FOR FUTURE
GENERATIONS
ANNUAL
REPORT
2021
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ACKNOWLEDGEMENT
We acknowledge and pay our respects
to the Indigenous and Tribal Peoples
of the lands, waters and territories on which
South32 is located and where we conduct
our business around the world.
We respect and acknowledge the unique
cultural and spiritual relationships that
Indigenous and Tribal Peoples have to the
land, waters and territories, and their rich
contribution to society.
In the spirit of respect and reconciliation,
we will continue to support initiatives that
strengthen culture and ways of life so that
their legacy continues and extends
to future generations.
Contents
OPERATING AND
FINANCIAL REVIEW
About us
Overview
South32 at a glance
From the Chair
From the CEO
Our business model
Our strategy
Progress against our strategy
Our contribution
Risk management
Financial and operational
performance summary
GOVERNANCE
Board of Directors
Directors’ report
Lead Team
Remuneration report
www.south32.net
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FINANCIAL REPORT
Consolidated income statement 95
Consolidated statement
of comprehensive income
Consolidated balance sheet
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97
Consolidated cash flow statement 98
Consolidated statement
of changes in equity
99
Notes to the financial statements 100
Directors' declaration
Lead auditor’s independence
declaration
Independent auditor’s report
RESOURCES AND
RESERVES
Information
Competent persons
Accompanying tables
INFORMATION
Shareholder information
Glossary of terms and
abbreviations
Corporate directory
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169
See the documents that make up the rest of our reporting suite at https://www.
south32.net/investors-media/investor-centre/annual-reporting-suite, including:
Corporate Governance Statement
Sustainable Development Report
Sustainability Databook
Modern Slavery Statement
Tax Transparency and Payments to Governments Report
Disclaimer:
This Annual Report is a summary of the operations, activities and performance of South32 Limited (ABN 84 093 732
597) and its controlled entities and joint arrangements(1) for the year ended 30 June 2021 and its financial position as
at 30 June 2021.
South32 Limited is the parent company of the South32 Group of companies. In this report, unless otherwise stated,
references to South32, the South32 Group, the Company, we, us and our refer to South32 Limited and its controlled
entities and South32-operated joint arrangements, as a whole. Unless otherwise stated, financial information in this
report is presented on the basis as described in the Notes to the Financial Statements basis of preparation on page
100 and includes South32 and its controlled entities and joint arrangements (including operated and non-operated
joint arrangements). South32 Limited shares trade on the ASX, JSE and LSE under the listing code of S32. Monetary
amounts in this document are reported in US dollars, unless otherwise stated.
Metrics describing sustainability and HSEC performance apply to operated operations that have been wholly owned
and operated by South32, or that have been operated by South32 in a joint arrangement, from 1 July 2020 to 30 June
2021. South32’s Sustainability Databook is available at www.south32.net.
Forward-looking statements
This report contains forward-looking statements. While these forward-looking statements reflect South32’s
expectations at the date of this report, they are not guarantees or predictions of future performance or statements
of fact. They involve known and unknown risks and uncertainties, which may cause actual results to differ materially
from those expressed in the statements contained in this Annual Report. For further information regarding South32’s
approach to risk, please see page 24 of this Annual Report. South32 makes no representation, assurance or
guarantee as to the accuracy or likelihood or fulfilment of any forward-looking statement or any outcomes expressed
or implied in any forward-looking statement. 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, particularly in light of the current economic
climate and the significant volatility, uncertainty and disruption arising in connection with COVID-19.
Information on likely developments in the Group’s business strategies, prospects and operations for future financial
years and the expected results that could result in unreasonable prejudice to the Group (for example, information
that is commercially sensitive, confidential or could give a third party a commercial advantage) has not been included
below in this report. The categories of information omitted include forward-looking estimates and projections
prepared for internal management purposes, information regarding the Group’s operations and projects, which are
developing and susceptible to change, and information relating to commercial contracts.
Non-IFRS
This report includes certain non-IFRS financial measures, including underlying measures of earnings, effective tax
rate, returns on invested capital, cash flow and net debt. Non-IFRS measures should not be considered as
alternatives to an IFRS measure of profitability, financial performance or liquidity.
For an explanation of how South32 uses non-IFRS measures, see page 34.
The meanings of individual non-IFRS measures used in this report are set out in the Glossary on page 165.
(1) In this Annual Report, references to ‘joint arrangements’ mean operations that are not wholly owned by South32,
such as joint ventures and joint operations. Joint arrangements are classified in accordance with IFRS 11 Joint
Arrangements.
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About us
SOUTH32 IS A
GLOBAL MINING
AND METALS
COMPANY
We produce bauxite, alumina, aluminium, metallurgical coal, manganese,
nickel, silver, lead and zinc at our operations in Australia, Southern Africa
and South America. With a focus on growing our base metals exposure,
we also have two development options in North America and several
partnerships with junior explorers around the world.
1
Making a difference
Our purpose is to make a difference by developing natural
resources, improving people’s lives now and for generations
to come. We are trusted by our owners and partners to realise
the potential of their resources.
See some of the ways we make a difference on page 20
Optimise, Unlock, Identify
Our purpose is underpinned by a simple strategy which
is focused on optimising the performance of our operations,
unlocking their potential and identifying new opportunities
to create value for all our stakeholders.
Read more about our strategy on page 12
Care, Trust, Togetherness and Excellence
While our strategy outlines what we do to achieve our purpose,
our values of care, trust, togetherness and excellence guide
how we do it. Every day, our values shape the way we behave
and the standards we set for ourselves and others.
Learn more about our people on page 20 of our Sustainable Development Report
South32 Annual Report 2021Operating and Financial Review Overview
YEAR
IN REVIEW
Total Recordable Injury Frequency (TRIF)(1)
FY21 Scope 1 greenhouse gas emissions against FY15 baseline
4.3
FY21
FY20
FY19
4.3
4.2
4.5
2
Community investment(2)
US$22.2m
FY21
FY20
FY19
US$22.2m
US$24.5m
US$17.3m
Underlying EBITDA(3)
US$1,564m
FY21
FY20
FY19
US$1,564m
US$1,185m
US$2,197m
16% below
FY21
FY20
FY19
16% below
10% below
9% below
Payment of taxes and royalties
US$569m
FY21
FY20
FY19
US$569m
US$751m
US$981m
Shareholder returns(4)
US$670m
FY21
FY20
FY19
US$670m
US$426m
US$765m
(1) TRIF was adversely affected by a reduction in the total number of hours worked, see page 14.
(2) Community investment consists of direct investment, in-kind support and administrative costs, see page 22.
(3) This is a non-IFRS measure. For an explanation of how South32 uses non-IFRS measures, see page 34.
(4) In respect of the June 2021 financial year. Includes fully franked dividends (interim ordinary US$67 million, final ordinary US$164 million and final
special US$93 million) and on-market share buy-back of US$346 million.
South32 Annual Report 2021Operating and Financial Review “
We plan to deliver our medium-term emissions
reduction target by investing in efficiency projects,
shifting to low-carbon energy and adopting new
technologies. At the same time we are increasing
our exposure to the base metals required for
a low-carbon future."
Graham Kerr, CEO
Highlights
〉 Announced a new medium-term
target to halve our operational
carbon emissions by 2035 from
our FY21 baseline.
〉 Reshaped our portfolio by
completing the divestment of
South Africa Energy Coal and the
TEMCO manganese alloy smelter.
〉 Achieved record production at
Worsley Alumina, Brazil Alumina
and Australia Manganese.
〉 Exceeded our initial production
guidance at South Africa
Manganese, Cerro Matoso
and Cannington.
〉 Progressed the pre-feasibility
study for the Taylor Deposit and
a scoping study for the Clark
Deposit at Hermosa.
〉 Delivered first ore from
the higher-grade Queresas
and Porvenir project
at Cerro Matoso.
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Operating and Financial Review
South32 at a glance
DIVERSIFIED
PORTFOLIO WITH
A BIAS TO BASE
METALS
AMBLER METALS
Copper, Lead, Gold, Silver & Zinc
ROOSEVELT PROJECT
FREEGOLD VENTURES
Copper, Zinc, Lead, Silver & Gold
Copper & Gold
Office
4
Upstream operations
Downstream processing facilities
Development option
Exploration partnership/project
South32 investment
FY21 Key Commodity Underlying EBITDA
US$2.1b(1)
4%
23%
29%
15%
44%
27%
58%
By Commodity
By Geography
Aluminium value chain
Base & precious metals
Manganese ore
Metallurgical coal
Australia
Africa
Americas
JUPITER PROJECT
Copper, Zinc, Lead, Silver & Gold
VANCOUVER
EMX ROYALTY CORP
Copper & Gold
SILVER BULL RESOURCES
Zinc, Silver, Lead & Copper
HERMOSA
Zinc, Lead, Silver & Manganese
CERRO MATOSO
Nickel
BRAZIL ALUMINA
Alumina
MINERAÇÃO RIO DO NORTE (MRN)
Bauxite
AUSQUEST
Copper & Gold
SABLE RESOURCES
Copper & Gold
MINSUD RESOURCES
Copper, Gold & Molybdenum
See Segment Reporting in Note 4 to the financial statements for more information
(1) Includes manganese on a proportional consolidation basis and excludes South Africa Energy Coal (-US$123 million), manganese alloys (-US$24 million), the Brazil Alumina
aluminium smelter (-US$3 million), Hermosa (-US$6 million), Group and unallocated costs (-US$93 million) and statutory adjustments (-US$300 million).
(2) During FY21, we divested our interest in South Africa Energy Coal and the TEMCO manganese alloy smelter.
South32 Annual Report 2021Operating and Financial Review Our commodities
We produce alumina, aluminium, ferronickel,
silver, lead and zinc, which have applications in
construction, transport, consumer goods, renewable
energy generation and battery storage and we
mine metallurgical coal and manganese ore which
are used to produce steel. We have operations and
development options in Australia, Africa and
the Americas and a geographically diverse
customer base.
Discover more about our business model on page 10
Portfolio outlook
We are actively reshaping our
portfolio to increase our exposure
to the base metals critical in the transition
to a low-carbon world. In addition, we are
building our pipeline of opportunities by
investing through the drill bit. We currently
have more than 20 greenfield exploration
partnerships and projects targeting base
metals around the world.(2)
Discover more about our strategy on page 12
ADVENTUS MINING CORPORATION
Zinc, Lead & Silver
LONDON
JOHANNESBURG
HOTAZEL
MANGANESE MINES
Manganese ore
MOZAL
ALUMINIUM
Aluminium
HILLSIDE ALUMINIUM
Aluminium
HARRY'S LAKE PROJECT
Nickel
5
NORTH QUEENSLAND RESOURCES
Copper, Zinc, Lead, Silver & Gold
CANNINGTON
Silver, Lead & Zinc
SINGAPORE
PEGMONT MINES
Copper
GEMCO
Manganese ore
IFFLEY PROJECT
Zinc, Lead & Silver
AUSQUEST
Nickel
PERTH HEAD OFFICE
WORSLEY ALUMINA
Alumina
AUSQUEST
Copper, Lead, Silver & Zinc
AUSQUEST
Copper & Gold
ILLAWARRA
METALLURGICAL COAL
Metallurgical coal
South32 Annual Report 2021Operating and Financial Review From the Chair
A TRANSFORMATIVE
YEAR FOR SOUTH32
The challenges presented by COVID-19 have remained with us
throughout the last year. We have lost colleagues and our people
have faced incredibly difficult times with the loss of loved ones
and the many other impacts associated with the virus.
6
Through it all our people have continued to
work tirelessly to protect and support our
people, our communities and our business.
The Board pays tribute to everyone at
South32, in particular the teams at our
operations, for their continued focus on
minimising the risk of infection and for
the way they have stepped up to support
each other and their communities in this
challenging time. We are truly grateful to
them all.
In May 2021 we were deeply saddened
by the death of Mr Petros Sibeko, a
contractor who was working at the
Klipspruit Extension Project at South Africa
Energy Coal. We express our sympathies
to Mr Sibeko’s family, friends and
colleagues. Following Mr Sibeko’s death an
investigation was undertaken to establish
the cause and, most importantly, identify
what steps we need to take to learn and
improve. The Board has reviewed the
findings and heard from management
on the changes which were implemented
in response.
After some volatility early in the financial
year, commodity prices improved by the
end of FY21. Our operations performed
well throughout the year and delivered
Underlying earnings before interest,
tax, depreciation and amortisation
of US$1.564 billion and free cash flow
of US$825 million(1). The Group’s
statutory profit after tax declined by
US$130 million to a loss of US$195 million
following the recognition of impairment
charges totalling US$728 million
(US$510 million after tax) in relation to
Illawarra Metallurgical Coal and a loss on
the sale of South Africa Energy Coal of
US$159 million.
We ended the financial year with a net cash
balance of US$406 million. We returned
US$670 million to our shareholders in
respect of the period. This included
US$439 million as part of our ongoing
capital management program, with
US$346 million allocated to our on-market
share buy-back and US$93 million returned
in the form of a special dividend to be paid
in October 2021.
During the year we completed the
divestment of South Africa Energy
Coal, marking a pivotal step in the
transformation of our portfolio and the
delivery of our strategy. Throughout
the divestment process, the Board and
management team focused on our vision
of making the business sustainable for the
long-term and transitioning it to become
Black-owned and operated, consistent with
South Africa’s transformation agenda. We
are pleased to have completed the sale
and fulfilled these objectives for the benefit
of all those who depend on the business.
We also divested the TEMCO manganese
alloy smelter in Australia and placed the
Metalloys manganese alloy smelter in
South Africa on care and maintenance.
Climate change has remained a strong
focus for the Board as part of its oversight
of material sustainability issues, and also
remains an area of significant interest for
many of our stakeholders. This year we
achieved our first short-term target and
set a medium-term target to halve our
operational carbon emissions (Scope 1 and
2) by 2035, based on our FY21 baseline.
This is both ambitious – which is necessary
to achieve our net zero goal – and realistic,
recognising that there is no definitive
‘best pathway’ to net zero and some of the
innovations we will need are not yet fully
developed.
Our approach to climate change is
aligned with our purpose, integrated with
our strategy and is focused on two key
objectives – decarbonising our existing
business and reshaping our portfolio for
a low-carbon future by increasing our
exposure to base metals. We will deliver
this through decarbonising our existing
operations, securing green energy,
designing our growth projects to be carbon
neutral and supporting the development
of low-carbon technology. The Board
sees this commitment as fundamental to
the future of South32 and as a result has
modified the executive long-term incentive
(LTI) plan to include performance on our
climate change commitments, with
10 per cent of the LTI awards to be
determined by the Board based on
our action and progress.
In recent years, we have added a number of
growth options to our portfolio with a bias
to base metals. We have also reassessed
our portfolio’s resilience to transition risk
using a scenario in which global warming is
assumed to be limited to 1.5°C above pre-
industrial levels, to illustrate the resilience
of our portfolio in a rapid transition. Our
analysis shows demand growth for most
of our commodities in a 1.5°C aligned
scenario.
In line with our purpose, we want to make
sure we are developing natural resources in
a way that benefits our stakeholders. Trust
and transparency are essential to the way
we operate and we work closely with all
of our stakeholders, considering different
perspectives and working together to
create shared value.
(1) Free cash flow from operations including net distributions from our manganese equity accounted investments (EAI).
South32 Annual Report 2021Operating and Financial Review “
The divestment of South Africa
Energy Coal marked a pivotal step
in the transformation of our portfolio
and the delivery of our strategy.”
Many of our operations and projects
intersect areas of cultural significance
and in FY21 we completed a review of our
cultural heritage performance in Australia.
The review informed where we need to
update our approach to Aboriginal and
Torres Strait Islanders’ Cultural Heritage
and led to the development of a set of
principles to guide our engagements
on this important topic. The Board was
briefed on the review findings and will
continue to receive reports on progress
towards addressing areas identified for
improvement. Similar reviews in other
jurisdictions where we operate are planned
for FY22.
Our Innovate Reconciliation Action Plan,
launched in September 2020, set new,
more ambitious goals to build constructive
relationships with Aboriginal and Torres
Strait Islander Peoples. It is based on
mutual trust and the recognition that we
need to be an active partner to create
positive, mutually beneficial outcomes.
Good progress has been made in several
areas including procurement, engagement
and training.
Workplace culture is an important part
of driving long-term value creation for
all stakeholders. The Board, CEO and
Lead Team set the direction and tone
for our culture. We work to create clarity
and shared understanding with our
people through regular connection and
engagement, so that we are all working
together to fulfil our purpose, deliver on our
strategy and live our values.
The pandemic has continued to disrupt
the Board’s practice of regularly visiting
operations and offices in the nine countries
in which we work. These visits provided
the opportunity for Directors to better
understand the daily experiences of our
people, the workforce culture and the
communities we operate in. The Board is
staying connected with our operations by
way of virtual operational overviews and
briefing sessions conducted as part of the
scheduled Board programs.
We are committed to providing a safe
and inclusive workplace, one in which no
form of harassment is tolerated. It has
been concerning to see recent reports of
incidents of harassment in our industry,
and across society more broadly. We
treat harassment, in all its forms, as a
serious risk and we are aware that it
is often under-reported. Victims and
observers are strongly encouraged to
report any incidents, knowing they will
be treated with confidentiality, respect
and sensitivity. We have reviewed the risk
of sexual harassment at all our locations
and identified several improvement
opportunities including targeted
campaigns that are underway to
confirm our zero-tolerance approach.
Inclusion supports a culture where people
feel free to speak up, and we believe in the
benefits of building an inclusive and diverse
team in South32. We continue to measure
our progress against several targets to
improve the representation of women
across the business and Black People in
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South Africa. We are pleased to report
that the representation of women on our
Operational Leadership Team increased
year-on-year, however there is more work
to do to meet our target of 20 per cent.
During the year, we became a signatory
to 40:40 Vision, an investor-led initiative
to achieve gender balance in executive
leadership across all ASX200 companies by
2030. The global response to the COVID-19
pandemic has changed perceptions
of flexible work and highlighted the
benefits it can bring to our business and
our people. We are leveraging this shift
across all our locations as we believe it
will help strengthen our employee value
proposition.
Looking ahead, we are strongly positioned
to continue to deliver against our strategy
despite the ongoing impacts of the
COVID-19 pandemic. We will continue to
prioritise work to protect our people, our
assets and our communities. The work that
was completed this year to reshape our
portfolio will enable Graham and his team
to focus on future growth opportunities
that will create sustainable long-term value.
On behalf of the Board, I would like to thank
our shareholders for their ongoing support
and reiterate our thanks to our people for
their unwavering commitment in these
most difficult of times.
Karen Wood
Chair
South32 Annual Report 2021Operating and Financial Review From the CEO
RESILIENCE IN
CHALLENGING TIMES
This year has come with many challenges – for our people,
our communities, and our business. No one has been immune
to the devastating impacts of COVID-19. I’ve been immensely proud
to see our people around the world unite and show courage
and resilience during these difficult times.
8
We are deeply saddened by the death
of our colleague, Mr Petros Sibeko, a
contractor working at South Africa Energy
Coal's Klipspruit Extension Project,
following an incident involving the use of
an Elevated Work Platform in May this year.
It's devastating that Mr Sibeko did not
return home at the end of his shift and our
thoughts are with his family, friends and
colleagues. We completed an investigation
into the incident and shared learnings
across the company, so that a similar event
does not happen again, at any of our sites.
In FY20, we commenced our reporting
practices to disclose fatalities for
contractor activities associated with our
operations that take place in locations
where we do not have control. Sadly,
one person from a contracting company
was fatally injured while carrying out
work to pave the public road between
the municipality of Planeta Rica and our
Queresas and Porvenir Project.
Our teams have been working hard to
improve our safety performance, and four
of our operations recorded their lowest
Total Recordable Injury Frequency (TRIF) to
date. We also saw a reduction in recordable
injuries for the period, however our TRIF
increased to 4.3 and our year-on-year
performance did not meet our
20 per cent reduction target. We will never
be truly successful until we eliminate
fatalities and significant incidents. We are
focused on improving our safety systems,
as well as influencing the organisations
we work with to improve safety outcomes,
so that everyone goes home safe and
well. During the year our people and
communities continued to face the many
challenges brought about by COVID-19 –
illness, the loss of loved ones, uncertainty
and isolation – to name but a few. Our
response to the pandemic remained
unchanged and we focused on keeping
our people safe and well, maintaining safe
and reliable operations and supporting our
communities.
Among our workforce, many people
contracted COVID-19, and encouragingly,
most of them recovered. Sadly we lost
some of our colleagues to the virus during
the year, and on behalf of everyone at
South32, my thoughts remain with their
families, friends and colleagues. We
continue to uphold the necessary controls
to protect our people and minimise the
risk of exposure to COVID-19. We have
supported government vaccination
programs by procuring vaccines for our
workforces in Colombia and Mozambique
and at our GEMCO operation in the
Northern Territory, Australia. To support
employees through the COVID-19
pandemic, we increased engagement
activities across the business and shared
resources to help our leaders engage their
teams during a period of great uncertainty.
We worked with our communities to
provide support when and where it was
needed most and implemented community
response plans at all sites. We invested an
additional US$2.5 million in our COVID-19
Community Investment Fund this year,
taking the total invested since the start
of the pandemic to US$7.6 million. Our
contributions have supported local health
clinics with medical equipment and
improved water supply, mobile classrooms
for schools, relief for small businesses,
essential supplies and improved access to
water for families. We are actively engaged
with governments and health authorities
regarding the vaccine roll-out plans and
have supported community vaccination
programs in South Africa, Colombia,
Mozambique, Arizona and on Groote
Eylandt in the Northern Territory.
We delivered a strong operating result for
the year and achieved several production
highlights, including records at Worsley
Alumina, Brazil Alumina and Australia
Manganese, where the refinery finished the
year strongly, operating above nameplate
capacity. Volumes improved by 21 per cent
at our South Africa Manganese operation,
following its recovery from COVID-19
related disruptions in the prior year.
We made significant progress reshaping
our portfolio during the year, completing
the divestment of South Africa Energy Coal
to Seriti Resources and two trusts for the
benefit of employees and communities in
June 2021. This is a transformative step for
South32, as it simplifies our business and
substantially reduces our capital intensity.
Through the divestment, we achieved our
vision of putting South Africa Energy Coal
on a pathway to becoming a sustainable
business and transitioning it to Black
ownership consistent with South Africa’s
transformation agenda.
We are actively repositioning our portfolio
to increase our exposure to the base
metals critical in a low-carbon world. At
Hermosa, following work on the pre-
feasibility study through the year, we
released an updated Mineral Resource
estimate for Taylor, which confirms the
potential for a long-life zinc-lead-silver
project, with study work confirming a
preference for a dual shaft development
that prioritises early access to higher grade
ore. The Taylor Deposit pre-feasibility study
was scheduled for completion prior to
the end of the June 2021 quarter but has
been delayed given the impact of ongoing
COVID-19 related workforce restrictions.
We expect to report outcomes of a scoping
study for the Clark Deposit, which is
evaluating the potential for a manganese
product for use in electric vehicle batteries,
in the first half of FY22.
