Wrap Text
Quarterly Report December 2021
South32 Limited
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX, LSE, JSE Share Code: S32 ADR: SOUHY
ISIN: AU000000S320
QUARTERLY REPORT DECEMBER 2021
• Achieved a 4% uplift in quarterly alumina production with Worsley Alumina continuing to operate above
nameplate capacity, and record production at Brazil Alumina as it returned to normalised rates following
the prior quarter’s bauxite unloader outage
• Revised Cannington FY22 production guidance higher by 5% with the operation on-track to transition to
100% truck haulage in the June 2022 quarter
• Increased payable nickel production at Cerro Matoso by 26% with plant availability benefitting from
completion of the furnace refurbishment in FY21
• Revised Australia Manganese FY22 production guidance lower by 9% as COVID-19 and weather impacted
production, preventing the re-build of stockpiles ahead of the wet season
• Increased South Africa Manganese production by 7% in the December 2021 half year with higher output of
premium material
• Completed an extended longwall move at Illawarra Metallurgical Coal in the quarter, resulting in lower
production for the December 2021 half year
• Realised record aluminium pricing in the December 2021 half year, while managing the impact of third-
party port and freight congestion for our Southern African smelters
• Committed to grow our green aluminium capacity through our agreed acquisition of an additional
shareholding in Mozal Aluminium(note 1) and restart of the Brazil Aluminium smelter(note 2)
• Added copper exposure to our portfolio, announcing the acquisition of a 45% interest in the Sierra Gorda
joint venture, which is expected to complete in the March 2022 quarter(note 3)
• Finalised the zinc-lead-silver Taylor Deposit’s pre-feasibility study following the end of the period,
confirming its potential to be the first development option at our Hermosa project(note 4)
“We achieved a number of strong production results across our portfolio and realised significantly
higher commodity prices in the December 2021 half year, lifting operating margins across the Group.
“We delivered higher base metals production and our integrated aluminium supply chain benefitted from
additional alumina volumes and record aluminium prices.
“We took further steps to reshape our portfolio for a low carbon future, increasing our exposure to critical metals
with our planned acquisition of a 45% interest in the Sierra Gorda copper mine in Chile and further investment in
green aluminium.
“We expect to grow our total share of aluminium production by approximately 24% to 1.2Mt in FY23, through our
proposed acquisition of an additional interest in the hydro powered Mozal Aluminium smelter and the restart of
the Brazil Aluminium smelter using 100 per cent renewable power.
“We returned US$316M to shareholders during the period through our on-market share buy-back and the
payment of ordinary and special dividends. Looking forward our shareholders are well positioned to benefit from
stronger markets and production growth, with our capital management framework designed to reward owners
as our financial performance improves.”
Graham Kerr, South32 CEO
Production summary
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 QoQ
Alumina production (kt) 2,716 2,610 (4%) 1,401 1,278 1,332 4%
Aluminium production (kt) 496 494 (0%) 248 248 246 (1%)
Metallurgical coal production 3,262 2,767 (15%) 1,399 1,575 1,192 (24%)
(kt)
Manganese ore production 2,920 2,861 (2%) 1,459 1,565 1,296 (17%)
(kwmt) nickel production (kt)
Payable 16.1 20.3 26% 6.1 9.6 10.7 11%
Payable silver production (koz) 5,993 6,710 12% 3,130 3,493 3,217 (8%)
Payable lead production (kt) 57.6 60.2 5% 31.2 31.9 28.3 (11%)
Payable zinc production (kt) 30.4 32.7 8% 18.0 15.4 17.3 12%
Unless otherwise noted: percentage variance relates to performance during the half year ended December 2021
compared with the half year ended December 2020 (HoH), or the December 2021 quarter compared with the
September 2021 quarter (QoQ); production and sales volumes are reported on an attributable basis.
CORPORATE UPDATE
• The COVID-19 pandemic continues to impact our operations and supply chains in different ways, across our
global portfolio. We have seen an increase in case numbers and workforce restrictions in many of the
jurisdictions in which we operate, impacting labour availability.
• Port congestion and tight global freight conditions continue to impact our supply chains, slowing the
movement of inventory, most notably for our aluminium smelters in Southern Africa. While the resultant
build in aluminium inventory during the December 2021 half year is expected to persist in the near term,
we have and continue to establish alternative shipping solutions and points of dispatch to minimise the
impact. We expect the working capital build to unwind once we realise the full benefit of our initiatives and
port congestion and general freight tightness is alleviated.
