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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
QUARTERLY REPORT
December 2022
• Group copper equivalent production1 increased by 12% in H1 FY23, as our recent investments in copper and low-carbon aluminium
capacity2 delivered strong growth
• H1 FY23 Operating unit costs expected to be in-line or below FY23 guidance at the majority of our operations
• We are well positioned to capture the benefit of improved market conditions, with further expected production growth in H2 FY23
and our ongoing focus on cost management to mitigate inflationary pressures
• Worsley Alumina and Brazil Alumina operated above nameplate capacity in the December 2022 quarter, delivering an 8% increase in
quarterly alumina volumes
• Aluminium production increased by 15% in the December 2022 half year, with a 50% uplift in low-carbon aluminium, following our
acquisition of an additional shareholding in Mozal Aluminium and restart of the Brazil Aluminium smelter
• Sierra Gorda realised sequentially higher copper grades, delivering 45kt of payable copper equivalent production3 in the December 2022
half year
• Cerro Matoso commissioned the Ore Sorting and Mechanical Ore Concentration project in the December 2022 quarter, underpinning a
15 year extension to the mining contract, and supporting higher expected nickel production in H2 FY23
• Australia Manganese achieved record half year production, supporting a 7% increase in total manganese production
• Illawarra Metallurgical Coal delivered a 17% increase in quarterly metallurgical coal production, with improved volumes and labour
productivity as we finalised a new industrial agreement at Appin
• FY23 production guidance at Cannington revised lower by 11% due to lower mill throughput and labour availability impacting mining
rates, and at Brazil Aluminium by 25kt (or 25%) due to a slower ramp-up to nameplate capacity
• Work completed on Hermosa’s Clark selection phase pre-feasibility study confirmed the opportunity to produce high-purity manganese
sulphate monohydrate for the growing North American electric vehicle supply chain
South32 Chief Executive Officer, Graham Kerr: “In November 2022, we were devastated by the loss of two of our colleagues who were fatally
injured in an incident at Mozal Aluminium. Our thoughts and deepest sympathies remain with their families, and we provided them with our
support following the incident. We are committed to improving our safety performance. Through our Safety Improvement Program, we are
undertaking a significant amount of work to achieve the necessary step-change.
“Group copper equivalent production increased by 12 per cent in the December half year, as we benefitted from transactions that have
repositioned our portfolio toward metals critical for a low-carbon future. Australia Manganese also achieved record half year production,
while Cerro Matoso successfully commissioned the Ore Sorting and Mechanical Ore Concentration project, underpinning a 15 year extension
to the mining contract.
“Despite industry wide inflationary pressures, we expect Operating unit costs for the first half to be in-line with or below guidance for the
2023 financial year at the majority of our operations. We remain focused on delivering safe and stable operational performance, and
efficiencies to mitigate cost pressures and capture higher margins as markets improve.
“We returned US$927 million to shareholders during the period, paying record fully-franked dividends in respect of the June 2022 half year
and continuing our on-market share buy-back. We have returned US$2.2 billion under our capital management program since inception, with
US$108 million remaining to be returned to shareholders ahead of its extension or expiry in September 2023.
“Looking forward, our capital management framework and disciplined approach to capital allocation is designed to reward shareholders as
we grow our production and realise the benefits of improving market conditions. At the same time, we continue to reshape our portfolio
toward metals critical for a low-carbon future, advancing construction work, studies and exploration at our high-quality development
options.”
Production summary
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 QoQ
Alumina production (kt) 2,610 2,613 0% 1,332 1,257 1,356 8%
Aluminium production (kt) 494 568 15% 246 279 289 4%
Payable copper production (kt) – 37.9 N/A – 19.0 18.9 (1%)
Payable silver production (koz) 6,710- 5,812 (13%) 3,217- 2,748 3,064 11%
Payable lead production (kt) 60.2 52.4 (13%) 28.3 24.6 27.8 13%
Payable zinc production (kt) 32.7 30.4 (7%) 17.3 14.0 16.4 17%
Payable nickel production (kt) 20.3 20.4 0% 10.7 9.6 10.8 13%
Metallurgical coal production (kt) 2,767 2,753 (1%) 1,192 1,270 1,483 17%
Manganese ore production (kwmt) 2,757 2,937 7% 1,252 1,460 1,477 1%
Unless otherwise noted: percentage variance relates to performance during the half year ended December 2022 compared with the half year ended December 2021 (HoH), or the December 2022 quarter
compared with the September 2022 quarter (QoQ); production and sales volumes are reported on an attributable basis.
CORPORATE UPDATE
• On 7 November 2022, two of our colleagues, Mr Cristovão Alberto Tonela and Mr Alfredo Francisco Domingos João, were fatally injured
in an incident at Mozal Aluminium. Our deepest sympathies are with the families and colleagues of the deceased to whom we have
provided our support and counselling. The incident occurred during maintenance work on a raising girder. Production operations were
temporarily suspended while an investigation was completed. Key learnings from the incident are being shared across our organisation
and with industry. As an immediate step, additional controls were put in place for all raising girders at Mozal Aluminium and Hillside
Aluminium.