South32 Annual Report 2021Operating and Financial Review “
We have a strong foundation to build
from with our operations performing
well, a strong balance sheet,
high quality growth options
in attractive commodities and
a plan to decarbonise our business.”
The Ambler Metals joint venture in Alaska,
where we have a 50 per cent shareholding,
is progressing a pre-feasibility study for the
high-grade Arctic copper and zinc deposit.
Earlier this year, Ambler Metals entered into
an agreement with the Alaska Industrial
Development and Export Authority (AIDEA)
to jointly fund pre-development activity for
the Ambler Access Road after the AIDEA
received Federal permits. The road has
potential to unlock the region and pre-
development activities are under way.
In addition, we are building our pipeline
of opportunities by investing through
the drill bit. We currently have more than
20 greenfield exploration partnerships
and projects targeting base metals
predominantly in the Americas and
Australia.
In February, the New South Wales
Independent Planning Commission (IPC)
refused the application for the Dendrobium
Next Domain (DND) project at Illawarra
Metallurgical Coal. We have requested
a judicial review of the IPC’s decision.
Separately, the State Legislative Council
has passed a motion requesting that any
future development of DND be declared
as state significant infrastructure. This
would enable the Minister to determine
the project upon the submission of an
alternative mine plan by South32. We
continue to assess options for the project,
including a revised mine plan, and we
expect to be able to provide a further
update relating to the project by the end
of the 2021 calendar year.
In May 2021 we announced our target to
halve our operational carbon emissions
(Scope 1 and 2) by 2035 compared with
our FY21 baseline. We have a plan to
deliver this target through decarbonising
our existing operations, securing green
energy, designing our growth projects to
be carbon neutral and adopting low carbon
technology.
Our decarbonisation plans are focused
on the operations which accounted for
90 per cent of our Scope 1 and 2 emissions
in FY21 – Worsley Alumina, Illawarra
Metallurgical Coal and our aluminium
smelters. We are undertaking short-term
emissions reduction activities focused on
process and energy efficiency projects
as well as studying the transition of our
energy intensive assets to lower carbon
alternatives over the medium-term. Our
prefeasibility study for the Taylor Deposit
at Hermosa incorporates low-carbon
design initiatives and we are focusing our
exploration activities on the commodities
needed to support the energy transition.
As part of our broader strategy, this
plan will shift the carbon intensity of our
business and re-position our portfolio for
a low-carbon future.
Wherever we operate we proudly support
our local communities and during
FY21, we invested US$22.2 million in
community initiatives and activities in
line with our four strategic community
investment priorities. We also rolled
out our Community Investment Impact
Measurement Framework to improve how
we measure the outputs and outcomes of
our community investment.
In Australia, we partnered with the
Australian Indigenous Leadership Centre
and Anindilyakwa Land Council, to launch a
program designed to enable and empower
young people on Groote Eylandt, where
GEMCO is located. The Anindilyakwa
Future Leaders Program was developed
in collaboration with Traditional Owners
and is focused on developing leadership
capability and governance skills – two
areas that will enable this community to
thrive long into the future.
When I reflect on the year that’s been, it’s
important to recognise that it has been
incredibly challenging for each of us. I’ve
been proud to see our people around the
world unite and show immense courage
and resilience in the face of COVID-19.
As we look to the future, we have a
strong foundation to build from with our
operations performing well, a strong
balance sheet, high quality growth options
in attractive commodities and a plan to
decarbonise our business.
9
Graham Kerr
Chief Executive Officer
South32 Annual Report 2021Operating and Financial Review Our business model
CREATING
LONG-TERM VALUE
As a global mining and metals company, we create value by producing commodities
that are used in all aspects of modern life. Our operations, development options and
exploration projects and partnerships are diversified by commodity and geography.
We work to minimise the impact of our operations and aim to create enduring social,
environmental and economic value.
Our pipeline of development options and early stage exploration partnerships is central
to our strategy to reshape and improve our portfolio to create long-term value.
Our operations focus on safe and reliable production, minimising their impact and
continually improving their competitiveness.
E
N
M
I
Bauxite(1)
Manganese ore
Metallurgical coal
Nickel ore(1)
Lead
Silver
Zinc
I
E Alumina
N
F
E
R
T Aluminium
L
Ferronickel
E
M
S
Our marketing team generates revenue from the sale of our commodities and purchases raw materials
from global markets. They also build a view of commodities and their markets that informs our strategy,
business planning and investment decisions.
Construction
Transport
Energy
Consumer
goods
Our strategy guides how we optimise the performance of our operations, unlock their potential and identify
new opportunities to create value for all our stakeholders.
For more information on Progress against our strategy in FY21, see page 14
(1) We mine and refine bauxite to produce alumina; we mine and smelt nickel ore to produce ferronickel.
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2
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Mine
Manganese ore and metallurgical coal are
used to produce steel for construction of
buildings and infrastructure. Manganese is
also required for steel recycling. We are the
world’s largest producer of manganese
ore from our operations in Australia and
South Africa.
We produce premium hard coking coal from
Illawarra Metallurgical Coal in Australia and
supply approximately two per cent of the
seaborne market as well as the domestic
steel industry.
Lead, silver and zinc from our Cannington
mine have a range of applications.
Approximately 65 per cent of global lead
production is used in batteries. Silver is
widely used in solar power and electronics
and zinc protects steel from corrosion.
Refine
Alumina is the key raw material used to
produce primary aluminium. Worsley
Alumina and Brazil Alumina mine and refine
bauxite which is used to produce alumina.
Approximately 60 per cent of the production
from Worsley Alumina is shipped to our
aluminium smelters in South Africa and
Mozambique, with the remainder going into
the seaborne market. Worsley Alumina is
one of the world’s largest alumina refineries.
Smelt
Aluminium is often referred to as the metal
of the future. It is lightweight, durable,
strong, resistant to corrosion, and
recyclable and it can conduct electricity,
meaning it has a wide range of applications
including construction, electrical wiring,
transportation, packaging and consumer
goods such as electronics and household
items. Hillside Aluminium in South Africa
is the largest aluminium smelter in the
southern hemisphere.
Cerro Matoso mines nickel ore which is
smelted in electric arc furnaces to produce
ferronickel. The majority of ferronickel is used
to make stainless steel for household items,
surgical instruments and vehicle parts.
Our commodities in a low-carbon future
1
1
Construction
Energy
Steel produced from
manganese ore and
metallurgical coal is essential in
construction. Modern steel supports
energy efficiency solutions to enable
low-carbon operation of buildings.
Aluminium is also key in construction
as it is lightweight, structurally strong
and is resistant to corrosion. Zinc is
instrumental in protecting key elements
of essential infrastructure from
corrosion.
Silver is a key component
for the production of solar
photovoltaic cells, which have
become the leading option in
renewable energy. Lead batteries
are the mainstay of storage technologies
for renewable energy sources. Zinc is
used to protect steel components of wind
turbines from corrosion and exposure
to harsh weather conditions. Nickel-
containing materials are increasingly being
used to generate, transmit and store
power in modern battery polymers in
renewable energy generation.
Transport
Consumer goods
The use of aluminium instead of other
materials can reduce the carbon
emissions of a vehicle given its relatively
light weight. Lead is a key material for the
starter or auxiliary batteries in vehicles.
Almost every electrical connection in a
vehicle uses silver and its intensity in
electric vehicles is around two times
higher compared to vehicles with
internal combustion engines.
Nickel-containing stainless
steel is found in passenger
trains and subway
systems.
Silver is widely used in consumer
electronics, including mobile phones
and computer equipment. Aluminium
can substitute single-use plastics for
packaging, such as in the food and
beverage industry and is also widely
used in electronics. Nickel-containing
stainless steel and aluminium
have various applications
in household items.
South32 Annual Report 2021Operating and Financial Review Our strategy
A STRATEGY
TO ACHIEVE
OUR PURPOSE
At South32 we believe that, when done sustainably,
the development of natural resources can change
people’s lives for the better.
This is integral to our purpose – to make a difference by developing natural
resources, improving people's lives now and for generations to come. We are
trusted by our owners and partners to realise the potential of their resources.
Our purpose is underpinned by a simple yet powerful strategy:
2
1
We optimise our business
by working safely, minimising
our impact, consistently
delivering stable and
predictable performance,
and continually improving
our competitiveness.
I
value of our business
through our people,
innovation, projects
and technology.
E We unlock the full
S
M
T
P
O
I
We identify
and pursue
opportunities
to sustainably
reshape our
business for the
future, and create
enduring social,
environmental and
economic value.
K
C
O
L
N
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Y
F
T
N
E
D
I
South32 Annual Report 2021Operating and Financial Review Our strategy outlines what we do to achieve our
purpose and our values of Care, Trust, Togetherness
and Excellence guide how we do it. Our values shape
the way we behave and the standards we set for
ourselves and others.
Our values
Care
We care about people, the communities
we’re a part of and the world we depend on.
Trust
We deliver on our commitments and rely on each other
to do the right thing.
Togetherness
We value difference and we openly listen and share,
knowing that together we are better.
Excellence
We are courageous and challenge ourselves
to be the best in what matters.
We deliver on our purpose and strategy by aligning our workforce behind
seven ‘breakthroughs’ – commitments which shape our business plans
across South32, enabling us to focus on what’s important.
FY21 was a significant year for the company, as the divestment of South
Africa Energy Coal (SAEC) had a transformational impact on the business.
We have also continued to respond to the COVID-19 pandemic with our
focus on keeping our people safe and well, maintaining safe and reliable
operations, and supporting our communities.
Our approach to climate change is integrated with our strategy and is
focused on decarbonising our existing business and adding growth options
to increase our exposure to the base metals required in a low-carbon world.
Within 12 months of South32 being established, we committed to
support the Paris Agreement and set a long-term goal of achieving net
zero operational carbon emissions by 2050. This year we achieved our
first short-term target of keeping our Scope 1 emissions below our FY15
baseline. In May 2021, we announced a new medium-term target to halve
our operational carbon emissions (Scope 1 and 2) by 2035, compared to the
FY21 baseline.
We are working towards our target considering the needs of all our
stakeholders. This includes assessing the physical resilience of our
operations to the impacts of climate change, investing in decarbonisation in
line with our capital allocation framework and planning for a Just Transition
where our people and communities may be affected by the changes
needed for a low-carbon future. Our performance on climate change now
forms part of our executive long-term incentive plans so remuneration
outcomes reflect the achievement of significant milestones and long-term
value protection and creation.
Our FY21 commitments and performance against those commitments,
including our actions on climate change, reshaping our portfolio and our
COVID-19 response, are summarised on the following pages.
Risk framework and corporate
governance
We are governed by robust risk
management and corporate governance
frameworks. For more information, see
pages 24 to 33 for our Risk management
section and our Corporate Governance
Statement which can be found at
www.south32.net.
Capital management framework
Our capital allocation priorities are to
maintain safe and reliable operations
and an investment grade credit rating
throughout the cycle. We intend to
distribute a minimum 40 per cent of
Underlying earnings as dividends to our
shareholders following each six-month
reporting period. We encourage internal
competition for excess capital, which can
include further investment in new projects,
acquisitions, greenfield exploration, share
buy-backs or special dividends.
After a suspension of the capital
management program in FY20 due
to COVID-19 related uncertainty, we
recommenced our on-market share
buy-back in October 2020. We returned
US$670 million to our shareholders in
respect of FY21 via ordinary dividends, a
special dividend and our on-market share
buy-back. The Board further expanded
our capital management program
to US$2 billion in August, leaving
US$252 million to be returned
by 2 September 2022.
Capital allocation
(Capital allocation since FY16)
3% 3%
17%
36%
US$9.4b
allocated
21%
20%
Net cash to balance sheet
Capital expenditure
(including equity accounted investments)
Ordinary dividends
Capital management program
Acquisitions
Greenfield exploration
1
3
South32 Annual Report 2021Operating and Financial Review Progress against our strategy
Working safely
OPTIMISE OUR BUSINESS
Total Recordable Injury Frequency
(TRIF)
4.3
Total Recordable Illness Frequency
(TRILF)
1.1
Our FY21 commitments:
– A 20 per cent reduction in Total Recordable Injury Frequency (TRIF) compared to FY20;
– A reported significant hazard frequency of "30"; and
– A 10 per cent reduction in material health exposures from adjusted baseline.
Progress during the year:
We are deeply saddened by the death of our colleague, Mr Petros Sibeko, a contractor
working at South Africa Energy Coal’s (SAEC) Klipspruit Extension Project, following an
incident involving the use of an Elevated Work Platform (EWP) on 12 May 2021. We express
our deepest sympathies to Mr Sibeko’s family and colleagues to whom we provided
counselling and support. We completed an investigation into the incident and shared
learnings across the company. Following this incident, we also commenced a global review
of the safety features of EWPs and the way we use them in our operations and projects.
In FY20, we commenced our reporting practices to disclose fatalities for contractor
activities associated with our operations that take place in locations where we do not have
control. Sadly, one person from a contracting company appointed by Cerro Matoso was
fatally injured while carrying out work to pave the public road between the municipality
of Planeta Rica and our Queresas and Porvenir project. We offered our support to the
contractor company following the incident.
Our TRIF increased to 4.3 despite a reduction in recordable injuries and four operations
reporting their lowest TRIF to date. Our year-on-year performance did not meet our
20 per cent reduction target. Our TRIF was adversely impacted by a reduction in the total
number of hours worked following the sale of SAEC and Tasmanian Electro Metallurgical
Company (TEMCO) and a reduction in the workforce at Metalloys. To set our TRIF target for
FY22, we have adjusted the baseline to account for the removal of SAEC and TEMCO from
the portfolio which will mean we measure our FY22 performance against a TRIF of 6.0.
4
1
Proactive hazard reporting is key to our approach to safety, and we exceeded our target
with a reported significant hazard frequency of "41". We also saw a reduction in near
misses and actual significant impact events.
We achieved a reduction in the number of people exposed above the Occupational
Exposure Limits (OEL) at South Africa Manganese and Hillside Aluminium, contributing to
a six per cent overall reduction in potential material exposures greater than 100 per cent
of the OEL. Unfortunately, planned exposure reduction measures at Mozal Aluminium
were delayed due to COVID-19. Our occupational exposure data represents the workplace
exposures determined through our hygiene monitoring program. Sampling was concluded
in June 2021 and therefore excludes the divested SAEC and TEMCO operations.
Our response to the COVID-19 pandemic continued throughout FY21 and critical controls
remain in place at all our operations, offices and projects, as we are still experiencing
waves of coronavirus infections in some locations. We are actively engaged with
governments and health authorities regarding their vaccine rollout plans and have offered
our support, providing access to our facilities to store and deliver vaccines and opening
vaccination centres at some of our operations. Read more about our response to COVID-19
in our Sustainable Development Report on page 12.
South32 Annual Report 2021Operating and Financial Review Stable and predictable performance while minimising impact
OPTIMISE OUR BUSINESS
Production vs budget
101%
Scope 1 and 2 emissions (CO2-e)
21.6Mt
FY21 community investment
US$22.2m
1
5
Our FY21 commitments:
– Production within 97-103 per cent of budget;
– Cost within US$50 million of FY21 budget;
– Capital expenditure within five per cent of capital budget and less than 20 per cent
break-in projects;
– Achieve the emissions forecast of 24,649kt CO2-e (inclusive of Scope 1 and 2); and
– Implement community investment plans for each operation.
Progress during the year:
In FY21, we achieved production at 101 per cent of budget (including SAEC until it was
divested on 1 June 2021). Three operations – Worsley Alumina, Brazil Alumina and Australia
Manganese – achieved record production. We also beat our initial production guidance
at South Africa Manganese, Cerro Matoso and Cannington. For more information on our
operating performance, see pages 44 to 53.
Costs were US$3 million above budget and we achieved 84 per cent of budget for
sustaining capital and major capital. We had 18 per cent break-in projects compared to
the sustaining capital plan at the start of FY21.
In FY21, our Scope 1 and 2 emissions were 21.6Mt CO2-e, a seven per cent reduction
compared to FY20 with lower fugitive emissions from Illawarra Metallurgical Coal (IMC) as
we realised higher rates of post-drainage gas capture efficiency, and curtailed production
from SAEC and the manganese alloy smelters. We achieved our first short-term target of
keeping our Scope 1 emissions below our FY15 baseline.
We completed a review of the water target for Hillside Aluminium to support the needs of
the water catchment, including local communities. Mozal Aluminium and Worsley Alumina
remained on track to meet their water targets.
During FY21, we invested US$22.2 million in community initiatives and activities, which
includes US$2.5 million invested in our targeted COVID-19 Community Investment Fund in
FY21, in addition to the US$5.1 million from FY20. The funds were used to support health
and education, social and economic recovery, community resilience, vaccine roll-out
and addressing the risk of gender-based violence. For more information on how we are
supporting communities through the pandemic, see pages 20 to 23.
We concluded a comprehensive review of the way we manage Aboriginal and Torres Strait
Islanders’ cultural heritage in Australia and led to the development of a set of principles
to guide our engagements on this important topic. We plan to undertake similar reviews
in other jurisdictions where we operate in FY22. We also rolled out cultural awareness and
heritage training for employees across the company.
South32 Annual Report 2021Operating and Financial Review Progress against our strategy continued
Our people are connected and engaged
UNLOCK THE VALUE OF OUR BUSINESS
Our FY21 commitments:
– Meet our measurable objectives to increase the representation of employees and leaders who are women; and
– Meet our measurable objectives for representation of Black People in our South African workforce and leadership.
Progress during the year:
This year, our performance either improved against or remained consistent for four of our seven diversity commitments(1).
Several changes, including the divestments of TEMCO and SAEC during the period have directly impacted the employee profile for
a number of our metrics. The representation of women across the company decreased to 18 per cent, down from 19 per cent in
FY20, while the representation of women on our Board and Lead Team was stable year-on-year. Representation of women on our
Operational Leadership Team increased year-on-year, however there is more work to do to meet our target of 20 per cent. Thirty-seven
per cent of all our new hires were women and we achieved gender-balanced recruitment into our development roles, with 44 per cent
offered to women.
Representation of Black People in our workforce in South Africa improved in FY21, reaching 86 per cent and meeting our target,
however representation of Black People in management roles declined three per cent to 52 per cent.
A global inclusion and diversity working group was formed to undertake a diagnostic review and assess actions to achieve an
immediate and a longer-term improvement in our people’s experience of inclusion and diversity in the workplace, with an action plan
being implemented in FY22. We became a signatory to 40:40 Vision, an investor-led initiative to achieve gender balance in executive
leadership across all ASX200 companies by 2030.
We launched our global flexible work standard in December 2020, which supports our efforts to attract and retain diverse talent.
We also launched our new leadership model, which sets out the core leadership accountabilities, competencies, and behaviours
expected of all our people.
6
1
Due to the impact of COVID-19, our annual employee survey did not take place in FY21 but we will undertake more regular employee
‘pulse’ surveys in FY22. With limited opportunities for leadership to visit operations during the COVID-19 pandemic, we increased other
engagement activities to support employees through this challenging time, including global calls that gave employees an opportunity
to hear from and ask questions of our senior leaders in an open forum.
(1) Our inclusion and diversity performance has been measured in our scorecard from FY20. All scorecard metrics have consistently excluded the contribution of SAEC as this
operation has been managed as a standalone business since the June 2019 quarter.
Technology and innovation unlock value
Our FY21 commitments:
– Implement South32’s approach to innovation, improvement and technology;
– Implement technology enabler programs focused on adoption of critical technology across South32; and
– Implement cyber security improvements to reduce material risk across South32.
Progress during the year:
In response to COVID-19, our technology and health teams collaborated to rapidly develop and deploy a fast and effective pre-shift
screening tool, which is being used across our sites globally. The tool helps identify employees with potential COVID-19 risk factors, so
they do not enter the workplace to carry out their shift – helping to keep our people and local communities safer. In 12 months, more
than one million screening assessments were completed.
This year, we’ve made progress in advancing our Cyber Security Program to improve our cyber resilience. We defined and
implemented a model to help embed best practice cyber security capabilities, including skills, governance, controls, and behaviours.
We also deployed solutions to mature our capability and continued our ongoing work to build a cyber-aware culture throughout the
company. We have reduced our cyber risks and consider our Cyber Security Program fit for purpose given our current risk profile.
Technology and innovation will be key enablers for mining in the transition to a low-carbon future. Our Innovate32 process has been
designed to enable the assessment, development and deployment of low-carbon technologies for our existing operations and for the
design of the carbon neutral Next Generation Mine, including at Hermosa.
In FY21 we became a founding member of the Electric Mine Consortium, which aims to accelerate progress towards a fully electrified
zero carbon, zero particulates mine. Our participation in the Consortium helps us make informed decisions about technology options
and readiness, while also accelerating the rate at which we learn, through direct and indirect trials.
We are also a founding member of the Heavy Industry Low-carbon Transition Cooperative Research Centre (HILT CRC) which brings
together industry, education and government partners to fund research into technology driven solutions for a low-carbon industry
transformation. The HILT CRC was recently awarded A$39 million from the Australian Government over ten years which is backed by an
additional A$176 million of funding and in-kind support from industry, government and research institutions.
South32 Annual Report 2021Operating and Financial Review UNLOCK THE VALUE OF OUR BUSINESS
Project execution
Our FY21 commitments:
– Complete the pre-feasibility study (PFS) for the Taylor Deposit at Hermosa;
– Unlock the value in our portfolio by delivering on key projects across our operations; and
– Complete the feasibility study for Eagle Downs.
Progress during the year:
Following work on the Taylor PFS through the year, we released an updated Mineral Resource estimate for the deposit in July 2021
which confirmed higher zinc, silver and lead grades, partially offsetting a reduction in tonnage. The Taylor Deposit PFS was scheduled
for completion prior to the end of the June 2021 quarter but has been delayed given the impact of ongoing COVID-19 related
workforce restrictions. Study work to date has confirmed a preference to pursue a dual shaft development that prioritises early access
to higher grade ore, identified through our improved understanding of the updated Taylor Mineral Resource estimate(1). Preliminary
outcomes of a scoping study for the Clark Deposit indicate the technical viability to produce battery grade manganese and we are
advancing marketing studies to evaluate customer opportunities for these products.
The PFS at the Ambler Metals Joint Venture continued during FY21. Earlier this year, Ambler Metals entered into an agreement with the
Alaska Industrial Development and Export Authority (AIDEA) to jointly fund pre-development activity for the Ambler Access Road after
AIDEA received Federal permits. The road has potential to unlock the region and pre-development activities are underway.
We approved development of the Queresas and Porvenir project at Cerro Matoso, which is a high returning, low capital option that is
expected to contribute to higher average ore grades over the next six years. We also approved the Ore Sorting and Mechanical Ore
Concentration project at Cerro Matoso which is expected to maintain payable nickel production by offsetting natural grade decline
beyond FY23.
