S32 South32 Limited

FINANCIAL RESULTS AND OUTLOOK HALF YEAR ENDED 31 DECEMBER 2023

 

 

 

ASX / LSE / JSE Share Code: S32; ADR: SOUHY

15 February 2024

South32 announces investment in Hermosa and is well positioned for second half

"We delivered Underlying EBITDA of US$708M, as record Group aluminium production was offset by commodity price headwinds, and lower metallurgical coal volumes as we completed planned longwall moves at Illawarra Metallurgical Coal.

"We continued our rigorous focus on costs identifying further opportunities to drive efficiencies. This supported FY24 Operating unit cost guidance being lowered or held unchanged across the majority of our operations, along with lower FY24 capital expenditure guidance at our operations through capital efficiencies and the deferral of certain non-critical projects.

"Today we have taken the next step in our portfolio transformation by announcing a US$2.16 billion investment in the Taylor zinc-lead-silver deposit at our Hermosa project in Arizona, with first production expected in H2 FY27.

"This investment is a major milestone for our business, that further reshapes our portfolio towards commodities critical to a low-carbon future. Taylor is expected to deliver value for shareholders for decades to come and underpin further growth phases at our regional scale Hermosa project, establishing it as a globally significant producer of commodities critical for a low-carbon future.

"In addition, we continue to invest to unlock value across our business. We remain on track for a final investment decision for the fourth grinding line expansion at Sierra Gorda during the fourth quarter of FY24 and continue to progress more than 25 greenfield exploration options in base metals.

"Looking forward, we remain focused on driving operating performance and cost efficiencies across our business. This focus, combined with our expected 7 per cent production uplift in the second half, places us in a strong position to capture higher margins as market conditions improve."

Graham Kerr, South32 CEO

Financial Highlights
US$M	H1 FY24	H1 FY23	% Change
Revenue	3,133	3,696	(15%)
Profit before tax and net finance income/(costs)	75	871	(91%)
Profit after tax	53	685	(92%)
Basic earnings per share (US cents)(2)	1.2	14.9	(92%)
Ordinary dividends per share (US cents)(3)	0.4	4.9	(92%)
Other financial measures
Underlying revenue(4)	3,881	4,524	(14%)
Underlying EBITDA(5)	708	1,364	(48%)
Underlying EBITDA margin(6)	19.0   %	31.5   %	(12.5%)
Underlying EBIT(5)	236	922	(74%)
Underlying EBIT margin(7)	6.1         %	21.3   %	(15.2%)
Underlying earnings(5)	40	560	(93%)
Basic Underlying earnings per share (US cents)(2)	0.9	12.2	(93%)
ROIC(8)	1.3         %	12.0   %	(10.7%)
Ordinary shares on issue (million)	4,529	4,572	(1%)

 

 

SAFETY

Nothing is more important than the health, safety and well-being of our people. We continue to implement our Safety Improvement Program, a multi-year global program of work launched in FY22, designed to enhance our safety culture and achieve a step change in our safety performance. Our Safety Improvement Program includes a significant investment in safety leadership through our 'Lead Safely Every Day' program, which supports our leaders to engage their teams on our 'safety guarantee', creating a sense of chronic unease aiding a risk reduction mindset to be applied to daily activities. Our Lead Safely Every Day program continued to be deployed across our leadership teams during H1 FY24, and will be extended to our frontline workforce from H2 FY24.

We use a range of leading and lagging indicators to assess our safety performance. Our leading indicator, significant hazard frequency⁽⁹⁾, increased to 118.0 for H1 FY24 (FY23: 91.6), indicating improved hazard awareness and a positive reporting culture. We expect the lagging indicators of total recordable injury frequency (TRIF)^(10)(11) and lost time injury frequency (LTIF)^(10)(12) to follow this positive trend over time. TRIF for H1 FY24 reduced to 5.2 (FY23: 5.9), while LTIF increased to 2.0 in H1 FY24 (FY23: 1.4).

 

PERFORMANCE SUMMARY

The Group's statutory profit after tax decreased by US$632M to US$53M in H1 FY24, as record Group aluminium production and lower raw material input prices, were more than offset by lower commodity prices and metallurgical coal volumes as we completed two planned longwall moves at Illawarra Metallurgical Coal. Underlying earnings decreased by US$520M to US$40M in H1 FY24. A reconciliation of statutory profit to Underlying earnings is set out on page 6.

Underlying EBITDA decreased by US$656M to US$708M, for a Group operating margin⁽⁶⁾ of 19.0%, due to the aforementioned commodity price and volume impacts. We maintained our focus on cost management, holding increases in controllable costs to approximately 4% of the Group's cost base⁽¹³⁾, despite broad inflationary pressures. We also realised the benefit of our portfolio improvements in copper and low-carbon aluminium⁽¹⁴⁾, with Sierra Gorda contributing Underlying EBITDA of US$117M at an operating margin of 36%, and production from Brazil Aluminium more than doubled. 

In H1 FY24, we completed a Group-wide review of expenditure that identified further efficiencies and options to defer non-critical projects. This has supported FY24 Operating unit cost guidance being lowered or maintained across the majority of our operations, and a 6% reduction in FY24 Group safe and reliable and improvement capital expenditure.

Looking forward, our expected production uplift of 7%⁽¹⁵⁾ in H2 FY24 and continued focus on driving cost efficiencies, places us in a strong position to capture higher margins as market conditions improve. 

Free cash flow from operations, including distributions from our manganese and Sierra Gorda equity accounted investments (EAIs), decreased by US$544M to an outflow of US$417M. This reflected our continued investment in productivity, improvement and growth projects, and a temporary build in our high value aluminium inventory as third-party port congestion impacted the timing of shipments. Looking forward, we expect to reduce our aluminium inventory position in H2 FY24, adding to the Group's cash generation.  

We returned US$180M to shareholders during H1 FY24, paying a US$145M fully-franked ordinary dividend in respect of H2 FY23 and returning US$35M via our on-market share buy-back. We have today announced a fully-franked ordinary dividend of US$18M (US 0.4 cents per share) in respect of H1 FY24, consistent with our policy to distribute a minimum 40% of Underlying earnings as ordinary dividends in each six month period.    

We continue to prioritise a strong balance sheet and investment grade credit rating through all cycles, finishing the period with net debt of US$1.1B. Our current investment grade credit ratings were re-affirmed in H1 FY24 and we retain access to significant liquidity, having successfully extended our undrawn sustainability-linked revolving credit facility.

To manage our financial position and ensure we retain the right balance of flexibility, efficiency and prudence, we have taken the decision to cancel our on-market share buy-back, which was due to expire on 1 March 2024⁽¹⁶⁾. Consistent with our unchanged capital management framework and in the context of our financial position, we will continue to assess opportunities to return excess cash to shareholders in the most efficient and value accretive manner.

We have today announced⁽¹⁷⁾ the next step in our portfolio transformation, approving a final investment decision to develop the Taylor zinc-lead-silver deposit at our Hermosa project in Arizona, USA. With first production expected in H2 FY27, Taylor has the potential to be one of the world's largest, lowest cost zinc producers and deliver value for our shareholders for decades to come.  

 

Specific highlights for H1 FY24 included:

•	Delivered record half-year Group aluminium production, and increased zinc and nickel production by 20% in Q2 FY24;
•	Finalised new industrial agreements at Illawarra Metallurgical Coal and Cannington;
•	Completed a Group-wide review of costs to deliver further efficiencies and reduce expenditure;
•	FY24 production guidance is unchanged and we expect to deliver a 7%(15) increase in production volumes in H2 FY24;
•	FY24 Operating unit cost guidance has been lowered or maintained across the majority of our operations;
•	Invested US$188M at Hermosa as we installed critical path infrastructure and progressed study work and federal permitting for our Taylor and Clark deposits;
•	Progressed the feasibility study for the fourth grinding line expansion at Sierra Gorda, ahead of a planned final investment decision in Q4 FY24;
•	Continued our investment in greenfield exploration to discover our next generation of base metal mines, spending US$19M in targeted prospective regions; and
•	Progressed decarbonisation programs to support our target(18) to reduce operational greenhouse gas (GHG) emissions by 50% by 2035, completing the conversion of Worsley Alumina's first coal-fired boiler to natural gas.

Subsequent to the end of the period:

•

Announced final investment approval for the Taylor deposit at our Hermosa project, a major milestone aligned with our strategy to reshape our portfolio toward commodities that are critical for a low-carbon future; and

•

Entered into a binding agreement to divest our 50% interest in the Eagle Downs metallurgical coal project to a subsidiary of Stanmore Resources Limited, for upfront consideration of US$15 million, a contingent payment of US$20 million, subject to the Eagle Downs project reaching metallurgical coal production of 100,000 tonnes, and a price-linked royalty of up to US$100 million. The transaction is expected to be completed in the 2024 calendar year subject to the satisfaction of conditions precedent including approval from Australia's Foreign Investment Review Board and certain joint venture consents.

 

EARNINGS RECONCILIATION

The Group's statutory profit after tax decreased by US$632M to US$53M in H1 FY24, while Underlying earnings decreased by US$520M to US$40M.

Consistent with our accounting policies, various items are excluded from the Group's statutory profit/(loss) to derive Underlying earnings. Total adjustments to derive Underlying EBIT (US$161M), shown in the table below, include:

•	Sierra Gorda (+US$47M) and manganese (+US$71M) joint venture adjustments: adjustments to reconcile the statutory equity accounting position to a proportional consolidation basis; and
•	Net impairment loss of financial assets (+US$48M): periodic revaluation of the shareholder loan receivable from Sierra Gorda reflecting copper prices and other macroeconomic assumptions. An offsetting amount is recorded in the Sierra Gorda joint venture adjustments noted above.

Further information on these earnings adjustments is included on page 42.

Group Underlying revenue declined by 14% (or US$643M) as lower realised prices (-US$396M), together with lower sales volumes at Illawarra Metallurgical Coal (-US$267M) due to planned longwall moves, more than offset higher volumes from Brazil Aluminium, Cannington, Australia Manganese and Worsley Alumina (+US$148M). Group Underlying EBITDA decreased by US$656M (or 48%) to US$708M for an operating margin⁽⁶⁾ of 19%. The Group's costs remained well controlled, with controllable cost increases held to approximately 4% of the Group's cost base⁽¹³⁾ (-US$131M) despite broad inflationary pressures, and we benefited from a reduction in raw material input prices and other price-linked costs (+US$231M).

The Group's Underlying EBIT decreased by US$686M (or 74%) to US$236M, as Underlying depreciation and amortisation increased by US$30M (or 7%) to US$472M, reflecting our continued investment in projects to improve productivity and grow future volumes.

