REG - South32 Limited - 2024 AGM Chair and CEO Addresses

South32Announcement

24/10/2024 08:00

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RNS Number : 4470J  South32 Limited  24 October 2024

 

 

24 October 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

south32.net

 

SOUTH32 LIMITED

2024 ANNUAL GENERAL MEETING

24 OCTOBER 2024

CHAIR AND CEO ADDRESSES

South32 Limited (ASX / LSE / JSE: S32; ADR: SOUHY) (South32), in accordance
with ASX Listing Rule 3.13.3, today releases the addresses to shareholders to
be given by the Chair and the Chief Executive Officer at South32's hybrid
Annual General Meeting.

A webcast of the event will be available to view live via the following link
(https://meetnow.global/S32AGM2024 (https://meetnow.global/S32AGM2024) ).
A recording of the session will be made available on the South32 website
following its completion.

About us

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, zinc, lead, silver, nickel and manganese
from our operations in Australia, Southern Africa and South America. We also
have a portfolio of high-quality development projects and options, and
exploration prospects, consistent with our strategy to reshape our portfolio
toward commodities that are critical for a low-carbon future.

 

 Investor Relations                                                         Media Relations
 Ben Baker                                                                  Jamie Macdonald

T          +61 8 9324 9363
T          +61 8 9324 9000

M        +61 403 763 086
M        +61 408 925 140
 E          Ben.Baker@south32.net (mailto:Ben.Baker@south32.net)
E          Jamie.Macdonald@south32.net
                                                                            (mailto:Jamie.Macdonald@south32.net)

 

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

Approved for release to the market by Graham Kerr, Chief Executive Officer

JSE Sponsor: The Standard Bank of South Africa Limited

24 October 2024

 

SOUTH32 LIMITED

2024 Annual General Meeting

24 October 2024

Addresses by Karen Wood, Chair and

Graham Kerr, Chief Executive Officer

 

The Chair acknowledged the Whadjuk people of the Noongar nation, introduced
the Non-Executive Directors and noted the attendance of the auditor, and the
returning officer for the meeting and scrutineer of the vote.

The Company Secretary discussed the meeting procedures including the
management of questions and voting.

 

Karen Wood, Chair

Once again, it is a pleasure to be with you today for our Annual General
Meeting, and we greatly appreciate your participation as we look back on one
of the most significant years in our history.

 

But before we do so, it is with great sadness that I must reflect on a recent,
tragic event. We were devastated by the news last month that Mr José Luis
Pérez, a contractor at our Cerro Matoso operation in Colombia, suffered fatal
injuries after a fall from height.

 

José Luis, who was 29 years old, was working as part of a scaffolding team,
undertaking quarterly maintenance work during a stoppage of Cerro Matoso's
production line, when this incident occurred. He is survived by his partner
and two young children. On behalf of the Board, I express my deepest and
heartfelt sympathies to his family, friends and colleagues.

 

Graham has been to Colombia to better understand the circumstances of this
tragedy and an investigation into the incident is underway. As your Chair, I
can assure you that improving our safety performance has been, and will
continue to be, a critical focus for everyone at South32. What is clear to us
is that shifting our safety performance requires cultural change.

 

That change is at the heart of our global, multi-year Safety Improvement
Program which includes the delivery of our LEAD Safely Every Day program
focusing on safety leadership capability and building a culture where each one
of us takes responsibility for our own safety and those with whom we work.

 

During the year each member of the Board participated in this training. We
also continued our regular site visits which gave each one of us the
opportunity to hear from team members about how they see the impact of the
Program in their operation.

 

While we are seeing positive trends in our leading safety indicators -
designed to detect and provide advance warning of latent safety hazards - we
can never be truly successful until each member of our workforce goes home to
their loved ones safe and well at the end of every shift. This means we must
support physical - and indeed psychological - safety for all. Every member of
your Board, Graham and each other member of the Senior Leadership Team remains
steadfastly committed to this.

 

During the year, the Board has continued its work in overseeing the
development and implementation of South32's strategy, a strategy that has led
our work since formation. A key element of that strategy has been the
identification and pursuit of opportunities to sustainably reshape our
business for the future.

 

I'm pleased to say that we completed two significant milestones during year,
the final investment decision for the zinc-lead-silver Taylor deposit at
Hermosa and the sale of Illawarra Metallurgical Coal. Through these changes,
we have further streamlined our portfolio towards base metals.

 

Following the sale of Illawarra Metallurgical Coal, approximately 90 per cent
of our portfolio's underlying revenue is now expected to come from base metals
including our aluminium value chain, with the remainder from manganese. This
compares to approximately 50 per cent of the portfolio's underlying revenue
that came from these base metals at demerger in 2015.