In February 2021, the New South Wales Independent Planning Commission (IPC) refused the application for the Dendrobium Next
Domain (DND) project at IMC. We have commenced proceedings to seek a judicial review of the IPC’s assessment and the State
Legislative Council has supported a Private Members’ Bill requesting the Minister for Planning and Public Spaces make an order
declaring any future development for the Dendrobium mine extension project be declared state significant infrastructure under New
South Wales law. This would enable the Minister to determine the project upon the submission of an alternative mine plan by South32.
We are assessing options for the broader IMC complex, including a revised DND mine plan, and expect to provide an update by the
end of the 2021 calendar year.
1
7
Following completion of the Eagle Downs Metallurgical Coal feasibility study in the December 2020 quarter, we determined not to
proceed with the project at this time. The study indicated the potential for a long-life operation, however the expected returns
did not support the allocation of capital in accordance with our capital management framework. The project has been placed on hold
while the partners assess options.
(1) For more information refer to the market announcement "Hermosa Project – Mineral Resource Estimate Update" dated 21 July 2021.
South32 Annual Report 2021Operating and Financial Review Progress against our strategy continued
IDENTIFY OPPORTUNITIES
Create enduring social, environmental and economic value
Our FY21 commitments:
– Define medium-term operational carbon emissions reduction target and glidepath;
– Progress decarbonisation studies and energy planning; and
– Implement our Community Investment Impact Measurement Framework.
Progress during the year:
We have set a new medium-term target to halve our Scope 1 and 2 carbon emissions by 2035 from a FY21 baseline, and we have
defined short-term activities to progress and broaden our decarbonisation studies.
At Worsley Alumina, our efficiency projects to reduce energy consumption are progressing through study phases. Mud-washing, the
most advanced efficiency project, is in pre-feasibility study (PFS) and is on-track for completion in FY22. Transitioning the energy
source from predominantly coal to lower carbon alternatives will be the most significant driver of emissions reduction and a PFS for
conversion of the existing coal-fired boilers to natural gas is also on-track for completion in FY22. The shift from energy coal to natural
gas is designed as an interim step until renewable energy options such as hydrogen or electrification are commercially viable at scale.
We are working with government and industry to support the development of low-carbon energy markets in Western Australia.
Our key decarbonisation actions at IMC relate to increasing the efficiency of gas drainage and assessing technologies for reducing
methane associated with ventilation. In partnership with Commonwealth Scientific and Industrial Research Organisation (CSIRO), we
are supporting the development of ventilation air methane abatement technologies that aim to increase the effectiveness of methane
capture at low concentrations. A trial of the technology is expected to be completed by March 2022, which will inform the technical
capability of its potential deployment.
At Hillside Aluminium we are conducting a trial of the AP3XLE technology, currently being deployed at Mozal Aluminium,
to increase energy efficiency. We are fast-tracking studies of ways to obtain affordable, low-carbon electricity for Hillside Aluminium.
The initial outcomes suggest that renewable energy could be technically feasible. Work is ongoing, with PFS outcomes expected in
mid-2022. While we complete these studies, we will engage with the South African Government, Eskom and other potential partners
to identify options for new renewable energy infrastructure.
8
1
During FY21, our investments in community initiatives and activities were in line with our four strategic community investment
priorities. We invested US$22.2 million with 32 per cent to support education and leadership; 41 per cent to support good health and
social wellbeing; 20 per cent to widen economic participation; and seven per cent to strengthen natural resource resilience. We also
introduced our Community Investment Impact Measurement Framework to improve how we measure the outputs and outcomes
of our community investment.
We made good progress implementing our Innovate Reconciliation Action Plan following its launch in September 2020, including
an increase in procurement of goods and services from Aboriginal and Torres Strait Islander businesses by 18 per cent year-on-year.
South32 Annual Report 2021Operating and Financial Review IDENTIFY OPPORTUNITIES
Sustainably reshape our business for the future
Our FY21 commitments:
– Complete divestment of SAEC; and
– Complete the review of our manganese alloy smelters.
Progress during the year:
We completed the divestment of SAEC to Seriti Resources, and two trusts for the benefit
of employees and communities, in June 2021. This is a transformative step for South32.
We achieved our two-fold vision through the divestment, by positioning the business to
be sustainable for the long-term, for the benefit of its employees, customers and local
communities and transitioning it to become a Black-owned and operated business,
consistent with South Africa’s transformation agenda.
We also completed the divestment of the TEMCO manganese alloy smelter in Australia,
with an effective accounting date of 31 December 2020, and concluded a restructure
of the workforce at Metalloys in July 2020 after the smelter was placed on care and
maintenance during the 2020 financial year.
Taken together these actions substantially reduce our Scope 3 emissions and our capital
intensity, increase group margins and provide greater balance sheet flexibility.
We also progressed our strategy of investing in exploration partnerships and our own
portfolio of 100 per cent owned projects. We invested US$18 million during FY21 in early
stage greenfield exploration opportunities. While COVID-19 restrictions persist across the
majority of our exploration jurisdictions, critical controls permit continued activity globally
with multiple programs underway in Australia, USA, Canada, Argentina, Peru and Ireland.
We also directed US$39 million towards exploration programs at our existing operations
and development options during FY21.
Invested in early stage greenfield
exploration opportunities
US$18m
1
9
South32 Annual Report 2021Operating and Financial Review Our contribution
MAKING A DIFFERENCE
NOW AND FOR
GENERATIONS TO COME
We’re committed to creating value through environmental and social
leadership. We work hard to be responsible stewards of the environment
and treat natural resources with care so that they are available for future
generations. We care about the people and groups who are interested in
what we do and want to have a say, or who are impacted by our operations.
0
2
South32 Annual Report 2021Operating and Financial Review At South32 we believe that, when done sustainably, the development of
natural resources can change people’s lives for the better. From supporting
our communities through COVID-19, to providing jobs and business
opportunities, contributing to governments through paying taxes and
royalties, developing local suppliers and supporting community programs we
can make a significant contribution to the way people live and work.
Supporting our diverse communities
There is socio-economic diversity across the communities, regions
and countries where we work.
We understand the value of creating opportunities in our communities. We want
our communities to benefit from our presence, providing employment and business
opportunities, supporting community programs, empowering suppliers and supporting
the South African Government’s transformation objectives.
Building relationships based on trust
Delivering on our commitments and being a trusted partner is essential
to the way we operate.
We believe trust and transparency are essential to the way we operate. That means being in
touch with the broader community – considering different perspectives and working together
to create shared value. We manage our impacts and create enduring social, environmental
and economic value in our communities by developing tailored community investment and
stakeholder engagement plans based on research and engagement. We address community
concerns through local complaints and grievance processes.
Read more about our work with communities at www.south32.net
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Indigenous and Tribal Peoples cultural heritage
We respect the unique cultural and spiritual relationships that Indigenous and
Tribal Peoples have to the land, waters and seas, and their rich contribution to
society and we are committed to working together to build lasting, meaningful
relationships for the benefit of all.
Many of our operations and projects intersect areas of cultural significance and we understand
we have a critical role to play in preserving cultural heritage. Guided by our values of care, trust,
togetherness and excellence we continually work to strengthen and enhance our approach to
preserving cultural heritage.
Read more about our approach to Indigenous and Tribal Peoples cultural heritage at www.south32.net
Governance and transparency
In line with our Code of Business Conduct, we are committed to the highest
standards of integrity and accountability and conduct our business in a way
that respects human rights.
This includes transparency in how community investment is allocated, supporting sound
governance of partner organisations, sourcing responsibly, and encouraging capacity building
so resources reach those who need it most.
Read more about our Code of Business Conduct at www.south32.net and our approach to human rights
in our Sustainable Development Report
South32 Annual Report 2021Operating and Financial Review Our contribution continued
Investing in what matters most
Our community investment in FY21(1)
US$22.2m
We are proud of our community investment programs,
designed in collaboration with our communities and
stakeholders to reflect their priorities.
In FY21, we implemented our Community Investment
Impact Measurement Framework to measure the outputs
and outcomes of our community investment and allow us
to understand how projects are contributing to desired
outcomes. It has also become a monitoring tool to make
program adjustments, upscale or replicate successful
initiatives, and overall improve our investment approach.
Education
and leadership
Economic
participation
2
2
Quality education is the
foundation of economic and
social prosperity and supports
the development of emerging
and future community leaders.
Economic opportunity and
participation ensure that local
and regional economies are
resilient now and sustainable
into the future.
32%
20%
directed towards projects that
support learning and development,
nurture future leaders and promote
equal access to education.
directed towards projects that
support local employment,
sustainable livelihoods and
diversified local economies.
10
emerging Indigenous leaders are
taking part in the Anindilyakwa Future
Leaders Program on Groote Eylandt
helping them to gain leadership
and governance qualifications and
pursue meaningful careers in their
communities.
450
students participated in the Star
Schools program, supported by Hotazel
Manganese Mines. The program
is designed to improve education
outcomes for high school students.
US$100,000
in COVID-19 relief grants were
provided to locally owned and
operated small businesses and non-
profit organisations near our Hermosa
project, helping them to continue to
operate and retain their workforce.
5
times more income was earned by
farmers near our Mozal operation in
Mozambique in FY21, when compared
to 2018. This was made possible by
their participation in our AGROMOZAL
program.
Good health and
social wellbeing
Health and social wellbeing
are integral to sustainable
development and contribute
to vibrant communities.
41%
directed towards projects that
support community health and social
wellbeing and promote inclusion.
R2 million
was invested with the Gender Based
Violence and Femicide Response
Fund1, who are working to raise
awareness and inspire change, to
address gender-based violence and
femicide in South Africa.
62
Hispanic and Latino women at
Hermosa engaged in a mental
health support group, with
members reporting an improvement
in resiliency outcomes.
(1) Community investment consists of direct investment, in-kind support and administrative costs and includes US$1.3 million in community investment made through our
corporate functions, US$19.9 million in community investment made through operations (see pages 44 to 53 for further information) and US$1.0 million in community
investment made through Hermosa.
South32 Annual Report 2021Operating and Financial Review US$7.6m
invested to support our communities through COVID-19.
We have been working closely with our communities
through the COVID-19 pandemic to identify and address
health and economic risks. In FY20 we set up our COVID-19
Community Investment Fund and invested US$5.1 million
to aid our local communities in COVID-19 prevention,
preparedness, response and recovery. In FY21 we invested
an additional US$2.5 million to support health and
education, social and economic recovery, community
resilience, vaccine roll out and the societal response
to combat gender-based violence. The support we have
provided includes medical equipment, personal protective
equipment and improved water supply to health facilities,
financial relief to small businesses, funding for food parcels
and water distribution, and setting up mobile classrooms
and providing mental health support for teachers and
school staff.
Read more about our response to COVID-19 in our Sustainable Development Report
on page 12
2
3
Natural resource
resilience
Communities that live
in balance with their natural
environments are resilient
and sustainable.
7%
directed towards projects that
support communities to thrive
within their environments and use
natural resources in responsible and
sustainable ways.
22,000
hectares of land at our Cannington
operation has been treated to
reduce, eradicate and prevent weeds.
This contributed to biodiversity
conservation and protection,
as well as improved economic
wellbeing and increased capacity
of local landholders.
882
households located near our
African operations have received
improved access to water and
sanitation services.
South32 Annual Report 2021Operating and Financial Review Risk management
MANAGING OUR RISKS
TO PROTECT
OUR PEOPLE AND
MAXIMISE VALUE
Risk management is fundamental to maximising the value of our business and
informing its strategic direction. Effective risk management enables us to identify
priorities, allocate resources, demonstrate due diligence in discharging legal and
regulatory obligations, and meet the standards and expectations of our stakeholders.
4
2
Our approach to risk management is
governed by our risk management
framework, which has been in place since
the Demerger of South32 from BHP in 2015.
The minimum mandatory requirements
for the management of risks that have a
material impact on our purpose, strategy
and business plans are defined in our
material risk management standard.
Material risks
Our System of Risk Management and
assurance processes are based on the
three lines model, which describes how
key organisational roles work together
to facilitate strong risk management
and assurance. This approach is used to
manage our material risks and enables
us to:
The framework and the standard are
delivered through our System of Risk
Management which is aligned to the
principles of the International Standard
for Risk Management AS/NZS ISO
31000:2018. This approach applies to all
employees, Directors and contractors of
the company and its subsidiaries. Our risks
are regularly assessed and managed at
both a company-wide strategic level and
at a material tactical level for operations,
functions and projects.
– Provide stable and consistent
processes, tools and routines to identify
and regularly assess the most impactful
risk and opportunities;
– Ensure predictable outcomes and
prevent unforeseen events with material
impacts;
– Ensure risks are well understood
and managed at all levels of the
organisation; and
– Eliminate risks where appropriate or
improve our processes using a risk-
based approach.
Risks assessed as material are routinely
reported to the South32 Lead Team and
reviewed by the Risk and Audit Committee
as well as the Sustainability Committee;
assisting the Board to carry out its role
in overseeing our risk management and
assurance practices.
We report transparent real-time risk
data through our risk management tool,
Global360. This software connects data
relating to the management of our risks,
events, hazards and assurance actions.
Aside from helping us manage our
operations and functions, reliable data
on material risks contributes towards
the monitoring and management of our
strategic risks. This provides insight into
trends and emerging themes that can
trigger a review of our business plans or
inform a change in strategic direction.
Strategic risks
Our strategic risks are risks which can
affect our ability to achieve our strategic
objectives. They have the capacity to
affect the whole, or a significant part of our
organisation and therefore tend to have
significant impacts, both negative and
positive. With that in mind, our strategic
risks and associated management
responses are evaluated every year. The
review process is informed by external and
internal events that could have a potential
impact on our organisation, as well as
emerging themes across our material risks.
In FY21, we identified 12 strategic risks
which could influence our plans and the
sustainability of our business.
South32 Annual Report 2021Operating and Financial Review Climate change
Climate change and the response of South32, our markets and broader society to it, poses a risk to both our
portfolio (i.e. demand for our commodities, costs and profit margins, social licence, regulatory exposure) and
to our physical assets, infrastructure, supply chains and people.
We regularly assess these dynamic risks through a framework that includes policy, market and physical
factors, and use climate change scenarios to stress test these risks and opportunities against our portfolio,
operations and communities.
Our response includes:
– We are actively shifting our portfolio towards those commodities
that will be required in a low-carbon future (with a bias to base
metals);
– We support the objectives of the Paris Agreement and have set
a medium-term operational carbon emissions reduction target
of 50 per cent by 2035, and a goal of net zero carbon emissions
by 2050;
– We seek to understand and stress-test our portfolio
performance in a range of future climate scenarios (inclusive of
a 1.5°C aligned scenario in FY21), considering both opportunities
and threats, to inform our business strategy;
– We use climate modelling data to inform us of the level of risk to
our operations and operational plans and identify controls in the
short-, medium- and long-term to address these risks;
– We engage regularly with investors, governments, industry
partners, membership-based sustainability organisations,
Environmental Social Governance (ESG) proxy advisors and ESG
activist groups to identify and monitor emerging climate risks,
opportunities and trends;
– The achievement of our emissions reduction targets is linked to
remuneration;
– We invest in research and development, both directly and
through partnerships, to develop technology and innovative
solutions necessary for the transition to a low-carbon future;
– We develop and implement energy efficiency, carbon abatement
and renewable and low carbon energy projects to reduce our
operational emissions; and
– We’re transparent in our disclosure of climate change-related
opportunities and threats in our annual reporting, in accordance
with the recommendations of the Task Force on Climate-
related Financial Disclosures. Further detail on this risk and its
management is detailed in our Sustainable Development Report.
2
5
Risk exposure trend 2021
↑
Mapping to strategic objectives(1)
– Stable and predictable performance while minimising impact
– Create enduring social, environmental and economic value
– Technology and innovation deliver value
– Sustainably reshape our business for the future
Opportunities
Aligning our business strategy, including how we operate
and what we produce, with stakeholder expectations, future
technologies and evolving climate policy and regulation, ensures
our portfolio sustains a favourable outlook in a low-carbon future
as we shift towards base metals.
Identifying and implementing energy efficiency projects to
reduce our emissions, has the potential to deliver financial and
other environmental benefits through reduced operating costs
(e.g. less purchased electricity) and related inputs (e.g. reduced
water consumption).
Threats
If we do not manage our portfolio to be resilient to changing
commodity demands, climate policies (including greenhouse gas
emission restrictions, pricing, taxation and trade regulations)
and developments in technology (including energy sources and
commodity substitution), nor reduce our emissions in line with
the goals of the Paris Agreement, our reputation and social
licence will be negatively impacted, our costs may increase, profit
margins decrease, and demand for our products may reduce.
This may result in ‘stranded asset exposures’ in relation to
emissions-intensive commodities and our associated assets.
Similarly, failure to build the resilience of our business and
operations to the physical impacts of climate change (including
both the increase in the frequency and intensity of extreme
weather events, and gradual onset impacts such as increases in
average temperatures and changing precipitation patterns) could
negatively impact the health and safety of our people, our supply
chains, communities, access to key operational inputs (e.g. water),
business continuity and distribution to market, while incurring
additional costs to maintain, adapt, repair or replace our assets
and infrastructure.
Failure to manage the above risks may increase our legal
exposures, while limiting our ability to access capital and
insurances, retain and attract employees and grow our business
in existing and new jurisdictions.
Climate change may also impact our ability to secure
development approvals, permits or licences, or their extension.
Refer to related risks of ‘Portfolio reshaping’, ‘Major events or
natural catastrophes’ and ‘Security of supply of logistics chains,
and critical goods and services’.
(1) As referenced in the Progress against our strategy section on pages 14 to 19.
South32 Annual Report 2021Operating and Financial Review Risk management continued
Ensuring that our people go home safe and well
A safe and healthy working environment is fundamental to living our values.
Risk exposure trend 2021
←→
Mapping to strategic objectives
– Working safely
Opportunities
Ensuring that our people go home safe and well drives the culture
we aspire to and sets our expectations of each other.
Threats
The impact of not having a safe working environment can be
devastating for our employees, contractors and communities.
It can alter lives, impact shareholder returns, stakeholder
confidence and ultimately our licence to operate.
Our response includes:
– In everything we do, we focus on the health and safety of our
people, contractors and communities;
– We have a system of risk management, comprehensive
internal health and safety policies, standards and systems with
associated performance requirements designed to prevent and
mitigate potential exposure to health and safety risks;
– We engage, develop and train our people so that our work is well
designed and executed;
– We investigate actual and potential significant events, ensure
controls are in place, and share our learnings across the
organisation;
– We continuously improve our work environment to make it safer,
healthier and more productive for our people; and
– We have an independent assurance function, following the three
lines model, that reviews our material risks and the associated
controls, to test how effective they are.
Actions by government, tax authorities and political risks
6
2
Changes in legislation, regulation and policy have the potential to impact our strategic objectives and the
way we work. This includes broader policy decisions and regulatory changes, related but not limited to,
changes to royalty and taxation policy, nationalisation of mineral resources, renegotiation or nullification of
contracts, leases, permits or agreements, and environmental and social performance requirements.
We aim to effectively manage this uncertainty through engagement with key stakeholders and industry
associations, monitoring of political activity, policy, legislative and regulatory changes, and by ensuring we
have access to specialised knowledge.
Risk exposure trend 2021
↑
Mapping to strategic objectives
– Stable and predictable performance while minimising impact
– World class project execution
– Sustainably reshape our business for the future
– Create enduring social, environmental and economic value
Opportunities
Proactive engagement leading to strong relationships with
governments provides a mutual understanding of drivers
for decision-making. This increases clarity around policy and
regulatory environments, enables appropriate and tailored
responses to issues, and provides investment certainty.
Threats
Legislation adverse to our business and regulatory or policy
decisions taken by governments can result in operational
disruption, affect future planning or lead to cessation of
operations or non-investment in operations or projects.
Our response includes:
– We have specialised knowledge through in-house expertise
or the use of external experts, including tax management
capability, tax advice and external affairs advice;
– We monitor political activity, policy, legislative and regulatory
changes in the jurisdictions we operate in, and we also engage
with relevant authorities;
– We engage with key stakeholders in all jurisdictions where we
operate, in accordance with our Stakeholder Engagement Plans;
– We work through selected industry associations to influence how
the industry is positioned; and
– We produce an annual Tax Transparency and Payments to
Governments Report, which shows how we meet our regulatory
tax obligations.
South32 Annual Report 2021Operating and Financial Review Portfolio reshaping
Our objective is to outperform by offering our shareholders exposure to high-quality operations
in commodities with a strong and sustainable outlook, in jurisdictions where we believe we can operate –
in line with our values.
Risk exposure trend 2021
↑
Mapping to strategic objectives
– World class project execution
– Sustainably reshape our business for the future
Opportunities
We invest for value in our preferred commodities and
jurisdictions. We do this by progressing our internal development
options, by acquiring exploration opportunities, development
projects or existing operations and by divesting non-preferred
exposures that we believe will not generate an acceptable
shareholder return.
Threats
If we don’t invest in a disciplined way, execute projects to budget
and plan or divest non-preferred exposures for value, we could
reduce shareholder returns. Climate change, and the transition to
a low-carbon economy, may present both risks and opportunities
for our portfolio commodity composition. This is discussed under
'Climate change' on page 25.
Our response includes:
– Our strategy informs the decisions we make about portfolio
composition. We formally evaluate our strategic positioning
annually with the Board and provide updates throughout the
year;
– We have a dedicated greenfields exploration team focused
on building a pipeline of low-cost, high-quality resource
development options;
– We maintain a life of operations planning process. By evaluating
the embedded options in our operations, we can progress with
selected organic options at the right time;
– We apply a rigorous project development process and have
experienced and dedicated project execution capability;
– We follow strong due diligence processes for acquisitions and
new business ventures;
– We carry out an annual review of commodity prices and
exchange rates, to develop long-term views for our portfolio
commodities and foreign exchange rates for the jurisdictions
where we operate;
– We apply a standardised valuation methodology with consistent
key macroeconomic assumptions;
– We have a mature and independent peer review process, which
we rigorously follow to inform key investment decisions; and
– We actively manage portfolio change with dedicated specialists
to deliver integration and separation benefits.
2
7
Global economic uncertainty and liquidity
Our aim is to manage uncertainty related to changing macroeconomic conditions. We do the same when it
comes to the volatility in commodity, currency and capital markets, given the impact they can have on our
earnings, balance sheet and ability to pursue our strategy.
Risk exposure trend 2021
←→
Mapping to strategic objectives
– Sustainably reshape our business for the future
– Create enduring social, environmental and economic value
Opportunities
We prioritise an investment grade credit rating and a disciplined
approach to allocating capital, which keeps our balance sheet
strong, providing us with financial flexibility regardless of market
conditions. By creating competition for capital and investing
selectively in our existing operations and growth options, external
opportunities, or by making returns to shareholders, we aim to
maximise total shareholder returns over time.
Threats
A significant or sharp deterioration in economic conditions can
adversely impact market demand, commodity prices, and/or
exchange rates which has the potential to significantly reduce
profitability, cash flow and returns to shareholders. A reduction in
liquidity available in capital markets has the potential to impact
our balance sheet and ability to pursue our strategy.