• A non-binding advisory resolution in relation to our Climate Change Action Plan (CCAP) was passed by shareholders at our Annual
General Meeting on 27 October 2022, with 89.6% of the votes received in favour of the resolution. Our CCAP included a new goal4 of
net zero Scope 3 greenhouse gas emissions by 2050 and a commitment not to develop or invest in greenfield metallurgical coal projects.
• Consistent with our focus on securing low-carbon energy, Sierra Gorda’s electricity supply will transition to cost efficient, fully renewable
sources from January 2023 under an agreement to December 2039. Electricity supplied to the operation will be from solar, wind and
hydroelectric power sources, sustainably reducing Sierra Gorda’s greenhouse gas emissions and energy costs.
• During the December 2022 quarter, we satisfied the conditions to extend the mining contract at Cerro Matoso by 15 years from 2029
to 2044. As part of this extension, we received third-party certification of the expanded processing capacity5 delivered by the Ore Sorting
and Mechanical Ore Concentration (OSMOC) project and paid US$43M to the National Mining Agency in the December 2022 quarter.
• We made a final investment decision to install additional ventilation capacity at Illawarra Metallurgical Coal’s Appin mine to enable
mining in the current Area 7 until at least 20396. This ~US$260M investment is expected to be completed by H1 FY26, with our guidance
for FY23 and FY24 safe and reliable capital expenditure already reflecting this activity.
• We expect to record a build in working capital of approximately US$100M in the December 2022 half year, primarily related to an
increase in inventories. This impact is most acute in our aluminium value chain in Southern Africa due to ongoing shipping delays.
• During the December 2022 quarter, we returned a record US$784M in fully-franked ordinary and special dividends in respect of the
June 2022 half year.
• We also returned US$143M via our on-market share buy-back during the December 2022 half year, purchasing a further 56M shares at
an average price of A$3.86. To 31 December 2022, our US$2.3B capital management program was 95% complete with US$108M
remaining to be returned ahead of its extension or expiry on 1 September 20237.
• We received net distributions8 of US$60M (South32 share) from our manganese equity accounted investments (EAI) in the December
2022 half year, following the payment of income tax (US$94M, 100% basis), and royalties at Australia Manganese (US$82M, 100% basis).
We did not receive a distribution from our Sierra Gorda EAI in the December 2022 half year.
• We made tax payments of US$347M in the December 2022 half year, which included US$111M in relation to our acquisition of Sierra
Gorda. Of this amount, ~€92M (~US$94M at the payment date) relates to pre-closing tax liabilities which we intend to seek to recover
from the vendors.
• Our Group Underlying effective tax rate (ETR) for the December 2022 half year is expected to be approximately 35%, reflecting the
corporate tax rates of the jurisdictions in which we operate9 and our geographical earnings mix, including our manganese and Sierra
Gorda EAIs which are proportionally consolidated in our Underlying results. Separately, the Underlying ETR of our manganese business
is expected to be in a range of approximately 55 to 60%, including the royalty related tax for Australia Manganese10 and the
derecognition of certain deferred tax assets.
• We extended our undrawn sustainability-linked revolving credit facility during the December 2022 quarter, retaining available capacity
of US$1.4B to December 2026 and US$1.2B to December 2027.
• Reflecting our strong balance sheet and continued disciplined approach to capital allocation, our current BBB+/Baa1 credit ratings were
re-affirmed by S&P Global Ratings and Moody’s, respectively.
South32 Quarterly Report December 2022 Page 2 of 15
DEVELOPMENT AND EXPLORATION UPDATE
Hermosa project
• We invested US$96M at Hermosa in the December 2022 half year as we continued critical path dewatering activity and study work for
the Taylor zinc-lead-silver deposit and the Clark battery-grade manganese-zinc-silver deposit.
• We completed drilling of the first two dewatering wells during the December 2022 half year, with a total of six dewatering wells expected
to be completed during FY23. The second water treatment plant remains on-track to be commissioned in the June 2023 quarter.
• We progressed the Taylor feasibility study which remains on-track to support a planned final investment decision in mid CY23.
• We completed work on the selection phase of the Clark pre-feasibility study during the December 2022 quarter. While this study remains
subject to independent review, work to date has confirmed the opportunity to produce high-purity manganese sulphate monohydrate
for the growing North American electric vehicle supply chain.
• In parallel, we progressed metallurgical test work and continued our drilling program at Clark to collect bulk samples that will support
initial pilot plant production from mid CY23.
• We directed US$6M to capitalised exploration in the December 2022 half year, as we continued our planned exploration programs
including at the copper-lead-zinc-silver Peake prospect11. We expect to commence exploration drilling at the Flux prospect12 during
CY23, following the receipt of approvals.
Ambler Metals project
• At our Ambler Metals joint venture, the CY22 summer exploration program was completed and the joint venture progressed work on
the pre-feasibility study for the Arctic deposit. Our share of capitalised exploration was US$8M in the December 2022 half year.
• Activity in CY23 is expected to focus on consolidating our geological knowledge and advancing engineering studies, while we monitor
progress on approvals for the Ambler Access Project.
