Wrap Text
Quarterly Report June 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 June 2019
• Achieved record production at Hillside Aluminium and strong “We had a strong finish to the year, with
performance at Mozal Aluminium, despite an increase in revenue equivalent production growing 10
load-shedding events in FY19. per cent in the quarter and 3 per cent for the
year.
• Increased production at Worsley Alumina by 12% in the June
quarter due to an uplift in calciner availability as we deliver
initiatives to sustainably increase to nameplate capacity “We achieved record annual production at
from FY20. Hillside Aluminium, increased production at
Illawarra Metallurgical Coal by 57 per cent
• Maintained higher manganese ore production, delivering 5.5Mt into and delivered 5.5 million tonnes of
a strong market during the year, exceeding revised production manganese ore into a favourable market.
guidance at South Africa Manganese and operating the Australia
Manganese Premium Concentrate Ore (PC02) circuit above design
capacity. “We reached a key milestone at our Hermosa
project declaring a Mineral Resource for the
• Increased saleable production at Illawarra Metallurgical Coal by Taylor Deposit, de-risking our investment
57% to 6.6Mt, exceeding FY19 guidance following the successful and increasing our confidence in the project
completion of two longwall moves in the June quarter. as we advance the pre-feasibility study
during FY20.
• Exceeded FY19 production guidance at Cannington,
notwithstanding the impact of significant floods in North “We also continued to benefit from strong
Queensland in the prior quarter. prices for our core commodities during the
year, distributing US$657 million in dividends
• Production at South Africa Energy Coal was lower than expected in to shareholders and allocating US$281
the June quarter as equipment availability and lower domestic million to our on-market buy-back. At year
sales of stockpiled product more than offset the benefit from the end we had completed US$986 million of our
Klipspruit dragline’s return to service in the prior quarter. approved US$1 billion capital management
program."
• Reported a Mineral Resource estimate for the Hermosa project’s Graham Kerr, South32 CEO
Taylor Deposit, advancing our pre-feasibility study and drill
program to further test the deposit which remains open at depth
and laterally.
• Continued to reshape and improve our portfolio, receiving bids for
South Africa Energy Coal, commencing a review of options for our
manganese alloy smelters and advancing studies for our
development options.
Production summary
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 QoQ
Alumina production (kt) 5,068 5,050 (0%) 1,295 1,201 1,307 9%
Aluminium production (kt) 983 982 (0%) 246 242 245 1%
Energy coal production (kt) 28,350 26,276 (7%) 7,253 6,310 7,037 12%
Metallurgical coal production (kt) 3,165 5,350 69% 1,089 990 1,278 29%
Manganese ore production (kwmt) 5,541 5,536 (0%) 1,342 1,360 1,290 (5%)
Manganese alloy production (kt) 244 223 (9%) 64 52 62 19%
Payable nickel production (kt) 43.8 41.1 (6%) 11.3 9.4 10.6 13%
Payable silver production (koz) 12,491 12,201 (2%) 4,234 2,881 3,253 13%
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Payable lead production (kt) 104.4 101.4 (3%) 31.4 24.8 28.3 14%
Payable zinc production (kt) 41.3 51.6 25% 12.5 10.7 14.6 36%
Unless otherwise noted: percentage variance relates to performance during the financial year ended June 2019 compared with the
financial year ended June 2018 (YoY) or the June 2019 quarter compared with the March 2019 quarter (QoQ); production and sales
volumes are reported on an attributable basis. Revenue equivalent production is based on FY18 realised prices and total group
production.
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Corporate Update
• We received bids for South Africa Energy Coal during the June 2019 quarter. We are currently engaging with the bidders
regarding finalisation of their offers that will form part of the Group’s usual bi-annual assessment of carrying values for
our operations. Once an acceptable agreement is reached, a determination will be made regarding any reclassification of the
operation as an asset held for sale on the balance sheet and a discontinued operation in the income statement. We expect to
provide a further update to the market in the December 2019 half year.
• One-off redundancy and restructuring charges of approximately US$30M (post-tax ~US$20M) are expected to be recorded in
our FY19 financial results. These charges will be excluded from Underlying earnings and relate to redundancies associated
with the simplification of the Group’s functional structures and the voluntary redundancy program undertaken at Hillside
Aluminium during the June 2019 quarter.