Our response includes:
– We have a diverse portfolio of operations, commodities and end
markets which strengthens our resilience to the disruption of any
one commodity, geography or operation;
– We prioritise a strong balance sheet and an investment grade
credit rating, so that we remain in control through economic
cycles;
– We test our financial strength across a range of scenarios,
including a depressed demand and pricing environment. We also
maintain a minimum liquidity buffer;
– We adjust our capital allocation plans according to market
conditions;
– We maintain strong relationships with high-quality customers
and suppliers from all around the world;
– We mostly sell our products with reference to floating, market-
based prices, which are broadly correlated with floating global
currency markets and the input costs we’re exposed to; and
– We carry out an annual review of commodity prices and
exchange rates, which we use to inform our operational plans.
This process is supplemented by tri-annual updates.
South32 Annual Report 2021Operating and Financial Review Risk management continued
Major events or natural catastrophes
Our operations and logistics networks can be disrupted by events such as pandemics, natural disasters,
extreme weather events and major process or infrastructure failures.
Risk exposure trend 2021
↑
Mapping to strategic objectives
– Working safely
– Stable and predictable performance while minimising impact
Opportunities
Achieving stable and predictable performance enhances the
value proposition to our shareholders, other stakeholders and
the communities in which we operate. The better we prepare
for and learn from events, the better we are placed to respond
and reduce the impact of future events – strengthening our
organisational resilience.
Threats
Failure to manage major events or natural catastrophes could
result in a significant event or other long-term damage that
could harm the company’s financial performance and licence to
operate. The role of climate change in increasing the frequency
and severity of natural catastrophes is addressed under 'Climate
change’ on page 25.
Our response includes:
– When facing potential catastrophes, we put safety and wellbeing
at the heart of everything we do;
– We use a system of risk management in design, construction
and operation phases, to analyse risks, and design and
implement plans that prevent or limit business impacts;
– We utilise climate modelling data to inform our long-term plans
and project pipelines, and conduct risk assessments of the
physical impacts of climate change for our assets;
– We have business continuity and disaster response plans in
place with trigger action response scenarios. We’ve tested
these to make sure we can respond rapidly to major events and
safely restore our operations, protecting the health and safety of
people and the communities in which we operate;
– We have assurance functions independent of our operating
activities, in line with the three lines model, that provide
assurance against our own comprehensive internal standards
including equipment integrity, tailings dam management and
technical stewardship. Where relevant, we work with external
experts, relevant industry bodies and technology suppliers, to
provide additional assurance and input; and
– We purchase insurance coverage against many, but not all,
potential losses or liabilities arising from major events or natural
catastrophes. This coverage has a deductible cost to the
company and limits that mean full financial coverage cannot be
achieved.
8
2
South32 Annual Report 2021Operating and Financial Review Predictable operational performance
Loss of predictable operational performance will prevent us from reliably delivering on our strategic
objectives. We build resilience and predictability into our business by sustaining our ability to keep our
people safe and well, meeting our regulatory and social obligations, managing cost inflation and consistently
providing quality products to our customers.
Risk exposure trend 2021
↑
Mapping to strategic objectives
– Working safely
– Stable and predictable performance while minimising impact
Opportunities
We mature our Operating System to control and continuously
improve our operations and processes, delivering stable and
predictable performance and unlocking the full value of our
business. We invest in our operations to sustain and improve
production capacity that generates reliable cash flow to deliver
on our strategic objectives.
Threats
If we can’t safely and consistently achieve our production, cash
flow or profitability targets, it could negatively impact our ability
to deliver on our strategic objectives and negatively impact
shareholder returns.
Our response includes:
– We have embedded, and continuously verify and improve our
safety and risk management systems across our business
(including our pandemic response);
– We have an effective Asset Management system in place at each
operation and review our asset health, asset integrity and capital
investments on a regular basis;
– We actively verify, and improve, the effectiveness of our
Operating System by embedding best operating practices
including operational planning, work design and standards,
process control and improvement practices;
– We actively manage risks to our resource and reserve, mine
and operational planning including reconciliation of Mineral
Resources and Ore Reserves to production, plan and spatial
compliance and management of geotechnical risks;
– We manage an integrated system of long- and short-
term planning and scheduling processes that considers
environmental, social and governance (ESG) themes and
optimises the value from our resources;
– We actively manage product delivery and supply chain risks
including effective sales and operational planning processes,
monitoring of raw material supply, and management of target
inventory operating windows; and
– We carry out rigorous quality assurance programs over our
products and operations.
2
9
South32 Annual Report 2021Operating and Financial Review Risk management continued
Shaping our culture and managing diverse talent
To deliver our strategic objectives, we must actively shape our culture to attract, leverage and retain our
diverse talent. Culture and talent are fundamental aspects of an empowered workforce that delivers
predictable operational performance and continuous improvement.
Risk exposure trend 2021
↑
Mapping to strategic objectives
– Our people are connected and engaged
Opportunities
By fostering an environment that is conducive to our aspired
culture, we will have even higher levels of employee engagement
and teams that are empowered to innovate and drive
performance.
By having an inclusive and diverse workplace, in every aspect,
we can improve our ability to attract and retain talent, and better
deliver safety and operational performance, together.
Our flexible work practices and global operating model provides
greater access to talent which can be positioned across the
company to better meet business challenges and capture
opportunities.
0
3
Threats
If we are unable to embed our preferred culture, we will likely
have lower levels of engagement, disconnected teams that
lack diversity and operate in silos, and relationship rather than
performance-based decision making. Over time, this would
likely constrain innovative thinking and may lead to significant
shareholder value erosion and reputational damage.
A stimulus related recovery in commodity markets has seen
competition for talent rise and voluntary turnover rates increase,
whilst COVID-19 has restricted travel and limited face-to-face
interaction between our key leaders and geographically disperse
talent pool.
Our response includes:
– Our Board and Lead Team actively measure and discuss culture
using a Culture Tensions framing model. This process acts as
a health check and allows us to assess positive or negative
change, and test whether we are making progress towards
our preferred culture that better balances relationships with
performance, and systems and processes with innovation
and empowerment. This process is supplemented by periodic
employee 'pulse' surveys that measure employee engagement
and test whether our culture is enabling the delivery of our
strategic objectives;
– We have an Inclusion and Diversity Policy and Framework which
sets out our commitments, strategy, measurable objectives and
approach to performance reporting;
– We have a Code of Business Conduct which sets out our
expected standards of conduct, with formal training and
assessment routines in place. Anyone can report a business
conduct concern, anonymously if preferred, or by using our
confidential and independently administered EthicsPoint
reporting hotline;
– We have a new leadership model which strengthens alignment
to our preferred culture and behaviours, and is integrated across
our people systems and processes;
– We design our reward elements to position ourselves relative
to the market, enabling us to attract appropriate skills and
experience, engage employees and drive performance;
– We have a Performance and Goals Process which supports
our reward philosophy and ensures that aligned leadership
behaviours and performance are recognised and rewarded;
– We routinely review our talent, creating individualised plans to
further their development;
– We support employees who undertake further education and
training related to their current or future career with South32;
– We utilise secondments to support the delivery of business
objectives while also providing employees with development
opportunities and exposure to other roles or areas of the
business; and
– We have an internal Flexible Work Standard which empowers
our leaders to engage with their teams to determine the
ways of working that balance individual, team and business
requirements.
South32 Annual Report 2021Operating and Financial Review Maintain competitiveness through innovation and technology
Technology and innovation are advancing at a rapid pace. Companies which are unable to effectively
leverage technology and innovation will find themselves failing to deliver against shareholder expectations
on returns, unable to attract and retain talent, or in the example of decarbonisation, failing to maintain a
licence to operate.
Risk exposure trend 2021
↑
Mapping to strategic objectives
– Technology and innovation deliver value
– Create enduring social, environmental and economic value
Opportunities
To stay competitive, we position our organisation to effectively
identify, develop and adopt sustainable business models for
technology and innovation in our operations and projects. Priority
innovation opportunities for South32 are identified and delivered
through Innovate32, our strategy-aligned, value-focused,
innovation portfolio. This approach will enable us to deliver
on shareholder return expectations and position us for future
business opportunities.
Threats
Failure to keep pace with, and leverage advances in technology
and innovation could result in reduced shareholder returns and
impact our licence to operate.
Cyber security incidents could pose multiple risks including
disruption to new projects and operations, theft, disclosure or
corruption of information.
Failure to adopt automation, electrification and digital systems
could result in deteriorating performance across safety,
productivity, returns and carbon emissions.
Our response includes:
– We have a clearly defined approach to innovation, improvement
and technology;
– We have organised to deliver specific programs focused
on adoption and improvement of critical technology
capabilities across multiple time horizons including cyber
security, connectivity, underground mine automation and
decarbonisation;
– We have a value-based ‘portfolio’ approach to testing and
scaling up innovation across the company;
– We have rigorous internal technology standards and processes
(technology ‘ways of working’);
– We benchmark our digital technology performance against
industry best practice and have organised the coordination
and integration of technology advances into South32’s growth
portfolio;
– We actively manage cyber security and data centre risks through
a system of risk management and have increased our cyber
security controls in response to COVID-19 and an increase in
remote working; and
– We monitor internal customer satisfaction and manage
customer support.
3
1
South32 Annual Report 2021Operating and Financial Review Risk management continued
Security of supply of logistics chains, and critical goods and services
Together with our customers and suppliers we manage our inbound and outbound supply chains. Critical
goods and services include raw materials, energy, water, gas, heavy mobile equipment, tyres, technology,
corporate services and logistics (which includes road, rail, air and shipping).
Risk exposure trend 2021
↑
Mapping to strategic objectives
– Stable and predictable performance while minimising impact
– Create enduring social, environmental and economic value
Opportunities
Optimal and sustainable management of supply chain risk
positions our business to operate safely and reliably, at the lowest
possible cost and in a manner that meets or exceeds societal
expectations.
Threats
The disruption of our supply chains could materially impact
our operations by affecting production, operating costs and
damaging our reputation.
The impact of a global pandemic and geopolitical tension are
more difficult to manage and have the potential to significantly
disrupt trade flows.
Failure to meet minimum ethical supply chain standards has the
potential to damage our social licence to operate (this is further
addressed under ‘Evolving societal expectations’ on page 33).
2
3
Climate change has the potential to increase the frequency and
severity of extreme weather events which may threaten our
supply chains, particularly logistics and the availability of critical
goods and services (this is addressed under 'Climate change’ on
page 25).
Our response includes:
– We understand, assess and continually monitor the risks in
our supply chains through embedded routines and processes.
This extends to the risks associated with the supply of critical
goods and services; materials with potential shortage risk;
critical suppliers and categories; vendor liquidity; and outbound
logistics providers. Internal and external data is integrated so we
have an accurate understanding of existing and emerging risks;
– We use this understanding of risk to deploy controls to support
predictable operations. This includes working closely with
our vendors and operations to better match availability with
demand; developing alternative sources of supply; optimising
inventory levels; flexing commercial terms and adjusting our
business continuity plans;
– We build strong strategic partnerships with key in and outbound
supply chain partners on a long-term, mutually beneficial basis;
– We have a clearly defined transformation strategy and
enterprise and supplier development programs in South Africa
aimed at building and growing small and medium enterprises;
– We have Reconciliation Action Plan targets to develop and
support Aboriginal and Torres Strait Islander enterprises in
Australia;
– We have local procurement initiatives designed to increase
opportunities for local suppliers;
– We actively review and manage payment terms to support small
and local businesses in all jurisdictions in which we operate; and
– We understand the risk of modern slavery in our supply chains
and have processes in place to manage this risk.
Maintain, realise or enhance the value of our Mineral Resources and Ore Reserves
We intend to realise the potential of the resources and reserves we are entrusted to develop. We work to
continually optimise our operations through sound technical and economic understanding of our resources
and reserves.
Risk exposure trend 2021
←→
Mapping to strategic objectives
– Stable and predictable performance while minimising impact
– World class project execution
– Create enduring social, environmental and economic value
Opportunities
We continue to enhance our understanding of our resources and
reserves. We leverage this enhanced understanding through
the annual planning cycle to define and assess additional
opportunities to add value to our business.
Threats
If we fail to continually optimise our operations and projects,
it will have a significant impact on shareholder returns,
the benefits our stakeholders receive and ultimately, the
sustainability of the company.
Our response includes:
– We report Mineral Resources and Ore Reserves (including Coal
Resources and Coal Reserves) in accordance with the JORC Code
as required in Chapter 5 of the ASX Listing Rules;
– We apply an annual planning process, that considers the impact
of climate change on our Ore Reserves, structured to maximise
value throughout the life of our operations;
– We have capital prioritisation, capital allocation and planning
processes which prioritise the highest-value options across our
portfolio;
– We apply a rigorous project development process that includes
independent peer review of project risks and approval tollgates;
and
– We have an internal closure standard which requires that our full-
life of operations value incorporates closure and rehabilitation
liabilities.
South32 Annual Report 2021Operating and Financial Review Evolving societal expectations
The expectations of resource companies by employees, government, investors, lenders, host communities,
non-governmental organisations (NGOs) and broader society continue to evolve. Our stakeholders may have
divergent views and wants.
We actively engage our stakeholders to understand and respond to their views and identify ways we can
create enduring social, environmental and economic value.
We aim to effectively manage this through regular stakeholder engagement and external monitoring on a
wide range of financial and ESG issues (including climate change).
Risk exposure trend 2021
↑
Mapping to strategic objectives
– Stable and predictable performance while minimising impact
– Create enduring social, environmental and economic value
Opportunities
Proactive, collaborative and transparent engagement with our
stakeholders builds relationships based on trust and shared
understanding. Our ongoing licence to operate is built on our
contribution to our stakeholders and broader society.
Threats
Failure to meet evolving societal expectations for ESG
performance could damage our reputation and negatively impact
our licence to operate, limiting our ability to access capital, retain
and attract employees and grow our business in existing and new
jurisdictions.
Our response includes:
– Our purpose and strategy expressly balance economic
outcomes with social and environmental outcomes, now and into
the future. In the decisions we take, we look to minimise impact,
respect human rights and create enduring social, environmental
and economic value for all our stakeholders;
– We undertake internal and external stakeholder analysis and
engagement on a wide range of financial and ESG issues,
including an annual materiality analysis to understand
our material ESG issues. Our approach is aligned with the
International Council on Mining and Metals (ICMM) Mining
Principles, The United Nations Global Compact Ten Principles
and Global Reporting Initiative Sustainability Reporting
Standards;
– We work to build strong, positive and meaningful relationships
with local communities, and we listen to their views. We regularly
complete and review community perception surveys, human
rights impact assessments, social baseline studies and impact
and opportunity assessments;
3
3
– We review and amend our community investment program
annually to align with community and stakeholder priorities.
We measure the outputs and outcomes of our community
investments to ensure they are having the desired impact;
– We engage with Indigenous and Tribal Peoples across our
operations to ensure we understand our commitments to
manage cultural areas of significance. Our engagement with
Indigenous and Tribal Peoples throughout the life of our
operations is sensitive to and respects cultural protocols;
– We participate in sustainability reporting transparency initiatives
and ESG rating agencies reviews that assess and score our
performance; and
– We transparently report on our risks, opportunities, regulatory
obligations, commitments and areas where we’re working that
are relevant to our stakeholders.
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary
DELIVERING STRONG
OPERATING RESULTS
IN CHALLENGING TIMES
We set production records at three operations,
progressed our portfolio transformation and
increased returns to our shareholders.
In discussing the operating results of the
Group, the focus is on Underlying earnings
and ROIC. Underlying earnings is the key
measure that is used by the Group to
assess its performance, make decisions
on the allocation of resources and assess
senior management’s performance.
In addition, the performance of each of
the Group’s operations and operational
management is assessed based on
Underlying EBIT. Management uses this
measure because financing structures
and tax regimes differ across the Group’s
operations and substantial components
of tax and interest charges are levied at
a Group level rather than an operational
level.
4
3
The Group uses both International Financial
Reporting Standards (IFRS) and non-IFRS
financial measures such as underlying
measures of earnings, effective tax rate
(ETR), return on invested capital (ROIC),
cash flow and net cash, to assess the
Group’s performance. The Directors
believe that the non-IFRS measures are
important when assessing the underlying
financial and operating performance of the
Group and its operations. The meanings of
individual non-IFRS measures used in this
report are set out in the Glossary on
page 164.
Underlying earnings, Underlying earnings
before interest and tax (EBIT) and
Underlying earnings before interest, tax,
depreciation and amortisation (EBITDA)
are included on page 102 in note 4 to
the financial statements. We believe that
Underlying earnings, Underlying EBIT
and Underlying EBITDA provide useful
information, but should not be considered
as an indication of, or an alternative to,
profit/(loss) after tax as an indicator of
actual operating performance or as an
alternative to cash flow as a measure of
liquidity.
In order to calculate Underlying earnings,
Underlying EBIT and Underlying EBITDA,
the following items are adjusted as
applicable each period, irrespective of
materiality:
– Exchange rate (gains)/losses on
restatement of monetary items;
– Impairment losses/(reversals);
– Net (gains)/losses on disposal and
consolidation of interests in businesses;
– (Gains)/losses on non-trading derivative
instruments and other investments
measured at fair value through profit or
loss;
– Major corporate restructures;
– Earnings adjustments included in profit/
(loss) of equity accounted investments;
– Exchange rate variations on net debt;
and
– Tax effect of earnings adjustments.
In addition, South32 management
retains the discretion to adjust for other
significant non-recurring items that are
not considered reflective of the underlying
performance of the Group’s operations.
South32 Annual Report 2021Operating and Financial Review Financial key performance indicators for FY21
Financial highlights
US$M
Revenue(1)
Profit/(loss) before tax and net finance costs
Profit/(loss) after tax and net finance costs
Basic earnings per share (US cents)(2)
Ordinary dividends per share (US cents)(3)
Special dividends per share (US cents)(4)
Other financial measures
Underlying EBITDA
Underlying EBITDA margin
Underlying EBIT
Underlying EBIT margin
Underlying earnings
Basic Underlying earnings per share (US cents)(2)
ROIC
Ordinary shares on issue (million)
FY21(5)
6,337
(94)
(195)
(4.1)
4.9
2.0
1,564
26.4%
844
14.1%
489
10.3
6.2%
4,675
FY20
6,075
261
(65)
(1.3)
2.1
1.1
1,185
21.9%
446
8.4%
193
3.9
2.4%
4,846
Change
4%
(136%)
N/A
N/A
133%
82%
32%
4.5%
89%
5.7%
153%
164%
3.8%
(4%)
(1) Revenue includes revenue from third party products and services.
(2) FY21 basic earnings per share is calculated as Profit/(loss) after tax divided by the weighted average number of shares for FY21 (4,771 million). FY21 basic Underlying earnings
per share is calculated as Underlying earnings divided by the weighted average number of shares for FY21. FY20 basic earnings per share is calculated as Profit/(loss) after
tax divided by the weighted average number of shares for FY20 (4,892 million). FY20 basic Underlying earnings per share is calculated as Underlying earnings divided by the
weighted average number of shares for FY20.
(3) FY21 ordinary dividends per share is calculated as H1 FY21 ordinary dividend announced (US$67 million) divided by the number of shares on issue at 31 December 2020
(4,781 million) plus H2 FY21 ordinary dividend announced (US$164 million) divided by the number of shares on issue at 30 June 2021 (4,675 million).
(4) FY21 special dividends per share is calculated as H2 FY21 special dividend announced (US$93 million) divided by the number of shares on issue at 30 June 2021 (4,675 million).
(5) FY21 includes the discontinued operation South Africa Energy Coal for 11 months.
External factors and trends
affecting the Group’s result
The following describes the main external
factors and trends that have had a material
impact on the Group’s financial position
and results of operations. Details of the
Group’s most significant risk factors and
how they are mitigated can be found in
Risk management on pages 24 to 33 of the
Annual Report.
Management monitors particular trends
arising from external factors with a view
to managing the potential impact on the
Group’s future financial position and results
of operations.
Commodity prices and changes in
product demand and supply
Estimated impact on Underlying EBIT of a
+/- 10% change in commodity price
3
5
South32 produces metals and ores, prices
of which are driven by global demand and
supply for each of these commodities.
Commodity prices were generally higher in
FY21 compared to FY20 as most physical
markets strengthened on the back of a
solid global economic recovery and easing
of COVID-19 restrictions. The prices that
the Group obtains for its products are a
key driver of business performance, and
fluctuations in these markets affects
its results, including cash flows and
shareholder returns.
US$M
Aluminium(1)
Alumina
Manganese ore(2)
Metallurgical coal
Nickel
Silver
Lead
Zinc
FY21
208
155
91
71
43
33
23
16
(1) Aluminium sensitivity shown without any associated
increase in alumina pricing.
(2) The sensitivity impacts for manganese ore are on a
pre-tax basis. The Group’s manganese operations
are reported as an equity accounted investment.
As a result, the profit after tax for manganese is
included in the Underlying EBIT of South32.
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
The following table shows the quoted market prices of the Group’s most significant commodities in FY21 and FY20. These prices differ
from the realised prices on the sale of production due to contracts to which the Group is a party, differences in quotational periods,
quality of products, delivery terms and the range of quoted prices that are used for contracting sales in different markets.
Quoted commodity prices
Year ended 30 June
Alumina(1) (US$/t)
Aluminium (LME Cash)(2) (US$/t)
Metallurgical coal(3) (US$/t)
Manganese ore(4) (US$/dmtu)
Nickel (LME Cash)(2) (US$/t)
Silver(5) (US$/toz)
Lead (LME Cash)(2) (US$/t)
Zinc (LME Cash)(2) (US$/t)
Average Value
Closing Value
FY21
283
2,023
122
4.63
16,241
25.4
1,978
2,653
FY20
277
1,678
144
4.96
14,009
16.9
1,901
2,211
Change
2%
21%
(15%)
(7%)
16%
50%
4%
20%
FY21
286
2,523
194
5.15
18,450
25.8
2,320
2,946
FY20
262
1,602
116
5.02
12,790
17.8
1,789
2,057
Change
9%
57%
67%
3%
44%
45%
30%
43%
(1) Platts Alumina Index (PAX) Free on Board (FOB) Australia – market price assessment of calcined metallurgical/smelter grade alumina.
(2) LME Cash represents the Official Seller price for nickel, zinc and lead and the A.M. Official price for aluminium.
(3) Platts Low-Vol Hard Coking Coal Index FOB Australia – representative of high-quality hard coking coals.
(4) FastMarkets Manganese Ore 44 per cent Mn CIF Tianjin China.
(5) Daily London Bullion Market Association (LBMA) Silver Fix.
The following summarises the pricing
trends of our most significant commodities
for FY21. The price change reflects the
average of FY21 over FY20.
Alumina: The average FOB Australia price
for the year was two per cent higher than
FY20. While a strong recovery in global
aluminium demand supported the market
in FY21, it remained well supplied due to
increased production from China.
6
3
Aluminium: The average LME cash
settlement price for the year was 21 per
cent higher than FY20. The price increase
was driven by the global demand recovery,
tight scrap availability and a ceiling for
Chinese primary capacity at around
45 million tonnes per year, which led to
domestic supply growing at a slower pace
than demand.
