South32 Ltd. · ASX:S32
South32 — BofA Securities 2020 Global Metals, Mining & Steel Conference
29 slides from South32's conference presentation, May 12, 2020
Slide 1: BofA Securities 2020 Global Metals, Mining & Steel Conference Presentation
12 May 2020 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 BOFA SECURITIES 2020 GLOBAL METALS, MINING & STEEL CONFERENCE PRESENTATION South32 Limited Chief Executive Officer
Slide 2: BofA Securities 2020 Global Metals, Mining & Steel Conference
BofA Securities 2020 Global Metals, Mining & Steel Conference • 12 May 2020
Slide 3: Important notices
Important notices This presentation should be read in conjunction with the “Financial Results and Outlook – half year ended 31 December 2019” announcement released on 13 February 2020, which is available on South32’s website (www.south32.net). Figures in italics indicate that an adjustment has been
Slide 4: Overview
Overview Consistently apply Respond to Protect our strong our strategy market conditions balance sheet Exit low returning Continue to embed high quality Maintain capital discipline and businesses options with a bias to base metals invest in high returning projects SLIDE 3
Slide 5: Our response to COVID-19
Our response to COVID-19 Our strong financial position and resilient portfolio has us well placed to navigate and respond to COVID-19’s impact - implementing procedures for social - stopping all non-business critical work distancing - ensuring reliable supply to our customers - adjusting roster patt
Slide 6: Our strategy
Our strategy A simple strategy underpinned by a disciplined capital management framework Optimise Unlock Identify our business by working safely, the full value of our business and pursue opportunities to minimising our impact, sustainably reshape our business consistently delivering stable and for
Slide 7: Our portfolio
Our portfolio Ambler Metals Large producer of manganese ore Base metals development and alumina and exploration options Options offer a staged Conditional agreement to divest build profile, subject to Hermosa South Africa Energy Coal1 investment decisions Cerro Matoso Brazil Alumina Australia Mangan
Slide 8: Our portfolio
Our portfolio Diversified by commodity and customer with growth options embedded and a pathway to exit low returning businesses Contribution to EBITDA(a) Energy coal Conditional agreement to divest South Africa Energy Coal (%) On-going exposure under review with in principle decision to 100% Mangane
Slide 9: Our cash generation
Our cash generation Cash from operations has significantly exceeded capital expenditure Average annual Underlying EBITDA of US$2.0B with excess funds directed to shareholders, at an Operating margin of 32%(a) portfolio improvement and our balance sheet Underlying EBITDA and Operating margin Cash flo
Slide 10: Our balance sheet
Our balance sheet A strong balance sheet through the cycle is at the core of our strategy Net cash, no term debt and an undrawn US$1.5B revolving credit facility Net cash/(debt)2 Net cash balance as at 31 March 20203 (US$M) (US$M) 2,400 Long term lease liability 2,000 for cogeneration facility expir
Slide 11: Capital management framework: cash flow priorities
Capital management framework Successful divestment of SAEC Ordinary dividend policy is Our framework has remained will meaningfully reduce the designed to flex and reward unchanged since day one Group’s capital intensity shareholders through the cycle Capital management framework Sustaining capital
Slide 12: Capital management framework: excess capital allocation
Capital management framework We have allocated excess cash to establish balance sheet resilience, improve our portfolio and return US$1.3B to shareholders in addition to ordinary dividends of US$1.6B Capital management framework Excess capital (paid and committed) Excess capital allocation (US$M) (C
Slide 13: Manganese market
Manganese market Long term price to be set by Prices moved off lows in late Chinese imports fell -18% YoY Significant COVID-19 related marginal South African supply CY19 with high cost producers in Q1 CY20 following supply disruptions in Q2 CY20 transitioning to more expensive exiting the market COV
Slide 14: Alumina market
Alumina market Long term price to be set by Majority of Chinese alumina industry Imported material remains new Chinese and Indonesian supply currently loss-making competitive into China well above the current spot price Alumina cost curve (CY20) China alumina imports/exports (US$/t) (Alumina price U