• We bought back 114M shares for a cash consideration of US$281M during FY19. To 30 June 2019 we had completed
US$986M of our approved US$1B capital management program, comprising the purchase of 318M shares at an average price
of A$3.16 per share (US$747M), a US$154M special dividend which was paid on 5 April 2018 and a US$85M special dividend
which was paid on 4 April 2019.
• We received net distributions(note 1) of US$458M (South32 share) from our manganese equity accounted investments (EAI)
in FY19, including US$132M in the June 2019 quarter.
• The primary corporate tax rates applicable to the Group include: Australia 30%, South Africa 28%, Colombia 33%(note 2),
Mozambique 0%(note 2) 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 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. Separately, the Group made tax payments totalling US$346M (excluding EAI) during
FY19.
Production guidance
FY18 FY19 FY19e(a) %(b) Comments
(South32 share)
Worsley Alumina
Alumina production (kt) 3,764 3,795 3,795 0% In-line with revised guidance
Brazil Alumina
Below revised guidance following lower
Alumina production (kt) 1,304 1,255 1,285 (2%) than expected availability
of package boilers
Hillside Aluminium
Aluminium production (kt) 712 715 720 (1%)
Mozal Aluminium
Aluminium production (kt) 271 267 269 (1%)
South Africa Energy Coal(note 3)
Energy coal production (kt) 27,271 24,979 26,200 (5%) Below revised guidance following: lower
than expected domestic sales of
Domestic coal production (kt) 15,154 14,978 15,500 (3%) stockpiled product; and lower than
planned equipment availability
Export coal production (kt) 12,117 10,001 10,700 (7%) impacting access to mining areas
Illawarra Metallurgical Coal for export coal
Total coal production (kt) 4,244 6,647 6,500 2%
Above revised guidance following
Metallurgical coal production (kt) 3,165 5,350 5,200 3% improved longwall performance
Energy coal production (kt) 1,079 1,297 1,300 (0%)
Australia Manganese
Below revised guidance following
Manganese ore production (kwmt) 3,396 3,349 3,500 (4%) extended wet weather
South Africa Manganese
Above revised guidance following
Manganese ore production(note 4) stronger production of premium
2,145 2,187 2,130 3% product from Wessels
(kwmt)
Cerro Matoso
Payable nickel production (kt) 43.8 41.1 40.5 1%
Cannington
Payable zinc equivalent production(note
5) (kt) 187.2 193.6 188.1 3%
Payable silver production (koz) 12,491 12,201 11,750 4%
Payable lead production (kt) 104.4 101.4 98.0 3%
Payable zinc production (kt) 41.3 51.6 51.0 1%
a. The denotation (e) refers to an estimate or forecast year.
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b. Percentage difference to latest production guidance. Worsley Alumina, Brazil Alumina, South Africa Energy Coal, Illawarra
Metallurgical Coal, Australia Manganese and South Africa Manganese restated FY19 production guidance during the 2019
financial year. FY19 guidance as at FY18 results: Worsley Alumina (alumina 3,965kt), Brazil Alumina (alumina 1,355kt),
South Africa Energy Coal (domestic coal 17,500kt, export coal 11,500kt), Illawarra Metallurgical Coal
(metallurgical coal 4,900kt, energy coal 1,200kt), Australia Manganese (manganese ore 3,350kwmt) and South Africa
Manganese (manganese ore 2,050kwmt).