 

Graham will shortly provide a detailed summary of our financial and operating
results, but I do want to acknowledge some significant events and challenges
that we faced during the year. In particular, the impact on GEMCO from
Tropical Cyclone Megan in March and the impairments recorded for Worsley
Alumina and our nickel refinery at Cerro Matoso.

 

At GEMCO we have commenced a phased return to mining activities and continue
to work towards resuming ore export shipments.

 

The impairment expense recorded at Worsley followed the increased uncertainty
created by recommended conditions for the Mine Development Project approval
and associated challenging operating conditions. We continue to engage with
the West Australian Government and seek approval of the Project on conditions
that we believe are reasonable, having regard to the necessary environmental
protections and the facilitation of this important industry in south west WA,
an area we have been working in responsibly for decades.

 

At Cerro Matoso, we recorded an impairment expense of US$264 million,
reflecting structural changes in the nickel market which are expected to
continue to place pressure on nickel prices. We continue to progress our
strategic review of this operation in response to these issues and expect to
provide information on the outcomes of this review in the second half of FY25.

 

I want to acknowledge the work of our teams who continue to work tirelessly to
deliver the best possible outcomes for our business. Despite these challenging
events, we finished the year strongly, achieving two annual production
records.

 

We delivered Underlying earnings of US$380 million in respect of Financial
Year 2024 and returned US$198 million to shareholders, including US$163
million in fully franked ordinary dividends and US$35 million via on-market
share buy-backs.

 

Reflecting the Group's strengthened financial position and our disciplined
approach to capital management, in August, the Board resolved to allocate
US$200 million to our ongoing capital management program, to be returned to
shareholders via our on-market share buy-back which we started following
completion of the sale of Illawarra Metallurgical Coal.

 

Against the backdrop of prevailing geopolitical tensions and uncertainty, we
expect some of the global volatility that has impacted the prices of some of
our key commodities will continue. We are focused on what we can control,
which is to remain disciplined in how we allocate capital to protect our
balance sheet while maintaining safe and reliable operations and continuing to
transform our portfolio for long-term value creation.

 

Just as we are working to build and maintain a diverse workforce to foster
greater collaboration, innovation, and performance, your Board, too,
represents a broad cultural and ethnic background and geographic mix. During
the year we welcomed Sharon Warburton as an independent Non-Executive
Director, further enhancing the Board's range of skills and experience. Sharon
is the third new Director to join the Board in the past two years, in line
with our succession planning process which ensures we appropriately plan for
the future.

 

And today, we farewell Keith Rumble who is stepping down as a Non-Executive
Director, a role he has held since the formation of South32 in 2015. Keith has
been a highly valued member of our board.  His deep operational skills have
contributed to our deliberations and, as chair of the Sustainability
Committee, Keith has overseen how we incorporate important sustainability
considerations into our strategy. I would like to take this opportunity to
formally thank Keith for his contribution to South32.

 

We have three remaining founding directors with succession plans in place for
all three positions. As you might expect we will stagger retirements to ensure
the valuable institutional knowledge each bring is not lost at the same time.

 

Arguably the Board's most important task is to oversee succession planning for
senior management, including the CEO, to ensure we have the right leadership
for your company. This process does not stop and involves identifying talent,
both internally and externally, and overseeing development plans. We are
fortunate to have a quality leadership team led by Graham who together have
transformed our business, including through the significant portfolio
decisions made during the year. Your Board continues to plan for the future
and you can be assured we have the processes in place to secure the leadership
skills needed to continue to deliver our strategy to best position South32 for
the future.

 

During the year we continued to focus on the areas of sustainability that are
material to our stakeholders, our business and our long-term future, the most
material of which is responding to the imperative to address climate change.
As shareholders know we support the Paris Agreement objectives to limit global
temperature rise to well below 2(o)C this century, and to pursue efforts to
limit the increase to 1.5(o)C. In early 2025, Government Parties to the Paris
Agreement will set their 2035 Nationally Determined Contributions for
emissions reduction.

 

In setting these contributions we encourage an ambitious approach to align
with limiting temperature increases to 1.5(o)C, but in so doing we also
encourage appropriate policy settings and commitments that recognise specific
sector, commodity, and geographic decarbonisation challenges to support a just
transition. This is a challenge that needs to be considered on a global basis
and in a way that does not drive businesses to jurisdictions without the
checks and balances needed for a genuine reduction in global emissions.

 

In 2022 we published our goals and targets in our first Climate Change Action
Plan.  At that time, we committed to update the plan and put it to
shareholders again for consideration in 2025.  Work is well underway on the
2025 Plan, including engaging with shareholders and other stakeholders for
input. Graham will talk to the work taking place to decarbonise operations
within our aluminium value chain, where the majority of our operational
greenhouse gas emissions are generated.

