Quarterly Report

September 2020

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

  • Delivered a US$70M increase in our net cash position to US$368M1, despite a build in working capital as commodity markets improved.
  • Lifted the suspension of our on-market share buy-back following another period of strong operating performance and further strengthening of our financial position.
  • Maintained FY21 production guidance for all operations.
  • Achieved record hydrate production at Worsley Alumina in the quarter and remain on-track to sustainably increase alumina production to nameplate capacity in FY21.
  • Continued to operate our aluminium smelters at their maximum technical capacity despite the impact of load-shedding.
  • Increased metallurgical coal production by 22% with Illawarra Metallurgical Coal benefitting from the successful return to a three longwall configuration during the prior quarter.
  • Delivered a 19% increase in manganese ore production as South Africa Manganese returned to full production following the nationwide COVID-19 restrictions in the prior quarter.
  • Progressed the sale of South Africa Energy Coal during the quarter, receiving a key approval and advancing discussions with Eskom to meet the material outstanding conditions.
  • Advanced study work for a potentially unconstrained development of the Hermosa project's Taylor deposit, including its integration with the Clark deposit. We expect to provide an update, including the expected capital profile, permitting route and timeline to first production following conclusion of the Taylor pre-feasibility study in the June 2021 half year.

"Our priority remains keeping our people safe

and well, maintaining safe and reliable operations and supporting our communities through the COVID-19 pandemic. We continue to adjust our response based on the various phases of the

pandemic in the jurisdictions where we operate.

"Despite the health crisis, we have maintained annual production guidance at all operations. We delivered a 19 per cent increase in manganese ore production and a 22 per cent increase in

metallurgical coal production.

"With another quarter of strong operating performance behind us and the further strengthening of our financial position, we have lifted the suspension of our on-market share buy-back. Our capital management program has US$121 million remaining and recommencing our buy-back will deliver immediate value to ourshareholders.

"During the quarter we continued our work to reshape and improve our portfolio, progressing the divestment of South Africa Energy Coal and entering into a binding agreement to divest ourinterest in the TEMCO manganese alloy smelter."

Graham Kerr, South32 CEO

Production summary

South32 share

YTD FY20

YTD FY21

YoY

1Q20

4Q20

1Q21

QoQ

Alumina production (kt)

1,308

1,315

1%

1,308

1,358

1,315

(3%)

Aluminium production (kt)

248

248

0%

248

245

248

1%

Energy coal production (kt)

6,723

6,771

1%

6,723

5,657

6,771

20%

Metallurgical coal production (kt)

1,651

1,863

13%

1,651

1,523

1,863

22%

Manganese ore production (kwmt)

1,415

1,461

3%

1,415

1,228

1,461

19%

Manganese alloy production (kt)

44

27

(39%)

44

34

27

(21%)

Payable nickel production (kt)

10.6

10.0

(6%)

10.6

9.7

10.0

3%

Payable silver production (koz)

2,972

2,863

(4%)

2,972

3,195

2,863

(10%)

Payable lead production (kt)

26.5

26.4

(0%)

26.5

30.1

26.4

(12%)

Payable zinc production (kt)

18.4

12.4

(33%)

18.4

16.9

12.4

(27%)

Unless otherwise noted: percentage variance relates to performance during the September 2020 quarter compared with the June 2020 quarter (QoQ); production and sales volumes are reported on an attributable basis.

