South32 Ltd. · ASX:S32
South32 — FY2020 Earnings Presentation
55 slides from South32's earnings presentation, Aug 20, 2020
Slide 1: 2020 Full Year Financial Results Presentation
20 August 2020 South32 Limited For personal use only (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 2020 FULL YEAR FINANCIAL RESULTS PRESENTATION South32 Limited (ASX, LSE, JSE: S32; ADR: S
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For personal use only U N LO C K OPTIMISE IDENTIFY
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• For personal use only AMBLER METALS EAGLE DOWNS METALLURGICAL COAL CANNINGTON HERMOSA CERRO MATOSO MRN SOUTH AFRICA ENERGY COAL BRAZIL ALUMINA GEMCO MOZAL HOTAZEL ALUMINIUM MANGANESE MINES WORSLEY ALUMINA HILLSIDE ALUMINIUM TEMCO ILLAWARRA METALLURGICAL COAL
Slide 6: FY20 Overview
FY20 Overview Record production at 3 operations Lower Operating unit costs at 9 of 10 operations US$424M in shareholder returns® Final ordinary dividend US$48M (1 US cent per share) Notes: Net loss after tax US$(65)M Underlying earnings US$193M Underlying EBITDA US$1.2B Acted to protect our strong b
Slide 7: Performance and Guidance
RFORMANCE AND GUIDANCE D)
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Slide 9: Sustainability performance
Sustainability performance Fatalities” TRIF*’? FY20" 1 FY20 42 FY19 | Oo FY19 4.6 FY18 1 FY18 5.1 GHG emissions” Community investment’ (Scope 1 & 2, Mt CO,-e) (US$M) On-track to meet our H ' FY21 Scope 1 emissions target H ' response to COVID-19 FY20 23.3 FY20 24.5, FY19 23.5 FY19 17.3 FY18 22.8 FY1
Slide 10: FY20 performance analysis
FY20 performance analysis SOUTHS2 FY20 Underlying EBITDA contribution by commodity@) J Alumina 9% g Aluminium Aluminium & alumina © Manganese ore Metallurgical coal 15% Zinclead-silver I Nickel Group operating margin? Alumina operating margin 39% 42% 25% FY18 FY19 FY20 Metallurgical coal operating m
Slide 11: Earnings analysis
Earnings analysis tory inven drew down iciencies, as we = © » on ° 8 £ = oO oO wi Ria ra =) ® 2 o. on ® 3 ra 6 ® - < 9 ¢ 2 6 ® > so) ® n © o £ .7) £ n 2 on ° .s) 2 2 ‘s ° © 5 < 3 (3) 35 — Lower volume 34 = Other cost efficiencies Less labour & contractor spend Lower energy costs 20 — Less pot relini
Slide 12: Revenue analysis
Revenue analysis W= ' Sales volume by operation (US$M) ' Nickel lawarra Metallurgical Coal 173 1 Nickel i 7 Brazil Alumina 88 ! Silver 5 Hl Cannington 45 ‘Lead ay H South Africa Energy Coal (104) 1 Zine (60) ' Manganese alloy (60) Other operations 468 | | 427 8,099 — 363 271 a — 101 H = o H oF |} ¢
Slide 13: Costs analysis
Costs analysis W= SOUTHS2 Cost efficiencies combined with weaker FX and lower raw material inputs reduced our cost base by 6%® in FY20 (US$M) ' Price-linked costs YoY impact ' ‘ (1) ' Hl (64) Hl ‘Caustic LME-linked Smelter raw Power and Bauxite Other’ ' | soda electricity materials diesel Hl ‘ rT] r
Slide 14: Operating unit costs guidance
Operating unit costs guidance SOUTHS2 We expect to deliver a further reduction in Operating unit costs across the majority of our operations Worsley Alumina (US$/t? 25 238 196 Higher volumes and the reduction of t contractor rates and activity, partially H offset by higher planned caustic H consumpt
Slide 15: Operating unit costs guidance
Operating unit costs guidance ‘2.005 1,657 ' as | 1931, ' Guidance H {not provided HLFY20 H2FY20 FYI9 ~—-FY20 Cerro Matoso (USS$/Ib? 3.99 Ce» 3.97 H1FY20 Notes: H2FY20 FY19 3.69 FY20 Fy21e Not provided but combined tailwinds of lower alumina prices and a weaker South African rand are expected to mit
Slide 16: Cash flow analysis
