QUARTERLY REPORT

March 2024

South32 Chief Executive Officer, Graham Kerr: "During the quarter, we achieved significant milestones aligned with our strategy to transform our portfolio toward commodities critical in the transition to a low-carbon future. 

"We approved development of the Taylor zinc-lead-silver deposit at our Hermosa project, which is expected to deliver attractive returns over multiple decades and unlock further value as the first phase of our regional scale opportunity.

"We also announced our decision to sell Illawarra Metallurgical Coal for up to US$1.65 billion, which will realise significant value, further streamline our portfolio and unlock capital to invest in our high-quality base metals projects.

"This quarter, we delivered improved operating results, highlighted by record year to date production at Hillside Aluminium and South Africa Manganese and a 60 per cent uplift in quarterly volumes at Illawarra Metallurgical Coal.

"Operations at Australia Manganese remain temporarily suspended following Tropical Cyclone Megan, while we progress recovery plans to enable a safe return to operations. We remain focused on the safety and wellbeing of our workforce and the Groote Eylandt community.

"With the exception of Australia Manganese, our FY24 production and Operating unit cost guidance is unchanged, placing us in a strong position to capitalise on strengthening market conditions for many of our key commodities."

CORPORATE UPDATE

DEVELOPMENT AND EXPLORATION UPDATE

Hermosa project

Greenfield exploration

Other exploration

PRODUCTION SUMMARY

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

s

WORSLEY ALUMINA (86% SHARE)

Worsley Alumina saleable production increased by 1% (or 34kt) to 2,861kt in the nine months ended March 2024 with planned calciner maintenance completed in the September 2023 and March 2024 quarters. FY24 production guidance remains unchanged at 4,000kt, with the refinery expected to achieve nameplate production rates (4.6Mtpa, 100% basis) in the June 2024 quarter. 

We realised a circa 2% premium to the Platts Alumina index¹⁷ on a volume weighted M-1 basis for alumina sales in the nine months ended March 2024, which reflected market based prices with the exception of a legacy supply contract with Mozal Aluminium which is linked to the LME aluminium price.

During the March 2024 quarter, we converted our second coal-fired boiler to natural gas, which will further reduce the refinery's coal consumption and operational greenhouse gas emissions.

BRAZIL ALUMINA (36% SHARE, NON-OPERATED)

Brazil Alumina saleable production decreased by 7% (or 72kt) to 953kt in the nine months ended March 2024 due to the previously reported impact of third-party power outages and unplanned maintenance. FY24 production guidance remains unchanged at 1,300kt.

We realised a circa 7% premium to the Platts Alumina index¹⁸ on a volume weighted M-1 basis for alumina sales in the nine months ended March 2024, which reflected regional premiums.

BRAZIL ALUMINIUM (40% SHARE, NON-OPERATED)

Brazil Aluminium saleable production increased by 69% (or 31kt) to 76kt in the nine months ended March 2024 as the smelter continued to ramp up all three potlines. FY24 production guidance remains unchanged at 100kt.

HILLSIDE ALUMINIUM (100% SHARE)

Hillside Aluminium saleable production increased by 1kt to an equal record of 540kt in the nine months ended March 2024 as the smelter continued to test its maximum technical capacity, despite the impact of load-shedding. FY24 production guidance remains unchanged at 720kt¹⁶.

Sales increased by 33% in the March 2024 quarter with three carry-over shipments from the prior quarter supporting a drawdown in inventory.

MOZAL ALUMINIUM (63.7% SHARE)

Mozal Aluminium saleable production decreased by 10% (or 26kt) to 237kt in the nine months ended March 2024, as the smelter continued to implement its recovery plan, while managing the impact of load-shedding. Saleable production volumes in the March 2024 quarter were in line with our previously revised guidance, and metal production was returned to 100% LME-grade quality by the end of the quarter. FY24 production guidance remains unchanged at 320kt¹⁶.   

Sales decreased by 36% in the March 2024 quarter due to lower product availability and the timing of shipments. 

As previously disclosed, we continue to work with Eskom and the Government of the Republic of Mozambique to secure the smelter's hydro-electric power supply beyond 2026, as there are currently no viable alternative suppliers of renewable energy at the required scale.

SIERRA GORDA (45% SHARE)

Sierra Gorda payable copper equivalent⁴ production decreased by 13% (or 8.6kt) to 55.4kt in the nine months ended March 2024 as higher plant throughput delivered by the de-bottlenecking project (annualised rate of 48.6Mtpa, 100% basis), was more than offset by lower planned copper grades, and lower molybdenum recoveries in the current phase of the mine plan. FY24 production guidance remains unchanged at 78.7kt payable copper equivalent (copper 67.0kt, molybdenum 0.8kt, gold 22.5koz and silver 550koz), with higher copper grades expected in the June 2024 quarter, consistent with the mine plan.

Sierra Gorda progressed the feasibility study for the fourth grinding line expansion, which is expected to deliver an increase in plant throughput to approximately 58Mtpa (100% basis). The feasibility study and a final investment decision by the joint venture partners is now expected in H1 FY25. 

