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SOUTH32 LIMITED - Quarterly Report March 2019

Release Date: 18/04/2019 08:00
Code(s): S32     PDF:  
 
Wrap Text
Quarterly Report March 2019

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

Quarterly Report March 2019


  -   Net cash increased US$48M to US$726M despite an increase in            “We achieved record year to date ore
      working capital and the allocation of a further US$37M to our          production at Australia Manganese and
      on-market share buy-back in the quarter.                               increased production guidance at both our
                                                                             manganese ore operations for FY19 as we respond
  -   Maintained FY19 Operating unit cost guidance for all                   to favourable market conditions.
      our operations. 
                                                                             “At Worsley Alumina we have lowered
  -   Achieved record year to date ore production at Australia               production guidance for FY19 as we focus on           
      Manganese and increased FY19 production guidance by 4% at              improving calciner performance to sustainably      
      both our manganese operations as we continue to respond to             achieve nameplate capacity.
      favourable market conditions.                                          
                                                                             “We remain focussed on mitigating inflationary 
  -   Lowered FY19 production guidance at Worsley Alumina by 4% as           pressure and have maintained FY19 unit cost 
      we deliver initiatives to support a sustainable increase to            guidance for all our operations.
      nameplate capacity from FY20 and Brazil Alumina by 5% as we            
      improve steam generation, enabling the realisation of the              “We continue to reshape our portfolio having
      full benefits of the De-bottlenecking Phase One                        committed to the final year of our Trilogy
      project.                                                               Metals option, retaining the right to earn a 50%
                                                                             interest in the Upper Kobuk Mineral projects.                                                                      
  -   Reduced FY19 production guidance at South Africa Energy Coal,          The divestment of South Africa Energy Coal is
      including low margin domestic production by 2Mt and export             on track with binding bids expected in the
      production by 0.8Mt following community protests and a slower          June 2019 quarter. Once an acceptable bid is
      than expected ramp-up of activity at Klipspruit after an               received and evaluated, we expect to
      insurable dragline outage.                                             reclassify the operation as held for sale.
                                                                             
  -   Remain on track to achieve FY19 production guidance at                 “Net cash has increased by US$48M to
      Illawarra Metallurgical Coal having completed longwall moves at        US$726M, following the return of a further
      Appin and Dendrobium following the end of the quarter and              US$37M to shareholders through our on-
      successfully renegotiated the remaining labour agreements.             market share buy-back.”
                                                                             
  -   Maintained production guidance at Cannington, having                   Graham Kerr, South32 CEO
      commenced temporary road haulage during the quarter to                 
      mitigate the loss of rail following floods in North Queensland.        
                                                                             
  -   Maintained production guidance at Hillside Aluminium and Mozal
      Aluminium despite an increase in the frequency of load-shedding        
      events.
  


 Production summary
                                              9M             9M
 South32 share                              YTD18          YTD19       YoY        3Q18        2Q19        3Q19       QoQ
                                                  

 Alumina production (kt)                    3,773          3,743       (1%)      1,232       1,383       1,201      (13%)

 Aluminium production (kt)                    737            737        0%         242         247         242       (2%)

 Energy coal production (kt)               21,097         19,239       (9%)      7,096       6,369       6,310       (1%)

 Metallurgical coal production (kt)         2,076          4,072       96%         794       1,567         990      (37%)

 Manganese ore production (kwmt)            4,199          4,246        1%       1,369       1,439       1,360       (5%)

 Manganese alloy production (kt)              180            161      (11%)         62          57          52       (9%)

 Payable nickel production (kt)              32.5           30.5      (6%)        10.7        10.4         9.4      (10%)

 Payable silver production (koz)            8,257          8,948       8%        3,082       2,882       2,881       (0%)

 Payable lead production (kt)                73.0           73.1       0%         23.6        22.5        24.8       10%

 Payable zinc production (kt)                28.8           37.0      28%          8.6        13.1        10.7      (18%)



                                                                                                                        1


Unless otherwise noted: percentage variance relates to performance during the nine months ended March 2019 compared with the nine 
months ended March 2018 (YoY) or the March 2019 quarter compared with the December 2018 quarter (QoQ); production and sales 
volumes are reported on an attributable basis.