Cash flow analysis i! SOUTHS2 We took action to protect our strong balance sheet, adjusting our capital expenditure plans and suspending our on-market share buy-back in H2 FY20 (US$M) Shareholder returns (US$676M), 12% below original (US$515M) guidance (US$771M)") 313 425 aad LJ LI 251 2 @ 3 S 3 © <
Slide 17: Balance sheet
Balance sheet i= sourHa2 A strong balance sheet through the cycle Net cash and no term debt is at the core of our strategy Undrawn US$1.45B revolving credit facility extended to CY23 Net cash/(debt) Net cash balance as at 30 June 2020 (US$M) (US$M) 2,400 2,000 1,600 1,200 800 1,315 Long term lease 4
Slide 18: Capital expenditure analysis
Capital expenditure analysis Re-designed and re-prioritised activity across the Group in response to market conditions Sustaining capital expenditure (excluding South Africa Energy Coal) (US$M) Continue to invest in our development options to create shareholder value Major capital expenditure (exclu
Slide 19: Capital management framework
Capital management framework Our framework remains unchanged Capital management framework Competition for excess capital Investment in our business Acquisitions Greenfield exploration Share buy-backs Special dividends Distribute a minimum 40% of Underlying earnings as ordinary dividends ise cash flo
Slide 20: Reshaping our portfolio
EFSHAPING OUR PORTFOLIO
Slide 21: Exiting lower returning businesses
Exiting lower returning businesses Te SOUTHS2 Planned divestments of South Africa Energy Coal and TEMCO will reshape our portfolio Lower capital intensity Less complexity, greater focus Higher Group margins and returns Historical capital expenditure (including EAI) Employee headcount® FY20 operating
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For personal use only AMBLER METALS (50%) HERMOSA (100%) EAGLE DOWNS METALLURGICAL COAL (50%) ILLAWARRA METALLURGICAL COAL (100%)
Slide 23: Hermosa project
Hermosa project i! SOUTHS2 Prospective Taylor Deposit Clark Deposit regional land package PFS expected Q2 FY21 scoping study underway Hermosa land package Taylor Deposit, Clark Deposit and regional landholdings Taylor Deposit mineralisation (looking southwest) Taylor and Clark Mineral Resources (loo
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Slide 26: Regional exploration partnerships
For personal use only AMBLER METALS REGIONAL FREEGOLD VENTURES ROOSEVELT PROJECT ADVENTUS MINING CORPORATION EMX ROYALTY CORP SILVER BULL RESOURCES HERMOSA REGIONAL NORTH QUEENSLAND RESOURCES AUSQUEST GEMCO SOUTHERN AREAS AUSQUEST AUSQUEST AUSQUEST MINSUD RESOURCES AUSQUEST
Slide 27: Markets Outlook
a =i. —— ONIN ee A 1 MARKETS OUTLOOK
Slide 28: Manganese market
Manganese market South African supply disruption and recovery has driven prices in CY20 South African exports® (Mt, Mn content unadjusted) UTIL Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 cyi7 cy17 cy18 cy18 cy18 CY18 cy19 CcY19 cY19 cY19 cY20 cY20 wo N » = Rail Truck Source: South32 industry analysis, IMnl
Slide 29: Alumina market
Alumina market Growth in Chinese imports and supply curtailments have supported recent price rise China annualised monthly alumina imports and prices (Alumina price US$/t LHS; kt RHS) Seaborne prices have 350 rebounded ~20% offlows | 300 ~ 250 6,000 200 5,000 4,000 3,000 2,000 1,000 Jul Aug Sep Oct
Slide 30: Metallurgical coal market
Metallurgical coal market i= souTHS2 Ex-China demand recovery, Chinese import Chinese import quotas, weak ex-China quotas and supply response from Long run demand driven by growth in demand and US supply response y have Impacted trade flows producers in Australia and US will India and other emerging