Profit to Underlying EBITDA reconciliation
US$M	H1 FY24	H1 FY23
Profit before tax and net finance income/(costs)	75	871
Adjustments to derive Underlying EBIT:
Significant items	-	(138)
Sierra Gorda joint venture adjustments	47	(57)
Manganese joint venture adjustments	71	101
Exchange rate (gains)/losses on the restatement of monetary items	13	(48)
Net impairment loss/(reversal) of financial assets	48	214
Net impairment loss/(reversal) of non-financial assets	-	(4)
Gains on non-trading derivative instruments, contingent consideration and other investments measured at fair value through profit and loss	(18)	(17)
Total adjustments to derive Underlying EBIT	161	51
Underlying EBIT	236	922
Underlying depreciation and amortisation	472	442
Underlying EBITDA	708	1,364

 

Profit/(loss) to Underlying earnings reconciliation
US$M	H1 FY24	H1 FY23
Profit after tax	53	685
Total adjustments to derive Underlying EBIT	161	51
Total adjustments to derive Underlying net finance costs	(109)	(102)
Total adjustments to derive Underlying income and royalty related tax expense	(65)	(74)
Underlying earnings	40	560

 

 

EARNINGS ANALYSIS

The following key factors influenced Underlying EBIT in H1 FY24, relative to H1 FY23.

Reconciliation of movements in Underlying EBIT (US$M)(5)(19)(20)(21)

 

Earnings Analysis	US$M	Commentary
H1 FY23 Underlying EBIT	922
Change in sales price	(396)	Lower average realised prices for our commodities, including: Aluminium (-US$136M) and alumina (-US$33M) Nickel (-US$121M) Manganese (-US$102M) Energy coal (-US$22M) Partially offset by higher average realised prices for silver (+US$15M) and copper (+US$8M)
Net impact of price-linked costs	231	Lower caustic soda prices at Worsley Alumina (+US$54M) and Brazil Alumina (+US$11M) Lower aluminium smelter raw material input prices (+US$60M), including pitch and coke Lower price-linked royalties (+US$30M) Lower coal, fuel oil and diesel prices (+US$28M) Lower freight and distribution costs (+US$25M) Lower electricity prices at Illawarra Metallurgical and Brazil Aluminium, partially offset by higher gas prices at Cannington (+US$13M)
Change in exchange rates	33	Weaker South African rand (+US$42M) and Australian dollar (+US$28M) Partially offset by a stronger Colombian peso (-US$16M), Brazilian real (-US$12M) and Chilean peso (-US$9M)
Change in inflation	(116)	Inflation-linked indexation of our Southern African aluminium smelter electricity prices (-US$27M) General inflation across Australia (-US$43M), South America (-US$29M) and Southern Africa (-US$17M)
Change in sales volume	(260)	Lower volumes, mostly at Illawarra Metallurgical Coal (-US$267M) as well as Sierra Gorda (-US$44M), Cerro Matoso (-US$36M) and Mozal Aluminium (-US$32M) Partially offset by higher volumes at Brazil Aluminium (+US$50M), Cannington (+US$44M), Australia Manganese (+US$34M) and Worsley Alumina (+US$20M)
Controllable costs	(131)	Inventory and volume related movements (-US$102M) including a planned drawdown of finished goods at Australia Manganese to support higher sales volumes Higher contractor and maintenance costs (-US$39M) including at Illawarra Metallurgical Coal to support the two completed longwall moves and at Australia Manganese to deliver planned mining activity A planned workforce payment at Sierra Gorda (-US$20M), following the finalisation of a new, three-year industrial agreement   Partially offset by lower energy costs at Sierra Gorda (+US$20M), following the transition to cost efficient, 100% renewable energy supply
Other	(47)	Higher Group depreciation and amortisation, and our share of the loss from Mineração Rio do Norte (MRN) due to lower bauxite prices
H1 FY24 Underlying EBIT	236

 

 

Net finance income/(costs)

The Group's H1 FY24 Underlying net finance costs of US$118M primarily comprise the unwinding of the discount applied to our closure and rehabilitation provisions (US$76M), interest on lease liabilities (US$28M) largely for our multi-fuel co-generation facility at Worsley Alumina, and interest on our US$700M of senior unsecured notes (US$16M) issued in H2 FY22 to partly fund the Sierra Gorda acquisition. 

Underlying net finance costs reconciliation
US$M	H1 FY24	H1 FY23
Unwind of discount applied to closure and rehabilitation provisions	(76)	(51)
Interest on lease liabilities	(28)	(28)
Interest on senior unsecured notes	(16)	(15)
Other	2	6
Underlying net finance costs	(118)	(88)
Add back earnings adjustment for exchange rate variations on net debt	(1)	4
Sierra Gorda joint venture adjustments(22)	91	85
Manganese joint venture adjustments(22)	19	13
Total adjustments to derive Underlying net finance costs	109	102
Net finance income/(costs)	(9)	14

Tax expense

The Group's Underlying income tax expense, which includes our material EAIs, decreased by US$196M to US$78M in H1 FY24, for an Underlying effective tax rate (ETR)⁽²³⁾ of 60.5% (FY23: 36.1%). While this largely reflected the corporate taxes of the jurisdictions in which we operate⁽²⁴⁾ and our geographical earnings mix, the Underlying ETR was elevated as permanent differences, together with losses incurred at Mozal Aluminium⁽²⁵⁾, had a disproportionate effect when combined with compressed profit margins.

The Underlying ETR for our manganese business was 81.3% in H1 FY24, reflecting royalty related tax at Australia Manganese⁽²⁶⁾ and the derecognition of certain deferred tax assets. The Underlying ETR for our Sierra Gorda EAI was 33.0% in H1 FY24, including royalty related tax⁽²⁷⁾_, and a one-off benefit due to the recognition of deferred tax assets.

During the period, the Colombian Constitutional Court annulled a recent tax law amendment that made royalty payments non-deductible for tax purposes from 1 January 2023. As a result of the Court's ruling, we have recognised a receivable of US$39M in relation to the expected refund of prior tax paid, also reducing our H1 FY24 income tax expense.

The Group's cash tax paid in H1 FY24, excluding EAIs, decreased by US$251M to US$96M as cash tax normalised following one-off portfolio related payments in the prior period.

Underlying income tax expense reconciliation and Underlying ETR
US$M	H1 FY24	H1 FY23
Underlying EBIT	236	922
Include: Underlying net finance costs	(118)	(88)
Remove: Share of (profit)/loss of EAIs	11	(7)
Underlying profit before tax	129	827
Income tax expense	13	200
Tax effect of earnings adjustments to Underlying EBIT	4	1
Tax effect of earnings adjustments to Underlying net finance costs	1	(1)
Exchange rate variations on tax balances	20	(5)
Significant items	-	(23)
Sierra Gorda joint venture adjustment relating to income tax(22)	(6)	6
Sierra Gorda joint venture adjustment relating to royalty related tax(22)	1	4
Manganese joint venture adjustment relating to income tax(22)	24	56
Manganese joint venture adjustment relating to royalty related tax(22)	21	36
Total adjustments to derive Underlying income tax expense	65	74
Underlying income tax expense	78	274
Underlying effective tax rate	60.5   %	33.1   %

 

 

CASH FLOW

Group free cash flow from operations declined by US$544M to an outflow of US$477M, due to lower profitability, an increase in capital expenditure for productivity, improvement and growth projects (-US$168M), and a build in working capital in the period (-US$276M).

Separately, we received net distributions⁽²⁸⁾ of US$42M from our manganese EAI in H1 FY24 (H1 FY23: US$60M), following the payment of income tax (US$34M, 100% basis), and royalties at Australia Manganese (US$45M, 100% basis). We also received US$18M from our Sierra Gorda EAI (H1 FY23: nil), as the operation invested in the plant de-bottlenecking project and the feasibility study for the fourth grinding line expansion project, designed to unlock future copper volumes.

The increase in working capital in the period reflected an increase in receivables due to the timing of sales, and a further increase in our high value aluminium inventory position as Brazil Aluminium continued to ramp up and three aluminium shipments slipped to January 2024 due to port congestion at Richards Bay. We expect to drawdown our aluminium inventory during H2 FY24 as port congestion eases.

Free cash flow from operations excluding EAIs
US$M	H1 FY24	H1 FY23
Profit from operations	75	871
Non-cash or non-operating items	421	377
Share of (profit)/loss from EAIs	9	(241)
Change in working capital	(276)	(152)
Cash generated from operations	229	855
Total capital expenditure, excluding EAIs, including intangibles and capitalised exploration	(584)	(416)
Operating cash flows generated from operations after capital expenditure	(355)	439
Net interest paid(29)	(26)	(25)
Income tax paid	(96)	(347)
Free cash flow from operations	(477)	67

 

Working capital movement
US$M	H1 FY24	Commentary
Trade and other receivables	(88)	Timing of shipments weighted toward the end of the period
Inventories	(84)	Continued ramp up of Brazil Aluminium, and temporary shipping delays at Hillside Aluminium due to port congestion at Richards Bay
Trade and other payables	(84)	Timing of raw material purchases
Provisions and other liabilities	(20)
Total working capital movement	(276)

 

Capital expenditure

The Group's capital expenditure⁽³⁰⁾, excluding EAIs, increased by US$168M to US$584M in H1 FY24 as we continued our investment in productivity, improvement and growth projects:

•	Safe and reliable capital expenditure increased by US$103M to US$335M, reflecting elevated capital expenditure at Illawarra Metallurgical Coal as we transition Appin to a more efficient single longwall configuration from FY25(31), and install additional ventilation capacity to enable mining in Appin's Area 7 until at least 2039(31);
•	Improvement and life extension capital expenditure increased by US$16M to US$40M as we advanced decarbonisation projects at Worsley Alumina and the De-bottlenecking Phase Two project at Brazil Alumina;
•	Growth capital expenditure increased by US$92M to US$188M at Hermosa, as we constructed critical path infrastructure and advanced studies for the Taylor zinc-lead-silver and Clark battery-grade manganese deposits; and
•	Intangibles and capitalised exploration expenditure was US$21M, as we completed multiple exploration programs across our portfolio focused on base metals.

Our share of capital expenditure for our material EAIs increased by US$39M to US$170M in H1 FY24:

•	Capital expenditure for our manganese EAIs increased by US$22M to US$66M, as Australia Manganese progressed construction of the Eastern Lease South life extension project, and South Africa Manganese continued work to access new mining areas and improve rail efficiencies; and
•	Capital expenditure for our Sierra Gorda EAI increased by US$17M to US$104M, as the operation continued its investment in deferred stripping, additional tailings storage infrastructure and the plant de-bottlenecking project, together with the feasibility study for the fourth grinding line expansion project.
Capital expenditure (South32 share)(21)(30)
US$M		H1 FY24	H1 FY23
Safe and reliable capital expenditure		(335)	(232)
Improvement and life extension capital expenditure		(40)	(24)
Growth capital expenditure		(188)	(96)
Intangibles and the capitalisation of exploration expenditure		(21)	(64)(a)
Total capital expenditure (excluding EAIs)		(584)	(416)
EAIs capital expenditure		(170)	(131)
Total capital expenditure (including EAIs)		(754)	(547)

(a)       Included a US$43M payment to the National Mining Agency of Colombia as part of the 15-year extension of Cerro Matoso's mining contract to 2044.

