REG - South32 Limited - Quarterly Report: March 2024
22/04/2024 07:00
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RNS Number : 4198L South32 Limited 22 April 2024
QUARTERLY REPORT
March 2024
• FY24 production and operating unit cost guidance is unchanged, with the
exception of Australia Manganese due to the impacts of Tropical Cyclone Megan.
• Achieved major milestones in our portfolio transformation, announcing final
investment approval for the Taylor zinc-lead-silver deposit at Hermosa(1), and
the sale of Illawarra Metallurgical Coal for up to US$1.65B(2).
• Aluminium production increased 1% year to date, as Hillside Aluminium achieved
record production and Brazil Aluminium continued to ramp up toward nameplate
capacity.
• Alumina production decreased by 1% year to date, as we completed planned
calciner maintenance at Worsley Alumina, while Brazil Alumina remains on track
to achieve production guidance.
• Cannington payable zinc equivalent(3) production increased by 15% year to
date, as the operation realised higher average metal grades, and mitigated the
impact of heavy rainfall following Tropical Cyclone Kirrily.
• Sierra Gorda payable copper equivalent(4) production decreased by 13% year to
date, as higher throughput was offset by lower planned copper grades, and
lower molybdenum recoveries in the current phase of the mine plan.
• Cerro Matoso payable nickel production decreased by 5% year to date, while
increasing by 8% in the quarter due to higher planned nickel grades.
• Illawarra Metallurgical Coal saleable coal production increased by 60% in the
quarter, as the operation completed two planned longwall moves in the prior
quarter, and delivered improved longwall performance at the Appin mine.
• Operations at Australia Manganese were temporarily suspended in March 2024 due
to Tropical Cyclone Megan(5), with recovery plans underway to enable a safe
return to operations and ore exports.
• South Africa Manganese achieved record production, delivering an 8% uplift in
year to date production.
South32 Chief Executive Officer, Graham Kerr: "During the quarter, we achieved
significant milestones aligned with our strategy to transform our portfolio
toward commodities critical in the transition to a low-carbon future.
"We approved development of the Taylor zinc-lead-silver deposit at our Hermosa
project, which is expected to deliver attractive returns over multiple decades
and unlock further value as the first phase of our regional scale opportunity.
"We also announced our decision to sell Illawarra Metallurgical Coal for up to
US$1.65 billion, which will realise significant value, further streamline our
portfolio and unlock capital to invest in our high-quality base metals
projects.
"This quarter, we delivered improved operating results, highlighted by record
year to date production at Hillside Aluminium and South Africa Manganese and a
60 per cent uplift in quarterly volumes at Illawarra Metallurgical Coal.
"Operations at Australia Manganese remain temporarily suspended following
Tropical Cyclone Megan, while we progress recovery plans to enable a safe
return to operations. We remain focused on the safety and wellbeing of our
workforce and the Groote Eylandt community.
"With the exception of Australia Manganese, our FY24 production and Operating
unit cost guidance is unchanged, placing us in a strong position to capitalise
on strengthening market conditions for many of our key commodities."
Production summary
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 QoQ
Alumina production (kt) 3,852 3,814 (1%) 1,239 1,284 1,240 (3%)
Aluminium production (kt) 847 853 1% 279 287 278 (3%)
Payable copper production (kt) 53.4 45.5 (15%) 15.5 15.6 13.9 (11%)
Payable silver production (koz) 8,291 10,049 21% 2,479 3,624 3,050 (16%)
Payable lead production (kt) 73.4 83.6 14% 21.0 30.3 24.8 (18%)
Payable zinc production (kt) 43.0 43.3 1% 12.6 15.8 14.3 (9%)
Payable nickel production (kt) 30.6 29.1 (5%) 10.2 10.0 10.8 8%
Metallurgical coal production (kt) 3,993 3,031 (24%) 1,240 744 1,244 67%
Manganese ore production (kwmt) 4,198 3,965 (6%) 1,261 1,272 1,175 (8%)
Unless otherwise noted: percentage variance relates to performance during the
nine months ended March 2024 compared with the nine months ended March 2023
(YoY), or the March 2024 quarter compared with the December 2023 quarter
(QoQ); production and sales volumes are reported on an attributable basis.
