REG - South32 Limited - Quarterly Report - March 2023
24/04/2023 07:15
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RNS Number : 1427X South32 Limited 24 April 2023
QUARTERLY REPORT
March 2023
· Group copper equivalent production(1) increased by 7% year to date, as our
recent investments delivered strong growth in copper and low-carbon
aluminium(2), and Australia Manganese achieved record production.
· Improved market conditions supported higher prices across most of our
commodities quarter-on-quarter, with strong price realisations for our premium
hard coking coal and manganese products.
· While we remain on-track to meet FY23 production guidance at the majority of
our operations, Group production was below plan in the March 2023 quarter due
to adverse weather and other temporary impacts.
· FY23 Operating unit cost guidance has been held largely unchanged and Group
capital expenditure guidance is unchanged, as we remain focused on delivering
efficiencies to mitigate cost pressures.
· Aluminium production increased by 15% year to date as Hillside Aluminium
continued to test its technical capacity and we realised the benefit of our
increased ownership of Mozal Aluminium and planned ramp-up of Brazil
Aluminium.
· At Mozal Aluminium, we reduced output to enable a safe recovery plan following
the fatal incident in November 2022, with this work impacted by local flooding
in the quarter. FY23 production guidance is revised down by 8%.
· Brazil Alumina lifted production by 6% year to date and Worsley Alumina
completed planned calciner maintenance.
· Sierra Gorda delivered strong volume growth in copper and remains on-track to
achieve FY23 production guidance.
· Cannington experienced severe wet weather during the quarter which resulted in
a temporary suspension of mining activity and prevented a rebuild in mining
stocks, with FY23 production guidance revised down by 6%.
· Cerro Matoso nickel production year to date was largely unchanged, reflecting
a temporary reduction in access to higher grade ore in the quarter, with FY23
production guidance revised down by 7%.
· Australia Manganese achieved record production and a 6% increase in year to
date volumes, supporting a 3% increase in FY23 production guidance.
· South Africa Manganese increased production by 5% year to date and remains
on-track to achieve FY23 guidance.
· Illawarra Metallurgical Coal's Appin mine encountered challenging strata
conditions in the quarter, resulting in lower longwall productivity and a 7%
reduction in FY23 production guidance.
South32 Chief Executive Officer, Graham Kerr: "Group-wide copper equivalent
production increased by seven per cent, following investments last year which
added copper to our portfolio and increased our share of low-carbon aluminium.
"Manganese ore production has increased by six per cent year-on-year, with
Australia Manganese achieving record production. The Eastern Leases project at
Australia Manganese has been approved, extending the life of the operation and
unlocking significant value.
"Several operations faced challenging conditions during the quarter, with
production guidance revised down as a result. At Mozal Aluminium, we reduced
output as the team continued to work through their recovery plan following the
devastating loss of two of our colleagues in November, with efforts hampered
by severe flooding in the local area. We also temporarily suspended mining
activity at Cannington during the quarter to enable the safe return to
operations following heavy rainfall.
"Our strong financial position enabled us to return US$31 million to
shareholders via our on-market share buy-back in the quarter, with a further
US$128 million still to be returned. Separately, we paid a fully-franked
interim dividend of US$223 million following the end of the period.
"We remain well positioned to capitalise on improved market conditions, with
higher production volumes expected to finish the 2023 financial year and
Operating unit cost and capital expenditure guidance held largely unchanged.
"We continue to reshape our portfolio towards commodities critical to a
low-carbon future, progressing construction and development studies at Hermosa
and adding the prospective Chita Valley copper project to our portfolio of
greenfield options."