 

Our approach to environmental stewardship, alongside climate change, is a
material strategic and governance issue for South32 that is overseen by your
Board. As stewards of the lands and waters upon which South32 operates, it is
our responsibility to minimise our impacts to the natural environment. During
the year, we worked to deepen our understanding of nature-related impacts,
dependencies, risks and opportunities, with this program of work shaping our
approach to addressing nature-related risks and opportunities, which we plan
to publish in 2025.

 

As we look ahead to our 10th year and beyond, we have much to be proud of and
much to look forward to as a global, diversified producer of commodities
critical for a low-carbon future. On behalf of the Board, I would like to
thank our people for their hard work and dedication throughout the year, as
well as the communities where we work, our shareholders and all our other
stakeholders for their ongoing support.

 

I will now hand over to Graham.

 

Graham Kerr, Chief Executive Officer

Thank you for joining us today.

 

Financial year 2024 was a pivotal period for South32. Building on our previous
milestones, the portfolio improvements we executed during the year
strengthened and streamlined our business.

 

I will go into further details about our work during financial year 2024 but
before I do so, I want to talk about the steps we are taking to improve our
safety performance which, I regret to say, is still not where we need it to
be.

 

As Karen outlined, everyone at South32 was devastated by the death of José
Luis Pérez, a contractor who suffered fatal injuries on September 17 while
working at Cerro Matoso. The loss of this young man's life is heartbreaking,
and our thoughts continue to be with José Luis' family, friends and
colleagues.

 

An investigation into the incident is underway, so we can understand what
happened and how similar incidents can be prevented in the future. We will
share learnings across the business and take time to reflect on what we can
all do differently - no family should experience the kind of loss that José
Luis' family has suffered.

 

These incidents can, and must, be prevented.

 

During financial year 2024, we continued to implement our Safety Improvement
Program, now in its fourth year, and we continue to embed our safety
guarantee. The safety guarantee is designed to create a sense of chronic
unease, reduce complacency and assist in the reduction of risk tolerance in
relation to safety and health.

 

We do this by asking our people to reflect on whether they can guarantee both
their safety and that of their colleagues when executing their role. If the
answer is 'no', the expectation is that they stop and ask what needs to be
done differently to provide that guarantee.

 

We assess our safety performance through a range of both leading and lagging
indicators. Our significant hazard frequency, a leading indicator, increased
by 34 per cent compared to FY23, indicating a positive reporting culture and
increased hazard awareness.

 

Conversely, our lost time injury frequency, a lagging indicator, increased by
19 per cent compared to FY23, underscoring that while we had no fatalities at
our operations in FY24, we are still seeing too many serious injuries and we
must be relentless in our pursuit of a safer workplace.

 

At all levels of our business, we are united in our belief that everyone can
go home safe and well at the end of their shift. We have more work to do and
remain committed to pursuing continuous improvements in our safety
performance.

 

We made two changes to our Lead Team in financial year 2024. Vanessa Torres
was appointed Chief Operating Officer Australia, with accountability for
Cannington, GEMCO and Worsley Alumina. Vanessa was previously Chief Technical
Officer and, in that role, led our multi-year Safety Improvement Program since
its inception. At the same time, Erwin Schaufler was promoted to Chief
Technical Officer, having previously served as Vice President Operations at
Worsley Alumina. Vanessa and Erwin will play key roles in driving improved
operational performance and better safety outcomes, as well as leading in
their other areas of accountability.

 

Turning now to our portfolio. During the year, we achieved two major
milestones that have transformed our business.

 

First, we announced final investment approval for the Taylor zinc-lead-silver
deposit at Hermosa. Taylor offers the potential for a long-life, low-cost,
low-carbon operation that is expected to deliver value for our shareholders
over multiple decades. It has the potential to be a top 10 global zinc
producer and with primary zinc demand growth expected to outpace production to
2032, we expect higher incentive zinc prices as Taylor ramps up to nameplate
capacity.

 

Our investment at Taylor unlocks value for future growth options at Hermosa by
establishing significant shared infrastructure. These options include the
Clark manganese deposit, which is currently the only advanced project in the
United States with a clear pathway to produce battery-grade manganese from
locally sourced ore for the North American electric vehicle battery market.

 

Recognising Clark's potential, Hermosa was recently selected for a US$166
million award negotiation from the US Department of Energy which will support
the potential development of a commercial-scale manganese production facility.
While subject to further study, construction of the facility and the
development of Clark represents a significant opportunity to establish a North
American supply chain of battery-grade manganese in a phased approach in line
with market development.

 

In addition to Taylor and Clark, we are continuing further exploration
programs at the Peake prospect to test the potential for a continuous copper
system connecting Peake and Taylor.