CORPORATE UPDATE
• We continued to implement our multi-year Safety Improvement Program, including
our investment in safety leadership through our 'Lead Safely Every Day'
training which is being deployed across our frontline workforce.
• Our FY24 Operating unit cost guidance is unchanged, as we remain focused on
driving operating performance and further efficiencies across our business.
• We entered into a binding agreement to sell Illawarra Metallurgical Coal to an
entity owned by Golden Energy and Resources Pte Ltd and M Resources Pty Ltd.
The consideration for the transaction is up to US$1,650M in cash, comprising
upfront consideration of US$1,050M, deferred consideration of US$250M and
contingent price-linked consideration of up to US$350M(2). The transaction is
expected to be completed in H1 FY25, subject to the satisfaction of conditions
including Foreign Investment Review Board (FIRB) approval and the waiver or
non-exercise of pre-emption rights held by BlueScope Steel (AIS) Proprietary
Limited.
• We entered into a binding agreement to sell our 50% interest in the Eagle
Downs metallurgical coal project to a subsidiary of Stanmore Resources
Limited, for upfront consideration of US$15M, a contingent payment of US$20M
and a price-linked royalty of up to US$100M. We have now received joint
venture approvals for the transaction, which is expected to close in the June
2024 quarter subject to FIRB approval and other remaining conditions(6).
• Net debt(7) decreased by US$154M to US$937M in the March 2024 quarter as we
benefited from improved operating performance and a partial unwind in working
capital, as we drew down inventory at Hillside Aluminium, partially offset by
a temporary inventory build at Cannington due to weather related disruptions
to rail logistics.
• We invested US$510M in safe and reliable, and improvement and life extension,
capital expenditure (excluding EAIs) in the nine months ended March 2024. Our
investment decreased by 31% to US$135M in the March 2024 quarter as we
realised capital efficiencies and deferred certain non-critical projects. FY24
guidance of US$655M (excluding EAIs) remains unchanged.
• We received net distributions(8) of US$60M (South32 share) from our equity
accounted investments (EAI) in the nine months ended March 2024 (US$42M from
our manganese business and US$18M from Sierra Gorda). No distributions were
received in the March 2024 quarter, following the temporary suspension of
operations at Australia Manganese, and investment in projects at Sierra Gorda
to improve productivity and grow future volumes.
• We made Group tax payments of US$148M (excluding EAIs) in the nine months
ended March 2024 (US$52M in the March 2024 quarter) as cash tax normalised
following one-off portfolio related tax payments in the prior period.
• Following the end of the quarter, we paid a fully-franked interim dividend of
US$18M in respect of the December 2023 half year.
DEVELOPMENT AND EXPLORATION UPDATE
Hermosa project
• We approved development of our Taylor zinc-lead-silver deposit, following
completion of a feasibility study which confirmed the potential for a
long-life, low-cost(9), low-carbon(10) operation, with an initial operating
life of ~28 years(11), an average EBITDA margin of ~50%(12) and an internal
rate of return of ~12%(13).
• We expect to invest direct and indirect capital expenditure of US$2,160M(14)
to deliver first production from Taylor in H2 FY27, with nameplate production
rates expected in FY30.
• As the first phase of a regional scale opportunity at Hermosa, Taylor's
infrastructure including dewatering, power, roads and site facilities, will
unlock value for future growth options. These include our Clark battery-grade
manganese deposit and potential discoveries in our highly prospective regional
land package, which has already returned high-grade copper and zinc results
from Peake and Flux(15).
• We invested US$256M of growth capital expenditure in the nine months ended
March 2024 (US$68M in the March 2024 quarter) as we progressed construction of
key infrastructure and permitting for Taylor and Clark.
