Slide 1: South32 Strategy and Business Update Presentation
5 December 2017 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 SOUTH32 STRATEGY AND BUSINESS UPDATE PRESENTATION South32 Limited (ASX, LSE, JSE: S32, ADR: SOUHY) (South32) ma
Slide 2: Further Information
FURTHER INFORMATION INVESTOR RELATIONS Alex Volante Rob Ward T +44 20 7798 1778 T +61 8 9324 9340 M +44 74 6853 3005 M +61 431 596 831 E Alex.Volante@south32.net E Robert.Ward@south32.net MEDIA RELATIONS Hayley Cardy James Clothier T +61 8 9324 9008 T +61 8 9324 9697 M +61 409 448 288 M +61 413 319
Slide 3: Strategy and Business Update
STRATEGY AND BUSINESS UPDATE • 5 DECEMBER 2017
Slide 4: Important Notices
• IMPORTANT NOTICES • THIS PRESENTATION SHOULD BE READ IN CONJUNCTION WITH THE “FINANCIAL RESULTS AND OUTLOOK – YEAR ENDED 30 JUNE 2017” ANNOUNCEMENT RELEASED ON 24 AUGUST 2017, WHICH IS AVAILABLE ON SOUTH32’S WEBSITE (WWW.SOUTH32.NET) • FINANCIAL INFORMATION • To assist shareholders in their unders
Slide 5: Welcome and Introduction
• WELCOME AND INTRODUCTION Agenda Strategy update Graham Kerr Session One Business update Brendan Harris Markets update Session Two Peter Finnimore David Clift Operations update Session Three Paul Harvey Mike Fraser Identifying new opportunities Graham Kerr Cash flow and balance sheet update Session
Slide 6: Strategy Update
STRATEGY UPDATE Graham Kerr (Chief Executive Officer) Need to scrub the earings JO – image sent to Jimi to remove
Slide 7: Overview Summary
• OVERVIEW SUMMARY Working opportunities Consistent application Sustainably improving across our portfolio to of our strategy performance unlock value Embedding Further simplifying our Substantially increasing high quality options business returns to shareholders with a bias to base metals 2017 STRA
Slide 8: Consistent Application of Our Strategy
CONSISTENT APPLICATION OF OUR STRATEGY Optimise the performance of Unlock their potential Identify new opportunities our existing operations Increase competition for capital Safety Convert high value People resource to reserve Optimise portfolio with ROIC increased exposure to base metals 2017 STRAT
Slide 9: Diversity and Sustainability
• DIVERSITY AND SUSTAINABILITY Measurable FY20 4 Level Actual1 2 objectives Target Fatalities 1 0 Corporate & Marketing 47% FY15 FY16 FY17 FY18⁴ Women Continuing in workforce improvement Total 16% 5.8 7.7 6.0 4.9 TRIF Board 33% 30% FY15 FY16 FY17 FY18⁴ Women in Lead Team 25% 30% leadership 3.5 Leade
Slide 10: Sustainably Improving Performance to Drive Increased Returns
SUSTAINABLY IMPROVING PERFORMANCE TO DRIVE INCREASED RETURNS Achieved to date • Reduced controllable costs by ~US$700M and sustaining capital expenditure by ~US$200M over two years Optimise the performance • Completed South Africa Manganese restructure, creating flexibility of our existing operation
Slide 11: Working Opportunities Across the Portfolio to Unlock Value
WORKING OPPORTUNITIES ACROSS THE PORTFOLIO TO UNLOCK VALUE Completed Testing • La Esmeralda, lifting grade at Cerro Matoso for less than a Study third of original budget • Agree Khutala life extension with Eskom • West Marradong agreement to access higher quality (South Africa Energy Coal) bauxite a
Slide 12: Embedding High Quality Options with a Bias to Base Metals
EMBEDDING HIGH QUALITY OPTIONS WITH A BIAS TO BASE METALS Optimise portfolio and increase exposure to base metals • Copper-gold exploration opportunity in Colombia (Cerro Matoso) • AusQuest Strategic Alliance ⎯ Three projects targeting base metals selected for drilling so far Identify new opportunit
Slide 13: A Portfolio of Long Life Operations with Options to Unlock Value
