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CANNINGTON MINERAL RESOURCES AND ORE RESERVES UPDATE
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
24 August 2017
CANNINGTON MINERAL RESOURCES AND ORE RESERVES UPDATE
South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) announces changes to its
estimates of Mineral Resources and Ore Reserves for the Cannington silver-lead-zinc mine:
- A 42% increase in total estimated open cut Mineral Resource with a 20% reduction in
total estimated underground Mineral Resource. A reclassification has resulted in a
24% increase in Measured Mineral Resources.
- A 9% increase in total estimated underground Ore Reserves with a 31% increase in
Proved Ore Reserves.
The Cannington polymetallic underground operation is 100% owned by South32 and is located
in northwest Queensland, Australia. Full details of this update are contained in the attached
report.
The estimates of Mineral Resources and Ore Reserves are reported in accordance with the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves, 2012 (JORC Code) and the ASX Listing Rules. This report summarises the
information contained in the JORC Code Table 1 appendix prepared in connection with this
report, submitted to UK Listing Authority (UKLA) national storage mechanism and available
for inspection at http://www.morningstar.co.uk/uk/NSM or are otherwise available on
South32's website at http://www.south32.net.
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.
INVESTOR RELATIONS
Alex Volante Rob Ward
T +61 8 9324 9029 T +61 8 9324 9340
M +61 403 328 408 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.
Update on estimates of Mineral Resources and Ore Reserves
South32 confirms a 42% increase in the total estimated open cut Mineral Resource at Cannington to
29 Mt, compared to the previously published 30 June 2016 estimate (see Appendix 1 Table 1 and Table 2).
The increase is due to a revision of the 'reasonable prospects for eventual economic extraction' criteria
for open cut mining. The open cut Mineral Resource preserves the potential development option until a decision
is required, beyond 2020.
A 24% increase in the total estimated Measured Mineral Resource (to 80 Mt) reflects a change in
classification approach of this Mineral Resource, that considers confidence in both geological and grade
estimation continuity.
A 20% reduction (15.6 Mt) in the previously reported underground Mineral Resource is attributable
to its reclassification to the open cut Mineral Resource; mining depletion and sterilisation of the
underground Mineral Resource; and an increase in reporting net smelter return (NSR) cut-off.
South32 confirms a 9% increase (2Mt) in total estimated underground Ore Reserves at Cannington
compared to the previously published 30 June 2016 estimate. The increase is due to additional drilling,
and an updated resource model and mine plans. Changes include a 31% increase (5.4Mt) in the
Proved Ore Reserve reflecting changes to the Mineral Resource classification approach.
The Mineral Resources and Ore Reserves estimates as at 30 June 2017 are presented in Appendix 1 Table 1
and Table 3 and a comparison to the previously published Mineral Resources and Ore Reserves
estimates (as at 30 June 2016) are presented in Table 2 and Table 4.
The estimates of Mineral Resources and Ore Reserves are reported in accordance with the Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 (JORC Code) and
the Australian Securities Exchange Listing Rules. The breakdown of the total estimates of Mineral
Resources and Ore Reserves into the specific JORC Code categories is contained in the Appendix 1 tables.
This report summarises the information contained in the JORC Code Table 1 which is included in
Appendix 2 to this report.
Estimate of Mineral Resources
Geology and geological interpretation
Cannington is a Broken Hill Type (BHT) silver-lead-zinc massive sulphide deposit hosted by Proterozoic
age high-grade metamorphic lithologies of the Soldiers Cap Group, located in the Eastern Succession of
the Mount Isa Block.
Mineralisation is stratiform bound along the limbs of a tight isoclinal recumbent synform with an easterly
dip and a southerly plunge. The core of the synform is composed of amphibolite with encompassing silver-
lead-zinc sulphide mineralisation. The mineralisation has been divided into nine types based on textural,
mineralogical and geochemical characteristics which assist in defining metallurgical performance.