                                                                                                                         
Corporate Update

              
-   Net cash[Note 1] increased by US$48M to US$726M during the March 2019 quarter despite a rise in working capital and the
    continuation of our capital management program. We returned a further US$37M to shareholders during the quarter by way of
    our on-market share buy-back. To 31 March 2019 we have bought back 286M shares at an average price of A$3.13 per share.
    Subsequent to the end of the quarter we returned an additional US$85M in the form of a special dividend, bringing total returns
    under our approved US$1B capital management program to US$908M with the remainder of the program due for completion
    by 5 September 2019. We also paid a fully franked interim dividend of US$256M on 4 April 2019.
                                  
-   We received net distributions[Note 2] of US$64M (South32 share) from our manganese equity accounted investments (EAI) during
    the quarter. The combination of strong operating performance and pricing has seen additional cash build in our manganese
    joint venture, despite Australia Manganese paying royalties of US$124M (100% share) in respect of the prior 6 month period.
    Excess cash in the joint venture is expected to be distributed to partners in the June 2019 quarter.

-   Our Operating unit costs are tracking to plan at all operations on the basis of previously disclosed exchange                                       
    rate and commodity price assumptions[Note 3] , albeit the cost profile of our aluminium smelters continues to be influenced by 
    still elevated raw material prices.

-   We remain on track to transform the ownership of South Africa Energy Coal with binding bids expected in the June 2019
    quarter. Once acceptable bids are received and evaluated, we expect to reclassify the operation as an asset held for sale on
    the balance sheet and a discontinued operation in the income statement.
                                                                                                                           
-   The primary corporate tax rates applicable to the Group include: Australia 30%, South Africa 28%, Colombia 33%[Note 4] ,
    Mozambique 0%[Note 4] and Brazil 34%. The disproportionate effect of intragroup agreements and other permanent differences can
    impact the Effective Tax Rate (ETR) of the Group when margins are compressed, or losses are incurred in specific
    jurisdictions. In the December 2018 half year our ETR was 37.3% and we now expect the FY19 ETR to remain elevated given
    continued compressed margins at our aluminium smelters, as profits have moved upstream to our refineries which are located in 
    higher tax rate jurisdictions.

Production guidance                               9M
                                      FY18       YTD19          FY19e      Comments
(South32 share)                                
Worsley Alumina
                                                                           Guidance reduced by 4% as we prioritise initiatives to
Alumina production (kt)               3,764      2,799     [Down]3,795     support a sustainable increase in production to nameplate
                                                                           capacity ahead of future de-bottlenecking 
Brazil Alumina
                                                                           Guidance reduced by 5% with package boilers introduced to
Alumina production (kt)               1,304        944     [Down]1,285     improve the reliability of steam generation ahead of  
                                                                           realising the full benefits of the De-bottlenecking Phase 
Hillside Aluminium                                                         One project
Aluminium production (kt)               712        536         720          
Mozal Aluminium
Aluminium production (kt)               271        201         269
South Africa Energy Coal[Note 5]
Energy coal production (kt)          27,271     18,269    [Down]26,200     Lower margin domestic guidance reduced by 11% following
                                                                           community protests and a delay in the implementation of a
Domestic coal production (kt)        15,154     11,595    [Down]15,500     new shift pattern at Khutala
                                                                           Export guidance reduced by 7% due to the slower than
                                                                           expected ramp-up of activity at Klipspruit after an 
Export coal production (kt)          12,117      6,674    [Down]10,700     insurable dragline outage
                                                                            
Illawarra Metallurgical Coal
Total coal production (kt)            4,244      5,042        6,500
Metallurgical coal production (kt)    3,165      4,072        5,200
Energy coal production (kt)           1,079        970        1,300
Australia Manganese
Manganese ore production
                                      3,396      2,631     [Up]3,500       Guidance increased by 4% (subject to market demand)
(kwmt)
South Africa Manganese
                            
Manganese ore production[Note 6]
                                      2,145      1,615     [Up]2,130       Guidance increased by 4% (subject to market demand)
(kwmt)
Cerro Matoso
Payable nickel production (kt)         43.8       30.5         40.5
Cannington
Payable zinc equivalent               187.2      140.1        188.1
production[Note 7] (kt)
Payable silver production (koz)      12,491      8,948       11,750
Payable lead production (kt)          104.4       73.1         98.0                                                              2


Payable zinc production (kt)           41.3       37.0         51.0
The denotation (e) refers to an estimate or forecast year.