Production summary
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 QoQ
Alumina production (kt) 3,927 3,852 (2%) 1,317 1,356 1,239 (9%)
Aluminium production (kt) 737 847 15% 243 289 279 (3%)
Payable copper production (kt) 8.4 53.4 536% 8.4 8.4 18.9 15.5 (18%)
Payable silver production (koz) 10,363 8,291 (20%) 3,653 3,064 2,479 (19%)
Payable lead production (kt) 94.8 73.4 (23%) 34.6 27.8 21.0 (24%)
Payable zinc production (kt) 49.1 43.0 (12%) 16.4 16.4 12.6 (23%)
Payable nickel production (kt) 30.9 30.6 (1%) 10.6 10.8 10.2 (6%)
Metallurgical coal production (kt) 4,332 3,993 (8%) 1,565 1,483 1,240 (16%)
Manganese ore production (kwmt) 3,963 4,198 6% 1,206 1,477 1,261 (15%)
Unless otherwise noted: percentage variance relates to performance during the
nine months ended March 2023 compared with the nine months ended March 2022
(YoY), or the March 2023 quarter compared with the December 2022 quarter
(QoQ); production and sales volumes are reported on an attributable basis.
Corporate Update
· We continued to implement our multi-year Safety Improvement Program, designed
to fundamentally shift our safety performance. During the quarter, we
progressed work to enhance leadership capability and ensure the sustained
effectiveness of enabling systems.
· We advanced decarbonisation programs to support our target(3) to halve our
operational greenhouse gas emissions by 2035, including the conversion of the
first onsite boiler at Worsley Alumina from coal to natural gas, which
isexpected be completed in mid CY23.
· FY23 Operating unit cost guidance has been held largely unchanged, with
guidance increased at Cannington and Illawarra Metallurgical Coal due to lower
planned volumes. All other FY23 Operating unit cost guidance and Group capital
expenditure guidance is unchanged, as we remain focused on delivering
efficiencies to mitigate cost pressures.
· Our manganese joint venture approved the Eastern Leases South life extension
project, which will extend the life of our low-cost Australia Manganese
operation to at least FY28(4). We are completing additional study work on
areas within our existing operating footprint and in the Southern Areas to
potentially extend the operation's life into the next decade. We expect to
invest US$44M over FY24 and FY25 to complete the life extension project,
unlocking significant value.
· Consistent with our focus on adding prospective base metals options, we
exercised our earn-in right to acquire a 50.1% interest and operatorship of
the Chita Valley copper exploration project in the San Juan province of
Argentina. The exercise of our earn-in right follows a three-year exploration
partnership at Chita Valley with Minsud Resources Corp. The transaction is
expected to be completed in the March 2024 quarter.
· We finished the March 2023 quarter with net debt(5) of US$298M as improved
commodity prices were offset by a further build in our aluminium working
capital position and the continuation of shareholder returns under our capital
management program. While aluminium sales volumes are expected to increase in
the June 2023 quarter as we drawdown inventory, the timing of sales is
expected to result in an elevated working capital position at 30 June 2023.
· We received net distributions(6) of US$33M (South32 share) during the March
2023 quarter from our manganese equity accounted investment (EAI) (US$93M in
the nine months ended March 2023). Excess cash held in both the manganese and
Sierra Gorda EAIs is expected to be distributed to partners in the June 2023
quarter.
· Our strong financial position supported the purchase of a further 11 million
shares via our on-market share buy-back at an average price of A$4.27,
enabling returns of US$31M in the March 2023 quarter (US$173M at an average
price of A$3.93 in the nine months ended March 2023). Our US$2.3B capital
management program is 94% complete with US$128M remaining to be returned ahead
of its extension or expiry on 1 September 2023(7).
· We have revised FY23 guidance for Underlying net finance costs to US$190M
(from US$150M), reflecting the Group's balance sheet position at the end of
the March 2023 quarter.
· Following the end of the period, we paid a fully-franked interim dividend of
US$223M in respect of the December 2022 half year.
Development and Exploration Update
Hermosa project
· We invested US$176M at our Hermosa project in the nine months ended March 2023
as we continued critical path activity and study work for the Taylor
zinc-lead-silver deposit and the Clark battery-grade manganese-zinc-silver
deposit.
· We progressed construction of the second water treatment plant, which remains
on-track to be commissioned in the June 2023 quarter. Dewatering is a critical
path activity which will enable access to both the Taylor and Clark
deposits.
