REG - South32 Limited - Quarterly Report - June 2023
24/07/2023 07:15
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RNS Number : 8833G South32 Limited 24 July 2023
QUARTERLY REPORT
June 2023
· We achieved strong year-on-year growth in aluminium, copper and manganese,
setting three annual production records and realising the benefit of our
investments in commodities for a low-carbon future.
· Group copper equivalent production(1) increased by 9% in the June 2023
quarter, underpinned by a return to stable operations following adverse
weather and other temporary impacts in the prior quarter.
· FY23 Operating unit costs are expected to be in-line with our previously
updated guidance.
· Aluminium production increased by 14% in FY23, as Hillside Aluminium achieved
record production and we benefited from our investments in low-carbon
aluminium(2) capacity at Mozal Aluminium and Brazil Aluminium.
· Alumina production declined by 4% in FY23 due to temporary outages in the June
2023 quarter. Both refineries have returned to nameplate production rates and
FY24 guidance is unchanged.
· Base metals production increased by 17%(3) in FY23 as we embedded the Sierra
Gorda copper operation(4) in our portfolio, while our Cannington
zinc-lead-silver and Cerro Matoso nickel operations achieved revised guidance.
· Australia Manganese and South Africa Manganese achieved annual production
records, delivering a 4% increase in manganese production in FY23.
· Illawarra Metallurgical Coal achieved revised FY23 production guidance, with
improved longwall performance delivering a 21% increase in metallurgical coal
production in the June 2023 quarter.
· We advanced study work for our Taylor zinc-lead-silver and Clark battery-grade
manganese development options at our Hermosa project, the first mining project
in the United States to be covered by the FAST-41 process.
· Today, we announced an upgrade to the Mineral Resource estimate for the Taylor
deposit(5), and our best exploration drill results to date from our Peake
copper exploration prospect(6).
· We will record a non-cash impairment expense for our Taylor deposit in our
FY23 financial results(7), reflecting delays from the impact of COVID-19,
significant dewatering requirements and current inflationary market
conditions.
South32 Chief Executive Officer, Graham Kerr: "We had a strong finish to the
year, with Group copper equivalent production growing 9% in the quarter. Our
strong operating results included record annual production at Hillside
Aluminium, Australia Manganese and South Africa Manganese. Aluminium
production increased by 14% and base metals production by 17% in FY23,
supported by our recent investments in commodities critical to a low-carbon
future.
"We maintained our disciplined track record of capital allocation, returning a
record US$1.2B to shareholders in FY23 while continuing to invest in our
high-quality growth options.
"Significant milestones were achieved at our Hermosa project, as we advanced
our Taylor and Clark development options and returned exciting copper
exploration results from our Peake prospect. Hermosa was also confirmed as the
first mining project in the United States to be covered by the FAST-41
process, underlining its potential to strengthen the domestic supply of
critical minerals.
"We progressed our greenfield exploration programs, exercising our earn-in
right to acquire a 50.1% interest in the Chita Valley copper exploration
project, located in Argentina's highly prospective San Juan mineral belt.
"Looking forward, we are well placed to continue to capitalise on the global
energy transition. We expect to deliver further production growth in aluminium
and base metals in FY24, and our high-quality development options have the
potential to further strengthen our long-term supply of critical minerals."
Production summary
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 QoQ
Alumina production (kt) 5,288 5,101 (4%) 1,361 1,239 1,249 1%
Aluminium production (kt) 992 1,133 14% 255 279 286 3%
Payable copper production (kt) 25.3 70.7 179% 16.9 16.9 15.5 17.3 12%
Payable silver production (koz) 13,199 11,813 (11%) 2,836 2,479 3,522 42%
Payable lead production (kt) 120.6 101.7 (16%) 25.8 21.0 28.3 35%
Payable zinc production (kt) 64.5 59.2 (8%) 15.4 12.6 16.2 29%
Payable nickel production (kt) 41.7 40.8 (2%) 10.8 10.2 10.2 0%
Metallurgical coal production (kt) 5,712 5,497 (4%) 1,380 1,240 1,504 21%
Manganese ore production (kwmt) 5,432 5,653 4% 1,469 1,261 1,455 15%
Unless otherwise noted: percentage variance relates to performance during the
financial year ended June 2023 compared with the financial year ended June
2022 (YoY), or the June 2023 quarter compared with the March 2023 quarter
(QoQ); production and sales volumes are reported on an attributable basis.
Corporate Update
Sustainability
· We continue to implement a multi-year Safety Improvement Program that was
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 commenced in FY23 and will continue in FY24.
· We continue to advance decarbonisation programs to support our target(8) to
halve our operational greenhouse gas (GHG) emissions by 2035. Worsley Alumina
is on-track to convert its first coal fired boiler to natural gas in the
September 2023 quarter, improving energy security and supporting the
refinery's transition to lower carbon energy. The boiler conversion is
expected to reduce the refinery's operational GHG emissions by up to ~205,000
tonnes per annum or ~6% from FY22 levels.
