REG - South32 Limited - Quarterly Report December 2023
22/01/2024 07:00
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RNS Number : 3752A South32 Limited 22 January 2024
QUARTERLY REPORT
December 2023
• FY24 Group copper equivalent production guidance reduced by 3%(1), reflecting
revised guidance for Brazil Alumina, Mozal Aluminium and molybdenum output
from Sierra Gorda.
• H1 FY24 Operating unit costs expected to be in line or below FY24 guidance for
the majority of our operations.
• We are well positioned to capture the benefit of improved market conditions
through expected production growth of 7%(2) in H2 FY24 and our ongoing focus
on cost efficiencies.
• Achieved record half year aluminium production, as Hillside Aluminium
maintained its strong performance and Brazil Aluminium delivered an 8%
increase in quarterly production.
• Cannington payable zinc equivalent production(3) increased by 13% in the
December 2023 half year, as we mined a higher-grade sequence of stopes during
the quarter.
• Cerro Matoso payable nickel production improved by 20% in the quarter,
following the completion of planned maintenance and a temporary reduction in
third-party gas supply in the prior quarter.
• Sierra Gorda payable copper equivalent(4) production decreased by 14% in the
December 2023 half year, due to lower planned copper grades, and a temporary
outage of the molybdenum plant.
• Illawarra Metallurgical Coal production decreased by 39% in the December 2023
half year, as we completed two planned longwall moves. FY24 guidance is
unchanged with volumes remaining weighted to the second half.
• Manganese production decreased by 5% in the December 2023 half year, as lower
yields impacted secondary production at Australia Manganese, and South Africa
Manganese completed planned maintenance.
• Alumina production was largely unchanged as Worsley Alumina completed planned
calciner maintenance, while we have lowered FY24 production guidance for
Brazil Alumina by 7% due to third-party power outages and maintenance.
• FY24 production guidance for Mozal Aluminium lowered by 12%, as we reduced
pots in operation to enable the smelter's recovery plan to be safely executed
and deliver a sustained improvement in process stability.
• We continued our investment in critical path infrastructure for the Hermosa
project and remain on track to make a final investment decision for the Taylor
zinc-lead-silver deposit in the March 2024 quarter.
South32 Chief Executive Officer, Graham Kerr: "In the December 2023 quarter,
our production results were mixed. Highlights for the quarter included a 20
per cent increase in zinc and nickel and a 7 per cent increase in silver. We
also delivered record aluminium production for the half, as Hillside Aluminium
maintained its strong performance and Brazil Aluminium continued to ramp up.
However, production from Brazil Alumina, Mozal Aluminium and molybdenum output
from Sierra Gorda was below plan, with flow on impacts to annual production
guidance.
"With some of our commodities facing headwinds in the half, we continued to
focus on delivering cost efficiencies and expect first half Operating unit
costs to be below or in line with guidance for the majority of our operations.
"As we enter the second half, strengthening market conditions for many of our
commodities, our planned 7 per cent production growth and ongoing cost
management focus, position us well to capture higher margins.
"We continued to invest to increase our exposure to commodities critical to a
low-carbon future. At our Hermosa project, we progressed critical path
infrastructure and remain on track to make a final investment decision for the
Taylor zinc-lead-silver deposit in the March 2024 quarter. Sierra Gorda also
continued work on the fourth grinding line expansion project, which has the
potential to sustainably increase copper production."
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 QoQ
Alumina production (kt) 2,613 2,574 (1%) 1,356 1,290 1,284 (0%)
Aluminium production (kt) 568 575 1% 289 288 287 (0%)
Payable copper production (kt) 37.9 31.6 (17%) 18.9 16.0 15.6 (3%)
Payable silver production (koz) 5,812 6,999 20% 3,064 3,375 3,624 7%
Payable lead production (kt) 52.4 58.8 12% 27.8 28.5 30.3 6%
Payable zinc production (kt) 30.4 29.0 (5%) 16.4 13.2 15.8 20%
Payable nickel production (kt) 20.4 18.3 (10%) 10.8 8.3 10.0 20%
Metallurgical coal production (kt) 2,753 1,787 (35%) 1,483 1,043 744 (29%)
Manganese ore production (kwmt) 2,937 2,790 (5%) 1,477 1,518 1,272 (16%)
Unless otherwise noted: percentage variance relates to performance during the
half year ended December 2023 compared with the half year ended December 2022
(HoH), or the December 2023 quarter compared with the September 2023 quarter
(QoQ); production and sales volumes are reported on an attributable basis.
Corporate Update
• Supporting our commitment to deliver improved safety performance, we continued
to implement our multi-year Safety Improvement Program. This program includes
significant investment in safety leadership through our 'Lead Safely Every
Day' training, which continued to be deployed across our frontline leadership
during the quarter.