Metallurgical coal: The FY21 average
Platts Premium Low Vol Hard Coking
Coal price was 15 per cent lower than
FY20. The price declined as China’s tight
import regulations led to the diversion of
Australian export volumes, which created
an oversupplied ex-China market before
trade flows rebalanced through the year.
Manganese ore: The average Manganese
Ore Metal Bulletin 44 per cent CIF China
price was seven per cent lower than
FY20. While the global demand recovery
remained a key driver, an increase in
seaborne supplies followed an easing of
post-COVID-19 restrictions which impacted
the market balance.
Nickel: The FY21 average LME cash
settlement price was 16 per cent higher
than FY20, driven by strong global demand
growth from both the stainless steel and
electric vehicle battery segments.
Silver: The FY21 average LBMA silver price
was 50 per cent higher than FY20. The
significant price gain was underpinned by
a sharp rebound in industrial demand and
strong investor appetite for silver.
Lead: The FY21 average LME cash
settlement price was four per cent higher
than FY20. Tight concentrate supply and a
post-pandemic rebound in battery demand
in North America and Europe provided
price support.
Zinc: The FY21 average LME cash
settlement price was 20 per cent higher
than FY20, as a prolonged supply
disruption stemming from COVID-19
related impacts helped to underpin prices.
Other external factors
A recovery in global demand as countries
emerged from COVID-19 lockdowns,
coupled with supply restraint by major
producers, led to a recovery in oil prices
in FY21. Oil prices were approximately five
per cent higher in FY21 compared to FY20.
This contributed to inflationary pressure in
mining costs.
While there remains a gap between
climate change ambition and action,
activity in carbon offset and credit markets
was supported by more countries and
companies pledging long-term net zero
targets or strengthening short-term
emission reduction goals. Australian
carbon credit units (“ACCUs”) were, on
average, five per cent higher in FY21 as
compared to FY20, reaching a new high
of A$19.30/t at the close of FY21. Both our
Australian and South African operations
are subject to emissions reporting and
domestic carbon pricing regimes. Carbon
pricing policies and associated regulatory
mechanisms may restrict emissions
or increase costs for companies with
liable emissions. We annually review the
signposts for changes in carbon pricing
policy and how it affects us.
Exchange rates
The Group is exposed to exchange rate risk
on foreign currency sales, purchases and
expenses, as no active currency hedging
is undertaken. As the majority of sales are
denominated in US dollars, and the US
dollar plays a dominant role in the Group’s
business, funds borrowed and held in US
dollars provide a natural hedge to currency
fluctuations. Operating costs and costs of
locally-sourced equipment are influenced
by fluctuations in local currencies, primarily
the Australian dollar, Brazilian real,
Colombian peso, Euro and South African
rand.
The Group is also exposed to exchange
rate translation risk in relation to net
monetary liabilities, being foreign currency
denominated monetary assets and
liabilities, including debt, tax and other
long-term liabilities. Details of the exposure
to foreign currency fluctuations are set out
in note 19 to the financial statements on
pages 126 to 133.
South32 Annual Report 2021Operating and Financial Review The following table indicates the estimated impact on FY21 Underlying EBIT of a change in the significant currencies to which the Group
is exposed against the US dollar. The sensitivities give the estimated impact on Underlying EBIT based on the exchange rate movement
in isolation. The sensitivities assume all variables except for exchange rates remain constant. There is an inter-relationship between
currencies and commodity prices where movements in exchange rates can cause movements in commodity prices and vice versa. This
is not reflected in the sensitivities below. These sensitivities should therefore be used with care.
Estimated impact on Underlying EBIT of a +/-10% change in producer currencies relative to the US dollar
US$M
Australian dollar(1)
South African rand(1)
Colombian peso
Brazilian real
FY21
188
104
23
9
(1) The sensitivity impacts for manganese ore are on a pre-tax basis. The Group’s manganese operations are reported as an equity accounted investment. As a result, the profit
after tax for manganese is included in the Underlying EBIT of South32.
The following table shows the average and period end closing exchange rates of the most significant currencies that affect the Group’s
results:
Exchange rates(1)
Year ended 30 June
Australian dollar(2)
Brazilian real(3)
Colombian peso(3)
South African rand(3)
Euro(4)
Average Value
Closing Value
FY21
0.75
5.39
3,660
15.42
1.19
FY20
0.67
4.47
3,542
15.66
1.11
Change
12%
(21%)
(3%)
2%
7%
FY21
0.75
5.00
3,757
14.33
1.19
FY20
0.69
5.48
3,759
17.26
1.12
Change
9%
9%
0%
17%
6%
(1) Positive per cent change in FX indicates strengthening currency relative to US$.
(2) Displayed as US$ to A$ based on common convention.
(3) Displayed as local currency to US$.
(4) Displayed as US$ to € based on common convention.
Global risk sentiment, monetary policies and commodity prices continue to be key drivers of currency markets. In FY21, producer
currencies generally strengthened against the US dollar, recovering losses registered at the height of the COVID-19 pandemic in FY20.
As economies exited from lockdowns, the accommodative monetary policies and strong global recovery boosted sentiment and
risk appetite, resulting in a weaker US dollar. Elevated commodity prices and strong exports bolstered the currencies of some of the
commodity dependent economies, such as Australia and South Africa. However, debt sustainability concerns and domestic instability
also exerted downward pressure on a few emerging market currencies including the Brazilian real and Colombian peso in FY21. The
Central Bank of Brazil implemented steep rate hikes which lent support to the Brazilian real towards the end of FY21.
3
7
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
2021 Financial year
summary
Our response to COVID-19
Our response to the COVID-19 pandemic
continued throughout FY21 and the Group
took significant measures to safeguard our
communities, employees and contractors,
and keep our operations running. Our
critical controls remain in place at all our
operations, offices and projects, as waves
of COVID-19 infections continue in some
of the locations where we operate. We are
actively engaged with governments and
health authorities on their vaccine roll-
out plans and have offered the use of our
facilities and logistics support.
During FY21 we adapted the way that
we work to deliver a solid operating
performance while navigating the ongoing
challenges of COVID-19. We continued to
focus on cost control and productivity
improvements, simplifying our functional
structures, reducing our corporate costs,
and delivering production broadly in line
with guidance.
As we look to FY22, we continue to monitor
the ongoing impacts of the pandemic
closely. Accordingly our FY22 production,
Operating unit cost and capital expenditure
guidance is subject to further potential
impacts from COVID-19.
8
3
Performance summary
The Group’s statutory profit after tax
declined by US$130 million to a loss of
US$195 million in FY21 following the
recognition of impairment charges totalling
US$728 million (US$510 million post-tax) in
relation to Illawarra Metallurgical Coal and a
loss on sale of US$159 million following our
divestment of South Africa Energy Coal.
The Illawarra Metallurgical Coal impairment
charge reflects the increased approval
uncertainty created by the New South
Wales Independent Planning Commission’s
(IPC) decision to refuse our application
for the Dendrobium Next Domain (DND)
life extension project and the resultant
potential impact on the economics of
the broader complex. We have scaled
back activity on the project while we
consider alternative options following
the IPC decision. The loss incurred on the
divestment of South Africa Energy Coal
reflects the recognition of the vendor
support package (refer to note 31 on
page 144 for further details) that we
provided to Seriti Resources Holdings
Proprietary Limited (Seriti) to underpin the
sustainability of the business.
Excluding these one-off charges, strong
operating performance and higher prices
for most of our commodities translated
into a 153 per cent increase in Underlying
earnings to US$489 million. Our production
performance, including three records,
partially offset cyclical inflation and
stronger producer currencies.
– US$439 million as part of our ongoing
capital management program, with
US$346 million allocated to our on-
market share buy-back (172 million
shares at an average price of A$2.68
per share), and the Board resolving to
pay a US$93 million fully franked special
dividend in October 2021.
Specific highlights for FY21 included:
– Record production at Worsley Alumina
and Brazil Alumina with both refineries
benefitting from higher plant availability;
– Record production at Australia
Manganese and a 21 per cent year-
on-year increase at South Africa
Manganese with both operations
exceeding guidance;
– A 14 per cent increase in zinc equivalent
production at Cannington with strong
underground performance enabling the
acceleration of a higher-grade mining
sequence during the year;
– A nine per cent increase in production
at Illawarra Metallurgical Coal with the
return to a three longwall configuration
delivering greater efficiencies;
– First ore from the higher-grade
Queresas and Porvenir project (Q&P
project) and successful refurbishment
of a furnace at Cerro Matoso, laying the
foundation for a 28 per cent increase in
nickel production in FY22;
– The announcement of our target to
achieve a 50 per cent reduction in
operational carbon emissions (Scope
1 and 2) by 2035, which steps up
our ambition on climate change and
supports a pathway to net zero by 2050;
and
– Successful divestment of South Africa
Energy Coal, the TEMCO manganese
alloy smelter and a portfolio of non-core
precious metals royalties during FY21,
simplifying and improving our portfolio.
We finished the period with net cash of
US$406 million, having generated free
cash flow from operations, including
distributions from our manganese equity
accounted investments, of US$825 million.
Reflecting our strong financial position
and demonstrating the continuation of
the disciplined and flexible approach we
are taking to our capital management
program, we returned US$670 million to our
shareholders in respect of FY21 comprised
of:
– A US$66.5 million fully franked interim
ordinary dividend paid in April 2021
in respect of H1 FY21, and the Board
resolving to pay a US$164 million fully
franked final ordinary dividend in
respect of H2 FY21; and
Having returned seven per cent of our
market capitalisation to shareholders
in respect of FY21, and having also
established a strong track record of
returning excess capital in a timely and
efficient manner, the Board has further
expanded our capital management
program by US$120 million to US$2 billion,
leaving US$252 million to be returned by
2 September 2022.
Earnings
The Group’s statutory profit after tax
declined by US$130 million to a loss of
US$195 million in FY21. Consistent with
our accounting policies, various items are
excluded from the Group’s statutory profit
to derive Underlying earnings including:
impairment losses (US$764 million pre-tax)
primarily at Illawarra Metallurgical Coal;
net losses on the disposal of our
interest in South Africa Energy Coal
(US$159 million pre-tax); exchange rate
losses on restatement of monetary items
(US$69 million pre-tax); gains made
from the sale of a portfolio of non-core
precious metals royalties (US$55 million
pre-tax); gains on non-trading derivative
instruments and other investments
measured at fair value through profit
or loss (US$37 million pre-tax); major
corporate restructures (US$23 million
pre-tax); losses associated with earnings
adjustments included in our equity
accounted investments (US$15 million
pre-tax); exchange rate losses
associated with the Group’s non US dollar
denominated net debt (US$52 million
pre-tax); and the tax expense for all pre-tax
earnings adjustments and exchange rate
variations on tax balances (US$306 million).
Further information on these earnings
adjustments is included on page 108.
The Group’s Underlying EBITDA increased
by US$379 million (or 32 per cent) to
US$1.6 billion in FY21, with Revenue four
per cent higher, as sales volumes increased
and our realised prices for aluminium, silver,
zinc and nickel all improved. Higher base
metals prices were partially offset by lower
realised prices for our bulk commodities,
with metallurgical coal and manganese ore
prices declining.
South32 Annual Report 2021Operating and Financial Review Our strong operating result and higher
prices translated into an improved Group
operating margin of 26 per cent. Our cost
base (excluding third party product cost
and ceased & sold operations) remained
largely unchanged, despite higher power
costs at Hillside Aluminium and the
inflationary impact of global freight rates
and stronger producer currencies. Savings
in our corporate spend and inventory
movements meant our controllable cost
base reduced, offsetting the impact of the
cyclical cost pressures.
Underlying EBIT increased by
US$398 million (or 89 per cent) to
US$844 million as depreciation and
amortisation decreased by US$19 million
to US$720 million. Underlying earnings
increased by US$296 million (or
153 per cent) to US$489 million despite
the de-recognition of tax assets at South
Africa Energy Coal associated with its
divestment, meaning our Underlying ETR
remained elevated in FY21. The divestment
of South Africa Energy Coal was completed
on 1 June 2021, with the operation
contributing an Underlying earnings loss
of US$194 million to the Group’s result for
FY21 (FY20: US$208 million loss).
Operating costs
FY21 and FY20 comparative underlying
operating costs are set out below,
excluding earnings adjustment items
impacting operating costs. Earnings
adjustment items are detailed on page 108
in note 4(b)(i) to the financial statements.
US$M
Operating cash costs
Third party commodity
purchases
Depreciation and
amortisation expense
Total operating costs
included in Underlying
EBIT
FY21
4,616
FY20
4,711
468
585
720
739
5,804
6,035
Capital expenditure
We allocate capital in line with our strategy
and capital management framework to
optimise our business, unlock the full value
of operations and identify and pursue
opportunities to create value. In FY21
the Group continued to prioritise capital
to ensure the safety and reliability of our
operations, progress life extension and
innovation and improvement projects, and
fund our current and future greenfield
growth to sustainably grow ROIC.
US$M
FY21
FY20
– Capital expenditure at South Africa
Safe and reliable capital
expenditure
Improvement and life
extension capital
expenditure
Growth capital
expenditure
Intangibles and the
capitalisation of
exploration expenditure
Divested operation –
South Africa Energy Coal
Total capital expenditure
(excluding equity
accounted investments)
Equity accounted
investment capital
expenditure (including
intangibles and capitalised
exploration)
Total capital expenditure
(including equity
accounted investments)
(325)
(364)
(63)
(33)
(72)
(115)
(30)
(69)
(76)
(164)
(566)
(745)
(72)
(91)
(638)
(836)
Total capital expenditure, excluding equity
accounted investments, decreased by
US$179 million to US$566 million as:
– Safe and reliable capital expenditure,
excluding equity accounted investments
and divested operations, decreased
by US$39 million (or 11 per cent) to
US$325 million, with spend at Illawarra
Metallurgical Coal declining following
the substantial investment in prior
periods to return to a three longwall
configuration;
– Improvement and life extension
capital expenditure, excluding equity
accounted investments and divested
operations, increased by US$30 million
(or 91 per cent) to US$63 million as we
accelerated development of the Q&P
project at Cerro Matoso and undertook
pre-commitment spend on studies and
critical path items associated with the
DND project at Illawarra Metallurgical
Coal;
– Growth capital expenditure decreased
by US$43 million (or 37 per cent) to
US$72 million with the rate of spend at
Hermosa declining due to the impact of
COVID-19 workforce restrictions and our
completion of the voluntary remediation
program in the prior year;
– Our spend on intangibles and the
capitalisation of exploration expenditure
decreased by US$39 million (or 57 per
cent) to US$30 million as COVID-19
travel restrictions led to the deferral of
an update to our information technology
systems and restricted our ability to
undertake exploration activity; and
Energy Coal decreased by US$88 million
(or 54 per cent) to US$76 million as
the rate of significant investment into
the business to secure its long-term
sustainability under the ownership of
Seriti slowed and the divestment was
completed on 1 June 2021.
Total capital expenditure associated
with our manganese equity accounted
investments declined by US$19 million
to US$72 million as we completed non-
processing infrastructure upgrades at
GEMCO and divested TEMCO.
Net finance costs
The Group’s Underlying net finance costs,
excluding equity accounted investments
and discontinued operation, of
US$109 million in FY21, largely reflects
the unwinding of the discount applied to
our closure and rehabilitation provisions
(US$59 million) and interest on our
lease liabilities (US$55 million), primarily
at Worsley Alumina. Costs for our
discontinued operation (US$43 million)
are mostly related to the unwind of the
discount applied to our closure and
rehabilitation provisions at South Africa
Energy Coal.
Tax expense
The Group’s Underlying income tax
expense, which excludes tax associated
with equity accounted investments, was
US$203 million for an Underlying ETR of
37.3 per cent in FY21. While a significant
reduction from the prior year, the ETR
remained elevated during FY21 due to the
de-recognition of tax assets associated
with losses at South Africa Energy Coal
prior to its divestment. From FY22 we
expect the rate to more closely reflect the
corporate tax rates of the geographies
where the Group operates which include:
Australia 30 per cent, South Africa
28 per cent, Colombia 31 per cent,
Mozambique zero per cent and Brazil
34 per cent. We continue to monitor for
potential changes to tax legislation in these
geographies.
The Underlying income tax expense for our
manganese equity accounted investments
was US$177 million, including royalty
related taxation of US$53 million at GEMCO
(Australia Manganese), for an Underlying
ETR of 51.9 per cent (FY20: 43.7 per cent).
The temporary increase in the Underlying
ETR was driven by the de-recognition
of certain deferred tax assets in our
Australian business during FY21.
3
9
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
Cash flow
The Group’s free cash flow from operations,
excluding equity accounted investments,
increased by US$369 million to
US$639 million in FY21, following a
24 per cent reduction in capital
expenditure and lower cash tax payments
that tend to lag an improvement in
profitability. We also received (net)
distributions of US$186 million from our
manganese equity accounted investments
(FY20: US$313 million) as our two ore
producing operations continued to
perform strongly, while the alloy business
incurred one-off costs associated with
the suspension of Metalloys and sale
of TEMCO. Cash generated from our
Group operations was largely unchanged
(+US$37 million to US$1.4 billion) as strong
operating performance and a broad based
price recovery across our commodities
more than offset the prior period’s benefit
of a substantial unwind in working capital
(US$287 million).
Free cash flow from operations, excluding
equity accounted investments
US$M
FY21
FY20
Profit/(loss) from
continuing and
discontinued operations
Non-cash items
(Profit)/loss from equity
accounted investments
(Profit)/loss from sale of
operations
Change in working capital
Cash generated
Total capital expenditure,
excluding equity
accounted investments,
including intangibles and
capitalised exploration
Operating cash flows
before financing
activities and tax, and
after capital expenditure
Interest (paid)/received
Income tax (paid)/received
Free cash flow from
operations
(94)
1,419
261
927
(133)
(100)
159
61
1,412
-
287
1,375
(566)
(745)
846
(44)
(163)
630
(25)
(335)
639
270
Although lower than the prior period,
working capital unwound by a further
US$61 million with provisions increasing
by US$95 million, and trade and other
payables by US$264 million. The latter
driven by higher raw material input costs
and the accrual of additional power
charges under our new pricing agreement
for our Hillside Aluminium smelter
(US$83 million). The accrual reflects the
increase in the smelter’s new tariff for the
period 1 August 2020 to 30 June 2021 and
is expected to unwind as payments are
made across 24 months. These movements
were partially offset by increases in trade
and other receivables (US$156 million)
and inventories (US$142 million), reflecting
higher commodity prices. Our debtor days
remained broadly unchanged at 24 (FY20:
23 days).
Working capital movement reconciliation
US$M
FY21
FY20
Trade and other
receivables
Inventories
Trade and other payables
Provisions and other
liabilities
Working capital
movement
(156)
(142)
264
95
61
367
208
(184)
(104)
287
0
4
Earnings analysis
The following key factors influenced Underlying EBIT in FY21, relative to FY20.
Reconciliation of movements in Underlying EBIT (US$M)(1)(2)(3)
1,000
500
446
Uncontrollable
401
(73)
(185)
115
(61)
238
11
(30)
(18)
Net finance
costs and tax
(152)
(203)
844
489
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F
(1) Sales price variance reflects the revenue impact of changes in commodity prices, based on the current period’s sales volume. Price-linked costs variance reflects the
change in royalties together with the change in input costs driven by changes in commodity prices or market traded consumables. Foreign exchange reflects the impact of
exchange rate movements on local currency denominated costs and sales. Volume variance reflects the revenue impact of sales volume changes, based on the comparative
period’s sales prices. Controllable costs variance represents the impact from changes in the Group’s controllable local currency cost base, including the variable cost impact
of production volume changes on expenditure, and period-on-period movements in inventories. The controllable cost variance excludes earnings adjustments including
significant items.
(2) Underlying net finance costs and Underlying income tax expense are actual FY21 results, not year-on-year variances.
(3) South32’s ownership share of operations is as follows: Worsley Alumina (86 per cent share), Hillside Aluminium (100 per cent), Mozal Aluminium (47.1 per cent share), Brazil
Alumina (Alumina 36 per cent share, Aluminium 40 per cent share), Illawarra Metallurgical Coal (100 per cent), Australia Manganese (60 per cent share), South Africa Manganese
(60 per cent share), Cerro Matoso (99.9 per cent share), Cannington (100 per cent), Hermosa (100 per cent), and Eagle Downs Metallurgical Coal (50 per cent share).
South32 Annual Report 2021Operating and Financial Review
Earnings analysis
FY20 Underlying EBIT
Change in sales price
US$M
Commentary
446
401
Higher average realised prices for our commodities, including:
Aluminium (+US$363 million)
Silver (+US$123 million)
Zinc (+US$65 million)
Nickel (+US$65 million)
Partially offset by lower average realised prices for:
Metallurgical coal (-US$182 million)
Manganese ore (-US$35 million)
Alumina (-US$3 million)
Net impact of price-linked costs
(73) Higher electricity costs (-US$103 million), primarily at Hillside Aluminium
Higher distribution and freight costs across our operations (-US$39 million)
Lower caustic soda prices at Worsley Alumina (+US$27 million) and Brazil Alumina
(+US$6 million)
Lower bauxite prices at Brazil Alumina (+US$18 million)
Change in exchange rates
Lower aluminium smelter raw material costs (+US$12 million), including pitch and coke
Stronger Australian dollar (-US$189 million)
(185)
Change in inflation
Change in sales volume
Stronger South African rand (-US$23 million)
Weaker Brazilian real (+US$16 million)
Southern Africa (-US$29 million)
Australia (-US$24 million)
Higher volumes at:
(61)
115
South Africa Manganese (+US$79 million)
Cannington (+US$66 million)
Worsley Alumina (+US$41 million)
Australia Manganese (+US$40 million)
Partially offset by lower volumes at:
Cerro Matoso (-US$91 million)
Mozal Aluminium (-US$31 million)
Controllable costs
238
Inventory movements (+US$249 million), resulting from the drawdown of metallurgical
coal and aluminium finished goods in the prior period
Reduction in controllable costs for our corporate functions (+US$29 million)
Impact of higher volumes (-US$15 million) primarily at South Africa Manganese,
Worsley Alumina and Illawarra Metallurgical Coal
Higher caustic usage (-US$13 million) at Worsley Alumina
Increased pot relining activity (-US$12 million) at Hillside Aluminium
Ceased and sold operations
11 Movement in loss-making ceased and sold operations (South Africa Energy Coal,
Other
Interest & tax (equity accounted
investments)
FY21 Underlying EBIT
TEMCO alloy smelter and Bayside aluminium smelter)
Lower joint venture recoveries partially offset by EBIT earned on third party trading
(30)
(18) Higher ETR in our jointly controlled manganese operations
844
Further analysis of operations performance is outlined on pages 44 to 53.
4
1
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
Net debt and sources of liquidity
Our policies on debt and treasury
management are as follows:
– Commitment to maintain an investment
grade credit rating;
– Diversification of funding sources; and
– Generally maintain borrowings and
excess cash in US dollars.