• Dewatering is a critical path item that will enable access to both the Taylor
and Clark deposits. During the quarter, we completed our fifth surface
dewatering well, with the final two wells on track for the June 2024 quarter.
• We completed planned pre-sink shaft activity at Taylor during the quarter,
with shaft construction on track to commence during the September 2024
quarter.
• We directed US$21M to capitalised exploration in the nine months ended March
2024 as we progressed drilling programs at our polymetallic Peake and Flux
prospects(15). Exploration results are expected across the calendar year.
Greenfield exploration
• We invested US$23M in our greenfield exploration opportunities in the nine
months ended March 2024, as we progressed exploration programs targeting base
metals in Australia, USA, Canada, Argentina and Ireland.
• Following the end of the quarter, we completed the acquisition of a 50.1%
interest and operatorship of the Chita Valley copper exploration project in
San Juan, Argentina.
Other exploration
• We invested US$51M (US$41M capitalised) in exploration programs at our
existing operations and development options in the nine months ended March
2024, including US$21M at the Hermosa project (noted above, all capitalised)
and US$11M for our Sierra Gorda EAI (all capitalised).
PRODUCTION SUMMARY
Production guidance FY23 9M YTD24 FY24e((a)) Comments
(South32 share)
Worsley Alumina
Alumina production (kt) 3,839 2,861 4,000
Brazil Alumina (non-operated)
Alumina production (kt) 1,262 953 1,300
Brazil Aluminium (non-operated)
Aluminium production (kt) 69 76 100
Hillside Aluminium(16)
Aluminium production (kt) 719 540 720
Mozal Aluminium(16)
Aluminium production (kt) 345 237 320
Sierra Gorda (non-operated)
Payable copper equivalent production (kt)(4) 86.5 55.4 78.7
Payable copper production (kt) 70.7 45.5 67.0
Payable molybdenum production (kt) 1.2 0.7 0.8
Payable gold production (koz) 28.8 18.7 22.5
Payable silver production (koz) 630 448 550
Cannington
Payable zinc equivalent production (kt)(3) 259.6 212.0 287.2
Payable silver production (koz) 11,183 9,601 12,500
Payable lead production (kt) 101.7 83.6 115.0
Payable zinc production (kt) 59.2 43.3 62.0
Cerro Matoso
Payable nickel production (kt) 40.8 29.1 40.5
Illawarra Metallurgical Coal
Total coal production (kt) 6,520 3,450 5,000
Metallurgical coal production (kt) 5,497 3,031 4,400
Energy coal production (kt) 1,023 419 600
Australia Manganese
Manganese ore production (kwmt) 3,545 2,324 n/a Production guidance withdrawn in March 2024 due to Tropical Cyclone Megan
South Africa Manganese
Manganese ore production (kwmt) 2,108 1,641 2,000
a. The denotation (e) refers to an estimate or forecast year.
s
WORSLEY ALUMINA (86% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Alumina production (kt) 2,827 2,861 1% 905 962 927 2% (4%)
Alumina sales (kt) 2,706 2,793 3% 845 985 895 6% (9%)
Worsley Alumina saleable production increased by 1% (or 34kt) to 2,861kt in
the nine months ended March 2024 with planned calciner maintenance completed
in the September 2023 and March 2024 quarters. FY24 production guidance
remains unchanged at 4,000kt, with the refinery expected to achieve nameplate
production rates (4.6Mtpa, 100% basis) in the June 2024 quarter.
We realised a circa 2% premium to the Platts Alumina index(17) on a volume
weighted M-1 basis for alumina sales in the nine months ended March 2024,
which reflected market based prices with the exception of a legacy supply
contract with Mozal Aluminium which is linked to the LME aluminium price.
During the March 2024 quarter, we converted our second coal-fired boiler to
natural gas, which will further reduce the refinery's coal consumption and
operational greenhouse gas emissions.