• We progressed a Group-wide review focused on delivering a reduction in
expenditure in FY24 and FY25 through cost efficiencies and capital
prioritisation. We expect to provide further detail on this as part of our
updated Operating unit cost and capital expenditure guidance with our H1 FY24
financial results announcement.
• We expect to record a build in working capital of ~US$275M in H1 FY24. Trade
receivables increased due to the timing of sales, and our high value aluminium
inventory remained temporarily elevated as port congestion at Richards Bay
impacted the timing of shipments from Hillside Aluminium. We expect to
complete additional shipments from Hillside Aluminium and drawdown our
aluminium inventory to normalised levels during the March 2024 quarter.
• We received net distributions(5) of US$60M (South32 share) from our equity
accounted investments (EAI) in H1 FY24 (US$42M from our manganese business and
US$18M from Sierra Gorda), which reflected lower commodity prices and
investment in projects to improve productivity and grow future production
volumes.
• We allocated US$375M to safe and reliable, and improvement and life extension,
capital expenditure(6) (excluding EAIs) in H1 FY24. This included our planned
investment to support Illawarra Metallurgical Coal's transition to a more
efficient single longwall configuration at the Appin mine from FY25 and
additional ventilation capacity to enable mining in Appin's Area 7 until at
least 2039(7).
• We returned US$145M in fully-franked ordinary dividends in respect of H2 FY23
during the December 2023 quarter.
• We also returned US$35M via our on-market share buy-back in H1 FY24,
purchasing a further 16M shares at an average price of A$3.37. To 31 December
2023, our US$2.4B capital management program was 96% complete with US$98M
remaining to be returned ahead of its extension or expiry on 1 March 2024(8).
• We made Group tax payments of US$96M (excluding EAIs) in H1 FY24 as cash tax
normalised following one-off portfolio related tax payments in the prior
period.
• During the December 2023 quarter, we received an indemnity payment of US$48M
from the vendors of our Sierra Gorda acquisition, following Chilean Mining Tax
reforms that were enacted in August 2023. This amount was recognised as a
receivable in our FY23 financial accounts.
• Our Underlying effective tax rate (ETR) largely reflects the corporate tax
rates and royalty related taxes of the jurisdictions in which we operate
operate(9) and our geographical earnings mix, including our manganese and
Sierra Gorda EAIs on a proportional consolidated basis (including royalty
related taxes for Australia Manganese(10) and Sierra Gorda(11)). The impact of
permanent differences can have a disproportionate effect on our Underlying ETR
when profit margins are compressed, or losses are incurred in specific
jurisdictions. For this reason, an Underlying ETR of approximately 60% to 65%
is now expected for H1 FY24.
• We expect to report H1 FY24 Group Underlying net finance costs of ~US$120M,
reflecting the Group's balance sheet position during the period.
Development and Exploration Update
Hermosa project
• We invested US$188M of growth capital expenditure in H1 FY24 as we progressed
construction of key infrastructure for our Taylor zinc-lead-silver and Clark
battery-grade manganese deposits.
• The second water treatment plant was commissioned and made operational and a
further two dewatering wells were completed. Dewatering is a critical path
item that will enable access to both the Taylor and Clark deposits.
• We progressed the feasibility study and independent peer review for the Taylor
deposit which remain on track to support a final investment decision in the
March 2024 quarter.
• The FAST-41(12) federal permitting process progressed to the next stage, with
the US Forest Service issuing a completeness determination for our mine plan
of operations for both the Taylor and Clark deposits.
• We directed US$14M to capitalised exploration in H1 FY24, commencing a first
time exploration drilling program at the Flux prospect(13), a priority target
in our highly prospective regional land package.
Greenfield exploration
• We invested US$19M in our greenfield exploration opportunities in H1 FY24 with
multiple exploration programs targeting base metals currently underway in
Australia, USA, Canada, Argentina, and Ireland.
• We also invested US$8M to increase our interest in Aldebaran Resources Inc.
(Aldebaran Resources) to 14.8%. Aldebaran Resources has an earn-in to acquire
an 80% interest in the Altar copper project in San Juan, Argentina.
Other exploration
• We invested US$34M (US$27M capitalised) in exploration programs at our
existing operations and development options in H1 FY24, including US$14M at
the Hermosa project (noted above, all capitalised), and US$6M for our Sierra
Gorda EAI (all capitalised).