• A PORTFOLIO OF LONG LIFE OPERATIONS WITH OPTIONS TO UNLOCK VALUE Nickel laterite and copper-gold regional Khutala life West Marradong exploration potential extension project resource to reserve Southern lease conversion exploration Cannington Klipspruit life potential open pit life Dendrobium exte
Slide 14: Our Portfolio Is Evolving
• OUR PORTFOLIO IS EVOLVING Base metal Trilogy Metals % FY17 Operating margin1 South32 operation exploration partnerships Bornite & Arctic and investments Northern Shield Resources Huckleberry Arizona Mining Hermosa Project Australia Brazil 66% Manganese2 32% AusQuest Alumina Bluebilly JV AusQuest J
Slide 15: South Africa Energy Coal Has Unique Attributes
• SOUTH AFRICA ENERGY COAL HAS UNIQUE ATTRIBUTES The status quo • Uncertain medium and long term 35% of all ~1.4% of demand in the export thermal coal employees and net assets market contractors • Constrained by long term take-or-pay 8,400 as at 30 October 2017 FY17: US$141M rail and domestic supply
Slide 16: South Africa Energy Coal Has Unique Attributes
• SOUTH AFRICA ENERGY COAL HAS UNIQUE ATTRIBUTES Once transformed South Africa Energy Coal will be better positioned to unlock its full potential 4.9Bt • Dedicated systems and processes designed to suit 346Mt South Africa Energy Coal’s unique characteristics • More readily able to access domestic op
Slide 17: Establishing South Africa Energy Coal as a Stand-Alone Business
• ESTABLISHING SOUTH AFRICA ENERGY COAL AS A STAND-ALONE BUSINESS TO UNLOCK VALUE How we will realise value South Africa Energy Coal South32 • Invest in the 4.3B Rand (US$301M) Klipspruit life • By establishing South Africa Energy Coal as a extension project (>20% IRR)1 stand-alone business we will
Slide 18: Overview Summary
• OVERVIEW SUMMARY Working opportunities Consistent application Sustainably improving across our portfolio to of our strategy performance unlock value Embedding Further simplifying our Substantially increasing high quality options business returns to shareholders with a bias to base metals 2017 STRA
Slide 19: Business Update
BUSINESS UPDATE Brendan Harris (Chief Financial Officer)
Slide 20: Unchanged Production Guidance
UNCHANGED PRODUCTION GUIDANCE Operation Q1 FY18 production run-rate FY18e Commentary relative to guidance guidance1 0% 25% 50% 75% 100% 125% Calciner maintenance and adverse weather (elevated bauxite moisture levels) impacted Q1 FY18 production Worsley Alumina Worsley Alumina 3,975 kt Substantial hy
Slide 21: Unchanged Production Guidance
UNCHANGED PRODUCTION GUIDANCE Operation Q1 FY18 production run-rate FY18e Commentary relative to guidance guidance1 0% 25% 50% 75% 100% 125% Strong performance from primary higher grade and PC02 Australia Manganese – ore 3,125 kwmt circuits (with wet season to follow) Continued utilisation of high c
Slide 22: Operating Unit Costs (Year to Date)
• OPERATING UNIT COSTS (YEAR TO DATE) Operation Unit FY17 FY18e1 YTD relative Commentary to guidance2 -10% 0% 10% 20% Higher alumina, price-linked power, pitch South Africa Aluminium3 US$/t 1,454 and coke input costs Mozal Aluminium3 US$/t 1,495 Higher alumina, pitch and coke input costs Higher caus
Slide 23: Operating Unit Costs (FY18 Spot Scenario)
• OPERATING UNIT COSTS (FY18 SPOT SCENARIO) Operation Unit FY17 FY18e1 Spot scenario Commentary relative to guidance2 -20% 0% 20% 40% Increasing price-linked cost pressure (power, coke, pitch South Africa Aluminium3 US$/t 1,454 and alumina of which we are a beneficiary) Increasing price-linked cost
Slide 24: Revised Capital Expenditure Guidance
REVISED CAPITAL EXPENDITURE GUIDANCE FY18e Run-rate YTD relative to guidance2 FY18e US$M Commentary prior1 0% 100% Revised1 Worsley Alumina 48 48 South Africa Aluminium 26 26 Expenditure tracking to plan with an adverse movement in capital creditors (timing) Mozal Aluminium 14 14 US$38M AP3XLE energ
Slide 25: Illawarra Metallurgical Coal Guidance