Greenfield exploration
• We invested US$19M during the December 2022 half year in our greenfield exploration opportunities, with multiple programs targeting
base metals underway in Australia, USA, Canada, Argentina, Peru and Ireland.
Other exploration
• We invested US$30M (US$20M capitalised) in exploration programs at our existing operations and development options in the
December 2022 half year, including US$6M at the Hermosa project (noted above, all capitalised), US$8M at Ambler Metals (noted
above, all capitalised), US$2M for our manganese EAI (US$1M capitalised) and US$3M for our Sierra Gorda EAI (US$1M capitalised).
South32 Quarterly Report December 2022 Page 3 of 15
PRODUCTION SUMMARY
Production guidance
FY22 1H23 FY23e(a) Guidance comments
(South32 share)
Worsley Alumina
Alumina production (kt) 3,991 1,922 4,000
Brazil Alumina (non-operated)
Alumina production (kt) 1,297 691 1,395
Brazil Aluminium (non-operated)
Guidance reduced by 25kt (from
100kt) due to a slower than
Aluminium production (kt) 0.3 23.7 ↓ 75
expected ramp-up to nameplate
capacity
Hillside Aluminium13
Aluminium production (kt) 714 362 720
Mozal Aluminium13,14
Aluminium production (kt) 278 182 370
Sierra Gorda (non-operated)
Payable copper equivalent production3 (kt) 30.6 44.9 89.0
Payable copper production (kt) 25.3 37.9 71.8
Payable molybdenum production (kt) 0.4 0.4 1.5
Payable gold production (koz) 9.6 15.3 29.9
Payable silver production (koz) 253 338 582
Cannington
Payable zinc equivalent production15 (kt) 224.2 98.8 ↓ 209.4 Guidance reduced by 11% (from
236.1kt payable zinc equivalent)
Payable silver production (koz) 12,946 5,474 ↓ 12,000 with lower H1 FY23 mill
Payable lead production (kt) 120.6 52.4 ↓ 108.5 throughput and labour
availability impacting mining
Payable zinc production (kt) 64.5 30.4 ↓ 63.5 rates
Cerro Matoso
OSMOC project expected to
Payable nickel production (kt) 41.7 20.4 43.5 support higher volumes in
H2 FY23
Illawarra Metallurgical Coal
Total coal production (kt) 6,509 3,331 7,000
Improved labour productivity
Metallurgical coal production (kt) 5,712 2,753 6,000
expected in H2 FY23
Energy coal production (kt) 797 578 1,000
Australia Manganese
Production tracking ahead of
Manganese ore production (kwmt) 3,363 1,844 3,400
guidance, prior to the wet season
South Africa Manganese
Subject to demand and our
Manganese ore production (kwmt) 2,069 1,093 2,000 continued use of higher cost
trucking
a. The denotation (e) refers to an estimate or forecast year. All guidance is subject to further potential impacts from COVID-19.
South32 Quarterly Report December 2022 Page 4 of 15
MARKETING UPDATE
Commodity prices were broadly lower in the December 2022 half year as we saw a moderation in demand and sentiment following record
conditions for many markets in the prior period.
The average realised prices achieved for our commodities are summarised below. Outstanding concentrate sales were revalued at 31
December 2022 with the final price of these to be determined in the June 2023 half year.
1H23 1H23
Realised prices16 1H22 2H22 1H23 vs vs
1H22 2H22
Worsley Alumina
Alumina (US$/t) 389 428 354 (9%) (17%)
Brazil Alumina (non-operated)(a)
Alumina (US$/t) 387 419 364 (6%) (13%)
Brazil Aluminium (non-operated)(a)
Aluminium (US$/t) – – 2,423 N/A N/A
Hillside Aluminium
Aluminium (US$/t) 2,952 3,347 2,555 (13%) (24%)
Mozal Aluminium
Aluminium (US$/t) 3,041 3,591 2,723 (10%) (24%)
Sierra Gorda (non-operated)17(a)(b)
Payable copper (US$/lb) – 3.50 3.41 N/A (3%)
Payable molybdenum (US$/lb) – 18.48 20.78 N/A 12%
Payable gold (US$/oz) – 1,934 1,688 N/A (13%)
Payable silver (US$/oz) – 23.5 17.4 N/A (26%)
Cannington18
Payable silver (US$/oz) 21.0 21.0 20.1 (4%) (4%)
Payable lead (US$/t) 2,180 1,902 2,008 (8%) 6%
Payable zinc (US$/t) 2,988 3,473 2,436 (18%) (30%)
Cerro Matoso19
Payable nickel (US$/lb) 8.39 11.64 9.05 8% (22%)
Illawarra Metallurgical Coal
Metallurgical coal (US$/t) 303 457 268 (12%) (41%)
Energy coal (US$/t) 108 200 164 52% (18%)
Australia Manganese20
Manganese ore (US$/dmtu, FOB) 4.59 6.05 4.57 0% (24%)
South Africa Manganese20
Manganese ore (US$/dmtu, FOB) 3.47 4.39 3.57 3% (19%)
a. While Brazil Alumina and Brazil Aluminium are non-operated, South32 owns the marketing rights for our share of production. While Sierra Gorda is also non-operated, the
Joint Venture is responsible for marketing our share of production.
b. Published 2H22 realised sales prices and Operating unit costs reflect the period 1 March 2022 to 30 June 2022. Whereas production and sales numbers, and all Income
Statement items reflect the period from first ownership (22 February 2022).