Production Summary
Production guidance FY23 1H24 FY24e((a)) Comments
(South32 share)
Worsley Alumina
Alumina production (kt) 3,839 1,934 4,000 Guidance unchanged
Brazil Alumina (non-operated)
Alumina production (kt) 1,262 640 ↓1,300 Guidance reduced by 7% (from 1,400kt) due to third-party power outages and
maintenance
Brazil Aluminium (non-operated)
Aluminium production (kt) 69 50 100 Guidance unchanged
Hillside Aluminium(14)
Aluminium production (kt) 719 359 720 Guidance unchanged
Mozal Aluminium(14)
Aluminium production (kt) 345 166 ↓320 Guidance reduced by 12% (from 365kt) as we reduced pots in operation to enable
a sustained improvement in process stability
Sierra Gorda (non-operated)
Payable copper equivalent production(4) (kt) 86.5 38.6 ↓78.7 Molybdenum guidance reduced to 0.8kt (from 2.5kt) due to an unplanned
molybdenum plant outage and low recoveries
Payable copper production (kt) 70.7 31.6 67.0
Payable molybdenum production (kt) 1.2 0.5 ↓0.8
Payable gold production (koz) 28.8 13.4 22.5
Payable silver production (koz) 630 295 550
Cannington
Payable zinc equivalent production(3) (kt) 259.6 147.2 287.2 Guidance unchanged
Payable silver production (koz) 11,183 6,704 12,500
Payable lead production (kt) 101.7 58.8 115.0
Payable zinc production (kt) 59.2 29.0 62.0
Cerro Matoso
Payable nickel production (kt) 40.8 18.3 40.5 Guidance unchanged with higher nickel grades expected H2 FY24
Illawarra Metallurgical Coal
Total coal production (kt) 6,520 2,045 5,000 Guidance unchanged with volumes weighted to H2 FY24 due to planned longwall
moves
Metallurgical coal production (kt) 5,497 1,787 4,400
Energy coal production (kt) 1,023 258 600
Australia Manganese
Manganese ore production (kwmt) 3,545 1,679 3,400 Guidance unchanged, subject to potential wet season impacts
South Africa Manganese
Manganese ore production (kwmt) 2,108 1,111 2,000 Guidance unchanged, subject to demand and our continued use of higher cost
trucking
a. The denotation (e) refers to an estimate or forecast year.
marketing Update
Commodity prices were broadly lower in the December 2023 half year reflecting
a moderation in demand and sentiment.
The average realised prices achieved for our commodities are summarised below.
Outstanding concentrate sales were revalued at 31 December 2023 with the final
price of these to be determined in the June 2024 half year.
Realised prices(15) 1H23 2H23 1H24 1H24 1H24
vs
vs
1H23
2H23
Worsley Alumina
Alumina (US$/t) 354 360 344 (3%) (4%)
Brazil Alumina (non-operated)((a))
Alumina (US$/t) 364 374 362 (1%) (3%)
Brazil Aluminium (non-operated)((a))
Aluminium (US$/t) 2,423 2,464 2,275 (6%) (8%)
Hillside Aluminium
Aluminium (US$/t) 2,555 2,518 2,318 (9%) (8%)
Mozal Aluminium
Aluminium (US$/t) 2,723 2,573 2,377 (13%) (8%)
Sierra Gorda (non-operated)(16(a))
Payable copper (US$/lb) 3.41 3.63 3.56 4% (2%)
Payable molybdenum (US$/lb) 20.78 22.11 20.82 0% (6%)
Payable gold (US$/oz) 1,688 1,971 1,957 16% (1%)
Payable silver (US$/oz) 17.4 27.2 23.3 34% (14%)
Cannington(16)
Payable silver (US$/oz) 20.1 22.1 22.5 12% 2%
Payable lead (US$/t) 2,008 1,824 1,979 (1%) 8%
Payable zinc (US$/t) 2,436 1,895 2,085 (14%) 10%
Cerro Matoso(17)
Payable nickel (US$/lb) 9.05 6.54 6.00 (34%) (8%)
Illawarra Metallurgical Coal
Metallurgical coal (US$/t) 268 289 276 3% (4%)
Energy coal (US$/t) 164 122 101 (38%) (17%)
Australia Manganese(18)
Manganese ore (US$/dmtu, FOB) 4.57 4.62 3.79 (17%) (18%)
South Africa Manganese(18)
Manganese ore (US$/dmtu, FOB) 3.57 3.59 3.03 (15%) (16%)
a. While Brazil Alumina and Brazil Aluminium are non-operated,
South32 owns the marketing rights for our share of production. While Sierra
Gorda is also non-operated, the Joint Venture is responsible for marketing our
share of production.
OPERATING UNIT COST UPDATE
We expect to report H1 FY24 Operating unit costs in line or below current FY24
guidance for the majority of our operations, with the benefit of cost
efficiencies and lower raw material input prices. Looking forward, we remain
focused on driving operating performance and further efficiencies to mitigate
cost pressures. Further, Operating unit costs in H2 FY24 are expected to
benefit from a planned 7% increase in Group production volumes(2).