BALANCE SHEET, DIVIDENDS AND CAPITAL MANAGEMENT

The Group finished the period with net debt of US$1,091M, due to lower profitability, higher investment in our business to improve productivity and grow future volumes, and a temporary build in working capital. We also returned US$180M to shareholders during H1 FY24, paying a US$145M fully-franked ordinary dividend in respect of H2 FY23, and a further US$35M via our on-market share buy-back.

We continue to prioritise a strong balance sheet and investment grade credit rating through all cycles. Our current BBB+/Baa1 credit ratings were re-affirmed by S&P Global Ratings and Moody's, respectively, during H1 FY24. We also retain access to significant liquidity, having successfully extended our undrawn sustainability-linked revolving credit facility of US$1.4B to December 2027 and US$1.3B to December 2028.    

To manage our financial position and ensure we retain the right balance of flexibility, efficiency and prudence, we have taken the decision to cancel our on-market share buy-back, which was due to expire on 1 March 2024⁽¹⁶⁾. Consistent with our unchanged capital management framework and in the context of our financial position, we will continue to assess opportunities to return excess cash to shareholders in the most efficient and value accretive manner.

Net debt
US$M	H1 FY24	FY23
Cash and cash equivalents	702	1,258
Lease liabilities	(682)	(674)
Other interest bearing liabilities	(1,111)	(1,067)
Net debt	(1,091)	(483)

Our unchanged capital management framework supports investment in our business and is designed to reward shareholders as our financial performance improves. Consistent with our policy to distribute a minimum 40% of Underlying earnings as ordinary dividends, the Board has resolved to pay a fully-franked interim ordinary dividend of US 0.4 cents per share (US$18M) in respect of H1 FY24, representing 45% of Underlying earnings.

Dividends announced
Period	Dividend per share (US cents)	US$M	Franking	Pay-out ratio
H1 FY22	8.7	405	100%	40%
H2 FY22	14.0	648	100%	41%
August 2022 special dividend	3.0	139	100%	N/A
H1 FY23	4.9	224	100%	40%
H2 FY23	3.2	145	100%	41%
H1 FY24	0.4	18	100%	45%

South32 shareholders registered on the South African branch register will not be able to dematerialise or rematerialise their shareholdings between 6 and 8 March 2024 (both dates inclusive), nor will transfers to/from the South African branch register be permitted between 29 February and 8 March 2024 (both dates inclusive).

Details of the currency exchange rates applicable for the dividend will be announced to the relevant stock exchanges. Further dividend information is available on our website (www.south32.net).

South32 American Depositary Receipts (ADRs) each represent five fully paid ordinary shares in South32 and ADR holders will receive dividends accordingly, subject to the terms of the Depositary Agreement.

Dividend timetable	Date
Announce currency conversion into rand	1 March 2024
Last day to trade cum dividend on the Johannesburg Stock Exchange (JSE)	5 March 2024
Ex-dividend date on the JSE	6 March 2024
Ex-dividend date on the ASX and London Stock Exchange (LSE)	7 March 2024
Record date (including currency election date for ASX)	8 March 2024
Payment date	4 April 2024

 

 

OUTLOOK

PRODUCTION

We expect to deliver a 7%⁽¹⁵⁾ increase in Group payable copper equivalent production in H2 FY24 following the completion of planned longwall moves at Illawarra Metallurgical Coal in H1 FY24, the continued ramp up of the Brazil Aluminium smelter, and sequentially higher base metals volumes from Sierra Gorda and Cerro Matoso.

Looking forward, we expect Group payable copper equivalent production growth of 3%⁽³²⁾ in FY25, as we continue to realise the benefit of our portfolio improvements in copper and low-carbon aluminium⁽¹⁴⁾.  

Production guidance (South32 share)(21)
	FY23	H1 FY24	FY24e(a)	FY25e(a)	Key guidance assumptions
Worsley Alumina					Guidance unchanged Planned calciner maintenance completed in Q1 FY24 and scheduled for Q3 FY24
Alumina production (kt)	3,839	1,934	4,000	4,000
Brazil Alumina (non-operated)					Guidance unchanged Additional maintenance reflected in guidance, following third-party power outages in H1 FY24
Alumina production (kt)	1,262	640	1,300	1,350
Brazil Aluminium (non-operated)					Guidance unchanged Expected to increase by 45% in FY24 and 30% in FY25, as the smelter ramps up toward nameplate capacity (179ktpa, 40% basis) in H2 FY26
Aluminium production (kt)	69	50	100	130
Hillside Aluminium(33)					Guidance unchanged (subject to load-shedding) Expected to test its maximum technical capacity
Aluminium production (kt)	719	359	720	720
Mozal Aluminium(33)					Guidance unchanged (subject to load-shedding) Expected to progressively increase the number of pots in operation across CY24
Aluminium production (kt)	345	166	320	372
Sierra Gorda (non-operated)					Guidance unchanged Expected to continue to benefit from the plant de-bottlenecking project, together with higher planned copper grades in H2 FY24 and FY25 Molybdenum plant performance and recoveries expected to improve from Q4 FY24
Ore processed (Mt)	21.2	10.9	21.8	21.8
Payable copper equivalent production (kt)(34)	86.5	38.6	78.7	91.8
Payable copper production (kt)	70.7	31.6	67.0	71.0
Payable molybdenum production (kt)	1.2	0.5	0.8	2.2
Payable gold production (koz)	28.8	13.4	22.5	25.0
Payable silver production (koz)	630	295	550	550
Cannington					Guidance unchanged Improved plant throughput and higher planned silver and lead grades expected in FY24 Further increase in plant throughput in FY25, offset by lower planned metal grades
Ore processed (kdmt)	2,156	1,139	2,300	2,400
Payable zinc equivalent production (kt)(35)	259.6	147.2	287.2	275.8
Payable silver production (koz)	11,183	6,704	12,500	12,000
Payable lead production (kt)	101.7	58.8	115.0	110.0
Payable zinc production (kt)	59.2	29.0	62.0	60.0
Cerro Matoso					Guidance unchanged Ore Sorting and Mechanical Ore Concentration (OSMOC) project expected to partially offset natural grade decline
Ore processed (kdmt)	2,807	1,317	2,700	2,750
Payable nickel production (kt)	40.8	18.3	40.5	35.0
Illawarra Metallurgical Coal					Guidance unchanged Volumes remain weighted to H2 FY24 due to the timing and duration of planned longwall moves
Total coal production (kt)	6,520	2,045	5,000	5,500
Metallurgical coal production (kt)	5,497	1,787	4,400	4,700
Energy coal production (kt)	1,023	258	600	800
Australia Manganese					Guidance unchanged (subject to wet season) Expected to continue strong primary output and return the PC02 circuit to nameplate in Q4 FY24
Manganese ore production (kwmt)	3,545	1,679	3,400	3,400
South Africa Manganese					Guidance unchanged (subject to demand) We expect to continue to use higher cost trucking to optimise sales volumes FY25 guidance is subject to market demand
Manganese ore production (kwmt)	2,108	1,111	2,000	Subject to demand

(a)       The denotation (e) refers to an estimate or forecast year.

 

 

COSTS AND CAPITAL EXPENDITURE

Operating unit costs guidance

H1 FY24 Operating unit costs were in line with or below prior guidance for the majority of our operations, as we continued our focus on delivering cost efficiencies and realised the benefit of lower raw material input prices.

In H1 FY24, we completed a Group-wide review focused on reducing our expenditure in FY24 and FY25. The review identified further cost efficiencies with respect to labour, contractors and consumables, that are expected to support a reduction in Operating unit costs and mitigate inflationary pressures.    

FY24 Operating unit cost guidance has been lowered or maintained across the majority of our operations, reflecting these cost efficiencies, and lower raw material input prices in our aluminium value chain.

While Operating unit cost guidance is not provided for our aluminium smelters, their cost profile will continue to be influenced by producer currencies, and the price of raw material inputs and energy.

Operating unit cost(36)
	H1 FY23	H1 FY24	FY24 prior guidance(a)	FY24 new guidance(b)	H1 FY24 to H1 FY23 commentary FY24e(c) new guidance to FY24 prior guidance commentary
Worsley Alumina
(US$/t)	288	258	290	270	H1 FY24: decreased by 10%, with lower caustic soda prices   FY24e guidance lowered by 7%, with lower caustic prices
Brazil Alumina (non-operated)
(US$/t)	364	325	Not provided	Not provided	H1 FY24: decreased by 11%, with lower caustic soda, energy and bauxite prices   H2 FY24e: Expected to benefit from a further reduction in raw material input prices
Brazil Aluminium (non-operated)
(US$/t)	5,876	4,025	Not provided	Not provided	H1 FY24: decreased by 32%, with higher volumes, and lower raw material input and energy prices   H2 FY24e: Expected to benefit from higher volumes in H2 FY24 as the smelter continues to ramp up
Hillside Aluminium
(US$/t)	2,276	2,135	Not provided	Not provided	H1 FY24: decreased by 6%, with lower raw material input prices and a weaker South African rand, partially offset by higher energy prices   H2 FY24e: Will continue to be influenced by the price of raw material inputs, the South African rand and inflation-linked energy costs
Mozal Aluminium
(US$/t)	2,237	2,461	Not provided	Not provided	H1 FY24: increased by 10%, due to lower volumes and higher maintenance costs   H2 FY24e: Expected to remain elevated, with the number of pots in operation to progressively increase across CY24
Sierra Gorda (non-operated)
(US$/t)(d)	16.6	18.8	16.0	17.0	H1 FY24: increased by 13%, with the benefit of cost efficient, 100% renewable electricity, more than offset by a planned workforce payment following a new three-year industrial agreement   FY24e guidance increased by 6%, with sequentially lower costs in H2 FY24
Cannington
(US$/t)(d)	136	150	155	155	H1 FY24: increased by 10%, with higher planned contractor and energy costs   FY24e guidance is unchanged
Cerro Matoso
(US$/lb)	4.93	5.57	5.30	5.20	H1 FY24: increased by 13%, with a stronger Colombian peso and lower H1 FY24 volumes   FY24e guidance lowered by 2%, with further cost efficiencies and higher volumes expected in H2 FY24
Illawarra Metallurgical Coal
(US$/t)	124	167	140	150	H1 FY24: increased by 35%, due to the volume impact of the two planned longwall moves   FY24e guidance increased by 7%, due to higher price-linked royalties
Australia Manganese
(US$/dmtu, FOB)	1.76	2.15	2.15	2.15	H1 FY24: increased by 22%, due to increased mining activity and contractor costs to deliver planned volumes   FY24e guidance is unchanged
South Africa Manganese
(US$/dmtu, FOB)	2.67	2.59	2.60	2.60	H1 FY24: decreased by 3%, with higher volumes, a weaker South African rand and lower price-linked royalties   FY24e guidance is unchanged

(a)       FY24 prior guidance Operating unit cost guidance includes royalties (where appropriate) and commodity price and foreign exchange rate forward curves or our internal expectations (refer to page 30 footnote 37).