Gearing and net debt
The table below presents net cash/(debt)
and net assets of the Group, based on the
balance sheet as at 30 June 2021:
US$M
FY21
FY20
Cash and cash
equivalents
Current external debt
Non-current external debt
Net cash
Net assets
1,613
(408)
(799)
406
8,954
1,315
(355)
(662)
298
9,562
Given the net cash position of the Group, a
gearing ratio is not presented.
Funding sources
In addition to cash flow from operations as
a primary source of funding, the Group at
the time of this report, has a committed
US$1.45 billion revolving credit facility
which is a standby arrangement to the
Group’s US dollar commercial paper
program and is not subject to financial
covenants at the Group’s current credit
rating. Certain financing facilities in relation
to specific operations are the subject of
financial covenants that vary from facility
to facility; however, these are considered
normal for such facilities.
As at 30 June 2021, the Group’s cash
and cash equivalents on hand were
US$1.6 billion. Details of our major standby
arrangement are as follows:
US$M
Available
FY21
Revolving credit facility(1)
1,450
Used
FY21
-
(1) The Group has an undrawn revolving credit
facility which is a standby arrangement to the
US commercial paper program. This facility was
extended in July 2020 by one year and expires in
February 2023.
Additional information regarding the
maturity profile of the Group’s debt
obligations and details of our major
standby agreement is included in note 19
to the financial statements on pages
126 to 133.
Balance sheet and capital
management
The Group’s generation of free cash flow
from operations, including net distributions
from our manganese equity accounted
investments, of US$825 million supported
a US$108 million increase in the Group’s
net cash balance to US$406 million at
30 June 2021, after we funded the return of
a further US$460 million to shareholders in
the period. Our lease and other
interest bearing liabilities increased by
US$190 million primarily due to recognition
of our commitment to fund rehabilitation
activity at South Africa Energy Coal
operations by way of 10 annual instalments
totalling US$200 million.
Consistent with our unchanged capital
management framework and commitment
to maintain an investment grade credit
rating, both Standard and Poor’s and
Moody’s reaffirmed their respective BBB+
and Baa1 credit ratings for the Group
during the period.
Reflecting our strong financial position and
demonstrating the disciplined and flexible
approach we are taking to our capital
management program, we recommenced
our on-market share buy-back in October
2020 as COVID-19 related operational risks
subsided, returning US$346 million during
the period in addition to paying
US$115 million in ordinary dividends. In
accordance with our ordinary dividend
policy, the Board has resolved to pay a fully
franked ordinary dividend of US 3.5 cents
per share (US$164 million), representing
46 per cent of Underlying earnings in
respect of H2 FY21.
Our capital management framework is
designed that our options compete for
excess capital to create shareholder value,
while our capital management program
seeks to return capital to shareholders
in a timely and efficient manner.
Following the aforementioned return of
US$346 million to shareholders in FY21,
our capital management program had
US$225 million remaining to be returned
to shareholders as at 30 June 2021.
Consistent with the flexible approach we
are taking to the execution of our program,
the Board has resolved to pay a fully
franked special dividend of US 2.0 cents
per share (US$93 million) and to increase
the amount committed under the program
by US$120 million. This increases the total
amount to be returned under our capital
management program to US$2 billion since
its commencement, with US$252 million
remaining to be returned by 2 September
2022.
2
4
South32 Annual Report 2021Operating and Financial Review Operations analysis
A summary of the underlying performance of the Group’s operations is presented below and more detailed analysis is presented on
pages 44 to 53.
Operations table (South32 share)(1)
US$M
Worsley Alumina
Brazil Alumina
Hillside Aluminium
Mozal Aluminium
Illawarra Metallurgical Coal
Australia Manganese
South Africa Manganese
Cerro Matoso
Cannington
Third party products and services(2)
Inter-segment / Group and unallocated(3)
Total
Equity accounting adjustment(4)
South32 Group (excluding South Africa Energy Coal)
South Africa Energy Coal
South32 Group
Revenue
Underlying EBIT
FY21
1,173
400
1,511
578
758
730
369
493
757
378
(573)
6,574
(1,098)
5,476
861
6,337
FY20
1,118
399
1,276
508
924
763
342
519
476
340
(550)
6,115
(1,105)
5,010
1,065
6,075
FY21
143
63
293
98
(103)
304
55
122
350
10
(139)
1,196
(202)
994
(150)
844
FY20
160
(15)
103
(24)
52
328
54
107
105
(2)
(73)
795
(184)
611
(165)
446
(1) South32’s ownership share of operations is as per footnote (3) on page 40.
(2) FY21 Third party products and services sold comprise US$43 million for aluminium, US$10 million for alumina, US$23 million for coal, US$206 million for freight services,
US$92 million for aluminium raw materials and US$4 million for manganese. Underlying EBIT on third party products and services comprise US$8 million for aluminium, nil for
alumina, US$1 million for coal, nil for freight services, US$1 million for aluminium raw materials and nil for manganese. FY20 Third party products and services sold comprise
US$42 million for aluminium, US$14 million for alumina, US$33 million for coal, US$165 million for freight services, US$86 million for aluminium raw materials and nil for
manganese. Underlying EBIT on third party products and services comprise US$2 million for aluminium, (US$4 million) for alumina, nil for coal, (US$2 million) for freight services,
US$2 million for aluminium raw materials and nil for manganese.
(3) Group and unallocated Underlying EBIT includes Hermosa -US$8 million (FY20 -US$5 million) and the recognition of one-off charges in H2 FY21.
(4) The equity accounting adjustment reconciles the proportional consolidation of the South32 manganese operations to the treatment of the manganese operations on an equity
accounted basis (including third party product).
4
3
South32 Annual Report 2021Operating and Financial Review
Financial and operational performance summary continued
WORSLEY ALUMINA
Location:
Western Australia, Australia
South32 share:
86%
South32 holds an 86 per cent interest in
Worsley Alumina, while Japan Alumina
Associates (Australia) Pty Ltd owns
10 per cent and Sojitz Alumina Pty Ltd
owns four per cent.
Bauxite is mined near the town of
Boddington, 130 kilometres south-east
of Perth. It is transported by overland
conveyor to the alumina refinery near Collie
and turned into alumina powder, before
being transported by rail to Bunbury Port.
It is then shipped to smelters around
the world, including South32’s Hillside
Aluminium and Mozal Aluminium smelters
in Africa.
Worsley Alumina is one of the largest
contributors to our operational carbon
emissions. Short-term emissions reduction
activities include a mud-washing project
to optimise energy consumption. We are
studying a transition from coal to gas as an
interim step, followed by the subsequent
deployment of renewable energy.
4
4
South32 share
Alumina production (kt)
Alumina sales (kt)
Realised alumina sales
price (US$/t)
Operating unit cost
(US$/t)
FY21
FY20
3,963
4,004
3,886
3,782
293
296
214
210
South32 share (US$M)
FY21
FY20
Revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life
extension
Community investment
1,173
318
143
2,667
55
51
1,118
322
160
2,789
48
44
4
1.1
4
0.3
Safety
TRIF was 6.8 for Worsley Alumina in FY21, a
38 per cent decrease year-on-year.
Volumes
Worsley Alumina saleable production
increased by two per cent (or 77kt) to a
record of 3,963kt in FY21, with the refinery
finishing the year strongly, setting a
quarterly record and operating above
nameplate capacity of 4.6Mtpa (100
per cent basis). The refinery’s record
performance in FY21 was enabled by
improvement initiatives in the calcination
circuit and record alumina hydrate
production.
Operating costs
Operating unit costs increased by two per
cent in FY21 to US$214/t as the benefits
of record production volumes, lower
caustic soda prices (FY21: US$302/t,
FY20: US$366/t) and reduced contractor
spend were more than offset by a stronger
Australian dollar and a planned increase
in our caustic usage rates (FY21: 102kg/t,
FY20: 93kg/t).
Financial performance
Underlying EBIT decreased by 11 per cent
(or US$17 million) in FY21 to US$143 million
as a one per cent decline in the average
realised price of alumina (-US$10 million), a
stronger Australian dollar (-US$58 million)
and a drawdown of finished goods
(-US$29 million) were partially
offset by increased sales volumes
(+US$65 million), a reduction in contractor
and consultant spend (+US$12 million) and
lower expenditure on caustic soda
(+US$9 million).
We realised a modest premium to the
PAX on a volume weighted M-1 basis for
alumina sales in FY21, due to the structure
of legacy supply contracts with our Mozal
Aluminium smelter. Contracts with the
smelter are linked to the LME aluminium
price and alumina indices on an M-1 basis,
with caps and floors embedded within
specific contracts that reset every calendar
year. All other alumina sales were at market
based prices.
Capital expenditure
Capital expenditure increased by
US$7 million in FY21 to US$55 million
as we continued to invest in additional
bauxite residue disposal capacity, further
improvements in processing infrastructure
that will support production creep and
initial works to support the development of
new mining areas.
Community investment
We invested US$1.1 million in communities
around Worsley Alumina in FY21, with a
focus on environmental protection and
restoration, economic diversification
and supporting education and cultural
programs for Aboriginal and Torres Strait
Islander peoples.
South32 Annual Report 2021Operating and Financial Review BRAZIL ALUMINA
Location:
Pará and Maranhão, Brazil
South32 share:
Alumina - 36%, Aluminium - 40%
South32 investment:
Bauxite - 14.8%
South32 holds 14.8 per cent interest
in the non-operated bauxite mine MRN,
a 36 per cent share of the non-operated
Alumar alumina refinery and a
40 per cent share in the Alumar
aluminium smelter, which is currently
on care and maintenance.
The MRN mine is an open-cut strip mining
operation. Mined ore is hauled to primary
crushers and then transported by conveyor
belt to the beneficiation plant. The bauxite
produced from the MRN mine is sold to its
shareholders. South32’s share of bauxite
produced from the MRN mine is supplied
to the Brazil Alumina refinery. Together
with our partners at MRN we continue
to progress the life extension project’s
pre-feasibility study. The project has the
potential to extend the life of the mine
by more than 20 years at a relatively low
capital cost.
The alumina produced from the refinery is
exported through the Alumar Port.
Financial performance
Alumina Underlying EBIT increased by
US$71 million in FY21 to US$66 million as
the refinery benefitted from lower bauxite
costs (price and consumption,
US$26 million), a weaker Brazilian real
(+US$16 million), lower depreciation
(+US$14 million) and the recognition of
historical tax credits (+US$16 million).
Aluminium Underlying EBIT improved by
US$7 million in FY21 to a loss of
US$3 million as we continued to incur
costs to maintain the smelter on care and
maintenance.
Capital expenditure
Capital expenditure decreased by
US$9 million to US$25 million in FY21 as
our rate of investment in bauxite residue
disposal capacity reduced.
4
5
South32 share
Alumina production (kt)
Alumina sales (kt)
Realised alumina sales
price (US$/t)
Alumina Operating unit
cost (US$/t)
FY21
FY20
1,398
1,391
1,383
1,392
288
287
203
244
South32 share (US$M)
FY21
FY20
Revenue
Alumina
Aluminium
Underlying EBITDA
Alumina
Aluminium
Underlying EBIT
Alumina
Aluminium
Net operating assets/
(liabilities)
Alumina
Aluminium
Capital expenditure
Safe and reliable
Improvement and life
extension
400
400
-
114
117
(3)
63
66
(3)
571
570
1
25
25
399
399
-
50
60
(10)
(15)
(5)
(10)
568
584
(16)
34
33
-
1
Volumes
Brazil Alumina saleable production
increased by one per cent (or 15kt) to a
record 1,398kt in FY21 as the refinery
continued to benefit from strong plant
availability, realising the benefits of the
De-bottlenecking Phase One project.
Operating costs
Operating unit costs decreased by 17 per
cent in FY21 to US$203/t as the refinery
achieved record output, combined with
lower bauxite usage rates and pricing
during the period. The operation also
recognised one-off historical tax credits
that provided a benefit to unit costs of
US$12/t.
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
HILLSIDE ALUMINIUM
Location:
KwaZulu-Natal, South Africa
South32 share:
100%
The Hillside Aluminium smelter is located in
Richards Bay in the South African province
of KwaZulu-Natal and is 100 per cent
owned and operated by South32 with a
solid metal production capacity of 720kt
per year.
Hillside Aluminium is the largest aluminium
smelter in the southern hemisphere. The
smelter produces high-quality, primary
aluminium for the domestic and export
markets.
To support the development of the
downstream aluminium industry in South
Africa a portion of liquid metal is supplied
to Hulamin and other local companies that
produce products for the domestic and
export markets.
Hillside Aluminium is a major contributor
to our operational carbon emissions. A
feasibility study of the AP3XLE energy
efficiency technology is underway and
we are also studying low carbon energy
sources for the smelter.
6
4
The smelter sources its alumina from our
Worsley Alumina refinery with prices linked
to the PAX on an M-1 basis, with alumina,
coke, pitch and aluminium tri-fluoride
accounting for 50 per cent of the smelter’s
cost base in FY21 (FY20: 54 per cent).
Financial performance
Underlying EBIT increased by
184 per cent (or US$190 million) in FY21 to
US$293 million as a 21 per cent increase
in the average realised price of aluminium
(+US$262 million) and lower raw material
input costs (+US$44 million) more than
offset an increase in costs from the new
power agreement (-US$100 million).
Pot relining activity also increased
(-US$12 million) at the smelter in FY21,
with 120 pots relined at a cost of
US$244 thousand per pot (FY20: 65 pots
at US$248 thousand per pot).
Capital expenditure
Capital expenditure increased by
US$4 million in FY21 to US$17 million.
Community investment
We invested US$3.0 million in communities
around Hillside Aluminium in FY21, with
a focus on local skills and economic
development, education and strengthening
healthcare services.
South32 share
Aluminium production (kt)
Aluminium sales (kt)
Realised sales price
(US$/t)
Operating unit cost
(US$/t)
FY21
717
707
FY20
718
723
2,137
1,765
1,631
1,531
South32 share (US$M)
Revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life
extension
Community investment
FY21
1,511
358
293
733
17
17
-
3.0
FY20
1,276
169
103
794
13
12
1
2.0
Safety
TRIF was 0.5 for Hillside Aluminium in FY21,
a 55 per cent decrease year-on-year.
Volumes
Hillside Aluminium saleable production
decreased by 1kt to 717kt in FY21 as the
smelter continued to test its maximum
technical capacity, despite the impact to
production from increased load-shedding.
Operating costs
Operating unit costs increased by seven
per cent in FY21 to US$1,631/t as the
benefit of lower raw material input costs
was more than offset by higher charges
from a new power agreement for the
smelter that has been operating under an
interim arrangement since 1 August 2020.
Subsequent to the end of the period, we
finalised the new agreement with Eskom
which secures the smelter’s energy supply
until 2031. The new tariff is South African
rand based, with a rate of escalation linked
to the South Africa Producer Price Index.
South32 Annual Report 2021Operating and Financial Review MOZAL ALUMINIUM
Location:
Maputo, Mozambique
South32 share:
47.1%
South32 has a 47.1 per cent share of Mozal
Aluminium, while Mitsubishi Corporation,
through MCA Metals Holding GmbH,
holds 25 per cent, Industrial Development
Corporation of South Africa Limited holds
24 per cent and the Government
of the Republic of Mozambique holds
3.9 per cent (through preference shares).
Mozal Aluminium is located 20 kilometres
west of Mozambique’s capital city Maputo
and has a solid metal production capacity
of 580kt (on a 100 per cent basis) per year.
Mozal Aluminium is the only aluminium
smelter in Mozambique and the second
largest aluminium smelter in Africa. It
produces standard aluminium ingots.
To support the development of the
downstream aluminium industry in
Mozambique a portion of liquid metal is
supplied to Midal Cables, a local company
that produces products for the domestic
and export markets.
South32 share
Aluminium production (kt)
Aluminium sales (kt)
Realised sales price
(US$/t)
Operating unit cost
(US$/t)
FY21
265
262
FY20
268
279
2,206
1,821
1,702
1,785
South32 share (US$M)
FY21
FY20
Revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life
extension
Community investment
578
132
98
456
11
10
1
1.8
508
10
(24)
436
11
11
-
1.5
Safety
TRIF was 0.5 for Mozal Aluminium in FY21, a
38 per cent decrease year-on-year.
Volumes
Mozal Aluminium saleable production
decreased by one per cent (or 3kt) to
265kt in FY21, with the smelter performing
strongly in Q4 FY21, despite the impact of
increased load-shedding. The strong finish
to the year followed COVID-19 workforce
restrictions that impacted operations
during Q3 FY21.
Operating costs
Operating unit costs decreased by five per
cent in FY21 to US$1,702/t as raw material
input costs decreased for alumina, coke,
pitch and aluminium tri-fluoride, which
combined to account for 42 per cent of the
smelter’s cost base (FY20: 46 per cent).
The smelter sources its alumina from
our Worsley Alumina refinery with
approximately 50 per cent priced as a
percentage of the LME aluminium index
under a legacy contract and the remainder
linked to the PAX on an M-1 basis, with
caps and floors embedded within specific
contracts that reset each calendar year.
Financial performance
Underlying EBIT increased by
US$122 million in FY21 to US$98 million
following a loss in FY20. The smelter's
return to profitability was enabled by a
21 per cent increase in the average realised
price of aluminium (+US$101 million),
favourable movements in finished goods
inventory (+US$48 million) and lower raw
material input prices (+US$20 million) that
were partially offset by lower sales volumes
(-US$31 million). 134 pots were relined
across FY21 at a cost of US$252 thousand
per pot (FY20: 112 pots at
US$278 thousand per pot).
Capital expenditure
Capital expenditure was unchanged at
US$11 million in FY21 as the smelter
continued to roll out the AP3XLE energy
efficiency technology in its pot relining
program.
Community investment
We invested US$1.8 million in communities
around Mozal Aluminium in FY21, with
a focus on education and employment,
health and wellbeing and sustainable
agricultural development.
4
7
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
SOUTH AFRICA ENERGY COAL
Location:
Mpumalanga, South Africa
South32 share:
100% divested
South Africa Energy Coal is located in the
South African province of Mpumalanga and
was 100 per cent owned and operated by
South32 until 1 June 2021, at which time
we concluded the sale of the business to a
subsidiary of Seriti and two trusts for the
benefit of employees and the community.
8
4
South32 share
FY21(1)
FY20
Energy coal production
(kt)
Domestic sales (kt)(2)
Export sales (kt)(2)
Realised domestic sales
price (US$/t)(2)
Realised export sales
price (US$/t)(2)
Operating unit cost
(US$/t)(3)
18,086
22,672
10,375 12,638
9,715
8,025
33
50
48
25
53
42
South32 share (US$M)
FY21(1)
FY20
Revenue(4)
Underlying EBITDA
Underlying EBIT
Net operating assets/
(liabilities)
Capital expenditure
Safe and reliable
Improvement and life
extension
Community investment
861
(123)
(150)
1,065
(118)
(165)
-
76
23
53
5.2
(178)
164
42
122
5.0
Safety
Sadly, in May this year a contractor,
Mr Petros Sibeko, was fatally injured while
working on the construction of a workshop
at the Klipspruit Extension Project. TRIF
was 1.6 for South Africa Energy Coal
in FY21, an 11 per cent decrease
year-on-year.
Financial performance
South Africa Energy Coal was divested
on 1 June 2021. Prior to the divestment,
the operation realised an EBIT loss of
US$150 million in FY21 as Operating unit
costs increased by 14 per cent to US$48/t.
Capital expenditure decreased by US$88
million in FY21 to US$76 million as the
substantial investment of recent periods
to ensure the operation’s sustainability
under Seriti’s ownership continued, and
the Klipspruit Life Extension project was
completed.
Community investment
We invested US$5.2 million in communities
around South Africa Energy Coal in
FY21, including in education and skills
development, community health,
community infrastructure and supporting
local economic development.
(1) South Africa Energy Coal FY21 reflects 11 months.
(2) Volumes and prices do not include any third party trading that may be undertaken independently of equity production.
(3) Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes.
(4) South Africa Energy Coal Revenue includes domestic and export sales Revenue.
South32 Annual Report 2021Operating and Financial Review ILLAWARRA METALLURGICAL COAL
Location:
New South Wales, Australia
South32 share:
100%
Located in the southern coalfields of New
South Wales, Illawarra Metallurgical Coal
is 100 per cent owned by South32 and
operates two underground metallurgical
coal mines, Appin mine and Dendrobium
mine, and West Cliff and Dendrobium coal
preparation plants. Illawarra Metallurgical
Coal also manages the Port Kembla Coal
Terminal (PKCT) on behalf of a consortium
of partners. Illawarra Metallurgical Coal
produces premium-quality, hard coking
coal for steelmaking and energy coal.
Operational emissions from Illawarra
Metallurgical Coal are predominantly from
the release of gases from the underground
coal seams during mining operations and
our decarbonisation activities are focused
on increasing the efficiency of gas drainage
and assessing technologies for reducing
ventilation air methane.
South32 share
FY21
FY20
Metallurgical coal
production (kt)
Energy coal production
(kt)
Metallurgical coal sales
(kt)(1)
Energy coal sales (kt)(1)
Realised metallurgical
coal sales price (US$/t)
Realised energy coal
sales price (US$/t)
Operating unit cost
(US$/t)(2)
South32 share (US$M)
Revenue(3)
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life
extension
Exploration expenditure
Exploration expensed
Community investment
6,170
5,549
1,475
1,457
6,074
1,542
5,842
1,442
115
145
40
87
FY21
758
94
(103)
612
188
151
37
14
5
1.0
51
93
FY20
924
243
52
1,356
199
181
18
16
7
0.7
Safety
TRIF was 19.6 for Illawarra Metallurgical
Coal in FY21, a 16 per cent increase year-
on-year.
Volumes
Illawarra Metallurgical Coal production
increased by nine per cent (or 639kt) to
7.6Mt in FY21 as the operation’s return to
a three longwall configuration delivered
greater efficiencies through the use of
alternate dual longwalls at the Appin mine,
and we monetised low-margin coal wash.
4
9
Operating costs
Operating unit costs decreased by six per
cent in FY21 to US$87/t as the operation
benefitted from increased sales volumes,
including the monetisation of low-margin
coal wash material, and a favourable
movement in finished goods inventory
that more than offset a stronger Australian
dollar.
Financial performance
Underlying EBIT decreased by
US$155 million in FY21 to a loss of
US$103 million as lower average realised
prices (-US$205 million) and a stronger
Australian dollar (-US$56 million), more
than offset the benefits of a favourable
movement in finished goods inventory
(+US$70 million) and increased sales
volumes (+US$39 million).
Capital expenditure
Safe and reliable capital expenditure
decreased by US$30 million in FY21
to US$151 million as our rate of spend
on underground development
(FY21: US$77 million) and the substantial
investment made to support a return
to a three longwall configuration returned
to historical levels.
Improvement and life extension capital
expenditure increased by US$19 million
to US$37 million as we incurred pre-
commitment spend on studies and critical
path items for the DND project. During Q3
FY21 the IPC refused our application for
the DND project (as per page 17). We have
scaled back activity on the project while we
consider alternative options following the
IPC decision.
