maximum technical capacity,
despite the impact of elevated load-shedding.
The smelter is expected to continue its strong operating performance, with
FY24 and FY25 guidance set at 720kt((39)).
Operating costs
Operating unit costs increased by 2% to US$2,178/t in FY23, as the benefit of
a weaker South African rand and lower alumina prices, was more than offset by
elevated smelter raw material input prices (including coke, pitch and
aluminium tri-fluoride), and inflation-linked indexation of energy costs.
Smelter raw material input prices began to moderate in H2 FY23, which together
with the smelter's strong operating performance, supported a sequential
reduction in Operating unit costs (H2 FY23: US$2,092/t, H1 FY23: US$2,276/t).
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 are working with Eskom and other
stakeholders in the South African energy sector on pathways to secure lower
carbon electricity supply.
We have signed a non-binding memorandum of understanding with Eskom to explore
the potential to enter into a pilot agreement to purchase energy attributes
associated with the electricity generated at Eskom's Koeberg Nuclear Power
Station. Since the attributes represent a new product for Eskom, the pilot
would test the commercial and regulatory requirements and other applicable
considerations, while we continue to investigate other low-carbon energy
solutions for the medium to long-term.
Financial performance
Underlying EBIT decreased by 71% (or US$475M), to US$191M in FY23, as the
benefit of a weaker South African rand (+US$106M) and higher sales volumes
(+US$18M), was more than offset by a 20% reduction in the average realised
price of aluminium (-US$449M) and higher raw material input (-US$56M) and
energy costs (-US$66M).
96 pots were relined at a cost of US$281k per pot in FY23 (FY22: 162 pots at
US$274k per pot), with 169 pots scheduled to be relined in FY24. The smelter
is deploying AP3XLE technology in its pot relining activity, to further
enhance the smelter's energy efficiency and reduce GHG emissions.
Capital expenditure
Capital expenditure was US$18M in FY23 and is expected to increase to US$38M
in FY24 as we invest in plant upgrades.
South32 share FY23 FY22
Aluminium production (kt) 719 714
Aluminium sales (kt) 719 713
Realised sales price (US$/t) 2,535 3,161
Operating unit cost (US$/t) 2,178 2,137
South32 share (US$M) FY23 FY22
Underlying revenue 1,823 2,254
Underlying EBITDA 257 730
Underlying EBIT 191 666
Net operating assets 845 927
Capital expenditure 18 24
Safe and reliable 16 20
Improvement and life extension 2 4
Mozal aluminium
(63.7% SHARE)((47))
Volumes
Mozal Aluminium saleable production increased by 24% (or 67kt) to 345kt in
FY23, following our acquisition of an additional 16.6% interest in May 2022.
The smelter implemented a recovery plan in response to the fatal safety incident in November 2022 and wet weather impacts in Q3 FY23, with nameplate production volumes expected to be achieved in Q2 FY24.
FY24 production guidance is unchanged at 365kt((39)) and production is
expected to increase to 372kt((39)) in FY25, with the benefit of additional
volumes from the AP3XLE project.
Operating costs
Operating unit costs increased by 4% to US$2,329/t in FY23, as the benefit of
a weaker South African rand and lower alumina prices, was more than offset by
elevated smelter raw material input prices (including coke, pitch and
aluminium tri-fluoride), and 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 hydroelectric power is generated by Hidroeléctrica de Cahora
Bassa (HCB) and supplied via Eskom's electricity grid under an agreement with
Mozambique Transmission Company (MOTRACO), a transmission joint venture
between Eskom and the national electricity utilities of Mozambique and
Eswatini. We are working with key stakeholders to extend this energy supply
agreement beyond 2026, as currently there are no viable alternative suppliers
of renewable energy at the required scale.
Financial performance
Underlying EBIT decreased by 79% (or US$215M), to US$56M((a)) in FY23, as the
benefit of our additional stake in Mozal Aluminium and a weaker South African
rand (+US$26M), was more than offset by a 21% decrease in the average realised
price of aluminium (-US$182M), lower sales volumes (-US$48M) and higher raw
material input (-US$8M) and energy costs (-US$17M).
82((48)) pots were relined in FY23 at a cost of US$318k per pot, as the pot
relining schedule was modified with the smelter's recovery plan (FY22:
127((48)) pots at US$266k per pot). 112((48)) pots are scheduled to be relined
in FY24. The smelter is deploying AP3XLE technology in its pot relining
activity to deliver incremental production benefits, with no associated
increase in power consumption.
Capital expenditure
Capital expenditure was US$17M in FY23 and is expected to be US$22M in FY24 as
we invest in plant upgrades and continue to deploy the AP3XLE technology.
South32 share((a)) FY23 FY22
Aluminium production (kt) 345 278
Aluminium sales (kt) 334 276
Realised sales price (US$/t) 2,653 3,348
Operating unit cost (US$/t) 2,329 2,243
South32 share (US$M)((a)) FY23 FY22
Underlying revenue 886 924
Underlying EBITDA 108 305
Underlying EBIT 56 271
Net operating assets 578 615
Capital expenditure 17 11
Safe and reliable 16 10
Improvement and life extension 1 1
(a) The results reflect the completion of our acquisition of an additional
16.6% shareholding in the smelter on 31 May 2022, taking our ownership to
63.7%. Prior period numbers have not been restated for this change in
ownership (presented on a 47.1% basis)
SIERRA GORDA
(45% SHARE)
Volumes
Sierra Gorda payable copper equivalent production((40)) was 86.2kt in FY23,
our first full year of ownership, with plant throughput of 47.1Mt (100% basis)
and an average realised copper grade of 0.42%.
FY24 guidance remains unchanged at 89.0kt payable copper equivalent
production((40)), with higher expected throughput (48.4Mt, 100% basis)
delivered by the plant de-bottlenecking project, partially offset by lower
planned copper grades (0.38%).
Production is expected to increase by 3% to 91.8kt payable copper equivalent
production((40)) in FY25, benefitting from higher planned copper grades
(0.42%) in accordance with the mine plan.
Operating costs
Operating unit costs were US$15.4/t ore processed in FY23, in-line with
guidance, with sequentially lower Operating unit costs (H2 FY23: US$14.1/t,
H1 FY23: US$16.6/t), following the transition to cost efficient, 100%
renewable electricity from January 2023.
We expect FY24 Operating unit costs to increase by 4% to US$16.0/t ore
processed with the benefit of higher planned mill throughput and lower
electricity prices, offset by higher labour costs. Exchange rate and price
assumptions for FY24 Operating unit cost guidance are detailed on page 29,
footnote 43.
Financial performance
Underlying EBIT was US$217M in FY23 at a margin of 52%, which improved the
Group margin and increased our exposure to commodities critical for a
low-carbon future.
Capital expenditure
Safe and reliable capital expenditure was US$151M in FY23 and is expected to
be US$180M in FY24 as the operation continues to invest in deferred stripping
and additional tailings infrastructure.
Improvement and life extension capital expenditure was US$45M in FY23 as the
operation progressed the plant de-bottlenecking project, including the
installation of a third tailings thickener in Q4 FY23. We expect to invest
US$30M in FY24 as the plant de-bottlenecking project is executed and we
advance the feasibility study for the fourth grinding line expansion. The
fourth grinding line has the potential to deliver a ~18% increase in plant
throughput to ~57Mtpa to 58Mtpa (100% basis), with a final investment decision
expected in H2 FY24.
South32 share FY23 FY22((a))
Ore mined (Mt) 26.0 13.7
Ore processed (Mt) 21.2 7.5
Ore grade processed (%, Cu) 0.42 0.42
Payable copper equivalent production (kt)((40)) 86.2 30.6
Payable copper production (kt) 70.7 25.3
Payable molybdenum production (kt) 1.2 0.4
Payable gold production (koz) 28.8 9.6
Payable silver production (koz) 630 253
Payable copper sales (kt) 71.8 27.7
Payable molybdenum sales (kt) 1.3 0.6
Payable gold sales (koz) 29.1 9.9
Payable silver sales (koz) 639 282
Realised copper sales price (US$/lb) 3.51 3.50
Realised molybdenum sales price (US$/lb) 21.3 18.5
Realised gold sales price (US$/oz) 1,821 1,934
Realised silver sales price (US$/oz) 21.9 23.5
Operating unit cost 15.4 14.6
(US$/t ore processed)((49))
South32 share (US$M) FY23 FY22((a))
Underlying revenue 684 241
Underlying EBITDA 358 133
Underlying EBIT 217 75
Net operating assets 1,588 1,402
Capital expenditure 196 81
Safe and reliable 151 36
Improvement and life extension 45 45
Exploration expenditure 7 2
Exploration expensed 4 1
(a) Realised sales prices and Operating unit costs presented in
the table above reflect the period 1 March 2022 to 30 June 2022.
Whereas production and sales numbers, and all Income Statement items reflect
the period from first ownership (22 February 2022). Operating unit costs of
US$1.42/lb CuEq and realised prices (copper of US$3.18/lb, molybdenum of
US$18.73/lb, gold of US$1,776/oz and silver of US$20.65/oz) reflect the period
from first ownership (22 February 2022).