BRAZIL ALUMINA (36% SHARE, NON-OPERATED)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Alumina production (kt) 1,025 953 (7%) 334 322 313 (6%) (3%)
Alumina sales (kt) 995 924 (7%) 317 375 277 (13%) (26%)
Brazil Alumina saleable production decreased by 7% (or 72kt) to 953kt in the
nine months ended March 2024 due to the previously reported impact of
third-party power outages and unplanned maintenance. FY24 production guidance
remains unchanged at 1,300kt.
We realised a circa 7% premium to the Platts Alumina index(18) on a volume
weighted M-1 basis for alumina sales in the nine months ended March 2024,
which reflected regional premiums.
BRAZIL ALUMINIUM (40% SHARE, NON-OPERATED)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Aluminium production (kt) 45 76 69% 22 26 26 18% 0%
Aluminium sales (kt) 42 72 71% 23 32 32 39% 0%
Brazil Aluminium saleable production increased by 69% (or 31kt) to 76kt in the
nine months ended March 2024 as the smelter continued to ramp up all three
potlines. FY24 production guidance remains unchanged at 100kt.
HILLSIDE ALUMINIUM (100% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Aluminium production (kt) 539 540 0% 177 179 181 2% 1%
Aluminium sales (kt) 534 536 0% 197 157 209 6% 33%
Hillside Aluminium saleable production increased by 1kt to an equal record of
540kt in the nine months ended March 2024 as the smelter continued to test its
maximum technical capacity, despite the impact of load-shedding. FY24
production guidance remains unchanged at 720kt(16).
Sales increased by 33% in the March 2024 quarter with three carry-over
shipments from the prior quarter supporting a drawdown in inventory.
MOZAL ALUMINIUM (63.7% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Aluminium production (kt) 263 237 (10%) 81 82 71 (12%) (13%)
Aluminium sales (kt) 220 225 2% 43 90 58 35% (36%)
Mozal Aluminium saleable production decreased by 10% (or 26kt) to 237kt in the
nine months ended March 2024, as the smelter continued to implement its
recovery plan, while managing the impact of load-shedding. Saleable production
volumes in the March 2024 quarter were in line with our previously revised
guidance, and metal production was returned to 100% LME-grade quality by the
end of the quarter. FY24 production guidance remains unchanged at 320kt(16).
Sales decreased by 36% in the March 2024 quarter due to lower product
availability and the timing of shipments.
As previously disclosed, we continue to work with Eskom and the Government of
the Republic of Mozambique to secure the smelter's hydro-electric power supply
beyond 2026, as there are currently no viable alternative suppliers of
renewable energy at the required scale.
SIERRA GORDA (45% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Payable copper equivalent production (kt)(4) 64.0 55.4 (13%) 19.2 18.3 16.8 (13%) (8%)
Payable copper production (kt) 53.4 45.5 (15%) 15.5 15.6 13.9 (10%) (11%)
Payable copper sales (kt) 53.8 45.6 (15%) 15.4 17.2 13.1 (15%) (24%)
Sierra Gorda payable copper equivalent(4) production decreased by 13% (or
8.6kt) to 55.4kt in the nine months ended March 2024 as higher plant
throughput delivered by the de-bottlenecking project (annualised rate of
48.6Mtpa, 100% basis), was more than offset by lower planned copper grades,
and lower molybdenum recoveries in the current phase of the mine plan. FY24
production guidance remains unchanged at 78.7kt payable copper equivalent
(copper 67.0kt, molybdenum 0.8kt, gold 22.5koz and silver 550koz), with higher
copper grades expected in the June 2024 quarter, consistent with the mine
plan.
Sierra Gorda progressed the feasibility study for the fourth grinding line
expansion, which is expected to deliver an increase in plant throughput to
approximately 58Mtpa (100% basis). The feasibility study and a final
investment decision by the joint venture partners is now expected in H1
FY25.