Community investment
We invested US$1.0 million in communities
around Illawarra Metallurgical Coal in
FY21, with a focus on education, health,
community support and services, and local
economic development.
(1) Volumes and prices do not include any third party trading that may be undertaken independently of equity production.
(2) Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes.
(3) Illawarra Metallurgical Coal Revenue includes metallurgical coal and energy coal sales Revenue.
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
AUSTRALIA MANGANESE
Location:
Northern Territory and Tasmania, Australia
South32 share:
Ore - 60%, Alloy - 60% divested
0
5
Australia Manganese consists of GEMCO in
the Northern Territory. South32 owns
60 per cent of GEMCO and Anglo American
Plc holds the remaining 40 per cent. The
TEMCO manganese alloys smelter (TEMCO)
was wholly owned by GEMCO until the
completion of its divestment with an
effective date for accounting purposes
of 31 December 2020.
GEMCO is an open-cut strip mining
operation, producing high-grade
manganese ore and is located in close
proximity to Asian export markets.
South32 share
FY21(1)
FY20
Manganese ore
production (kwmt)
Manganese alloy
production (kt)
Manganese ore sales
(kwmt)
External customers
TEMCO
Manganese alloy sales
(kt)
Realised external
manganese ore sales
price (US$/dmtu, FOB)(2)(3)
Realised manganese alloy
sales price (US$/t)(2)
Ore Operating unit cost
(US$/dmtu)(3)(4)
Alloy Operating unit cost
(US$/t)(4)
3,529
3,470
51
110
3,621
3,506
115
3,440
3,300
140
59
116
4.13
4.39
958
940
1.52
1.55
1,034
905
South32 share (US$M)
Revenue(5)
Manganese ore
Manganese alloy
Intra-segment
elimination
Underlying EBITDA
Manganese ore
Manganese alloy
Underlying EBIT
Manganese ore
Manganese alloy
Net operating assets
Manganese ore
Manganese alloy
Capital expenditure
Safe and reliable
Improvement and life
extension
Exploration expenditure
Exploration expensed
Community investment
FY21(1)
730
685
57
(12)
385
389
(4)
304
308
(4)
234
234
-
55
53
2
2
1
1.7
FY20
763
668
109
(14)
400
396
4
328
329
(1)
242
293
(51)
67
64
3
2
1
1.1
Safety
TRIF was 6.3 for GEMCO in FY21, a
11 per cent increase year-on-year.
Volumes
Australia Manganese saleable ore
production increased by two per cent (or
59kwmt) to a record 3,529kwmt in FY21
despite the impact of higher than average
rainfall during the wet season. The primary
concentrator continued to achieve strong
output as we drew down previously
established run of mine stocks, while
output from the PC02 circuit remained
above nameplate capacity, contributing
10 per cent of total production (FY20:
12 per cent).
Manganese alloy saleable production
decreased by 54 per cent (or 59kt) to 51kt
in FY21 as we completed the divestment
of TEMCO.
Operating costs
FOB manganese ore Operating unit costs
decreased by two per cent in FY21 to
US$1.52/dmtu as the operation benefitted
from higher sales volumes due to improved
equipment productivity and lower planned
maintenance, that more than offset the
impact of a stronger Australian dollar.
Financial performance
Manganese ore Underlying EBIT decreased
by six per cent (or US$21 million) in FY21
to US$308 million as a stronger Australian
dollar (-US$21 million), lower realised prices
(-US$21 million) and higher customer
freight rates (-US$11 million) were partially
offset by increased sales volumes
(+US$40 million) and reduced maintenance
expenditure (+US$3 million).
Manganese alloy Underlying EBIT
decreased by US$3 million in FY21 to a
loss of US$4 million as we completed the
divestment of TEMCO.
Capital expenditure
Capital expenditure decreased by
US$12 million in FY21 to US$55 million
as we completed non-processing
infrastructure upgrades at GEMCO and
divested TEMCO during the year.
Community investment
We invested US$1.6 million in communities
around GEMCO and TEMCO in FY21,
with a focus on supporting economic
development, education and health
programs for Aboriginal and Torres Strait
Islander peoples at GEMCO and local
education, economic development and
community wellbeing at TEMCO.
(1) Reflects the effective completion date for the sale of TEMCO for accounting purposes of 31 December 2020.
(2) Realised ore prices are calculated as external sales Revenue less freight and marketing costs, divided by external sales volume. Realised alloy prices are calculated as sales
Revenue, including sinter Revenue, divided by alloy sales volume. Ore converted to sinter and alloy, and sold externally, is eliminated as an intracompany transaction.
(3) Manganese Australia FY21 average manganese content of external ore sales was 44.4 per cent on a dry basis (FY20: 44.6 per cent). 97 per cent of FY21 external manganese
ore sales (FY20: 95 per cent) were completed on a CIF basis. FY21 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of
US$63 million (FY20: US$46 million).
(4) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume. Alloy operating unit cost is Revenue less Underlying
EBITDA divided by alloy sales volumes and includes costs associated with sinter sold externally.
(5) Revenues associated with sales from GEMCO to TEMCO are eliminated as part of the consolidation.
South32 Annual Report 2021Operating and Financial Review SOUTH AFRICA MANGANESE
Location:
Northern Cape and Gauteng, South Africa
South32 share:
Ore - 44.4%, Alloy - 60%
South Africa Manganese consists of two
manganese mines and the Metalloys
manganese alloy smelter which was placed
on care and maintenance in FY20.
Hotazel Manganese Mines (HMM) is located
in the Kalahari Basin. South32 holds a
60 per cent interest in Samancor Holdings
(Pty) Ltd and Anglo American Plc holds the
remaining 40 per cent. Samancor indirectly
owns 74 per cent of HMM, which gives
South32 its ownership interest of
44.4 per cent. The remaining 26 per cent of
HMM is owned by B-BBEE entities.
South32 holds an effective 60 per cent
interest in Samancor Manganese (Pty) Ltd
(Metalloys manganese smelter).
South32 share
FY21
FY20
2,264
1,878
-
53
South32 share (US$M)
Revenue(4)
Manganese ore(5)
Manganese alloy
Intra-segment
elimination
Underlying EBITDA
Manganese ore(5)
Manganese alloy
Underlying EBIT
Manganese ore(5)
Manganese alloy
Net operating assets
Manganese ore(5)
Manganese alloy
Capital expenditure
Safe and reliable
Improvement and life
extension
Exploration expenditure
Exploration expensed
Community investment
FY21
369
362
7
-
72
92
(20)
55
75
(20)
182
242
(60)
16
16
-
1
1
2.1
FY20
342
305
50
(13)
81
106
(25)
54
88
(34)
237
281
(44)
23
22
1
1
1
2.3
Manganese ore
production (kwmt)
Manganese alloy
production (kt)
Manganese ore sales
(kwmt)
External customers
Metalloys
Manganese alloy sales
(kt)
Realised external
manganese ore sales
price (US$/dmtu, FOB)(1)(2)
Realised manganese alloy
sales price (US$/t)
Ore Operating unit cost
(US$/dmtu)(2)(3)
Alloy Operating unit cost
(US$/t)(3)
2,236
2,236
-
1,865
1,772
93
Safety
TRIF was 1.8 for HMM in FY21, a 22 per cent
decrease year-on-year.
11
55
3.53
3.76
648
909
2.48
2.25
N/A
1,364
Volumes
South Africa Manganese saleable ore
production increased by 21 per cent (or
386kwmt) to 2,264kwmt in FY21 as the
operation recovered from an extended
shutdown in response to COVID-19
restrictions and subdued market conditions
in the prior year.
We did not produce any manganese alloy in
FY21 as our Metalloys manganese alloy
smelter remained on care and maintenance.
5
1
Operating costs
FOB manganese ore Operating unit costs
increased by 10 per cent in FY21 to
US$2.48/dmtu as the operation lifted
volumes, increasing its use of higher cost
trucking in response to market demand. Prior
period costs had benefitted from the impact
of a one-off royalty tax credit settled in FY20.
Financial performance
Manganese ore Underlying EBIT decreased
by 15 per cent (or US$13 million) in FY21 to
US$75 million as a six per cent reduction in
average realised prices (-US$14 million),
higher customer freight rates (-US$43 million)
and the recognition of royalty tax credit in
the prior period (-US$13 million) were
partially offset by increased sales volumes
(+US$84 million).
Manganese alloy Underlying EBIT improved
by US$14 million in FY21, to a loss of
US$20 million, as we incurred one-off costs
associated with the smelter’s placement on
care and maintenance.
Notwithstanding the decline in index prices,
our average realised price for external sales
of South African ore was a two per cent
premium to the medium grade 37 per cent
manganese lump ore index (FOB Port
Elizabeth, South Africa) in FY21. This followed
adjustments to our product mix, with our
lower quality fines product making up a
smaller proportion of total sales (FY21:
7 per cent, FY20: 13 per cent).
Capital expenditure
Safe and reliable capital expenditure
decreased by US$6 million in FY21 to
US$16 million despite continued investment
in asset integrity projects and the
replacement of mobile equipment.
Community investment
We invested US$2.1 million in communities
around South Africa Manganese in FY21, with
a focus on education, health and local
economic development.
(1) Volumes and prices do not include any third party trading that may be undertaken independently of equity production. Realised ore prices are calculated as external sales
Revenue less freight and marketing costs, divided by external sales volume. Ore converted to alloy, and sold externally, is eliminated as an intracompany transaction.
Manganese ore sales are grossed-up to reflect a 60 per cent accounting effective interest.
(2) Manganese South Africa FY21 average manganese content of external ore sales was 39.9 per cent on a dry basis (FY20: 40.1 per cent). 76 per cent of FY21 external manganese
ore sales (FY20: 72 per cent) were completed on a CIF basis. FY21 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of
US$55 million (FY20: US$33 million).
(3) FOB ore Operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume. Alloy Operating unit cost is Revenue less Underlying
EBITDA divided by alloy sales volumes.
(4) Revenues associated with sales from Hotazel Manganese Mines (HMM) to Metalloys are eliminated as part of the consolidation.
(5) Consistent with the presentation of South32’s segment information, South Africa Manganese ore production and sales have been reported at 60 per cent. South32 has a 44.4
per cent ownership interest in HMM. 26 per cent of HMM is owned by a B-BBEE consortium comprising Ntsimbintle Mining (nine per cent), NCAB Resources (seven per cent),
Iziko Mining (five per cent) and HMM Education Trust (five per cent). The interests owned by NCAB Resources, Iziko Mining and HMM Education Trust were acquired using
vendor finance with the loans repayable via distributions attributable to these parties, pro rata to their share in HMM. Until these loans are repaid, South32’s interest in HMM is
accounted at 54.6 per cent.
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
CERRO MATOSO
Location:
Córdoba, Colombia
South32 share:
99.9%
Cerro Matoso is an integrated nickel laterite
mine and smelter located in the Cordoba
area of northern Colombia, consisting of a
truck and shovel open-cut mine and
a processing plant. South32 owns
99.9 per cent of Cerro Matoso. Current and
former employees own 0.02 per cent, with
the balance of shares held in a reserve
account following a buy-back.
Cerro Matoso is a major producer of nickel
contained in ferronickel which is used to
make stainless steel. Ore mined is blended
with ore from stockpiles, which is then
dried in rotary kilns and smelted in two
electric arc furnaces where ferronickel is
produced.
In FY21 we approved the low capital
Q&P project, which will contribute higher
feed grades, and the Ore Sorting and
Mechanical Ore Concentration Project
(OSMOC), which is expected to maintain
payable nickel production by offsetting
natural grade decline beyond FY23.
2
5
Operating costs
Operating unit costs increased by nine
per cent in FY21 to US$4.01/lb despite a
weaker Colombian peso, as the furnace
refurbishment contributed to a 17 per cent
decline in sales volumes.
Financial performance
Underlying EBIT increased by 14 per cent
(or US$15 million) in FY21 to US$122 million,
with the extended furnace shut lowering
sales volumes (-US$91 million), more than
offset by a 15 per cent rise in the average
realised nickel price (+US$65 million), lower
energy usage (+US$16 million), a weaker
Colombian peso (+US$7 million) and lower
depreciation (+US$7 million).
Capital expenditure
Safe and reliable capital expenditure
was unchanged in FY21 at US$30 million.
Improvement and life extension capital
expenditure increased by US$6 million to
US$15 million in FY21 as we invested in the
Q&P and OSMOC projects.
Community investment
We invested US$3.3 million in communities
around Cerro Matoso in FY21, with a focus
on providing access to land for ethnic
communities, supporting education and
community housing.
South32 share
Ore mined (kwmt)
Ore processed (kdmt)
Ore grade processed
(%, Ni)
Payable nickel production
(kt)
Payable nickel sales (kt)
Realised nickel sales
price (US$/lb)
Operating unit cost
(US$/lb)(1)
Operating unit cost
(US$/t)(2)
FY21
3,238
2,385
FY20
2,839
2,761
1.63
1.65
34.1
33.5
40.6
40.6
6.68
5.80
4.01
3.69
124
120
South32 share (US$M)
FY21
FY20
Revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life
extension
Exploration expenditure
Exploration expensed
Community investment
493
197
122
405
45
30
15
-
-
3.3
519
189
107
425
39
30
9
4
2
3.8
Safety
TRIF was 5.7 for Cerro Matoso in FY21,
a 54 per cent increase year-on-year.
Volumes
Cerro Matoso payable nickel production
decreased by 16 per cent (or 6.5kt) to
34.1kt in FY21 following a major furnace
refurbishment in Q2 and Q3 FY21.
(1) Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes.
(2) Cerro Matoso Operating unit cost per tonne is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact
Operating unit costs as related marketing costs may change.
South32 Annual Report 2021Operating and Financial Review CANNINGTON
Location:
Queensland, Australia
South32 share:
100%
Located in north-west Queensland,
Cannington is 100 per cent owned by
South32 and is one of the world’s largest
producers of silver and lead.
Cannington consists of an underground
hard rock mine and surface processing
facility, a road-to-rail transfer facility and
a concentrate handling and ship loading
facility at the Port of Townsville.
Silver, lead and zinc are extracted from
the ore using grinding, sequential flotation
and leaching techniques that produce
high-grade, marketable lead and zinc
concentrates with a high silver content.
We expect to transition to a 100% truck
haulage operation in Q4 FY22.
South32 share
Ore mined (kwmt)
Ore processed (kdmt)
Ore grade processed
(g/t, Ag)
Ore grade processed
(%, Pb)
Ore grade processed
(%, Zn)
Payable zinc equivalent
production (kt)(1)
Payable silver production
(koz)
Payable lead production
(kt)
Payable zinc production
(kt)
Payable silver sales (koz)
Payable lead sales (kt)
Payable zinc sales (kt)
Realised silver sales price
(US$/oz)
Realised lead sales price
(US$/t)
Realised zinc sales price
(US$/t)
Operating unit cost
(US$/t ore processed)(2)
FY21
2,819
2,746
FY20
2,792
2,839
185
156
5.7
3.5
4.7
3.3
380.2
332.6
13,655
11,792
131.8
110.4
67.7
13,736
131.7
69.0
66.7
12,109
108.1
68.7
25.4
16.5
1,862
1,648
2,357
1,416
124
113
South32 share (US$M)
FY21
FY20
Revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life
extension
Exploration expenditure
Exploration expensed
Community investment
757
416
350
195
43
41
2
2
2
0.4
476
155
105
214
52
52
-
4
4
0.5
5
3
Safety
TRIF was 7.2 for Cannington in FY21,
a 148 per cent increase year-on-year.
Volumes
Cannington payable zinc equivalent
production increased by 14 per cent
(or 47.6kt) to 380.2kt in FY21. Strong
underground mine performance supported
the acceleration of a higher-grade mining
sequence, which was extracted in Q4 FY21.
Operating costs
Operating unit costs increased by
10 per cent to US$124/t in FY21 as a
stronger Australian dollar, and lower mill
throughput following the prior period’s
draw down of inventory, were partially
offset by efficiencies in consumables usage
and energy spend.
Financial performance
Underlying EBIT increased by
233 per cent (or US$245 million) in FY21
to US$350 million as higher average
realised prices (+US$215 million), increased
sales volumes (+US$66 million), and
efficiencies in consumables usage and
energy spend (+US$7 million), were partially
offset by a stronger Australian dollar
(-US$28 million) and higher price-linked
royalties (-US$12 million).
Capital expenditure
Capital expenditure decreased by
US$9 million in FY21 to US$43 million
as we lowered our rate of investment in
underground development and additional
tailings storage capacity in accordance
with our capital plan for the operation.
Community investment
We invested US$0.4 million in communities
around Cannington in FY21, with a focus on
education, community wellbeing and social
infrastructure.
(1) Payable zinc equivalent (kt) was calculated by aggregating revenues from payable silver, lead and zinc, and dividing the total Revenue by the price of zinc. FY20 realised prices
for zinc (US$1,416/t), lead (US$1,648/t) and silver (US$16.5/oz) have been used for FY20 and FY21.
(2) Cannington Operating unit cost is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact Operating unit
costs as related marketing costs may change.
South32 Annual Report 2021Operating and Financial Review Financial and operational performance summary continued
Third party product sales
The Group differentiates the sale of its production from the sale of third party products due to a significant difference in profit margin
earned on these sales. The table below shows the breakdown between the Group’s production and third party products:
US$M
Group Production
Revenue
Related operating costs (net of other income)
Group production Underlying EBIT
Margin on Group production
Third party products
Revenue
Related operating costs (net of other income)(1)
Third party Underlying EBIT
Margin on third party products
(1) Includes depreciation and amortisation.
FY21
FY20
5,837
(5,162)
675
11.6%
500
(479)
21
4.2%
5,492
(5,237)
255
4.6%
583
(600)
(17)
(2.9%)
The Group engages in third party trading for the following reasons:
– To ensure a consistent supply of materials to its customers;
– As a result of production variability and occasional shortfalls from the Group’s operations; and
– To enhance value through product blending and supply chain optimisation.
Outlook
Production
In FY21 we achieved record production at Worsley Alumina, Brazil Alumina and Australia Manganese while beating our initial market
guidance at South Africa Manganese, Cerro Matoso and Cannington. While remaining subject to further potential impacts from
COVID-19, FY22 guidance is unchanged with the exception of non-operated Brazil Alumina and our underground base metals operation
Cannington. Separately, volumes at Mozal Aluminium and Cerro Matoso are expected to lift from FY21 following our investment in high
returning improvement projects to increase production into currently favourable markets for aluminium and nickel.
4
5
Production guidance (South32’s share)(1)
FY21
FY22e(2)
FY23e(2)
Key guidance assumptions
Worsley Alumina
Alumina production (kt)
Brazil Alumina (non-operated)
Alumina production (kt)
Hillside Aluminium
Aluminium production (kt)
Mozal Aluminium
Aluminium production (kt)
3,963
3,965
4,000 The refinery is expected to maintain nameplate capacity in FY22 and
target creep into FY23.
1,398
↓1,300
1,395 Repair work on one of the two bauxite ship unloaders which was
damaged subsequent to the end of the period is expected to impact
production in H1 FY22.
Production volumes are expected to recover in FY23, increasing by
seven per cent as the refinery returns to normalised rates.
717
720
720 Smelter to continue to test its maximum technical capacity.
Guidance remains subject to load-shedding.
265
273
273 Expected to realise the benefits of the AP3XLE energy efficiency
project in FY22 with production expected to increase three per cent.
Guidance remains subject to load-shedding.
Illawarra Metallurgical Coal
Total coal production (kt)
Metallurgical coal production (kt)
Energy coal production (kt)
7,645
6,170
1,475
7,300
6,300
1,000
7,500 Total saleable coal production is expected to decline by five per cent
6,600
900
to 7.3Mt in FY22 with fewer planned sales of low-margin coal wash
material. Metallurgical coal volumes are expected to increase by two
per cent to 6.3Mt, despite an additional longwall move (three in total)
being scheduled.
The operation is expected to produce 7.5Mt in FY23 with metallurgical
coal volumes increasing by a further five per cent to 6.6Mt.
Australia Manganese
Manganese ore production (kwmt)
3,529
3,500
3,400 Our low cost PC02 circuit is expected to continue to operate above
nameplate capacity, supporting secondary product volumes and
production levels commensurate with FY21’s record rate.
South32 Annual Report 2021Operating and Financial Review
Production guidance (South32’s share)(1) continued
FY21
FY22e(2)
FY23e(2)
Key guidance assumptions
South Africa Manganese
Manganese ore production (kwmt)
2,264
2,200 Subject to
demand
Planned production volumes are predicated on market conditions
remaining attractive for the sale of lower quality fines product and our
use of higher cost trucking.
FY23 guidance subject to market demand.
Cerro Matoso
Ore to kiln (kt)
Payable nickel production (kt)
2,385
34.1
2,850
43.8
2,850 Production is expected to increase by 28 per cent in FY22 and remain
43.5
steady in FY23 as the operation benefits from the refurbishment of
one of its furnaces and receives its first full year of ore from the higher
grade Q&P project.
Cannington
Ore processed (kdmt)
Payable zinc equivalent production
(kt)(3)
Payable silver production (koz)
Payable lead production (kt)
Payable zinc production (kt)
2,746
319.0
↑2,750
↑278.3
2,850 Production is expected to benefit from the operation’s planned
313.9
transition to 100 per cent truck haulage in Q4 FY22 and the
continuation of underground mine efficiencies that supported
production growth in FY21.
13,655 ↑11,647
↑112.6
↑63.9
131.8
67.7
13,500
122.0
72.0
(1) South32’s ownership share of operations is as per footnote (3) on page 40.
(2) The denotation (e) refers to an estimate or forecast year.
(3) Payable zinc equivalent (kt) was calculated by aggregating revenues from payable silver, lead and zinc, and dividing the total Revenue by the price of zinc. FY21 realised prices
for zinc (US$2,357/t), lead (US$1,862/t) and silver (US$25.4/oz) have been used for FY21, FY22e and FY23e.
Costs and capital expenditure
We continue to pursue cost and volume efficiencies across our business to offset the impact of stronger producer currencies and
cyclical inflation in labour, price-linked royalties and raw materials. While these factors are expected to have an effect on unit costs,
steepening industry cost curves, our business is well placed to realise volume improvements and pursue productivity benefits to
partially offset their impact, and capture additional margins from improved market conditions. Although Operating unit cost guidance is
not provided for our aluminium smelters, their cost profile will continue to be influenced by the South African rand and the price of raw
material inputs.
Operating unit cost performance and guidance(1)(2)
FY20
FY21
FY22e(3)(4)
Commentary
5
5
Worsley Alumina
(US$/t)
210
214
241
Brazil Alumina
(non-operated)
(US$/t)
244
203
Not
provided
Hillside Aluminium
(US$/t)
1,531
1,631
Not
provided
Mozal Aluminium
(US$/t)
1,785
1,702
Not
provided
Illawarra Metallurgical
Coal
(US$/t)
93
87
101
FY20 versus FY21: Record volumes, lower caustic soda prices and reduced
spend on contractors more than offset by a stronger Australian dollar and higher
caustic usage rates.
