South32 Ltd. · ASX:S32
South32 — FY2021 Earnings Presentation
60 slides from South32's earnings presentation, Aug 18, 2021
Slide 1: 2021 Full Year Financial Results Presentation
19 AUGUST 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 south32.net 2021 FULL YEAR FINANCIAL RESULTS PRESENTATION South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) will h
Slide 2: Outlook
Slide 3: Important Notices
IMPORTANT NOTICES This presentation should be read in conjunction with the “Financial Results and Outlook - year ended 30 June 2021” announcement released on 19 August 2021, which is available on South32's website (www.south32 net), Figures in italics indicate that an adjustment has been made since
Slide 4: FY21 Overview
FY21 OVERVIEW We have a strong foundation from which to position our business for a low carbon future Progressed studies for our base metals development projects Hermosa and Ambler Metals Achieved record production at three operations Completed the divestments of South Africa Energy Coal and TEMCO m
Slide 5: Financial Scorecard
FINANCIAL SCORECARD Our strong operating performance has translated to our financial result and increased returns for shareholders Net Loss after Tax US$195M Underlying Earnings US$489M Underlying EBITDA 732% to US$1.6B Underlying EPS 7164% to 10.3 US cents per share Free cash flow® 442% to US$825M
Slide 6: Our Response to COVID-19
j OUR RESPONSE TO COVID-19 KEEPING OUR PEOPLE SAFE AND WELL We have tailored controls in place at our operations to help protect our employees and contractors We have provided mental health and wellbeing support to our people We are actively engaged with governments and health authorities regarding
Slide 7: Health & Safety Performance
HEALTH & SAFETY PERFORMANCE II eee 2(a) 2,3 3 Fatalities” TRIF TRILF™ aa 4.2 4.3 15 1 1 13 aa FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21 Notes: International Council ‘on Mining & Metals a. _ Incidents are included where South32 controls the work location or controls the work activity. In FY20, two
Slide 8: Inclusion and Diversity Progress
INCLUSION AND DIVERSITY PROGRESS Percentage of total employees who are women 18% 19% 18% FY19 FY20 Fy21 Black People* in our South African management team 55% 52% 49% FY19 FY20 Fy21 Women on our Board 38% 38% 38% FY19 FY20 Fy21 Women in senior leadership> 37% 36% | il 30% FY19 FY20 Fy21 Women on our
Slide 9: Climate Change
CLIMATE CHANGE We achieved our short-term climate change target in FY21@ Scope 1 and 2 carbon emissions?” (Mt CO3-e) 7% reduction in FY21, enabled by higher gas drainage at ' \llawarra Metallurgical Coal and curtailment of our Metalloys smelter | 23.5 FY19 FY20 FY21 FY21 Baseline by FY35 Notes: a FY
Slide 10: South32 Financial Results
SOUTH32 FINANCIAL RESULTS
Slide 11: Production Overview
PRODUCTION OVERVIEW Aluminium (kt) FY18 FY19 FY20 FY21 Both smelters continued to test their maximum technical capacity, despite the impact from increased load-shedding and COVID-19 workforce restrictions Zinc equivalent? (kt) Fy18 FY19 FY20 FY21 Acceleration of a higher grade mining sequence at Can
Slide 12: FY21 Performance Analysis
FY21 PERFORMANCE ANALYSIS N= FY21 Underlying EBITDA contribution by commodity») Aluminium . Alumina | Manganese ore operating margin operating margin® operating margin z 56% @ Aluminium 48% 48% 44% Alumina 28% © Manganese ore 19% 27% 25% 24% © 26% a i Zinc-lead:-silver ay 12% . : | ii | Hi Nickel |
Slide 13: Earnings Analysis