                                                                                                                                 3


                                                                                                                    
Development and Exploration Update
-   We invested US$25M in our early stage greenfield exploration projects during the nine months ended
    March 2019. This included US$10M to maintain our option with Trilogy Metals Inc. (TSX:TMQ) for the third and final year,
    retaining our right to earn a 50% interest in the Upper Kobuk Mineral projects in Alaska by committing approximately US$150M
    to a 50:50 joint venture by 31 January 2020. Our guidance for FY19 greenfield exploration remains unchanged at US$41M.
-   We directed US$29M towards exploration programs at our existing operations in the nine months ended March 2019
    (US$18M capitalised). This included US$2M for our EAI (US$1M capitalised) and US$12M at the Hermosa project
    (all capitalised) to further increase our knowledge of this high grade resource. We remain on track to declare a Mineral
    Resource[Note 8] for Hermosa in accordance with the JORC Code during the June 2019 quarter.
-   We commenced a drilling program at the Eagle Downs Metallurgical Coal project to further support the completion of the 
    feasibility study ahead of a final investment decision scheduled for the December 2020 half year.


Worsley Alumina
(86% share)


                                                                                                                         
                                                     9M         9M                                                  3Q19     3Q19
South32 share                                      YTD18      YTD19       YoY         3Q18     2Q19       3Q19       vs       vs
                                                                                                                    3Q18     2Q19          
                                                                                                                   

Alumina production (kt)                            2,783     2,799        1%          918     1,052        893      (3%)     (15%)

Alumina sales (kt)                                 2,796     2,821        1%          910     1,035        936       3%      (10%)


Worsley Alumina saleable production increased by 1% (or 16kt) to 2.8Mt in the nine months ended March 2019, as further calciner
maintenance was undertaken and the refinery retained a substantial hydrate inventory position. We have commenced several
initiatives that are expected to improve calciner availability and support a sustainable increase in production to nameplate capacity
of 4.6Mtpa (100% basis) from FY20. Given this focus, we now expect FY19 production of 3,795kt (versus prior guidance of 3,965kt).

Brazil Alumina
(36% share)

                                                     9M         9M                                                  3Q19     3Q19
South32 share                                      YTD18      YTD19       YoY         3Q18     2Q19       3Q19       vs       vs
                                                                                                                    3Q18     2Q19   


Alumina production (kt)                              990       944       (5%)          314      331        308      (2%)      (7%)

Alumina sales (kt)                                   963       866      (10%)          314      317        247     (21%)     (22%)


Brazil Alumina saleable production decreased by 5% (or 46kt) to 944kt in the nine months ended March 2019 as boiler
performance and power outages impacted production and our ability to realize the full benefits of the De-bottlenecking Phase One project. 
We now expect FY19 production of 1,285kt (versus prior guidance of 1,355kt) with the addition of package boilers in the  
the June 2019 quarter to improve the reliability of steam generation. Production guidance of 1,370kt for FY20 remains unchanged.




                                                                                                                               4
Hillside Aluminium
(100%)

                                                    9M         9M                                                 3Q19     3Q19
South32 share                                      YTD18      YTD19     YoY         3Q18     2Q19       3Q19       vs       vs
                                                                                                                  3Q18     2Q19   
      

Aluminium production (kt)                           533       536       1%           175      180       176        1%      (2%)

Aluminium sales (kt)                                528       516      (2%)          184      182       156      (15%)    (14%)
 

Hillside Aluminium saleable production increased by 1% (or 3kt) to 536kt in the nine months ended March 2019 as the smelter
continued to test its maximum technical capacity, despite an increase in the frequency of load-shedding events. FY19 production
guidance remains unchanged at 720kt, but remains subject to load-shedding. Sales declined by 14% in the March 2019 quarter
reflecting the timing of shipments.

Notwithstanding the smelter’s continued strong operating performance, its cost profile continues to be influenced by still elevated
raw material prices, including alumina sourced from Worsley Alumina. In order to ensure the smelter’s ongoing sustainability and to
improve its competitiveness, we commenced a consultation process with our employees[Note 9] during the March 2019 quarter regarding
a proposed restructure of the business. We expect this process to conclude in the June 2019 quarter.