CANNINGTON
(100% SHARE)
Volumes
Cannington payable zinc equivalent production((41)) decreased by 13% to
195.6kt in FY23, with severe weather impacts in Q3 FY23. The operation
successfully recovered in Q4 FY23, increasing quarterly production by 36% and
achieving revised production guidance.
We expect to increase payable zinc equivalent production((41)) by 11% to
287.2kt in FY24 (silver 12,500koz, lead 115.0kt and zinc 62.0kt), with
improved plant throughput (2,300kdmt) and higher planned silver and lead
grades. FY25 production guidance has been set at 275.8kt payable zinc
equivalent((41)), with a further increase in plant throughput (2,400kdmt),
offset by lower planned grades. We expect throughput to average 2,400kdmt over
FY25 to FY28, reflecting more complex underground mining conditions, with a
greater number of stopes of varying size from FY24.
Operating costs
Operating unit costs increased by 15% to US$153/t in FY23, in-line with
revised guidance, as the benefit of a weaker Australian dollar and lower
price-linked royalties was more than offset by lower mill throughput.
We expect FY24 Operating unit costs to be largely unchanged at US$155/t, with
improved mill throughput more than offset by higher labour costs. Exchange
rate and price assumptions for FY24 Operating unit cost guidance are detailed
on page 29, footnote 43.
Financial performance
Underlying EBIT decreased by 55% (or US$173M), to US$142M in FY23, as lower
zinc and lead prices (-US$75M) and reduced sales volumes (-US$119M), more than
offset the benefit of a weaker Australian dollar (+US$21M) and lower
price-linked royalties (+US$10M).
Capital expenditure
Capital expenditure increased by US$16M to US$61M in FY23 as we invested in
additional tailings storage capacity and upgrades to water and ventilation
infrastructure. Capital expenditure is expected to reduce to US$42M in FY24 as
these upgrades are completed.
South32 share FY23 FY22
Ore mined (kwmt) 2,223 2,753
Ore processed (kdmt) 2,156 2,618
Ore grade processed (g/t, Ag) 187 180
Ore grade processed (%, Pb) 5.6 5.4
Ore grade processed (%, Zn) 3.8 3.5
Payable zinc equivalent production (kt)((41)) 195.6 224.2
Payable silver production (koz) 11,183 12,946
Payable lead production (kt) 101.7 120.6
Payable zinc production (kt) 59.2 64.5
Payable silver sales (koz) 10,739 12,898
Payable lead sales (kt) 99.0 122.2
Payable zinc sales (kt) 58.1 66.2
Realised silver sales price (US$/oz) 21.1 21.0
Realised lead sales price (US$/t) 1,919 2,046
Realised zinc sales price (US$/t) 2,151 3,248
Operating unit cost 153 133
(US$/t ore processed)((49))
South32 share (US$M) FY23 FY22
Underlying revenue 542 736
Underlying EBITDA 213 388
Underlying EBIT 142 315
Net operating assets 172 141
Capital expenditure 61 45
Safe and reliable 60 43
Improvement and life extension 1 2
Exploration expenditure 8 3
Exploration expensed 6 2
cerro matoso
(99.9% SHARE)
Volumes
Cerro Matoso payable nickel production decreased by 2% to 40.8kt in FY23, as
the benefits of the OSMOC project were offset by a temporary access
restriction to the higher-grade Q&P pit.
The OSMOC project underpinned a 15-year extension to Cerro Matoso's mining
contract to 2044. It is also expected to partially offset natural grade
decline (FY22 Ore Reserve grade: 1.2% nickel), with processed nickel grades
expected to be 1.63% in FY24 and 1.48% in FY25.
FY24 production guidance is unchanged at 40.5kt and FY25 production guidance
is set at 35.0kt, reflecting the planned nickel grade profile. A major furnace
refurbishment previously scheduled for Q4 FY25, is now expected to be
completed during FY26.
Operating costs
Operating unit costs increased by 16% to US$5.03/lb in FY23, 1% above revised
guidance, as the benefit of a weaker Colombian peso was more than offset by
higher labour and contractor costs, including the delivery of the OSMOC
project.
We expect FY24 Operating unit costs to increase by 5% to US$5.30/lb, with the
benefit of lower price-linked royalties more than offset by a stronger
Colombian peso and higher labour costs. Exchange rate and price assumptions
for FY24 Operating unit cost guidance are detailed on page 29, footnote 43.
Financial performance
Underlying EBIT decreased by 59% (or US$274M), to US$189M in FY23, as a 23%
decline in the average realised nickel price (-US$209M), reduced sales volumes
(-US$22M) and increased labour and contractor costs (-US$20M), was partially
offset by a weaker Colombian peso (+US$48M).
Capital expenditure
Safe and reliable capital expenditure increased by US$15M to US$33M in FY23 as
we progressed planned furnace upgrades and invested in new mobile fleet.
We expect to spend US$45M in FY24 as we continue these investments.
Improvement and life extension capital expenditure decreased by US$14M to
US$5M in FY23 following the successful commissioning of the OSMOC project in
H1 FY23.
The extended mining contract underpinned by the OSMOC project unlocks existing
resources and creates an opportunity to analyse options to optimise our
product mix in the battery supply chain. As part of this, we are progressing
concept studies to assess the potential to produce intermediary nickel
products for electric vehicle markets.
South32 share FY23 FY22
Ore mined (kwmt) 5,560 4,867
Ore processed (kdmt) 2,807 2,703
Ore grade processed (%, Ni) 1.62 1.73
Payable nickel production (kt) 40.8 41.7
Payable nickel sales (kt) 40.8 41.8
Realised nickel sales price (US$/lb)((50)) 7.76 10.08
Operating unit cost (US$/lb) 5.03 4.34
South32 share (US$M) FY23 FY22
Underlying revenue 698 929
Underlying EBITDA 246 529
Underlying EBIT 189 463
Net operating assets 363 349
Capital expenditure 38 37
Safe and reliable 33 18
Improvement and life extension 5 19
Exploration expenditure 2 -
Exploration expensed 2 -
ILLAWARRA METALLURGICAL COAL
(100% SHARE)
Volumes
Illawarra Metallurgical Coal saleable production was largely unchanged at
6.5Mt in FY23 (Appin ~3.2Mt, Dendrobium ~3.3Mt), in-line with revised
guidance. The operation completed two longwall moves during the year, and
delivered a 22% increase in quarterly production in Q4 FY23, overcoming
challenging mining conditions encountered at Appin in Q3 FY23.
We expect production to decrease to 5.0Mt in FY24 (Appin ~3.1Mt, Dendrobium
~1.9Mt), with a total of four longwall moves planned across the complex during
the year. The next longwall at Dendrobium is now expected to commence in Q2
FY24 (previously Q1 FY24), with a changed starting position to accommodate a
revised subsidence management plan.
FY25 production guidance is set at 5.5Mt (Appin ~3.6Mt, Dendrobium ~1.9Mt),
consistent with our prior medium-term production guidance for the
complex((25)). We are on-track to transition Appin to a single longwall
configuration in H2 FY25, which will deliver further operating and capital
efficiencies. At Dendrobium, we remain focused on optimising the mine within
approved domains.
Operating costs
Operating unit costs were largely unchanged at US$127/t in FY23, in-line with
revised guidance, as the benefit of a weaker Australian dollar and lower
price-linked royalties was offset by higher local energy costs.
We expect FY24 Operating unit costs to increase by 10% to US$140/t due to
lower planned volumes in FY24, ahead of the transition to the more efficient
single longwall configuration at Appin. Exchange rate and price assumptions
for FY24 Operating unit cost guidance are detailed on page 29, footnote 43.
Financial performance
Underlying EBIT decreased by 50% (or US$696M), to US$692M in FY23, with a 27%
decline in the average realised price for metallurgical coal (-US$550M), lower
volumes (-US$133M) and higher contractor and labour costs (-US$23M). This more
than offset the benefit of a weaker Australian dollar (+US$52M) and lower
price-linked royalties (+US$43M).
Depreciation and amortisation increased by US$22M, to US$141M, reflecting
higher development rates in FY23.
Capital expenditure
Safe and reliable capital expenditure increased by US$65M to US$242M in FY23.
We continued to invest to support the transition to a more efficient single
longwall configuration at Appin from H2 FY25, and commenced work to install
additional ventilation capacity to enable mining in the current Area 7 until
at least 2039((25)). This ~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.
Improvement and life extension capital expenditure decreased to US$6M in FY23
as we ceased activity on the DND project. We expect to spend US$3M in FY24 as
we progress further emissions abatement studies.
South32 share FY23 FY22
Metallurgical coal production (kt) 5,497 5,712
Energy coal production (kt) 1,023 797
Metallurgical coal sales (kt) 5,402 5,823
Energy coal sales (kt) 957 783
Realised metallurgical coal sales price (US$/t) 279 381
Realised energy coal sales price (US$/t) 144 156
Operating unit cost (US$/t) 127 126
South32 share (US$M) FY23 FY22
Underlying revenue((51)) 1,643 2,338
Underlying EBITDA 833 1,507
Underlying EBIT 692 1,388
Net operating assets 769 786
Capital expenditure 248 189
Safe and reliable 242 177
Improvement and life extension 6 12
Exploration expenditure 17 11
Exploration expensed 9 9
AUSTRALIA MANGANESE
(60% SHARE)
Volumes
Australia Manganese saleable production increased by 5% (or 182kwmt) to a
record 3,545kwmt in FY23, as improved yields supported higher primary
concentrator output, and our low-cost PC02 circuit continued to operate above
its design capacity.