South32 Quarterly Report December 2022 Page 5 of 15
OPERATING UNIT COST UPDATE
We expect to report H1 FY23 Operating unit costs in-line or below current FY23 guidance at the majority of our operations, with a
combination of cost efficiencies and weaker producer currencies partially offsetting industry-wide cost inflation. Looking forward, we remain
focused on delivering safe and stable operational performance and further efficiencies to mitigate cost pressures. Further, Operating unit
costs in H2 FY23 are expected to benefit from higher production volumes as we realise the benefit of prior investments, embedded
improvement projects and maintenance completed in H1 FY23.
The below commentary reflects our current expectations for H1 FY23 Operating unit costs. We will report H1 FY23 Operating unit costs and
provide updated FY23 guidance with our financial results announcement for the December 2022 half year.
Operating unit cost(a)
Guidance
H1 FY23 Operating unit costs commentary
FY23e(b)(c)
Worsley Alumina
Expected to be ~2.5% below current FY23 guidance, with a weaker Australian
(US$/t) 296
dollar and lower caustic soda costs to more than offset higher energy prices
Brazil Alumina (non-operated)
Expected to be ~17.5% above H2 FY22 Operating unit costs (US$312/t), as raw
Not
material input and energy prices remain elevated, and we incurred higher
provided
contractor costs
Brazil Aluminium (non-operated)
Not Gross operating costs of ~US$120M expected as we invest to support the smelter’s
provided ramp-up to nameplate capacity
Hillside Aluminium
The cost profile of our Southern African aluminium smelters is heavily influenced
by the South African rand, and the price of raw materials and energy.
We expect to report a modest reduction in Operating unit costs in
Not H1 FY23 relative to H2 FY22, with the benefit of a weaker South African rand, while
Mozal Aluminium provided smelter raw material prices (pitch, coke and aluminium
tri-fluoride) remained elevated.
H1 FY23 Operating unit costs for Hillside Aluminium are expected to be ~2.5%
lower (H2 FY22: US$2,318/t) and at Mozal Aluminium ~7.5% lower (H2 FY22:
$2,429/t).
Sierra Gorda (non-operated)
Expect to be ~12.5% above current FY23 guidance, with higher coal price-linked
(US$/t)(d) 14.8
energy costs and lower ore processed
Cannington
Expect to be ~5% above current FY23 guidance, with a weaker Australian dollar
(US$/t)(d) 129
and lower price-linked royalties, to be more than offset by lower ore processed
Cerro Matoso
Expected to be in-line with current FY23 guidance, with a weaker Colombian peso
(US$/lb) 4.97
and lower price-linked royalties, expected to offset lower volumes
Illawarra Metallurgical Coal
Expected to be ~7.5% above current FY23 guidance, with a weaker Australian
(US$/t) 116
dollar and lower price-linked royalties, to be more than offset by lower volumes
Australia Manganese (FOB)
Expected to be ~15% below current FY23 guidance, benefitting from higher
(US$/dmtu) 2.08 volumes, together with a weaker Australian dollar and lower
price-linked royalties
South Africa Manganese (FOB)
Expected to be in-line with current guidance, with a weaker South African rand
(US$/dmtu) 2.66
partially offset by the use of higher cost trucking
a. Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes. Operating cost is Revenue less Underlying EBITDA excluding third
party sales.
b. FY23e Operating unit cost guidance includes royalties (where appropriate) and commodity price and foreign exchange rate forward curves or our
internal expectations (refer to footnote 21).
c. The denotation (e) refers to an estimate or forecast year. All guidance is subject to further potential impacts from COVID-19.
d. US dollar per tonne of ore processed. Periodic movements in finished product inventory may impact Operating unit costs.
South32 Quarterly Report December 2022 Page 6 of 15
WORSLEY ALUMINA (86% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Alumina production (kt) 1,979 1,922 (3%) 973 920 1,002 3% 9%
Alumina sales (kt) 1,946 1,861 (4%) 1,022 885 976 (5%) 10%
Worsley Alumina saleable production decreased by 3% (or 57kt) to 1,922kt in the December 2022 half year, while saleable production
improved by 9% (or 82kt) in the December 2022 quarter following the completion of planned calciner maintenance in the September 2022
quarter. FY23 production guidance remains unchanged at 4,000kt with the expectation that nameplate production rates (4.6Mtpa, 100%
basis) are achieved following planned calciner maintenance in the March 2023 quarter.
During the December 2022 quarter, we imported approximately 58kt of low-calorific coal to supplement our domestic coal supply. While we
have no current plans to import further coal, we will continue to monitor the performance of our domestic third-party coal suppliers and
respond accordingly.