ILLAWARRA METALLURGICAL COAL GUIDANCE Production Operating unit costs1 Capital expenditure2 (kt) (US$/t) (US$M) 130 1,471 51 1,307 1,376 119 80 74 30 61 1,150 7,455 7,059 106 8 5,697 60 138 63 3,350 49 60 41 FY15 FY16 FY17 FY18e FY15 FY16 FY17 FY18e FY15 FY16 FY17 FY18e Metallurgical Coal Energy Coa
Slide 26: Markets Update
MARKETS UPDATE Peter Finnimore (Chief Marketing Officer) David Clift (Head of Technical Marketing and Commodity Analysis)
Slide 27: Key China Themes Driving Commodity Prices
KEY CHINA THEMES DRIVING COMMODITY PRICES Alignment between central and local governments SOE Reforms Environmental reforms • Stronger alignment drives • Supply side reforms on removing • More focus on pollution control and implementation of top-down capacity and deleveraging environmental protectio
Slide 28: Our Major Commodity Exposures
OUR MAJOR COMMODITY EXPOSURES FY15 to FY17 Underlying Revenue contribution1 FY15 to FY17 Underlying EBITDA contribution1 Manganese Manganese 12% 17% Aluminium Aluminium & Alumina & Alumina 43% 35% Notes: 1. Underlying Revenue and EBITDA represents the Group’s interest in the manganese operations and
Slide 29: Manganese Market Status
• MANGANESE MARKET STATUS • Manganese ore price and China port stocks1 • Mn ore trade flows2 • (US$/dmtu; Mt) • (Mt, Mn content unadjusted) Downward correction as higher prices induce a supply response 10 10 Steel market recovery 24 and increased spread Exports Imports Increasing ore supply tightnes
Slide 30: Manganese Supply Outlook
• MANGANESE SUPPLY OUTLOOK • Manganese ore cost curve1 Economic supply 2016 to 20241 • (US$/t, 44% Mn, CIF China, real January 2017) (Mt ore, 40% Mn) 2017 demand 2024 demand 39Mt 41Mt South Africa, Australia and Gabon are expected to displace 50 higher-cost, lower-quality domestic ore in China and e
Slide 31: Alumina Market Overview
• ALUMINA MARKET OVERVIEW Alumina monthly price1 China alumina production and imports2 (US$/t) (Mt, alumina equivalent) Sharp rise in prices as tight raw material supply and winter capacity cuts gained momentum 500 80 71 High Chinese prices driven by transportation regulation and 63 increased raw ma
Slide 32: Aluminium and Alumina Demand
• ALUMINIUM AND ALUMINA DEMAND Aluminium demand by end-use sector1 Smelter grade alumina demand by region1 (Mt) (Mt) 80 160 CAGR 3% CAGR 3% 60 120 CAGR 6% CAGR 6% 40 80 20 40 0 0 2010 2016 2025 2010 2016 2025 Construction Transportation Electrical Packaging Machinery Others China Middle East and Afr
Slide 33: Alumina Supply
• ALUMINA SUPPLY Alumina trade flows1 Incremental alumina supply by region2 (kt) (Mt) Marginal alumina supply growth expected to come 12,000 Exports Imports 160 from China and Indonesia 8 149 5 Diversified traded market, although 13 9,000 China sets the marginal spot price given arbitrage between do
Slide 34: Alumina Marginal Cost of Supply
• ALUMINA MARGINAL COST OF SUPPLY China bauxite mineralisation quality by region1 Alumina marginal producer cost breakdown2 (Mt) (US$/t, real January 2017) Consensus long term price is below marginal cost and 1,800 500 inducement of new supply Central & North Southwest 1% Current Forecast 1,500 (201
Slide 35: Refinery and Smelter Raw Material Inputs
• REFINERY AND SMELTER RAW MATERIAL INPUTS Caustic soda price Raw material input prices3 and LME Aluminium (US$/t) 710 (US$/t) Spot price2 600 Pitch and aluminium fluoride predominantly 800 priced on an M-1 basis 2,800 Predominantly priced on an M-1 basis Petcoke priced on a quarterly or M-1 basis A
Slide 36: Refinery and Smelter Raw Material Procurement
• REFINERY AND SMELTER RAW MATERIAL PROCUREMENT • South32 smelter and refinery raw material input suppliers Our Marketing function procures strategically important inputs: • Contracting strategy to lock in annual volumes, not price • Security of supply and quality adherence is paramount • Our well d