 

Shortly after the Taylor final investment decision, we announced the sale of
Illawarra Metallurgical Coal for up to US$1.65 billion. This transaction
completed in August and unlocked significant value for our shareholders. It
has simplified our business, strengthened our balance sheet and reduced
capital intensity, unlocking capital to invest in our high-quality growth
options in base metals.

 

As Karen mentioned, financial year 2024 was not without challenges. From a
global perspective, the period was marked by a mix of recovery and volatility.
Interest rates remained high and inflationary pressures persisted in some
regions. Severe weather also affected our business, with Cannington impacted
by Tropical Cyclone Kirrily in January and Australia Manganese being
significantly impacted by Tropical Cyclone Megan in March, resulting in the
temporary suspension of operations on Groote Eylandt.

 

Cyclone Megan was a severe weather system, which resulted in widespread
flooding and significant damage to critical infrastructure, including wharf
and port infrastructure, and a critical bridge connecting northern pits of the
Western Leases mining area and the processing plant.

 

Implementation of our operational recovery plan at GEMCO is ongoing. We
continued to progress a substantial dewatering program and a phased mining
restart, and remain on track to resume production from the primary
concentrator this quarter. We also continued our investment in mine repairs
and infrastructure, including a critical bridge and the wharf. Subject to
maintaining construction productivity during the upcoming wet season, sales
volumes are expected to progressively increase over the fourth quarter of
FY25.

 

Since 2019, the Worsley Mine Development Project has been subject to a
comprehensive State and Commonwealth environmental approval and public review
process. Throughout this process Worsley Alumina has consulted extensively
with Government, the community and other stakeholders outlining in detail how
we will minimise our impacts to the environment, and rehabilitate areas that
we do disturb. We have listened, responded to concerns and altered the project
in response to feedback. We know we have an important role to play in
environmental stewardship, responsibly managing land and supporting
biodiversity, balanced with the need to develop the resources that will
support the transition to a low-carbon future.

 

In July, the WA Environmental Protection Authority published its
recommendation that the Project be approved, subject to conditions. If imposed
in the form recommended, several conditions would create significant operating
challenges.  We have lodged an appeal in relation to the WA EPA assessment
report.

 

On October 15, the Western Australian State Government announced that it would
defer regulation of greenhouse gas emissions to the Federal Government's
Safeguard Mechanism.  The change will remove policy inconsistencies that
currently exist between the State and Federal Government with regard to
greenhouse gas emissions, and is expected to be addressed as part of the
appeals process for the Project.

 

We continue to work collaboratively with the Western Australian Government to
enable Worsley Alumina to continue to meet the State's robust environmental
standards. The Western Australian Environment Minister is expected to consider
approval of the Project in December 2024, with required Federal approvals
expected shortly thereafter.

 

Despite these challenges, I am pleased to report a strong finish to the year,
with improved operating performance, a strengthened financial position and the
commencement of the on-market share buyback. We set consecutive annual
production records at Hillside Aluminium and South Africa Manganese, and
lifted production at Cannington by 10 per cent. We recorded Underlying EBITDA
of US$1.8 billion in respect of FY24, with Underlying earnings and free cash
flow increasing in the second half of the year.

 

Looking ahead, we expect volume growth in copper and low-carbon aluminium in
2025 and 2026. Construction of Taylor is progressing to plan, and we are also
progressing a pipeline of prospects in targeted regions through the drill bit,
with exploration activity this year including consolidating our position in
the highly prospective San Juan region of Argentina.

 

Reshaping our portfolio is a key element of our approach to climate change, as
is decarbonising our operations. The majority of our operational greenhouse
gas emissions are generated in our aluminium value chain which is where we are
focusing our decarbonisation efforts.

 

During the year, we converted two coal-fired boilers to natural gas at Worsley
Alumina, expected to reduce Worsley Alumina's operational greenhouse gas
emissions by around 10 per cent against FY21 levels. At our aluminium smelters
in South Africa and Mozambique, we continue to work with stakeholders and
governments on identifying and securing long-term, low-carbon energy solutions
and I'm pleased that we reported a six per cent decrease in operational
greenhouse gas emissions in FY24, compared to FY23 levels.

 

As we enter our 10th year, the South32 of today looks very different to the
one we established in 2015 and is focused on copper, zinc and our aluminium
value chain representing an attractive commodity mix from which we believe we
can grow.

 

Our outlook is positive as we continue to optimise our business and seek to
capitalise on our transformed portfolio which, more than ever, is focused on
commodities critical for a low-carbon future.

 

In closing, I would like to thank our teams around the world for their hard
work during the year - one of the most significant in our history - and
reiterate our unwavering commitment to improving our safety performance.

 

Thank you.

 

I'll now hand back to our Chair.

 

The Chair then conducted the formal items of business.

 

Approved for release to the market by Graham Kerr, Chief Executive Officer
JSE Sponsor: The Standard Bank of South Africa Limited

24 October 2024

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