The below commentary reflects our current expectations for H1 FY24 Operating
unit costs. We will report H1 FY24 Operating unit costs and provide updated
FY24 guidance with our H1 FY24 financial results announcement.
Operating unit cost((a))
Current Guidance H1 FY24 Operating unit costs commentary
FY24e((b)(c))
Worsley Alumina
(US$/t) 290 Expected to be ~10% below current FY24 guidance, due to lower caustic soda
prices and labour costs.
Brazil Alumina (non-operated)
Not Expected to be ~12.5% below H2 FY23 Operating unit costs (US$372/t), due to
higher volumes, and lower caustic soda and energy prices.
provided
Brazil Aluminium (non-operated)
Not Expected to be ~7.5% above H2 FY23 Operating unit costs (US$3,747/t), due to
lower sales volumes, ahead of further export sales in H2 FY24.
provided
Hillside Aluminium
Not
provided
The cost profile of our South African aluminium smelters is heavily influenced
by the South African rand, and the price of raw materials and energy.
H1 FY24 Operating unit costs for Hillside Aluminium are expected to be largely
in line with H2 FY23 (US$2,092/t).
H1 FY24 Operating unit costs for Mozal Aluminium are expected to be ~2.5%
lower than H2 FY23 (US$2,433/t). Operating unit costs are expected to remain
elevated in H2 FY24 due to higher pots out of service.
Mozal Aluminium
Sierra Gorda (non-operated)
(US$/t)((d)) 16.0 Expected to be ~17.5% above current FY24 guidance, due to higher maintenance
costs, and a planned one-off workforce payment.
Cannington
(US$/t)((d)) 155 Expected to be ~2.5% below current FY24 guidance.
Cerro Matoso
(US$/lb) 5.30 Expected to be ~5% above current FY24 guidance, due to lower volumes, more
than offsetting lower price-linked royalties.
Illawarra Metallurgical Coal
(US$/t) 140 Expected to be ~20% above current FY24 guidance, due to the volume impact of
planned longwall moves completed in H1 FY24. Annual production volumes remain
weighted to H2 FY24.
Australia Manganese (FOB)
(US$/dmtu) 2.15 Expected to be in line with current FY24 guidance.
South Africa Manganese (FOB)
(US$/dmtu) 2.60 Expected to be in line with current FY24 guidance.
a. Operating unit cost is Revenue less Underlying EBITDA,
excluding third party sales, divided by sales volumes.
b. FY24e Operating unit cost guidance includes royalties
(where appropriate) and commodity price and foreign exchange rate forward
curves or our
internal expectations (refer to footnote 19).
c. The denotation (e) refers to an estimate or forecast year.
d. US dollar per tonne of ore processed. Periodic movements in
finished product inventory may impact Operating unit costs.
Worsley Alumina (86% share)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Alumina production (kt) 1,922 1,934 1% 1,002 972 962 (4%) (1%)
Alumina sales (kt) 1,861 1,898 2% 976 913 985 1% 8%
Worsley Alumina saleable production increased by 1% (or 12kt) to 1,934kt in
the December 2023 half year. FY24 production guidance remains unchanged at
4,000kt with the refinery expected to deliver at nameplate production rates
(4.6Mt, 100% basis) following planned calciner maintenance in the March 2024
quarter.
Brazil Alumina (36% share, NON-OPERATED)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Alumina production (kt) 691 640 (7%) 354 318 322 (9%) 1%
Alumina sales (kt) 678 647 (5%) 365 272 375 3% 38%
Brazil Alumina saleable production decreased by 7% (or 51kt) to 640kt in the
December 2023 half year. Following the recovery from the prior period's port
infrastructure outages, the refinery was impacted by third-party power outages
and unplanned maintenance. Due to these impacts and additional required
maintenance, we have reduced FY24 production guidance by 7% to 1,300kt and
FY25 production guidance by 5% to 1,350kt.
Sales increased by 38% in the December 2023 quarter with a carry-over shipment
from the prior quarter supporting a drawdown in inventory.
Brazil AluminIUM (40% share, NON-OPERATED)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Aluminium production (kt) 24 50 108% 15 24 26 73% 8%
Aluminium sales (kt) 19 40 111% 16 8 32 100% 300%
Brazil Aluminium saleable production increased by 26kt to 50kt in the December
2023 half year as the smelter continued to ramp up all three potlines. FY24
production guidance remains unchanged at 100kt.
Sales increased by 24kt to 32kt in the December 2023 quarter as we completed
our first export shipment of low-carbon aluminium from the smelter, supporting
a significant drawdown in inventory at the end of the period.