Mozal Aluminium
(47.1% share)

                                                    9M         9M                                                  3Q19     3Q19
South32 share                                      YTD18      YTD19      YoY          3Q18     2Q19       3Q19      vs       vs
                                                                                                                   3Q18     2Q19   


Aluminium production (kt)                           204       201       (1%)          67        67        66       (1%)      (1%)

Aluminium sales (kt)                                198       198        0%           51        70        69       35%       (1%)


Mozal Aluminium saleable production decreased by 1% (or 3kt) to 201kt in the nine months ended March 2019 as the smelter’s
operating performance was impacted by an increase in the frequency of load-shedding events. FY19 production guidance remains
unchanged at 269kt, but remains subject to load-shedding.

Notwithstanding the smelter’s continued strong operating performance, its cost profile continues to be influenced by still elevated
raw material prices, including alumina sourced from Worsley Alumina. Damage caused by Cyclone Idai to in-country power
distribution lines during the March 2019 quarter is also expected to result in higher power costs for the smelter during the June
2019 half year.




                                                                                                                                 5
South Africa Energy Coal
(100%)

                                                    9M         9M                                                  3Q19     3Q19
South32 share                                      YTD18      YTD19      YoY         3Q18     2Q19       3Q19       vs       vs
                                                                                                                   3Q18     2Q19   


Energy coal production (kt)                       20,164    18,269      (9%)        6,741     6,001      6,098     (10%)      2%

Domestic sales (kt)                               11,169    11,699       5%         3,835     3,646      3,950       3%       8%

Export sales (kt)                                  9,337     6,753     (28%)        3,472     2,283      2,547     (27%)      12%


South Africa Energy Coal saleable production decreased by 9% (or 1,895kt) to 18.3Mt in the nine months ended March 2019, albeit
production improved during the March 2019 quarter as domestic sales volumes benefitted from a contract to sell lower quality
stockpiled product.

Notwithstanding the improved performance, disruptions caused by community protests, a delay in the implementation of a new shift
pattern at Khutala and the slower than expected ramp-up of activity following the Klipspruit dragline’s return to service resulted in
lower than planned volumes in the March 2019 quarter. The dragline incident at Klipspruit has been confirmed as an insurable
event and the volume and cost impact will be subject to an insurance claim. We now expect FY19 export production of 10.7Mt
(versus prior guidance of 11.5Mt) and a larger decline in lower margin domestic production to 15.5Mt (versus prior guidance of 17.5Mt).

We remain on track to transform the ownership of South Africa Energy Coal with binding bids expected in the June 2019 quarter.
Once acceptable bids are received and evaluated, we expect to reclassify South Africa Energy Coal as an asset held for sale on
the balance sheet and a discontinued operation in the income statement.


Illawarra Metallurgical Coal
(100%)

                                                    9M         9M                                                   3Q19     3Q19
South32 share                                      YTD18      YTD19      YoY          3Q18      2Q19       3Q19      vs       vs
                                                                                                                    3Q18     2Q19   


Total coal production (kt)                         3,009     5,042       68%         1,149     1,935      1,202       5%     (38%)

Total coal sales (kt)                              2,751     4,790       74%         1,091     1,755      1,531      40%     (13%)

Metallurgical coal production (kt)                 2,076     4,072       96%           794     1,567        990      25%     (37%)

Metallurgical coal sales (kt)                      1,817     3,783      108%           760     1,349      1,256      65%      (7%)

Energy coal production (kt)                          933       970        4%           355       368        212     (40%)    (42%)

Energy coal sales (kt)                               934     1,007        8%           331       406        275     (17%)    (32%)


Illawarra Metallurgical Coal saleable production increased by 68% (or 2,033kt) to 5.0Mt in the nine months ended March 2019 as
the Dendrobium and Appin longwalls performed strongly. We also successfully renegotiated a new Appin Trades and Operators
and West Cliff Coal Preparation Plant Enterprise Agreement during the March 2019 quarter, thereby concluding the renegotiation of
all major labour agreements at the operation.

FY19 production guidance remains unchanged at 6.5Mt as we commence the extraction of new panels at both Appin and
Dendrobium in the June 2019 quarter, following the successful completion of two longwall moves. Our focus remains on achieving
a substantial uplift in development rates at Appin in order to sustain the operation of two longwalls in parallel from H2 FY20.