• We received net distributions(note 5) of US$102M (South32 share) from our manganese equity accounted
investments (Manganese EAI) in the December 2021 half year.
• We spent US$60M purchasing a further 25M shares at an average price of A$3.36 via our on-market share
buy-back during the December 2021 half year. To 31 December 2021 our US$2B capital management
program was 90% complete with US$192M remaining to be returned to shareholders ahead of its
extension or expiry on 2 September 2022(note 6).
• We refinanced our multicurrency revolving credit facility, securing US$1.4B of commitments for a five-year
term to 2026, with options to extend for up to a further two years by mutual agreement. The facility has
been established as a sustainability-linked loan with measures linked to our ongoing commitment to
emissions reduction and improving energy and water use efficiency.
• Reflecting our strong balance sheet and continued disciplined approach to capital allocation, our current
BBB+/Baa1 credit ratings were re-affirmed by S&P and Moody’s respectively.
• Our Group Underlying effective tax rate (ETR) for the December 2021 half year is expected to be
approximately 30%, reflecting the corporate tax rates of the jurisdictions in which we operate(note 7), as
well as a change in accounting treatment with our manganese business (including a royalty related tax for
Australia Manganese) now included in Underlying earnings on a proportionally consolidated basis(note 8).
The ETR for our manganese business in the December 2021 half year is expected to be in a range of
approximately 40-45%, including the royalty related tax(note 9).
• We entered into binding conditional agreements with Sumitomo Metal Mining and Sumitomo Corporation
(collectively Sumitomo) on 14 October 2021 to acquire a 45% interest in the Sierra Gorda copper mine in
Chile for upfront cash consideration of US$1.55B and contingent price-linked consideration of up to
US$500M(note 3). The acquisition is expected to be completed in the March 2022 quarter, subject to the
satisfaction of the remaining conditions.
• Our acquisition of an additional shareholding in Mozal Aluminium from MCA Metals (Mitsubishi)(note 1),
remains on-track to complete in the March 2022 quarter. Our shareholding is expected to increase by a
minimum of 16.6% to 63.7% for a headline purchase price of US$166M.
• Following the end of the period, we announced our decision to participate in the restart of the Alumar
aluminium smelter (Brazil Aluminium, 40% South32 share), together with our joint venture partner Alcoa
Corporation (Alcoa)(note 2). First production is expected in the June 2022 quarter, with full capacity of
447ktpa (100%) in the March 2023 quarter. We have secured cost efficient renewable power for our share
of production, while our alumina supply will be sourced from the co-located Brazil Alumina refinery (36%
South32 share).
• Separately, to secure and align our Brazilian bauxite supply requirements, we have entered into a
conditional agreement for the acquisition of an additional 18.2% interest in the MRN bauxite mine from
subsidiaries of Alcoa, which would take our ownership of the mine to 33%. Completion is expected in the
June 2022 half year, subject to the satisfaction of conditions.
• Samancor Manganese entered into a binding conditional agreement on 29 November 2021 to divest the
Metalloys manganese alloy smelter, subject to the satisfaction of conditions.
• Illawarra Metallurgical Coal’s Dendrobium Next Domain life extension project was declared as State
Significant Infrastructure by the New South Wales Government on 4 December 2021. We are working
towards the completion of an alternate mine plan and the submission of an environmental impact
statement for the project in the March 2022 quarter.
DEVELOPMENT AND EXPLORATION UPDATE
Hermosa project
• Following the end of the period, we reported the results of a pre-feasibility study (PFS) for the Taylor
Deposit(note 4), the first development option at our Hermosa project. The PFS results support Taylor’s
potential to be the first stage of a multi-decade operation, establishing Hermosa as a globally significant
producer of metals critical to a low carbon future. An initial development case demonstrates a sustainable,
highly productive zinc-lead-silver underground mine and conventional process plant, in the first quartile of
the industry cost curve. Completion of the feasibility study and a final investment decision to construct
Taylor are expected in mid CY23.
• In parallel, we are advancing a PFS for the Clark Deposit, following the completion of a scoping study which
confirmed the potential for a separate, integrated underground mining operation producing battery-grade
manganese, as well as zinc and silver(note 4). Our study work will also consider the opportunity to
integrate its development with Taylor, potentially unlocking further operating and capital efficiencies.