Slide 37: Operations Update
OPERATIONS UPDATE Paul Harvey (Chief Operating Officer, Australia) Mike Fraser (Chief Operating Officer, Africa)
Slide 38: Illawarra Metallurgical Coal
ILLAWARRA METALLURGICAL COAL • Transforming culture and • Recent production disruptions have contributed to • Dendrobium next domain temporary impact to price realisation performance at Appin colliery FY17 Illawarra Metallurgical Coal hard coking coal sales External Ownership • 100% Product • Metall
Slide 39: Appin Colliery Restart Plan
APPIN COLLIERY RESTART PLAN Phase I (~3 months) Phase II (~12 months) Phase III Review systems, processes and organisational structure Safe commencement of staged ramp-up Work with the regulator to address Focus on gas drainage and ventilation Ability to safely return operation to concerns historica
Slide 40: Illawarra Longwall Configuration
ILLAWARRA LONGWALL CONFIGURATION Appin colliery restart plan Phase I Phase II Phase III • Single longwall • Single longwall configuration at Appin colliery • Twin longwall configuration at restart activities • Focus on transforming culture and performance Appin colliery complete • Maintain safe and
Slide 41: Illawarra Metallurgical Coal Guidance
ILLAWARRA METALLURGICAL COAL GUIDANCE • Cost base is mostly Australian dollar Saleable production guidance Cost guidance1 denominated with circa two-thirds fixed (kt) (US$M) • Unit cost performance will improve • Single longwall at Appin colliery for1,000 substantially with an increase in remainder
Slide 42: Dendrobium Next Domain
DENDROBIUM NEXT DOMAIN • Potential to unlock high-quality coal resources at Dendrobium Area 6 • Leverages existing infrastructure • Study and development time frame of Area 5 4-6 years Dendrobium ‒ Assessing Area 5 and Area 6 Area 3 Shafts ‒ Prefeasibility on track for completion in March 2018 Wollo
Slide 43: Cannington
CANNINGTON • Optimise stope sequence for recovery to maximise value • Make decision on open pit • Long term lead concentrate treatment and refining • Increased focus on scheduling to post-2020 charges negotiated to lowest level in a decade manage geotechnical complexity External FY17 lead concentrat
Slide 44: Cannington Mine Scheduling and Stope Design
CANNINGTON MINE SCHEDULING AND STOPE DESIGN Sharpened focus on mine scheduling and stope design to maximise • Underground crushing ceased end of September 2017, subsequent payable metal recovery over the life of mine ramp-up of trucking activity proceeding to plan • Reduced stope size to improve geo
Slide 45: Cannington Grade Profile
CANNINGTON GRADE PROFILE • Grades currently at or below reserve grade • High-grade stopes will be sequenced to maximise metal recovery over the life of the mine • Geometallurgical studies will optimise process plant recovery through optimal grinding and flotation for specific ore types Silver grade
Slide 46: Cannington Guidance
CANNINGTON GUIDANCE Saleable production guidance Cost guidance1 • Cost base has been re-set lower to (US$M) mitigate impact of lower throughput 200 • Structural reduction in treatment and 22.6 21.4 refining charges also achieved 180 15.6 15.0 14.4 20.0 500 • Lower grades and declining throughput 150
Slide 47: South Africa Energy Coal
SOUTH AFRICA ENERGY COAL • Establish as a stand-alone • Klipspruit and Khutala life • Discounts to benchmark price have narrowed business to realise full potential extension projects FY17 South Africa Energy Coal export sales Ownership • 92%4 Product • Export and domestic energy coal (FY17: 42% / 58
Slide 48: Klipspruit Life Extension Project
