Wrap Text
South32 Limited quarterly report June 2021
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 Limited Quarterly Report June 2021
• Record annual production at Worsley Alumina and Brazil Alumina with both refineries
benefitting from high plant availability
• Record annual production at Australia Manganese and a 21% year-on-year increase at South
Africa Manganese with both operations exceeding guidance
• A 14% year-on-year increase in zinc equivalent production[note 1] at Cannington with
strong underground performance enabling the acceleration of a higher-grade mining sequence
• A 9% year-on-year increase in production at Illawarra Metallurgical Coal with the return
to a three longwall configuration delivering greater efficiencies
• A 54% increase in nickel production at Cerro Matoso during the June 2021 quarter
following the successful refurbishment of a furnace and first ore from the higher-grade
Q&P project
• Steady year-on-year production and a 21% lift in average realised prices at our aluminium
smelters
• Successful divestment of South Africa Energy Coal and the TEMCO manganese alloy smelter
during FY21, simplifying and improving our portfolio
• Updated Mineral Resource for our Taylor Deposit[note 2] at Hermosa, confirming higher
zinc equivalent grades and improved confidence in the orebody to support our ongoing
pre-feasibility study work
“During the year we achieved production records at Worsley Alumina, Brazil Alumina and Australia
Manganese. At South Africa Manganese volumes increased by 21 per cent, following COVID-19 related
impacts in the prior year.
“Our base metals operations, Cannington and Cerro Matoso, both finished the year strongly,
achieving 20 and 54 per cent increases in zinc equivalent and nickel production volumes
respectively during the June quarter.
“Our strong financial position supported the return of US$346 million to shareholders via our
on-market share buy-back during the year, bringing total returns under our capital management
program to US$1.7 billion over the past four years.
“We also made substantial progress reshaping our portfolio during the year, completing the
divestments of South Africa Energy Coal and the TEMCO manganese alloy smelter, while
progressing studies for our base metals development options at Hermosa and Ambler Metals.
This, along with the release of our medium-term target to halve our operational emissions by
2035, positions us well as the world transitions to a low carbon future.”
Graham Kerr, South32 CEO
Production summary
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 QoQ
Alumina production (kt) 5,269 5,361 2% 1,358 1,218 1,427 17%
Aluminium production (kt) 986 982 (0%) 245 240 246 3%
Energy coal production (kt) 24,129 19,561 (19%) 5,657 4,020 3,464 (14%)
Metallurgical coal production (kt) 5,549 6,170 11% 1,523 1,568 1,340 (15%)
Manganese ore production (kwmt) 5,348 5,793 8% 1,228 1,409 1,464 4%
Payable nickel production (kt) 40.6 34.1 (16%) 9.7 7.1 10.9 54%
Payable silver production (koz) 11,792 13,655 16% 3,195 3,484 4,178 20%
Payable lead production (kt) 110.4 131.8 19% 30.1 33.0 41.2 25%
Payable zinc production (kt) 66.7 67.7 1% 16.9 17.8 19.5 10%
Unless otherwise noted: percentage variance relates to performance during the financial year
ended June 2021 compared with the financial year ended June 2020 (YoY) or the June 2021
quarter compared with the March 2021 quarter (QoQ); production and sales volumes are reported
on an attributable basis.
CORPORATE UPDATE
• In May 2021, we announced our target to achieve a 50% reduction in operational carbon emissions
(Scope 1 and 2) by FY35[note 3] compared to our FY21 baseline, which steps up our ambition on
climate change and pathway to net zero by 2050.
• We completed the divestment of our 100% shareholding in South32 SA Coal Holdings Proprietary
Limited (South Africa Energy Coal) to Seriti Resources Holdings Proprietary Limited (Seriti) and
two trusts for the benefit of employees and communities[note 4] during the June 2021 quarter.
We have booked an unaudited loss on sale of approximately US$160M which will be excluded from
Underlying earnings, with South Africa Energy Coal to be presented as a discontinued operation in
our June 2021 full year results.