(b)      FY24 new guidance Operating unit cost guidance includes royalties (where appropriate) and commodity price and foreign exchange rate forward curves or our internal expectations (refer to page 30 footnote 38.

(c)       The denotation (e) refers to an estimate or forecast year.

(d)      US dollar per tonne of ore processed. Periodic movements in finished product inventory may impact Operating unit costs.

Capital expenditure guidance (excluding exploration and intangibles)                      

FY24 Group safe and reliable and improvement and life extension capital expenditure guidance (including EAIs) has been revised down by US$60M (or 6%) to US$970M, following the Group-wide review, which identified further capital efficiencies and resulted in the deferral of certain non-critical projects.

FY24 guidance for growth capital expenditure at our Hermosa project has been set at US$390M, following final investment approval to develop the Taylor zinc-lead-silver deposit. We expect to invest ~US$200M in H2 FY24 as we construct critical path infrastructure for Taylor, advance the Clark battery-grade manganese deposit, and continue work across the broader project. Capitalised exploration at Hermosa is expected to be ~US$25M in FY24, as we continue exploration programs at our Peake copper-lead-zinc-silver prospect and our Flux zinc-lead-silver prospect⁽³⁹⁾.

Capital expenditure excluding exploration and intangibles (South32 share)(21)
US$M	H1 FY24	FY24e(a)
Worsley Alumina	34	70
Brazil Alumina	38	60
Brazil Aluminium	4	10
Hillside Aluminium	24	40
Mozal Aluminium	11	20
Cannington	23	40
Cerro Matoso	21	35
Illawarra Metallurgical Coal	180	310
Safe and reliable capital expenditure (excluding EAIs)	335	585
Worsley Alumina	24	45
Brazil Alumina	13	20
Other operations	3	5
Improvement and life extension capital expenditure (excluding EAIs)	40	70
Hermosa	188	390
Growth capital expenditure	188	390
Total capital expenditure (excluding EAIs)	563	1,045
Total capital expenditure (including EAIs)	727	1,360

 

Capital expenditure for EAIs excluding exploration and intangibles (South32 share)(21)
US$M	H1 FY24	FY24e(a)
Sierra Gorda	83	160
Australia Manganese	24	55
South Africa Manganese	20	30
Safe and reliable capital expenditure (EAIs)	127	245
Sierra Gorda	15	30
Australia Manganese	16	30
South Africa Manganese	6	10
Improvement and life extension capital expenditure (EAIs)	37	70
Total capital expenditure (EAIs)	164	315

(a)       The denotation (e) refers to an estimate or forecast year.

 

Exploration and intangibles guidance

FY24 Group capitalised exploration (including EAIs) has been revised to US$45M (previously US$40M), as we continue base metals exploration programs across our portfolio, including an expanded drilling program at Sierra Gorda's Catabela Northeast copper porphyry exploration prospect.

Capitalised exploration (South32 share)(21)
US$M	H1 FY24	FY24e(a)
Capitalised exploration (excluding EAIs)	21	35
EAIs capitalised exploration	6	10
Capitalised exploration (including EAIs)	27	45

(a)       The denotation (e) refers to an estimate or forecast year.

Other expenditure guidance

Other expenditure items presented below are on a proportional consolidation basis including our manganese and Sierra Gorda EAIs.

Other expenditure guidance
	H1 FY24	FY24e(a)	Commentary
Group and unallocated expense in Underlying EBIT (excluding greenfield exploration and third party products and services EBIT)
(US$M)	39	100	Guidance unchanged   H1 FY24 included non-core royalty receipts of US$5M
Underlying depreciation and amortisation
(US$M)	472	930	Guidance unchanged
Underlying net finance costs
(US$M)	118	á 220	Guidance revised to US$220M (from US$200M)   Reflects balance sheet position as at H1 FY24
Greenfield exploration
(US$M)	19	30	Guidance unchanged   Greenfield exploration activity targeting base metals in the Americas, Australia and Europe, subject to the timing of programs

(a)       The denotation (e) refers to an estimate or forecast year.

OPERATIONS ANALYSIS

A summary of the underlying performance of the Group's operations is presented below and a more detailed analysis is presented on pages 18 to 28. Unless otherwise stated: all metrics reflect South32's share; Operating unit cost is Underlying revenue less Underlying EBITDA excluding third party products and services divided by sales volumes; Operating cost is Underlying revenue less Underlying EBITDA excluding third party products and services; and Realised sales price is calculated as Underlying revenue excluding third party products and services divided by sales volume.

Operations table (South32 share)(21)
	Underlying revenue		Underlying EBIT
US$M	H1 FY24	H1 FY23	H1 FY24	H1 FY23
Worsley Alumina	653	659	68	33
Brazil Alumina	234	247	(9)	(19)
Brazil Aluminium	91	47	(74)	(70)
Hillside Aluminium	758	861	27	62
Mozal Aluminium	397	482	(48)	65
Sierra Gorda	322	357	49	107
Cannington	318	272	109	82
Hermosa	-	-	(9)	(9)
Cerro Matoso	238	395	(14)	154
Illawarra Metallurgical Coal	520	801	111	340
Australia Manganese	318	355	67	149
South Africa Manganese	152	175	3	25
Third party products and services(40)	262	249	14	12
Inter-segment / Group and unallocated	(382)	(376)	(58)	(9)
South32 Group	3,881	4,524	236	922

 

WORSLEY ALUMINA

(86% SHARE)

 

Volumes

Worsley Alumina saleable production increased by 1% (or 12kt) to 1,934kt in H1 FY24. FY24 production guidance remains unchanged at 4,000kt, with the refinery expected to operate at nameplate production rates (4.6Mtpa, 100% basis) following planned calciner maintenance in Q3 FY24.

We continue to progress regulatory approvals for new mining areas, with primary environmental approvals for our Worsley Mine Development project expected in H1 FY25. While not currently expected to impact production guidance, we continue to manage the delays experienced with respect to new mining approvals.

Operating costs

Operating unit costs decreased by 10%, to US$258/t in H1 FY24, as the refinery benefited from lower caustic soda prices (H1 FY24: US$460/t, H1 FY23: US$714/t) and a weaker Australian dollar.

We have revised FY24 Operating unit cost guidance to US$270/t (previously US$290/t), reflecting lower caustic soda prices. Exchange rate and price assumptions for FY24 Operating unit cost guidance are detailed on page 30, footnote 38.

Financial performance

Underlying EBIT increased by 106% (or US$35M), to US$68M in H1 FY24, as higher sales volumes (+US$13M), lower caustic soda prices (+US$54M) and a weaker Australian dollar (+US$9M), more than offset a 3% decrease in the average realised price of alumina (-US$19M) and a drawdown of inventory (-US$22M).

Capital expenditure

Safe and reliable capital expenditure increased by US$10M to US$34M in H1 FY24 as we invested in infrastructure to enable access to new mining areas, and additional bauxite residue disposal capacity. FY24 safe and reliable expenditure guidance has been revised to US$70M (previously US$85M) as we target further capital efficiencies.

Improvement and life extension capital expenditure increased by US$14M to US$24M in H1 FY24 and is expected to be US$45M in FY24 as we advance decarbonisation projects at the refinery. We completed the conversion of the first coal-fired boiler to natural gas in H1 FY24 and expect to complete the second in H2 FY24, improving the refinery's energy security and supporting the transition to lower carbon⁽⁴¹⁾ energy. 

 

South32 share	H1 FY24	H1 FY23
Alumina production (kt)	1,934	1,922
Alumina sales (kt)	1,898	1,861
Realised alumina sales price (US$/t)	344	354
Operating unit cost (US$/t)	258	288
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	653	659
Underlying EBITDA	164	123
Underlying EBIT	68	33
Net operating assets(a)	2,485	2,457
Capital expenditure	58	34
Safe and reliable	34	24
Improvement and life extension	24	10

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

BRAZIL ALUMINA

(36% SHARE)

 

Volumes

Brazil Alumina saleable production decreased by 7% (or 51kt) to 640kt in H1 FY24, as the refinery was impacted by third-party power outages and unplanned maintenance. FY24 and FY25 production guidance is set at 1,300kt and 1,350kt, respectively, reflecting these impacts and additional maintenance in FY25.

Operating costs

Operating unit costs decreased by 11%, to US$325/t in H1 FY24, as lower caustic soda prices (H1 FY24: US$541/t, H1 FY23: US$728/t), coal-linked energy prices, and bauxite costs from MRN linked to alumina and aluminium prices on a trailing basis, more than offset lower volumes due to the third-party power outages.

While Operating unit cost guidance is not provided for this non-operated facility, we expect Operating unit costs in H2 FY24 to benefit from a further reduction in raw material input prices.

Financial performance

Underlying EBIT increased by US$10M, to a loss of US$9M in H1 FY24, as lower prices for caustic soda (+US$11M), energy (+US$20M) and bauxite (+US$10M), more than offset lower sales volumes (-US$11M).

Our share of earnings from MRN was a loss of US$9M in H1 FY24 (H1 FY23: +US7M), due to lower bauxite prices. 

Capital expenditure

Safe and reliable capital expenditure increased by US$9M to US$38M in H1 FY24 and is expected to be US$60M in FY24 as we continue our investment in additional bauxite residue disposal capacity.

Improvement and life extension capital expenditure increased by US$7M to US$13M in H1 FY24 and is expected to be US$20M in FY24 as the refinery progresses work on the De-bottlenecking Phase Two project. The project is on track to be completed in H1 FY26, and is expected to increase nameplate capacity by ~4% to ~4.0Mt (100% basis).

 

South32 share	H1 FY24	H1 FY23
Alumina production (kt)	640	691
Alumina sales (kt)	647	678
Realised sales price (US$/t)	362	364
Operating unit cost (US$/t)(a)	325	364
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	234	247
Underlying EBITDA	15	7
Underlying EBIT	(9)	(19)
Net operating assets(b)	788	738
Capital expenditure	51	35
Safe and reliable	38	29
Improvement and life extension	13	6

(a)       Excludes the profit/(loss) from our equity interest in MRN.

(b)      H1 FY23 reflects the balance as at 30 June 2023.

 

BRAZIL ALUMINIUM

(40% SHARE)

Volumes

Brazil Aluminium saleable production increased by 26kt to 50kt in H1 FY24 as the smelter continued to ramp up all three potlines. Production is expected to be 100kt in FY24 and increase a further 30% to 130kt in FY25. Nameplate capacity (179ktpa, 40% basis) remains on track to be achieved during H2 FY26.

Operating costs

Operating unit costs decreased by 32%, to US$4,025/t in H1 FY24, with the benefit of higher volumes as the smelter continued to ramp up, lower alumina and smelter raw material input (including coke and pitch) and energy prices.

