Market Outlook and Operational Insights
FOOTNOTES
1.
Refer to market release "Hermosa Project Non-Cash Impairment" dated 24 July 2023.
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III
SOUTH32
Refer to market release "South32 unlocks up to US$200M in value from non-core royalty sale" dated 12 July 2022. The sales price included US$103M in cash payments, US$82M of Ecora Resources PLC (formerly known as Anglo Pacific Group
PLC) shares issued on completion and contingent payments of up to US$15M. The cash payment comprises US$48M paid on completion, and US$55M payable in six equal quarterly instalments over the 18 months from completion (US$28M will
be received across FY24). The contingent payment is triggered if the West Musgrave project achieves commercial production, and throughput and commodity price-related conditions are met prior to an agreed expiry date.
In August 2023, the Chilean Mining Tax reforms became fully enacted and are effective from 1 January 2024. As part of the Group's acquisition of Sierra Gorda during FY22, the Group has the right to claim an indemnity from the vendors for any
mining tax changes enacted prior to December 2025. As the Mining Tax reforms have become law, the Group has recognised other income of US$48 million and a corresponding receivable of US$48 million from the vendors in relation to the
indemnity.
Refer to market release "Dendrobium Next Domain Update" dated 23 August 2022.
Metrics describing health, safety, environment, people and community related performance in this presentation apply to 'operated operations' which include our controlled entities and South32-operated joint arrangements.
Incidents are included where South32 controls the work location or controls the work activity. Since FY20 we have disclosed fatalities that occur as part of activities associated with our operations, where we seek to influence safety performance,
but which occur in locations where we do not have operational control. In FY21, an employee from a company contracted by Cerro Matoso lost their life while carrying out road paving activities on the public road between the municipality of
Planeta Rica and our Q&P Project. In FY23, an employee from a company contracted by our South Africa Manganese operation lost their life in an offsite road trucking accident.
Total Recordable Injury Frequency (TRIF): (Sum of recordable injuries x 1,000,000) + exposure hours. Lost Time Injury Frequency (LTIF): (Sum of lost time injuries x 1,000,000) + exposure hours. Total recordable illness frequency (TRILF): (Sum of
recordable illnesses x1,000,000) + exposure hours. TRIF, LTIF and TRILF are stated in units of per million hours worked for employees and contractors. We adopt the United States Government Occupational Safety and Health Administration and
the International Council on Mining and Metals guidelines for the recording and reporting of occupational injuries.
In FY22 an additional two illnesses have been recorded and restated, and one additional illness was reported and restated in FY21. The nature of illnesses can result in prolonged diagnosis.
Total significant hazards frequency (per 1,000,000 hours worked). A hazard is something that has the potential to cause harm, ill health or injury, or damage to property, plant, or the environment.
10. FY23 growth in copper equivalent production at our aluminium (Brazil Aluminium, Hillside Aluminium and Mozal Aluminium) and base metals (Sierra Gorda, Cannington and Cerro Matoso) operations, compared to FY22. Copper equivalent
production was calculated using FY22 realised prices for all operations (except for Brazil Aluminium which is based on FY22 average index prices for aluminium).
Refers to aluminium produced using renewable power.
11.
12. Operating margin comprises Underlying EBITDA excluding third party product EBITDA, divided by Underlying revenue excluding third party product revenue.
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14.
Free cash flow represents cash generated from operations, including net distributions from EAIS, and after capital expenditure, net interest and income taxes paid.
South32 demerged in FY15. Normalised revenue based on FY23 average realised prices at all our operations except for South Africa Energy Coal (SAEC), Tasmanian Electro Metallurgical Company (TEMCO) and Metalloys. For these exceptions,
the normalised revenue is based on the average index prices for FY23 except for SAEC's domestic energy coal, which is calculated based on R550/t using a USD:ZAR exchange rate of 17.66. South Africa Manganese ore has been restated to
54.6%.
15. Group FY22, FY23, and FY24e copper equivalent production was calculated using FY23 realised prices for all operations.
16. Community investment consists of direct investment, in-kind support and administrative costs. In FY23, our total community investment comprises of US$0.6M in-kind support, US$2.5M administrative costs, and US$24.6M in direct investments
(including enterprise development).
17. Local procurement is the direct purchase of goods and services within the local communities in which South32 operates. Suppliers are deemed as local based on their proximity to our local communities, including boundaries defined by local
government areas, provinces and states.
18.
Goal is defined as an aspiration to deliver an outcome for which we have not identified a pathway for delivery, but for which efforts will be pursued towards achieving that outcome, subject to certain assumptions or conditions.
19. "Women" are defined as employee headcount with a sex of "Female".
20. Operations Leadership Team is defined as all members of an Operations Lead Team. Functional membership is limited to one per function and must be site based.
21. Generic term meaning Africans, Coloureds and Indians who are citizens of the Republic of South Africa by birth or descent; or who became citizens of the Republic of South Africa by naturalisation before 27 April 1994 or on or after 27 April 1994
and who would have been entitled to acquire citizenship by naturalisation prior to that date, as defined in the Broad-Based Black Economic Empowerment Amendment Act 2013 (South Africa).
22. Management roles are leaders with an identified job grading, based on the requirements of their role and salary, including executives and senior management.
23. 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.
24. South Africa Manganese ore has been reported as a 54.6% interest (previously 60%) reflecting our Metalloys manganese alloy smelter (60% interest) having been placed on care and maintenance, and aligning with our interest in Hotazel
Manganese Mines (HMM). South32 has a 44.4% ownership interest in HMM. 26% of HMM is owned by a B-BBEE consortium comprising Ntsimbintle Mining (9%), NCAB Resources (7%), Iziko Mining (5%) and HMM Education Trust (5%). The interests
owned by NCAB Resources, Iziko Mining and HMM Education Trust were acquired using vendor finance with the loans repayable via distributions attributable to these parties, pro rata to their share in HMM. Until these loans are repaid, South32's
interest in HMM is accounted at 54.6%.
25. Other includes cost savings associated with the Metalloys manganese alloy smelter having been placed on care and maintenance, partially offset by lower profitability from our additional interest in Mozal Aluminium and costs related to the
closed Bayside Aluminium smelter.
26. Other primarily relates to Underlying depreciation and amortisation, Underlying other income, Underlying third party products and services, and Underlying share of profit/(loss) of non-material EAI.
27. Underlying net finance costs and Underlying income tax expense are actual FY23 results, not year-on-year variances.
28. Other includes cost savings associated with the Metalloys manganese alloy smelter having been placed on care and maintenance, partially offset by costs related to the closed Bayside Aluminium smelter.
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