• As reported to the market on 1 April 2021[note 5], as part of the divestment of South Africa Energy
Coal we have provided a vendor support package to Seriti to underpin the sustainability of the
business. This package includes providing US$200M to fund rehabilitation activity by way of 10 annual
instalments, and a US$50M restructure facility. At 30 June 2021 we expect to recognise a liability
to reflect the commitment to fund rehabilitation activity which will reduce our net cash balance
by approximately US$180M. Subsequent to the end of the quarter, the US$50M restructure facility
was also fully drawn, further reducing our net cash balance.
• During FY21 we purchased 172M shares via our on-market share buy-back at an average price of A$2.68
per share, taking total returns through the capital management program to US$346M for the year,
including US$144M in the June 2021 quarter. On 18 May 2021, reflecting our strong balance sheet
and disciplined approach to capital allocation we increased the program’s size by US$200M to
US$1.88B. As at 30 June 2021 the capital management program was 88% complete with US$225M remaining
to be returned ahead of its expiry on 3 September 2021[note 6].
• We received net distributions[note 7] of US$186M (South32 share) from our manganese equity accounted
investments (EAI) in FY21, including US$88M in the June 2021 quarter.
• Today we announced that we will recognise a pre-tax, non-cash impairment charge for Illawarra
Metallurgical Coal of US$728M (post-tax ~US$510M) in our FY21 financial results[note 8]. These
charges will be excluded from our Underlying earnings in FY21.
• Notwithstanding the benefits of simplification to our functional support costs through our exit
of lower returning businesses and a reduction in the Group’s office footprint, FY21 group and
unallocated costs, excluding greenfield exploration, are expected to be above our guidance of US$80M
(H1 FY21: US$47M), following the recognition of one-off charges during H2 FY21.
• Our Group Underlying effective tax rate (ETR) is expected to remain elevated in a range between
35% and 45% (excluding EAI) in FY21, given the impact of losses incurred at South Africa Energy Coal
prior to its divestment. From FY22 we expect the rate to more closely reflect the corporate tax rates
of the geographies where the Group operates[note 9]. Separately, we expect the underlying ETR of our
manganese EAI to be in a range between 50% and 55% in FY21 following the de-recognition of certain
deferred tax assets in our Australian business.
DEVELOPMENT AND EXPLORATION UPDATE
Hermosa project
• Today we released an updated Mineral Resource estimate for the Taylor Deposit[note 2] that supports the
ongoing pre-feasibility study (PFS) work. The updated Mineral Resource estimate (Table A) of 138Mt,
averaging 3.82% zinc, 4.25% lead and 81 g/t silver confirms higher zinc, lead and silver grades, with
zinc equivalent grade increasing from 7.62% to 8.61%, partially offsetting a 17% reduction in total
tonnage. The deposit remains open at depth and laterally.
• The Taylor Deposit PFS was scheduled for completion prior to the end of the June 2021
quarter but has been delayed given the impact of ongoing COVID-19 related workforce restrictions.
Notwithstanding, study work to date has confirmed a preference to pursue a dual shaft development that
prioritises early access to higher grade ore, identified through our improved understanding of the updated
Taylor Mineral Resource estimate.
• We expect to report scoping study outcomes and future work plans for the Clark Deposit in H1 FY22.
• We directed US$16M to exploration programs at Taylor, Clark and across the broader land package at
Hermosa during FY21.
Other development and exploration options
• We commenced exploration activities for the summer field season at our Ambler Metals Joint Venture
in the June 2021 quarter under strict COVID-19 protocols. Planned activities include infill drilling
of the Arctic Deposit and drilling at identified regional targets along the Arctic VMS belt.
• We invested US$18M during FY21 in our early stage greenfield exploration opportunities.
Although COVID-19 restrictions persist across the majority of our exploration jurisdictions,
activity continues to ramp-up globally with multiple programs underway in Australia, USA, Canada,
Argentina, Peru and Ireland.
• We directed US$39M towards exploration programs at our existing operations and development options
during FY21 (US$30M capitalised), including US$3M for our EAI (US$1M capitalised), US$16M at the
Hermosa project (as noted above, all capitalised) and US$4M at Ambler Metals (all capitalised).