BRAZIL ALUMINA (36% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Alumina production (kt) 631 691 10% 359 337 354 (1%) 5%
Alumina sales (kt) 626 678 8% 379 313 365 (4%) 17%
Brazil Alumina saleable production increased by 10% (or 60kt) to 691kt in the December 2022 half year, as the refinery operated at nameplate
capacity (3.86Mtpa, 100% basis), following the bauxite ship unloader outage in the prior period. FY23 production guidance remains
unchanged at 1,395kt.
South32 Quarterly Report December 2022 Page 7 of 15
BRAZIL ALUMINIUM (40% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Aluminium production (kt) – 23.7 N/A – 8.3 15.4 N/A 86%
Aluminium sales (kt) – 19.4 N/A – 3.3 16.1 N/A 388%
Brazil Aluminium saleable production was 23.7kt in the December 2022 half year, following the successful restart of the smelter in the June
2022 quarter. Production increased by 86% (or 7.1kt) in the December 2022 quarter as potlines one and two continued to ramp-up towards
capacity and potline three was restarted in November 2022.
During the December 2022 quarter, the smelter experienced temporary challenges with its alumina feeding systems and higher than
expected pot failure rates. As a result, fewer pots are in operation than planned, and the ramp-up to nameplate capacity (179ktpa, 40%
basis) is delayed to the September 2023 quarter. Accordingly, we have reduced FY23 production by 25kt (or 25%) to 75kt and FY24 production
guidance by 31kt (or 17%) to 148kt.
HILLSIDE ALUMINIUM (100% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Aluminium production (kt) 358 362 1% 178 179 183 3% 2%
Aluminium sales (kt) 336 337 0% 176 162 175 (1%) 8%
Hillside Aluminium saleable production increased by 1% (or 4kt) to 362kt in the December 2022 half year as the smelter continued to test its
maximum technical capacity despite the impact of elevated load-shedding. FY23 production guidance remains unchanged at 720kt13.
While sales increased by 8% in the December 2022 quarter, inventory remained above target levels as two shipments were delayed to
January 2023 due to shipping delays at Richards Bay.
MOZAL ALUMINIUM (63.7%14 SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Aluminium production (kt) 136 182 34% 68 92 90 32% (2%)
Aluminium sales (kt) 122 177 45% 67 87 90 34% 3%
Mozal Aluminium saleable production increased by 34% (or 46kt) to 182kt in the December 2022 half year, reflecting our increased
ownership of the smelter14. Production decreased by 2% (or 2kt) in the December 2022 quarter as operations in Potroom A were temporarily
suspended as we responded to the fatal incident on 7 November 2022. FY23 production guidance remains unchanged at 370kt13, with the
smelter having subsequently returned to full production and continued to test its maximum technical capacity despite the impact of elevated
load-shedding.
South32 Quarterly Report December 2022 Page 8 of 15
SIERRA GORDA (45% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Payable copper equivalent production3 (kt) – 44.9 N/A – 22.6 22.3 N/A (1%)
Payable copper production (kt) – 37.9 N/A – 19.0 18.9 N/A (1%)
Payable copper sales (kt) – 38.4 N/A – 19.2 19.2 N/A 0%
Sierra Gorda payable copper equivalent production3 was 44.9kt in the December 2022 half year, as the operation realised sequentially higher
average copper grades (H1 FY23: 0.45%, H2 FY22: 0.42%) and delivered plant throughput at an annualised rate of ~48Mt (100% basis). FY23
payable copper equivalent production3 guidance of 89.0kt remains unchanged (copper 71.8kt, molybdenum 1.5kt, gold 29.9koz and silver
582koz).
Sierra Gorda progressed work on the plant de-bottlenecking project during the December 2022 quarter, completing planned conveyor
upgrades, while commissioning of the third tailings thickener is delayed to the March 2023 quarter. Based on recent performance of the
grinding circuit, we now expect annual plant throughput to be in a range of 48 to 49Mtpa (100% basis) following the completion of de-
bottlenecking work. In parallel, feasibility study work continues on a potential fourth grinding line, designed to sustainably lift plant
throughput above 50Mtpa (100% basis). The feasibility study is expected to be completed in H1 FY24.
We will provide FY24 production guidance with our financial results announcement for the December 2022 half year.
CANNINGTON (100% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Payable zinc equivalent production15 (kt) 114.0 98.8 (13%) 55.9 46.1 52.7 (6%) 14%
Payable silver production (koz) 6,710 5,474 (18%) 3,217 2,568 2,906 (10%) 13%
Payable silver sales (koz) 6,718 5,083 (24%) 4,000 1,704 3,379 (16%) 98%
Payable lead production (kt) 60.2 52.4 (13%) 28.3 24.6 27.8 (2%) 13%
Payable lead sales (kt) 63.3 51.3 (19%) 38.0 18.7 32.6 (14%) 74%
Payable zinc production (kt) 32.7 30.4 (7%) 17.3 14.0 16.4 (5%) 17%
Payable zinc sales (kt) 32.8 27.5 (16%) 18.5 14.9 12.6 (32%) (15%)
Cannington payable zinc equivalent production15 decreased by 13% (or 15.2kt) to 98.8kt in the December 2022 half year with mill throughput
below plan due to lower than expected performance of temporary mobile crushers deployed to support the transition to truck haulage. Ore
mined volumes also declined with lower operator availability due to skilled labour shortages and further COVID-19 absenteeism.