• We directed US$8M to exploration programs at Hermosa in the December 2021 half year, including work
to identify targets across the broader land package. As part of this work, we have identified a highly
prospective corridor which contains Taylor and Clark as well as the Peake and Flux exploration targets(note
4). Exploration drilling at both prospects is planned during CY22, with the Flux program subject to the
receipt of required permits.
Other development and exploration options
• At our Ambler Metals joint venture, infill drilling was completed at the Arctic Deposit during the summer
exploration season. Further resource drilling at the Arctic Deposit and drill testing of regional exploration
targets in the Ambler Belt is planned for the CY22 summer exploration season. An update on the forward
work program from our joint venture partner can be accessed at www.trilogymetals.com.
• We invested US$13M during the December 2021 half year in our early stage greenfield exploration
opportunities with multiple programs targeting base metals underway in Australia, USA, Canada,
Argentina, Peru and Ireland.
• We directed US$24M toward exploration programs at our existing operations and development options in
the December 2021 half year (US$17M capitalised), including US$2M for our Manganese EAI (US$1M
capitalised), US$8M at the Hermosa project as noted above (all capitalised) and US$7M at Ambler Metals
(all capitalised).
PRODUCTION SUMMARY
Production guidance FY22e
FY21 1H22 Guidance comments
(South32 share) (note a)
Worsley Alumina
Alumina production (kt) 3,963 1,979 3,965
Brazil Alumina
Alumina production (kt) 1,398 631 1,300
Brazil Aluminium
Smelter expected to
restart in the June 2022
Aluminium production (kt) - - 5 quarter, reaching full
capacity (179kt, 40%
South32 share) in the
March 2023 quarter
Hillside Aluminium(note 10)
Aluminium production (kt) 717 358 720
Mozal Aluminium(note 10)
No change to guidance
pending the completion of
Aluminium production (kt) 265 136 273 our acquisition of an
additional
shareholding(note 1)
Illawarra Metallurgical Coal
Total coal production (kt) 7,645 3,145 7,300 Subject to further COVID-
Metallurgical coal production (kt) 6,170 2,767 6,300 19 related impacts on
labour availability. An
update to our FY22 and
FY23 guidance is expected
Energy coal production (kt) 1,475 378 1,000 to be provided with our H1
FY22 results
announcement
Australia Manganese
Revised to reflect COVID-
19 and weather disrupted
Manganese ore production (kwmt) 3,529 1,704 Down 3,200 production, preventing the
re-build of stockpiles
ahead of the wet season
South Africa Manganese
Manganese ore production(note 11)
2,264 1,157 2,200
(kwmt)
Cerro Matoso
Payable nickel production (kt) 34.1 20.3 43.8
Cannington
Payable zinc equivalent
production(note 12) (kt) 319.0 152.5 Up 292.2 Revised to reflect
continued strong
Payable silver production (koz) 13,655 6,710 Up 12,283 underground mine
performance and higher
average grades
Payable lead production (kt) 131.8 60.2 Up 117.9
Payable zinc production (kt) 67.7 32.7 Up 66.7
a. The denotation (e) refers to an estimate or forecast year. All guidance is subject to further potential impacts from COVID-19.
MARKETING SUMMARY
Market conditions remained strong in the December 2021 half year. Robust demand, congested freight markets
and supply disruptions, including energy curtailments, resulted in significant price increases across many of our
commodities.
1H22 1H22
Realised prices(note 13) 1H21 2H21 1H22 vs vs
1H21 2H21
Worsley Alumina
Alumina (US$/t) 278 309 389 40% 26%
Brazil Alumina
Alumina (US$/t) 277 297 387 40% 30%
Hillside Aluminium
Aluminium (US$/t) 1,882 2,386 2,952 57% 24%
Mozal Aluminium
Aluminium (US$/t) 1,943 2,457 3,041 57% 24%
Illawarra Metallurgical Coal
Metallurgical coal (US$/t) 107 123 303 183% 146%
Energy coal (US$/t) 31 51 108 248% 112%
Australia Manganese(note 14)
Manganese ore (US$/dmtu, FOB) 3.93 4.34 4.59 17% 6%
South Africa Manganese(note
15)
Manganese ore (US$/dmtu, FOB) 3.49 3.56 3.47 (1%) (3%)
Cerro Matoso(note 16)
Payable nickel (US$/lb) 6.29 7.06 8.39 33% 19%
Cannington(note 17)
Payable silver (US$/oz) 26.0 24.9 21.0 (19%) (16%)
Payable lead (US$/t) 1,744 1,965 2,180 25% 11%
Payable zinc (US$/t) 2,228 2,468 2,988 34% 21%
WORSLEY ALUMINA (86% SHARE)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Alumina production (kt) 2,010 1,979 (2%) 1,047 1,006 973 (7%) (3%)
Alumina sales (kt) 2,078 1,946 (6%) 1,077 924 1,022 (5%) 11%
Worsley Alumina saleable production decreased by 2% (or 31kt) to 1,979kt in the December 2021 half year.