The operation is expected to continue its strong performance with FY24 and
FY25 guidance set at 3,400kwmt, subject to potential wet season impacts.
Operating costs
Operating unit costs were largely unchanged at US$1.88/dmtu in FY23, 5% below
guidance, as the operation delivered strong production volumes and benefitted
from a weaker Australian dollar.
As previously noted, we expect FY24 Operating unit costs to rise, with
guidance set at US$2.15/dmtu, due to increased mining activity and contractor
costs required to deliver planned volumes. This approach is designed to
optimise margins and value given the position of Australia Manganese as one of
the largest, lowest cost operations in the industry((52)). Exchange rate and
price assumptions for FY24 Operating unit cost guidance are detailed on page
29, footnote 43.
Financial performance
Underlying EBIT decreased by 34% (or US$136M), to US$266M in FY23, as the
benefit of lower freight rates (+US$36M) and a weaker Australian dollar
(+US$21M), was more than offset by a 13% decline in average realised
manganese ore prices (-US$128M), higher diesel prices (-US$14M) and contractor
costs (-US$12M).
Sales volumes declined (-US$32M) due to in-land logistics constraints. We have
optimised our road haulage and implemented alternative shipping solutions to
improve our logistics chain and lift sales volumes in FY24.
Capital expenditure
Safe and reliable capital expenditure decreased by US$15M to US$41M in FY23.
We expect to spend US$55M in FY24 as we invest in additional mobile fleet and
mining equipment.
Improvement and life extension capital expenditure increased by US$11M to
US$17M in FY23 as we completed the feasibility study for the Eastern Lease
South life extension project, which was approved for development in Q3 FY23.
We expect to invest US$35M in FY24 and US$9M in FY25, with first production
from Eastern Lease South expected in FY25. The Eastern Lease South project
is expected to sustain production to at least FY28((53)), with further work
underway across our existing operating footprint and in the Southern Areas to
potentially extend the operation's life into the next decade.
South32 share FY23 FY22
Manganese ore production (kwmt) 3,545 3,363
Manganese ore sales (kwmt) 3,261 3,372
Realised external manganese ore sales price (US$/dmtu, FOB)((54)(55)) 4.59 5.29
Ore operating unit cost (US$/dmtu)((55)(56)) 1.88 1.86
South32 share (US$M) FY23 FY22
Underlying revenue 688 848
Underlying EBITDA 369 488
Underlying EBIT 266 402
Net operating assets 239 258
Capital expenditure 58 62
Safe and reliable 41 56
Improvement and life extension 17 6
Exploration expenditure 1 1
Exploration expensed - -
south africa manganese
(ORE 54.6% SHARE, ALLOY 60% SHARE)
Volumes
South Africa Manganese saleable production increased by 2% (or 39kwmt) to a
record 2,108kwmt in FY23, with increased volumes of premium material from our
Mamatwan mine.
FY24 guidance of 2,000kwmt assumes we continue to use higher cost trucking to
optimise sales volumes of our premium products. FY25 guidance is not provided,
with volumes to be optimised subject to market conditions.
Operating costs
Operating unit costs decreased by 3% to US$2.64/dmtu in FY23, in-line with
guidance, as the benefit of a weaker South African rand more than offset lower
sales volumes due to a temporary reduction in third-party rail and port
availability.
We expect FY24 Operating unit costs to decrease by 2% to US$2.60/dmtu, with
the benefit of a weaker South African rand and lower price-linked royalties,
to more than offset higher in-land logistics costs. Exchange rate and price
assumptions for FY24 Operating unit cost guidance are detailed on page 29,
footnote 43.
Financial performance
Ore Underlying EBIT decreased by 35% (or US$28M), to US$51M in FY23, as the
benefit of a weaker South African rand (+US$32M) and lower freight rates
(+US$25M), was more than offset by a 9% decline in average realised manganese
ore prices (-US$53M) and lower sales volumes (-US$22M) due to the timing of
shipments.
The Metalloys manganese alloy smelter remains on care and maintenance.
Capital expenditure
Safe and reliable capital expenditure was US$16M in FY23 as we invested in
mining equipment. We expect to spend US$30M in FY24 as we upgrade our rail
infrastructure to improve efficiencies.
Improvement and life extension capital expenditure was US$9M in FY23 and is
expected to be US$10M in FY24 as we advance work to access new mining areas at
our high-grade underground Wessels mine.
South32 share FY23 FY22
Manganese ore production (kwmt) 2,108 2,069
Manganese ore sales (kwmt) 2,065 2,170
Realised external manganese ore sales price (US$/dmtu, FOB)((54)(57)) 3.58 3.92
Ore operating unit cost (US$/dmtu)((56)(57)) 2.64 2.73
South32 share (US$M) FY23 FY22
Underlying revenue 344 419
Manganese ore 344 419
Manganese alloy - -
Underlying EBITDA 66 78
Manganese ore 72 99
Manganese alloy (6) (21)
Underlying EBIT 45 58
Manganese ore 51 79
Manganese alloy (6) (21)
Net operating assets/(liabilities) 143 135
Manganese ore 195 211
Manganese alloy (52) (76)
Capital expenditure 25 19
Safe and reliable 16 14
Improvement and life extension 9 5
Exploration expenditure 1 1
Exploration expensed 1 1
notes
(1) Net tangible assets as at 30 June 2023 includes all
right-of-use assets and lease liabilities, in accordance with AASB 16 Leases.
(2) FY23 basic earnings per share is calculated as Profit after
tax divided by the weighted average number of shares for FY23 (4,572 million).
FY23 basic Underlying earnings per share is calculated as Underlying earnings
divided by the weighted average number of shares for FY23. FY22 basic earnings
per share is calculated as Profit after tax divided by the weighted average
number of shares for FY22 (4,647 million). FY22 basic Underlying earnings per
share is calculated as Underlying earnings divided by the weighted average
number of shares for FY22.
(3) FY23 ordinary dividends per share is calculated as H1 FY23
ordinary dividend announced (US$224M) divided by the number of shares on issue
at 31 December 2022 (4,572 million) plus H2 FY23 ordinary dividend announced
(US$145M) divided by the number of shares on issue at 30 June 2023 (4,545
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 impairment reversal of Brazil Aluminium, and
unproductive capital associated with Growth and Life Extension projects) and
inventories.
(9) 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.
(10) 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.
(11) 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.
(12) 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.
(13) Refer to market release "Hermosa Project Non-Cash Impairment" dated
24 July 2023.
(14) FY23 growth in copper equivalent production at our base metals
operations (Sierra Gorda, Cannington and Cerro Matoso), compared to FY22.
Copper equivalent production was calculated using FY22 realised prices.
(15) Refer to market release "South32 unlocks up to US$200M in value
from non-core royalty sale" dated 12 July 2022. The sales price included
US$103M in cash payments, US$82M of Ecora Resources PLC (formerly known as
Anglo Pacific Group PLC) shares issued on completion and contingent payments
of up to US$15M. The cash payment comprises US$48M paid on completion, and
US$55M payable in six equal quarterly instalments over the 18 months from
completion (US$28M will be received across FY24). The contingent payment is
triggered if the West Musgrave project achieves commercial production, and
throughput and commodity price-related conditions are met prior to an agreed
expiry date.
(16) Since inception, US$1.7B has been allocated to the on-market share
buy-back (778M shares at an average price of A$3.04 per share) and US$525M
returned in the form of special dividends.
(17) Refers to aluminium produced using renewable power.
(18) FY23 growth in copper equivalent production at our aluminium
(Brazil Aluminium, Hillside Aluminium and Mozal Aluminium) and base metals
(Sierra Gorda, Cannington and Cerro Matoso) operations, compared to FY22.
Copper equivalent production was calculated using FY22 realised prices for all
operations (except for Brazil Aluminium which is based on FY22 average index
prices for aluminium).
(19) Market capitalisation as at 21 August 2023. Calculated as the
number of shares on issue (4,545 million), the South32 closing share price
A$3.68, and an AUD:USD exchange rate of 0.64.
(20) The transaction is expected to be completed in the March 2024
quarter.
(21) South32 acquired a 9.9% interest in Aldebaran Resources Inc for
~C$11M (~US$8M on payment date) in July 2022, with a further 4.9% interest
agreed to be acquired in August 2023 for ~C$9M. On completion of the
transaction, South32 will hold approximately 14.8% interest. Aldebaran
Resources Inc.'s key asset is an option to acquire a controlling interest in
the Altar copper project in San Juan, Argentina.
(22) 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.
(23) Goal is defined as an aspiration to deliver an outcome for which we
have not identified a pathway for delivery, but for which efforts will be
pursued towards achieving that outcome, subject to certain assumptions or
conditions.
(24) In August 2023, the Chilean Mining Tax reforms became fully enacted
and are effective from 1 January 2024. As part of the Group's acquisition of
Sierra Gorda during FY22, the Group has the right to claim an indemnity from
the vendors for any mining tax changes enacted prior to December 2025. As the
Mining Tax reforms have become law, the Group has recognised other income of
US$48M and a corresponding receivable of US$48M from the vendors in relation
to the indemnity.