While Operating unit cost guidance is not provided for this non-operated facility, we expect Operating unit costs in H2 FY24 to benefit from a further increase in volumes as the smelter continues to ramp up.

Financial performance

Underlying EBIT was largely unchanged at a loss of US$74M in H1 FY24, as  higher sales volumes (+US$50M), combined with lower smelter raw material input prices (+US$12M) and energy costs (+US$6M), was more than offset by a 6% decline in the average realised price of aluminium (-US$6M) and production and inventory related costs (-US$68M) ahead of the smelter's ramp up to nameplate capacity.

Capital expenditure

Safe and reliable capital expenditure was US$4M in H1 FY24 and is expected to be US$10M in FY24.

 

South32 share	H1 FY24	H1 FY23
Aluminium production (kt)	50	24
Aluminium sales (kt)	40	19
Realised sales price (US$/t)	2,275	2,423
Operating unit cost (US$/t)	4,025	5,876
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	91	47
Underlying EBITDA	(70)	(67)
Underlying EBIT	(74)	(70)
Net operating assets(a)	70	28
Capital expenditure	4	6
Safe and reliable	4	6
Improvement and life extension	-	-

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

HILLSIDE ALUMINIUM

(100% SHARE)

 

Volumes

Hillside Aluminium saleable production decreased by 1% (or 3kt) to 359kt in H1 FY24 as the smelter continued to test its maximum technical capacity, despite the impact of elevated load-shedding. FY24 production guidance remains unchanged at 720kt⁽³³⁾.

Operating costs

Operating unit costs decreased by 6%, to US$2,135/t in H1 FY24, as lower alumina and smelter raw material input prices (including coke, pitch and aluminium tri-fluoride) and a weaker South African rand, more than offset inflation-linked indexation of energy costs.

While Operating unit cost guidance is not provided, the cost profile of the smelter will continue to be heavily influenced by the price of raw material inputs, including alumina supplied by our Worsley Alumina refinery, and other external factors including the South African rand and inflation-linked indexation of energy costs.

The smelter's electricity is supplied by Eskom under a contract to 2031, with a tariff that is South African rand based and a rate of escalation linked to the South Africa Producer Price Index. We continue to work with Eskom and other stakeholders in the South African energy sector on pathways to secure lower carbon⁽⁴¹⁾ electricity supply.

Financial performance

Underlying EBIT decreased by 56% (or US$35M), to US$27M in H1 FY24, as lower smelter raw material input prices (+US$54M) and a weaker South African rand (+US$24M), was more than offset by a 9% reduction in the average realised price of aluminium (-US$77M), higher energy prices (-US$14M), and lower sales volumes (-US$26M) as port congestion at Richards Bay impacted the timing of shipments.

Capital expenditure

Capital expenditure increased by US$15M to US$25M in H1 FY24 as the smelter invested in upgrades to its pot tending assemblies. FY24 capital expenditure guidance has been revised to US$43M (previously US$38M) to reflect this activity.

 

South32 share	H1 FY24	H1 FY23
Aluminium production (kt)	359	362
Aluminium sales (kt)	327	337
Realised sales price (US$/t)	2,318	2,555
Operating unit cost (US$/t)	2,135	2,276
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	758	861
Underlying EBITDA	60	94
Underlying EBIT	27	62
Net operating assets(a)	854	845
Capital expenditure	25	10
Safe and reliable	24	9
Improvement and life extension	1	1

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

MOZAL ALUMINIUM

(63.7% SHARE)

 

Volumes

Mozal Aluminium saleable production decreased by 9% (or 16kt) to 166kt in H1 FY24, as the smelter continued to implement its recovery plan following the fatal safety incident in H1 FY23, while managing the impact of elevated load-shedding.

FY24 production guidance is set at 320kt⁽³³⁾, reflecting the lower number of pots currently in operation, as we complete additional work to deliver improved process stability and complete upgrades to the girder infrastructure. The number of pots in operation is expected to progressively increase over CY24, with FY25 production guidance currently set at 372kt⁽³³⁾.

Operating costs

Operating unit costs increased by 10%, to US$2,461/t in H1 FY24, as lower prices for alumina and smelter raw material inputs prices (including, coke, pitch and aluminium tri-fluoride) and a weaker South African rand, was more than offset by lower volumes, higher maintenance costs and the inflation-linked indexation of energy costs.

The cost profile of the smelter will continue to be heavily influenced by the price of raw material inputs, including alumina supplied by our Worsley Alumina refinery, and other external factors including the South African rand and inflation-linked indexation of energy costs. While guidance is not provided, we expect Operating unit costs to remain elevated in H2 FY24 as the number of pots in operation is progressively increased.     

Electricity supplied to Mozal is generated by Hidroeléctrica de Cahora Bassa (HCB), a hydro-electric power generator situated in the north-west of Mozambique. The electricity is supplied via Eskom's South African grid under an agreement with MOTRACO, a transmission joint venture between Eskom and the national electricity utilities of Mozambique and Eswatini.

The current power supply agreement for Mozal expires in 2026. We continue to work with Eskom and the Government of the Republic of Mozambique to extend the smelter's hydro-electric power supply beyond 2026, as there are currently no viable alternative suppliers of renewable energy at the required scale.

Financial performance

Underlying EBIT decreased by US$113M, to a loss of US$48M in H1 FY24, as lower alumina and smelter raw material input prices (+US$30M) and a weaker South African rand (+US$9M), was more than offset by a 13% decrease in the average realised aluminium price (-US$53M), lower sales volumes (-US$32M) and higher energy prices (-US$18M). Maintenance costs also increased with the girder refurbishment program (-US$7M), and we recorded an inventory adjustment due to higher production costs in the period (-US$16M).  

Capital expenditure

Capital expenditure was US$11M in H1 FY24 and is expected to be US$21M in FY24 as we continue our investment in plant upgrades.

 

South32 share	H1 FY24	H1 FY23
Aluminium production (kt)	166	182
Aluminium sales (kt)	167	177
Realised sales price (US$/t)	2,377	2,723
Operating unit cost (US$/t)	2,461	2,237
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	397	482
Underlying EBITDA	(14)	86
Underlying EBIT	(48)	65
Net operating assets(a)	540	578
Capital expenditure	11	9
Safe and reliable	11	9
Improvement and life extension	-	-

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

SIERRA GORDA

(45% SHARE)

 

Volumes

Sierra Gorda payable copper equivalent production⁽³⁴⁾ decreased by 14% (or 6.2kt) to 38.6kt in H1 FY24, as higher plant throughput delivered by the plant de-bottlenecking project, was more than offset by lower planned copper grades, and a temporary outage of the molybdenum plant.

FY24 production guidance has been set at 78.7kt payable copper equivalent production⁽³⁴⁾ (copper 67.0kt, molybdenum 0.8kt, gold 22.5koz and silver 550koz), with molybdenum output expected to improve from Q4 FY24.

Production is expected to increase by 17% to 91.8kt in FY25 (copper 71.0kt, molybdenum 2.2kt, gold 25.0koz and silver 550koz), with higher planned copper grades in accordance with the mine plan, and higher molybdenum production. 

Operating costs

Operating unit costs increased by 13%, to US$18.8/t ore processed in H1 FY24, as the benefit of the transition to cost efficient, 100% renewable energy, was more than offset by a planned workforce payment following the finalisation of a new three-year industrial agreement, and higher maintenance costs.

FY24 Operating unit costs have been revised to US$17.0/t ore processed (previously US$16.0/t), reflecting sequentially lower Operating unit costs  following the workforce payment in H1 FY24. Exchange rate and price assumptions for FY24 Operating unit cost guidance are detailed on page 30, footnote 38.

Financial performance

Underlying EBIT decreased by 54%, (or US$58M) to US$49M in H1 FY24, as higher average realised metal prices (+US$9M) and the transition to lower cost, 100% renewable electricity (+US$20M), was more than offset by lower sales volumes (-US$44M), the one-off workforce payment (-US$20M), a stronger Chilean peso (-US$9M) and higher maintenance costs (-US$6M).

Capital expenditure

Safe and reliable capital expenditure increased by US$18M to US$83M in H1 FY24. We have revised FY24 guidance to US$160M (previously US$180M) to reflect expected deferred stripping activity and the timing of investment in additional tailings storage capacity.

Improvement and life extension capital expenditure was US$15M in H1 FY24 and is expected to be US$30M in FY24 as the operation continues the de-bottlenecking project and completes the feasibility study for the fourth grinding line expansion. The fourth grinding line has the potential to deliver a ~18% increase in plant throughput to ~57Mtpa to 58Mtpa (100% basis), with a final investment decision expected in Q4 FY24.  

South32 share	H1 FY24	H1 FY23
Ore mined (Mt)	11.9	15.4
Ore processed (Mt)	10.9	10.7
Ore grade processed (%, Cu)	0.37	0.45
Payable copper equivalent production (kt)(34)	38.6	44.8
Payable copper production (kt)	31.6	37.9
Payable molybdenum production (kt)	0.5	0.4
Payable gold production (koz)	13.4	15.3
Payable silver production (koz)	295	338
Payable copper sales (kt)	32.5	38.4
Payable molybdenum sales (kt)	0.7	0.8
Payable gold sales (koz)	13.8	15.4
Payable silver sales (koz)	300	345
Realised copper sales price (US$/lb)	3.56	3.41
Realised molybdenum sales price (US$/lb)	20.82	20.78
Realised gold sales price (US$/oz)	1,957	1,688
Realised silver sales price (US$/oz)	23.3	17.4
Operating unit cost (US$/t ore processed)(42)	18.8	16.6
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	322	357
Underlying EBITDA	117	179
Underlying EBIT	49	107
Net operating assets(a)	1,591	1,588
Capital expenditure	98	86
Safe and reliable	83	65
Improvement and life extension	15	21
Exploration expenditure	6	3
Exploration expensed	-	2

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

CANNINGTON

(100% SHARE)

 

Volumes

Cannington payable zinc equivalent production⁽³⁵⁾ increased by 13% to 147.2kt in H1 FY24, as we mined a sequence of higher-grade stopes in Q2 FY24.                  

In January 2024, the operation experienced severe wet weather following Tropical Cyclone Kirrily. While we continue to monitor the impact on the operation, and regional logistics chains due to widespread flooding, FY24 production guidance is currently unchanged at 287.2kt payable zinc equivalent production⁽³⁵⁾ (silver 12,500koz, lead 115.0kt and zinc 62.0kt).

Operating costs

Operating unit costs increased by 10%, to US$150/t in H1 FY24, as the benefit of a weaker Australian dollar was more than offset by higher local gas prices and additional contractor costs to support a planned increase in underground mining activity.

FY24 Operating unit cost guidance remains unchanged at US$155/t ore processed. Exchange rate and price assumptions for FY24 Operating unit cost guidance are detailed on page 30, footnote 38.