Table A: Mineral Resources for the Taylor Deposit as at 30 June 2021[note (b)(c)(d)]
Measured Mineral Resources Indicated Mineral Resources
Ore Type Mt %Zn %Pb g/tAg %ZnEq Mt %Zn %Pb g/tAg %ZnEq
UG Sulphide[note a] 29 4.10 4.05 57 8.25 82 3.65 4.45 88 8.73
UG Transition[note a] - - - - - 3.7 6.11 4.21 60 10.44
Total 29 4.10 4.05 57 8.25 86 3.76 4.44 86 8.79
Inferred Mineral Resources Total Mineral Resources
Ore Type Mt %Zn %Pb g/tAg %ZnEq Mt %Zn %Pb g/tAg %ZnEq
UG Sulphide[note a] 23 3.62 3.82 93 8.34 133 3.74 4.26 82 8.56
UG Transition[note a] 1.4 5.55 3.91 64 9.74 5.1 5.95 4.13 61 10.24
Total 24 3.73 3.82 91 8.41 138 3.82 4.25 81 8.61
Notes:
a. Cut-off grade: Net smelter return (NSR) of US$80/t for both UG Sulphide and UG Transition.
b. All masses are reported as dry metric tonnes.
c. All tonnes and grade information have been rounded to reflect relative uncertainty of the estimate,
hence small differences may be present in the totals.
d. ZnEq (%) is zinc equivalent which accounts for combined value of zinc (Zn), lead (Pb) and silver (Ag).
Metals are converted to ZnEq via unit value calculations using long term consensus metal
price assumptions and relative metallurgical recovery assumptions. Average metallurgical recovery
assumptions are Zn 92%, Pb 95%, and Ag 89% and metals pricing assumptions are South32 prices from
the December 2020 quarter. The formula used for calculation of zinc equivalent is ZnEq (%)
= Zn (%) + 0.7376 * Pb (%) + 0.0204 * Ag (g/t).
PRODUCTION SUMMARY
Production guidance
FY20 FY21 FY21e % Comments
(South32 share) [note a] [note b]
Worsley Alumina
Alumina production (kt) 3,886 3,963 3,965 100%
Brazil Alumina
Alumina production (kt) 1,383 1,398 1,370 102%
Hillside Aluminium[note 10]
Aluminium production (kt) 718 717 720 100%
Mozal Aluminium[note 10]
Impacted by load-shedding, and
Aluminium production (kt) 268 265 273 97% COVID-19 workforce restrictions
in the March 2021 quarter
Illawarra Metallurgical Coal
Total coal production (kt) 7,006 7,645 8,000 96%
Impacted by challenging strata
Metallurgical coal production (kt) 5,549 6,170 6,400 96% conditions at our Appin mine
in the June 2021 quarter
Energy coal production (kt) 1,457 1,475 1,600 92%
Australia Manganese
Manganese ore production (kwmt) 3,470 3,529 3,500 101%
South Africa Manganese
Benefitted from increased use of
Manganese ore production[note 11] (kwmt) 1,878 2,264 2,200 103% higher-cost trucking in response
to favourable market conditions
Cerro Matoso
Payable nickel production (kt) 40.6 34.1 34.6 99%
Cannington
Payable zinc equivalent production 332.6 380.2 82.6 99%
[note 1](kt)
Payable silver production (koz) 11,792 13,655 13,700 100%
Payable lead production (kt) 110.4 131.8 130.7 101%
Payable zinc production (kt) 66.7 67.7 69.2 98%
a. The denotation (e) refers to an estimate or forecast year.
b. Percentage difference to latest production guidance. FY21 guidance as at FY20 results: Illawarra
Metallurgical Coal (energy coal 1,300kt), South Africa Manganese (manganese ore 2,000kwmt), Cerro
Matoso (nickel 33.5kt) and Cannington (silver 11,800koz, lead 113.9kt, zinc 60.7kt).