(25) Refer to market release "Dendrobium Next Domain Update" dated 23
August 2022. Based on average between FY24 and FY28, with outcomes to vary
depending on the timing of longwall moves. The information in this
announcement that relates to the Production Target for Appin (up to 2039) and
Dendrobium (up to 2032) of Illawarra Metallurgical Coal is based on 23% Proved
and 52% Probable Coal Reserves, and 20% Measured and 5% Indicated Coal
Resources from Wongawilli (Dendrobium), and 9% Proved and 91% Probable Coal
Reserves from Bulli (Appin). Production Target cautionary statement - The Coal
Resources and Coal Reserves estimates underpinning the Production Target have
been prepared by Competent Persons and reported in accordance with the JORC
Code. The Coal Resources and Coal Reserves estimates are available to view in
South32's FY22 Annual Report (http://www.south32.net) published on 9 September
2022. 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.
(26) 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.
(27) Underlying net finance costs and Underlying income tax expense are
actual FY23 results, not year-on-year variances.
(28) South32's ownership shares of operations are presented as follows:
Worsley Alumina (86% share), Brazil Alumina (36% share), Brazil Aluminium (40%
share), Hillside Aluminium (100%), Mozal Aluminium (63.7% share, noting that
the FY22 Income statement reflects only one month of our increased ownership
at 63.7% following the completion of the acquisition for an additional 16.6%
shareholding on 31 May 2022), Sierra Gorda (45% share), Cannington (100%),
Hermosa (100%), Cerro Matoso (99.9% share), Illawarra Metallurgical Coal
(100%), Australia Manganese (60% share), South Africa Manganese ore (54.6%
share) and South Africa Manganese alloy (60% share).
(29) 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.
(30) Underlying ETR is Underlying income tax expense, including royalty
related tax, divided by Underlying profit subject to tax.
(31) 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%. The South African corporate tax rate reduced from 28% to
27% from 1 July 2022. The Mozambique operations are subject to a royalty on
revenues instead of income tax.
(32) From 1 January 2023, the Colombian dividend withholding tax has
increased from 10% to 20% and income tax deductions are no longer available
for royalty payments. Cerro Matoso is subject to a royalty tax equal to 13.5%
of mine gate value which is included in operating cost.
(33) Australia Manganese is subject to a royalty related tax equal to
20% of adjusted EBIT which is included in Underlying tax expense.
(34) 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.
(35) FY23 net distributions from our material equity accounted joint
ventures comprises of dividends (US$223M), a net drawdown of shareholder loans
(US$50M) from manganese and a distribution (US$14M) from Sierra Gorda. The
distribution from Sierra Gorda comprised a repayment of US$14M of accrued
interest.
(36) Net interest paid excludes distributions from material equity
accounted investments.
(37) 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.
(38) FY24e and FY25e growth in copper equivalent production at our
aluminium (Brazil Aluminium, Hillside Aluminium and Mozal Aluminium) and
copper (Sierra Gorda) operations, compared to FY23 and FY24e. Copper
equivalent production was calculated using FY23 realised prices.
(39) Production guidance for Hillside Aluminium and Mozal Aluminium does
not assume any load-shedding impact on production.
(40) 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, FY24e and FY25e. FY22 realised prices
for copper (US$3.50/lb), molybdenum (US$18.48/lb), gold (US$1,934/oz) and
silver (US$23.5/oz) have been used for FY22 and FY23 on page 22.
(41) 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, FY24e and FY25e. FY22
realised prices for zinc (US$3,248/t), lead (US$2,046/t) and silver
(US$21.0/oz) have been used for FY22 and FY23 on page 23.
(42) 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 55 and 57.
(43) FY24 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.
(44) Peake Prospect Exploration Target: The information in this
announcement that relates to Exploration Results for Peake prospect is
extracted from the announcement entitled (Hermosa Project - Mineral Resource
Estimate Update and Exploration Results) published on 24 July 2023 and is
available to view on www.south32.net. The company confirms that it is not
aware of any new information or data that materially affects the information
included in the original market announcement. The company confirms that the
form and context in which the Competent Person's findings are presented have
not been materially modified from the original market announcement.
(45) Flux Exploration Target: The information in this announcement that
relates to the Exploration Target for Flux is extracted from the announcement
entitled (South32 Strategy and Business Update) published on 18 May 2021 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.
(46) FY23 Third party products and services sold comprise US$86M for
aluminium, US$25M for alumina, US$140M for coal, US$106M for freight services,
US$149M for raw materials and US$33M for manganese. Underlying EBIT on
third party products and services comprise (US$1M) for aluminium, US$13M for
alumina, US$11M for coal, (US$1M) for freight services, US$1M for raw
materials and nil for manganese. FY22 Third party products and services sold
comprise US$110M for aluminium, US$25M for alumina, US$115M for coal, US$145M
for freight services, US$165M for raw materials and US$40M for manganese.
Underlying EBIT on third party products and services comprise US$8M for
aluminium, US$8M for alumina, US$7M for coal, (US$3M) for freight services,
nil for raw materials and nil for manganese.
(47) Refer to market release "South32 completes acquisition of
additional shareholding in Mozal Aluminium" dated 31 May 2022. Historical
production and sales figures have not been restated for our increased
ownership (presented on a 47.1% basis to 31 May 2022).
(48) Presented on a 100% basis.
(49) 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.
(50) Cerro Matoso realised nickel sales price is inclusive of
by-products.
(51) Illawarra Metallurgical Coal revenue includes metallurgical coal
and energy coal sales revenue.
(52) Based on the CRU Cost Model 2022.
(53) Australia Manganese: The information in this announcement that
refers to Production Target and forecast financial information is based on
Proved (64%) and Probable (36%) Ore Reserves. The updated Mineral Resources
and Ore Reserves underpinning the Production Target was prepared by Competent
Persons and is an extract from our announcement entitled "Strategy and
Business update" dated 16 May 2023 and is available to view on
www.south32.net. The company confirms that it is not aware of any new
information or data that materially affects the information included in the
original market announcement and, that all material assumptions and technical
parameters underpinning the estimates in the relevant market announcement
continue to apply and have not materially changed. The company confirms that
the form and context in which the Competent Person's findings are presented
have not been materially modified from the original market announcement.
(54) 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.
(55) Manganese Australia FY23 average manganese content of external ore
sales was 43.8% on a dry basis (FY22: 44.2%). 96% of FY23 external manganese
ore sales (FY22: 96%) were completed on a CIF basis. FY23 realised FOB ore
prices and Operating unit costs have been adjusted for freight and marketing
costs of US$62M (FY22: US$96M), consistent with our FOB cost guidance.
(56) FOB Ore Operating unit cost is Underlying revenue less Underlying
EBITDA, freight and marketing costs, divided by ore sales volume.
(57) Manganese South Africa FY23 average manganese content of external
ore sales was 39.1% on a dry basis (FY22: 39.7%). 88% of FY23 external
manganese ore sales (FY22: 75%) were completed on a CIF basis. FY23 realised
FOB ore prices and Operating unit costs have been adjusted for freight and
marketing costs of US$61M (FY22: US$88M), consistent with our FOB cost
guidance.
Figures in Italics indicate that an adjustment has been made since the figures
were previously reported. The denotation (e) refers to an estimate or forecast
year.
The following abbreviations may be used throughout this report: US$ million
(US$M); US$ billion (US$B); financial year 2023 (FY23); 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 year ended 30 June 2023
BASIS OF PREPARATION
The financial information included in this document for the year ended 30 June
2023 is unaudited. The financial information does not constitute the Group's
full financial statements for the year ended 30 June 2023, which will be
approved by the Board, reported on by the auditors, and filed with the
Australian Securities and Investments Commission. The Group's full financial
statements will be prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board (AASB),
International Financial Reporting Standards (IFRS) and other authoritative
pronouncements of the International Accounting Standards Board (IASB).
The financial information set out on pages 32 to 47 for the year ended 30 June
2023 has been prepared on the basis of accounting policies and methods of
computation consistent with those applied in the 30 June 2022 financial
statements contained within the Annual Report of the Group. As required, and
unless otherwise stated, comparative financial information for the Group has
been presented.
All amounts are expressed in US dollars unless otherwise stated. The Group's
presentation currency (and the functional currency of the majority of its
operations) is US dollars as this is the principal currency of the economic
environment in which it operates.