· At Clark, we completed the collection of bulk samples to support initial pilot
plant production of battery-grade manganese in mid CY23. We also signed our
first non-binding, non-exclusive memorandum of understanding for the future
potential supply of battery-grade material to the North American
market.
· We directed US$12M to capitalised exploration in the nine months ended March
2023 as we continued exploration programs at Taylor and Clark and the
copper-lead-zinc-silver Peake prospect(8). Exploration drilling at the Flux
prospect(9) is expected to commence in the September 2023 quarter following
the receipt of approvals.
Ambler Metals project
· Our 50% share of capitalised exploration for the Ambler Metals joint venture
was US$9M in the nine months ended March 2023 as the CY22 summer exploration
program was completed and the joint venture progressed work on the
pre-feasibility study for the polymetallic Arctic deposit.
· Following the end of the period, we agreed to invest US$1.2M in Trilogy Metals
Inc. (TSX:TMQ, Trilogy), our partner in the Ambler Metals joint venture,
taking our equity ownership in Trilogy to 12.0%.
Greenfield exploration
· We invested US$28M in our greenfield exploration opportunities in the nine
months ended March 2023, as we progressed multiple programs targeting base
metals in Australia, USA, Canada, Argentina, Peru and Ireland.
Other exploration
· We invested US$47M (US$31M capitalised) in exploration programs at our
existing operations and development options in the nine months ended March
2023, including US$12M at the Hermosa project (noted above, all capitalised),
US$9M at Ambler Metals (noted above, all capitalised), US$2M for our manganese
EAI (US$1M capitalised) and US$5M for our Sierra Gorda EAI (US$2M
capitalised).
Production Summary
Production guidance FY22 9M YTD23 FY23e((a)) Guidance comments
(South32 share)
Worsley Alumina
Alumina production (kt) 3,991 2,827 4,000 Guidance unchanged
Calciner maintenance in Q1 FY23 and Q3 FY23
Brazil Alumina (non-operated)
Alumina production (kt) 1,297 1,025 ↓ 1,340 Guidance reduced by 4% (from 1,395kt) due to a temporary conveyor outage
Brazil Aluminium (non-operated)
Aluminium production (kt) 0.3 45.3 75 Guidance unchanged
Smelter continues to ramp-up to nameplate
Hillside Aluminium(10)
Aluminium production (kt) 714 539 720 Guidance unchanged
Mozal Aluminium(10)(,) (11)
Aluminium production (kt) 278 263 ↓ 340 Guidance reduced by 8% (from 370kt) as we temporarily reduced output to
support a safe recovery plan and manage weather impacts in Q3 FY23
Sierra Gorda (non-operated)
Payable copper equivalent production(12) (kt) 30.6 63.9 89.0 Guidance unchanged
Payable copper production (kt) 25.3 53.4 71.8
Payable molybdenum production (kt) 0.4 0.7 1.5
Payable gold production (koz) 9.6 21.5 29.9
Payable silver production (koz) 253 476 582
Cannington
Payable zinc equivalent production(13) (kt) 224.2 139.8 ↓ 195.9 Guidance reduced by 6% (from 209.4kt payable zinc equivalent(13)) due to
severe wet weather in Q3 FY23
Payable silver production (koz) 12,946 7,815 ↓ 11,000
Payable lead production (kt) 120.6 73.4 ↓ 102.0
Payable zinc production (kt) 64.5 43.0 ↓ 60.5
Cerro Matoso
Payable nickel production (kt) 41.7 30.6 ↓ 40.5 Guidance reduced by 7% (from 43.5kt) due to a temporary reduction in access to
higher grade ore
Illawarra Metallurgical Coal
Total coal production (kt) 6,509 4,767 ↓ 6,500 Guidance reduced by 7% (from 7.0Mt) as Appin encountered challenging strata
conditions in Q3 FY23
Metallurgical coal production (kt) 5,712 3,993 ↓ 5,500
Energy coal production (kt) 797 774 1,000
Australia Manganese
Manganese ore production (kwmt) 3,363 2,676 ↑ 3,500 Guidance increased by 3% (from 3,400kwmt) with improved primary output
South Africa Manganese
Manganese ore production (kwmt) 2,069 1,522 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.