Financial performance

Underlying EBIT increased by 33% (or US$27M), to US$109M in H1 FY24, with higher sales volumes (+US$44M) as a result of higher average metal grades, partially offset by higher local gas prices (-US$7M) and contractor costs (-US$4M).

Capital expenditure

Capital expenditure decreased by US$10M to US$23M in H1 FY24, following the transition to 100% truck haulage in the prior period, and is expected to be US$40M in FY24.

 

South32 share	H1 FY24	H1 FY23
Ore mined (kwmt)	1,150	1,123
Ore processed (kdmt)	1,139	1,142
Ore grade processed (g/t, Ag)	211	175
Ore grade processed (%, Pb)	6.0	5.5
Ore grade processed (%, Zn)	3.4	3.6
Payable zinc equivalent production (kt)(35)	147.2	130.8
Payable silver production (koz)	6,704	5,474
Payable lead production (kt)	58.8	52.4
Payable zinc production (kt)	29.0	30.4
Payable silver sales (koz)	6,529	5,083
Payable lead sales (kt)	56.6	51.3
Payable zinc sales (kt)	28.3	27.5
Realised silver sales price (US$/oz)	22.5	20.1
Realised lead sales price (US$/t)	1,979	2,008
Realised zinc sales price (US$/t)	2,085	2,436
Operating unit cost (US$/t ore processed)(42)	150	136
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	318	272
Underlying EBITDA	147	117
Underlying EBIT	109	82
Net operating assets(a)	183	172
Capital expenditure	23	33
Safe and reliable	23	32
Improvement and life extension	-	1
Exploration expenditure	5	3
Exploration expensed	3	3

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

CERRO MATOSO

(99.9% SHARE)

 

Volumes

Cerro Matoso payable nickel production decreased by 10% to 18.3kt in H1 FY24, while production improved by 20% (or 1.7kt) in Q2 FY24 following planned maintenance and a temporary reduction in third-party gas supply.

FY24 production guidance remains unchanged at 40.5kt, with the OSMOC project expected to support higher nickel grades in H2 FY24.

Operating costs

Operating unit costs increased by 13%, to US$5.57/lb in H1 FY24, due to a stronger Colombian peso and lower first half volumes.

We have revised FY24 Operating unit cost guidance to US$5.20/lb (previously US$5.30/lb), reflecting lower contractor and consumables costs as we target further cost efficiencies. Exchange rate and price assumptions for FY24 Operating unit cost guidance are detailed on page 30, footnote 38.

Financial performance

Underlying EBIT decreased by US$168M, to a loss of US$14M in H1 FY24, due to a 34% decline in the average realised nickel price (-US$121M) as structural challenges in the nickel market placed pressure on nickel prices and discounts for our ferronickel product. This significant price impact together with lower sales volumes (-US$36M) and a stronger Colombian peso (-US$16M), more than offset maintenance efficiencies (+US$6M) and lower price-linked royalties (+US$6M).

Capital expenditure

Safe and reliable capital expenditure increased by US$4M to US$21M in H1 FY24.  FY24 guidance has been revised to US$35M (previously US$45M) as we defer certain non-critical projects, in response to the current challenging nickel market conditions.

As previously announced, we have commenced a strategic review of Cerro Matoso to evaluate options to enhance the operation's competitive position. 

 

South32 share	H1 FY24	H1 FY23
Ore mined (kwmt)	2,183	2,752
Ore processed (kdmt)	1,317	1,392
Ore grade processed (%, Ni)	1.55	1.64
Payable nickel production (kt)	18.3	20.4
Payable nickel sales (kt)	18.0	19.8
Realised nickel sales price (US$/lb)(43)	6.00	9.05
Operating unit cost (US$/lb)	5.57	4.93
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	238	395
Underlying EBITDA	17	180
Underlying EBIT	(14)	154
Net operating assets(a)	368	363
Capital expenditure	21	20
Safe and reliable	21	17
Improvement and life extension	-	3
Exploration expenditure	1	-
Exploration expensed	1	-

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

 

ILLAWARRA METALLURGICAL COAL

(100% SHARE)

 

Volumes

Illawarra Metallurgical Coal saleable production decreased by 39% (or 1,286kt) to 2,045kt in H1 FY24, as the operation completed two longwall moves, including a planned extended outage at the Dendrobium mine. A new four-year industrial agreement covering deputies at the Appin mine was finalised in Q2 FY24.

FY24 production guidance is unchanged at 5.0Mt with volumes remaining weighted to H2 FY24, reflecting the shorter duration of the two remaining longwall moves to be completed during Q4 FY24.

Operating costs

Operating unit costs increased by 35%, to US$167/t in H1 FY24, as the volume impact of the two planned longwall moves completed in Q2 FY24, more than offset the benefit of a weaker Australian dollar, lower price-linked royalties and local electricity prices.

We have revised our FY24 Operating unit cost guidance to US$150/t (previously US$140/t), due to higher price-linked royalties, with Operating unit costs to be sequentially lower in H2 FY24, benefitting from higher planned production volumes. Exchange rate and price assumptions for FY24 Operating unit cost guidance are detailed on page 30, footnote 38.

Financial performance

Underlying EBIT decreased by 67% (or US$229M), to US$111M in H1 FY24, as the volume impact of the two planned longwall moves (-US$267M) more than offset lower price-linked royalties (+US$21M), lower electricity prices (+US$13M), and a weaker Australian dollar (+US$9M).

Capital expenditure

Capital expenditure increased by US$73M to US$181M in H1 FY24 as we continued to invest in Appin's transition to a more efficient single longwall configuration from H2 FY25, and additional ventilation capacity to enable mining in the current Area 7 until at least 2039⁽³¹⁾.  We expect to invest US$311M in FY24 (previously US$323M) as we progress these significant investments.

Our ~US$260M investment in additional ventilation capacity is expected to be completed in FY26, with ~US$90M expected to be spent in both FY24 and FY25.   

 

South32 share	H1 FY24	H1 FY23
Metallurgical coal production (kt)	1,787	2,753
Energy coal production (kt)	258	578
Metallurgical coal sales (kt)	1,759	2,678
Energy coal sales (kt)	337	507
Realised metallurgical coal sales price (US$/t)	276	268
Realised energy coal sales price (US$/t)	101	164
Operating unit cost (US$/t)	167	124
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue(44)	520	801
Underlying EBITDA	171	407
Underlying EBIT	111	340
Net operating assets(a)	896	769
Capital expenditure	181	108
Safe and reliable	180	106
Improvement and life extension	1	2
Exploration expenditure	7	8
Exploration expensed	3	4

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

AUSTRALIA MANGANESE

(60% SHARE)

 

Volumes

Australia Manganese saleable production decreased by 9% (or 165kwmt) to 1,679kwmt in H1 FY24, as PC02 production declined due to lower yields, contributing 7% of total production (H1 FY23: 10%).

FY24 production guidance remains unchanged at 3,400kwmt as the operation continues its strong primary output and is expected to return the PC02 circuit to nameplate production rates during Q4 FY24. 

Operating costs

Operating unit costs increased by 22%, to US$2.15/dmtu in H1 FY24, in line with prior FY24 guidance, as a weaker Australian dollar was offset by additional planned mining activity and contractor costs to deliver planned volumes. 

FY24 Operating unit cost guidance remains unchanged at US$2.15/dmtu. Exchange rate and price assumptions for FY24 Operating unit cost guidance are detailed on page 30, footnote 38.

Financial performance

Underlying EBIT decreased by 55% (or US$82M), to US$67M in H1 FY24, as a 17% decline in average realised ore prices (-US$71M) and additional contractor and labour costs (-US$11M), more than offset higher sales volumes (+US$34M) following a planned drawdown of finished goods (-US$28M), lower diesel prices (+US$5M) and a weaker Australian dollar (+US$4M).

Capital expenditure

Safe and reliable capital expenditure was US$24M in H1 FY24 and is expected to be US$55M in FY24 as we continue our investment in additional mobile fleet and mining equipment.

Improvement and life extension capital expenditure increased by US$9M to US$16M in H1 FY24 and is expected to be US$30M in FY24 as we invest in the Eastern Lease South life extension project, which remains on track to deliver first production in FY25.

The Eastern Lease South Project is expected to sustain production to at least FY28⁽⁴⁵⁾, with further work underway across our existing operating footprint and in the Southern Areas to potentially extend the operation's life into the next decade.

 

South32 share	H1 FY24	H1 FY23
Manganese ore production (kwmt)	1,679	1,844
Manganese ore sales (kwmt)	1,864	1,652
Realised external manganese ore sales price (US$/dmtu, FOB)(46)(47)	3.79	4.57
Ore operating unit cost (US$/dmtu, FOB)(47)(48)	2.15	1.76
South32 share (US$M)	H1 FY24	H1 FY23
Underlying revenue	318	355
Underlying EBITDA	125	197
Underlying EBIT	67	149
Net operating assets(a)	212	239
Capital expenditure	40	32
Safe and reliable	24	25
Improvement and life extension	16	7
Exploration expenditure	-	1
Exploration expensed	-	-

(a)       H1 FY23 reflects the balance as at 30 June 2023.

 

SOUTH AFRICA MANGANESE

(ORE 54.6% SHARE, ALLOY 60% SHARE)

 

Volumes

South Africa Manganese saleable production increased by 2% (or 18kwmt) to 1,111kwmt in H1 FY24 as the operation achieved record production in Q1 FY24 and completed a planned maintenance shut at the Mamatwan mine in Q2 FY24.

FY24 production guidance remains unchanged at 2,000kwmt, subject to our continued use of higher cost trucking to optimise sales volumes of our premium products.

Operating costs

Operating unit costs decreased by 3% to US$2.59/dmtu in H1 FY24, in line with prior guidance, as the benefit of higher volumes, a weaker South African rand and lower price-linked royalties, more than offset higher in-land logistics costs.

FY24 Operating unit costs remain unchanged at US$2.60/dmtu. Exchange rate and price assumptions for FY24 Operating unit cost guidance are detailed on page 30, footnote 38.

Financial performance

Ore Underlying EBIT decreased by  77% (or US$20M), to US$6M in H1 FY24, as the benefit of higher sales volumes (+US$8M), a weaker South African rand (+US$8M) and lower price-linked royalties (+US$4M), was more than offset by a 15% decline in average realised manganese ore prices (-US$31M) and higher in-land logistics costs (-US$6M).

Capital expenditure

Safe and reliable capital expenditure increased by US$13M to US$20M in H1 FY24 and is expected to be US$30M in FY24 as we upgrade our rail infrastructure to improve efficiencies.

Improvement and life extension capital expenditure was US$6M in H1 FY24 and is expected to be US$10M in FY24 as we advance work to access new mining areas at our high-grade underground Wessels mine.

