SOUTH32 LIMITED - South Africa Energy Coal Divestment update and impairment

South Africa Energy Coal Divestment update and impairment

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

22 August 2019

             SOUTH AFRICA ENERGY COAL DIVESTMENT UPDATE AND IMPAIRMENT

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) announces that following a
comprehensive and competitive process we have entered into exclusive negotiations with Seriti
Resources Holdings Proprietary Limited (Seriti) in respect of its indicative offer (the Offer) to acquire
our South Africa Energy Coal business. Seriti’s Offer includes a modest up-front cash payment with a
deferred payment mechanism whereby both companies will share commodity price upside for an
agreed period. The Offer is subject to final negotiation and execution of a binding Sale and Purchase
Agreement with a subsidiary of Seriti and entities holding equity on behalf of employees and
communities.

South32 Chief Executive Officer, Graham Kerr said “When we announced our intention to broaden
the ownership of South Africa Energy Coal in November 2017, our vision was that it become a
sustainable, black-owned and operated business, consistent with South Africa’s transformation
agenda.

                                                                                           1
“To improve South Africa Energy Coal’s competitiveness we approved a 4.3B South African rand
investment to extend the life of the Klipspruit colliery by at least 20 years (KPSX project). Across
FY18 and FY19 we invested US$377M of capital expenditure, including US$185M to advance the
KPSX project, while we progressed the divestment process.

“Following this historical investment, our assessment of Seriti’s current Offer and the market outlook
for thermal coal demand and prices, we have recognised a pre-tax, impairment charge of US$504M
within our 30 June 2019 Financial Results.

“Our announcement that we have entered into exclusive negotiations with Seriti is an important
milestone and we expect to provide a further update to the market in the December 2019 half year.”
Impairment summary
    -    Pre-tax, impairment charge of US$504M (US$578M post tax, including de-recognition of
         deferred tax assets);
    -    Considers Seriti’s current Offer, including a modest up-front cash payment with a mechanism
         whereby both companies will share commodity price upside for an agreed period;
    -
                                                                                       2
         No further cash outflows outside of the normal course of business are expected;
    -    Assumes transaction approvals fulfilled by June 2020;



1
  Refer to the market announcement “South32 approves Klipspruit Life Extension Project” dated 27 November 2017.
2
  Predicated on guidance of approximately 26-28Mt for production, US$37 - 40/t for Operating unit costs and US$205M for
capital expenditure (sustaining US$90M, KPSX project US$115M). Operating unit cost guidance includes various assumptions
including a thermal coal price of US$69/t (API4) and a USD:ZAR exchange rate 15.06.
    -  The South Africa Energy Coal operation will continue to be reported in the Group’s Underlying
        results; and
  -     Impairments and associated tax impacts are excluded from the Group’s Underlying earnings
        measures.
About South32

South32 is a globally diversified mining and metals company. We produce bauxite, alumina,
aluminium, energy and metallurgical coal, manganese, nickel, silver, lead and zinc at our operations
in Australia, Southern Africa and South America. We are also the owner of a high grade zinc, lead
and silver development option in North America and have several partnerships with junior explorers
with a focus on base metals. Our purpose is to make a difference by developing natural resources,
improving people’s lives now and for generations to come, and to be trusted by our owners and
partners to realise the potential of their resources.


FURTHER INFORMATION


INVESTOR RELATIONS

Alex Volante                        Tom Gallop
T +61 8 9324 9029                   T +61 8 9324 9030
M +61 403 328 408                   M +61 439 353 948
E Alex.Volante@south32.net          E Tom.Gallop@south32.net

MEDIA RELATIONS

James Clothier                      Jenny White
T +61 8 9324 9697                   T +44 20 7798 1773
M +61 413 391 031                   M +44 7900 046 758
E James.Clothier@south32.net        E Jenny.White@south32.net


JSE Sponsor: UBS South Africa (Pty) Ltd
22 August 2019

Date: 22/08/2019 08:30:00
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