Drilling techniques
Out of a total of 6,884 drill holes considered for this resource update, 6,803 are diamond core and 81 are
surface percussion/reverse circulation drill holes. 89% of the diamond core holes were drilled from
underground using a fan drilling pattern.
Sampling and sub-sampling techniques
All diamond core samples were halved and samples were collected on one metre (m) intervals through the
mineralised zone, including a visually identifiable buffer of at least six metres into the non-mineralised core.
The samples were submitted for preparation and analysis at the Cannington on-site laboratory. The
mineralised intersections are verified by mine geologists throughout each drilling programme and field
duplicates are within an acceptable range for resource modelling.
Sample analysis method
Samples are crushed to a nominal 2mm from which a 300g sub-sample is pulverized to 90% passing 75 microns,
subjected to a three acid digest, and analysed by Inductively Coupled Plasma – Optical Emission
Spectrometry (ICP-OES). Coarse crushed duplicates and laboratory pulp duplicates were undertaken at a
submission rate of one in ten samples and one in 100 samples were sent to an external laboratory for
analysis.
Laboratory quality assurance and quality control measures at the Cannington laboratory include eight
geological standards made of homogenised Cannington ore representing the range of Mineral Resource
grades.
Cut-off grade
Cannington is a polymetallic deposit and a NSR dollar value is used for representing the minimum block
value required for potential economic extraction, determined as follows:
- Underground Mineral Resource cut-off of A$130/t (Dry Metric Tonnes); and
- Open cut Mineral Resource cut-off of A$58/t.
Mining and metallurgical methods and parameters
Cannington has been operating as an underground long hole open stope mine for 20 years and uses
periodically updated performance data to establish its modifying factors. This includes geological
interpretations with defined mineralisation and waste lithology as well as metallurgical recovery
assumptions which are reconciled annually.
Estimation methodology
Resource estimation is performed by ordinary kriging interpolation for silver (Ag), lead (Pb), zinc (Zn) and
for minor elements: iron (Fe), arsenic (As), bismuth (Bi), magnesium oxide (MgO) and silica oxide (SiO2).
Search estimation criteria are consistent with geostatistical models developed for each estimation domain
according to the appropriate geological controls. Validation includes statistical analysis, swath plots and
visual inspection.
Specific gravity measurements from drill cores are used as the basis for estimating dry bulk density in
tonnage calculations for both mineralised and non-mineralised material.
Mineral Resource classification
Mineral Resources are classified based on the level of data informing both the geological model and grade
estimation. Infill underground drill spacing to approximately 12.5mN x 15mE x 15mRL in the majority of
modelled areas provides a high confidence basis for geological modelling. Grade estimation confidence is
overlain on the geological modelling classification criteria. The kriging variance is matched to block
estimation conditions that relate to the number and distance of data, informing the estimate in relation to
semi-variogram models for Ag, Pb and Zn.
Estimate of Ore Reserves
The declared Ore Reserves are based on the Mineral Resource estimate as at 30 June 2017.
Material and economic assumptions
Cannington is an operating underground mine which has been in continuous operation since 1997.
Sufficient studies have been undertaken to enable Mineral Resources to be converted to Ore Reserves on
the basis of current operating methods and practices. The run-of-mine (ROM) ore is beneficiated on site
before being transported by road to the rail load-out facility (Yurbi) for transport to Townsville.
Capital costs are based on the expected future development of the mine, tailings facilities and sustaining
capital requirements. The costs are accounted for in the operation's valuation models. Operating costs are
estimated as part of the internal budgeting process. Transport charges are based on current truck, rail and
shipping contracts and are estimated as part of the internal budgeting process. Other economic
assumptions used for valuation reflect South32's view on demand, supply, volume forecasts and competitor
analysis and are commercially sensitive.
Ore Reserve classification
Proved and Probable Ore Reserves are derived from the respective Mineral Resource classification.