EARNINGS ANALYSIS (19) Manganese ore n | . Metallurgical coal 125 Aluminium value Reduction in controllable costs = a G 2 203 152 844 18 30 il 185 61 73 401 a sBuiues Buikpapun TZAd SLIDE 12 asuadxe xe} awodu! 6BulkLapun expense? $}S09 aoueUl) JOU 6Bulkyapun Net finance costs and income tax Liga 6ul
Slide 14: Commodity and Foreign Exchange Analysis
j COMMODITY AND FOREIGN EXCHANGE ANALYSIS N= Commodity Aluminium) Aluminat>) Manganese ore‘) Metallurgical coal Nickel Silver Lead Zinc Australian dollar South African rand Colombian peso Brazilian real EBIT sensitivity” +/- 10% US$M 214 154 89 73 56 31 22 15 197 117 29 13 20% -10% South32 commodity
Slide 15: Cost Analysis
j COST ANALYSIS (US$M) | Increase in market traded consumables and price-linked costs! 1 (USSM) YoY impact i 102 Hl | 46 1 gg) (a2) (a2) (a8) | Caustic soda Higher Smelterraw Powerand Bauxite Other"® i smelter materials diesel Hl power costs 585 3 By B, | 8 2% 5s | 8 3 F 8B By % av | cv s i QD oa o
Slide 16: Cash Flow Analysis
CASH FLOW ANALYSIS (us$M) - - - 7" = Hl Capital expenditure | | Shareholder returns | ' (US$460M) uy (US$461M) ' 186 | 325 i ' Vendor support package includes 10 year 1 tt | rehabilitation commitment, and working capital 1,205 [i 63 am it ' facility that was fully-drawn post 30 June 2021 | H rite |
Slide 17: Balance Sheet
BALANCE SHEET Net cash/(debt) (US$M) 2,400 2,000 1,600 1,200 800 400 + We target an investment grade credit rating through the cycle * The divestment of lower returning, capital intensive businesses has increased our flexibility * Our strong balance sheet has supported returns to shareholders, inves
Slide 18: Capital Management Framework
CAPITAL MANAGEMENT FRAMEWORK Our capital management framework remains unchanged Capital management framework Competition for excess capital Distribute a minimum 40% of Underlying earnings as ordinary dividends Maximise cash flow Maintain safe and reliable operations and an investment grade credit ra
Slide 19: Returns to Shareholders
RETURNS TO SHAREHOLDERS = Total dividend pay-out ratio (%) 82% 78% 69% e@ e ® 50% e 54% 49% 40% 40% 40% e e e e Minimum ordinary -@-------- --- - 0-H a Sividend policy Dividends declared (US$M) 400 300 200 “ ii L] a Hi FY17 H2 FY17 H1 FY18 H2 FY18 H1FY19 H2 FY19 H1 FY20 H2 FY20 H1FY21 H2 FY21 Ordina
Slide 20: Returns to Shareholders
RETURNS TO SHAREHOLDERS = Our capital management program has The benefit of our on-market Our capital management program has had duration, is flexible and seeks to share buy-back has accumulated through been increased by a further US$120M, return excess capital ef ntly time, reducing shares on issue
Slide 21: Slide 21
Slide 22: Production Guidance
PRODUCTION GUIDANCE Aluminium (kt) Alumina (Mt) FY20 FY21 FY22e FY23e Mozal Aluminium expected to realise the benefits of installing AP3XLE technology with production increasing 3% from FY22 Study underway to assess deployment of AP3XLE at Hillside Aluminium 5.4 J FY20 FY21 FY22e FY23e Worsley Alumi
Slide 23: Operating Unit Costs Performance and Guidance
OPERATING UNIT COSTS PERFORMANCE AND GUIDANCE Worsley Alumina (US$/t)?* 224 H 204 214 H1 FY21 H2 FY21 FY21 FY22e Hillside Aluminium (US$/t) 47225 1,536 | 1,631 H Guidance ! not provided H1 FY21 H2 FY21 FY21 FY22e Notes a. Customer freight which is typically margin neutral. Brazil Alumina (non-operat
Slide 24: Operating Unit Costs Performance and Guidance
OPERATING UNIT COSTS PERFORMANCE AND GUIDANCE Australia Manganese ore (US$/dmtu)**?5 - 1 152 - LI | HL FY21 H2 FY22 Fy21 Cerro Matoso (US$/Ib?* 4.22 H 4.01 i H1 FY21 H2 FY21 FY21 Illawarra Metallurgical Coal (US$/t)?* 98 ' ' 87 : : L Hi FY21 H2 FY21 FY21 FY22 guidance +1% from H2 FY21 Stronger Austr
Slide 25: Capital Expenditure Guidance