FY22 production guidance remains unchanged at 3,965kt with our ongoing focus on improvement initiatives at
the refinery expected to maintain production above nameplate capacity of 4.6Mt (100% basis).
We realised a circa 8% premium to the Platts Alumina Index(note 18) on a volume weighted M-1 basis for
alumina sales from Worsley Alumina in the December 2021 half year, with our realised prices benefitting from
the impact of elevated global freight rates which are also reflected in Operating unit costs.
Notwithstanding the refinery’s continued strong performance that has enabled us to capture the benefit of
market conditions, elevated caustic soda prices and freight rates are expected to result in Operating unit costs
for the December 2021 half year being approximately 5% above our FY22 guidance (US$241/t). We expect
higher caustic soda prices to persist in the June 2022 half year further impacting the refinery’s Operating unit
costs. Updated FY22 Operating unit cost guidance will be provided in our financial results announcement for the
December 2021 half year.
BRAZIL ALUMINA (36% SHARE)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Alumina production (kt) 706 631 (11%) 354 272 359 1% 32%
Alumina sales (kt) 674 626 (7%) 334 247 379 13% 53%
Saleable production decreased by 11% (or 75kt) to 631kt in the December 2021 half year. Production improved
by 32% (or 87kt) to a record 359kt in the December quarter as the refinery returned to nameplate capacity in
October 2021, following an incident in July 2021 that damaged one of the two bauxite unloaders at the
operation. FY22 production guidance remains unchanged at 1,300kt.
Sales increased by 53% in the December 2021 quarter with the prior quarter’s shipment schedule impacted by
the bauxite unloader outage and vessel availability. We realised a circa 4% premium to the Platts Alumina
Index18 on a volume weighted M-1 basis for alumina sales from Brazil Alumina in the December 2021 half year,
with our realised prices benefitting from the impact of elevated global freight rates which are also reflected in
Operating unit costs.
Notwithstanding the improvement in production volumes from the refinery returning to nameplate capacity,
the impact of elevated raw material input prices, in combination with the already realised volume
impact of the bauxite unloader outage, is expected to result in Operating unit costs for the December 2021 half
year being approximately 30% higher than the June 2021 half year (US$201/t).
HILLSIDE ALUMINIUM (100%)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Aluminium production (kt) 361 358 (1%) 181 180 178 (2%) (1%)
Aluminium sales (kt) 347 336 (3%) 172 160 176 2% 10%
Hillside Aluminium saleable production decreased by 1% (or 3kt) to 358kt in the December 2021 half year as the
smelter continued to test its maximum technical capacity, despite the impact from higher load-shedding in the
period. FY22 production guidance, which does not assume any load-shedding impact, remains unchanged at
720kt(note 10).
During the half year, we completed a feasibility study for the AP3XLE energy efficiency project, approving its
execution. We expect to roll the technology out as part of the smelter's pot relining program starting in FY23,
bringing both volume and efficiency benefits, while reducing carbon intensity.
Third party port performance at Richards Bay and ongoing congestion in global shipping conditions, impacted
the smelter’s capacity to sustainably unwind working capital that was built in the September 2021 quarter. In
response we have and continue to establish alternative discharge and cargo shipping options to mitigate these
challenges, while maintaining sales volumes into strong market conditions. The smelter realised record prices of
US$2,952/t in the December 2021 half year. We expect the current working capital build to unwind once we
realise the full benefit of our initiatives, and port congestion and general freight tightness is alleviated.
While the smelter has benefitted from the continuation of strong underlying realised prices, that are anticipated
to further improve operating margins, elevated raw material input costs and the smelter’s energy price linkage
to the South Africa Producer Price Index are expected to result in an increase in Operating unit costs in the
December 2021 half year (June 2021 half year: US$1,722/t) of approximately 10%.