While the transition to truck haulage was completed at the end of the December 2022 quarter and is expected to bring forward higher-grade
material in the mine plan, the ability to recover production volumes in H2 FY23 is expected to be constrained with near-term labour
availability challenges expected to impact mining rates. Accordingly, we have reduced FY23 production guidance by 11% to 209.4kt payable
zinc equivalent15 (ore processed 2,450kdmt, silver 12,000koz, lead 108.5kt and zinc 63.5kt).
Sales volumes in the December 2022 quarter reflected the timing of shipments, including carry-over shipments of silver and lead from the
prior quarter. Our realised zinc price of US$2,436/t in the December 2022 half year is net of treatment and refining charges that have widened
in the current market.
South32 Quarterly Report December 2022 Page 9 of 15
CERRO MATOSO (99.9% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Payable nickel production (kt) 20.3 20.4 0% 10.7 9.6 10.8 1% 13%
Payable nickel sales (kt) 20.1 19.8 (1%) 9.7 9.0 10.8 11% 20%
Cerro Matoso payable nickel production was largely unchanged at 20.4kt in the December 2022 half year. Production improved by 13% (or
1.2kt) in the December 2022 quarter as mill throughput returned to normalised rates following the completion of a planned shut, while the
OSMOC project was commissioned. FY23 production guidance remains unchanged at 43.5kt, with the OSMOC project expected to support
higher production volumes in H2 FY23.
Sales increased by 20% in the December 2022 quarter, which reflected improved product availability. Our ferronickel product typically
attracts a discount to the LME Nickel price index on a volume weighted M or M+1 basis, with this discount further widening to 16% in the
December 2022 half year (H2 FY22: 8%).
Following a change in tax legislation, we expect Cerro Matoso’s effective tax rate to increase in future periods, with the Colombian dividend
withholding tax increasing from 10% to 20% and income tax deductions no longer available for royalty payments22 from January 2023.
ILLAWARRA METALLURGICAL COAL (100% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Total coal production (kt) 3,145 3,331 6% 1,257 1,595 1,736 38% 9%
Total coal sales23 (kt) 3,255 3,185 (2%) 1,547 1,390 1,795 16% 29%
Metallurgical coal production (kt) 2,767 2,753 (1%) 1,192 1,270 1,483 24% 17%
Metallurgical coal sales (kt) 2,877 2,678 (7%) 1,387 1,193 1,485 7% 24%
Energy coal production (kt) 378 578 53% 65 325 253 289% (22%)
Energy coal sales (kt) 378 507 34% 160 197 310 94% 57%
Illawarra Metallurgical Coal saleable production increased by 6% (or 186kt) to 3,331kt in the December 2022 half year. Metallurgical coal
production increased by 17% (or 213kt) in the December 2022 quarter, with improved labour productivity at the Appin mine following the
successful negotiation in October 2022 of a new Enterprise Agreement, which has a four year term to 2026. The benefit to production of
improved labour productivity following the conclusion of protected industrial action was partially offset by a temporary outage in the
December 2022 quarter. Energy coal production decreased by 22% (or 72kt) during the December 2022 quarter, due to maintenance and
water management activity at the Dendrobium mine.
FY23 production guidance remains unchanged at 7.0Mt (metallurgical coal 6.0Mt and energy coal 1.0Mt) with the complex expected to
deliver higher volumes over the remainder of FY23, benefitting from an expected improvement in labour productivity.
South32 Quarterly Report December 2022 Page 10 of 15
AUSTRALIA MANGANESE (60% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Manganese ore production (kwmt) 1,704 1,844 8% 807 898 946 17% 5%
Manganese ore sales (kwmt) 1,737 1,652 (5%) 831 779 873 5% 12%
Australia Manganese saleable production increased by 8% (or 140kwmt) to a record of 1,844kwmt in the December 2022 half year as
improved yields supported higher primary concentrator output. Separately, our low-cost PC02 circuit continued to operate above its design
capacity, delivering approximately 10% of production (FY22: 11%). FY23 production guidance remains unchanged at 3,400kwmt, with
production volumes tracking ahead of plan prior to the commencement of the wet season.
SOUTH AFRICA MANGANESE (ORE 54.6% SHARE)
2Q23 2Q23
South32 share 1H22 1H23 HoH 2Q22 1Q23 2Q23 vs vs
2Q22 1Q23
Manganese ore production (kwmt) 1,053 1,093 4% 445 562 531 19% (6%)
Manganese ore sales (kwmt) 1,094 1,032 (6%) 579 473 559 (3%) 18%
South Africa Manganese saleable production increased by 4% (or 40kwmt) to 1,093kwmt in the December 2022 half year, as improved mining
performance was partially offset by planned maintenance in the December 2022 quarter. FY23 production guidance remains unchanged at
2,000kwmt, subject to market conditions and our continued use of higher cost trucking.