SOUTH32 QUARTERLY REPORT SEPTEMBER 2020

1

Corporate Update

  • We continue to respond to COVID-19, adjusting to the different phases of the pandemic across the jurisdictions where we operate, focussing on keeping our people well, maintaining safe and reliable operations and supporting our communities.
  • We further simplified our functional support structures by reorganising the accountabilities of our leadership team and will reduce its size to align to our planned portfolio changes. In support of this initial step towards delivering a further US$50M in annualised savings from FY22, we have commenced the staged reduction of our office footprint, including the downsizing of our offices in Singapore and London.
  • Net cash1 increased by US$70M to US$368M, despite a build in working capital during the quarter. Subsequent to the end of the period, we paid a fully-franked ordinary dividend of US$48M in respect of the June 2020 half year.
  • We received net distributions2 of US$21M (South32 share) from our manganese equity accounted investments (EAI) in the September 2020 quarter following the payment of US$73M (100% share) in royalties at Australia Manganese in respect of the prior 6 month period.
  • Following another quarter of strong operating performance and the further strengthening of our financial position we have lifted our on-market share buy-back suspension. Our US$1.43B capital management program is 92% complete with US$121M remaining to be returned to shareholders, ahead of its extension or expiry on 3 September 20213.
  • We continued to progress the sale of our shareholding in South Africa Energy Coal to Seriti Resources Holdings Proprietary Limited (Seriti Resources)4 receiving final approval under Section 11 of the Mineral and Petroleum Resources Development Act in the period. Separately the Competition Commission of South Africa recommended the Competition Tribunal conditionally approve the transaction with the Competition Tribunal hearings expected to be finalised in the December 2020 quarter. While the transaction remains subject to material conditions including approvals from Eskom Holdings SOC Limited5 we expect to agree a resolution for the future of our South Africa Energy Coal business by no later than 31 December 2020.
  • GEMCO entered into a binding agreement to divest the TEMCO manganese alloy smelter, which is subject to approval from Australia's Foreign Investment Review Board. Our Metalloys manganese alloy smelter remains on care and maintenance.

Development and Exploration Update

  • We progressed our pre-feasibility study for the Hermosa project's Taylor Deposit and scoping study for the Clark Deposit. Study work to date supports a potential unconstrained development of Taylor, including its integration with Clark. All options under consideration have different cost, permitting and schedule implications. To allow finalisation of this work, the Taylor pre-feasibility study is now expected to be concluded in the June 2021 half year at which time we will provide an update on our preferred configuration, expected capital profile and timeline to first production.
  • We remain on-track to consider a final investment decision with our joint venture partner for the Eagle Downs Metallurgical Coal project by the end of this calendar year.
  • At our Ambler Metals joint venture, permitting of the proposed industrial access road progressed, with the signing of the Record of Decision by the United States Bureau of Land Management and issuance of the Clean Water Act Section 404 permit by the United States Army Corp. of Engineers. The joint venture also appointed Ramzi Fawaz as its President and CEO during the quarter. Mr. Fawaz brings extensive leadership experience in North American project development to the role.
  • We completed a pre-feasibility study for the Eastern Leases at Australia Manganese during the period, progressing the project to feasibility stage. The Eastern Leases has the potential to extend the mine life at our low-cost GEMCO mine. Exploration drilling in the Southern Areas is expected to recommence in the December 2020 quarter.
  • Consistent with our strategy to partner with companies to fund early stage greenfield exploration opportunities, we invested US$5M during the September 2020 quarter. Our greenfield exploration activity continues to be impacted by COVID-19 restrictions on the movement of people and equipment, which has limited the ability to execute exploration work programs in certain jurisdictions. We continue to review the evolving environment and work with our partners to optimise our exploration programs to maximise the benefit of the US$18M we plan to spend in FY21.
  • We directed US$8M towards exploration programs at our existing operations and development options in the September 2020 quarter (US$7M capitalised), including US$2M at Hermosa (all capitalised).