MARKETING UPDATE
FY21 2H21
Realised prices[note 12] FY20 1H21 2H21 FY21 vs vs
FY20 1H21
Worsley Alumina
Alumina (US$/t) 295 278 309 293 (1%) 11%
Brazil Alumina
Alumina (US$/t) 287 277 297 287 0% 7%
Hillside Aluminium
Aluminium (US$/t) 1,766 1,882 2,386 2,138 21% 27%
Mozal Aluminium
Aluminium (US$/t) 1,816 1,943 2,457 2,202 21% 26%
South Africa Energy Coal
Domestic coal (US$/t) 25 28 40 33 32% 43%
Export coal (US$/t) 53 43 59 50 (6%) 37%
Illawarra Metallurgical Coal
Metallurgical coal (US$/t) 145 107 123 115 (21%) 15%
Energy coal (US$/t) 51 31 51 40 (22%) 65%
Australia Manganese[note 13]
Manganese ore (US$/dmtu, FOB) 4.39 3.93 4.34 4.13 (6%) 10%
South Africa Manganese[note 14]
Manganese ore (US$/dmtu, FOB) 3.76 3.49 3.56 3.53 (6%) 2%
Cerro Matoso[note 15]
Payable nickel (US$/lb) 5.80 6.29 7.06 6.68 15% 12%
Cannington[note 16]
Payable silver (US$/oz) 16.5 26.0 24.9 25.4 54% (4%)
Payable lead (US$/t) 1,648 1,744 1,965 1,862 13% 13%
Payable zinc (US$/t) 1,416 2,228 2,468 2,357 66% 11%
WORSLEY ALUMINA (86% SHARE)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Alumina production (kt) 3,886 3,963 2% 1,017 875 1,078 6% 23%
Alumina sales (kt) 3,782 4,004 6% 1,031 840 1,086 5% 29%
Worsley Alumina saleable production increased by 2% (or 77kt) to a record of 3,963kt in FY21, with the
refinery finishing the year strongly, setting a quarterly record and operating above nameplate capacity of
4.6Mtpa (100% basis). The refinery’s record performance in FY21 was enabled by improvement initiatives in the
calcination circuit and record alumina hydrate production. Notwithstanding the refinery’s strong operating performance,
H2 FY21 Operating unit cost guidance of US$217/t was premised on planned higher consumables and raw material input
costs. These impacts, combined with local labour cost pressure, are expected to further increase unit costs in FY22.
We realised a modest premium to the Platts Alumina Index[note 17] (PAX) on a volume weighted M-1 basis
for alumina sales in FY21 due to the structure of legacy supply contracts with our Mozal Aluminium
smelter. Contracts with the smelter are linked to the LME aluminium price and alumina indices on an M-1
basis, with caps and floors embedded within specific contracts that reset every calendar year. All other
alumina sales were at market based prices.
BRAZIL ALUMINA (36% SHARE)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Alumina production (kt) 1,383 1,398 1% 341 343 349 2% 2%
Alumina sales (kt) 1,392 1,391 (0%) 378 384 333 (12%) (13%)
Brazil Alumina saleable production increased by 1% (or 15kt) to a record 1,398kt in FY21 as the refinery
continued to benefit from strong plant availability, realising the benefits of the De-bottlenecking Phase
One project. Sales decreased by 13% in the June 2021 quarter due to the timing of shipments.
Subsequent to the end of the period, one of the two bauxite unloaders at the refinery sustained damage
and is currently undergoing assessments for repair. As a result, the refinery is expected to reduce
production rates in the September 2021 quarter, until repair work is complete and full bauxite loading
capacity is restored. We expect to provide an update on the impact to our FY22 production guidance
with our FY21 financial results.
HILLSIDE ALUMINIUM (100%)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Aluminium production (kt) 718 717 (0%) 178 176 180 1% 2%
Aluminium sales (kt) 723 707 (2%) 199 191 169 (15%) (12%)
Hillside Aluminium saleable production decreased by 1kt to 717kt in FY21 as the smelter continued to test
its maximum technical capacity, despite the impact to production from increased load-shedding. Sales
decreased by 12% in the June 2021 quarter as ongoing congestion in the global freight market led to a
slipped shipment at the end of the period.
H2 FY21 Operating unit costs are expected to increase half-on-half (H1 FY21: US$1,536/t) for the
smelter reflecting a stronger South African rand, and higher raw material input and
freight costs.
