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South32 approves Klipspruit life extension project
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 APPROVES KLIPSPRUIT LIFE EXTENSION PROJECT
South32 Limited (ASX, LSE, JSE: S32, ADR: SOUHY) (South32) announced today that it
has approved the 4.3 billion South African Rand (US$301M)[1] Klipspruit Life Extension
project (KPSX) at South Africa Energy Coal[2]. Development activity is expected to commence
in the current quarter with first coal expected from the open-cut operation in FY19.
South32 Chief Executive Officer Graham Kerr said: “Approval of the 4.3 billion Rand
Klipspruit Life Extension project will secure the future of the colliery for at least another 20
years, ensure employment for 740 people and create 4,000 jobs during construction.
“The investment is expected to generate an internal rate of return (IRR) on investment of
more than 20 percent[3] by unlocking 616Mt[4] of Resource at the Klipspruit South and
Weltevreden deposits, and fulfilling around half of our current rail obligations with Transnet.”
About South32
South32 is a globally diversified mining and metals company with high quality operations in
Australia, Southern Africa and South America. 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 have a
simple strategy to maximise the potential of our assets and shareholder returns by
optimising our existing operations, unlocking their potential and identifying new opportunities
to compete for capital.
FURTHER INFORMATION
INVESTOR RELATIONS
Alex Volante Rob Ward
T +44 20 7798 1778 T +61 8 9324 9340
M +44 74 6853 3005 M +61 431 596 831
E Alex.Volante@south32.net E Robert.Ward@south32.net
MEDIA RELATIONS
Hayley Cardy James Clothier
T +61 8 9324 9008 T +61 8 9324 9697
M +61 409 448 288 M +61 413 319 031
E Hayley.Cardy@south32.net E James.Clothier@south32.net
Further information on South32 can be found at www.south32.net.
JSE Sponsor: UBS South Africa (Pty) Ltd
27 November 2017
KPSX fact sheet
Location • Mpumalanga, South Africa, 110km east of Johannesburg
• Klipspruit average saleable export thermal coal production rate of
7.2Mtpa between FY14 and FY17 under an owner-operator model
- Production to cease in the existing mining areas in 2020
following the depletion of Coal Reserves
Overview
• KPSX expected to commence production from FY19, extending the life
of Klipspruit by more than 20 years
- Contract-miner operation, utilising existing infrastructure ramping
up to an average 8.0Mtpa saleable export thermal coal
production rate from 3 open-cut pits (Klipspruit South, Pit BD
and Pit H)[5]
• Klipspruit South: 69Mt of Measured Resources
Coal Resources[4] • Weltevreden: 547Mt comprising 225Mt Measured (41%), 151Mt
Indicated (28%) and 171Mt Inferred Resources (31%)[6]
• A mix of high grade (~5,900kcal/kg) and low grade export
(~4,650kcal/kg) and domestic (~ 4,250kcal/kg) product
• Average production over the life of the project:
Product,production and - Run of Mine production 9.6Mtpa
costs - Marketable production 8.0Mtpa
- Strip ratio 5.5[7]
• Combined Klipspruit and KPSX operating unit costs:
- FY18-20: average 490 Rand/t (real) at a strip ratio of 3.0[8]
• Phola coal handling and preparation plant:
- Existing 50:50 joint venture with Anglo American
Processing - Installed capacity of 16Mtpa washed product
- Export rail load-out facility with direct access to Richards Bay
Coal Terminal (RBCT)
• Access to seaborne market via 611km heavy-haul rail line to RBCT
Logistics and • Entitlement covered by 16.4Mtpa Transnet rail agreement until 2024
marketing • Flexibility to supply larger volumes to the domestic market beyond
2024
Permits • Fully permitted, having received a Section 102 Mining Right, extending
Weltevreden into the Klipspruit mining area during H1 FY18
• South32 owns 92% of South Africa Energy Coal, with the remaining
Ownership 8% held by a Broad-Based Black Economic Empowerment (B-BBEE)
consortium[9]
Notes:
1. The project’s costs are primarily South African Rand based and the capital expenditure conversion to USD is predicated on a
USD:ZAR exchange rate of 14.36 (average of daily spot rate from 13 to 17 November 2017 inclusive).
2. Project execution is subject to South32 reaching satisfactory agreement on securing all land rights for infrastructure
development.