CANNINGTON (100% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Payable zinc equivalent production (kt)(3) 185.1 212.0 15% 54.3 76.9 64.8 19% (16%)
Payable silver production (koz) 7,815 9,601 23% 2,341 3,474 2,897 24% (17%)
Payable silver sales (koz) 7,495 8,739 17% 2,412 3,656 2,210 (8%) (40%)
Payable lead production (kt) 73.4 83.6 14% 21.0 30.3 24.8 18% (18%)
Payable lead sales (kt) 73.0 74.5 2% 21.7 31.0 17.9 (18%) (42%)
Payable zinc production (kt) 43.0 43.3 1% 12.6 15.8 14.3 13% (9%)
Payable zinc sales (kt) 36.3 39.9 10% 8.8 14.4 11.6 32% (19%)
Cannington payable zinc equivalent production(3) increased by 15% (or 26.9kt)
to 212.0kt in the nine months ended March 2024, as the operation realised
higher average silver and lead grades, and mitigated the impact of widespread
flooding following Tropical Cyclone Kirrily during the quarter. FY24
production guidance is currently unchanged at 287.2kt payable zinc equivalent
production (silver 12,500koz, lead 115.0kt and zinc 62.0kt), subject to
accessing higher grade slopes planned at the end of the June 2024 quarter.
Lower sales volumes in the March 2024 quarter reflected lower product
availability and the deferral of shipments to the June 2024 quarter due to a
temporary outage of a third-party rail line following Tropical Cyclone
Kirrily. With the rail line now restored, we expect to drawdown inventory in
the June 2024 quarter.
CERRO MATOSO (99.9% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Payable nickel production (kt) 30.6 29.1 (5%) 10.2 10.0 10.8 6% 8%
Payable nickel sales (kt) 30.4 28.8 (5%) 10.6 9.5 10.8 2% 14%
Cerro Matoso payable nickel production decreased by 5% (or 1.5kt) to 29.1kt in
the nine months ended March 2024, while improving by 8% (or 0.8kt) in the
March 2024 quarter due to higher planned nickel grades. FY24 production
guidance remains unchanged at 40.5kt.
Sales increased by 14% in the March 2024 quarter due to the timing of
shipments. Year to date price realisations for our ferronickel product
reflected a discount of ~27% to the LME Nickel Index(19), as market dynamics
remained largely unchanged (FY23: ~29% discount).
We continue to progress our strategic review of Cerro Matoso and expect to
provide an update with our FY24 financial results.
ILLAWARRA METALLURGICAL COAL (100% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Total coal production (kt) 4,767 3,450 (28%) 1,436 877 1,405 (2%) 60%
Total coal sales (kt)(20) 4,662 3,334 (28%) 1,477 900 1,238 (16%) 38%
Metallurgical coal production (kt) 3,993 3,031 (24%) 1,240 744 1,244 0% 67%
Metallurgical coal sales (kt) 3,873 2,812 (27%) 1,195 763 1,053 (12%) 38%
Energy coal production (kt) 774 419 (46%) 196 133 161 (18%) 21%
Energy coal sales (kt) 789 522 (34%) 282 137 185 (34%) 35%
Illawarra Metallurgical Coal saleable production decreased by 28% (or 1,317kt)
to 3,450kt in the nine months ended March 2024. Saleable production increased
by 60% (or 528kt) to 1,405kt in the March 2024 quarter as the operation
completed two planned longwall moves in the prior quarter and delivered
improved longwall performance at the Appin mine, which more than offset
challenging strata conditions at the Dendrobium mine during the
quarter.
Looking forward, the operation plans to complete a longwall move at Appin and
commence the next longwall move at Dendrobium by the end of the June 2024
quarter. FY24 production guidance remains unchanged at 5.0Mt, reflecting a
further expected improvement in longwall performance and the shorter duration
of planned longwall moves in the June 2024 quarter.
AUSTRALIA MANGANESE (60% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Manganese ore production (kwmt) 2,676 2,324 (13%) 832 789 645 (22%) (18%)
Manganese ore sales (kwmt) 2,395 2,573 7% 743 924 709 (4%) (23%)
Australia Manganese saleable production decreased by 13% (or 352kwmt) to
2,324kwmt in the nine months ended March 2024 as we temporarily suspended
operations due to the impacts of Tropical Cyclone Megan.