Income statement items
· We expect to report FY23 Operating unit costs in-line with our previously
updated guidance.
· As announced today(7), we will record a non-cash impairment expense of
~U$1,300M for the Taylor deposit in our FY23 financial results, resulting in a
carrying value of ~US$1,001M for our Hermosa project as at 30 June 2023. The
carrying value of the Clark deposit and our regional exploration land package
is unchanged. The impairment expense will be excluded from FY23 Underlying
earnings.
The impairment of the Taylor deposit reflects the impact of delays due to
COVID-19, significant dewatering requirements, and current inflationary
pressures. There remains substantial opportunity to unlock additional value
across Taylor, Clark and our highly prospective regional exploration package
and that optionality is not included in the impairment assessment.
· FY23 Group Underlying depreciation and amortisation is expected to be
~US$920M, including ~US$125M for our manganese business and ~US$140M for
Sierra Gorda.
· FY23 Group Underlying net finance costs are expected to be ~US$190M.
Cash flow and balance sheet items
· We received net distributions(9) of US$173M (South32 share) from our manganese
equity accounted investments (EAI) in FY23. This included net distributions of
US$79M in the June 2023 quarter, as both Australia Manganese and South Africa
Manganese increased quarterly sales volumes.
· Our Sierra Gorda EAI invested in plant de-bottlenecking and study work for the
operation's fourth grinding line expansion. We received net distributions of
US$14M from our Sierra Gorda EAI in FY23.
· We received up-front cash proceeds of US$48M and deferred cash instalments of
US$27M from our sale of
non-core base metal royalties to Ecora Resources PLC (Ecora Resources) for up
to US$200M(10). We made tax payments of US$32M in relation to the sale during
FY23 and expect to pay US$16M in H1 FY24.
· FY23 Group safe and reliable and improvement and life extension capital
expenditure (excluding EAIs) is expected to be ~US$545M. Our share of safe and
reliable and improvement and life extension capital expenditure for our EAIs
is expected to be ~US$280M.
· We paid a record US$1,007M in fully-franked ordinary and special dividends
during FY23(11). We also returned US$218M to shareholders via our on-market
share buy-back, purchasing a further 83M shares at an average price of A$3.97
per share in FY23. Our US$2.3B capital management program is 96% complete with
US$83M remaining to be returned ahead of its extension or expiry on 1
September 2023(12).
Tax
· The Group made tax payments of US$818M in FY23, including US$115M in relation
to our Sierra Gorda acquisition. Of this amount, ~€92M (~US$94M at the
payment date) relates to pre-closing tax liabilities for Sierra Gorda which we
are seeking to recover from the vendors(13). No further acquisition related
tax payments are required.
· Our FY23 Group Underlying effective tax rate (ETR) is expected to be ~36%,
reflecting our geographical earnings mix and the corporate tax rates of the
jurisdictions in which we operate(14), including recent changes in Colombian
tax legislation(15). The Colombian tax changes, which were effective from
January 2023, are expected to increase the Group's Underlying ETR in future
periods.
Development and Exploration Update
We continue to actively reshape our portfolio, progressing our development and
greenfield exploration options to further enhance our exposure to commodities
critical to a low-carbon future.
We invested US$256M of growth capital expenditure at our Hermosa project in
FY23, achieving significant milestones. We progressed the feasibility study
for the Taylor zinc-lead-silver deposit, confirmed the potential to produce
battery-grade manganese from our Clark deposit, and installed critical path
dewatering infrastructure.
During the June 2023 quarter, Hermosa was confirmed by the US Federal
Permitting Improvement Steering Council as the first mining project to be
covered by the FAST-41 process, reflecting its status as currently the only
advanced project in the United States with the potential to supply two
federally designated critical minerals, zinc and manganese.
Greenfield exploration continues to play a critical role in our approach to
embedding growth options in base metals, with more than 25 options across our
partnerships and own properties. We consolidated our position in the highly
prospective San Juan mineral belt in Argentina during FY23, exercising our
earn-in right to acquire a 50.1% interest and operatorship in the Chita Valley
copper exploration project(16) and acquiring a 9.9% interest in Aldebaran
Resources Inc.(17).
Hermosa project - Taylor deposit
· The feasibility study for the Taylor deposit is on-track for H1 FY24, as we
align the mine development schedule for a federal permitting process under
FAST-41 and incorporate current market cost estimates. Feasibility study work
to date has validated the potential for a highly productive zinc-lead-silver
underground mine and conventional processing plant with a nameplate processing
rate of up to 4.3 million tonnes per annum.
· Today, we released an updated Mineral Resource estimate for the Taylor
deposit(5) that supports the ongoing feasibility study work. The Mineral
Resource estimate (Table A) has been upgraded to 153Mt, averaging 3.53% zinc,
3.83% lead and 77g/t silver. The upgrade includes a 41% increase in the
Measured Mineral Resource, providing a compelling base to underpin future
production. The deposit remains open in several directions, offering the
potential for further growth.