CANNINGTON (100% SHARE)

Cannington payable zinc equivalent production³ increased by 15% (or 26.9kt) to 212.0kt in the nine months ended March 2024, as the operation realised higher average silver and lead grades, and mitigated the impact of widespread flooding following Tropical Cyclone Kirrily during the quarter. FY24 production guidance is currently unchanged at 287.2kt payable zinc equivalent production (silver 12,500koz, lead 115.0kt and zinc 62.0kt), subject to accessing higher grade slopes planned at the end of the June 2024 quarter.

Lower sales volumes in the March 2024 quarter reflected lower product availability and the deferral of shipments to the June 2024 quarter due to a temporary outage of a third-party rail line following Tropical Cyclone Kirrily. With the rail line now restored, we expect to drawdown inventory in the June 2024 quarter. 

CERRO MATOSO (99.9% SHARE)

Cerro Matoso payable nickel production decreased by 5% (or 1.5kt) to 29.1kt in the nine months ended March 2024, while improving by 8% (or 0.8kt) in the March 2024 quarter due to higher planned nickel grades. FY24 production guidance remains unchanged at 40.5kt.

Sales increased by 14% in the March 2024 quarter due to the timing of shipments. Year to date price realisations for our ferronickel product reflected a discount of ~27% to the LME Nickel Index¹⁹, as market dynamics remained largely unchanged (FY23: ~29% discount).

We continue to progress our strategic review of Cerro Matoso and expect to provide an update with our FY24 financial results. 

ILLAWARRA METALLURGICAL COAL (100% SHARE)

Illawarra Metallurgical Coal saleable production decreased by 28% (or 1,317kt) to 3,450kt in the nine months ended March 2024. Saleable production increased by 60% (or 528kt) to 1,405kt in the March 2024 quarter as the operation completed two planned longwall moves in the prior quarter and delivered improved longwall performance at the Appin mine, which more than offset challenging strata conditions at the Dendrobium mine during the quarter.    

Looking forward, the operation plans to complete a longwall move at Appin and commence the next longwall move at Dendrobium by the end of the June 2024 quarter. FY24 production guidance remains unchanged at 5.0Mt, reflecting a further expected improvement in longwall performance and the shorter duration of planned longwall moves in the June 2024 quarter.

AUSTRALIA MANGANESE (60% SHARE)

Australia Manganese saleable production decreased by 13% (or 352kwmt) to 2,324kwmt in the nine months ended March 2024 as we temporarily suspended operations due to the impacts of Tropical Cyclone Megan.

On 16 to 17 March 2024, Tropical Cyclone Megan severely impacted operations at Groote Eylandt, with record rainfall of 681mm and the second strongest wind gusts in the past 20 years.

The intense weather system resulted in widespread flooding across Groote Eylandt and significant damage to critical infrastructure, including the wharf and port infrastructure and a haulage road bridge that connects the northern pits of the Western Leases mining area and the processing plant. 

The operational recovery has focused on re-establishing critical services and dewatering targeted mining pits.

Engineering studies are underway on the wharf and haulage road bridge infrastructure restoration. These studies will inform the final schedule and capital costs. Based on our preliminary schedule estimate, we expect to recommence wharf operations and export sales in Q3 FY25.

Alternative shipping options are being evaluated to mitigate the impact of the wharf outage. These options may establish partial ore export capability in advance of the wharf restoration.

Further detail and anticipated capital costs will be provided once the recovery plans are sufficiently progressed. Guidance for Australia Manganese remains withdrawn.

Australia Manganese maintains property damage and business interruption insurance. We are working with our insurers to assess the impact of Tropical Cyclone Megan and expected insurance recoveries.

SOUTH AFRICA MANGANESE (ORE 54.6% SHARE)

South Africa Manganese saleable production increased by 8% (or 119kwmt) to a record 1,641kwmt in the nine months ended March 2024 as the operation delivered improved mining performance, and planned maintenance was deferred to the June 2024 quarter. FY24 production guidance remains unchanged at 2,000kwmt.

Sales decreased by 14% in the March 2024 quarter due to the timing of shipments. Our year to date realised price for manganese ore sales was a premium of approximately 6% to the medium grade 37% manganese lump ore index²¹ on a M-1 basis, as we increased volumes of premium material from our Wessels mine.

NOTES

The following abbreviations have been used throughout this report: US$ million (US$M); US$ billion (US$B); grams per tonne (g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per annum (ktpa); million tonnes (Mt); million tonnes per annum (Mtpa); ounces (oz); thousand ounces (koz); million ounces (Moz); thousand wet metric tonnes (kwmt); million wet metric tonnes (Mwmt); million wet metric tonnes per annum (Mwmt pa); 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

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.

FURTHER INFORMATION

Approved for release to the market by Graham Kerr, Chief Executive Officer
JSE Sponsor: The Standard Bank of South Africa Limited

22 April 2024

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