KLIPSPRUIT LIFE EXTENSION PROJECT • 4.3B Rand project secures the colliery’s future for at least another 20 years1 KPSX project map • Internal rate of return >20%1 • Unlocks 616Mt1 of resource • Leverages existing infrastructure • 8Mtpa of export coal, partially mitigating rail take-or-pay obligatio
Slide 49: South Africa Energy Coal Guidance
SOUTH AFRICA ENERGY COAL GUIDANCE Saleable energy coal production guidance1 • Export sales volumes continue to Cost guidance1,2 (kt) be impacted by weather related (US$M) congestion at RBCT • Export volumes expected to 1,000 improve in FY19 following • Establish as a stand-alone company investment i
Slide 50: South Africa Manganese Ore
SOUTH AFRICA MANGANESE ORE • Optimise product mix and • Unlock value of fines • Continue to take advantage of market conditions by route to market to maximise stockpiles selling additional fine grained product value FY17 South Africa Manganese ore sales Ownership • South Africa Manganese includes a
Slide 51: South Africa Manganese Ore Guidance
SOUTH AFRICA MANGANESE ORE GUIDANCE Saleable Manganese ore production guidance1 Manganese ore FOB cost guidance1,2 (kwmt) (US$M) • Operated above 2.9Mwmt (100% share) optimised base rate in 2,274 Subject 2,038 1,885 September 2017 quarter (3.5Mwmt) • Higher cost trucking and an increase 1,711 to 179
Slide 52: Australia Manganese Ore
AUSTRALIA MANGANESE ORE • Convert Eastern leases to • Optimise product blend and mix reserves • High grade ore continues to attract strong demand • Transition to new mining areas • Test potential of Southern lease FY17 Australia Manganese ore sales Ownership • 60% Internal Product • High-grade manga
Slide 53: Australia Manganese Ore
AUSTRALIA MANGANESE ORE Optimise performance Alyangula • Improving mobile fleet utilisation and broader mine port productivity to address increasing strip ratio and haulage distances over the life of mine • Optimising concentrator throughput and yield with a focus on value over volume Southern lease
Slide 54: Australia Manganese Ore Guidance
AUSTRALIA MANGANESE ORE GUIDANCE Saleable Manganese ore production guidance1 Manganese ore FOB cost guidance1,2 (kwmt) ($USM) Subject • Focus on fleet utilisation, mine 2,942 3,071 2,994 3,125 to productivity and use of contractors to offset the impact of increasing strip demand 214 198 208 209 • FY
Slide 55: Cerro Matoso
CERRO MATOSO • Regional exploration for • Optimise energy mix and cost nickel and copper/gold • FeNi realising improved premiums year to date • Maximise furnace input • Near mine, lower-grade resource opportunities FY17 Cerro Matoso Ferronickel sales Ownership • 99.9% Off-spec Product • Ferronickel
Slide 56: Cerro Matoso
CERRO MATOSO Optimising performance • Improving furnace performance by de-bottlenecking plant Planeta Rica • Optimising energy procurement by establishing an independent energy company Unlock • Converting high-quality resource to reserve • Successful ramp-up of La Esmeralda delivers temporary produc
Slide 57: Cerro Matoso Guidance
CERRO MATOSO GUIDANCE Saleable nickel production guidance1 Cost guidance1,2 (kt) (US$M) • Temporary lift in production across FY18 and FY19 from higher grade 500 • Substantial reduction to controllable La Esmeralda deposit cost base in recent years with the 40.4 41.6 38.8 • Assessing options to exte
Slide 58: Worsley Alumina
WORSLEY ALUMINA • Further improve industry • Unlock low impurity bauxite resource at • Steep increase in price over the December quarter position by leveraging energy West Marradong expected to be realised on an M-1 basis supply flexibility FY17 Worsley Alumina sales Ownership • 86% Product • Alumin
Slide 59: West Marradong Bauxite Feed Will Reduce Caustic Soda Consumption and Defer Capital
• WEST MARRADONG BAUXITE FEED WILL REDUCE CAUSTIC SODA CONSUMPTION AND DEFER CAPITAL West Marradong will be accessed under an existing sublease agreement with Alcoa West Marradong adds 74Mt of higher quality bauxite to the Worsley Mineral Resource2. Access to bauxite Defers capital spend Blending op