All guidance is subject to further potential impacts from COVID-19.
Worsley Alumina (86% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Alumina production (kt) 2,961 2,827 (5%) 982 1,002 905 (8%) (10%)
Alumina sales (kt) 2,856 2,706 (5%) 910 976 845 (7%) (13%)
Worsley Alumina saleable production decreased by 5% (or 134kt) to 2,827kt in
the nine months ended March 2023 with planned calciner maintenance in the
September 2022 and March 2023 quarters. FY23 production guidance remains
unchanged at 4,000kt, with the refinery expected to achieve nameplate
production rates in the June 2023 quarter.
Brazil Alumina (36% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Alumina production (kt) 966 1,025 6% 335 354 334 (0%) (6%)
Alumina sales (kt) 932 995 7% 306 365 317 4% (13%)
Brazil Alumina saleable production increased by 6% (or 59kt) to 1,025kt in the
nine months ended March 2023, following the bauxite ship unloader outage in
the prior period.
In late March 2023, the belt system that conveys raw materials from the port
failed and the refinery reduced production to manage bauxite inventories. The
belt system was repaired in April 2023 and the refinery has since returned to
normal production levels. Due to this temporary outage, FY23 production
guidance has been reduced by 4% to 1,340kt.
Notwithstanding lower planned volumes, FY23 Operating unit costs are expected
to be approximately 5% below H1 FY23 (US$364/t) as raw material and energy
prices continue to moderate.
Brazil AluminIUM (40% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Aluminium production (kt) - 45.3 N/A - 15.4 21.6 N/A 40%
Aluminium sales (kt) - 41.9 N/A - 16.1 22.5 N/A 40%
Brazil Aluminium saleable production was 45.3kt in the nine months ended March
2023, following the successful restart of the smelter in the June 2022
quarter. Production improved by 40% (or 6.2kt) in the March 2023 quarter as
all three potlines ramped-up toward nameplate capacity as planned. FY23 and
FY24 production guidance remains unchanged at 75kt and 148kt respectively.
Hillside Aluminium (100% SHARE)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Aluminium production (kt) 535 539 1% 177 183 177 0% (3%)
Aluminium sales (kt) 515 534 4% 179 175 197 10% 13%
Hillside Aluminium saleable production increased by 1% (or 4kt) to 539kt in
the nine months ended March 2023 as the smelter continued to test its maximum
technical capacity despite the impact of elevated load-shedding. FY23
production guidance remains unchanged at 720kt(10).
Sales increased by 13% in the March 2023 quarter with two carry-over shipments
from the prior quarter supporting a drawdown in inventory.
While the cost profile of Hillside Aluminium will continue to be heavily
influenced by the South African rand and the price of raw materials, we expect
FY23 Operating unit costs to be largely in-line with H1 FY23 (US$2,276/t).
Mozal Aluminium (63.7%(11) share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Aluminium production (kt) 202 263 30% 66 90 81 23% (10%)
Aluminium sales (kt) 188 220 17% 66 90 43 (35%) (52%)
Mozal Aluminium saleable production increased by 30% (or 61kt) to 263kt in the
nine months ended March 2023, reflecting our increased ownership of the
smelter(11). During the March 2023 quarter, we made the decision to
temporarily reduce amperage at the smelter to support the safe recovery of
operations following the fatal incident in November 2022. The recovery plan
was impacted by resourcing constraints during the quarter as significant
floods restricted the movement of people and equipment to the smelter. FY23
production guidance has been reduced by 8% to 340kt(10), with the smelter
expected to return to nameplate capacity during the September 2023 quarter.
FY24 production guidance is unchanged at 370kt(10).
The execution of the recovery plan also resulted in a temporary reduction in
metal quality. During the quarter, approximately 35% of production was below
specification and sales volumes decreased by 52% (or 47kt) as we assessed
commercial alternatives for this material. We have now commenced shipments of
this material, achieving realised prices that reflect a modest discount to our
other LME-linked aluminium sales. Sales volumes are expected to increase to
approximately 100kt in the June 2023 quarter as inventory is drawn down and
product quality improves in-line with the recovery plan.