Slide 15: Metallurgical coal market
Metallurgical coal market Chinese imports currently Further exit of high cost supply Long run growth to be Ex-China steel cuts are supported by arbitrage despite and easing of global lockdown driven by India and other impacting demand in Q2 CY20 tight import regulations measures to return market bal
Slide 16: Business update: Australia
Business update: Australia Production and sales volumes from Australian operations largely unaffected to date by COVID-19 restrictions or measures Cannington (100%) Australia Manganese ore (60%) Production volumes not impacted to date FY20 production guidance reduced by 5% in FY20 Operating unit cos
Slide 17: Business update: Southern Africa
Business update: Southern Africa Updated guidance subject to no further impact following the easing of South African national lockdown restrictions on May 1st South Africa Energy Coal (100%) Mozal Aluminium (47.1%) Continue to adjust volumes to maximise margins Production volumes not impacted to dat
Slide 18: Business update: Americas
Business update: Americas Ambler Metals (50%) CY20 exploration programs under review due to COVID-19 restrictions in Alaska Hermosa (100%) US Bureau of Land Management has filed the final Environmental Impact Statement for the Ambler access road Pre-feasibility study (PFS) for the Taylor Deposit exp
Slide 19: Hermosa project
Hermosa project Taylor Deposit Mineral Resource(a) Total Mineral Resources Ore Type Mt % Zn % Pb g/t Ag Mineral Resource estimate for Taylor has de-risked UG Sulphide(a) 149 3.32 3.66 70 and increased our confidence in the project UG Transition(a) 6.2 5.22 3.82 57 Total 155 3.39 3.67 69 Hermosa Tail
Slide 20: Hermosa project
Hermosa project Hermosa project land package Clark Deposit Mineral Resource(a) Taylor Deposit, Clark Deposit and regional landholdings Total Mineral Resources Regional landholdings Ore Type Mt % Zn % Mn g/t Ag increased by ~50% UG Oxide(a) 55 2.31 9.08 78 since acquisition Total 55 2.31 9.08 78 Clar
Slide 21: Ambler Metals JV
Ambler Metals JV Regional scale in an Arctic, a high grade VMS • Bornite, a large carbonate Identified prospects attractive mining jurisdiction development option hosted copper deposit and VMS clusters Ambler Metals JV location map High grade development option in northwest Alaska • 50% joint ventur
Slide 22: Ambler Metals JV
Ambler Metals JV CY20 work program to be Exploration targets in Arctic PFS • Further resource definition prioritised in response to Ambler VMS belt commenced by JV drilling planned at Arctic COVID-19 restrictions prioritised for drilling Arctic Deposit Mineral Resource (looking north west) Bornite D
Slide 23: Summary
Summary Consistently apply Respond to Protect our strong our strategy market conditions balance sheet Exit low returning Continue to embed high quality Maintain capital discipline and businesses options with a bias to base metals invest in high returning projects SLIDE 22
Slide 24: Supplementary Information
Supplementary Information
Slide 25: Production performance and guidance
Production performance and guidance FY20e production (South32’s share) Operation Unit Guidance Key FY20 guidance assumptions Worsley Alumina FY20e Guidance unchanged Production volumes not impacted to date by COVID-19 2,869 1,096 kt 3,965 Expected to approach guidance with no further material calcin
Slide 26: Production performance and guidance
Production performance and guidance FY20e production (South32’s share) Operation Unit Guidance Key FY20 guidance assumptions Illawarra Metallurgical Coal FY20e Guidance unchanged Metallurgical coal 4,026 1,774 kt 5,800 • Production volumes not impacted to date by COVID-19, although challenging strat
Slide 27: Operating unit cost guidance
Operating unit cost guidance FY20 FY20 new guidance vs. H1 FY20 FY20 prior FY20 new Operating unit costs adjusted FY20 prior guidance Commentary actual guidance11 guidance8 guidance12 (10%) (5%) 0% 5% 10% 15% Worsley Alumina Lower caustic prices and consumption rates, and a weaker 225 219 213 210 Au
Slide 28: Footnotes
Footnotes 1. Refer to the market announcement “Agreement to Divest South Africa Energy Coal” dated 6 November 2019. 2. The Group’s June 2019 net cash position reduced by US$140M to US$364M on 1 July 2019 following the adoption of AASB 16 Leases. 3. Numbers are unaudited. Net cash number should not b
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