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Marketing Update
FY19 2H19
Realised prices(note 6) FY18 1H19 2H19 FY19 vs vs
FY18 1H19
Worsley Alumina
Alumina (US$/t) 391 458 383 420 7% (16%)
Brazil Alumina
Alumina (US$/t) 411 504 409 456 11% (19%)
Hillside Aluminium
Aluminium (US$/t) 2,226 2,144 1,922 2,035 (9%) (10%)
Mozal Aluminium
Aluminium (US$/t) 2,296 2,171 1,986 2,075 (10%) (9%)
South Africa Energy Coal
Domestic coal (US$/t) 25 22 26 24 (4%) 18%
Export coal (US$/t) 79 83 59 69 (13%) (29%)
Illawarra Metallurgical Coal
Metallurgical coal (US$/t) 203 207 210 209 3% 1%
Energy coal (US$/t) 76 68 62 66 (13%) (9%)
Australia Manganese(note 7)
Manganese ore (US$/dmtu, FOB) 6.38 6.59 6.11 6.35 (0%) (7%)
South Africa Manganese(note 8)
Manganese ore (US$/dmtu, FOB) 5.21 5.85 5.29 5.57 7% (10%)
Cerro Matoso(note 9)
Payable nickel (US$/lb) 5.86 5.20 5.58 5.38 (8%) 7%
Cannington
Payable silver (US$/oz) 16.6 14.7(a) 14.2(a) 14.4(a) (13%) (3%)
Payable lead (US$/t) 2,463 1,656(a) 1,838(a) 1,754(a) (29%) 11%
Payable zinc (US$/t) 3,185 2,146(a) 2,096(a) 2,122(a) (33%) (2%)
(a) FY19 realised prices for Cannington reflect the Group’s adoption of AASB 15 Revenue from Contracts with Customers, with revenue
recognised net of treatment and refining charges, which will no longer be treated as an expense item. These changes result in
lower realised prices and Operating unit costs, with no net impact to earnings. Prior period realised prices have not been
restated to reflect these changes.
Development and Exploration Update
• We reported a Mineral Resource estimate for the first time during the June 2019 quarter for the Taylor Deposit, which forms
part of the Hermosa project(note 10). The Mineral Resource was reported in accordance with the JORC Code (2012)
guidelines at 155 million tonnes, averaging 3.39% zinc, 3.67% lead and 69 g/t silver with a contained 5.3 million tonnes of zinc,
5.7 million tonnes of lead and 344 million ounces of silver(note 11). The Mineral Resource remains open at depth and laterally,
with multiple targets to be tested as we advance our extensive surface drilling program in parallel with our pre-feasibility
study.
We expect to conclude the pre-feasibility study before the end of FY20.
• We continued our 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.
• We invested US$34M in our early stage greenfield exploration projects during FY19. 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.
• We directed US$42M towards exploration programs at our existing operations in FY19 (US$30M capitalised). This included
US$2M for our EAI (US$1M capitalised) and US$18M at the Hermosa project (all capitalised).
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Worsley Alumina
(86% share)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Alumina production (kt) 3,764 3,795 1% 981 893 996 2% 12%
Alumina sales (kt) 3,763 3,857 2% 967 936 1,036 7% 11%
Worsley Alumina saleable production increased by 1% (or 31kt) to 3.8Mt in FY19, with the refinery finishing the year on a strong
note as an increase in calciner availability underpinned a 12% increase in production in the June 2019 quarter. Calcined alumina
production is expected to approach nameplate capacity of 4.6Mt (100% basis) in FY20 as we further benefit from initiatives that are
expected to sustainably improve calciner availability and the refinery processes excess hydrate stocks. Notwithstanding the strong
finish to FY19, lower than budgeted volumes, higher caustic soda consumption and additional maintenance costs are expected to
result in a modest increase in Operating unit costs from our prior guidance of US$227/t.
The average realised price for alumina sales in FY19 was a discount of approximately 5% to the Platts Alumina Index (PAX) (note
12) on a volume weighted M-1 basis. This discount narrowed to 1% in the June 2019 half year and reflects the structure of specific
legacy supply contracts with our Mozal Aluminium smelter that are linked to the LME aluminium price and the elevated alumina to
aluminium price ratio in the spot market during FY19. All alumina sales to other customers were at market based prices.
Brazil Alumina
(36% share)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Alumina production (kt) 1,304 1,255 (4%) 314 308 311 (1%) 1%
Alumina sales (kt) 1,341 1,240 (8%) 378 247 374 (1%) 51%
Brazil Alumina saleable production decreased by 4% (or 49kt) to 1,255kt in FY19 as boiler performance and power outages
impacted production and our ability to realise the full benefits of the De-bottlenecking Phase One project. The addition of package
boilers in the June 2019 quarter is expected to improve the reliability of steam generation at the refinery in FY20. Sales increased
by 51% in the June 2019 quarter following a slipped shipment from the prior quarter.