The temporary reduction in sales volumes is expected to have a modest impact
on FY23 Operating unit costs, with FY23 Operating unit costs expected to be
approximately 5% above H1 FY23 (US$2,237/t) subject to the price of raw
materials.
SIERRA GORDA (45% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Payable copper equivalent production(12) (kt) 10.3 63.9 520% 10.3 22.3 19.0 84% (15%)
Payable copper production (kt) 8.4 53.4 536% 8.4 18.9 15.5 85% (18%)
Payable copper sales (kt) 11.1 53.8 385% 11.1 19.2 15.4 39% (20%)
Sierra Gorda payable copper equivalent production(12) was 63.9kt in the nine
months ended March 2023. Payable copper equivalent production decreased by 15%
to 19.0kt in the March 2023 quarter, reflecting a lower average copper grade
in accordance with the mine plan, and lower plant throughput as wet weather
caused a temporary sub-station outage. FY23 payable copper equivalent
production guidance of 89.0kt remains unchanged, with mill throughput
expected to improve in the June 2023 quarter.
Work continued on the plant de-bottlenecking project, with construction of the
third tailings thickener completed in the quarter. The de-bottlenecking
project is targeting an increase in plant throughput of 48 to 49Mtpa (100%
basis), while feasibility study work continues on the potential fourth
grinding line expansion.
Cannington (100% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Payable zinc equivalent production(13) (kt) 175.3 139.8 (20%) 61.3 52.7 41.0 (33%) (22%)
Payable silver production (koz) 10,278 7,815 (24%) 3,568 2,906 2,341 (34%) (19%)
Payable silver sales (koz) 9,536 7,495 (21%) 2,818 3,379 2,412 (14%) (29%)
Payable lead production (kt) 94.8 73.4 (23%) 34.6 27.8 21.0 (39%) (24%)
Payable lead sales (kt) 91.2 73.0 (20%) 27.9 32.6 21.7 (22%) (33%)
Payable zinc production (kt) 49.1 43.0 (12%) 16.4 16.4 12.6 (23%) (23%)
Payable zinc sales (kt) 50.1 36.3 (28%) 17.3 12.6 8.8 (49%) (30%)
Cannington payable zinc equivalent production(13) decreased by 20% (or 35.5kt)
to 139.8kt in the nine months ended March 2023, due to lower mill throughput
and labour constraints in the first half of the 2023 financial year and severe
wet weather in the March 2023 quarter. During the quarter, we temporarily
suspended mining activity to ensure safety of the underground operation
following the heavy rainfall, while the movement of people and critical
supplies to site was also disrupted by widespread flooding. As a result,
payable zinc equivalent production decreased by 22% (or 11.7kt) in the quarter
and the operation was unable to rebuild run of mine stocks.
FY23 production guidance has been reduced by 6% to 195.9kt payable zinc
equivalent (silver 11,000koz, lead 102.0kt and zinc 60.5kt). The revised
guidance reflects an expected 10% reduction in ore processed (to 2,200kdmt),
partly offset by higher zinc, lead and silver grades, with the transition to
100% truck haulage providing access to higher grade material. We expect run of
mine stock availability and more complex underground mining conditions to
constrain output in FY24, with production guidance reduced by 8% to 215.3kt
payable zinc equivalent (ore processed 2,400kdmt, silver 12,500koz, lead
115.0kt and zinc 62.0kt).
Due to the lower planned volumes, we have revised FY23 Operating unit cost
guidance to US$152/t ore processed (from US$141/t).
Cerro Matoso (99.9% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Payable nickel production (kt) 30.9 30.6 (1%) 10.6 10.8 10.2 (4%) (6%)
Payable nickel sales (kt) 29.9 30.4 2% 9.8 10.8 10.6 8% (2%)
Cerro Matoso payable nickel production was largely unchanged at 30.6kt in the
nine months ended March 2023. Production decreased by 6% (or 0.6kt) to 10.2kt
in the March 2023 quarter due to lower ore availability from the higher grade
Q&P pit, as road access was temporarily restricted due to an environmental
order. This order was lifted by the end of the quarter and truck haulage of
Q&P material has resumed. Due to lower volumes of this higher grade ore,
FY23 production guidance has been reduced by 7% to 40.5kt.