MOZAL ALUMINIUM (47.1% SHARE)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Aluminium production (kt) 135 136 1% 67 68 68 1% 0%
Aluminium sales (kt) 130 122 (6%) 66 55 67 2% 22%
Mozal Aluminium saleable production increased by 1% (or 1kt) to 136kt in the December 2021 half year as the
benefit of our investment in the AP3XLE energy efficiency project more than offset the impact of further load-
shedding. FY22 production guidance, which does not assume any load-shedding impact, remains unchanged at
273kt(note 10). Updated production guidance will be provided following the completion of our acquisition of an
additional shareholding in Mozal Aluminium that remains on-track to complete in the March 2022 quarter(note
1).
Challenging port and global shipping conditions impacted sales volumes from Mozal Aluminium in the
December 2021 half year. Conditions improved in the December 2021 quarter with sales increasing by 22%. The
smelter realised record prices of US$3,041/t in the December 2021 half year.
While the smelter has benefitted from the continuation of strong underlying realised prices, that are anticipated
to further improve operating margins, elevated raw material input costs are expected to result in an increase in
Operating unit costs in the December 2021 half year (June 2021 half year: US$1,818/t) of approximately 10%.
ILLAWARRA METALLURGICAL COAL (100%)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Total coal production (kt) 4,096 3,145 (23%) 1,725 1,888 1,257 (27%) (33%)
Total coal sales(note 19) (kt) 4,027 3,255 (19%) 2,087 1,708 1,547 (26%) (9%)
Metallurgical coal production (kt) 3,262 2,767 (15%) 1,399 1,575 1,192 (15%) (24%)
Metallurgical coal sales (kt) 3,165 2,877 (9%) 1,697 1,490 1,387 (18%) (7%)
Energy coal production (kt) 834 378 (55%) 326 313 65 (80%) (79%)
Energy coal sales (kt) 862 378 (56%) 390 218 160 (59%) (27%)
Illawarra Metallurgical Coal saleable production decreased by 23% (or 951kt) to 3,145kt in the December 2021
half year as we completed an extended longwall move at the Dendrobium mine in the current quarter. We made
no energy coal sales of low-margin coal wash, with elevated freight rates making them uneconomic in the period.
The implementation of additional COVID-19 workforce restrictions in New South Wales has the potential to
further impact labour availability across the June 2022 half year. We expect to provide updated production
guidance for FY22 and FY23 at our financial results announcement for the December 2021 half year, as we
continue to monitor the impact of COVID-19 and progress design of an alternate mine plan for the Dendrobium
Next Domain life extension project.
Lower December 2021 half year production and sales volumes, and higher price-linked royalties arising from the
significant increase in prices year to date, are expected to result in our Operating unit costs for the
December 2021 half year being approximately 20% above our FY22 guidance (US$101/t). Updated FY22 Operating
unit cost guidance will be provided in our financial results announcement for the December 2021 half year.
AUSTRALIA MANGANESE (60% SHARE)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Manganese ore production (kwmt) 1,834 1,704 (7%) 954 897 807 (15%) (10%)
Manganese ore sales (kwmt) 1,865 1,737 (7%) 871 906 831 (5%) (8%)
Australia Manganese saleable production decreased by 7% (or 130kwmt) to 1,704kwmt in the December 2021
half year with lower yield at the primary concentrator, while the PC02 circuit continued to deliver production
above nameplate capacity (13% of total production, 1H21: 10%).
FY22 production guidance has been revised lower by 9% to 3,200kwmt with wet weather disruptions and
additional COVID-19 workforce restrictions in the Northern Territory preventing the re-build of stockpiles ahead
of the wet season.
Lower December 2021 half year production and sales volumes are expected to result in our Operating unit costs
for the period being approximately 5% above our FY22 guidance (US$1.68/dmtu). Updated FY22 Operating unit
cost guidance will be provided in our financial results announcement for the December 2021 half year.
SOUTH AFRICA MANGANESE (60% SHARE)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Manganese ore production(note 11)
1,086 1,157 7% 505 668 489 (3%) (27%)
(kwmt)
Manganese ore sales(note 11) (kwmt) 1,103 1,202 9% 586 566 636 9% 12%
South Africa Manganese saleable production increased by 7% (or 71kwmt) to 1,157kwmt in the December 2021
half year as planned maintenance completed in the December 2021 quarter was more than offset by higher
volumes of premium material from our Mamatwan mine as we optimised our product mix.