 

South32 share(a)	H1 FY24	H1 FY23
Manganese ore production (kwmt)	1,111	1,093
Manganese ore sales (kwmt)	1,082	1,032
Realised external manganese ore sales price (US$/dmtu, FOB)(46)(49)	3.03	3.57
Ore operating unit cost (US$/dmtu, FOB)(48)(49)	2.59	2.67
South32 share (US$M)(a)	H1 FY24	H1 FY23
Underlying revenue	152	175
Manganese ore	152	175
Manganese alloy	-	-
Underlying EBITDA	14	35
Manganese ore	17	36
Manganese alloy	(3)	(1)
Underlying EBIT	3	25
Manganese ore	6	26
Manganese alloy	(3)	(1)
Net operating assets/(liabilities)(b)	159	143
Manganese ore	224	195
Manganese alloy	(65)	(52)
Capital expenditure	26	11
Safe and reliable	20	7
Improvement and life extension	6	4
Exploration expenditure	-	1
Exploration expensed	-	1

(a)       The Metalloys manganese alloy smelter remains on care and maintenance.

(b)      H1 FY23 reflects the balance as at 30 June 2023.

 

NOTES

 

(1)	Net tangible assets as at 31 December 2023 includes all right-of-use assets and lease liabilities, in accordance with AASB 16 Leases.
(2)	H1 FY24 basic earnings per share is calculated as Profit after tax divided by the weighted average number of shares for H1 FY24 (4,523 million). H1 FY24 basic Underlying earnings per share is calculated as Underlying earnings divided by the weighted average number of shares for H1 FY24. H1 FY23 basic earnings per share is calculated as Profit after tax divided by the weighted average number of shares for H1 FY23 (4,596 million). H1 FY23 basic Underlying earnings per share is calculated as Underlying earnings divided by the weighted average number of shares for H1 FY23.
(3)	H1 FY24 ordinary dividends per share is calculated as H1 FY24 ordinary dividend announced (US$18M) divided by the number of shares on issue at 31 December 2023 (4,529 million).
(4)	Underlying revenue includes revenue from third party products and services.
(5)	The underlying information reflects the Group's interest in material equity accounted joint ventures and is presented on a proportional consolidation basis. Underlying EBIT is profit before net finance income/(costs), tax and any earnings adjustments, including impairments. Underlying EBITDA is Underlying EBIT before Underlying depreciation and amortisation. Underlying earnings is Profit after tax and earnings adjustment items. Underlying earnings is the key measure that South32 uses to assess the performance of the South32 Group, make decisions on the allocation of resources and assess senior management's performance. In addition, the performance of each of the South32 operations and operational management is assessed based on Underlying EBIT. In order to calculate Underlying earnings, Underlying EBIT and Underlying EBITDA, the following items are adjusted as applicable each period, irrespective of materiality: •          Exchange rate (gains)/losses on restatement of monetary items; •          Impairment losses/(reversals); •          Net (gains)/losses on disposal and consolidation of interests in operations; •          (Gains)/losses on non-trading derivative instruments, contingent consideration and other investments measured at fair value through profit or loss; •          Major corporate restructures; •          Joint venture adjustments; •          Exchange rate variations on net cash/(debt); •          Tax effect of earnings adjustments; and •          Exchange rate variations on tax balances In addition, items that do not reflect the underlying operations of South32, and are individually, or in combination with other related earnings adjustments, significant to the financial statements, are excluded to determine Underlying earnings. When applicable, significant items are detailed in the Financial Information.
(6)	Comprises Underlying EBITDA excluding third party products and services EBITDA, divided by Underlying revenue excluding third party products and services revenue. Also referred to as operating margin.
(7)	Comprises Underlying EBIT excluding third party products and services EBIT, divided by Underlying revenue excluding third party products and services revenue.
(8)	Return on invested capital (ROIC) is a key measure that South32 uses to assess performance. ROIC is calculated as Underlying EBIT less the discount on rehabilitation provisions included in Underlying net finance costs, tax effected by the Group's Underlying effective tax rate (ETR) including our material equity accounted investments on a proportional consolidation basis, divided by the sum of fixed assets (excluding any rehabilitation assets, the impact of any impairments or impairment reversals, and unproductive capital) and inventories.
(9)	Significant hazards frequency: (The sum of significant hazards x 1,000,000) ÷ exposure hours. This is stated in units of per million hours worked for employees and contractors. A significant hazard is something that has the potential to cause harm, ill health or injury, or damage to property, plant or the environment.
(10)	To ensure that incident classification definitions are applied uniformly across our workforce, we have adopted the United States Government Occupational Safety and Health Administration (OSHA) and the International Council on Mining and Metals (ICMM) guidelines for the recording and reporting of occupational injuries and illnesses.
(11)	Total Recordable Injury Frequency (TRIF): (The sum of recordable injuries x 1,000,000) ÷ exposure hours. This is stated in units of per million hours worked for employees and contractors.
(12)	Lost Time Injury Frequency (LTIF): (The sum of lost time injuries x 1,000,000) ÷ exposure hours. This is stated in units of per million hours worked for employees and contractors.
(13)	Calculated by taking the increase in controllable costs from H1 FY23 to H1 FY24 divided by the Group's underlying H1 FY23 cost base excluding third party product costs.
(14)	Refers to aluminium produced using renewable power.
(15)	Group payable copper equivalent production in H2 FY24e, compared to H1 FY24, calculated by applying FY23 realised prices for all operations.
(16)	US$98M was remaining to be returned under our current capital management program. Since inception, US$1.7B has been returned via the on-market share buy-back (795M shares at an average price of A$3.05 per share) and US$525M returned in the form of special dividends.
(17)	Refer to market release "Final Investment Approval to Develop Hermosa's Taylor Deposit" dated 15 February 2024.
(18)	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. Our medium-term target is to halve our operational greenhouse gas (GHG) emissions by 2035 compared to our FY21 baseline. FY21 baseline adjusted to exclude GHG emissions from South Africa Energy Coal and TEMCO, which were divested in FY21.
(19)	Sales price variance reflects the revenue impact of changes in commodity prices, based on the current period's sales volume. Price-linked costs variance reflects the change in royalties together with the change in input costs driven by changes in commodity prices or market traded consumables. Foreign exchange reflects the impact of exchange rate movements on local currency denominated costs and sales. Sales volume variance reflects the revenue impact of sales volume changes, based on the comparative period's sales prices. Controllable costs variance represents the impact from changes in the Group's controllable local currency cost base, including the variable cost impact of production volume changes on expenditure, and period-on-period movements in inventories. The controllable cost variance excludes earnings adjustments including significant items.
(20)	Underlying net finance costs and Underlying income tax expense are actual H1 FY24 results, not half-on-half variances.
(21)	South32's ownership shares of operations are presented as follows: Worsley Alumina (86% share), Brazil Alumina (36% share), Brazil Aluminium (40% share), Hillside Aluminium (100%), Mozal Aluminium (63.7% share), Sierra Gorda (45% share), Cannington (100%), Hermosa (100%), Cerro Matoso (99.9% share), Illawarra Metallurgical Coal (100%), Australia Manganese (60% share), South Africa Manganese ore (54.6% share) and South Africa Manganese alloy (60% share).
(22)	The underlying information reflects the Group's interest in material equity accounted joint ventures and is presented on a proportional consolidation basis, which is the measure used by the Group's management to assess their performance. The joint venture adjustments reconcile the proportional consolidation to the equity accounting position included in the Group's consolidated financial statements.
(23)	Underlying ETR is Underlying income tax expense, including royalty related tax, divided by Underlying profit subject to tax.
(24)	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%.
(25)	Mozal Aluminium is subject to a royalty on revenues instead of income tax which is included in Operating costs.
(26)	Australia Manganese is subject to a royalty related tax equal to 20% of adjusted EBIT which is included in Underlying tax expense.
(27)	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 Underlying tax expense.
(28)	H1 FY24 net distributions from our material equity accounted joint ventures comprises of dividends (US$76M), a net drawdown of shareholder loans (US$34M) from manganese and a distribution (US$18M) from Sierra Gorda. The distribution from Sierra Gorda comprised a repayment of US$18M of accrued interest.
(29)	Net interest paid excludes distributions from material equity accounted investments.
(30)	Total capital expenditure comprises Capital expenditure, capitalised exploration and evaluation expenditure and the purchase of intangibles. Capital expenditure comprises safe and reliable capital expenditure, improvement and life extension capital expenditure (including decarbonisation), and growth capital expenditure.
(31)	The information in this announcement that relates to the Production Target for Illawarra Metallurgical Coal is based on 21% Proved and 79% Probable Coal Reserves from Bulli (Appin) and was originally disclosed in "September 2023 Quarterly Report" dated 23 October 2023. The Coal Reserves estimates underpinning the Production Target have been prepared by Competent Persons and reported in accordance with the JORC Code. The Coal Resources and Coal Reserves estimates are available to view in South32's FY23 Annual Report published on 8 September 2023 and is available to view on www.south32.net. South32 confirms that all the material assumptions underpinning the Production Target in the initial public report continue to apply and have not materially changed. 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.
(32)	Group payable copper equivalent production in FY25e, compared to FY24e, calculated by applying FY23 realised prices for all operations. FY25e assumes South Africa Manganese production of 2,000kwmt, which is subject to market conditions and our continued use of higher cost trucking.
(33)	Production guidance for Hillside Aluminium and Mozal Aluminium does not assume any load-shedding impact on production.
(34)	Payable copper equivalent production (kt) was calculated by aggregating revenues from copper, molybdenum, gold and silver, and dividing the total Revenue by the price of copper. FY23 realised prices for copper (US$3.51/lb), molybdenum (US$21.28/lb), gold (US$1,821/oz) and silver (US$21.9/oz) have been used for FY23, H1 FY24, FY24e and FY25e.
(35)	Payable zinc equivalent (kt) was calculated by aggregating revenues from payable silver, lead and zinc, and dividing the total Revenue by the price of zinc. FY23 realised prices for zinc (US$2,151/t), lead (US$1,919/t) and silver (US$21.1/oz) have been used for FY23, H1 FY24, FY24e and FY25e.
(36)	Operating unit cost is Underlying revenue less Underlying EBITDA, excluding third party products and services, divided by sales volumes. Operating cost is Underlying revenue less Underlying EBITDA excluding third party products and services. Additional manganese disclosures are included in footnotes 47 and 49.
(37)	FY24 prior Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY24, including: an alumina price of US$349/t; an average blended coal price of US$210/t for Illawarra Metallurgical Coal; a manganese ore price of US$4.85/dmtu for 44% manganese product; a nickel price of US$8.90/lb; a silver price of US$24.5/troy oz; a lead price of US$2,131/t (gross of treatment and refining charges); a zinc price of US$2,446/t (gross of treatment and refining charges); a copper price of US$3.87/lb (gross of treatment and refining charges); a molybdenum price of US$22.5/lb (gross of treatment and refining charges); a gold price of US$1,984/troy oz; an AUD:USD exchange rate of 0.65; a USD:ZAR exchange rate of 18.98; a USD:COP exchange rate of 4,033; USD:CLP exchange rate of 876; and a reference price for caustic soda; which reflect forward markets as at July 2023 or our internal expectations.
(38)	FY24 new Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY24, including: an alumina price of US$340/t; an average blended coal price of US$296/t for Illawarra Metallurgical Coal; a manganese ore price of US$4.58/dmtu for 44% manganese product; a nickel price of US$8.67/lb; a silver price of US$22.7/troy oz; a lead price of US$2,105/t (gross of treatment and refining charges); a zinc price of US$2,446/t (gross of treatment and refining charges); a copper price of US$3.67/lb (gross of treatment and refining charges); a molybdenum price of US$19.22/lb (gross of treatment and refining charges); a gold price of US$1,892/troy oz; an AUD:USD exchange rate of 0.64; a USD:ZAR exchange rate of 19.12; a USD:COP exchange rate of 4,050; USD:CLP exchange rate of 924; and a reference price for caustic soda; which reflect forward markets as at January 2024 or our internal expectations.
(39)	Exploration Results and Exploration Targets: The information in this announcement that relates to the Exploration Results and Targets for Taylor, Clark, Peake and Flux is extracted from the announcement entitled (Final Investment Approval to Develop Hermosa's Taylor Deposit) published on 15 February 2024 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.
(40)	H1 FY24 Third party products and services sold comprise US$42M for aluminium, US$3M for alumina, US$106M for coal, US$43M for freight services, US$53M for raw materials and US$15M for manganese. Underlying EBIT on third party products and services comprise nil for aluminium, US$2M for alumina, US$14M for coal, US$(2)M for freight services, nil for raw materials and nil for manganese. H1 FY23 Third party products and services sold comprise US$30M for aluminium, US$2M for alumina, US$60M for coal, US$63M for freight services, US$78M for raw materials and US$16M for manganese. Underlying EBIT on third party products and services comprise US$(1)M for aluminium, US$8M for alumina, US$6M for coal, US$(1)M for freight services, nil for raw materials and nil for manganese.
(41)	Refers to lower levels of GHG emissions when compared to the current state. Where used in relation to South32's products or portfolio, it refers to enhancement of existing methods, practices and technologies to substantially lower the level of embodied GHG emissions as compared to the current state.
(42)	Sierra Gorda and Cannington Operating unit cost is Underlying revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact Operating unit costs.
(43)	Cerro Matoso realised nickel sales price is inclusive of by-products.
(44)	Illawarra Metallurgical Coal revenue includes metallurgical coal and energy coal sales revenue.
(45)	Australia Manganese: The information in this announcement that refers to Production Target and forecast financial information is based on Proved (62%) and Probable (38%) Ore Reserves. Production Target cautionary statement - The Mineral Resources and Ore Reserves underpinning the Production Target have been prepared by  Competent Persons and reported in accordance with the JORC Code.  The Resources and Reserves estimates are available to view in South32's FY23 Annual Report (http://www.south32.net) published on 8 September 2023. 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.
(46)	Volumes and prices do not include any third party trading that may be undertaken independently of equity production. Realised ore prices are calculated as external sales Underlying revenue less freight and marketing costs, divided by external sales volume.
(47)	Manganese Australia H1 FY24 average manganese content of external ore sales was 42.5% on a dry basis (H1 FY23: 44.2%). 97% of H1 FY24 external manganese ore sales (H1 FY23: 95%) were completed on a CIF basis. H1 FY24 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of US$30M (H1 FY23: US$36M), consistent with our FOB cost guidance.
(48)	FOB Ore Operating unit cost is Underlying revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume.
(49)	Manganese South Africa H1 FY24 average manganese content of external ore sales was 38.7% on a dry basis (H1 FY23: 39.2%). 90% of H1 FY24 external manganese ore sales (H1 FY23: 86%) were completed on a CIF basis. H1 FY24 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of US$28M (H1 FY23: US$32M), consistent with our FOB cost guidance.