FY23 Operating unit cost guidance is held unchanged at US$4.99/lb with the
benefit of a weaker Colombian peso (USD:COP exchange rate of 4,688) and lower
price-linked royalties, expected to offset lower planned volumes.
Sales declined 2% in the March 2023 quarter. Price realisations for our
ferronickel product remain dislocated from the LME Nickel index due to market
dynamics. Our realised price for nickel sales for the nine months ended March
2023 was US$8.31/lb.
Illawarra Metallurgical Coal (100% sHARE)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Total coal production (kt) 4,926 4,767 (3%) 1,781 1,736 1,436 (19%) (17%)
Total coal sales(14) (kt) 4,720 4,662 (1%) 1,465 1,795 1,477 1% (18%)
Metallurgical coal production (kt) 4,332 3,993 (8%) 1,565 1,483 1,240 (21%) (16%)
Metallurgical coal sales (kt) 4,235 3,873 (9%) 1,358 1,485 1,195 (12%) (20%)
Energy coal production (kt) 594 774 30% 216 253 196 (9%) (23%)
Energy coal sales (kt) 485 789 63% 107 310 282 164% (9%)
Illawarra Metallurgical Coal saleable production decreased by 3% (or 159kt) to
4.8Mt in the nine months ended March 2023, with production decreasing by 17%
(or 300kt) in the March 2023 quarter as challenging strata conditions were
encountered at the Appin mine.
Improved longwall performance and production is expected at Appin in the June
2023 quarter, while a longwall move is scheduled at Dendrobium. FY23
production guidance has been reduced by 7% to 6.5Mt (metallurgical coal 5.5Mt
and energy coal 1.0Mt) to reflect lower year to date volumes. FY24 production
guidance is unchanged at 5.3Mt.
Due to the lower planned volumes, we have revised FY23 Operating unit cost
guidance to US$127/t (from US$119/t).
Sales decreased by 18% in the March 2023 quarter due to lower product
availability. Notwithstanding, we achieved strong price realisations for our
premium quality hard coking coal product, with our realised prices
representing a premium of circa 4% to the low-volatile hard coking coal
index(15) on a M-1 basis.
Australia Manganese (60% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Manganese ore production (kwmt) 2,519 2,676 6% 815 946 832 2% (12%)
Manganese ore sales (kwmt) 2,512 2,395 (5%) 775 873 743 (4%) (15%)
Australia Manganese saleable production increased by 6% (or 157kwmt) to a
record of 2,676kwmt in the nine months ended March 2023, as improved yields
supported higher primary concentrator output and the operation drew down
stockpiles in the quarter, as planned, to manage wet season mining
constraints. FY23 production guidance has been increased by 3% to 3,500kwmt,
reflecting the operation's strong year to date performance.
We recorded improved price realisations in the March 2023 quarter, achieving
the high grade 44% manganese lump ore index(16) on a M-1 basis, despite our
low-cost PC02 circuit continuing to operate above its design capacity,
contributing approximately 10% of production (9M YTD22: 12%).
Due to in-land logistics constraints and timing of sales, we expect to hold
elevated inventory positions at 30 June 2023. Inventories are expected to be
drawn down in the September 2023 quarter.
South Africa Manganese (ore 54.6% share)
South32 share 9M YTD22 9M YTD23 YoY 3Q22 2Q23 3Q23 3Q23 3Q23
vs
vs
3Q22
2Q23
Manganese ore production (kwmt) 1,444 1,522 5% 391 531 429 10% (19%)
Manganese ore sales (kwmt) 1,589 1,524 (4%) 495 559 492 (1%) (12%)
South Africa Manganese saleable production increased by 5% (or 78kwmt) to
1,522kwmt in the nine months ended March 2023, as improved mining performance
more than offset the impact of wet weather disruptions in the quarter. FY23
production guidance remains unchanged at 2,000kwmt, subject to market
conditions and our continued use of higher cost trucking.