Table A: Mineral Resources for the Taylor deposit as at 30 June 2023(5)
Ore Type Measured Indicated Inferred Total
Mineral Resources Mineral Resources Mineral Resources Mineral Resources
Mt((b)) % % g/t Ag Mt((b)) % % g/t Ag Mt((b)) % % g/t Ag Mt((b)) % % g/t Ag
Zn Pb Zn Pb Zn Pb Zn Pb
UG Sulphide((a)) 41 4.22 4.25 67 83 3.38 3.91 76 28 2.96 2.97 93 153 3.53 3.83 77
Million dry metric tonnes((b)), % Zn - percent zinc, % Pb - percent lead, g/t
Ag - grams per tonne of silver.
Notes:
a) Cut-off grade: NSR of US$80/dmt for UG Sulphide. Input
parameters for the NSR calculation are based on South32's long-term forecasts
for zinc, lead and silver pricing; haulage, treatment, shipping, handling and
refining charges. Total metallurgical recovery assumptions differ between
geological domains and vary from 85% to 92% for zinc, 89% to 92% for lead, 76%
to 83% for silver.
b) All masses are reported as dry metric tonnes (dmt). All
tonnes and grade information have been rounded to reflect relative uncertainty
of the estimate, hence small differences may be present in the totals.
Hermosa project - Clark deposit
· We are progressing our Clark battery-grade manganese deposit through three
strategic pathways to de-risk the path to potential production:
o Progressing a single option to produce up to 185ktpa(18) of high-purity
manganese sulphate monohydrate (HPMSM) for the North American market through
pre-feasibility and feasibility stages, with initial production from a
demonstration plant, prior to a final investment decision;
o We have commenced pilot scale production to generate HPMSM for product
feedback from customers and inform demonstration plant design. We have
approved construction of a decline to provide access to ore to facilitate
demonstration scale production, with construction of the decline expected to
be completed by the end of CY25; and
o Engaging with potential customers, including the execution of multiple
non-binding, non-exclusive memorandums of understanding, to assist in our
market development, product quality and qualification requirements.
Hermosa project - Exploration
· We directed US$20M to capitalised exploration during FY23, completing multiple
exploration programs across Hermosa's highly prospective land package.
· Today, we released results from the four most recently completed exploration
drill holes at our Peake copper-lead-zinc-silver prospect(6), a lateral zone
prospective for copper mineralisation, located south of the Taylor deposit.
· The results include our best intercept at Peake to date, with diamond drill
hole HDS-813 returning a downhole intersection of 139m @ 1.88% copper, 0.51%
lead, 0.34% zinc and 52g/t silver at 2.49% CuEq(19) including 58.2m @ 3.1%
copper, 0.6% lead, 0.24% zinc, 74g/t silver and 0.015% molybdenum at 3.84%
CuEq(19). Further detail is shown in Table B below.
· We consider the results to be supportive of future exploration potential, with
the Peake prospect remaining open in several directions. Further exploration
drilling at Peake is planned in H1 FY24.
Table B: Selected Peake drilling results(6)
Hole ID From To Cut Off Width Zinc Lead Silver (ppm) Copper Molybdenum (%) CuEq(19)
(%)
(m) (m) (m) (%) (%) (%)
HDS-810 No Significant Intersection
HDS-813 1302.7 1441.7 0.2% Cu 139 0.34 0.51 52 1.88 - 2.49
Including
1315.1 1424 0.2% Cu 109 0.32 0.52 60 2.27 - 2.93
Including
1333.8 1392 0.2% Cu 58.2 0.24 0.6 74 3.1 0.015 3.84
HDS-814 1192.7 1545.6 0.2% Cu 353 0.1 0.2 12.1 0.28 - 0.45
Including
1242.4 1268 0.2% Cu 25.6 0 0 14.3 0.7 - 0.8
1442.3 1476.8 0.2% Cu 34.4 0.5 0.5 17.3 0.35 - 0.78
HDS-815 No Significant Intersection
Cross-section through the Taylor, Clark and Peake mineralisation domains
showing the previously reported and new exploration holes, simplified geology
and Taylor Thrust - looking east 2000m wide
Greenfield exploration
· We invested US$42M in our greenfield exploration opportunities during FY23, as
we progressed multiple programs targeting base metals in Australia, USA,
Canada, Argentina, Peru and Ireland.
· Following the end of the period, we commenced an inaugural exploration
drilling campaign at our 100% owned Roosevelt project in Alaska, targeting
potential copper and zinc mineralisation. The exploration program is scheduled
to be completed in H1 FY24.
Other exploration
· We invested US$65M (US$43M capitalised) in exploration programs at our
existing operations and development options during FY23, including US$20M at
the Hermosa project (noted above, all capitalised), US$9M at
Ambler Metals (all capitalised), US$2M for our manganese EAI (US$1M
capitalised) and US$7M for our Sierra Gorda EAI (US$3M capitalised).