Hillside Aluminium
(100%)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Aluminium production (kt) 712 715 0% 179 176 179 0% 2%
Aluminium sales (kt) 711 707 (1%) 183 156 191 4% 22%
Hillside Aluminium saleable production increased by 3kt to a record 715kt in FY19 as the smelter continued to test its maximum
technical capacity, despite an increase in the frequency of load-shedding events. Sales increased by 22% in the June 2019 quarter
reflecting the timing of shipments.
In order to ensure the smelter’s ongoing sustainability and to improve its cost competitiveness, we completed a restructure of the
workforce during the June 2019 quarter. Notwithstanding the restructure, which is expected to deliver cost savings from FY20, and
the continued strong operating performance during the year, lower aluminium prices and elevated raw material input costs, are
expected to result in the smelter recording a loss in FY19.
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Mozal Aluminium
(47.1% share)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Aluminium production (kt) 271 267 (1%) 67 66 66 (1%) 0%
Aluminium sales (kt) 274 268 (2%) 76 69 70 (8%) 1%
Mozal Aluminium saleable production decreased by 1% (or 4kt) to 267kt in FY19 as the smelter’s strong operating performance
was impacted by an increase in the frequency of load-shedding events.
Notwithstanding the smelter’s continued strong operating performance during the year, lower aluminium prices and elevated power
and raw material input costs, are expected to result in the smelter recording a loss in FY19. In order to improve the smelter’s cost
competitiveness we commenced relining pots with AP3XLE energy efficiency technology during FY19. The project is expected to
deliver a circa 5% (or 10kt pa) increase in annual production with no associated increase in power consumption. First incremental
production is anticipated in FY20, with the full benefit to be realised by FY24.
South Africa Energy Coal
(100%)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Energy coal production (kt) 27,271 24,979 (8%) 7,107 6,098 6,710 (6%) 10%
Domestic sales (kt) 15,396 15,035 (2%) 4,227 3,950 3,336 (21%) (16%)
Export sales (kt) 12,518 9,875 (21%) 3,181 2,547 3,122 (2%) 23%
South Africa Energy Coal saleable production decreased by 8% (or 2,292kt) to 25.0Mt in FY19, as export sales volumes were
impacted by an extended outage of the Klipspruit dragline following an incident in August 2018.
Although domestic sales were largely unchanged in FY19, volumes declined by 16% in the June 2019 quarter following reduced
sales of lower quality stockpiled product. Export sales volumes improved by 23% in the June 2019 quarter following a ramp-up of
activity at Klipspruit after the dragline’s return to service in the prior quarter.
The incident that caused the extended outage of the dragline has been confirmed as an insurable event, with an initial progress
payment for the volume and cost impact of the outage awarded in June. Notwithstanding the initial progress payment for the
insurance claim offsetting the impact of lower volumes, additional mining costs for concurrent rehabilitation work are expected to
contribute to a modest increase in Operating unit costs from our prior FY19 guidance of US$38/t.
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Illawarra Metallurgical Coal
(100%)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Total coal production (kt) 4,244 6,647 57% 1,235 1,202 1,605 30% 34%
Total coal sales (kt) 4,116 6,306 53% 1,365 1,531 1,516 11% (1%)
Metallurgical coal production (kt) 3,165 5,350 69% 1,089 990 1,278 17% 29%
Metallurgical coal sales (kt) 2,937 5,044 72% 1,120 1,256 1,261 13% 0%
Energy coal production (kt) 1,079 1,297 20% 146 212 327 124% 54%
Energy coal sales (kt) 1,179 1,262 7% 245 275 255 4% (7%)
Illawarra Metallurgical Coal saleable production increased by 57% (or 2,403kt) to 6.6Mt in FY19 as the Dendrobium and Appin
longwalls continued to perform strongly following the successful completion of two longwall moves in the June 2019 quarter.
Development performance at Appin continued to improve in the June 2019 quarter and our focus remains on achieving a further
uplift in rates to support a sustainable return to a three longwall configuration at Illawarra Metallurgical Coal during the June 2020
quarter.