Hillside Aluminium (100% SHARE)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Aluminium production (kt) 362 359 (1%) 183 180 179 (2%) (1%)
Aluminium sales (kt) 337 327 (3%) 175 170 157 (10%) (8%)
Hillside Aluminium saleable production decreased by 1% (or 3kt) to 359kt in
the December 2023 half year as the smelter continued to test its maximum
technical capacity, despite the impact of elevated load-shedding. FY24
production guidance remains unchanged at 720kt(14).
Sales decreased by 8% in the December 2023 quarter as three shipments
totalling approximately 40kt were delayed to January 2024 due to port
congestion at Richards Bay. We expect to drawdown inventory to normalised
levels during the March 2024 quarter.
Mozal Aluminium (63.7% share)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Aluminium production (kt) 182 166 (9%) 90 84 82 (9%) (2%)
Aluminium sales (kt) 177 167 (6%) 90 77 90 0% 17%
Mozal Aluminium saleable production decreased by 9% (or 16kt) to 166kt in the
December 2023 half year, as the smelter continued to implement its recovery
plan following the fatal safety incident in the prior period, while managing
the impact of elevated load-shedding.
The smelter progressed upgrades to the girder infrastructure during the
December 2023 quarter, which resulted in an unplanned reduction in crane
availability. We took the decision to reduce the number of pots in operation
to enable the recovery plan to be safely executed and complete work designed
to deliver a sustained improvement in process stability. As a result,
approximately 73 pots (~13% of the total) were out of operation at the end of
quarter, with these pots expected to be progressively returned to operation
during the 2024 calendar year. FY24 production guidance has been reduced by
12% to 320kt(14) to reflect the lower number of pots in operation. FY25
production guidance is currently unchanged at 372kt(14).
During the December 2023 quarter, approximately 60% of production was below
specification material, which attracts product discounts compared to our other
LME-linked aluminium sales. Metal quality is expected to progressively improve
to LME-grade quality during the June 2024 half year.
SIERRA GORDA (45% share)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Payable copper equivalent production(4) (kt) 44.8 38.6 (14%) 22.3 20.3 18.3 (18%) (10%)
Payable copper production (kt) 37.9 31.6 (17%) 18.9 16.0 15.6 (17%) (3%)
Payable copper sales (kt) 38.4 32.5 (15%) 19.2 15.3 17.2 (10%) 12%
Sierra Gorda payable copper production decreased by 17% (or 6.3kt) to 31.6kt
in the December 2023 half year as higher throughput delivered by the plant
de-bottlenecking project, was more than offset by lower planned grades.
Payable molybdenum production decreased by 0.3kt to 0.1kt in the December 2023
quarter due to an unplanned outage of the molybdenum plant and low recoveries.
The operation has commenced work to restore production, with higher output
expected in the June 2024 quarter. As a result, FY24 molybdenum production
guidance has been reduced to 0.8kt (from 2.5kt).
Sierra Gorda progressed the feasibility study for the fourth grinding line
expansion during the December 2023 quarter. The feasibility study remains on
track to support a planned final investment decision in the June 2024 half
year.
Cannington (100% share)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Payable zinc equivalent production(3) (kt) 130.8 147.2 13% 69.7 70.3 76.9 10% 9%
Payable silver production (koz) 5,474 6,704 22% 2,906 3,230 3,474 20% 8%
Payable silver sales (koz) 5,083 6,529 28% 3,379 2,873 3,656 8% 27%
Payable lead production (kt) 52.4 58.8 12% 27.8 28.5 30.3 9% 6%
Payable lead sales (kt) 51.3 56.6 10% 32.6 25.6 31.0 (5%) 21%
Payable zinc production (kt) 30.4 29.0 (5%) 16.4 13.2 15.8 (4%) 20%
Payable zinc sales (kt) 27.5 28.3 3% 12.6 13.9 14.4 14% 4%
Cannington payable zinc equivalent production(3) increased by 13% (or 16.4kt)
to 147.2kt in the December 2023 half year as the mine plan moved through a
sequence of higher-grade stopes in the quarter. FY24 production guidance
remains unchanged at 287.2kt payable zinc equivalent production (silver
12,500koz, lead 115.0kt and zinc 62.0kt).
Cerro Matoso (99.9% share)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Payable nickel production (kt) 20.4 18.3 (10%) 10.8 8.3 10.0 (7%) 20%
Payable nickel sales (kt) 19.8 18.0 (9%) 10.8 8.5 9.5 (12%) 12%
Cerro Matoso payable nickel production decreased by 10% (or 2.1kt) to 18.3kt
in the December 2023 half year. Production improved by 20% (or 1.7kt) in the
December 2023 quarter following the completion of planned maintenance and a
temporary reduction in third-party gas supply in the prior quarter. FY24
production guidance remains unchanged at 40.5kt, with higher nickel grades
expected in the June 2024 half year.