Production Summary
Production guidance FY22 FY23 FY23e((a)) %((b)) Comments
(South32 share)
Worsley Alumina
Alumina production (kt) 3,991 3,839 4,000 96% Higher calciner availability in Q4 FY23, partially offset by a temporary
bauxite conveyor outage
Brazil Alumina (non-operated)
Alumina production (kt) 1,297 1,262 1,340 94% Temporary port infrastructure outage and maintenance in Q4 FY23
Brazil Aluminium (non-operated)
Aluminium production (kt) 0.3 68.9 75 92% Slower than expected
ramp-up of the smelter
Hillside Aluminium(20)
Aluminium production (kt) 714 719 720 100% Achieved record annual production despite elevated load-shedding
Mozal Aluminium(20, 21)
Aluminium production (kt) 278 345 340 101% Recovery plan delivered
as expected in Q4 FY23
Sierra Gorda (non-operated)
Payable copper equivalent production(22) (kt) 30.6 86.2 89.0 97% Stronger copper production in Q4 FY23, offset by lower molybdenum output
Payable copper production (kt) 25.3 70.7 71.8 98%
Payable molybdenum production (kt) 0.4 1.2 1.5 80%
Payable gold production (koz) 9.6 28.8 29.9 96%
Payable silver production (koz) 253 630 582 108%
Cannington
Payable zinc equivalent production(23) (kt) 224.2 195.6 195.9 100% Recovered from weather impacts in Q3 FY23
Payable silver production (koz) 12,946 11,183 11,000 102%
Payable lead production (kt) 120.6 101.7 102.0 100%
Payable zinc production (kt) 64.5 59.2 60.5 98%
Cerro Matoso
Payable nickel production (kt) 41.7 40.8 40.5 101% Resumed access to
higher-grade Q&P deposit
Illawarra Metallurgical Coal
Total coal production (kt) 6,509 6,520 6,500 100% Achieved improved longwall performance at Appin
Metallurgical coal production (kt) 5,712 5,497 5,500 100%
Energy coal production (kt) 797 1,023 1,000 102%
Australia Manganese
Manganese ore production (kwmt) 3,363 3,545 3,500 101% Achieved record annual production
South Africa Manganese
Manganese ore production (kwmt) 2,069 2,108 2,000 105% Achieved record annual production
a. The denotation (e) refers to an estimate or forecast year.
b. Reflects percentage of achieved production for FY23
compared to current FY23e.
marketing Update
Commodity prices were broadly lower in FY23 as we saw a moderation in demand
and sentiment following record conditions for many markets in the prior
period.
We delivered strong sales performance in the June 2023 quarter, supporting a
drawdown in inventory prior to the end of the period. We expect to record an
unwind in working capital in H2 FY23, offsetting the working capital build
experienced in H1 FY23 (H1 FY23: US$152M build).
The average realised prices achieved for our commodities are summarised below.
Outstanding concentrate sales were revalued at 30 June 2023 with the final
price of these to be determined in the December 2023 half year.
Realised prices(24) FY22 1H23 2H23 FY23 FY23 2H23
vs
vs
FY22
1H23
Worsley Alumina
Alumina (US$/t) 409 354 360 357 (13%) 2%
Brazil Alumina (non-operated)((a))
Alumina (US$/t) 403 364 374 369 (8%) 3%
Brazil Aluminium (non-operated)((a))
Aluminium (US$/t) - 2,423 2,464 2,452 N/A 2%
Hillside Aluminium
Aluminium (US$/t) 3,161 2,555 2,518 2,535 (20%) (1%)
Mozal Aluminium
Aluminium (US$/t) 3,348 2,723 2,573 2,653 (21%) (6%)
Sierra Gorda (non-operated)(25(a)(b))
Payable copper (US$/lb) 3.50 3.41 3.63 3.51 0% 6%
Payable molybdenum (US$/lb) 18.48 20.78 22.11 21.28 15% 6%
Payable gold (US$/oz) 1,934 1,688 1,971 1,821 (6%) 17%
Payable silver (US$/oz) 23.5 17.4 27.2 21.9 (7%) 56%
Cannington(25)
Payable silver (US$/oz) 21.0 20.1 22.1 21.1 0% 10%
Payable lead (US$/t) 2,046 2,008 1,824 1,919 (6%) (9%)
Payable zinc (US$/t) 3,248 2,436 1,895 2,151 (34%) (22%)
Cerro Matoso(26)
Payable nickel (US$/lb) 10.08 9.05 6.54 7.76 (23%) (28%)
Illawarra Metallurgical Coal
Metallurgical coal (US$/t) 381 268 289 279 (27%) 8%
Energy coal (US$/t) 156 164 122 144 (8%) (26%)
Australia Manganese(27)
Manganese ore (US$/dmtu, FOB) 5.29 4.57 4.62 4.59 (13%) 1%
South Africa Manganese(27)
Manganese ore (US$/dmtu, FOB) 3.92 3.57 3.59 3.58 (9%) 1%
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.
b. Published FY22 realised sales prices and Operating unit
costs 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).