MOZAL ALUMINIUM (47.1% SHARE)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Aluminium production (kt) 268 265 (1%) 67 64 66 (1%) 3%
Aluminium sales (kt) 279 262 (6%) 78 64 68 (13%) 6%
Mozal Aluminium saleable production decreased by 1% (or 3kt) to 265kt in FY21, with the smelter
performing strongly in the June 2021 quarter, despite the impact of increased load-shedding.
This followed COVID-19 workforce restrictions that impacted operations during the
prior quarter.
H2 FY21 Operating unit costs are expected to increase half-on-half (H1 FY21: US$1,585/t)
for the smelter reflecting a stronger South African rand, and higher raw material
input and freight costs.
SOUTH AFRICA ENERGY COAL (100%)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Energy coal production (kt) 22,672 18,086 (20%) 5,228 3,764 3,079 (41%) (18%)
Domestic sales (kt) 12,638 10,375 (18%) 3,006 2,025 1,823 (39%) (10%)
Export sales (kt) 9,715 8,025 (17%) 2,180 1,879 1,449 (34%) (23%)
South Africa Energy Coal saleable production decreased by 20% (or 4.6Mt) to 18.1Mt in FY21 as we
completed our divestment of the operation on 1 June 2021 and booked an unaudited loss on sale of
~US$160M, which will be excluded from our Underlying earnings.
While it will be presented as a discontinued operation, we also expect to report an Underlying EBIT
loss of ~US$150M including third party products and services) with our FY21 results. Separately, we
invested US$23M in Sustaining capital expenditure and US$53M in Major project capital expenditure at
the operation during FY21, prior to its divestment.
ILLAWARRA METALLURGICAL COAL (100%)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Total coal production (kt) 7,006 7,645 9% 1,952 1,824 1,725 (12%) (5%)
Total coal sales[note 18](kt) 7,284 7,616 5% 2,071 1,823 1,766 (15%) (3%)
Metallurgical coal production (kt) 5,549 6,170 11% 1,523 1,568 1,340 (12%) (15%)
Metallurgical coal sales (kt) 5,842 6,074 4% 1,644 1,542 1,367 (17%) (11%)
Energy coal production (kt) 1,457 1,475 1% 429 256 385 (10%) 50%
Energy coal sales (kt) 1,442 1,542 7% 427 281 399 (7%) 42%
Illawarra Metallurgical Coal saleable production increased by 9% (or 639kt) to 7.6Mt in FY21 as the
return to a three longwall configuration delivered greater efficiencies through the operation of alternate
dual longwalls at the Appin mine and we monetised further low-margin coal wash material. While this product
attracts considerable grade and product-type discounts to the API5 (5,500Kcal) index[note 19] for our energy
coal sales, the incremental volume benefits our Operating unit costs by eliminating coal waste emplacement.
Notwithstanding, FY21 Operating unit costs are expected to be moderately higher than guidance of US$83/t as a
result of lower than planned total coal volumes.
Metallurgical coal production decreased by 15% during the June 2021 quarter as we encountered challenging
strata conditions and completed a planned longwall move at our Appin mine during the period. Three longwall
moves are scheduled across FY22, including in the December 2021 quarter, March 2022 quarter and
June 2022 quarter.
AUSTRALIA MANGANESE (60% SHARE)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Manganese ore production (kwmt) 3,470 3,529 2% 854 829 866 1% 4%
Manganese ore sales (kwmt) 3,440 3,621 5% 928 865 891 (4%) 3%
Manganese alloy production (kt) 110 51 (54%) 29 - - (100%) 0%
Manganese alloy sales (kt) 116 59 (49%) 27 - - (100%) 0%
Australia Manganese saleable ore production increased by 2% (or 59kwmt) to a record 3,529kwmt in FY21
despite the impact of higher than average rainfall during the wet season. The primary concentrator
continued to achieve strong output as we drew down previously established run of mine stocks, while
output from the PC02 circuit remained above nameplate capacity, contributing 10% of total
production (FY20: 12%).
We did not produce any manganese alloy in the June 2021 half year following our divestment of the TEMCO
manganese alloy smelter. The effective completion date of the sale for accounting purposes
was 31 December 2020.