On 16 to 17 March 2024, Tropical Cyclone Megan severely impacted operations at
Groote Eylandt, with record rainfall of 681mm and the second strongest wind
gusts in the past 20 years.
The intense weather system resulted in widespread flooding across Groote
Eylandt and significant damage to critical infrastructure, including the wharf
and port infrastructure and a haulage road bridge that connects the northern
pits of the Western Leases mining area and the processing plant.
The operational recovery has focused on re-establishing critical services and
dewatering targeted mining pits.
Engineering studies are underway on the wharf and haulage road bridge
infrastructure restoration. These studies will inform the final schedule and
capital costs. Based on our preliminary schedule estimate, we expect to
recommence wharf operations and export sales in Q3 FY25.
Alternative shipping options are being evaluated to mitigate the impact of the
wharf outage. These options may establish partial ore export capability in
advance of the wharf restoration.
Further detail and anticipated capital costs will be provided once the
recovery plans are sufficiently progressed. Guidance for Australia Manganese
remains withdrawn.
Australia Manganese maintains property damage and business interruption
insurance. We are working with our insurers to assess the impact of Tropical
Cyclone Megan and expected insurance recoveries.
SOUTH AFRICA MANGANESE (ORE 54.6% SHARE)
South32 share 9M YTD23 9M YTD24 YoY 3Q23 2Q24 3Q24 3Q24 3Q24
vs vs
3Q23 2Q24
Manganese ore production (kwmt) 1,522 1,641 8% 429 483 530 24% 10%
Manganese ore sales (kwmt) 1,524 1,567 3% 492 564 485 (1%) (14%)
South Africa Manganese saleable production increased by 8% (or 119kwmt) to a
record 1,641kwmt in the nine months ended March 2024 as the operation
delivered improved mining performance, and planned maintenance was deferred to
the June 2024 quarter. FY24 production guidance remains unchanged at
2,000kwmt.
Sales decreased by 14% in the March 2024 quarter due to the timing of
shipments. Our year to date realised price for manganese ore sales was a
premium of approximately 6% to the medium grade 37% manganese lump ore
index(21) on a M-1 basis, as we increased volumes of premium material from our
Wessels mine.
NOTES
1. Refer to market release "Final investment approval to develop Hermosa's Taylor
deposit" dated 15 February 2024.
2. Refer to market release "Sale of Illawarra Metallurgical Coal" dated 29
February 2024.
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, 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, FY24 and FY24e.
5. Refer to market release "Australia Manganese Update" dated 18 March 2024.
6. Refer to media release "Agreement to divest interest in Eagle Downs" dated 12
February 2024.
7. 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.
8. 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.
9. Based on estimated all-in sustaining costs in the Taylor Feasibility Study
benchmarked against the Wood Mackenzie Zinc Mine Normal Costs League (Q4 2023
dataset). Costs are calculated as the sum of direct costs, indirect cash
costs, interest charges and sustaining capital expenditure.
10. Taylor's mine design utilises automation and technology to minimise our
environmental impact and lower our greenhouse gas emissions. Discussions are
ongoing to support our aim of securing 100% renewable energy for the project.