Slide 60: Worsley Alumina Guidance
WORSLEY ALUMINA GUIDANCE Saleable alumina production guidance1 Cost guidance1,2 (kt) (US$M) 1500 • Cost reduction driven by employee 1000 productivity and optimisation of the • Refinery operated at maximum energy mix 3,961 3,975 3,965 technical capacity in FY17 • Lower caustic usage from West 3,819
Slide 61: South Africa Aluminium
SOUTH AFRICA ALUMINIUM • Study energy efficiency • Resolve long-term power • Supporting local downstream beneficiation through initiatives given improved supply agreement with hot liquid metal sales reliability in power supply Eskom FY17 South Africa Aluminium sales Ownership • 100% Product • Alumin
Slide 62: South Africa Aluminium Guidance
SOUTH AFRICA ALUMINIUM GUIDANCE Saleable aluminium production guidance Cost base1 (kt) (US$M) 1,500 1,000 699 697 714 720 720 • Smelter operating at maximum 1,224 • Expect to see raw material cost technical capacity, benefitting from 500 1,014 1,037 inflation, including for price linked improved rel
Slide 63: South Africa Aluminium Energy Supply
SOUTH AFRICA ALUMINIUM ENERGY SUPPLY • Power sourced from state utility, Eskom, under two long term Electricity tariff sensitivity to aluminium prices2 (Indexed) contracts: External ‒ Potlines one and two; LME aluminium and ZAR:USD linked ‒ Potline three; Rand based, linked to South African and Unit
Slide 64: Mozal Aluminium
MOZAL ALUMINIUM • Maintain supply base • AP3XLE energy efficiency diversification for project will deliver 5% • Realises premium pricing for product raw materials production increase (full benefit FY24) FY17 Mozal Aluminium sales Ownership • 47.1% Domestic Product • Aluminium ingots and liquid metal
Slide 65: Mozal Aluminium Guidance
MOZAL ALUMINIUM GUIDANCE Saleable aluminium production guidance1 Cost base1,2 (kt) ($USM) 500 1,500 1,000 265 266 271 269 269 • Smelter set annual production record in 481 • Expect to see cost base inflation in FY17 and quarterly production record in 396 408 500FY18 with increased prices for raw Sep
Slide 66: Identify New Opportunities
IDENTIFY NEW OPPORTUNITIES Graham Kerr (Chief Executive Officer)
Slide 67: Adding to Portfolio with High Quality Options
• ADDING TO PORTFOLIO WITH HIGH QUALITY OPTIONS Prospective project Attractive commodity Attractive Reserve potential Quality partner + Resource potential + (with upside) + development opportunity Favourable jurisdiction Advance options to improve overall quality Project life cycle Arizona Mining (I
Slide 68: Current Opportunities
• CURRENT OPPORTUNITIES Concept Discovery AusQuest Strategic Alliance1 Trilogy Metals Option Agreement Cu, Pb, Zn Zn (±Cu,Pb) • Blue Billy JV (Australia) • Bornite & Arctic (Alaska) Au, Ag Ni, Cu • Jimberlana (Australia) • 3.8Mt contained Cu in Mineral Resource2 (Arctic 40Mt @ 2.95% Cu, Bornite Open
Slide 69: Investment in Arizona Mining
• INVESTMENT IN ARIZONA MINING Arizona Mining Zn, Pb, Ag • Hermosa (Arizona) • Initial investment of US$81M for 15% stake in TSX listed Arizona Mining (C$2.45 per share) • Subsequently entered into prepayment designed to move investment to 19.9% • Hermosa Project including underground Taylor sulphid
Slide 70: Cash Flow and Balance Sheet Update
CASH FLOW AND BALANCE SHEET UPDATE Brendan Harris (Chief Financial Officer)
Slide 71: Cash Flow Update
• CASH FLOW UPDATE Performance four months to end October 2017 Net cash balance and cash flows as at 31 October 2017 (US$M) US$386M of underlying free cash flow1 85 333 386 US$85M received from EAI2 71 284 US$333M Ordinary final dividend and US$71M returned via 1,640 capital management program 140 2
Slide 72: Capital Management Framework