Price realisations for our ferronickel product reflected a discount of ~29% to
the LME Nickel Index(19), as structural changes in the nickel market continued
to place pressure on both nickel prices and discounts for our ferronickel
product. Along with the Group-wide cost review, we have commenced a strategic
review of Cerro Matoso to evaluate options to enhance the operation's
competitive position.
Illawarra Metallurgical Coal (100% sHARE)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Total coal production (kt) 3,331 2,045 (39%) 1,736 1,168 877 (49%) (25%)
Total coal sales(21) (kt) 3,185 2,096 (34%) 1,795 1,196 900 (50%) (25%)
Metallurgical coal production (kt) 2,753 1,787 (35%) 1,483 1,043 744 (50%) (29%)
Metallurgical coal sales (kt) 2,678 1,759 (34%) 1,485 996 763 (49%) (23%)
Energy coal production (kt) 578 258 (55%) 253 125 133 (47%) 6%
Energy coal sales (kt) 507 337 (34%) 310 200 137 (56%) (32%)
Illawarra Metallurgical Coal saleable production decreased by 39% (or 1,286kt)
to 2,045kt in the December 2023 half year as the operation completed two
planned longwall moves, including a planned extended outage at the Dendrobium
mine. A new four year industrial agreement covering deputies at the Appin mine
was finalised in the December 2023 quarter.
FY24 production guidance remains unchanged at 5.0Mt with volumes remaining
weighted to the June 2024 half year, reflecting the shorter duration of the
two remaining longwall moves to be completed during the June 2024 quarter.
Australia Manganese (60% share)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Manganese ore production (kwmt) 1,844 1,679 (9%) 946 890 789 (17%) (11%)
Manganese ore sales (kwmt) 1,652 1,864 13% 873 940 924 6% (2%)
Australia Manganese saleable production decreased by 9% (or 165kwmt) to
1,679kwmt in the December 2023 half year, as PC02 output declined due to lower
yields, contributing 7% of total production (H1 FY23: 10%). FY24 production
guidance remains unchanged at 3,400kwmt with the operation expected to
continue to achieve strong primary output and return the PC02 circuit to
nameplate production rates during the June 2024 quarter.
Sales increased by 13% in the December 2023 half year as improved road haulage
capacity and alternative shipping solutions supported a planned drawdown in
inventory. Our average realised price for manganese ore sales was a discount
of approximately 5% to the high grade 44% manganese lump ore index(22) on a
M-1 basis (FY23: 6% discount), reflecting lower planned ore grades, as well as
price realisations for our PC02 product.
South Africa Manganese (ore 54.6% share)
South32 share 1H23 1H24 HoH 2Q23 1Q24 2Q24 2Q24 vs 2Q23 2Q24 vs 1Q24
Manganese ore production (kwmt) 1,093 1,111 2% 531 628 483 (9%) (23%)
Manganese ore sales (kwmt) 1,032 1,082 5% 559 518 564 1% 9%
South Africa Manganese saleable production increased by 2% (or 18kwmt) to
1,111kwmt in the December 2023 half year, while production decreased by 23%
(or 145kwmt) in the December 2023 quarter as we completed a planned
maintenance shut at our Mamatwan mine. FY24 production guidance remains
unchanged at 2,000kwmt.
Sales increased by 9% in the December 2023 quarter with a carry-over shipment
from the prior quarter. Our realised price for manganese ore sales was a
premium of approximately 5% to the medium grade 37% manganese lump ore
index(23) on a M-1 basis (FY23: 6% premium) as we continued to optimise our
sales mix.
Notes
1. Group payable copper equivalent production based on revised
FY24 production guidance, calculated by applying FY23 realised prices for all
operations.
2. Group payable copper equivalent production in H2 FY24e,
compared to H1 FY24, calculated by applying FY23 realised prices for all
operations.
3. Payable zinc equivalent production (kt) was calculated by
aggregating revenues from payable silver, lead and zinc, and dividing the
total Revenue by the price of zinc. FY23 realised prices for zinc
(US$2,151/t), lead (US$1,919/t) and silver (US$21.1/oz) have been used for
FY23, H1 FY24 and FY24e.
4. Payable copper equivalent production (kt) was calculated by
aggregating revenues from copper, molybdenum, gold and silver, and dividing
the total Revenue by the price of copper. FY23 realised prices for copper
(US$3.51/lb), molybdenum (US$21.28/lb), gold (US$1,821/oz) and silver
(US$21.9/oz) have been used for FY23, H1 FY24 and FY24e.