11. The information in this announcement that refers to Production Target and
forecast financial information for Taylor is based on Probable (61%) Ore
Reserves and Measured (1%), Indicated (5%), Inferred (9%) Mineral Resources
and Exploration Target (24%) for the Taylor deposit, and was originally
disclosed in "Final investment approval to develop Hermosa's Taylor deposit"
dated 15 February 2024. The Ore Reserves, Mineral Resources and Exploration
Target underpinning the Production Target have been prepared by Competent
Persons in accordance with the JORC Code. South32 confirms that all the
material assumptions underpinning the Production Target in the initial public
report referred to in ASX Listing Rule 5.16 continue to apply and have not
materially changed. There is low level of geological confidence associated
with Inferred Mineral Resources and there is no certainty that further
exploration work will result in the determination of Indicated Mineral
Resources or that the Production Target will be realised. The potential
quantity and grade of the Exploration Target is conceptual in nature. In
respect of Exploration Target used in the Production Target, there has been
insufficient exploration to determine a Mineral Resource and there is no
certainty that further exploration work will result in the determination of
Mineral Resources or that the Production Target itself will be realised. 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 33% of tonnage (9% Inferred Mineral
Resources and 24% Exploration Target) is not the determining factor of the
project viability and the project forecasts a positive financial performance
when using 67% tonnage (61% Probable Ore Reserves and 1% Measured and 5%
Indicated Mineral Resources). South32 is satisfied, therefore, that the use of
Inferred Mineral Resources and Exploration Target in the Production Target and
forecast financial information reporting is reasonable.
12. Average EBITDA margin calculated over steady state production years
(FY30-FY51).
13. Post tax internal rate of return (nominal) calculation is reflective of cash
outflows from 1 January 2024.
14. Pre-production direct and indirect capital expenditure, in real terms, from 1
January 2024 to first expected production in H2 FY27.
15. Exploration Results and Exploration Targets: The information in this
announcement that relates to the Exploration Results and Targets for Taylor,
Clark, Peake and Flux is extracted from the market release "Final investment
approval to develop Hermosa's Taylor deposit" dated 15 February 2024. 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.
16. Production guidance for Hillside Aluminium and Mozal Aluminium does not assume
any load-shedding impact on production.
17. The sales volume weighted average of the Platts Alumina index (FOB) on the
basis of a one-month lag to published pricing (Month minus one or "M-1") was
US$342/t in the nine months ended March 2024.
18. The sales volume weighted average of the Platts Alumina index (FOB) on the
basis of a one-month lag to published pricing (Month minus one or "M-1") was
US$341/t in the nine months ended March 2024.
19. Our realised price for nickel sales in the nine months ended March 2024 was
US$5.95/lb, which represented a ~27% discount to the average LME Nickel index
price of US$8.13/lb.
20. Illawarra Metallurgical Coal sales are adjusted for moisture and will not
reconcile directly to Illawarra Metallurgical Coal production.
21. The sales volume weighted average of the Metal Bulletin 37% manganese lump ore
index (FOB Port Elizabeth, South Africa) on the basis of a one-month lag to
published pricing (Month minus one or "M-1") was US$2.87/dmtu in the nine
months ended March 2024.