We submitted our Environmental Impact Statement to the NSW Department of Planning and Environment for the Dendrobium Next
Domain project during the June 2019 quarter. While still subject to necessary regulatory approvals, the project has the potential to
extend the mine life of Dendrobium to approximately FY36, with a financial investment decision anticipated in H2 FY21.
Australia Manganese
(60% share)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Manganese ore production (kwmt) 3,396 3,349 (1%) 865 820 718 (17%) (12%)
Manganese ore sales (kwmt) 3,290 3,438 4% 875 782 916 5% 17%
Manganese alloy production (kt) 165 154 (7%) 42 38 40 (5%) 5%
Manganese alloy sales (kt) 170 151 (11%) 55 29 46 (16%) 59%
Australia Manganese saleable ore production decreased by 1% (or 47kwmt) to 3,349kwmt in FY19 as production was impacted by
the annual wet season extending into the June 2019 quarter. We achieved record ore sales of 3,438kwmt in FY19, drawing down
inventory stockpiles in the June 2019 quarter and operating our PC02 circuit at approximately 120% of its design capacity to take
advantage of strong market conditions.
Our low cost PC02 fines product has a manganese content of approximately 40%, which leads to both grade and product-type
discounts when referenced to the high grade 44% manganese lump ore index. Notwithstanding the PC02 circuit contributing 10%
of total production, our average realised price for external sales of Australian ore was in-line with the high grade 44% manganese
lump ore index(note 13) in FY19. Internal sales continue to occur on commercial terms.
Manganese alloy saleable production decreased by 7% (or 11kt) to 154kt in FY19. We continue to review options for our
manganese alloy smelters as changes in market dynamics have reduced the attractiveness of our exposure and we will update the
market in due course.
8
South Africa Manganese
(60% share)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Manganese ore production(note 4) (kwmt) 2,145 2,187 2% 477 540 572 20% 6%
Manganese ore sales (kwmt) 2,082 2,113 1% 539 530 573 6% 8%
Manganese alloy production (kt) 79 69 (13%) 22 14 22 0% 57%
Manganese alloy sales (kt) 67 73 9% 18 16 22 22% 38%
South Africa Manganese saleable ore production increased by 2% (or 42kwmt) to 2,187kwmt in FY19 as productivity improvements
at our high grade Wessels mine delivered an increase in premium material. Notwithstanding the impact of additional volumes, we
are expecting a modest increase in Operating unit costs from our prior FY19 guidance of US$2.56/dmtu as we continued to take
advantage of favourable market conditions by increasing workforce activity and utilising higher cost trucking as an alternative route
to market.
In FY19 our average realised price for external sales of South African ore reflects the medium grade 37% manganese lump ore
index (FOB Port Elizabeth, South Africa) (note 14) as increased production of higher quality premium material was offset by the
contribution of our lower quality fines product (6% FY19; 13% FY18). We continue to monitor market conditions and will optimise
our use of higher cost trucking and sales of lower quality fines product in response to market demand.
Manganese alloy saleable production decreased by 13% (or 10kt) to 69kt in FY19. We continue to review options for our
manganese alloy smelters as changes in market dynamics have reduced the attractiveness of our exposure and we will update the
market in due course.
Cerro Matoso
(99.9% share)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Payable nickel production (kt) 43.8 41.1 (6%) 11.3 9.4 10.6 (6%) 13%
Payable nickel sales (kt) 43.3 41.2 (5%) 11.2 9.1 10.8 (4%) 19%
Cerro Matoso payable nickel production decreased by 6% (or 2.7kt) to 41.1kt in FY19 following a planned increase in the
contribution of lower grade stockpiled ore feed.
Finalisation adjustments and the provisional pricing of nickel sales decreased Underlying EBIT(note 15) by US$9M in FY19
(US$19M FY18; -US$16M H1 FY19). Outstanding nickel sales of 3.89kt were revalued at 30 June 2019. The final price of these
sales will be determined in the December 2019 half year.