CAPITAL EXPENDITURE GUIDANCE Safe and reliable capital supports Improvement and life extension Growth capital funds our development regulatory compliance, risk reduction spend includes our decarbonisation projects that are leveraged to and sustains performance and innovation projects the green econo
Slide 26: Alumina Market
ALUMINA MARKET = Expected to lift in the long term, driven by higher raw material costs, Strong recovery in global Cost curve has been shifting upwards in aluminium demand will provide CY21 due to rising energy, support to alumina prices caustic soda and freight rates bauxite resource depletion and
Slide 27: Alumina Market
ALUMINA MARKET = Supportive of a higher long-term New domestic refineries are more inducement cost when dependency is dependent on imported bauxite combined with the need for greater investment in ex-China refining capacity Deteriorating quality, combined with stricter regulations, have lowered Chin
Slide 28: Manganese Market
MANGANESE MARKET WE Supply disruptions, alloy demand for H2 CY21 outlook expected to see We continue to expect the long term price steel and higher sea freight strong demand for high grade ore to be set by marginal South African supply supported delivered prices in H1 CY21 to compensate for high fre
Slide 29: Metallurgical Coal Market
j METALLURGICAL COAL MARKET A strong rebound in demand for high quality Australian coal in JKT and other traditional markets has underpinned a strong rise in prices Metallurgical coal price and arbitrage North American supply diverted to China in H1 CY21 for the price premium, increasing ex-China’s
Slide 30: Commodity Demand in a 1.5°C Scenario
j COMMODITY DEMAND IN A 1.5°C SCENARIO = Aluminium value chain Base and precious metals Manganese ore Metallurgical coal FY21 Underlyi EBITDA 050 average commodity demand 1.5°C scenar' 100 200 1 ® Aluminium ‘mmmn() Manganese ore ® Metallurgical coal H Key drivers in the 1.5°C scenario 4 Aluminium: b
Slide 31: Nomen
Nomen i dun sn wo aN eee.
Slide 32: Our Strategy
OUR STRATEGY @ OPTIMISE our business by working safely, minimising our impact, consistently delivering stable and predictable performance and continually improving our competitiveness. (3 UNLOCK the full value of our business through our people, innovation, projects and technology. IDENTIFY and purs
Slide 33: Our Operations and Projects
AMBLER METALS HERMOSA CERRO MATOSO MRN CANNINGTON BRAZIL ALUMINA GEMCO MOZAL HOTAZEL ALUMINIUM MANGANESE MINES WORSLEY ALUMINA HILLSIDE ALUMINIUM ILLAWARRA METALLURGICAL COAL
Slide 34: Our New Cost Base
OUR NEW COST BASE Group cost base® and Group operating margin (US$M and %) 39% 37% fo) fo) 34% 22% 7% increase in FY21 when excluding ! |__ South Africa Energy Coal (SAEC) | Looking forward other FY22 cost expectations for the Group include: 210 988 962 959 * Depreciation and amortisation (excluding
Slide 35: Our Alumina and Aluminium Operations
OUR ALUMINA AND ALUMINIUM OPERATIONS Il FY21 EBITDA contribution® | ussszam | FY21 Underlying EBITDA ‘% FY21 vs. FY20 = Alumina = Aluminium FY21 Group alumina and aluminium operations at %, smelters ~1.9Mt of alumina directed to our smelters (S32 share) producing ~1Mt alumi ~3.5Mt of alumina ‘ected
Slide 36: Our Manganese Ore Operations
OUR MANGANESE ORE OPERATIONS Il FY21 EBITDA contribution G Ie = FY21 Underlying EBITDA l= Manganese ore Realised prices and Operating unit costs (Us$dmtu, FOB) Australia Manganese 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 South Africa Manganese FY16 FY17 FY18 FY19 FY20 FY21 FY16 FY17 FY18 FY19 FY20 FY21 ™™ Lo
Slide 37: Our Base Metals Operations