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Slide 32: Production profile
Production profile i! SOUTHS2 ction result in FY20 and expect to ease production at the majority of our operations in FY21@ Alumina & aluminium production (kt) Manganese ore production (kwmt) = Alumina = Aluminium ™ Australia Manganese ore ™ South Africa Manganese ore 5,068 5,050 5,269 5,335 5,355 u
Slide 33: Worsley Alumina
sourHa2 Production Calciner outage days Production ' Planned calciner outage days expected to decline as we ' (ko : benefit from our investment over the past 24 months ! 3,764 3,795 3/886 3,965 3,965 aa 102 92 ' i 68 Fy18 Fy19 FY20 Fy21e FY22e H ' ! ' Costs H i H H 1 . FY19 FY20 FY21e FY22e Operatin
Slide 34: Brazil Alumina (non-operated)
Brazil Alumina (non-operated) Production Production peeee eee e eee ees (kt) | Planned maintenance | i during FY21 t 1,383 1,370 1,390 1,304 | ' FY18 FY19 FY20 FY21e FY22e Operating unit cost (US$/t) ‘ 1 270 v 252 244 Guidance not [| “ Fy18 Fy19 FY20 Fy21e Notes: a. Refer to important notices (slide
Slide 35: Hillside Aluminium
Hillside Aluminium Operating unit cost (US$/t) Production FY20 Operating unit cost Production (guidance subject to load-shedding) H1: US$1,657/t H2: US$1,431/t “ 5% 720 720 712 715 718 «Labour "Electricity = Raw materials = Other us me mye Mate Fva2e i HoH impact on costs (US$/t) i ; a ! (a3) 2) | A
Slide 36: Mozal Aluminium
Mozal Aluminium i= sourHa2 Production FY20 Operating unit cost Production (guidance subject to load-shedding) H1: US$1,904/t H2: US$1,671/t “ re, 3% 271 267 268 273 273 «Labour "Electricity = Raw materials = Other H FY18 Fy19 FY20 FY21e FY22e wana tonne n canna nna - (27) o o (42) Operating unit cos
Slide 37: Illawarra Metallurgical Coal
Illawarra Metallurgical Coal i= SOUTHS2 Production Average Appin longwall performance Tonnes per day (90 day moving average) Production (kt) Longwall performance has stal due to longwall change outs sit mmm coal fraction 15,000 90 day rolling average 6,400 63000; © ne Financial year average 5,350 5,
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Slide 39: Illawarra Metallurgical Coal
Illawarra Metallurgical Coal i= SOUTHS2 Dendrobium mining domains and infrastructure ° 5 ko z—> Securing Dendrobium’s future % Dendrobium Next Domain (DND) + If approved, will target Area 5 and extend Dendrobium's life to ~FY36, sustaining mining and steel making in the region Dendrobium * Utilises
Slide 40: Australia Manganese ore
Australia Manganese ore Te SOUTHS2 Production volumes and sales by product Producti i roduction Production volume (kwmt, LHS); sales by product (%, RHS) Production (guidance subject to market demand) (kwmt) We have opened new markets for secondary products, supporting the continued supply of higher
Slide 41: South Africa Manganese ore
South Africa Manganese ore Te SOUTHS2 Production volumes and export logistics” Producti , isti shctananihanial Production volume (kwmt, LHS); export logistics (%; RHS) Production (guidance subject to market demand) (kwmt) 2,145 2,187 1,878 2,000 2,500 100% 2,000 80% Subject to market demand 1,500 60
Slide 42: Cerro Matoso
sourHa2 Production Ore to kiln (kdmt) Production ret nene scence ee eee e cece cence eee ce cence cence econ nnenenees , (hn {Planned refur window ofthe | ‘Furnace outage | | furnace, enabling processing of variable grade ore and enhanced nickel recovery! 50 | scheduled} ~~ 43.8 St 3,000 sen 40.6 38
Slide 43: Cannington