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Cannington
(100% share)
4Q19 4Q19
South32 share FY18 FY19 YoY 4Q18 3Q19 4Q19 vs vs
4Q18 3Q19
Payable zinc equivalent production 187.2 193.6 3% 58.9 44.9 53.5 (9%) 19%
(note 5)(kt)
Payable silver production (koz) 12,491 12,201 (2%) 4,234 2,881 3,253 (23%) 13%
Payable silver sales (koz) 11,985 13,034 9% 3,542 1,820 4,874 38% 168%
Payable lead production (kt) 104.4 101.4 (3%) 31.4 24.8 28.3 (10%) 14%
Payable lead sales (kt) 97.9 101.5 4% 25.8 12.7 41.7 62% 228%
Payable zinc production (kt) 41.3 51.6 25% 12.5 10.7 14.6 17% 36%
Payable zinc sales (kt) 45.0 47.6 6% 13.0 7.2 15.7 21% 118%
Cannington payable zinc equivalent production increased by 3% (or 6.4kt) to 193.6kt in FY19 as improved productivity underground
supported higher mill throughput and zinc grades improved in accordance with our expectations. Higher payable silver, lead and
zinc sales in the June 2019 quarter reflect timing differences following significant floods in North Queensland in the prior quarter
that caused an extended outage of a third-party rail line connecting Cannington to the Townsville Port.
Finalisation adjustments and the revaluation of provisionally priced sales of Cannington concentrates will decrease Underlying
EBIT by US$8.2M in FY19 (US$0.1M FY18; -US$9.8M H1 FY19). Outstanding concentrate sales (containing 3Moz of silver, 29.2kt
of lead and 5.6kt of zinc) were revalued at 30 June 2019. The final price of these sales will be determined in the December 2019
half year.
Notes:
1. 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.
2. 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.
3. 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%.
4. 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.
5. 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, FY19 and FY19e.
6. 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.
7. 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.
8. 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.
9. Realised nickel sales prices are unaudited and inclusive of by-products.
10. Information that relates to estimates of Mineral Resources for the Clark Deposit (formally the Central Deposit) of the Hermosa
project are foreign estimates under ASX Listing Rules and are not reported in accordance with the JORC Code. 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” dated 18 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 estimate or has the
ability to verify the foreign estimate as a Mineral Resource in accordance with the JORC Code. South32 confirms that the
supporting information contained in the clarifying statement in the 18 June 2018 market announcement continues to apply and
has not materially changed. 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. South32 intends
to conduct a work program to increase confidence in the resource to ensure that resources are reported in accordance with
the JORC Code.
11. The information that relates to the Mineral Resources of the Taylor Deposit was declared in the market announcement “Hermosa
Project – Mineral Resource Declaration” dated 17 June 2019 (www.south32.net) based on information compiled by Matthew
Readford, Competent Person. 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.
12. The quarterly sales volume weighted average of the Platts Alumina Index (PAX) (FOB Australia) on the basis of a one month lag
to published pricing (Month minus one or “M-1”) was US$443/t in FY19.
13. The quarterly sales volume weighted average of the Metal Bulletin 44% manganese lump ore index (CIF Tianjin, China) on the
basis of a one month lag to published pricing (Month minus one or “M-1”) was US$6.74/dmtu in FY19.
14. The quarterly sales volume weighted average of the Metal Bulletin 37% manganese lump ore index (FOB Port Elizabeth,
South Africa) on the basis of a one month lag to published pricing (Month minus one or “M-1”) was US$5.61/dmtu in FY19.
15. Underlying EBIT is earnings before net finance costs, taxation and any earnings adjustments. Underlying EBIT is reported net of
South32’s share of net finance costs and taxation of equity accounted investments.
16. The following abbreviations have been used throughout this report: US$ 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).