SOUTH AFRICA MANGANESE (60% SHARE)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Manganese ore production[note 11] (kwmt) 1,878 2,264 21% 374 580 598 60% 3%
Manganese ore sales[note 11] (kwmt) 1,865 2,236 20% 316 497 636 101% 28%
Manganese alloy production (kt) 53 - (100%) 5 - - (100%) 0%
Manganese alloy sales (kt) 55 11 (80%) 7 - - (100%) 0%
South Africa Manganese saleable ore production increased by 21% (or 386kwmt) to 2,264kwmt in FY21
as the operation recovered from an extended shutdown in response to COVID-19 restrictions and
market conditions in the prior year. Strong production in the June 2021 quarter supported higher
sales, with an increase in our use of opportunistic, higher cost trucking lifting sales
volumes by 28%.
We did not produce any manganese alloy in FY21 as our Metalloys smelter remained on care and
maintenance.
CERRO MATOSO (99.9% SHARE)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Payable nickel production (kt) 40.6 34.1 (16%) 9.7 7.1 10.9 12% 54%
Payable nickel sales (kt) 40.6 33.5 (17%) 10.0 6.7 10.3 3% 54%
Cerro Matoso payable nickel production decreased by 16% (or 6.5kt) to 34.1kt in FY21 following the
major refurbishment of one of the furnaces in the December 2020 and March 2021 quarters.
Payable nickel production increased by 54% during the June 2021 quarter as processed ore grade
increased 10% following the receipt of first ore from the higher-grade Q&P project. While our
ferronickel product sells with reference to the LME Nickel index price on a M or M+1 basis it
continues to attract product discounts of approximately 10%.
CANNINGTON (100% SHARE)
4Q21 4Q21
South32 share FY20 FY21 YoY 4Q20 3Q21 4Q21 vs vs
4Q20 3Q21
Payable zinc equivalent production 332.6 380.2 14% 89.2 96.8 116.1 30% 20%
[note 1] (kt)
Payable silver production (koz) 11,792 13,655 16% 3,195 3,484 4,178 31% 20%
Payable silver sales (koz) 12,109 13,736 13% 3,571 2,950 4,460 25% 51%
Payable lead production (kt) 110.4 131.8 19% 30.1 33.0 41.2 37% 25%
Payable lead sales (kt) 108.1 131.7 22% 33.5 28.4 41.9 25% 48%
Payable zinc production (kt) 66.7 67.7 1% 16.9 17.8 19.5 15% 10%
Payable zinc sales (kt) 68.7 69.0 0% 19.0 15.9 21.3 12% 34%
Cannington payable zinc equivalent production increased by 14% (or 47.6kt) to 380.2kt in FY21.
Strong underground mine performance supported the acceleration of a higher-grade mining sequence,
which was extracted in the June 2021 quarter.
We expect to provide pre-feasibility study outcomes for the transition of the underground mine to a truck
haulage operation, and an update in relation to our FY22 production guidance, with our FY21 results
announcement.
Silver, lead and zinc sales increased by 51%, 48% and 34% respectively in the June 2021 quarter, as rail
logistics recovered from weather related disruptions in the prior period.
NOTES
1. 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. FY20 realised prices
for zinc (US$1,416/t), lead (US$1,648/t) and silver (US$16.5/oz) have been used
for FY20, FY21 and FY21e.
2. The information in this report that relates to Mineral Resource estimate for the Taylor Deposit
was declared in the announcement titled "Hermosa Project- Mineral Resource Estimate update" dated
21 July 2021 and prepared by Matthew Hastings, MAusIMM (CP) 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 announcement. All material assumptions and technical
parameters underpinning the estimates in the relevant market announcement continue to apply and have
not materially changed. South32 confirms that the form and context in which the Competent Person’s
findings are presented have not been materially modified from the original market announcement. ZnEq (%)
is zinc equivalent which accounts for combined value of zinc (Zn), lead (Pb) and silver (Ag). Metals are
converted to ZnEq via unit value calculations using long term consensus metal price assumptions and relative
metallurgical recovery assumptions. Average metallurgical recovery assumptions are Zn 92%, Pb 95%
and Ag 89% and metals pricing assumptions are South32 prices from the December 2020 quarter.
The formula used for calculation of zinc equivalent is ZnEq (%) = Zn (%) + 0.7376 * Pb (%) + 0.0204
* Ag (g/t).