Worsley Alumina (86% share)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Alumina production (kt) 3,991 3,839 (4%) 1,030 905 1,012 (2%) 12%
Alumina sales (kt) 3,974 3,817 (4%) 1,118 845 1,111 (1%) 31%
Worsley Alumina saleable production decreased by 4% (or 152kt), from record
levels in FY22, to 3,839kt in FY23.
Saleable production increased by 12% (or 107kt) to 1,012kt in the June 2023
quarter as improved calciner availability supported above nameplate production
rates (4.6Mtpa, 100% basis), partially offset by a temporary bauxite conveyor
outage. FY24 production guidance is unchanged at 4,000kt.
Sales increased by 31% in the June 2023 quarter with a carry-over shipment
from the prior quarter supporting a drawdown in inventory.
Brazil Alumina (36% share, NON-OPERATED)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Alumina production (kt) 1,297 1,262 (3%) 331 334 237 (28%) (29%)
Alumina sales (kt) 1,299 1,237 (5%) 367 317 242 (34%) (24%)
Brazil Alumina saleable production decreased by 3% (or 35kt) to 1,262kt in
FY23. The refinery reduced output in the June 2023 quarter to manage bauxite
inventories, following a temporary failure of a belt system from the port, and
unplanned maintenance was completed for one of the two bauxite ship unloaders.
The refinery has returned to nameplate production rates and FY24 guidance is
unchanged at 1,400kt.
FY23 Operating unit costs are expected to be ~US$365/t, reflecting the impact
of lower volumes in H2 FY23.
Brazil AluminIUM (40% share, NON-OPERATED)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Aluminium production (kt) 0.3 68.9 N/A 0.3 21.6 23.6 N/A 9%
Aluminium sales (kt) - 67.7 N/A - 22.5 25.8 N/A 15%
Brazil Aluminium saleable production was 68.9kt in FY23 following the restart
of all three potlines at the smelter. Production increased by 9% (or 2.0kt) to
23.6kt in the June 2023 quarter, which was below plan, as lower overhead crane
availability impacted pot restart activities and metal production. As a
result, fewer pots are in operation than planned, and we expect a delayed
ramp-up to nameplate capacity. We have reduced guidance for our share of FY24
production to 100kt (from 148kt) and expect to provide a revised timeline for
achieving nameplate capacity (179ktpa, our 40% share) with our FY23 financial
results announcement.
We expect to report sequentially lower Operating unit costs in H2 FY23 (H1
FY23: US$5,876/t) with FY23 Operating unit costs expected to be ~US$4,350/t,
ahead of the smelter's ramp-up to nameplate capacity.
Hillside Aluminium (100% SHARE)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Aluminium production (kt) 714 719 1% 179 177 180 1% 2%
Aluminium sales (kt) 713 719 1% 198 197 185 (7%) (6%)
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. FY24 production guidance is
unchanged at 720kt(20).
Mozal Aluminium (63.7%(21) share)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Aluminium production (kt) 278 345 24% 76 81 82 8% 1%
Aluminium sales (kt) 276 334 21% 88 43 114 30% 165%
Mozal Aluminium saleable production increased by 24% (or 67kt) to 345kt in
FY23, reflecting our increased ownership share(21). The smelter continued to
implement its recovery plan, delivering production of 82kt in the June 2023
quarter, exceeding revised production guidance. Nameplate production rates are
expected to be achieved in the December 2023 quarter, with FY24 production
guidance revised to 365kt(20).
Sales volumes increased by 165% (or 71kt) to 114kt in the June 2023 quarter as
production returned to 100% LME-grade quality by the end of the period and we
sold all below specification material produced in the prior quarter, at a
modest discount to our other LME-linked aluminium sales.
SIERRA GORDA (45% share)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Payable copper equivalent production(22) (kt) 30.6 86.2 182% 20.3 19.0 22.3 10% 17%
Payable copper production (kt) 25.3 70.7 179% 16.9 15.5 17.3 2% 12%
Payable copper sales (kt) 27.7 71.8 159% 16.6 15.4 18.0 8% 17%
Sierra Gorda payable copper equivalent production(22) was 86.2kt in FY23, or
97% of FY23 guidance, with molybdenum output below plan. The operation
delivered a strong finish to the year, increasing payable copper equivalent
production by 17% to 22.3kt in the June 2023 quarter with improved plant
availability.
The operation's plant de-bottlenecking project is on-track to support an
increase in plant throughput to ~48 to 49Mtpa (100% basis), as reflected in
our unchanged FY24 guidance of 87.5kt payable copper equivalent production.
Feasibility study work for the fourth grinding line is ongoing, with the
expansion supporting a potential further uplift in plant throughput to 57 to
58Mtpa (100% basis).