Amounts in this financial information have, unless otherwise indicated, been
rounded to the nearest million dollars (US$M or US$ million).
consolidated income statement
for the year ended 30 June 2023
US$M FY23 FY22
Revenue:
Group production 6,795 8,522
Third party products and services 634 747
7,429 9,269
Other income 345 183
Expenses excluding finance costs (7,822) (6,000)
Share of profit/(loss) of equity accounted investments 246 272
Profit from operations 198 3,724
Comprising:
Group production 175 3,704
Third party products and services 23 20
Profit from operations 198 3,724
Finance income 222 79
Finance costs (207) (110)
Net finance income/(costs) 15 (31)
Profit before tax 213 3,693
Income tax expense (386) (1,024)
Profit/(loss) for the year (173) 2,669
Attributable to:
Equity holders of South32 Limited (173) 2,669
Profit/(loss) for the year attributable to equity holders of South32 Limited:
Basic earnings per share (cents) (3.8) 57.4
Diluted earnings per share (cents) (3.8) 57.0
The accompanying notes form part of the financial information.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2023
US$M FY23 FY22
Profit/(loss) for the year (173) 2,669
Other comprehensive income
Items that may be reclassified to the Consolidated Income Statement:
Share of other comprehensive income/(loss) of equity accounted investments 6 (4)
Total items that may be reclassified to the Consolidated Income Statement 6 (4)
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) (11) (78)
Income tax (expense)/benefit 3 24
Share of other comprehensive income/(loss) of equity accounted investments - 1
Gains/(losses) on pension and medical schemes 3 3
Income tax (expense)/benefit recognised within other comprehensive income (1) (1)
Total items that will not be reclassified to the Consolidated Income Statement (6) (51)
Total other comprehensive income/(loss) - (55)
Total comprehensive income/(loss) (173) 2,614
Attributable to:
Equity holders of South32 Limited (173) 2,614
The accompanying notes form part of the financial information.
CONSOLIDATED BALANCE SHEET
as at 30 June 2023
US$M FY23 FY22
ASSETS
Current assets
Cash and cash equivalents 1,258 2,365
Trade and other receivables 778 844
Other financial assets 1 1
Inventories 1,102 982
Current tax assets 54 4
Other assets 46 44
Total current assets 3,239 4,240
Non-current assets
Trade and other receivables 1,923 1,903
Other financial assets 118 64
Inventories 82 76
Property, plant and equipment 8,050 8,988
Intangible assets 242 186
Equity accounted investments 499 470
Deferred tax assets 390 394
Other assets 21 15
Total non-current assets 11,325 12,096
Total assets 14,564 16,336
LIABILITIES
Current liabilities
Trade and other payables 985 989
Interest bearing liabilities 365 402
Other financial liabilities - 6
Current tax payables 10 308
Provisions 194 186
Deferred income 6 6
Total current liabilities 1,560 1,897
Non-current liabilities
Trade and other payables 19 8
Interest bearing liabilities 1,376 1,425
Other financial liabilities 37 84
Deferred tax liabilities 210 307
Provisions 1,986 1,835
Deferred income 1 1
Total non-current liabilities 3,629 3,660
Total liabilities 5,189 5,557
Net assets 9,375 10,779
EQUITY
Share capital 13,251 13,469
Treasury shares (51) (32)
Reserves (3,553) (3,558)
Retained earnings/(accumulated losses) (271) 901
Total equity attributable to equity holders of South32 Limited 9,376 10,780
Non-controlling interests (1) (1)
Total equity 9,375 10,779
The accompanying notes form part of the financial information.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2023
US$M FY23 FY22
Operating activities
Profit before tax 213 3,693
Adjustments for:
Non-cash or non-operating significant items (186) (77)
Depreciation and amortisation expense 653 624
Net impairment loss/(reversal) of financial assets 71 26
Net impairment loss/(reversal) of non-financial assets 1,300 145
Employee share awards expense 24 23
Net finance (income)/costs (15) 31
Share of (profit)/loss of equity accounted investments (246) (272)
(Gains)/losses on derivative instruments, contingent consideration and (6) (29)
other investments measured at fair value through profit or loss (FVTPL)
Other non-cash or non-operating items (4) (18)
Changes in assets and liabilities:
Trade and other receivables 178 (300)
Inventories (126) (206)
Trade and other payables (45) 160
Provisions and other liabilities 3 (82)
Cash generated from operations 1,814 3,718
Interest received 78 66
Interest paid (109) (70)
Income tax paid (818) (868)
Dividends received 3 -
Dividends received from equity accounted investments 223 224
Net cash flows from operating activities 1,191 3,070
Investing activities
Purchases of property, plant and equipment (790) (522)
Exploration expenditure (98) (70)
Exploration expenditure expensed and included in operating cash flows 59 37
Purchase of intangibles (65) (4)
Investment in financial assets (179) (222)
Proceeds from financial assets 117 230
Payments related to the acquisition of subsidiaries and joint operations, net (25) (114)
of their cash
Payments related to the acquisition of equity accounted investments - (1,430)
Proceeds from sale of intangibles 73 -
Net cash flows from investing activities (908) (2,095)
Financing activities
Proceeds from interest bearing liabilities - 1,527
Repayment of interest bearing liabilities (133) (932)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts (33) (22)
Share buy-back (218) (128)
Dividends paid (1,007) (660)
Net cash flows from financing activities (1,391) (215)
Net increase/(decrease) in cash and cash equivalents (1,108) 760
Cash and cash equivalents, net of overdrafts, at the beginning of the year 2,365 1,613
Effect of foreign exchange rate changes on cash and cash equivalents 1 (8)
Cash and cash equivalents, net of overdrafts, at the end of the year 1,258 2,365
The accompanying notes form part of the financial information.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 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)) Retained earnings/ (accumulated losses) Total Non-controlling interests Total equity
Balance as at 1 July 2022 13,469 (32) (6) 45 (3,597) 901 10,780 (1) 10,779
Profit/(loss) for the year - - - - - (173) (173) - (173)
Other comprehensive income/(loss) - - (8) - 6 2 - - -
Total comprehensive income/(loss) - - (8) - 6 (171) (173) - (173)
Transactions with owners:
Dividends - - - - - (1,007) (1,007) - (1,007)
Shares bought back and cancelled (218) - - - - - (218) - (218)
Employee share entitlements for unvested awards, net of tax - - - 29 - - 29 - 29
Employee share awards vested and lapsed, net of tax - 14 - (22) - 6 (2) - (2)
Purchase of shares by ESOP Trusts - (33) - - - - (33) - (33)
Balance as at 30 June 2023 13,251 (51) (14) 52 (3,591) (271) 9,376 (1) 9,375
Balance as at 1 July 2021 13,597 (22) (22) 48 (3,593) (1,053) 8,955 (1) 8,954
Profit/(loss) for the year - - - - - 2,669 2,669 - 2,669
Other comprehensive income/(loss) - - (54) - (4) 3 (55) - (55)
Total comprehensive income/(loss) - - (54) - (4) 2,672 2,614 - 2,614
Transactions with owners:
Dividends - - - - - (660) (660) - (660)
Shares bought back and cancelled (128) - - - - - (128) - (128)
Employee share entitlements for unvested awards, net of tax - - - 27 - - 27 - 27
Employee share awards vested and lapsed, net of tax - 12 - (30) - 12 (6) - (6)
Purchase of shares by ESOP Trusts - (22) - - - - (22) - (22)
Transfer of cumulative fair value loss on an investment in equity instruments - - 70 - - (70) - - -
designated as FVOCI((4))
Balance as at 30 June 2022 13,469 (32) (6) 45 (3,597) 901 10,780 (1) 10,779
(1) Represents the fair value movement in financial assets designated
as FVOCI.
(2) Represents the accrued employee entitlements to share awards that
have not yet vested.
(3) Primarily consists of the common control transaction reserve of
US$3,569 million, which reflects the difference between consideration paid and
the carrying value of assets and liabilities acquired, as well as the
gains/(losses) on disposal of entities as part of the demerger of the Group in
2015.
(4) Relates to the acquisition of an additional 18.2 per cent
shareholding and related rights in Mineração Rio do Norte in FY22.
The accompanying notes form part of the financial information.
SEGMENT INFORMATIOn
(a) Description of segments
The operating segments (also referred to as operations) are organised and
managed separately according to the nature of products produced.
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 options 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 before net finance income/(costs), income tax
expense, royalty related 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 (including net finance
income/(costs)) 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.
SEGMENT INFORMATION (Continued)
FY23
US$M Worsley Alumina Brazil Brazil Aluminium Hillside Aluminium Mozal Aluminium Sierra Cannington Hermosa Cerro Illawarra Metallurgical Coal Australia Manganese((1)) Group and unallocated items/ eliminations Group underlying results((1))
Alumina
Matoso
Gorda((1))
South Africa Manganese((1))
Revenue from customers 1,364 456 166 1,822 888 682 554 - 698 1,664 720 369 (236) 9,147
Other((2)) (1) - - 1 (2) 2 (12) - - (21) (32) (25) (7) (97)
Total underlying revenue 1,363 456 166 1,823 886 684 542 - 698 1,643 688 344 (243) 9,050
Comprising:
Group production 642 395 166 1,823 886 684 542 - 698 1,643 688 344 - 8,511
Third party products and services((3)) - - - - - - - - - - - - 539 539
Inter-segment revenue 721 61 - - - - - - - - - - (782) -
Total underlying revenue 1,363 456 166 1,823 886 684 542 - 698 1,643 688 344 (243) 9,050
Underlying EBITDA 251 7 (129) 257 108 358 213 (15) 246 833 369 66 (30) 2,534
Underlying depreciation and amortisation (183) (52) (7) (66) (52) (141) (71) (4) (57) (141) (103) (21) (20) (918)
Underlying EBIT 68 (45) (136) 191 56 217 142 (19) 189 692 266 45 (50) 1,616
Comprising:
Group production 68 (51) (136) 191 56 221 148 (19) 191 696 266 46 (31) 1,646
Exploration expensed - - - - - (4) (6) - (2) (9) - (1) (42) (64)
Third party products and services((3)) - - - - - - - - - - - - 23 23
Share of profit/(loss) of equity accounted investments - 6 - - - - - - - 5 - - - 11
Underlying EBIT 68 (45) (136) 191 56 217 142 (19) 189 692 266 45 (50) 1,616
Underlying net finance costs (188)
Underlying income tax expense (457)
Underlying royalty related tax expense (55)
Underlying earnings 916
Total adjustments to profit/(loss)((4)) (1,089)
Profit/(loss) for the year (173)
Underlying exploration expenditure - - - - - 7 8 20 2 17 1 1 51 107
Underlying capital expenditure((5)) 82 58 9 18 17 196 61 256 38 248 58 25 3 1,069
Underlying equity accounted investments - 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$128
million and third party product revenue of US$33 million included in Group and
unallocated items/eliminations. Refer to Underlying results reconciliation for
the joint venture adjustments that reconcile the underlying proportional
consolidation to the statutory 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$86 million for aluminium, US$25 million for alumina, US$140
million for coal, US$33 million for manganese, US$106 million for freight
services and US$149 million for raw materials. Underlying EBIT on third party
products and services sold comprises US$(1) million for aluminium, US$13
million for alumina, US$11 million for coal, US$(1) million for freight
services and US$1 million for raw materials.