• CAPITAL MANAGEMENT FRAMEWORK Framework remains unchanged since listing Return on invested capital (%) ROIC ~US$700M reduction in controllable costs and lower sustaining capital expenditure increased ROIC by 5% (FY15 to FY17) Competition for excess capital - Investment in the business 13.5% - Acqui
Slide 73: Our Framework in Action
• OUR FRAMEWORK IN ACTION Maintain safe and reliable operations and a Dividend policy reflects the cyclicality of our strong balance sheet business H2 FY17 shareholder returns (US$M) • Protects balance sheet and rewards • Disciplined planning process shareholders as margins expand − Establishes sust
Slide 74: Capital Management Update
• CAPITAL MANAGEMENT UPDATE • Intention to complete US$750M capital management program by 10 October 2018 Flexible program designed to return capital efficiently 38% (or US$282M) of program completed to end October 2017 - On-market share buy-back - Average buy-back price of A$2.77 per share - Specia
Slide 75: Summary
SUMMARY Graham Kerr (Chief Executive Officer)
Slide 76: Summary
• SUMMARY Working opportunities Consistent application Sustainably improving across our portfolio to of our strategy performance unlock value Embedding Further simplifying our Substantially increasing high quality options structure returns to shareholders with a bias to base metals 2017 STRATEGY AND
Slide 77: Appendix
SOUTH32 APPENDIX
Slide 78: Non-Operated - Brazil Alumina
NON-OPERATED - BRAZIL ALUMINA • Complete de-bottlenecking • Steep increase in price over the • Agree bauxite life phase one project and December 2017 quarter expected to be extension project commence phase two realised on an M-1 basis FY17 Brazil Alumina sales Ownership • Bauxite Mine: 14.8%; Alumin
Slide 79: Aluminium Cost Base
• ALUMINIUM COST BASE FY17 South Africa Aluminium cost breakdown 14% 10% 25% 75% 29% 56% 15% 52% Fixed Variable ZAR denominated USD denominated 24% Royalties and aluminium price linked contracts Raw materials/consumables Labour and contractor related costs Energy (including fuel) Other FY17 Mozal Al
Slide 80: Alumina Cost Base
• ALUMINA COST BASE FY17 Worsley Alumina cost breakdown 12% 19% 2% 20% 56% 44% 75% 23% 22% Fixed AUD denominated USD denominated Variable Royalties and alumina price linked contracts 5% 22% Raw materials/consumables Labour and contractor related costs Energy (including fuel) Other Caustic soda Minin
Slide 81: Manganese Ore Cost Base
• MANGANESE ORE COST BASE FY17 Australia Manganese ore cost breakdown 22% 20% 8% 8% 60% 40% 83% 9% Fixed Variable AUD denominated USD denominated Royalties and manganese price linked costs 50% Raw materials/consumables Labour and contractor related costs Energy (including fuel) Other FY17 South Afri
Slide 82: Base Metals Cost Base
• BASE METALS COST BASE FY17 Cerro Matoso cost breakdown 18% 17% 9% 49% 51% 75% 16% Fixed Variable COP denominated USD denominated 24% 41% Royalties and nickel price linked contracts Raw materials/consumables Labour and contractor related costs Energy (including fuel) Other FY17 Cannington cost brea
Slide 83: Metallurgical and Thermal Coal Cost Base
• METALLURGICAL AND THERMAL COAL COST BASE FY17 Illawarra Metallurgical Coal cost breakdown 13% 5% 65% 35% 88% 12% 39% Fixed Variable AUD denominated USD denominated 43% Royalties and metallurgical coal price linked costs Raw Materials/consumables Labour and contractor related costs Energy (includin
Slide 84: Reserve and Resource Statement
RESERVE AND RESOURCE STATEMENT (1) Mineral Resources information is inclusive of Mineral Resource that have been modified to produce Ore Reserves reported on 100% basis. (2) All tonnage is reported on dry metric tonne basis. (3) Commodity price and exchange rates used to estimate economic viability
Slide 85: South32
SOUTH32