The following abbreviations have been used throughout this report: US$ 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 YTD23 9M YTD24 3Q23 4Q23 1Q24 2Q24 3Q24
Worsley Alumina (86% share)
Alumina hydrate production (kt) 2,876 2,860 921 957 973 961 926
Alumina production (kt) 2,827 2,861 905 1,012 972 962 927
Alumina sales (kt) 2,706 2,793 845 1,111 913 985 895
Brazil Alumina (36% share)
Alumina production (kt) 1,025 953 334 237 318 322 313
Alumina sales (kt) 995 924 317 242 272 375 277
Brazil Aluminium (40% share)
Aluminium production (kt) 45 76 22 24 24 26 26
Aluminium sales (kt) 42 72 23 26 8 32 32
Hillside Aluminium (100% share)
Aluminium production (kt) 539 540 177 180 180 179 181
Aluminium sales (kt) 534 536 197 185 170 157 209
Mozal Aluminium (63.7% share)
Aluminium production (kt) 263 237 81 82 84 82 71
Aluminium sales (kt) 220 225 43 114 77 90 58
Sierra Gorda (45% share)
Ore mined (Mt) 20.5 15.0 5.1 5.5 5.9 6.0 3.1
Ore processed (Mt) 15.8 16.4 5.1 5.4 5.5 5.4 5.5
Copper ore grade processed (%, Cu) 0.43 0.36 0.40 0.40 0.37 0.38 0.34
Payable copper equivalent production (kt)(4) 64.0 55.4 19.2 22.5 20.3 18.3 16.8
Payable copper production (kt) 53.4 45.5 15.5 17.3 16.0 15.6 13.9
Payable copper sales (kt) 53.8 45.6 15.4 18.0 15.3 17.2 13.1
Payable molybdenum production (kt) 0.7 0.7 0.3 0.5 0.4 0.1 0.2
Payable molybdenum sales (kt) 1.0 1.1 0.2 0.3 0.4 0.3 0.4
Payable gold production (koz) 21.5 18.7 6.2 7.3 6.3 7.1 5.3
Payable gold sales (koz) 21.8 19.0 6.4 7.3 6.3 7.5 5.2
Payable silver production (koz) 476 448 138 154 145 150 153
Payable silver sales (koz) 482 441 137 157 140 160 141
Cannington (100% share)
Ore mined (kwmt) 1,592 1,679 469 631 551 599 529
Ore processed (kdmt) 1,594 1,664 452 562 562 577 525
Silver ore grade processed (g/t, Ag) 179 208 191 210 206 216 200
Lead ore grade processed (%, Pb) 5.5 5.9 5.5 5.8 5.8 6.2 5.6
Zinc ore grade processed (%, Zn) 3.7 3.5 3.8 4.0 3.2 3.6 3.8
Payable zinc equivalent production (kt)(3) 185.1 212.0 54.3 74.5 70.3 76.9 64.8
Payable silver production (koz) 7,815 9,601 2,341 3,368 3,230 3,474 2,897
Payable silver sales (koz) 7,495 8,739 2,412 3,244 2,873 3,656 2,210
Payable lead production (kt) 73.4 83.6 21.0 28.3 28.5 30.3 24.8
Payable lead sales (kt) 73.0 74.5 21.7 26.0 25.6 31.0 17.9
Payable zinc production (kt) 43.0 43.3 12.6 16.2 13.2 15.8 14.3
Payable zinc sales (kt) 36.3 39.9 8.8 21.8 13.9 14.4 11.6
Cerro Matoso (99.9% share)
Ore mined (kwmt) 3,941 3,669 1,189 1,619 940 1,243 1,486
Ore processed (kdmt) 2,105 2,028 713 702 594 723 711
Ore grade processed (%, Ni) 1.62 1.57 1.58 1.62 1.57 1.53 1.61
Payable nickel production (kt) 30.6 29.1 10.2 10.2 8.3 10.0 10.8
Payable nickel sales (kt) 30.4 28.8 10.6 10.4 8.5 9.5 10.8
Illawarra Metallurgical Coal (100% share)
Total coal production (kt) 4,767 3,450 1,436 1,753 1,168 877 1,405
Total coal sales (kt)(20) 4,662 3,334 1,477 1,697 1,196 900 1,238
Metallurgical coal production (kt) 3,993 3,031 1,240 1,504 1,043 744 1,244
Metallurgical coal sales (kt) 3,873 2,812 1,195 1,529 996 763 1,053
Energy coal production (kt) 774 419 196 249 125 133 161
Energy coal sales (kt) 789 522 282 168 200 137 185
Australia Manganese (60% share)
Manganese ore production (kwmt) 2,676 2,324 832 869 890 789 645
Manganese ore sales (kwmt) 2,395 2,573 743 866 940 924 709
Ore grade sold (%, Mn) 44.1 42.6 44.0 43.1 42.9 42.2 42.2
South Africa Manganese (54.6% share)
Manganese ore production (kwmt) 1,522 1,641 429 586 628 483 530
Manganese ore sales (kwmt) 1,524 1,567 492 541 518 564 485
Ore grade sold (%, Mn) 39.1 38.7 38.8 39.4 39.0 38.4 38.7
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 Miles Godfrey
M +61 403 763 086 M +61 415 325 906
E Ben.Baker@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 April 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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