Sales increased by 18% in the December 2022 quarter as third-party rail and port availability progressively improved after Transnet’s
industrial action was resolved in October 2022. Notwithstanding this strong quarterly performance, we did see a build in working capital
during the December 2022 half year as a result of this disruption.
South32 Quarterly Report December 2022 Page 11 of 15
NOTES
1. Group payable copper equivalent production calculated by applying H1 FY23 production volumes and FY22 realised prices for all operations
(except for Brazil Aluminium which is based on FY22 average index prices for aluminium). The 12% increase in H1 FY23 Group payable copper equivalent production is
calculated relative to H1 FY22 production volumes and FY22 realised prices for all operations (except for Brazil Aluminium which is based on FY22 average index prices for
aluminium).
2. Refers to aluminium produced using renewable power.
3. Payable copper equivalent production (kt) was calculated by aggregating revenues from payable copper, molybdenum, gold and silver, and dividing the total Revenue by the
price of copper. FY22 realised prices for copper (US$3.50/lb), molybdenum (US$18.48/lb), gold (US$1,934/oz) and silver (US$23.5/oz) have been used for FY22, H1 FY23 and
FY23e.
4. Goal is defined as an ambition to seek an outcome for which there is no current pathway(s), but for which efforts will be pursued towards addressing that challenge, subject
to certain assumptions or conditions. Target is defined as an intended outcome in relation to which we have identified one or more pathways for delivery of that outcome,
subject to certain assumptions or conditions.
5. The information in this report that relates to the production target is based on Proved (75%) and Probable (25%) Ore Reserves for Cerro Matoso. Mineral Resources and Ore
Reserve estimates for Cerro Matoso was declared as part of South32's Annual Resource and Reserve declaration in the Annual Report 2022 (www.south32.net) issued on 9
September 2022 and prepared by I Espitia (MAusIMM) and N Monterroza (MAusIMM) in accordance with the requirements of the JORC Code. South32 confirms that it is not
aware of any new information or data that materially affects the information included in the original announcement. All material assumptions and technical parameters
underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. South32 confirms that the form and context in which
the Competent Person’s findings are presented have not been materially modified from the original market announcement. Payable nickel is calculated using long-term
consensus metal prices and relative metallurgical recoveries.
6. Refer to market release “Dendrobium Next Domain Update” dated 23 August 2022 (market release). The information in the market release that refers to the Production Target
and forecast financial information for the Appin mine at Illawarra Metallurgical Coal is based on Proved (14%) and Probable (86%) Coal Reserves from Bulli. The Coal Reserves
estimates underpinning the Production Target have been prepared by M Rose (Competent Person) and reported in accordance with the JORC Code. The Coal Reserves
estimates are available to view in South32’s FY22 Annual Report (http://www.south32.net) published on 9 September 2022. The stated Production Target is based on South32's
current expectations of future results or events and should not be solely relied upon by investors when making investment decisions. Further evaluation work and appropriate
studies are required to establish sufficient confidence that this target will be met.
7. Since inception, US$1.6B has been allocated to the on-market share buy-back (752M shares at an average price of A$3.00 per share) and US$525M returned in the form of
special dividends.
8. Net distributions from our material equity accounted investments (manganese and Sierra Gorda) 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.
9. The corporate tax rates of the geographies where the Group operates include: Australia 30%, South Africa 27%, Colombia 35%, Mozambique 0%, Brazil 34% and Chile 27%.
The South African corporate tax rate reduced from 28% to 27% from 1 July 2022. The Mozambique operations are subject to a royalty on revenues instead of income tax.
Sierra Gorda is subject to a royalty related tax based on the amount of copper sold and the mining operating margin, the rate is between 5% and 14% for annual sales over
50kt of refined copper. This royalty is included in tax expense.
10. Australia Manganese is subject to a royalty related tax equal to 20% of adjusted EBIT which is included in tax expense.
11. Peake Prospect Exploration Target: The information in this announcement that relates to the Exploration Target for Peake Prospect is extracted from “Hermosa Project Update”
published on 17 January 2022 and is available to view on www.south32.net. The information was prepared by D Bertuch (Competent Person) in accordance with the
requirements of the JORC Code. South32 confirms that it is not aware of any new information or data that materially affects the information included in the original market
announcement. South32 confirms that the form and context in which the Competent Person’s findings are presented have not been materially changed from the original
market announcement.
12. Flux Exploration Target: The information in this announcement that relates to the Exploration Target for Flux is extracted from “South32 Strategy and Business Update”
published on 18 May 2021 and is available to view on www.south32.net. The information was prepared by D Bertuch (Competent Person) in accordance with the requirements
of the JORC Code. South32 confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement.
South32 confirms that the form and context in which the Competent Person’s findings are presented have not been materially changed from the original market
announcement.
13. Production guidance for Hillside Aluminium and Mozal Aluminium does not assume any load-shedding impact on production.
14. Refer to market release “South32 completes acquisition of additional shareholding in Mozal Aluminium” dated 31 May 2022. Historical production and sales figures have not
been restated for our increased ownership (presented on a 47.1% basis to 31 May 2022).