OUR BASE METALS OPERATIONS FY21 EBITDA contribution UST Sey =FY21 Underlying EBITDA 479% FY21 vs. FY20 2029-2050 average commodity demand in 1.5°C scenario vs. base case?” = Cannington ™ Cerro Matoso Oo 200 Cannington G Transition to trucking will bring high grade material forward in the mine plan,
Slide 38: Cannington – Transition to Trucking
j CANNINGTON — TRANSITION TO TRUCKING © Project Summary Hoisting shaft at Cannington is nearing the end of its life Planning is underway to transition to a trucking only operation from Q4 FY22 Decommissioning underground infrastructure reduces constraints on our mining sequence, allowing for further
Slide 39: Cerro Matoso – Q&P
CERRO MATOSO - Q&P Project Summary * Queresas and Porvenir (Q&P) is a project that comprises the development of a 17Mt® satellite deposit north of Cerro Matoso’s plant * High returning (IRR >100%*9), low capital (US$13M) option expected to contribute to higher average ore feed grades + 4.8Mt of ore
Slide 40: Cerro Matoso – OSMOC
CERRO MATOSO —- OSMOC Project Summary OSMOC Overview * The Ore Sorting and Mechanical Ore Concentration (OSMOC) project replaces the current ore upgrading circuit at Cerro Matoso + Enhances the concentration of nickel, resulting in further upgrading prior to the ore entering the kilns + Expected to
Slide 41: Hermosa Project – Taylor
HERMOSA PROJECT - TAYLOR Over 153km? of tenure in Arizona, USA hosting metals essential for a low carbon future Establishment of initial on-site infrastructure and permitting underway Obenlalde biianidlaterally, Taylor Deposit geology and mineralisation (looking south-west) Taylor Deposit + Updated
Slide 42: Hermosa Project – Clark
HERMOSA PROJECT - CLARK Zinc-lead-manganese oxide resource located above Taylor Clark and Taylor deposits (looking southwest) Proposed shaft location I Clark Deposit (NSR cut-off US$175/t) ~ II Taylor Deposit (NSR cut-off USS80/t) 0 0.5 km Notes: a. Refer to important notices (Slide 2) for additiona
Slide 43: Ambler Metals
AMBLER METALS Regional scale, base and precious metals Federal permits received for project with supportive local partner, PFS for Arctic Deposit progressing access road that has the NANA Regional Corporation potential to unlock the region 2021 exploration field season underway o + Commenced in Q4 F
Slide 44: Metallurgical Coal
METALLURGICAL COAL FY21 EBITDA contribution | ussoum | FY21 Underlying EBITDA % FY21 vs. FY20 = lllawarra Metallurgical Coal Illawarra Metallurgical Coal production (Mt) FY18 FY19 FY20 FY21 BAppin |Dendrobium Notes: a b. FY21 and FY22e includes low-margin coal wash material JKT: Japan-Korea-Taiwan F
Slide 45: Appin Optimised Plan
Appin optimised plan LLAWARRA METALLURGICAL COAL = Dendrobium mining domains and infrastructure q z, t % Dendrobium | shafts Y Mining lease a | @ Wollongong — Pit to SE Mined area D Por Kembia Future areas ‘Coal Terminal all Dendrobium coal Road Preparation Plant Notes a. Operating unit costs. b. As
Slide 46: FY21 Summary
FY21 SUMMARY We have a strong foundation from which to position our business for a low carbon future Our unchanged capital management framework is rewarding our shareholders as our financial performance improves Our operations are performing We are reshaping our portfolio well and are positioned by
Slide 47: South32 Appendix
SOUTH22,
Slide 48: Earnings Sensitivities
EARNINGS SENSITIVITIES EBIT sensi Annualised estimated impact on FY22e Underlying EBIT of a 10% change in commodity prices or currency® Aluminium) 214 Alumina’) 154 Manganese ore) 89 Metallurgical coal 73 Nickel 56 Silver 31 Lead 22 Zinc 15 Australian dollar 197 South African rand 117 Colombian peso