(4) Represents the total of all adjustments made to Profit from
operations, Net finance income/(costs) and Income tax expense. Refer to
Underlying results reconciliation for further details.
(5) Underlying capital expenditure excludes the purchase of intangibles
and capitalised exploration expenditure.
(6) Total underlying assets and liabilities for each operating segment
represent operating assets and liabilities which predominantly exclude the
carrying amount of non-material equity accounted investments, cash, interest
bearing liabilities, tax balances and certain other financial assets and
liabilities.
SEGMENT INFORMATION (CONTinUED)
FY22
US$M Worsley Alumina Brazil Brazil Aluminium Hillside Aluminium Mozal Aluminium Sierra Cannington Hermosa Cerro Illawarra Metallurgical Coal Australia Manganese((1)) Group and unallocated items/ eliminations Group underlying results((1))
Alumina
Matoso
Gorda((1))
South Africa Manganese((1))
Revenue from customers 1,626 522 - 2,257 925 280 771 - 927 2,336 833 418 (205) 10,690
Other((2)) (1) 2 - (3) (1) (39) (35) - 2 2 15 1 (3) (60)
Total underlying revenue 1,625 524 - 2,254 924 241 736 - 929 2,338 848 419 (208) 10,630
Comprising:
Group production 818 523 - 2,254 924 241 736 - 929 2,338 848 419 - 10,030
Third party products and services((3)) - - - - - - - - - - - - 600 600
Inter-segment revenue 807 1 - - - - - - - - - - (808) -
Total underlying revenue 1,625 524 - 2,254 924 241 736 - 929 2,338 848 419 (208) 10,630
Underlying EBITDA 571 150 (43) 730 305 133 388 (12) 529 1,507 488 78 (69) 4,755
Underlying depreciation and amortisation (185) (61) (1) (64) (34) (58) (73) (2) (66) (119) (86) (20) (19) (788)
Underlying EBIT 386 89 (44) 666 271 75 315 (14) 463 1,388 402 58 (88) 3,967
Comprising:
Group production 386 92 (44) 666 271 76 317 (14) 463 1,396 402 59 (82) 3,988
Exploration expensed - - - - - (1) (2) - - (9) - (1) (26) (39)
Third party products and services((3)) - - - - - - - - - - - - 20 20
Share of profit/(loss) of equity accounted investments - (3) - - - - - - - 1 - - - (2)
Underlying EBIT 386 89 (44) 666 271 75 315 (14) 463 1,388 402 58 (88) 3,967
Underlying net finance costs (155)
Underlying income tax expense (1,151)
Underlying royalty related tax expense (59)
Underlying earnings 2,602
Total adjustments to profit/(loss)((4)) 67
Profit/(loss) for the year 2,669
Underlying exploration expenditure - - - - - 2 3 19 - 11 1 1 37 74
Underlying capital expenditure((5)) 55 51 1 24 11 81 45 97 37 189 62 19 12 684
Underlying equity accounted investments - 40 - - - - - - - 2 - - - 42
Total underlying assets((6)) 3,571 805 67 1,284 764 1,614 555 2,098 592 1,277 645 331 3,666 17,269
Total underlying liabilities((6)) 1,000 109 21 357 149 212 414 67 243 491 387 196 2,844 6,490
(1) The segment information reflects the Group's interest in material
equity accounted joint ventures and is presented on a proportional
consolidation basis, which is the measure used by the Group's management to
assess their performance. 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$187
million and third party product revenue of US$40 million included in Group and
unallocated items/eliminations. Refer to Underlying results reconciliation for
the joint venture adjustments that reconcile the underlying proportional
consolidation to the statutory 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$110 million for aluminium, US$25 million for alumina, US$115
million for coal, US$40 million for manganese, US$145 million for freight
services and US$165 million for raw materials. Underlying EBIT on third party
products and services sold comprises US$8 million for aluminium, US$8 million
for alumina, US$7 million for coal and US$(3) 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
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.
UNDERLYING RESULTS RECONCILIATION
The following tables reconcile the underlying segment information to the
statutory financial information:
US$M FY23 FY22
Underlying EBIT 1,616 3,967
Significant items((1)) 186 77
Sierra Gorda joint venture adjustments((2)(3)) (144) (44)
Manganese joint venture adjustments((2)(4)) (147) (216)
Gains on the consolidation of interests in operations((5)) - 9
Exchange rate gains/(losses) on restatement of monetary items((6)) 62 50
Net impairment (loss)/reversal of financial assets((6)(7)) (71) (26)
Net impairment (loss)/reversal of non-financial assets((6)(8)) (1,300) (145)
Gains/(losses) on non-trading derivative instruments, contingent consideration (4) 52
and other investments measured at FVTPL((6))
Profit from operations 198 3,724
Underlying net finance costs (188) (155)
Sierra Gorda joint venture adjustments((2)) 167 62
Manganese joint venture adjustments((2)) 28 22
Exchange rate variations on net cash/(debt) 8 40
Net finance income/(costs) 15 (31)
Underlying income tax expense (457) (1,151)
Underlying royalty related tax expense (55) (59)
Tax effect of significant items((1)) (23) (26)
Sierra Gorda joint venture adjustments relating to income tax expense((2)) 11 1
Sierra Gorda joint venture adjustments relating to royalty related tax 12 4
expense((2))
Manganese joint venture adjustments relating to income tax expense((2)) 85 153
Manganese joint venture adjustments relating to royalty related tax 43 55
expense((2))
Tax effect of other adjustments to Underlying EBIT (3) 32
Tax effect of other adjustments to Underlying net finance costs (3) (13)
Exchange rate variations on tax balances 4 (20)
Income tax expense (386) (1,024)
Underlying earnings 916 2,602
Total adjustments to profit/(loss) (1,089) 67
Profit/(loss) for the year (173) 2,669
(1) Refer to Significant items.
(2) The segment information reflects the Group's interest in material
equity accounted joint ventures and is presented on a proportional
consolidation basis, which is the measure used by the Group's management to
assess their performance. Joint venture adjustments reconcile the proportional
consolidation to the statutory equity accounting positions, recognised in
share of profit/(loss) of equity accounted investments in the Consolidated
Income Statement.
(3) The Group's investment in the Sierra Gorda operation is represented
by the carrying value of an equity accounted investment of US$101 million
(FY22: US$30 million), and the carrying value of a purchased credit-impaired
receivable of US$1,711 million (FY22: US$1,648 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$71 million (FY22: gain of US$26 million) relating to the
shareholder loan payable that was eliminated from the Group's Underlying EBIT
upon proportional consolidation.
(4) Includes earnings adjustments of US$(3) million (FY22: US$6 million)
included in the Australia Manganese segment and US$12 million (FY22: US$8
million) included in the South Africa Manganese segment.
(5) FY22 gain relates to the acquisition of an additional 16.6 per cent
shareholding and related rights in Mozal Aluminium, recognised in other income
in the Consolidated Income Statement.
(6) Recognised in expenses excluding finance costs in the Consolidated
Income Statement.
(7) Refer to Impairment of financial assets.
(8) Refer to Impairment of non-financial assets.
FY23
US$M Group underlying results Sierra Gorda joint venture adjustments Manganese joint venture adjustments Group statutory results
Total revenue 9,050 (684) (937) 7,429
Depreciation and amortisation 918 (141) (124) 653
Share of profit/(loss) of equity accounted investments 11 71 164 246
Exploration expenditure 107 (7) (2) 98
Capital expenditure 1,069 (196) (83) 790
Equity accounted investments 58 101 340 499
Total assets 15,515 (450) (501) 14,564
Total liabilities 6,140 (450) (501) 5,189
UNDERLYING RESULTS RECONCILIATION (continued)
FY22
US$M Group underlying results Sierra Gorda joint venture adjustments Manganese joint venture adjustments Group statutory results
Total revenue 10,630 (241) (1,120) 9,269
Depreciation and amortisation 788 (58) (106) 624
Share of profit/(loss) of equity accounted investments (2) 30 244 272
Exploration expenditure 74 (2) (2) 70
Capital expenditure 684 (81) (81) 522
Equity accounted investments 42 30 398 470
Total assets 17,269 (452) (481) 16,336
Total liabilities 6,490 (452) (481) 5,557
Significant items
Significant items are those items, not separately identified in the Underlying
results reconciliation, whose nature and amount are considered material to the
Group's consolidated financial statements.