10
Operating Performance
South32 share FY18 FY19 4Q18 1Q19 2Q19 3Q19 4Q19
Worsley Alumina (86% share)
Alumina hydrate production (kt) 3,796 3,802 911 959 988 921 934
Alumina production (kt) 3,764 3,795 981 854 1,052 893 996
Alumina sales (kt) 3,763 3,857 967 850 1,035 936 1,036
Brazil Alumina (36% share)
Alumina production (kt) 1,304 1,255 314 305 331 308 311
Alumina sales (kt) 1,341 1,240 378 302 317 247 374
Hillside Aluminium (100%)
Aluminium production (kt) 712 715 179 180 180 176 179
Aluminium sales (kt) 711 707 183 178 182 156 191
Mozal Aluminium (47.1% share)
Aluminium production (kt) 271 267 67 68 67 66 66
Aluminium sales (kt) 274 268 76 59 70 69 70
South Africa Energy Coal (100%)
Energy coal production (kt) 27,271 24,979 7,107 6,170 6,001 6,098 6,710
Domestic sales (kt) 15,396 15,035 4,227 4,103 3,646 3,950 3,336
Export sales (kt) 12,518 9,875 3,181 1,923 2,283 2,547 3,122
Illawarra Metallurgical Coal (100%)
Total coal production (kt) 4,244 6,647 1,235 1,905 1,935 1,202 1,605
Total coal sales (kt) 4,116 6,306 1,365 1,504 1,755 1,531 1,516
Metallurgical coal production (kt) 3,165 5,350 1,089 1,515 1,567 990 1,278
Metallurgical coal sales (kt) 2,937 5,044 1,120 1,178 1,349 1,256 1,261
Energy coal production (kt) 1,079 1,297 146 390 368 212 327
Energy coal sales (kt) 1,179 1,262 245 326 406 275 255
Australia Manganese (60% share)
Manganese ore production (kwmt) 3,396 3,349 865 932 879 820 718
Manganese ore sales (kwmt) 3,290 3,438 875 884 856 782 916
Ore grade sold (%, Mn) 45.7 45.9 45.7 46.1 45.8 45.8 46.0
Manganese alloy production (kt) 165 154 42 41 35 38 40
Manganese alloy sales (kt) 170 151 55 29 47 29 46
South Africa Manganese (60% share)
Manganese ore production
(note 4) (kwmt) 2,145 2,187 477 515 560 540 572
Manganese ore sales (kwmt) 2,082 2,113 539 487 523 530 573
Ore grade sold (%, Mn) 39.9 40.5 39.1 40.0 40.5 39.7 41.7
Manganese alloy production (kt) 79 69 22 11 22 14 22
Manganese alloy sales (kt) 67 73 18 16 19 16 22
11
South32 share FY18 FY19 4Q18 1Q19 2Q19 3Q19 4Q19
Cerro Matoso (99.9% share)
Ore mined (kwmt) 3,741 2,278 823 613 596 645 424
Ore processed (kdmt) 2,722 2,738 710 712 689 634 703
Ore grade processed (%, Ni) 1.79 1.66 1.73 1.68 1.69 1.63 1.65
Payable nickel production (kt) 43.8 41.1 11.3 10.7 10.4 9.4 10.6
Payable nickel sales (kt) 43.3 41.2 11.2 10.9 10.4 9.1 10.8
Cannington (100%)
Ore mined (kwmt) 2,463 2,725 683 623 683 648 771
Ore processed (kdmt) 2,355 2,495 643 638 606 547 704
Silver ore grade processed (g/t, Ag) 194 184 237 184 181 202 172
Lead ore grade processed (%, Pb) 5.3 5.0 5.8 4.9 4.7 5.6 4.8
Zinc ore grade processed (%, Zn) 2.6 3.0 2.8 2.9 3.0 3.0 3.0
Payable Zinc equivalent production (note 5) (kt) 187.2 193.6 58.9 49.7 45.5 44.9 53.5
Payable silver production (koz) 12,491 12,201 4,234 3,185 2,882 2,881 3,253
Payable silver sales (koz) 11,985 13,034 3,542 3,057 3,283 1,820 4,874
Payable lead production (kt) 104.4 101.4 31.4 25.8 22.5 24.8 28.3
Payable lead sales (kt) 97.9 101.5 25.8 22.5 24.6 12.7 41.7
Payable zinc production (kt) 41.3 51.6 12.5 13.2 13.1 10.7 14.6
Payable zinc sales (kt) 45.0 47.6 13.0 8.8 15.9 7.2 15.7
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 July 2019
JSE Sponsor: UBS South Africa (Pty) Ltd
12
Date: 18/07/2019 08:02:00
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