REG - South32 Limited - US$200M in Value Unlocked From Royalty Sale

South32Announcement

12/07/2022 07:45

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RNS Number : 1441S  South32 Limited  12 July 2022

 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

 south32.net

12 July 2022

 

SOUTH32 UNLOCKS UP TO US$200M IN VALUE FROM NON-CORE ROYALTY SALE

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) is pleased to
announce that it has entered into a binding agreement for the sale of a
package of four non-core base metals royalties (Base Metals Royalties) to
London Stock Exchange listed Anglo Pacific Group Plc (Anglo Pacific). The
total sale price includes US$185M of fixed consideration plus contingent
payments of up to US$15M 1 . The Base Metals Royalties are across third party
interests in a mix of producing assets and advanced development stage
projects, largely in copper and nickel in Australia, USA and Chile.

There are no conditions precedent for the transaction, with completion
expected within five business days. The fixed consideration includes US$103M
in cash payments 2 , and US$82M of Anglo Pacific shares, which will be issued
to South32 on completion. Following completion, South32 will hold a ~16.9%
interest in Anglo Pacific.

Today's transaction follows our successful divestment of four precious metal
royalties to Elemental Royalties Corp. (Elemental) in 2021 for a US$40M cash
payment and US$15M in Elemental shares 3 .

South32 Chief Executive Officer, Graham Kerr said: "Today's sale of another
non-core royalty package is a further step forward in unlocking latent value
from our portfolio. The proposed transaction will realise an immediate cash
payment, while also retaining long-term exposure to these royalties through
our shareholding in Anglo Pacific. Following the sale, we still retain an
exciting package of 36 royalties at different stages of maturity, weighted
towards base metals."

Further detail on the royalty package sold today is included in the table
below.

 Royalty        Project operator        Stage                Primary commodity  High level terms
 West Musgrave  OZ Minerals Ltd         Feasibility          Nickel             2.0% Net Smelter Return (NSR) royalty plus a contingent payment payable 12
                                                                                months after commencement of production
 Santo Domingo  Capstone Copper Corp.   Feasibility          Copper             2.0% NSR royalty
 Nifty          Cyprium Metals Ltd      Re-start             Copper             1.5% realised value royalty
 Carlota        KGHM Polska Miedz S.A.  Residual production  Copper             5.0% NSR royalty

The package of 36 royalties retained by South32 include NSR royalties over
Ecuacorriente S.A.'s Mirador mine, Explorcobres S.A.'s San Carlos/Panantza
project, and Solaris Resources Inc.'s Warintza project, which are located in
Ecuador.

Accounting and tax

The Base Metals Royalties are currently recognised as intangible assets with a
US$nil carrying value. On completion, we expect to recognise a gain on sale of
~US$193M (~US$135M post-tax) within Other income, which will be excluded from
Underlying earnings as an earnings adjustment. We also expect to make tax
payments associated with the transaction of ~US$58M across FY23.

Advisers

Scotiabank are acting as financial advisor and Herbert Smith Freehills,
Cariola Díez Pérez-Cotapos and McCarthy Tetrault are acting as legal
advisors.

About South32

South32 is a globally diversified mining and metals company. Our purpose is to
make a difference by developing natural resources, improving people's lives
now and for generations to come. We are trusted by our owners and partners to
realise the potential of their resources. We produce commodities including
bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical
coal and manganese from our operations in Australia, Southern Africa and South
America. With a focus on growing our base metals exposure, we also have two
development options in North America and several partnerships with junior
explorers around the world.

About Anglo Pacific

Anglo Pacific Group PLC (Anglo Pacific) is a global natural resources royalty
and streaming company listed on the London Stock Exchange (APF) and Toronto
Stock Exchange (APY) with a focus on future facing commodities. Anglo
Pacific's strategy is to become a leading natural resources company through
investing in high quality projects in preferred jurisdictions with trusted
counterparties, underpinned by strong ESG principles. It is a continuing
policy of the Anglo Pacific to pay a portion of these royalties and streams to
shareholders as dividends.

 Investor Relations
 Alex Volante                                          Tom Gallop

T          +61 8 9324 9029
T          +61 8 9324 9030

M        +61 403 328 408
M        +61 439 353 948

E          Alex.Volante@south32.net
E          Tom.Gallop@south32.net
 Media Relations
 Jamie Macdonald                                       Miles Godfrey

T          +61 8 9324 9000                           T          +61 8 9324 9000

M        +61 408 925 140                             M        +61 415 325 906

E          Jamie.Macdonald@south32.net
E          Miles.Godfrey@south32.net

Further information on South32 can be found at www.south32.net
(http://www.south32.net) .

Approved for release by Graham Kerr, Chief Executive Officer

JSE Sponsor:  The Standard Bank of South Africa Limited

12 July 2022

 1  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.

 2  The cash payment comprises US$48M payable on completion, and US$55M
payable in six equal quarterly instalments over the next 18 months.

 3  Refer to media release "Agreement to divest select precious metal
royalties" dated 24 November 2020.

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