FY23
US$M Gross Tax Net
Disposal of royalties 189 (56) 133
Assets write-off (51) 16 (35)
Tax adjustments relating to the Sierra Gorda acquisition - 17 17
Vendor indemnity relating to the Sierra Gorda acquisition 48 - 48
Total significant items 186 (23) 163
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.
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 the year, the Group recognised an income tax benefit of US$31 million
relating to tax liabilities recognised on the acquisition of Sierra Gorda
during FY22. The US$31 million benefit comprises a reassessment of US$17
million and foreign exchange gain of US$14 million which is 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.
Vendor indemnity relating to the Sierra Gorda acquisition
On 17 May 2023, Chilean Mining Tax reforms were passed by the Chilean Congress
and subsequently enacted in August 2023. As part of the Group's acquisition of
Sierra Gorda during FY22, the Group has the right to claim an indemnity from
the vendors for any mining tax changes enacted prior to December 2025. As a
result of these changes the Group has recognised other income of US$48 million
in the Group's Consolidated Income Statement and a corresponding receivable of
US$48 million from the vendors on the Group's Consolidated Balance Sheet in
relation to the indemnity.
UNDERLYING RESULTS RECONCILIATION (continued)
Significant items (continued)
FY22
US$M Gross Tax Net
Recognition of indirect tax assets 77 (26) 51
Total significant items 77 (26) 51
Recognition of indirect tax assets
Following the Group's decision to participate in the restart of Brazil
Aluminium, the Group recognised indirect tax assets of US$77 million that were
previously expensed since the smelter was placed on care and maintenance in
2015. The recognition of the indirect tax assets has resulted in a significant
one-off amount of US$77 million (US$51 million post-tax) being recorded as
other income in the Consolidated Income Statement.
Impairment of financial assets
The Group recognised the following net impairment of financial assets:
US$M FY23 FY22
Trade and other receivables
Loans to equity accounted investments((1)) (71) (26)
(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 the Sierra Gorda operation is dependent on its financial
performance. At 30 June 2023, the Group updated its estimated timing of the
loan repayments and as a result recognised an impairment of US$71 million
(FY22: impairment of US$26 million) which is included in expenses excluding
finance costs in the Consolidated Income Statement. The future loan repayments
were informed by a production profile based on mineral resources and mineral
reserves that are qualifying foreign estimates under the ASX Listing Rules,
and costs based on 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.
For further information on the qualifying foreign estimates and production
profile, refer to market release "South32 to acquire a 45 per cent interest in
the Sierra Gorda Copper mine" dated 14 October 2021. The Group's technical
team has been reviewing available information in collaboration with the Sierra
Gorda operational team to verify the foreign resource and reserve estimates,
with the intention of enabling these estimates to be reported in accordance
with the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC Code). Following a review of all information,
we have updated the Mineral Resource estimate in accordance with the JORC
Code. Refer to market release "Sierra Gorda Mineral Resource declaration"
dated 24 August 2023 for additional information.
With respect to the mineral reserve estimate, the Group is not in possession
of any new information or data relating to the foreign estimate that
materially impacts on the reliability of the estimates or our ability to
verify the foreign mineral reserve estimates as Ore Reserves in accordance
with the JORC Code. The Group confirms that the information contained in our
14 October 2021 market release in relation to the mineral reserve foreign
estimates continues to apply and has not materially changed. The Competent
Person has not done sufficient work to classify the foreign estimates as Ore
Reserves in accordance with the JORC Code and it is uncertain at this time
whether, following evaluation and further exploration, the foreign estimates
will be able to be reported as Ore Reserves in accordance with the JORC Code.
UNDERLYING RESULTS RECONCILIATION (CONTINUED)
Impairment of non-financial assets
The Group recognised the following net impairment of non-financial assets:
US$M FY23 FY22
Impairment
Property, plant and equipment((1)) (1,300) (176)
Right-of-use assets((1)) - (7)
Intangible assets - (4)
Impairment reversal
Property, plant and equipment((2)) - 42
Net impairment of non-financial assets (1,300) (145)
(1) FY23 relates to a US$1,300 million impairment of the Taylor Deposit
at Hermosa. FY22 relates to a US$183 million impairment included in Group and
unallocated items in respect of Eagle Downs. This includes a US$176 million
impairment of property, plant and equipment and a US$7 million impairment of
right-of-use lease assets.
(2) FY22 relates to a US$42 million impairment reversal included in the
Brazil Aluminium segment.
Hermosa - Taylor Deposit
In August 2018, the Group completed its acquisition of the Hermosa project
located in Arizona, United States. The Hermosa project comprises the
zinc-lead-silver sulphide deposit (Taylor Deposit), the manganese-zinc-silver
oxide deposit (Clark Deposit) and a land package with the potential for
further polymetallic and copper mineralisation (Land Package). In FY23, the
Group advanced the feasibility study for the Taylor Deposit, completed a
pre-feasibility selection study for the Clark Deposit and announced that the
US Federal Permitting Improvement Steering Council, an independent federal
agency, had confirmed the Hermosa project as the first mining project added to
the FAST-41 process. Since acquisition, the fair value of the Taylor Deposit
has been negatively impacted by delayed first production as a result of
COVID-19 related restrictions and significant dewatering requirements, as well
as capital cost escalation in line with industry-wide inflation.
Recently completed study work confirmed that the Taylor Deposit and the Clark
Deposit can be developed independently. As a result, the Group identified
three separate areas of interest within the Hermosa project; the Taylor
Deposit, the Clark Deposit and the Regional Land Package. On separation into
three separate areas of interest, the Group allocated the carrying value of
the previous single Hermosa area of interest to each of the newly identified
and separate areas of interest.
As a result of the study work to date, the Group identified an impairment
indicator for the Taylor Deposit and recognised a resulting impairment of
property, plant and equipment of US$1,300 million in FY23 within expenses
excluding finance costs in the Consolidated Income Statement. The impairment
of US$1,300 million includes US$1,049 million recognised in other mineral
assets, US$119 million recognised in assets under construction and US$132
million recognised in exploration and evaluation. The recoverable amount of
the Taylor Deposit was determined as US$482 million based on its Fair Value
less Cost of Disposal (FVLCD).
The fair value measurement was categorised as a Level 3 fair value based on
the inputs in the discounted cashflow valuation model. The recoverable amount
was informed by inputs from the feasibility study in progress for the Taylor
Deposit, including the expected technical performance of the deposit as well
as expected capital and operating costs for the life of the operation. The
determination of FVLCD was most sensitive to:
- Zinc, lead and silver prices;
- Pre-production capital expenditure;
- Mineral Resource estimation;
- Development approvals; and
- Discount rate.
Zinc, lead and silver prices - The long-run zinc, lead, and silver prices, in
real terms, used in the FVLCD determinations were within the following ranges:
FY23 Assumptions used
Zinc (US$/t) 2,700 to 3,200
Lead (US$/t) 2,000 to 2,100
Silver (US$/oz) 20 to 22
UNDERLYING RESULTS RECONCILIATION (CONTINUED)
Impairment of non-financial assets (continued)
Hermosa - Taylor Deposit (continued)
Pre-production capital expenditure - The calculation of FVLCD includes an
estimate of pre-production capital to support the development of the Taylor
Deposit to its nameplate capacity of up to 4.3 million tonnes per annum. Key
inputs including steel, cement and electrical components are subject to
uncertainties, including industry-wide inflation.
Mineral Resource estimation - The Mineral Resource estimate of the Taylor
Deposit is reported in accordance with the JORC Code, and the ASX Listing
Rules Chapter 5: Additional reporting on mining and oil and gas production and
exploration activities. Refer to market release "Hermosa Project - Mineral
Resource Estimate and Exploration Results update" dated 24 July 2023 for an
update on the Taylor Deposit Mineral Resource estimate.
Development approvals - Construction is planned to commence in late FY24,
subject to a final investment decision for the Taylor Deposit. The addition of
the Hermosa project to the FAST-41 process has reduced the expected timing of
Federal environmental approvals and permits by approximately 2 years. A Record
of Decision (RoD) to permit surface disturbance and additional tailings
storage on unpatented land will require completion of the National
Environmental Policy Act process with the United States Forest Service. The
ramp-up to planned nameplate production could be impacted if the RoD is
delayed as production will have to be slowed due to tailings capacity
restrictions on patented lands.
Discount rate - In determining the FVLCD, a real US$ post tax discount rate
range of between 6 and 8 per cent was applied to discount future cash flows
expressed in real terms.
The following table illustrates the sensitivity of the recoverable amount of
the Taylor Deposit based on a reasonably possible change in key assumptions.
Owing to the complexity of the relationships between each key assumption, the
analysis was performed for each assumption individually (all other assumptions
held constant).