                                                                                                                                6
Australia Manganese
(60% share)


                                                    9M         9M                                                3Q19      3Q19
South32 share                                      YTD18      YTD19     YoY         3Q18     2Q19      3Q19       vs        vs
                                                                                                                 3Q18      2Q19 
  

Manganese ore production (kwmt)                   2,531     2,631       4%          830       879       820      (1%)      (7%)

Manganese ore sales (kwmt)                        2,415     2,522       4%          803       856       782      (3%)      (9%)

Manganese alloy production (kt)                     123       114      (7%)          41        35        38      (7%)       9%

Manganese alloy sales (kt)                          115       105      (9%)          37        47        29     (22%)     (38%)


Australia Manganese achieved record ore performance in the nine months ended March 2019, increasing saleable ore production
by 4% (or 100kwmt) to 2,631kwmt. The primary circuit continued to achieve high utilisation rates despite the impact of the wet
season, while the Premium Concentrate Ore (PC02) circuit operated at approximately 120% of its design capacity, contributing
10% of total production as we continued to take advantage of strong market conditions. Notwithstanding the potential impact from
the wet season across the remainder of the financial year, we now expect FY19 production of 3,500kwmt (versus prior guidance of
3,350kwmt).

Manganese alloy saleable production decreased by 7% (or 9kt) to 114kt in the nine months ended March 2019.


South Africa Manganese
(60% share)

                                                    9M         9M                                                3Q19     3Q19
South32 share                                      YTD18      YTD19     YoY        3Q18      2Q19      3Q19       vs       vs
                                                                                                                 3Q18     2Q19   

Manganese ore production (kwmt)                   1,668     1,615      (3%)         539       560       540        0%      (4%)

Manganese ore sales (kwmt)                        1,543     1,540      (0%)         476       523       530       11%       1%

Manganese alloy production (kt)                      57        47     (18%)          21        22        14      (33%)    (36%)

Manganese alloy sales (kt)                           49        51       4%           21        19        16      (24%)    (16%)


South Africa Manganese saleable ore production decreased by 3% (or 53kwmt) to 1,615kwmt in the nine months ended March
2019 as an increase in higher quality premium material was more than offset by a decline in fine grained secondary material. While
we will continue to monitor market conditions, we now expect FY19 production of 2,130kwmt (versus prior guidance of 2,050kwmt)
as we optimise our use of higher cost trucking in response to currently strong demand.
Manganese alloy saleable production decreased by 18% (or 10kt) to 47kt in the nine months ended March 2019.

Cerro Matoso
(99.9% share)


                                                    9M         9M                                                3Q19     3Q19
South32 share                                      YTD18      YTD19     YoY        3Q18      2Q19       3Q19      vs       vs
                                                                                                                 3Q18     2Q19   


Payable nickel production (kt)                     32.5      30.5      (6%)        10.7      10.4        9.4    (12%)     (10%)

Payable nickel sales (kt)                          32.1      30.4      (5%)        10.8      10.4        9.1    (15%)     (13%)


Cerro Matoso payable nickel production decreased by 6% (or 2.0kt) to 30.5kt in the nine months ended March 2019 as a planned
increase in the contribution of lower grade stockpiled ore feed was realised. FY19 production guidance remains unchanged at
40.5kt following the completion of a planned furnace outage during the March 2019 quarter.




                                                                                                                           7
Cannington
(100% share)


                                                                                                                                                              
                                                                                                         3Q19     3Q19
South32 share                                 9M           9M         YoY     3Q18      2Q19    3Q19      vs       vs
                                             YTD18        YTD19                                          3Q18     2Q19
                                                                                                                 

Payable zinc equivalent production (kt)      128.3        140.1        9%     42.9      45.5    44.9      5%      (1%)

Payable silver production (koz)              8,257        8,948        8%    3,082     2,882   2,881     (7%)     (0%)

Payable silver sales (koz)                   8,443        8,160       (3%)   3,014     3,283   1,820    (40%)    (45%)

Payable lead production (kt)                  73.0         73.1        0%     23.6      22.5    24.8       5%      10%

Payable lead sales (kt)                       72.1         59.8      (17%)    23.5      24.6    12.7     (46%)    (48%)

Payable zinc production (kt)                  28.8         37.0       28%      8.6      13.1    10.7      24%     (18%)

Payable zinc sales (kt)                       32.0         31.9       (0%)     6.3      15.9     7.2      14%     (55%)


Cannington payable zinc equivalent production increased by 9% (or 11.8kt) to 140.1kt in the nine months ended March 2019 as
silver and zinc grades improved in accordance with our expectations and mill throughput continued to track to plan. Lower payable
silver, lead and zinc sales in the March 2019 quarter reflect timing differences following significant floods in North Queensland that
caused an extended outage of a third-party rail line connecting Cannington to the Townsville Port. FY19 zinc equivalent[Note 7] 
production guidance remains unchanged at 188.1kt (silver 11,750koz, lead 98.0kt and zinc 51.0kt) with the disruption to rail 
successfully mitigated by temporary road haulage, at minimal incremental cost.