Ore sales increased by 12% during the December 2021 quarter and 9% across the half year as we continued to
truck additional volume, drawing down inventory and optimising our sales mix for market conditions. As a
result, our sales achieved a premium of approximately 11% to the medium grade 37% manganese lump ore
index(note 20) on a volume weighted M-1 basis.
FY22 production guidance remains unchanged at 2,200kwmt as we continue to monitor market conditions and
our use of higher cost trucking.
CERRO MATOSO (99.9% SHARE)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Payable nickel production (kt) 16.1 20.3 26% 6.1 9.6 10.7 75% 11%
Payable nickel sales (kt) 16.5 20.1 22% 6.1 10.4 9.7 59% (7%)
Cerro Matoso payable nickel production increased by 26% (or 4.2kt) to 20.3kt in the December 2021 half year as
plant availability returned to normal following the major plant refurbishment completed in FY21. Separately,
average ore processed nickel grades improved to 1.73% (1H21: 1.57%) with the processing of higher-grade
material from the Q&P project.
Notwithstanding a shipment slipping at the end of the period due to congestion at a destination port, nickel
sales increased by 22% in the December 2021 half year as production levels normalised. While our ferronickel
product continues to sell at a discount to the LME Nickel index price on a M or M+1 basis, this discount
narrowed during the December 2021 half year, averaging approximately 5% (FY21: 9%).
FY22 production guidance remains unchanged at 43.8kt with the operation expected to benefit from a further
improvement in plant availability and additional volumes from the higher-grade Q&P project in the June 2022
half year.
CANNINGTON (100% SHARE)
2Q22 2Q22
South32 share 1H21 1H22 HoH 2Q21 1Q22 2Q22 vs vs
2Q21 1Q22
Payable zinc equivalent
140.5 152.5 9% 76.4 78.2 74.3 (3%) (5%)
production(note 12) (kt)
Payable silver production (koz) 5,993 6,710 12% 3,130 3,493 3,217 3% (8%)
Payable silver sales (koz) 6,326 6,718 6% 3,359 2,718 4,000 19% 47%
Payable lead production (kt) 57.6 60.2 5% 31.2 31.9 28.3 (9%) (11%)
Payable lead sales (kt) 61.4 63.3 3% 31.9 25.3 38.0 19% 50%
Payable zinc production (kt) 30.4 32.7 8% 18.0 15.4 17.3 (4%) 12%
Payable zinc sales (kt) 31.8 32.8 3% 20.0 14.3 18.5 (8%) 29%
Cannington payable zinc equivalent production increased by 9% (or 12kt) to 152.5kt in the December 2021 half
year as higher grades across all products and strong underground performance supported metal production.
FY22 production guidance has been revised higher by 5% (silver 12,283koz, lead 117.9kt and zinc 66.7kt,
for 292.2kt of payable zinc equivalent production(note 12)) with the operation remaining on-track to transition
to 100% truck haulage from the June 2022 quarter.
Payable zinc sales increased by 29% during the December 2021 quarter as we drew down inventory, while
payable lead and silver sales increased by 50% and 47% respectively due to the timing of shipments, following
adverse weather in the September 2021 quarter.
A trial of light battery electric vehicles is expected to commence during the June 2022 half year, testing their
potential use in our vehicle fleet.
NOTES
1. Refer to market release “South32 to acquire up to an additional 25% of Mozal Aluminium” dated 30 September 2021.
2. Refer to market release “Restart of Brazil Aluminium using renewable power” dated 6 January 2022.
3. Refer to market release “South32 to acquire a 45% interest in the Sierra Gorda copper mine” dated 14 October 2021.
Upfront consideration subject to customary working capital and net debt adjustments. Contingent price-linked
consideration payable at threshold copper production rates and prices in the years 2022-25. The estimates indicated
in the original announcement are qualifying foreign estimate and are not reported in accordance with the JORC Code.
A Competent Person has not done sufficient work to classify foreign
estimates as Mineral Resources or Ore Reserves in accordance with the JORC Code. It is uncertain that following
evaluation and/or further work that the foreign estimates will be reported as Mineral Resources or Ore Reserves in
accordance with the JORC Code.
4. Refer to market release “Hermosa project update” dated 17 January 2022.
5. Net distributions from equity accounted investments includes net debt movements and dividends, which are unaudited and
should not be considered as an indication of or alternative to an IFRS measure of profitability, financial performance
or liquidity.