FY23 Change in assumption Impact on profit/(loss) after tax
US$M Favourable Unfavourable
Zinc prices 10% 235 (235)
Lead prices 10% 200 (200)
Silver prices 10% 120 (120)
Pre-production capital expenditure 10% 205 (205)
Discount rate 100 basis points 335 (275)
income tax expense
US$M FY23 FY22
Current income tax expense (476) (1,006)
Deferred income tax (expense)/benefit 90 (18)
Total income tax expense (386) (1,024)
DIVIDENDS
US$M FY23 FY22
Prior year final dividend((1)) 646 163
Prior year special dividend((1)) 138 93
Interim dividend((2)) 223 404
Total dividends declared and paid during the year 1,007 660
(1) On 25 August 2022, the Directors resolved to pay a fully franked
final dividend of US 14.0 cents per share (US$648 million) and a fully franked
special dividend of US 3.0 cents per share (US$139 million) in respect of the
2022 financial year. The dividends were paid on 13 October 2022. In addition
to the ESOP Trusts receiving dividends from South32 Limited, a total of
9,665,568 shares were bought back between the declaration and the ex-dividend
dates, therefore reducing the dividends paid externally to US$784 million.
(2) On 16 February 2023, the Directors resolved to pay a fully-franked
interim dividend of US 4.9 cents per share (US$224 million) in respect of the
2023 financial half year. The dividend was paid on 6 April 2023. In addition
to the ESOP Trusts receiving dividends from South32 Limited, a total of
3,292,746 shares were bought back between the declaration and the ex-dividend
dates, therefore reducing the dividend paid externally to US$223 million.
EARNINGS PER SHARE
Basic earnings per share (EPS) amounts are calculated based on profit or loss
attributable to equity holders of South32 Limited and the weighted average
number of shares outstanding during the year.
Dilutive EPS amounts are calculated based on profit or loss attributable to
equity holders of South32 Limited and the weighted average number of shares
outstanding after adjustment for the effects of all dilutive potential shares.
The following reflects the profit or loss and share data used in the basic and
diluted EPS computations:
Profit/(loss) attributable to equity holders
US$M FY23 FY22
Profit/(loss) attributable to equity holders of South32 Limited (basic) (173) 2,669
Profit/(loss) attributable to equity holders of South32 Limited (diluted) (173) 2,669
Weighted average number of shares
Million FY23 FY22
Basic EPS denominator((1)) 4,572 4,647
Shares contingently issuable under employee share ownership plans((2)) - 32
Diluted EPS denominator 4,572 4,679
(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.
(2) The diluted EPS calculation excludes 26,994,090 (FY22: nil) rights
which are considered anti-dilutive and are subject to service and performance
conditions.
Earnings per share
US cents FY23 FY22
Basic EPS (3.8) 57.4
Diluted EPS (3.8) 57.0
NET FINANCE Income/(COSTS)
US$M FY23 FY22
Finance income
Interest on loans to equity accounted investments 162 63
Other interest income 60 16
Total finance income 222 79
Finance costs
Interest on borrowings (68) (31)
Interest on lease liabilities (52) (53)
Discounting on provisions and other liabilities (92) (65)
Change in discount rate on closure and rehabilitation provisions - 2
Net interest expense on post-retirement employee benefits (3) (3)
Exchange rate variations on net debt 8 40
Total finance costs (207) (110)
Net finance income/(costs) 15 (31)
equity accounted investments
The Group's interest in equity accounted investments with the most significant
contribution to the Group's net profit/(loss) or net assets, are as follows:
Significant joint ventures Country of incorporation Principal activity Acquisition date Ownership interest %
FY23 FY22
Australia Manganese((1)) Australia Manganese ore mine 8 May 2015 60 60
South Africa Manganese((2)) South Africa Manganese ore mines 3 February 2015 60 60
Sierra Gorda((3)) Chile Copper mine 22 February 2022 45 45
(1) Australia Manganese consists of an investment in Groote
Eylandt Mining Company Pty Ltd (GEMCO).
(2) The Group holds a 60 per cent interest in Samancor Holdings
(Pty) Ltd (Samancor). Samancor indirectly owns 74 per cent of Hotazel
Manganese Mines (Pty) Ltd (HMM), which gives the Group its indirect legal
ownership interest of 44.4 per cent. The remaining 26 per cent of HMM is owned
by B-BBEE entities, of which 17 per cent of the interests were acquired using
vendor finance, with the loans repayable via distributions attributable to
these parties, pro rata to their share in HMM. Until these loans are repaid,
the Group's interest in HMM is accounted for at 54.6 per cent.
(3) Sierra Gorda consists of an investment in Sierra Gorda
Sociedad Contractual Minera.
Share of profit/(loss) of equity accounted investments FY23 FY22
US$M
Australia Manganese 120 211
South Africa Manganese 36 31
Sierra Gorda 71 30
Individually immaterial((1)) 19 -
Total 246 272
(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).
interests in joint operations
Significant joint operations of the Group, which are those with the most
significant contribution to the Group's net profit/(loss) or net assets, are
as follows:
Significant joint operations Country of operation Principal activity Acquisition date Effective interest %
FY23 FY22
Ambler Metals United States Base metals exploration and development option 11 February 2020 50 50
Brazil Alumina Brazil Integrated bauxite mine and alumina refinery 3 July 2014 36 36
Brazil Aluminium Brazil Aluminium smelter 3 July 2014 40 40
Eagle Downs Metallurgical Coal Australia Metallurgical coal exploration and development option 14 September 2018 50 50
Mozal Aluminium((1)) Mozambique Aluminium smelter 27 March 2015((2)) 63.7 63.7
Worsley Alumina((1)) Australia Integrated bauxite mine and alumina refinery 8 May 2015 86 86
(1) While the Group holds a greater than 50 per cent interest in
Worsley Alumina and Mozal Aluminium, participants jointly approve certain
matters and are entitled to receive their share of output from the
arrangement.
(2) The Group initially acquired a 47.1 per cent interest on 27
March 2015 and subsequently acquired a further 16.6 per cent interest on 31
May 2022.
SUBSEQUENT EVENTS
Capital management
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 will be paid on 12 October 2023. The dividends
have not been provided for in the consolidated financial statements and will
be recognised in the 2024 financial year.
On 24 August 2023, the Group also announced an increase to the existing
capital management program, announced in March 2017, of US$50 million to a
total of US$2.4 billion. This leaves US$133 million expected to be returned by
1 March 2024.
No other matters or circumstances have arisen since the end of the year that
have significantly affected, or may significantly affect, the operations,
results of operations or state of affairs of the Group in subsequent
accounting periods.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements, including statements about
trends in commodity prices and currency exchange rates; demand for
commodities; production forecasts; plans, strategies and objectives of
management; capital costs and scheduling; operating costs; anticipated
productive lives of projects, mines and operations; and provisions and
contingent liabilities. These forward-looking statements reflect expectations
at the date of this release, however they are not guarantees or predictions of
future performance. They involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, and which may cause
actual results to differ materially from those expressed in the statements
contained in this release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws or
regulations, the South32 Group does not undertake to publicly update or review
any forward-looking statements, whether as a result of new information or
future events. Past performance cannot be relied on as a guide to future
performance. South32 cautions against reliance on any forward looking
statements or guidance.
NON-IFRS FINANCIAL INFORMATION
This release includes certain non-IFRS financial measures, including
Underlying earnings, Underlying EBIT and Underlying EBITDA, Underlying
revenue, Underlying net finance costs, Underlying depreciation and
amortisation, Underlying operating costs, Underlying income tax expense,
Underlying royalty related tax expense, Basic Underlying earnings per share,
Underlying effective tax rate, Underlying EBIT margin, Underlying EBITDA
margin, Underlying return on capital, Free cash flow, net debt, net operating
assets and ROIC. These measures are used internally by management to assess
the performance of our business, make decisions on the allocation of our
resources and assess operational management. Non-IFRS measures have not been
subject to audit or review and should not be considered as an indication of or
alternative to an IFRS measure of profitability, financial performance or
liquidity.
NO OFFER OF SECURITIES
Nothing in this release should be read or understood as an offer or
recommendation to buy or sell South32 securities, or be treated or relied upon
as a recommendation or advice by South32.
NO FINANCIAL OR INVESTMENT ADVICE - SOUTH AFRICA
South32 does not provide any financial or investment 'advice' as that term is
defined in the South African Financial Advisory and Intermediary Services Act,
37 of 2002, and we strongly recommend that you seek professional advice.
further information
INVESTOR RELATIONS MEDIA RELATIONS
Ben Baker Jamie Macdonald Miles Godfrey
M +61 403 763 086
M +61 408 925 140
M +61 415 325 906
E Ben.Baker@south32.net E Jamie.Macdonald@south32.net E Miles.Godfrey@south32.net
Further information on South32 can be found at www.south32.net
(http://www.south32.net) .
South32 Limited (ABN 84 093 732 597)
Registered in Australia
(Incorporated in Australia under the Corporations Act 2001)
Registered Office: Level 35, 108 St Georges Terrace
Perth Western Australia 6000 Australia
ISIN: AU000000S320
Approved for release by Graham Kerr, Chief Executive Officer
JSE Sponsor: The Standard Bank of South Africa Limited
24 August 2023
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