5. Net distributions from our material equity accounted
investments (EAI) (manganese and Sierra Gorda) includes dividends and net
repayments/drawdowns of shareholder loans, which are unaudited and should not
be considered as an indication of or alternative to an IFRS measure of
profitability, financial performance or liquidity.
6. Group safe and reliable capital expenditure and improvement
and life extension capital expenditure (excluding EAIs). FY24 guidance is
US$690M.
7. The information in this announcement that relates to the
Production Target for Appin (up to 2039) of Illawarra Metallurgical Coal is
based on 21% Proved and 79% Probable Coal Reserves from Bulli (Appin).
Production Target cautionary statement - The Coal Reserves estimates
underpinning the Production Target have been prepared by Competent Persons and
reported in accordance with the JORC Code. The Coal Resources and Coal
Reserves estimates are available to view in South32's FY23 Annual Report
(http://www.south32.net) published on 8 September 2023. The stated Production
Target is based on South32's current expectations of future results or events
and should not be solely relied upon by investors when making investment
decisions. Further evaluation work and appropriate studies are required to
establish sufficient confidence that this target will be met.
8. Since inception, US$1.7B has been allocated to the
on-market share buy-back (795M shares at an average price of A$3.05 per share)
and US$525M returned in the form of special dividends.
9. 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 Mozambique operations are subject to a
royalty on revenues instead of income tax.
10. Australia Manganese is subject to a royalty related tax equal to
20% of adjusted EBIT which is included in Underlying tax expense.
11. 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.
12. Refer to market release "Hermosa Project Update" dated 8 May
2023. In May 2023, our Hermosa project was confirmed by the US Federal
Permitting Improvement Steering Council, an independent federal agency, as the
first mining project added to the FAST-41 process.
13. 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.
14. Production guidance for Hillside Aluminium and Mozal Aluminium
does not assume any load-shedding impact on production.
15. Realised prices are unaudited. Volumes and prices do not include
any third party trading that may be undertaken independently of equity
production. Realised sales price is calculated as sales Revenue divided by
sales volume unless otherwise stated.
16. Realised prices for Sierra Gorda and Cannington are net of
treatment and refining charges.
17. Realised nickel sales prices are inclusive of by-products.
18. Realised ore prices are calculated as external sales Revenue
less freight and marketing costs, divided by external sales volume.
19. 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.
20. Our realised price for nickel sales during the December 2023
half year was US$6.00/lb, which represented a ~29% discount to the average LME
Nickel index price of US$8.49/lb.
21. Illawarra Metallurgical Coal sales are adjusted for moisture and
will not reconcile directly to Illawarra Metallurgical Coal production.
22. The sales volume weighted average of the Metal Bulletin 44%
manganese lump ore index (CIF Tianjin, China) on the basis of a one-month lag
to published pricing (Month minus one or "M-1") was US$4.40/dmtu in the
December 2023 half year.
23. The sales volume weighted average of the Metal Bulletin 37%
manganese lump ore index (FOB Port Elizabeth, South Africa) on the basis of a
M-1 basis was US$2.89/dmtu in the December 2023 half year.
The following abbreviations have been used throughout this report: US$ million
(US$M); US$ billion (US$B); 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); million
wet metric tonnes per annum (Mwmt pa); dry metric tonne unit (dmtu); thousand
dry metric tonnes (kdmt).
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.
Operating Performance
South32 share 1H23 1H24 2Q23 3Q23 4Q23 1Q24 2Q24
Worsley Alumina (86% share)
Alumina hydrate production (kt) 1,955 1,934 998 921 957 973 961
Alumina production (kt) 1,922 1,934 1,002 905 1,012 972 962
Alumina sales (kt) 1,861 1,898 976 845 1,111 913 985
Brazil Alumina (36% share)
Alumina production (kt) 691 640 354 334 237 318 322
Alumina sales (kt) 678 647 365 317 242 272 375
Brazil Aluminium (40% share)
Aluminium production (kt) 24 50 15 22 24 24 26
Aluminium sales (kt) 19 40 16 23 26 8 32