6. Since inception, US$1.4B has been allocated to the on-market share buy-back (674M shares at an average price of A$2.88
per share) and US$386M returned in the form of special dividends.
7. The corporate tax rates of the geographies where the Group operates include: Australia 30%, South Africa 28%,
Colombia 31%,Mozambique 0% and Brazil 34%. The Colombian corporate tax rate increased to 35% from 1 January 2022.
The Mozambique operations are subject to a royalty on revenues instead of income tax.
8. Our manganese business is included in our Underlying EBITDA, EBIT and earnings on a proportionally consolidated
basis from 1 July 2021, aligning our approach for material equity accounted investments including the proposed
acquisition of Sierra Gorda.
9. Australia Manganese is subject to a royalty related tax equal to 20% of adjusted EBIT which is included in tax expense.
10. Production guidance for Hillside Aluminium and Mozal Aluminium does not assume any load-shedding impact on production.
11. Consistent with the presentation of South32’s segment information, South Africa Manganese ore production and sales
have been reported at 60%. The Group’s financial statements will continue to reflect a 54.6% interest in South
Africa Manganese ore.
12. Payable zinc equivalent production (kt) was calculated by aggregating revenues from payable silver, lead and zinc,
and dividing the total Revenue by the price of zinc. FY21 realised prices for zinc (US$2,357/t), lead (US$1,862/t)
and silver (US$25.4/oz) have been used for FY21, H1 FY22 and FY22e.
13. Realised prices are unaudited. Volumes and prices do not include any third party trading that may be undertaken
independently of equity production. Realised sales price is calculated as sales Revenue divided by sales volume
unless otherwise stated.
14. Realised ore prices are unaudited and calculated as external sales Revenue less freight and marketing costs, divided
by external sales volume. Ore converted to sinter and alloy, and sold externally, is eliminated as an intracompany
transaction.
15. Realised ore prices are unaudited and calculated as external sales Revenue less freight and marketing costs, divided
by external sales volume. Manganese ore sales are grossed-up to reflect a 60% accounting effective interest.
16. Realised nickel sales prices are unaudited and inclusive of by-products.
17. Realised prices for Cannington are unaudited and net of treatment and refining charges.
18. The sales volume weighted average of the Platts Alumina Index (FOB Australia) on the basis of a one month lag to
published pricing (Month minus one or “M-1”) for Worsley Alumina was US$360/t and Brazil Alumina was US$371/t in the
December 2021 half year.
19. Illawarra Metallurgical Coal sales are adjusted for moisture and will not reconcile directly to Illawarra
Metallurgical Coal production.
20. The sales volume weighted average of the Metal Bulletin 37% manganese lump ore index (FOB Port Elizabeth,
South Africa) on the basis of M-1 was US$3.12/dmtu in the December 2021 half year.
The following abbreviations have been used throughout this report: US$ million (US$M); US$ billion (US$B); grams per
tonne (g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per annum (ktpa); million tonnes (Mt); million tonnes per
annum (Mtpa); ounces (oz); th ousand ounces (koz); million ounces (Moz); thousand wet metric tonnes (kwmt); million wet
metric tonnes (Mwmt); million wet metric tonnes per annum (Mwmt pa); dry metric tonne unit (dmtu); thousand dry metric
tonnes (kdmt).
Figures in Italics indicate that an adjustment has been made since the figures were previously reported.
The denotation (e) refers to an estimate or forecast year.