Cannington Production Zinc equivalent” (kt, LHS); Ore processed (kdmt; RHS) 350 3,000 300 2,500 250 2,000 FY18 FY19 FY20 FY21e FY22e "=== Payable zinc equivalent —ore processed Operating unit cost? 1° (US$/t) 150@ FY18 FY19 FY20 FY21e Notes: a. FY18 Operating unit costs are gross of treatment and re
Slide 44: FY20 Summary
FY20 Summary Record production at 3 operations Lower Operating unit costs at 9 of 10 operations US$424M in shareholder returns® Final ordinary dividend US$48M (1 US cent per share) Notes: Net loss after tax US$(65)M Underlying earnings US$193M Underlying EBITDA US$1.2B Acted to protect our strong ba
Slide 45: Supplementary Information
a SUPPLEMENTARY INFORMA‘
Slide 46: Operating unit costs
Operating unit costs Te SOUTHS2 FY20 actual vs. FY20 guidance (15%) (5%) 5% FY20 guidance’® Operating unit costs H1 FY20 H2 FY20 Worsley Alumina wean 238 225 196 210 210 Brazil Alumina (non-operated) 270 257 231 244 ea ed wear Metallurgical Coal o4 91 95 93 92 os esaanganese 1.59 1.62 1.48 1.55 1.61
Slide 47: Operating unit cost guidance
Operating unit cost guidance i! SOUTHS2 FY21 guidance vs. " FY20 actual Commentary guidance? | (15%) (5%) 5% H2 FY20 Fy21 Operating unit costs ar FY20 Higher volumes and reduction of contractor rates and activity, Worsley Alumina 196 210 205 partially offset by higher planned caustic consumption rat
Slide 48: Earnings adjustments
Earnings adjustments W= Earnings adjustments Adjustments to Underlying EBIT Exchange rate (gains)/losses on restatement of monetary items (72) 3 Impairment losses - 504 (Gains)/losses on non-trading derivative instruments and other investments measured at fair value 149 35 Major corporate restructur
Slide 49: Underlying income tax expense
Underlying income tax expense Underlying income tax expense reconciliation and Underlying effective tax rate Underlying EBIT 446 1,440 Include: Underlying net finance cost (145) (118) Remove: Share of profit/(loss) of equity accounted investments (208) (450) Underlying profit/(loss) before tax 93 87
Slide 50: Underlying net finance cost
Underlying net finance cost i= Underlying net finance cost reconciliation Unwind of discount applied to closure and rehabilitation provisions (102) (103) Finance lease interest - (47) Interest on lease liabilities (51) - Other 8 32 Underlying net finance cost (145) (118) Add back earnings adjustment
Slide 51: Closure provisions
Closure provisions i= Closure and rehabilitation ! Profit and loss impact ‘| Balance | provisions by operation H (+US$61M) '1 sheet?? | (South32 share) ‘ || GUS$99M) | South Africa Energy Coal 739 756 102 48 7 99 Worsley Alumina 402 408 a — Hillside Aluminium 175 209 Cannington 167 164 Illawarra Met
Slide 52: Capital expenditure guidance
Capital expenditure guidance i= Capital expenditure (excluding exploration and intangibles) (South32 share) US$M FY20 Fy2ie Worsley Alumina 48 57 Brazil Alumina 34 27 Hillside Aluminium 13 18 Mozal Aluminium 11 8 Illawarra Metallurgical Coal 185 150 Australia Manganese 67 58 South Africa Manganese 2
Slide 53: Earnings sensitivities
Earning sensitivities i= EBIT impact +/- 10% ig EBIT of a 10% change in commodity prices or currency@ USSM Aluminium® 176 Alumina’) 154 Manganese ore’) 95 Metallurgical coal 87 Nickel 37 Energy coal) 31 Silver 19 Lead 18 Zinc 15 Australian dollar 175 South African rand 91 Colombian peso 17 Brazilian
Slide 54: Notes
SOUTHS2 LLL 1. Fatalities, Total Recordable Injury Frequency (TRIF) per million hours worked and Total Recordable lliness Frequency (TRILF) per million hours worked, are all calculated in accordance with the United States Government Occupational Safety and Health Assessment (OSHA) guidelines for the
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