15. Payable zinc equivalent production (kt) was calculated by aggregating revenues from payable silver, lead and zinc, and dividing the total Revenue by the price of zinc. FY22
realised prices for zinc (US$3,248/t), lead (US$2,046/t) and silver (US$21.0/oz) have been used for FY22, H1 FY23 and FY23e.
16. Realised prices are unaudited. Volumes and prices do not include any third party trading that may be undertaken independently of equit y production. Realised sales price is
calculated as sales Revenue divided by sales volume unless otherwise stated.
17. Realised prices for Sierra Gorda are net of treatment and refining charges.
18. Realised prices for Cannington are net of treatment and refining charges.
19. Realised nickel sales prices are inclusive of by-products.
20. Realised ore prices are calculated as external sales Revenue less freight and marketing costs, divided by external sales volume.
21. FY23 Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY23, including: an alumina
price of US$364/t; an average blended coal price of US$265/t for Illawarra Metallurgical Coal; a manganese ore price of US$6.40/dmtu for 44% manganese product; a nickel
price of US$9.94/lb; a silver price of US$22.11/troy oz; a lead price of US$2,059/t (gross of treatment and refining charges); a zinc price of US$3,480/t (gross of treatment and
refining charges); a copper price of US$4.07/lb (gross of treatment and refining charges); a molybdenum price of US$16.95/lb (gross of treatment and refining charges); a gold
price of US$1,860/troy oz; an AUD:USD exchange rate of 0.69; a USD:ZAR exchange rate of 16.62; a USD:COP exchange rate of 3,851; USD:CLP exchange rate of 814; and a
reference price for caustic soda; which reflect forward markets as at June 2022 or our internal expectations.
22. Cerro Matoso is subject to a royalty related tax equal to 13.5% of mine gate value which is included in operating cost.
23. Illawarra Metallurgical Coal sales are adjusted for moisture and will not reconcile directly to Illawarra Metallurgical Coal production.
The following abbreviations have been used throughout this report: US$ million (US$M); US$ billion (US$B); € (Euro); 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); dry metric tonne unit (dmtu); thousand dry metric tonnes (kdmt).
Figures in Italics indicate that an adjustment has been made since the figures were previously reported. The denotation (e) refers to an estimate or forecast year.
South32 Quarterly Report December 2022 Page 12 of 15
OPERATING PERFORMANCE
South32 share 1H22 1H23 2Q22 3Q22 4Q22 1Q23 2Q23
Worsley Alumina (86% share)
Alumina hydrate production (kt) 1,994 1,955 997 972 1,014 957 998
Alumina production (kt) 1,979 1,922 973 982 1,030 920 1,002
Alumina sales (kt) 1,946 1,861 1,022 910 1,118 885 976
Brazil Alumina (36% share)
Alumina production (kt) 631 691 359 335 331 337 354
Alumina sales (kt) 626 678 379 306 367 313 365
Brazil Aluminium (40% share)
Aluminium production (kt) - 23.7 - - 0.3 8.3 15.4
Aluminium sales (kt) - 19.4 - - - 3.3 16.1
Hillside Aluminium (100% share)
Aluminium production (kt) 358 362 178 177 179 179 183
Aluminium sales (kt) 336 337 176 179 198 162 175
Mozal Aluminium (63.7%14 share)
Aluminium production (kt) 136 182 68 66 76 92 90
Aluminium sales (kt) 122 177 67 66 88 87 90
Sierra Gorda (45% share)
Ore mined (Mt) – 15.4 – 4.7 9.0 8.8 6.6
Ore processed (Mt) – 10.7 – 2.3 5.2 5.4 5.3
Copper ore grade processed (%, Cu) – 0.45 – 0.45 0.40 0.45 0.44
Payable copper equivalent production3 (kt) – 44.9 – 10.3 20.3 22.6 22.3
Payable copper production (kt) – 37.9 – 8.4 16.9 19.0 18.9
Payable copper sales (kt) – 38.4 – 11.1 16.6 19.2 19.2
Payable molybdenum production (kt) – 0.4 – 0.2 0.2 0.2 0.2
Payable molybdenum sales (kt) – 0.8 – 0.1 0.5 0.3 0.5
Payable gold production (koz) – 15.3 – 2.3 7.3 7.8 7.5
Payable gold sales (koz) – 15.4 – 3.0 6.9 7.7 7.7
Payable silver production (koz) – 338 – 85 168 180 158
Payable silver sales (koz) – 345 – 111 171 179 166
South32 Quarterly Report December 2022 Page 13 of 15
South32 share 1H22 1H23 2Q22 3Q22 4Q22 1Q23 2Q23
Cannington (100%)
Ore mined (kwmt) 1,475 1,123 725 637 641 639 484
Ore processed (kdmt) 1,385 1,142 698 681 552 518 624
Silver ore grade processed (g/t, Ag) 177 175 169 188 177 179 171
Lead ore grade processed (%, Pb) 5.2 5.5 4.9 5.9 5.5 5.6 5.4
Zinc ore grade processed (%, Zn) 3.4 3.6 3.6 3.4 3.8 3.7 3.6
Payable zin ...