OPERATING PERFORMANCE
South32 share 1H21 1H22 2Q21 3Q21 4Q21 1Q22 2Q22
Worsley Alumina (86% share)
Alumina hydrate production (kt) 2,012 1,994 1,002 977 992 997 997
Alumina production (kt) 2,010 1,979 1,047 875 1,078 1,006 973
Alumina sales (kt) 2,078 1,946 1,077 840 1,086 924 1,022
Brazil Alumina (36% share)
Alumina production (kt) 706 631 354 343 349 272 359
Alumina sales (kt) 674 626 334 384 333 247 379
Hillside Aluminium (100%)
Aluminium production (kt) 361 358 181 176 180 180 178
Aluminium sales (kt) 347 336 172 191 169 160 176
Mozal Aluminium (47.1% share)
Aluminium production (kt) 135 136 67 64 66 68 68
Aluminium sales (kt) 130 122 66 64 68 55 67
Illawarra Metallurgical Coal (100%)
Total coal production (kt) 4,096 3,145 1,725 1,824 1,725 1,888 1,257
Total coal sales(note 19) (kt) 4,027 3,255 2,087 1,823 1,766 1,708 1,547
Metallurgical coal production (kt) 3,262 2,767 1,399 1,568 1,340 1,575 1,192
Metallurgical coal sales (kt) 3,165 2,877 1,697 1,542 1,367 1,490 1,387
Energy coal production (kt) 834 378 326 256 385 313 65
Energy coal sales (kt) 862 378 390 281 399 218 160
Australia Manganese (60% share)
Manganese ore production (kwmt) 1,834 1,704 954 829 866 897 807
Manganese ore sales (kwmt) 1,865 1,737 871 865 891 906 831
Ore grade sold (%, Mn) 44.4 44.2 44.5 44.4 44.5 44.2 44.2
South Africa Manganese (60% share)
Manganese ore production(note 11) (kwmt) 1,086 1,157 505 580 598 668 489
Manganese ore sales(note 11) (kwmt) 1,103 1,202 586 497 636 566 636
Ore grade sold (%, Mn) 39.9 39.5 40.0 40.6 39.5 40.3 38.7
Cerro Matoso (99.9% share)
Ore mined (kwmt) 1,470 2,416 825 594 1,174 1,058 1,358
Ore processed (kdmt) 1,155 1,335 457 528 702 620 715
Ore grade processed (%, Ni) 1.57 1.73 1.55 1.60 1.76 1.76 1.71
Payable nickel production (kt) 16.1 20.3 6.1 7.1 10.9 9.6 10.7
Payable nickel sales (kt) 16.5 20.1 6.1 6.7 10.3 10.4 9.7
Cannington (100%)
Ore mined (kwmt) 1,409 1,475 709 714 696 750 725
Ore processed (kdmt) 1,302 1,385 672 724 720 687 698
Silver ore grade processed (g/t, Ag) 174 177 179 177 213 185 169
Lead ore grade processed (%, Pb) 5.1 5.2 5.2 5.8 6.6 5.5 4.9
Zinc ore grade processed (%, Zn) 3.3 3.4 3.7 3.5 3.9 3.2 3.6
Payable Zinc equivalent production(note 12)
140.5 152.5 76.4 81.4 97.1 78.2 74.3
(kt)
Payable silver production (koz) 5,993 6,710 3,130 3,484 4,178 3,493 3,217
Payable silver sales (koz) 6,326 6,718 3,359 2,950 4,460 2,718 4,000
Payable lead production (kt) 57.6 60.2 31.2 33.0 41.2 31.9 28.3
Payable lead sales (kt) 61.4 63.3 31.9 28.4 41.9 25.3 38.0
Payable zinc production (kt) 30.4 32.7 18.0 17.8 19.5 15.4 17.3
Payable zinc sales (kt) 31.8 32.8 20.0 15.9 21.3 14.3 18.5
Forward-looking statements
This release contains forward-looking statements, including statements about trends in commodity
prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies
and objectives of management; capital costs and scheduling; operating costs; anticipated productive
lives of projects, mines and facilities; and provisions and contingent liabilities. These forward-looking statements
reflect expectations at the date of this release, however they are not guarantees or predictions of future performance.
They involve known and unknown risks, uncertainties and other factors, many of which are beyond our control,
and which may cause actual results to differ materially from those expressed in the statements contained in this
release. Readers are cautioned not to put undue reliance on forward-looking statements. Except as required by
applicable laws or regulations, the South32 Group does not undertake to publicly update or review any
forward-looking statements, whether as a result of new information or future events. Past performance cannot
be relied on as a guide to future performance. South32 cautions against reliance on any forward looking
statements or guidance, particularly in light of the current economicclimate and the significant volatility,
uncertainty and disruption arising in connection with COVID-19.
FURTHER INFORMATION
INVESTOR RELATIONS MEDIA RELATIONS
Tom Gallop Miles Godfrey Jenny White
M +61 439 353 948 M +61 415 325 906 M +44 7900 046 758
E Tom.Gallop@south32.net E Miles.Godrey@south32.net E Jenny.White@south32.net
24 January 2022
Approved for release by Graham Kerr, Chief Executive Officer
JSE Sponsor: UBS South Africa (Pty) Ltd
Date: 24-01-2022 07:05:00
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