Cannington (100% share)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Payable zinc equivalent production(23) (kt) 224.2 195.6 (13%) 48.9 41.0 55.8 14% 36%
Payable silver production (koz) 12,946 11,183 (14%) 2,668 2,341 3,368 26% 44%
Payable silver sales (koz) 12,898 10,739 (17%) 3,362 2,412 3,244 (4%) 34%
Payable lead production (kt) 120.6 101.7 (16%) 25.8 21.0 28.3 10% 35%
Payable lead sales (kt) 122.2 99.0 (19%) 31.0 21.7 26.0 (16%) 20%
Payable zinc production (kt) 64.5 59.2 (8%) 15.4 12.6 16.2 5% 29%
Payable zinc sales (kt) 66.2 58.1 (12%) 16.1 8.8 21.8 35% 148%
Cannington payable zinc equivalent production(23) was 195.6kt in FY23, in-line
with revised guidance. The operation successfully recovered from severe wet
weather impacts in the March 2023 quarter, increasing payable zinc equivalent
production by 36% (or 14.8kt) to 55.8kt in the June 2023 quarter. FY24
guidance is unchanged at 215.3kt payable zinc equivalent production (silver
12,500koz, lead 115.0kt and zinc 62.0kt).
Payable zinc sales increased by 148% in the June 2023 quarter, as logistics
recovered from widespread flooding in the March 2023 quarter, supporting a
drawdown in inventory.
Cerro Matoso (99.9% share)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Payable nickel production (kt) 41.7 40.8 (2%) 10.8 10.2 10.2 (6%) 0%
Payable nickel sales (kt) 41.8 40.8 (2%) 11.9 10.6 10.4 (13%) (2%)
Cerro Matoso payable nickel production was 40.8kt in FY23, in-line with
revised guidance, as truck haulage from the higher-grade Q&P pit resumed
in the June 2023 quarter.
Looking forward, we expect nickel production guidance in FY24 to be largely
unchanged at 40.5kt, with the benefits of the Ore Sorting and Mechanical Ore
Concentration project partially offset by additional plant maintenance.
Sales decreased by 2% in the June 2023 quarter. Price realisations for our
ferronickel product remain dislocated from the LME Nickel Index due to market
dynamics, as reflected in our realised price for nickel sales of US$7.76/lb in
FY23.
Illawarra Metallurgical Coal (100% sHARE)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Total coal production (kt) 6,509 6,520 0% 1,583 1,436 1,753 11% 22%
Total coal sales (kt)(28) 6,606 6,359 (4%) 1,886 1,477 1,697 (10%) 15%
Metallurgical coal production (kt) 5,712 5,497 (4%) 1,380 1,240 1,504 9% 21%
Metallurgical coal sales (kt) 5,823 5,402 (7%) 1,588 1,195 1,529 (4%) 28%
Energy coal production (kt) 797 1,023 28% 203 196 249 23% 27%
Energy coal sales (kt) 783 957 22% 298 282 168 (44%) (40%)
Illawarra Metallurgical Coal saleable production was 6.5Mt in FY23, in-line
with revised guidance. Saleable production increased by 22% (or 317kt) to
1.75Mt in the June 2023 quarter, as the operation delivered improved longwall
performance at Appin, and completed a planned longwall move at Dendrobium.
FY24 production guidance is currently unchanged at 5.3Mt, with two longwall
moves planned at both Appin and Dendrobium during the year. Commencement of
the next longwall at Dendrobium, scheduled in Q1 FY24, remains subject to
regulatory approvals. If the necessary approvals are delayed, this would
impact production volumes from Dendrobium in FY24. We will provide an update
with our FY23 financial results announcement.
Metallurgical coal sales increased by 28% in the June 2023 quarter, as we
optimised our sales mix and achieved improved product availability.
Australia Manganese (60% share)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Manganese ore production (kwmt) 3,363 3,545 5% 844 832 869 3% 4%
Manganese ore sales (kwmt) 3,372 3,261 (3%) 860 743 866 1% 17%
Australia Manganese saleable production increased by 5% (or 182kwmt) to a
record of 3,545kwmt in FY23, as improved yields supported higher primary
concentrator output. Separately, our low-cost PC02 circuit continued to
operate above its design capacity, delivering ~11% of production (FY22: 11%).
Sales increased by 17% in the June 2023 quarter as we benefitted from improved
road haulage capacity and implemented alternative shipping solutions. This is
expected to support a further drawdown in inventory in the September 2023
quarter.
The operation's strong performance is expected to result in FY23 Operating
unit costs being ~5% below FY23 guidance of US$1.97/dmtu. Looking forward,
FY24 Operating unit costs are expected to be in a range of ~US$2.20/dmtu to
~US$2.25/dmtu, reflecting a higher planned strip ratio and increased haul
lengths.