Internal dilution within the Ore Reserve stope boundaries represents <4% of the Ore Reserve by mass and
is considered to have the same level of confidence as the reported Mineral Resource.
The Mineral Resource inside each stope is considered for Ore Reserve should it have <30% of its total
mass as Inferred Mineral Resource and have a weighted average NSR value greater than or equal to
A$130 per dry metric tonne. Stopes within the life of operation plan that are considered to have either a
high level of geotechnical/operational risk, potential for sterilisation, marginal economics, or where there is
uncertainty in the modifying factors, are excluded from consideration as an Ore Reserve.
The Reserve Life reported in FY17 reflects the scheduled extraction period in years for the total Ore
Reserves in the current approved life of operation plan. In FY16, Reserve Life was reported as the Ore
Reserves divided by the FY16 nominated production rate.
Mining method and assumptions
The underground mine is accessed via a single surface portal with a decline extending to a depth of 645m
below surface. Stope production is conducted using the Long Hole Open Stoping (LHOS) with backfill
mining method. The primary backfill method is paste fill with a supplementary use of ROM waste and ROM
paste rock. Mining extraction factors for tonnage and grade are updated annually and are applied to
individual mining blocks based on their individual characteristics. Extraction factors are derived from actual
mining performance/reconciliation data. Average stope dilution across the mine is 11% with mining
recovery at 91%.
Processing method and assumptions
The Cannington process plant has a demonstrated throughput capacity of 3.4Mtpa (million tonnes per
annum). The existing metallurgical process is appropriate to the style of mineralisation. Predicted metal
recoveries are derived using historic recovery regression models; over the life of the operation, average
recoveries for silver, lead and zinc are 85%, 87% and 80%, respectively. Regression models include
multiple input variables such as ROM grade, metal ratios, enrichment ratios, mill throughput and
concentrate grade. These models are revised annually using actual operating data.
There are no allowances made for deleterious elements in the life of operation plan valuation, with these
expected to remain non-material.
Cut-off grade
Cannington is a polymetallic deposit which uses an equivalent NSR value as a grade descriptor. NSR
considers the remaining gross value of the in-situ revenue generating elements once processing
recoveries, royalties, concentrate transport, refining costs and other deductions have been considered.
The cut-off strategy employed at Cannington is to optimise the net present value (NPV) of the operation.
A dollar equivalent cut-off NSR of A$130 per dry metric tonne forms the basis of mine design and FY17 Ore
Reserve reporting. The chosen cut-off grade is supported by a cut-off grade optimisation study conducted
in FY16.
Estimation methodology
Ore Reserves are estimated from the current life of operation plan, revised in FY17 with updated modifying
factors, mine designs, geotechnical parameters, capacity constraints and mining sequences. The plan
provides the optimised long-term direction of the operation and provides the mining physicals from which
the Ore Reserves are scheduled and evaluated.
Material modifying factors
The reported Ore Reserves are those that are mined from underground using current mining methods and
practices and are fully contained within South32 mining tenements. The Ore Reserves are scheduled to
be extracted within the expiration date of all mining leases.
Cannington is an operating asset with all infrastructure required to execute the mine plan in place and
assumes no outstanding or foreseeable issues with material legal agreements. Long-term marketing
arrangements are in place with smelter supply contracts in various geopolitical regions.
Competent Person's Statement
The information in this report that relates to Mineral Resources for Cannington is presented on a 100%
basis, represents an estimate as at 30 June 2017, and is based on information compiled by Matthew
Readford.
The information in this report that relates to Ore Reserves for Cannington is presented on a 100% basis,
represents an estimate as at 30 June 2017, and is based on information compiled by Tyson Curypko.
Mr. Readford and Mr. Curypko are full time employees of South32 and are members and Chartered
Professionals of the Australasian Institute of Mining and Metallurgy. Both 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'. Each Competent Person
consents to the inclusion in this report of the matters based on his information in the form and context in
which it appears.
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24 August 2017
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