Notes
1. Group payable copper equivalent production calculated by applying year to date
FY23 production volumes and 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. 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.
4. Australia Manganese Production Targets cautionary statement: The information
in this announcement that refers to Production Target and forecast financial
information is based on Proved (70.2%) and Probable (4.9%) Ore Reserves and
Measured (21.3%) and Indicated (3.6%) Mineral Resources. The Mineral Resources
and Ore Reserves underpinning the Production Target have been prepared by
Joshua Harvey and Ursula Sandilands, Competent Persons in accordance with the
requirements of the JORC Code. The Mineral Resources and Ore Reserves
estimates are available to view in South32's FY22 Annual Report
(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. South32 confirms
that inclusion of 3.6% of tonnage from Indicated Mineral Resources is not the
determining factor of the project viability and the project forecasts a
positive financial performance when using 96.4% of the tonnage. South32 is
satisfied, therefore, that the use of Indicated Mineral Resources in the
Production Target and forecast financial information reporting is reasonable.
5. Net debt number is unaudited and should not be considered as an indication of
or alternative to an IFRS measure of profitability, financial performance or
liquidity.
6. Net distributions from our material equity accounted investments (manganese
and Sierra Gorda) includes net debt movements and dividends, which are
unaudited and should not be considered as an indication of or alternative to
an IFRS measure of profitability, financial performance or liquidity.
7. Since inception, US$1.7B has been allocated to the on-market share buy-back
(762M shares at an average price of A$3.02 per share) and US$525M returned in
the form of special dividends.
8. Peake Prospect Exploration Target: The information in this announcement that
relates to the Exploration Target for Peake Prospect is extracted from
"Hermosa Project Update" published on 17 January 2022 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.
9. Flux Exploration Target: The information in this announcement that relates to
the Exploration Target for Flux is extracted from "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.
10. Production guidance for Hillside Aluminium and Mozal Aluminium does not assume
any load-shedding impact on production.
11. 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).
12. 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 and FY23e.
13. 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 and FY23e.
14. Illawarra Metallurgical Coal sales are adjusted for moisture and will not
reconcile directly to Illawarra Metallurgical Coal production.
15. The premium low-volatile hard coking coal Platts index (FOB Australia) on the
basis of a one-month lag to published pricing (Month minus one or "M-1") was
US$315/t in the March 2023 quarter.
16. The Metal Bulletin 44% manganese lump ore index (CIF Tianjin, China) on the
basis of M-1 was US$5.30/dmtu in the March 2023 quarter
The following abbreviations have been used throughout this report: US$ 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 9M YTD22 9M YTD23 3Q22 4Q22 1Q23 2Q23 3Q23
Worsley Alumina (86% share)
Alumina hydrate production (kt) 2,966 2,876 972 1,014 957 998 921
Alumina production (kt) 2,961 2,827 982 1,030 920 1,002 905
Alumina sales (kt) 2,856 2,706 910 1,118 885 976 845