Notes:
1.    Net Cash number is unaudited and should not be considered as an indication of or alternative to an IFRS measure of profitability, 
      financial performance or liquidity.
2.    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.
3.    FY19 Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes 
      various assumptions for FY19, including: an alumina price of US$443/t; an average blended coal price of US$173/t for Illawarra 
      Metallurgical Coal; a manganese ore price of US$6.58/dmtu for 44% manganese product; a nickel price of US$5.47/lb; a thermal 
      coal price of US$92/t (API4) for South Africa Energy Coal; a silver price of US$15.06/troy oz; a lead price of US$2,023/t 
      (gross of treatment and refining charges); a zinc price of US$2,587/t (gross of treatment and refining charges); an AUD:USD 
      exchange rate of 0.72; a USD:ZAR exchange rate of 14.02; a USD:COP exchange rate of 3,096; and a reference price for caustic 
      soda; all of which reflected forward markets as at January 2019 or our internal expectations.
4.    The Colombian corporate tax rate was 40% during CY17, 37% during CY18 and is 33% in CY19. The corporate tax rate will decrease 
      on an annual basis by a percent each year, stabilising at 30% from 1 January 2022. The Mozambique operations are subject to a 
      royalty on revenues instead of income tax.
5.    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 at 100%.
6.    Consistent with the presentation of South32’s segment information, South Africa Manganese ore 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.
7.    Payable Zinc Equivalent (kt) is calculated by aggregating Revenue from payable silver, lead and zinc, and dividing the total 
      Revenue by the price of zinc. FY18 realised prices for zinc (US$3,185/t), lead (US$2,463/t) and silver (US$16.6/oz) have been 
      used for FY18 and FY19e.
8.    The information in this release that relates to estimates of Mineral Resources for the Hermosa project are foreign estimates 
      under ASX Listing Rules and reference should be made to the clarifying statement on Mineral Resources in the market announcement 
      ‘South32 to acquire Arizona Mining in agreed all cash offer’ dated18 June 2018, in accordance with ASX Listing Rule 5.12. 
      South32 is not in possession of any new information or data relating to the foreign estimate that materially impacts on the 
      reliability of the estimates. South32 confirms that the information contained in the clarifying statement in the 18 June 2018 
      market announcement continues to apply and has not materially changed. The estimates of Mineral Resources are not reported 
      in accordance with the JORC Code. Competent Persons have not done sufficient work to classify the foreign estimates as Mineral 
      Resources in accordance with JORC Code. It is uncertain that following evaluation and further exploration that the foreign 
      estimates will be able to be reported as Mineral Resources or Ore Reserves in accordance with the JORC Code.
9.    On 18 February 2019 South32 informed employees at its Hillside Aluminium smelter in Richards Bay, South Africa, that it intends 
      to commence consultation with them in accordance with Section 189 of the Labour Relations Act. The consultation is related to a 
      proposed restructure of the business.
10.   The following abbreviations have been used throughout this report: US$ 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).



                                                                                                                                8
Operating Performance
                                         9M       9M
South32 share                          YTD18    YTD19    3Q18    4Q18    1Q19    2Q19    3Q19
                                          

Worsley Alumina (86% share)

Alumina hydrate production (kt)        2,885    2,868    938     911     959     988     921

Alumina production (kt)                2,783    2,799    918     981     854    1,052    893

Alumina sales (kt)                     2,796    2,821    910     967     850    1,035    936

Brazil Alumina (36% share)

Alumina production (kt)                 990      944     314     314     305     331     308

Alumina sales (kt)                      963      866     314     378     302     317     247

Hillside Aluminium (100%)

Aluminium production (kt)               533      536     175     179     180     180     176

Aluminium sales (kt)                    528      516     184     183     178     182     156