3. Compared with FY21 Baseline. The baseline will be adjusted for any material acquisitions or divestments
based on emissions at the time of the transaction.
4. Refer to the market announcement “Agreement to divest South Africa Energy Coal” dated 6 November 2019.
Purchaser includes Thabong Coal Proprietary Limited, a wholly-owned subsidiary of Seriti and two trusts
for the benefit of employees and communities.
5. Refer to market announcement “South Africa Energy Coal Divestment Update” dated 1 April 2021 which includes
details of the vendor support package to be provided.
6. Since inception, US$1.4B has been allocated to the on-market share buy-back (649M shares at an average price
of A$2.86 per share) and US$292M returned in the form of special dividends. The current on-market share
buy-back program expires on 3 September 2021 however may be extended prior to its expiry.
7. Net distributions from equity accounted investments includes net debt movements and dividends, which are
unaudited and should not be considered as an indication of or alternative to an IFRS measure of profitability,
financial performance or liquidity.
8. Refer to market announcement “Illawarra Metallurgical Coal Impairment” dated 21 July 2021.
9. The primary corporate tax rates applicable to the Group for FY21 include: Australia 30%, South Africa 28%,
Colombia 31%, Mozambique 0% and Brazil 34%. The Colombian corporate tax rate is 31% in CY21 and will decrease
to 30% from 1 January 2022. The Mozambique operations are subject to a royalty on revenues instead of
income tax.
10. Production guidance for Hillside Aluminium and Mozal Aluminium did not assume any load-shedding impact
on production.
11. Consistent with the presentation of South32’s segment information, South Africa Manganese ore production
and sales have been reported at 60%. The Group’s financial statements will continue to reflect a 54.6%
interest in South Africa Manganese ore.
12. Realised prices are unaudited. Volumes and prices do not include any third party trading that may be
undertaken independently of equity production. Realised sales price is calculated as sales Revenue divided
by sales volume unless otherwise stated.
13. Realised ore prices are unaudited and calculated as external sales Revenue less freight and marketing costs,
divided by external sales volume. Ore converted to sinter and alloy, and sold externally, is eliminated as
an intracompany transaction.
14. Realised ore prices are unaudited and calculated as external sales Revenue less freight and marketing costs,
divided by external sales volume. Ore converted to sinter and alloy, and sold externally, is eliminated
as an intracompany transaction. Manganese ore sales are grossed-up to reflect a 60% accounting effective
interest.
15. Realised nickel sales prices are unaudited and inclusive of by-products.
16. Realised prices for Cannington are unaudited and net of treatment and refining charges.
17. The quarterly sales volume weighted average of the Platts Alumina Index (FOB Australia) on the basis
of a one month lag to published pricing (Month minus one or “M-1”) was US$280/t in FY21.
18. Illawarra Metallurgical Coal sales are adjusted for moisture and will not reconcile directly to
Illawarra Metallurgical Coal production.
19. The sales volume weighted average of the Argus McCloskey API5 Coal index 5,500Kcal NAR (FOB Newcastle, Australia)
on a basis of a one month lag to published pricing (Month minus one or “M-1”) was US$46/t in FY21.