Slide 49: Operating Unit Costs
OPERATING UNIT COSTS ills FY21 actual vs. Fy21 FY21 guidance Operating unit costs H1 FY21 H2 FY21 guidance® Commentary to guidance or FY20 0% Worsley Alumina tussit) 210 204 224 214 210 ° Higher caustic soda usage and freight costs ss vemeperete®) ay 0620208 oe ana cng ui we sored agar Metallurgical
Slide 50: Operating Unit Cost Guidance
j OPERATING UNIT COST GUIDANCE = FY22 guidance vs. H2 FY21 FY22 FY21 actual Operating unit costs acer Guidance? Commentary 0% 10% Worsley Alumina Higher caustic soda prices, price-linked freight and a (Uss/t) 224 ae aut , planned transition to a higher cost mining area - , Expected to be impacted by
Slide 51: Closure & Rehabilitation Provisions
CLOSURE & REHABILITATION PROVISIONS = Closure and rehabilitation provisions by operation (South32 share) Worsley Alumina 825 402 Cannington 232 167 Hillside Aluminium® 206 175 Illawarra Metallurgical Coal 206 118 Cerro Matoso 115 97 Mozal Aluminium 49 54 Brazil Alumina (non-operated) 46 44 Hermosa 3
Slide 52: Earnings Adjustments
EARNINGS ADJUSTMENTS Continuing operations Earnings adjustments Discontinued operation Adjustments to Underlying EBIT Significant items (55) - (55) - Exchange rate (gains)/losses on restatement of monetary items 35 34 69 (72) Impairment losses 764 - 764 - (Gains)/losses on non-trading derivative ins
Slide 53: Underlying Income Tax Expense
UNDERLYING INCOME TAX EXPENSE Underlying income tax expense reconciliation and Underlying effective tax rate Underlying EBIT 844 446 Include: Underlying net finance costs (152) (145) Remove: Share of profit/(loss) of equity accounted investments (148) (208) Underlying profit/(loss) before tax 544 93
Slide 54: Underlying Net Finance Costs
UNDERLYING NET FINANCE COSTS Underlying net finance costs reconciliation Unwind of discount applied to closure and rehabilitation provisions (59) (54) Change in discount rate on closure and rehabilitation provisions 6 - Interest on lease liabilities (55) (51) Other (1) 5 Discontinued operation (43)
Slide 55: Capital Expenditure Guidance
j CAPITAL EXPENDITURE GUIDANCE Capital expenditure (excluding exploration an les) (South32 share) Worsley Alumina 51 43 Brazil Alumina 25 54 Hillside Aluminium 17 22 Mozal Aluminium 10 10 South Africa Energy Coal 23 - Illawarra Metallurgical Coal 151 215 Cerro Matoso 30 23 Cannington 41 43 Safe and
Slide 56: Footnotes
28, 25. FOOTNOTES NS Scope 1 and 2 carbon emissions, compared with our FY21 baseline of 20.7Mt (actual emissions of 21.6Mt less South Africa Energy Coal and TEMCO). The FY21 baseline will be adjusted for any other material acquisitions or divestments. Metrics describing sustainability and Health, sa
Slide 57: Footnotes
FOOTNOTES ills 26. Cannington Operating unit cost is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished productinventory may impact Operating unit costs as related marketing costs may change. 27. In FY21, we developed a scenario in which global warming is assumed
Slide 58: Appendix A
APPENDIX A Coal Resources As at 30 June 2021 As at 30 June 2020 Measured Coal Resources indicated Coal Resources inferred Coal Resources Total Coal Resources S0Uth32-—_ Total Coal Resources Deposit? vans oe Mt %Ash =%VM %S Mt %Ash %VM %S Mt %Ash %VM %S Mt %Ash %VM %S % Mt %Ash %VM %S Illawarra Metal
Slide 59: Appendix B
APPENDIX B nesource! Reserve Original DND Mine Plan DND Adapt Appin Only Category ~7eMtpa 75 -8.0Mtpa ~4.5Mtpa Proved 3% 4% 5% Coal Reserves Probable 66% 74% 91% Measured 13% 15% 0% Coal Resources: indicated 12% 4% 0% inferred 6% 3% 4% SLIDE 58
Slide 60: Slide 60