South Africa Manganese (ore 54.6% share)
South32 share FY22 FY23 YoY 4Q22 3Q23 4Q23 4Q23 4Q23
vs
vs
4Q22
3Q23
Manganese ore production (kwmt) 2,069 2,108 2% 625 429 586 (6%) 37%
Manganese ore sales (kwmt) 2,170 2,065 (5%) 581 492 541 (7%) 10%
South Africa Manganese saleable production increased by 2% (or 39kwmt) to a
record of 2,108kwmt in FY23, exceeding guidance by 5%. The operation delivered
a strong finish to the year, increasing saleable production by 37% (or
157kwmt) to 586kwmt in the June 2023 quarter, including higher volumes of
premium material from the Mamatwan mine.
Sales increased by 10% in the June 2023 quarter with improved third-party
truck and rail availability, partially offset by loading delays at port due to
wet weather.
Notes
1. Group payable copper equivalent production in Q4 FY23, compared to Q3 FY23,
calculated by applying FY22 realised prices for all operations (except for
Brazil Aluminium which is based on FY22 average index prices for aluminium).
2. Refers to aluminium produced using renewable power.
3. Copper equivalent production at our base metals operations (Sierra Gorda,
Cannington and Cerro Matoso) in FY23, compared to FY22, calculated by applying
FY22 realised prices.
4. Refer to market release "South32 completes acquisition of 45% interest in
Sierra Gorda copper mine" dated 22 February 2022.
5. Mineral Resource Estimate: The information in this announcement that relates
to Mineral Resource estimate for Taylor deposit 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 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.
6. 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.
7. Refer to market release "Hermosa Project Non-Cash Impairment" dated 24 July
2023.
8. 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.
9. 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.
10. 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.
11. Comprised of US$784M in respect of the June 2022 half year returned in the
December 2022 quarter and US$223M in respect of the December 2022 half year
returned in the June 2023 quarter.
12. 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.
13. Tax payments of US$115M have been made to the Dutch tax authorities and
Australian Taxation Office in FY23.
14. 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. 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 tax expense.
15. 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 related tax equal to 13.5% of
mine gate value which is included in operating cost.
16. The transaction is expected to be completed in the March 2024 quarter.
17. South32 paid US$8M on completion of the transaction. Aldebaran Resources
Inc.'s key asset is an option to acquire a controlling interest in the Altar
copper project in San Juan, Argentina.
18. Refer to market release "Hermosa Project Update" dated 9 May 2023.
19. Percentage copper equivalent (% CuEq) accounts for combined value of Cu, Zn,
Pb and Ag. Metals are converted to % CuEq via unit value calculations using
long-term consensus metal price assumptions and relative metallurgical
recovery assumptions. Total metallurgical recoveries differ between geological
domains and vary from 85% to 92% for Zn, 89% to 92% for Pb, 76% to 83% for Ag
and 80% for Cu. Average payable metallurgical recovery assumptions are Zn 90%,
Pb 91%, Ag 81% and 80% for Cu. Metals pricing assumptions are South32's
long-term consensus prices as at the April 2023 quarter. The formula used for
calculation of copper equivalent is CuEq (%) = Cu (%) + 0.3965*Zn (%) + 0.2331
* Pb (%) + 0.0068 * Ag (g/t).
20. Production guidance for Hillside Aluminium and Mozal Aluminium does not assume
any load-shedding impact on production.
21. 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).
22. Payable copper equivalent production (kt) was calculated by aggregating
revenues from payable copper, molybdenum, gold and silver, and dividing the
total Revenue by the price of copper. FY22 realised prices for copper
(US$3.50/lb), molybdenum (US$18.48/lb), gold (US$1,934/oz) and silver
(US$23.5/oz) have been used for FY22, FY23, FY23e and FY24e.
23. 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. FY22 realised prices for zinc (US$3,248/t), lead (US$2,046/t)
and silver (US$21.0/oz) have been used for FY22, FY23, FY23e and FY24e.
24. Realised prices are unaudited. Volumes and prices do not include any third
party trading that may be undertaken independently of equity production.
Realised sales price is calculated as sales Revenue divided by sales volume
unless otherwise stated.
25. Realised prices for Sierra Gorda and Cannington are net of treatment and
refining charges.
26. Realised nickel sales prices are inclusive of by-products.
27. Realised ore prices are calculated as external sales Revenue less freight and
marketing costs, divided by external sales volume.
28. Illawarra Metallurgical Coal sales are adjusted for moisture and will not
reconcile directly to Illawarra Metallurgical Coal production.