Mozal Aluminium (47.1% share)

Aluminium production (kt)               204      201      67      67      68      67      66

Aluminium sales (kt)                    198      198      51      76      59      70      69

South Africa Energy Coal (100%)

Energy coal production (kt)           20,164   18,269   6,741   7,107   6,170   6,001   6,098

Domestic sales (kt)                   11,169   11,699   3,835   4,227   4,103   3,646   3,950

Export sales (kt)                      9,337    6,753   3,472   3,181   1,923   2,283   2,547

Illawarra Metallurgical Coal (100%)

Total coal production (kt)             3,009    5,042   1,149   1,235   1,905   1,935   1,202

Total coal sales (kt)                  2,751    4,790   1,091   1,365   1,504   1,755   1,531

Metallurgical coal production (kt)     2,076    4,072    794    1,089   1,515   1,567    990

Metallurgical coal sales (kt)          1,817    3,783    760    1,120   1,178   1,349   1,256

Energy coal production (kt)             933      970     355     146     390     368     212

Energy coal sales (kt)                  934     1,007    331     245     326     406     275

Australia Manganese (60% share)

Manganese ore production (kwmt)        2,531    2,631    830     865     932     879     820

Manganese ore sales (kwmt)             2,415    2,522    803     875     884     856     782

Ore grade sold (%, Mn)                  45.7     45.9    45.0    45.7    46.1    45.8    45.8

Manganese alloy production (kt)         123      114      41      42      41      35      38

Manganese alloy sales (kt)              115      105      37      55      29      47      29

South Africa Manganese (60% share)

Manganese ore production (kwmt)        1,668    1,615    539     477     515     560     540

Manganese ore sales (kwmt)             1,543    1,540    476     539     487     523     530

Ore grade sold (%, Mn)                  40.2     40.1    40.1    39.1    40.0    40.5    39.7

Manganese alloy production (kt)          57       47      21      22      11      22      14

Manganese alloy sales (kt)               49       51      21      18      16      19      16

                                                                                                9
                                                     
South32 share                                 9M       9M       3Q18    4Q18    1Q19    2Q19    3Q19
                                            YTD18     YTD19

Cerro Matoso (99.9% share)

Ore mined (kwmt)                            2,918     1,854      831     823     613     596     645

Ore processed (kdmt)                        2,012     2,035      672     710     712     689     634

Ore grade processed (%, Ni)                  1.81      1.67     1.76    1.73    1.68    1.69    1.63

Payable nickel production (kt)               32.5      30.5     10.7    11.3    10.7    10.4     9.4

Payable nickel sales (kt)                    32.1      30.4     10.8    11.2    10.9    10.4     9.1

Cannington (100%)

Ore mined (kwmt)                            1,780     1,954      571     683     623     683     648

Ore processed (kdmt)                        1,712     1,791      544     643     638     606     547

Silver ore grade processed (g/t, Ag)          178       188      207     237     184     181     202

Lead ore grade processed (%, Pb)              5.1       5.0      5.2     5.8     4.9     4.7     5.6

Zinc ore grade processed (%, Zn)              2.5       3.0      2.5     2.8     2.9     3.0     3.0

Payable Zinc equivalent production (kt)     128.3     140.1     42.9    58.9     49.7   45.5    44.9

Payable silver production (koz)             8,257     8,948    3,082   4,234    3,185  2,882   2,881

Payable silver sales (koz)                  8,443     8,160    3,014   3,542    3,057  3,283   1,820

Payable lead production (kt)                 73.0      73.1     23.6    31.4     25.8   22.5    24.8

Payable lead sales (kt)                      72.1      59.8     23.5    25.8     22.5   24.6    12.7

Payable zinc production (kt)                 28.8      37.0      8.6    12.5     13.2   13.1    10.7

Payable zinc sales (kt)                      32.0      31.9      6.3    13.0      8.8   15.9     7.2

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.


Further information
Investor Relations                              Media Relations
Alex Volante                                    James Clothier                                   Jenny White
T +61 8 9324 9029                               T +61 8 9324 9697                                T +44 20 7798 1773
M +61 403 328 408                               M +61 413 391 031                                M +44 7900 046 758
E Alex.Volante@south32.net                      E James.Clothier@south32.net                     E Jenny.White@south32.net


18 April 2019
JSE Sponsor: UBS South Africa (Pty) Ltd




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