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.

The following abbreviations may be used throughout this report: US$ million (US$M); US$ billion (US$B); December half year (H1 FY24); financial year 2024 (FY24); financial year (FY); calendar year (CY); copper equivalent (CuEq); 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); thousand dry metric tonnes (kdmt); dry metric tonne unit (dmtu); pound (lb); megawatt (MW); Australian Securities Exchange (ASX); London Stock Exchange (LSE); Johannesburg Stock Exchange (JSE); equity accounted investment (EAI); and American Depositary Receipts (ADR).

 

SOUTH32 FINANCIAL INFORMATION

For the half year ended 31 December 2023

CONTENTS

CONSOLIDATED INCOME STATEMENT		33
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME		34
CONSOLIDATED BALANCE SHEET		35
CONSOLIDATED CASH FLOW STATEMENT		36
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY		37
NOTES TO FINANCIAL STATEMENTS
1.	Reporting entity	38
2.	Basis of preparation	38
3.	Segment information	39
4.	Dividends	45
5.	Earnings per share	45
6.	Interest bearing liabilities	46
7.	Net finance income/(costs)	46
8.	Financial assets and financial liabilities	47
9.	Equity accounted investments	50
10.	Subsequent events	50
DIRECTORS' DECLARATION		51
DIRECTORS' REPORT		52
LEAD AUDITOR'S INDEPENDENCE DECLARATION		54
INDEPENDENT AUDITOR'S REVIEW REPORT		55

 

 

CONSOLIDATED INCOME STATEMENT

for the half year ended 31 December 2023

US$M	Note	H1 FY24	H1 FY23
Revenue:
Group production		2,827	3,388
Third party products and services		306	308
	3	3,133	3,696
Other income		61	242
Expenses excluding finance costs		(3,110)	(3,308)
Share of profit/(loss) of equity accounted investments	9	(9)	241
Profit from operations		75	871
Comprising:
Group production		61	859
Third party products and services		14	12
Profit from operations		75	871
Finance income		116	111
Finance costs		(125)	(97)
Net finance income/(costs)	7	(9)	14
Profit before tax		66	885
Income tax expense		(13)	(200)
Profit for the period		53	685
Attributable to:
Equity holders of South32 Limited		53	685
Profit for the period attributable to equity holders of South32 Limited:
Basic earnings per share (cents)	5	1.2	14.9
Diluted earnings per share (cents)	5	1.2	14.8

The accompanying notes form part of the half year consolidated financial statements.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the half year ended 31 December 2023

US$M		H1 FY24	H1 FY23
Profit for the period		53	685
Other comprehensive income
Items that will not be reclassified to the Consolidated Income Statement:
Investments in equity instruments designated as fair value through other comprehensive income (FVOCI):
Net fair value gains/(losses)		(19)	(3)
Income tax (expense)/benefit		(1)	1
Share of other comprehensive income/(loss) of equity accounted investments		-	1
Gains/(losses) on pension and medical schemes		-	2
Income tax (expense)/benefit recognised within other comprehensive income		-	(1)
Total items that will not be reclassified to the Consolidated Income Statement		(20)	-
Total other comprehensive income/(loss)		(20)	-
Total comprehensive income		33	685
Attributable to:
Equity holders of South32 Limited		33	685

The accompanying notes form part of the half year consolidated financial statements.

 

CONSOLIDATED BALANCE SHEET

as at 31 December 2023

US$M	Note	H1 FY24	FY23
ASSETS
Current assets
Cash and cash equivalents		702	1,258
Trade and other receivables		656	778
Other financial assets	8	1	1
Inventories		1,196	1,102
Current tax assets		118	54
Other assets		33	46
Total current assets		2,706	3,239
Non-current assets
Trade and other receivables		2,134	1,923
Other financial assets	8	107	118
Inventories		72	82
Property, plant and equipment		8,352	8,050
Intangible assets		237	242
Equity accounted investments		414	499
Deferred tax assets		355	390
Other assets		21	21
Total non-current assets		11,692	11,325
Total assets		14,398	14,564
LIABILITIES
Current liabilities
Trade and other payables		840	985
Interest bearing liabilities	6	435	365
Current tax payables		9	10
Provisions		182	194
Deferred income		6	6
Total current liabilities		1,472	1,560
Non-current liabilities
Trade and other payables		20	19
Interest bearing liabilities	6	1,358	1,376
Other financial liabilities	8	18	37
Deferred tax liabilities		162	210
Provisions		2,141	1,986
Deferred income		1	1
Total non-current liabilities		3,700	3,629
Total liabilities		5,172	5,189
Net assets		9,226	9,375
EQUITY
Share capital		13,216	13,251
Treasury shares		(40)	(51)
Reserves		(3,579)	(3,553)
Accumulated losses		(370)	(271)
Total equity attributable to equity holders of South32 Limited		9,227	9,376
Non-controlling interests		(1)	(1)
Total equity		9,226	9,375

The accompanying notes form part of the half year consolidated financial statements.

 

CONSOLIDATED CASH FLOW STATEMENT

for the half year ended 31 December 2023

US$M	Note	H1 FY24	H1 FY23
Operating activities
Profit before tax		66	885
Adjustments for:
Non-cash or non-operating significant items		48	(138)
Depreciation and amortisation expense		335	312
Net impairment loss/(reversal) of financial assets	3	48	214
Net impairment loss/(reversal) of non-financial assets		-	(4)
Employee share awards expense		12	13
Net finance (income)/costs		9	(14)
Share of (profit)/loss of equity accounted investments		9	(241)
(Gains)/losses on derivative instruments, contingent consideration and other investments measured at fair value through profit or loss (FVTPL)		(17)	(19)
Other non-cash or non-operating items		(5)	(1)
Changes in assets and liabilities:
Trade and other receivables		(88)	88
Inventories		(84)	(134)
Trade and other payables		(84)	(81)
Provisions and other liabilities		(20)	(25)
Cash generated from operations		229	855
Interest received		49	29
Interest paid		(57)	(54)
Income tax paid		(96)	(347)
Dividends received		2	1
Dividends received from equity accounted investments		76	108
Net cash flows from operating activities		203	592
Investing activities
Purchases of property, plant and equipment		(563)	(352)
Exploration expenditure		(47)	(44)
Exploration expenditure expensed and included in operating cash flows		26	26
Purchase of intangibles		-	(46)
Investment in financial assets		(84)	(116)
Proceeds from financial assets		42	61
Payments related to the acquisition of subsidiaries and joint operations, net of their cash		(3)	(25)
Proceeds from sale of intangibles		18	55
Net cash flows from investing activities		(611)	(441)
Financing activities
Proceeds from interest bearing liabilities		149	28
Repayment of interest bearing liabilities		(110)	(42)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts		(8)	(13)
Share buy-back		(35)	(143)
Dividends paid	4	(145)	(784)
Net cash flows from financing activities		(149)	(954)
Net decrease in cash and cash equivalents		(557)	(803)
Cash and cash equivalents, net of overdrafts, at the beginning of the period		1,258	2,365
Effect of foreign exchange rate changes on cash and cash equivalents		1	(2)
Cash and cash equivalents, net of overdrafts, at the end of the period		702	1,560

The accompanying notes form part of the half year consolidated financial statements.