Brazil Alumina (36% share)
Alumina production (kt) 966 1,025 335 331 337 354 334
Alumina sales (kt) 932 995 306 367 313 365 317
Brazil Aluminium (40% share)
Aluminium production (kt) - 45.3 - 0.3 8.3 15.4 21.6
Aluminium sales (kt) - 41.9 - - 3.3 16.1 22.5
Hillside Aluminium (100% share)
Aluminium production (kt) 535 539 177 179 179 183 177
Aluminium sales (kt) 515 534 179 198 162 175 197
Mozal Aluminium (63.7%(11) share)
Aluminium production (kt) 202 263 66 76 92 90 81
Aluminium sales (kt) 188 220 66 88 87 90 43
Sierra Gorda (45% share)
Ore mined (Mt) 4.7 20.5 4.7 9.0 8.8 6.6 5.1
Ore processed (Mt) 2.3 15.8 2.3 5.2 5.4 5.3 5.1
Copper ore grade processed (%, Cu) 0.45 0.43 0.45 0.40 0.45 0.44 0.40
Payable copper equivalent production(12) (kt) 10.3 63.9 10.3 20.3 22.6 22.3 19.0
Payable copper production (kt) 8.4 53.4 8.4 16.9 19.0 18.9 15.5
Payable copper sales (kt) 11.1 53.8 11.1 16.6 19.2 19.2 15.4
Payable molybdenum production (kt) 0.2 0.7 0.2 0.2 0.2 0.2 0.3
Payable molybdenum sales (kt) 0.1 1.0 0.1 0.5 0.3 0.5 0.2
Payable gold production (koz) 2.3 21.5 2.3 7.3 7.8 7.5 6.2
Payable gold sales (koz) 3.0 21.8 3.0 6.9 7.7 7.7 6.4
Payable silver production (koz) 85 476 85 168 180 158 138
Payable silver sales (koz) 111 482 111 171 179 166 137
Cannington (100% share)
Ore mined (kwmt) 2,112 1,592 637 641 639 484 469
Ore processed (kdmt) 2,066 1,594 681 552 518 624 452
Silver ore grade processed (g/t, Ag) 180 179 188 177 179 171 191
Lead ore grade processed (%, Pb) 5.4 5.5 5.9 5.5 5.6 5.4 5.5
Zinc ore grade processed (%, Zn) 3.4 3.7 3.4 3.8 3.7 3.6 3.8
Payable zinc equivalent production(13) (kt) 175.3 139.8 61.3 48.9 46.1 52.7 41.0
Payable silver production (koz) 10,278 7,815 3,568 2,668 2,568 2,906 2,341
Payable silver sales (koz) 9,536 7,495 2,818 3,362 1,704 3,379 2,412
Payable lead production (kt) 94.8 73.4 34.6 25.8 24.6 27.8 21.0
Payable lead sales (kt) 91.2 73.0 27.9 31.0 18.7 32.6 21.7
Payable zinc production (kt) 49.1 43.0 16.4 15.4 14.0 16.4 12.6
Payable zinc sales (kt) 50.1 36.3 17.3 16.1 14.9 12.6 8.8
Cerro Matoso (99.9% share)
Ore mined (kwmt) 3,726 3,941 1,310 1,141 1,332 1,420 1,189
Ore processed (kdmt) 2,025 2,105 690 678 666 726 713
Ore grade processed (%, Ni) 1.73 1.62 1.73 1.71 1.63 1.65 1.58
Payable nickel production (kt) 30.9 30.6 10.6 10.8 9.6 10.8 10.2
Payable nickel sales (kt) 29.9 30.4 9.8 11.9 9.0 10.8 10.6
Illawarra Metallurgical Coal (100%)
Total coal production (kt) 4,926 4,767 1,781 1,583 1,595 1,736 1,436
Total coal sales(14) (kt) 4,720 4,662 1,465 1,886 1,390 1,795 1,477
Metallurgical coal production (kt) 4,332 3,993 1,565 1,380 1,270 1,483 1,240
Metallurgical coal sales (kt) 4,235 3,873 1,358 1,588 1,193 1,485 1,195
Energy coal production (kt) 594 774 216 203 325 253 196
Energy coal sales (kt) 485 789 107 298 197 310 282
Australia Manganese (60% share)
Manganese ore production (kwmt) 2,519 2,676 815 844 898 946 832
Manganese ore sales (kwmt) 2,512 2,395 775 860 779 873 743
Ore grade sold (%, Mn) 44.2 44.1 44.1 44.2 44.3 44.1 44.0
South Africa Manganese (54.6% share)
Manganese ore production (kwmt) 1,444 1,522 391 625 562 531 429
Manganese ore sales (kwmt) 1,589 1,524 495 581 473 559 492
Ore grade sold (%, Mn) 39.8 39.1 40.5 39.4 38.5 39.8 38.8
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, including any disruption arising in connection with
COVID-19.
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 April 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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