SOUTH32 QUARTERLY REPORT SEPTEMBER 2020

2

Production Summary

Production guidance

FY20

3M YTD FY21

FY21e(a)

(South32 share)

Worsley Alumina

Alumina production (kt)

3,886

963

3,965

Brazil Alumina

Alumina production (kt)

1,383

352

1,370

Hillside Aluminium6

Aluminium production (kt)

718

180

720

Mozal Aluminium6

Aluminium production (kt)

268

68

273

South Africa Energy Coal

Energy coal production (kt)

22,672

6,263

10,500 - 12,500

Domestic coal production (kt)

12,552

3,536

6,500 - 7,800

Export coal production (kt)

10,120

2,727

4,000 - 4,700

Illawarra Metallurgical Coal

Total coal production (kt)

7,006

2,371

7,700

Metallurgical coal production (kt)

5,549

1,863

6,400

Energy coal production (kt)

1,457

508

1,300

Australia Manganese

Manganese ore production (kwmt)

3,470

880

3,500

South Africa Manganese

Manganese ore production7 (kwmt)

1,878

581

2,000

Cerro Matoso

Payable nickel production (kt)

40.6

10.0

33.5

Cannington

Payable zinc equivalent production8 (kt)

332.6

76.6

330.8

Payable silver production (koz)

11,792

2,863

11,800

Payable lead production (kt)

110.4

26.4

113.9

Payable zinc production (kt)

66.7

12.4

60.7

  1. The denotation (e) refers to an estimate or forecast year. All guidance is subject to further potential impacts from COVID-19. South Africa Energy Coal guidance is provided for H1 FY21.

SOUTH32 QUARTERLY REPORT SEPTEMBER 2020

3

Worsley Alumina

(86% share)

YTD

YTD

1Q21

1Q21

South32 share

YoY

1Q20

4Q20

1Q21

vs

vs

FY20

FY21

1Q20

4Q20

Alumina production (kt)

952

963

1%

952

1,017

963

1%

(5%)

Alumina sales (kt)

918

1,001

9%

918

1,031

1,001

9%

(3%)

Worsley Alumina saleable alumina production decreased by 5% (or 54kt) to 963kt in the September 2020 quarter as a scheduled calciner shut was completed. Hydrate production increased by 4% (or 43kt) to 1,010kt with the hydrate circuit operating at a record annualised rate of 4.65mtpa (100% basis). FY21 production guidance remains unchanged at 3,965kt with the refinery on track to sustainably achieve nameplate capacity.

Brazil Alumina

(36% share)

YTD

YTD

1Q21

1Q21

South32 share

YoY

1Q20

4Q20

1Q21

vs

vs

FY20

FY21

1Q20

4Q20

Alumina production (kt)

356

352

(1%)

356

341

352

(1%)

3%

Alumina sales (kt)

304

340

12%

304

378

340

12%

(10%)

Brazil Alumina saleable production increased by 3% (or 11kt) to 352kt in the September 2020 quarter as the refinery benefitted from increased plant availability. FY21 production guidance remains unchanged at 1,370kt with planned maintenance scheduled in the December 2020 quarter.

Hillside Aluminium

(100%)

YTD

YTD

1Q21

1Q21

South32 share

YoY

1Q20

4Q20

1Q21

vs

vs

FY20

FY21

1Q20

4Q20

Aluminium production (kt)

181

180

(1%)

181

178

180

(1%)

1%

Aluminium sales (kt)

174

175

1%

174

199

175

1%

(12%)

Hillside Aluminium saleable production increased by 1% (or 2kt) to 180kt in the September 2020 quarter as the smelter continued to test its maximum technical capacity, despite the impact from load-shedding. FY21 production guidance6 remains unchanged at 720kt.

Mozal Aluminium

(47.1% share)

YTD

YTD

1Q21

1Q21

South32 share

YoY

1Q20

4Q20

1Q21

vs

vs

FY20

FY21

1Q20

4Q20

Aluminium production (kt)

67

68

1%

67

67

68

1%

1%

Aluminium sales (kt)

64

64

0%

64

78

64

0%

(18%)

Mozal Aluminium saleable production increased by 1% (or 1kt) to 68kt in the September 2020 quarter as the smelter continued to test its maximum technical capacity, despite the impact from load-shedding. FY21 production guidance6 remains unchanged at 273kt.

SOUTH32 QUARTERLY REPORT SEPTEMBER 2020

4

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South32 Ltd. published this content on 18 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 October 2020 22:24:03 UTC