3. IRR is predicated on the commencement of production from KPSX in H2 FY19 and a long term thermal coal price of
US$60.5/t (API4 equivalent) based on the average of 12 broker estimates (Barclays, BMO Capital, BoAML, Credit Suisse,
Deutsche Bank, HSBC, Investec, Jefferies, Macquarie, Morgan Stanley, Renaissance Capital, UBS) and a spot USD:ZAR
exchange rate of 14.36 (average of daily spot rate from 13 to 17 November 2017 inclusive).
4. The Coal Resource is part of the total Coal Resources for Klipspruit and Weltevreden as at 30 June 2017 disclosed as part of
South32's Annual Resource and Reserve declaration in the FY17 Annual Report on 14 September 2017 (www.south32.net).
The breakdown of Coal Resources for Klipspruit South, Pit BD and Pit H is provided in Table 1 of this announcement.
5. Saleable production target is based on 280Mt of Coal Resources from a Coal Resource base of 616Mt. There is a low level
of geological confidence associated with 9.3Mt (3%) of Inferred Coal Resources and there is no certainty that further
exploration work will result in the determination of Indicated Coal Resources or that the production target itself will be
realised.
6. Weltevreden includes Pit BD comprising 163Mt of Measured (81%), 28Mt Indicated (14%) and 9.2 Mt Inferred Resources
(5%); and Pit H comprising 8.8Mt of Measured (85%), 1.5Mt Indicated (14%) and 0.1Mt Inferred Resources (1%).
7. Ratio of mining waste in bank cubic metres to the coal tonnes mined.
8. Operating unit cost and strip ratio predicated on internal analysis undertaken for the project.
9. 8% of South Africa Energy Coal is owned by a Broad-Based Black Economic Empowerment (B-BBEE) consortium. The
interests owned by the B-BBEE consortium were acquired using vendor finance, with the loans repayable to South32 via
distributions attributable to these parties’ pro rata to their share in South Africa Energy Coal. Until these loans are repaid,
South32’s interest in South Africa Energy Coal is accounted for at 100%.
South Africa Energy Coal location map
For the release containing the location map please refer to National Storage Mechanism,
available for inspection at http://www.morningstar.co.uk/uk/NSM, or otherwise available on
South32's website at http://www.south32.net.
KPSX project map
For the release containing the KPSX project map please refer to National Storage Mechanism,
available for inspection at http://www.morningstar.co.uk/uk/NSM, or otherwise available on
South32's website at http://www.south32.net.
Forward-looking statements
This release contains forward-looking statements, including statements about currency exchange
rates, commodity prices, production forecasts, plans, development decisions, exploration and
capital expenditure. 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, South32
Limited 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.
Coal Resources
The information in this announcement that relates to Coal Resources for South Africa Energy
Coal is presented on a 100% basis, represents an estimate as at 30 June 2017 based on
information compiled by H Strauss and P Maseko in the capacity of Competent Persons Coal
Resources for Klipspruit and Weltevreden respectively.
Mr. Strauss (Member, GSSA) and Mr. Maseko (Pr. Sci. Nat., SACNASP) are full time employees
of South32 and members of a ‘Recognised Professional Organisation’ (RPO) included in a list
posted on the ASX website from time to time. They have sufficient experience relevant to the
style of mineralisation and type of deposit under consideration, and to the activities being
undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. The estimated
Coal Resources underpinning the production target have been prepared in accordance with the
requirements in Appendix 5A (JORC Code) of the ASX Listing Rules, Chapter 5 and the
Competent Persons consent to the inclusion in this report of the matters based on their
information in the form and context in which it appears.
Years of production is estimated from the relevant Classified Coal Resources, converted to a
run-of-mine basis using historical Coal Resources to Ore Reserves conversion factors (as
applicable), divided by the nominated run-of-mine production rate on a 100 per cent basis. Years
of production calculations are indicative only and do not necessarily reflect future uncertainties
such as economic conditions, technical or permitting issues. Historical Coal Resources to Ore
Reserves conversion factors may not be indicative of future conversion factors. Years of
production is based on the company’s’ current expectations of future results and should not be
solely relied upon by investors when making investment decisions.
Table 1: Coal Resources for Klipspruit and Weltevreden as at 30 June 2017.
For the release containing Table 2: Coal Resources for Klipspruit and Weltevreden please refer to National Storage Mechanism, available for inspection at
http://www.morningstar.co.uk/uk/NSM, or otherwise available on South32's website at http://www.south32.net.
5
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