The following abbreviations have been used throughout this report: US$ 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 FY22 FY23 4Q22 1Q23 2Q23 3Q23 4Q23
Worsley Alumina (86% share)
Alumina hydrate production (kt) 3,980 3,833 1,014 957 998 921 957
Alumina production (kt) 3,991 3,839 1,030 920 1,002 905 1,012
Alumina sales (kt) 3,974 3,817 1,118 885 976 845 1,111
Brazil Alumina (36% share)
Alumina production (kt) 1,297 1,262 331 337 354 334 237
Alumina sales (kt) 1,299 1,237 367 313 365 317 242
Brazil Aluminium (40% share)
Aluminium production (kt) 0.3 68.9 0.3 8.3 15.4 21.6 23.6
Aluminium sales (kt) - 67.7 - 3.3 16.1 22.5 25.8
Hillside Aluminium (100% share)
Aluminium production (kt) 714 719 179 179 183 177 180
Aluminium sales (kt) 713 719 198 162 175 197 185
Mozal Aluminium (63.7%(21) share)
Aluminium production (kt) 278 345 76 92 90 81 82
Aluminium sales (kt) 276 334 88 87 90 43 114
Sierra Gorda (45% share)
Ore mined (Mt) 13.7 26.0 9.0 8.8 6.6 5.1 5.5
Ore processed (Mt) 7.5 21.2 5.2 5.4 5.3 5.1 5.4
Copper ore grade processed (%, Cu) 0.42 0.42 0.40 0.45 0.44 0.40 0.40
Payable copper equivalent production(22) (kt) 30.6 86.2 20.3 22.6 22.3 19.0 22.3
Payable copper production (kt) 25.3 70.7 16.9 19.0 18.9 15.5 17.3
Payable copper sales (kt) 27.7 71.8 16.6 19.2 19.2 15.4 18.0
Payable molybdenum production (kt) 0.4 1.2 0.2 0.2 0.2 0.3 0.5
Payable molybdenum sales (kt) 0.6 1.3 0.5 0.3 0.5 0.2 0.3
Payable gold production (koz) 9.6 28.8 7.3 7.8 7.5 6.2 7.3
Payable gold sales (koz) 9.9 29.1 6.9 7.7 7.7 6.4 7.3
Payable silver production (koz) 253 630 168 180 158 138 154
Payable silver sales (koz) 282 639 171 179 166 137 157
Cannington (100% share)
Ore mined (kwmt) 2,753 2,223 641 639 484 469 631
Ore processed (kdmt) 2,618 2,156 552 518 624 452 562
Silver ore grade processed (g/t, Ag) 180 187 177 179 171 191 210
Lead ore grade processed (%, Pb) 5.4 5.6 5.5 5.6 5.4 5.5 5.8
Zinc ore grade processed (%, Zn) 3.5 3.8 3.8 3.7 3.6 3.8 4.0
Payable zinc equivalent production(23) (kt) 224.2 195.6 48.9 46.1 52.7 41.0 55.8
Payable silver production (koz) 12,946 11,183 2,668 2,568 2,906 2,341 3,368
Payable silver sales (koz) 12,898 10,739 3,362 1,704 3,379 2,412 3,244
Payable lead production (kt) 120.6 101.7 25.8 24.6 27.8 21.0 28.3
Payable lead sales (kt) 122.2 99.0 31.0 18.7 32.6 21.7 26.0
Payable zinc production (kt) 64.5 59.2 15.4 14.0 16.4 12.6 16.2
Payable zinc sales (kt) 66.2 58.1 16.1 14.9 12.6 8.8 21.8
Cerro Matoso (99.9% share)
Ore mined (kwmt) 4,867 5,560 1,141 1,332 1,420 1,189 1,619
Ore processed (kdmt) 2,703 2,807 678 666 726 713 702
Ore grade processed (%, Ni) 1.73 1.62 1.71 1.63 1.65 1.58 1.62
Payable nickel production (kt) 41.7 40.8 10.8 9.6 10.8 10.2 10.2
Payable nickel sales (kt) 41.8 40.8 11.9 9.0 10.8 10.6 10.4
Illawarra Metallurgical Coal (100%)
Total coal production (kt) 6,509 6,520 1,583 1,595 1,736 1,436 1,753
Total coal sales(28) (kt) 6,606 6,359 1,886 1,390 1,795 1,477 1,697
Metallurgical coal production (kt) 5,712 5,497 1,380 1,270 1,483 1,240 1,504
Metallurgical coal sales (kt) 5,823 5,402 1,588 1,193 1,485 1,195 1,529
Energy coal production (kt) 797 1,023 203 325 253 196 249
Energy coal sales (kt) 783 957 298 197 310 282 168
Australia Manganese (60% share)
Manganese ore production (kwmt) 3,363 3,545 844 898 946 832 869
Manganese ore sales (kwmt) 3,372 3,261 860 779 873 743 866
Ore grade sold (%, Mn) 44.2 43.9 44.2 44.3 44.1 44.0 43.1
South Africa Manganese (54.6% share)
Manganese ore production (kwmt) 2,069 2,108 625 562 531 429 586
Manganese ore sales (kwmt) 2,170 2,065 581 473 559 492 541
Ore grade sold (%, Mn) 39.7 39.2 39.4 38.5 39.8 38.8 39.4
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.Godrey@south32.net
Approved for release to the market by Graham Kerr, Chief Executive Officer
JSE Sponsor: The Standard Bank of South Africa Limited
24 July 2023
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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