The following abbreviations have been used throughout this report: US$ 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);
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 FY20 FY21 4Q20 1Q21 2Q21 3Q21 4Q21
Worsley Alumina (86% share)
Alumina hydrate production (kt) 3,840 3,981 967 1,010 1,002 977 992
Alumina production (kt) 3,886 3,963 1,017 963 1,047 875 1,078
Alumina sales (kt) 3,782 4,004 1,031 1,001 1,077 840 1,086
Brazil Alumina (36% share)
Alumina production (kt) 1,383 1,398 341 352 354 343 349
Alumina sales (kt) 1,392 1,391 378 340 334 384 333
Hillside Aluminium (100%)
Aluminium production (kt) 718 717 178 180 181 176 180
Aluminium sales (kt) 723 707 199 175 172 191 169
Mozal Aluminium (47.1% share)
Aluminium production (kt) 268 265 67 68 67 64 66
Aluminium sales (kt) 279 262 78 64 66 64 68
South Africa Energy Coal (100%)
Energy coal production (kt) 22,672 18,086 5,228 6,263 4,980 3,764 3,079
Domestic sales (kt) 12,638 10,375 3,006 3,607 2,920 2,025 1,823
Export sales (kt) 9,715 8,025 2,180 2,487 2,210 1,879 1,449
Illawarra Metallurgical Coal (100%)
Total coal production (kt) 7,006 7,645 1,952 2,371 1,725 1,824 1,725
Total coal sales18 (kt) 7,284 7,616 2,071 1,940 2,087 1,823 1,766
Metallurgical coal production (kt) 5,549 6,170 1,523 1,863 1,399 1,568 1,340
Metallurgical coal sales (kt) 5,842 6,074 1,644 1,468 1,697 1,542 1,367
Energy coal production (kt) 1,457 1,475 429 508 326 256 385
Energy coal sales (kt) 1,442 1,542 427 472 390 281 399
Australia Manganese (60% share)
Manganese ore production (kwmt) 3,470 3,529 854 880 954 829 866
Manganese ore sales (kwmt) 3,440 3,621 928 994 871 865 891
Ore grade sold (%, Mn) 44.6 44.4 43.9 44.3 44.5 44.4 44.5
Manganese alloy production (kt) 110 51 29 27 24 - -
Manganese alloy sales (kt) 116 59 27 26 33 - -
South Africa Manganese (60% share)
Manganese ore production11 (kwmt) 1,878 2,264 374 581 505 580 598
Manganese ore sales11 (kwmt) 1,865 2,236 316 517 586 497 636
Ore grade sold (%, Mn) 40.1 39.9 40.8 39.7 40.0 40.6 39.5
Manganese alloy production (kt) 53 - 5 - - - -
Manganese alloy sales (kt) 55 11 7 8 3 - -
Cerro Matoso (99.9% share)
Ore mined (kwmt) 2,839 3,238 798 645 825 594 1,174
Ore processed (kdmt) 2,761 2,385 679 698 457 528 702
Ore grade processed (%, Ni) 1.65 1.63 1.59 1.58 1.55 1.60 1.76
Payable nickel production (kt) 40.6 34.1 9.7 10.0 6.1 7.1 10.9
Payable nickel sales (kt) 40.6 33.5 10.0 10.4 6.1 6.7 10.3
Cannington (100%)
Ore mined (kwmt) 2,792 2,819 726 700 709 714 696
Ore processed (kdmt) 2,839 2,746 744 630 672 724 720
Silver ore grade processed (g/t, Ag) 156 185 161 169 179 177 213
Lead ore grade processed (%, Pb) 4.7 5.7 4.8 5.0 5.2 5.8 6.6
Zinc ore grade processed (%, Zn) 3.3 3.5 3.2 2.9 3.7 3.5 3.9
Payable Zinc equivalent 332.6 380.2 89.2 76.6 90.7 96.8 116.1
production1 (kt)
Payable silver production (koz) 11,792 13,655 3,195 2,863 3,130 3,484 4,178
Payable silver sales (koz) 12,109 13,736 3,571 2,967 3,359 2,950 4,460
Payable lead production (kt) 110.4 131.8 30.1 26.4 31.2 33.0 41.2
Payable lead sales (kt) 108.1 131.7 33.5 29.5 31.9 28.4 41.9
Payable zinc production (kt) 66.7 67.7 16.9 12.4 18.0 17.8 19.5
Payable zinc sales (kt) 68.7 69.0 19.0 11.8 20.0 15.9 21.3
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, particularly in light of the current economic climate and the significant
volatility, uncertainty and disruption arising in connection with COVID-19.
FURTHER INFORMATION
INVESTOR RELATIONS MEDIA RELATIONS
Tom Gallop Miles Godfrey Jenny White
T +61 8 9324 9030 M +61 415 325 906 T +44 20 7798 1773
M +61 439 353 948 E Miles.Godrey@south32.net M +44 7900 046 758
E Tom.Gallop@south32.net E Jenny.White@south32.net
21 July 2021
Approved for release by Graham Kerr, Chief Executive Officer
JSE Sponsor: UBS South Africa (Pty) Ltd
Date: 21-07-2021 08:03:00
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