Hillside Aluminium (100% share)
Aluminium production (kt) 362 359 183 177 180 180 179
Aluminium sales (kt) 337 327 175 197 185 170 157
Mozal Aluminium (63.7% share)
Aluminium production (kt) 182 166 90 81 82 84 82
Aluminium sales (kt) 177 167 90 43 114 77 90
Sierra Gorda (45% share)
Ore mined (Mt) 15.4 11.9 6.6 5.1 5.5 5.9 6.0
Ore processed (Mt) 10.7 10.9 5.3 5.1 5.4 5.5 5.4
Copper ore grade processed (%, Cu) 0.45 0.37 0.44 0.40 0.40 0.37 0.38
Payable copper equivalent production(4) (kt) 44.8 38.6 22.3 19.2 22.5 20.3 18.3
Payable copper production (kt) 37.9 31.6 18.9 15.5 17.3 16.0 15.6
Payable copper sales (kt) 38.4 32.5 19.2 15.4 18.0 15.3 17.2
Payable molybdenum production (kt) 0.4 0.5 0.2 0.3 0.5 0.4 0.1
Payable molybdenum sales (kt) 0.8 0.7 0.5 0.2 0.3 0.4 0.3
Payable gold production (koz) 15.3 13.4 7.5 6.2 7.3 6.3 7.1
Payable gold sales (koz) 15.4 13.8 7.7 6.4 7.3 6.3 7.5
Payable silver production (koz) 338 295 158 138 154 145 150
Payable silver sales (koz) 345 300 166 137 157 140 160
Cannington (100% share)
Ore mined (kwmt) 1,123 1,150 484 469 631 551 599
Ore processed (kdmt) 1,142 1,139 624 452 562 562 577
Silver ore grade processed (g/t, Ag) 175 211 171 191 210 206 216
Lead ore grade processed (%, Pb) 5.5 6.0 5.4 5.5 5.8 5.8 6.2
Zinc ore grade processed (%, Zn) 3.6 3.4 3.6 3.8 4.0 3.2 3.6
Payable zinc equivalent production(3) (kt) 130.8 147.2 69.7 54.3 74.5 70.3 76.9
Payable silver production (koz) 5,474 6,704 2,906 2,341 3,368 3,230 3,474
Payable silver sales (koz) 5,083 6,529 3,379 2,412 3,244 2,873 3,656
Payable lead production (kt) 52.4 58.8 27.8 21.0 28.3 28.5 30.3
Payable lead sales (kt) 51.3 56.6 32.6 21.7 26.0 25.6 31.0
Payable zinc production (kt) 30.4 29.0 16.4 12.6 16.2 13.2 15.8
Payable zinc sales (kt) 27.5 28.3 12.6 8.8 21.8 13.9 14.4
Cerro Matoso (99.9% share)
Ore mined (kwmt) 2,752 2,183 1,420 1,189 1,619 940 1,243
Ore processed (kdmt) 1,392 1,317 726 713 702 594 723
Ore grade processed (%, Ni) 1.64 1.55 1.65 1.58 1.62 1.57 1.53
Payable nickel production (kt) 20.4 18.3 10.8 10.2 10.2 8.3 10.0
Payable nickel sales (kt) 19.8 18.0 10.8 10.6 10.4 8.5 9.5
Illawarra Metallurgical Coal (100% share)
Total coal production (kt) 3,331 2,045 1,736 1,436 1,753 1,168 877
Total coal sales(21) (kt) 3,185 2,096 1,795 1,477 1,697 1,196 900
Metallurgical coal production (kt) 2,753 1,787 1,483 1,240 1,504 1,043 744
Metallurgical coal sales (kt) 2,678 1,759 1,485 1,195 1,529 996 763
Energy coal production (kt) 578 258 253 196 249 125 133
Energy coal sales (kt) 507 337 310 282 168 200 137
Australia Manganese (60% share)
Manganese ore production (kwmt) 1,844 1,679 946 832 869 890 789
Manganese ore sales (kwmt) 1,652 1,864 873 743 866 940 924
Ore grade sold (%, Mn) 44.2 42.6 44.1 44.0 43.1 42.9 42.2
South Africa Manganese (54.6% share)
Manganese ore production (kwmt) 1,093 1,111 531 429 586 628 483
Manganese ore sales (kwmt) 1,032 1,082 559 492 541 518 564
Ore grade sold (%, Mn) 39.2 38.7 39.8 38.8 39.4 39.0 38.4
Forward-looking statements
This release contains forward-looking statements, including statements about
trends in commodity prices and currency exchange rates; demand for
commodities; production forecasts; plans, strategies and objectives of
management; capital costs and scheduling; operating costs; anticipated
productive lives of projects, mines and facilities; and provisions and
contingent liabilities. These forward-looking statements reflect expectations
at the date of this release, however they are not guarantees or predictions of
future performance. They involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, and which may cause
actual results to differ materially from those expressed in the statements
contained in this release. Readers are cautioned not to put undue reliance on
forward-looking statements. Except as required by applicable laws or
regulations, the South32 Group does not undertake to publicly update or review
any forward-looking statements, whether as a result of new information or
future events.
Past performance cannot be relied on as a guide to future performance. South32
cautions against reliance on any forward-looking statements or guidance.
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
Approved for release to the market by Graham Kerr, Chief Executive Officer
JSE Sponsor: The Standard Bank of South Africa Limited
22 January 2024
South32 Limited
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32; ADR: SOUHY
ISIN: AU000000S320
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