FY22 key guidance assumptions: Higher caustic soda prices, price-linked
freight and a planned transition to a higher cost mining area.
FY20 versus FY21: Record volumes, lower bauxite costs (usage and prices), and
the recognition of one-off historical tax credits (-US$12/t) during the period.
FY22 key guidance assumptions: Not provided but expected to be impacted by
lower sales volumes, higher bauxite costs and prior year’s one-off tax credit.
Incremental costs are also expected due to the bauxite ship unloader failure
subsequent to the end of the period.
FY20 versus FY21: Higher power charges and a stronger South African rand,
partially offset by lower raw material input costs.
FY22 key guidance assumptions: Not provided but we expect the cost profile to
continue to be influenced by the South African rand, price of raw material inputs
and a planned increase in pot relining.
FY20 versus FY21: Stronger South African rand, more than offset by lower raw
material input costs.
FY22 key guidance assumptions: Not provided but we expect the cost profile to
continue to be influenced by the South African rand and the price of raw material
inputs.
FY20 versus FY21: Higher volumes from the return to a three longwall
configuration and our monetisation of low-margin coal wash material.
FY22 key guidance assumptions: Fewer planned sales of low-margin coal wash
material, higher price-linked royalties, incremental maintenance activity and
longwall moves.
South32 Annual Report 2021Operating and Financial Review
Financial and operational performance summary continued
Operating unit cost performance and guidance(1)(2) continued
FY20
FY21
FY22e(3)(4)
Commentary
Australia Manganese
ore (FOB)
(US$/dmtu)
1.55
1.52
1.68
South Africa
Manganese ore (FOB)
(US$/dmtu)
2.25
2.48
2.57
Cerro Matoso
(US$/t)(5)
(US$/lb)
Cannington
(US$/t)(6)
120
3.69
124
4.01
141
4.12
113
124
121
FY20 versus FY21: Record volumes from improved equipment productivity and
lower planned maintenance.
FY22 key guidance assumptions: Stronger Australian dollar, an expected
decline in product yield and a planned increase in strip ratio.
FY20 versus FY21: Additional costs from the use of higher cost, opportunistic
trucking, to maximise margins.
FY22 key guidance assumptions: Stronger South African rand and increased
trucking costs partially offset by labour efficiencies.
FY20 versus FY21: Lower volumes (-16 per cent) as we completed a major
furnace refurbishment in the year.
FY22 key guidance assumptions: Increased sales volumes more than offset by
higher price-linked royalties and electricity prices.
FY20 versus FY21: Lower mill throughput, following the prior year’s drawdown of
inventory and a stronger Australian dollar, partially offset by efficiencies in our
consumables usage and energy spend.
FY22 key guidance assumptions: Higher throughput, production efficiencies
and the impact of inventory movements more than offset a stronger Australian
dollar.
(1) South32’s ownership share of operations is as per footnote (3) on page 40.
(2) Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes. Operating cost is Revenue less Underlying EBITDA excluding third
party sales.
(3) FY22 Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY22, including: an
alumina price of US$289/t; an average blended coal price of US$140/t for Illawarra Metallurgical Coal; a manganese ore price of US$4.79/dmtu for 44 per cent manganese
product; a nickel price of US$7.93/lb; a silver price of US$25.84/troy oz; a lead price of US$2,165/t (gross of treatment and refining charges); a zinc price of US$2,846/t (gross of
treatment and refining charges); an AUD:USD exchange rate of 0.75; a USD:ZAR exchange rate of 15.00; a USD:COP exchange rate of 3,650; and a reference price for caustic
soda; all of which reflected forward markets as at June 2021 or our internal expectations.
(4) The denotation (e) refers to an estimate or forecast year.
(5) US dollar per tonne of ore to kiln. Periodic movements in finished product inventory may impact Operating unit costs.
(6) US dollar per tonne of ore processed. Periodic movements in finished product inventory may impact Operating unit costs.
6
5
Capital expenditure
Our investment in Safe and reliable capital expenditure, excluding equity accounted investments, is expected to increase by
US$62 million to US$410 million in FY22 as we upgrade coal clearance and ventilation infrastructure at Illawarra Metallurgical Coal’s
Appin mine and establish additional bauxite residue disposal capacity at Brazil Alumina.
Improvement and life extension capital expenditure, excluding equity accounted investments, is expected to decrease by US$46 million
to US$70 million in FY22 reflecting a reduction in spend attributable to South Africa Energy Coal (US$53 million) following its divestment.
While we expect to maintain some activity at our DND project in FY22, this is expected to be lower than our rate of spend in FY21.
Partially offsetting these reductions, we expect to increase our investment in decarbonisation projects, processing improvements and
new mining area access at Worsley Alumina and projects at Cerro Matoso to further lift volumes beyond FY23.
Growth capital expenditure of US$45 million is expected at our Hermosa project in H1 FY22 as we progress the Taylor pre-feasibility
study. Guidance excludes our expectation for investment in orebody dewatering and other critical path activities for the potential
development of the Taylor Deposit in FY22 that remain subject to internal approvals.
Capital expenditure at our Manganese operations is expected to increase by US$24 million to US$95 million in FY22 as we invest in mine
life extension projects at GEMCO’s Eastern Leases and rail infrastructure upgrades in South Africa.
South32 Annual Report 2021Operating and Financial Review
Capital expenditure guidance (South32’s share)(1)(2)
US$M
FY20
FY21
FY22e(3)
Worsley Alumina
Brazil Alumina
Hillside Aluminium
Mozal Aluminium
South Africa Energy Coal
Illawarra Metallurgical Coal
Cerro Matoso
Cannington
Safe and reliable capital expenditure (excluding equity accounted investments)
Worsley Alumina
South Africa Energy Coal
Illawarra Metallurgical Coal – Dendrobium Next Domain
Cerro Matoso
Other operations
Improvement and life extension capital expenditure (excluding equity accounted
investments)
Hermosa
Eagle Downs
Growth capital expenditure
Total capital expenditure (excluding equity accounted investments)
Total capital expenditure (including equity accounted investments)
Equity accounted investments capital expenditure guidance (South32’s share)(1)(2)
44
33
12
11
42
181
30
52
405
4
122
18
9
3
156
104
11
115
676
766
51
25
17
10
23
151
30
41
348
4
53
37
15
7
116
64
8
72
536
607
43
54
22
10
-
215
23
43
410
18
-
15
20
17
70
45(4)
-
45
525
620
US$M
FY20
FY21
FY22e(3)
Australia Manganese
South Africa Manganese
Safe and reliable capital expenditure (equity accounted investments)
Australia Manganese
South Africa Manganese
Improvement and life extension capital expenditure (equity accounted investments)
Total capital expenditure (equity accounted investments)
64
22
86
3
1
4
90
53
16
69
2
-
2
71
47
18
65
10
20
30
95
5
7
(1) South32’s ownership share of operations is as per footnote (3) on page 40.
(2) Total capital expenditure comprises Capital expenditure and evaluation expenditure. Capital expenditure comprises Safe and reliable capital expenditure (Deferred stripping,
Regulatory compliance, Risk reduction, and Sustained performance), Improvement (Decarbonisation) and Life extension capital expenditure, and Growth (development of our
current and future greenfields growth) capital expenditure.
(3) The denotation (e) refers to an estimate or forecast year.
(4) Guidance for Hermosa Growth capital expenditure reflects H1 FY22.
Other expenditure guidance
Group and unallocated costs, excluding greenfield exploration, are expected to reduce by US$13 million to US$100 million in FY22
following the recognition of one-off charges in H2 FY21. We remain on-track to deliver US$50 million in annualised savings from FY22
(compared to FY20), as we further simplify the Group’s functional structures and footprint.
Underlying net finance costs (excluding equity accounted investments) are expected to decrease by US$42 million to approximately
US$110 million in FY22 following our divestment of South Africa Energy Coal and resultant reduction in the Group’s closure and
rehabilitation provisions.
We have a prospective portfolio of greenfield exploration partnerships targeting base metals in Australia, the Americas and Europe.
FY22 guidance for greenfield exploration expenditure to progress these early stage projects is US$26 million (FY21: US$18 million).
In addition, we expect to capitalise US$44 million of exploration expenditure in FY22 (FY21: US$30 million), including US$25 million at our
Hermosa project (FY21: US$16 million).
Depreciation and amortisation, and tax expense
Depreciation and amortisation (excluding equity accounted investments) is expected to reduce by US$90 million to approximately
US$630 million in FY22 following our divestment of South Africa Energy Coal and the recognition of an impairment to our Illawarra
Metallurgical Coal operation. Depreciation and amortisation for our manganese equity accounted investments is expected to increase
by US$15 million to US$113 million in FY22.
The Group’s Underlying ETR, while a significant reduction from the prior year, remained elevated during FY21 due to the de-recognition
of tax assets associated with losses at South Africa Energy Coal prior to its divestment. From FY22 we expect the rate to more closely
reflect the corporate tax rates of the geographies where the Group operates.
South32 Annual Report 2021Operating and Financial Review Board of Directors
e
c
n
a
n
r
e
v
o
G
Ms Karen Wood BEd, LLB (Hons), 65
Chair and Independent Non-Executive Director
Appointed 1 November 2017
(Chair from 12 April 2019)
Chair of the Nomination and Governance Committee
Location: Australia
Mr Graham Kerr BBus, FCPA, 50
Chief Executive Officer since October 2014
Managing Director, appointed 21 January 2015
Location: Australia
Mr Kerr has been our Chief Executive Officer since October 2014 and
is responsible for running all parts of our business. He led South32
through the Demerger from BHP in 2015 and its public listing in three
countries and has overseen the development and implementation of
our strategy.
Mr Kerr is passionate about health, safety and sustainability, with a
strong track record in global resource development. He joined BHP
in 1994 and was appointed Chief Financial Officer in November 2011.
Previously, Mr Kerr was President of Diamonds and Specialty Products
and worked in a wide range of operational and commercial roles across
BHP.
As President of Diamonds and Specialty Products, Mr Kerr was
accountable for the Ekati Diamond Mine in Canada, the Richards Bay
Minerals Joint Venture in South Africa, diamonds exploration in Angola,
the Corridor Sands Project in Mozambique and the development
of BHP’s potash portfolio in Canada. Prior to that, Mr Kerr held the
positions of Chief Financial Officer Stainless Steel Materials, Vice
President Finance Diamonds and Finance Director for the Canadian
Diamonds Company, all for BHP. In 2004, Mr Kerr left BHP for a two-year
period when he was General Manager Commercial for Iluka Resources
Ltd.
Mr Kerr holds a Business degree from Edith Cowan University
and studied at Deakin University to become a Certified Practicing
Accountant.
Other Directorships and Offices:
– Chair, CEOs for Gender Equity.
During her career, Ms Wood has attained executive and leadership
skills which she brings to her role as Chair of South32. She has
comprehensive experience in public policy, social performance,
community, people, remuneration and regulatory and legal compliance.
She has held various senior global leadership roles with BHP, including
Group Company Secretary, Chief People Officer and President
Corporate Affairs. She was a member of BHP’s leadership team and
served as Chair of The Global Ethics Advisory Panel, the Disclosure
Committee and as Chief Governance Officer.
8
5
Ms Wood gained extensive expertise as a key adviser to BHP’s
Board and CEO on matters of governance, composition of leadership
teams, development and succession planning, organisational design
and culture, remuneration structures and stakeholder relations.
Following the merger between BHP Limited and Billiton plc in 2001,
she established the multi-jurisdictional governance framework for the
merged entity. Ms Wood joined BHP as Group Company Secretary in
2001 and retired in 2014.
Before joining BHP, Ms Wood held the role of General Counsel and
Company Secretary with Bonlac Foods Limited.
Ms Wood’s governance experience is broadened by her membership
of the Takeovers Panel (Australia) from 2000 to 2012 and her roles
with the Australian Securities and Investment Commission (Business
Consultative Panel) and the Australian Federal Government's Business
Regulatory Advisory Group.
Following her retirement from BHP, Ms Wood chaired the BHP
Foundation, where she oversaw grant provisions for not-for-profit
organisations to deliver large, long-term global programs in the areas
of natural resource governance, human capability and social inclusion,
and conserving and sustainably managing natural environments.
She is currently a Non-Executive Director of Djerriwarrh Investments
Limited (and member of the Audit Committee and the Investment
Committee), a member of Chief Executive Women, member of the 30%
Club Australia and a Fellow of Monash University.
Current ASX listed directorships:
– Djerriwarrh Investments Limited: Independent Non-Executive
Director since July 2016.
Other Directorships and Offices:
– Board Member and Member of the Audit & Risk Management and
Appointments and Remuneration Committees, State Library
of Victoria;
– Council Member, State Library of Victoria Foundation Council;
– Director, Robert Salzer Foundation; and
– Member, Business Council of Australia (Chairman’s Group).
South32 Annual Report 2021 Mr Frank Cooper AO BCom, FCA, FAICD, 65
Independent Non-Executive Director
Appointed 7 May 2015
Chair of the Risk and Audit Committee
Location: Australia
Mr Guy Lansdown BSc (Engineering (Civil)),
MSc (Engineering (Project Management)), 60
Independent Non-Executive Director
Appointed 2 December 2019
Location: Mexico
Mr Cooper’s combined experience gives him a good understanding
of the challenges of operating in different cultural and political
environments. He brings this to South32, alongside a strong focus on
organisational philosophy, values and standards.
Mr Lansdown complements the South32 Board with his extensive
experience in early and late stage greenfield and brownfield project
development and delivery, together with his strong technical
background and strategic leadership abilities.
Mr Cooper is a chartered accountant with over 40 years of experience
in the finance and accounting profession. His prior appointments
include Partner at Ernst & Young, Partner at PricewaterhouseCoopers,
and Managing Partner for Arthur Andersen in Perth, during which time
he specialised in the mining, energy and utility sectors.
Mr Lansdown is a civil engineer with almost 40 years’ experience
in project development and mining, including as an executive at
Newmont Mining Corporation where he was most recently Executive
Vice President Discovery and Development. In that role he led
Newmont’s exploration and major project development.
Mr Cooper is currently a Non-Executive Director of Woodside
Petroleum Limited (including Chair of the Audit & Risk Committee and
member of the Human Resources & Compensation Committee and
Nominations & Governance Committee). Until 2006, he was a Director
of Alinta Infrastructure Limited and Alinta Funds Management Limited.
Mr Cooper was awarded an Officer of the Order of Australia in 2014 and
was named West Australian of the Year in the Professions category in
2015.
Mr Cooper is also a Fellow of the Australian Institute of Company
Directors and Chartered Accountants Australia and New Zealand.
Current ASX listed directorships:
– Woodside Petroleum Limited: Independent Non-Executive
Director since February 2013.
Other Directorships and Offices:
– Commissioner and Chairman, Insurance Commission of Western
Australia;
– Member, WA Council of the Australian Institute of Company
Directors (from February 2016 to 23 June 2021);
– Pro Chancellor, University of Western Australia;
– Trustee, St John of God Health Care; and
– Director, St John of God Australia Limited.
During his 20-year career with Newmont Mining Corporation,
Mr Lansdown held many senior positions, including Senior Vice
President of Project Development and Technical Services USA,
Vice President of Project Development USA, Executive Manager
Boddington Australia, Operations Manager Minera Yanacocha Peru and
Engineering and Development Director Australia.
5
9
Prior to joining Newmont, Mr Lansdown held various roles contributing
to his global business experience, including Associate and Projects
Manager at Knight Piesold in the USA and a Director of Projects at
Group Five in South Africa. He has worked in North and South America,
Asia, Australia and Africa.
Mr Lansdown is currently President and Director of his US consulting
company Project Excellence Inc., which offers a range of services
including strategic planning, project development, organisational
design and independent project reviews.
He is also President and Director of two charities, Un Futuro Mejor
Inc. and Fundación Lansdown A.C., which provide opportunities for
disadvantaged youth in Mexico to reach their full potential.
Other Directorships and Offices:
– President and Director, Project Excellence Inc.;
– President and Director, Un Futuro Mejor Inc.; and
– President and Director, Fundación Lansdown A.C.
South32 Annual Report 2021Governance Board of Directors continued
Dr Xiaoling Liu
BEng (Extractive Metallurgy), PhD (Extractive Metallurgy),
FAusIMM, FTSE, GAICD, 64
Independent Non-Executive Director
Appointed 1 November 2017
Dr Ntombifuthi (Futhi) Mtoba
CA(SA), DCom (Honoris Causa), BCompt (Hons), HDip Banking Law,
BA (Econ)(Hons), BA (Arts), 66
Independent Non-Executive Director
Appointed 7 May 2015
Location: Australia
Location: South Africa
Dr Liu is a metallurgical engineer with a 26-year career at the Rio Tinto
Group. Dr Liu’s strong operational, technical, strategic, marketing and
risk management skills are an important contribution to the South32
Board.
Dr Mtoba is a chartered accountant with an extensive career in
business and community engagement in South Africa. In addition, she
brings valuable sustainability and environmental experience to the
South32 Board.
0
6
Dr Liu’s roles at Rio Tinto included General Manager and Managing
Director positions in smelting operational management. She held other
senior positions, including Managing Director Technical Services where
she led Rio Tinto’s global technical services unit, and President and
Chief Executive Officer of Rio Tinto Minerals where she ran integrated
mining, processing, and supply chain operations in the United States,
Europe and Asia.
Since her retirement from Rio Tinto in 2014, Dr Liu held the position
of Non-Executive Director of Iluka Resources Limited until April 2019
and Non-Executive Director of Newcrest Mining Limited (including as a
member of the Human Resources & Remuneration Committee, Audit
& Risk Committee and Nominations Committee) until November 2020.
Dr Liu is currently a Non-Executive Director of Incitec Pivot Limited
(including as a member of the Audit & Risk Committee and Chair of the
HSEC Committee). These roles have contributed to Dr Liu’s skills and
experience in remuneration, acquisitions and divestments.
Dr Liu has been the Chancellor, Queensland University of Technology
since January 2020. She held the office of Director, Melbourne Business
School until October 2019. She has also served as a board member of
the California Chamber of Commerce and Vice President of the Board
of the Australian Aluminium Council.
Dr Liu is a Fellow of the Australian Academy of Technological Science
and Engineering, a Fellow of the Australasian Institute of Mining and
Metallurgy and a member of Chief Executive Women.
Current ASX listed directorships:
– Incitec Pivot Limited: Independent Non-Executive Director since
November 2019.
Previous ASX listed directorships:
– Newcrest Mining Limited: Independent Non-Executive Director
from September 2015 to November 2020; and
– Iluka Resources Limited: Independent Non-Executive Director
from February 2016 to April 2019
Other Directorships and Offices:
– Chancellor, Queensland University of Technology.
Dr Mtoba joined Deloitte and Touche South Africa in 1988, specialising
in financial services. She became one of the first African Black women
to be appointed as a Partner by one of the Big Four accounting firms
and was later appointed the first African woman Deputy Chairman and
then Chairman of Deloitte Southern Africa.
Dr Mtoba has been a member of the International Monetary Fund
Advisory Group of Sub-Saharan Africa, the World Economic Forum
Global Advisory Council, the B20 Financing Growth and Infrastructure
Task Force and the B20 Transparency Task Team. She was also the
first woman president of the Association for the Advancement of Black
Accountants of Southern Africa.
Additionally, she has served as Chair of Council of the University of
Pretoria, President of Business Unity South Africa, and board member
of the Public Accountants and Auditors Board, the South African
Institute of Chartered Accountants, the New Partnership for Africa’s
Development Business Foundation and African Union Foundation.
Dr Mtoba is engaged in the regional and global community. In 2019,
Dr Mtoba was appointed as a Director of the International Women’s
Forum (South Africa). She is a former board member of the United
Nations Global Compact.
In October 2020, Dr Mtoba was appointed as a Non-Executive Director
of the Public Investment Corporation Limited (having previously served
as a Board member and Investment Committee Chair). In February
2021, she was appointed Deputy Chairperson and is Chair of the Audit
Committee of Public Investment Corporation Limited.
For her contributions, Dr Mtoba has received numerous awards,
including Most Outstanding Leadership Women of the Year (Africa
Economy Builders, 2018). She is also a Harvard Advanced Leadership
Initiative Fellow (2017).
Other Directorships and Offices:
– Lead Independent Director and Audit Committee Chair, Discovery
Bank Limited;
– Director, Discovery Bank Holdings Limited;
– Founding Trustee, ZMDT;
– Trustee and Audit Committee Chair, Nelson Mandela Foundation;
– Trustee and Audit Committee Chair, National Education
Collaboration Trust (NECT); and
– Independent Non-Executive Director and Deputy Chairperson,
Public Investment Corporation Limited.
South32 Annual Report 2021Governance Mr Wayne Osborn Dip Elect Eng, MBA, FAICD, FTSE, 69
Independent Non-Executive Director
Appointed 7 May 2015
Chair of the Remuneration Committee
Location: Australia
Mr Keith Rumble BSc, MSc (Geology), 67
Independent Non-Executive Director
Appointed 27 February 2015
Chair of the Sustainability Committee
Location: South Africa
Mr Osborn brings over 40 years of experience from the mining,
resources and manufacturing sectors to the South32 Board.
Mr Osborn was Managing Director of Alcoa in Australia from 2001 until
2008, leading an integrated business comprised of bauxite mining,
alumina refining, coal mining, power generation and aluminium
smelting. This included operations in Victoria and Western Australia.
His prior role at Alcoa included accountability for its Asia-Pacific
manufacturing operations in China, Japan, Korea and Australia. He
joined Alcoa in 1979 after working as an engineer in the iron ore and
telecommunications sector.
Since 2008, Mr Osborn has worked as a Non-Executive Director in the
mining, construction and energy industries. He was also Chairman of
the Australian Institute of Marine Science, Chairman of the Western
Australia Branch of the Australia Business Arts Foundation and
Vice President of the Chamber of Commerce and Industry, Western
Australia.
Mr Osborn is currently a Non-Executive Director of Wesfarmers Limited
(including membership of the Remuneration Committee and the
Nomination Committee).
He has been awarded a WA Business Leader Award in 2007 for his
work with the Australian Business Arts Foundation and an Australian
Institute of Company Directors Award for Excellence in 2018.
Mr Osborn is a Fellow of the Australian Academy of Technological
Sciences and Engineering and International Fellow of the Explorers
Club (New York).
Current ASX listed directorships:
– Wesfarmers Limited: Independent Non-Executive Director since
March 2010.
Mr Rumble has more than 40 years of experience in the resources
industry, specifically in titanium and platinum mining. He also has
experience managing a portfolio of private equity assets in the
resource sector in Russia, India and other emerging markets. This
combination of skills and knowledge are a valuable contribution to the
South32 Board.
Mr Rumble has held various leadership roles including CEO of SUN
Mining (a wholly-owned entity of the SUN Group), CEO of Impala
Platinum (Pty) Ltd and President and CEO of Rio Tinto Iron and Titanium
Inc in Canada. He also worked for Verref, a division of the Anglo
American Corporation, prior to joining Richards Bay Minerals in 1980,
working in smelting and metallurgy, progressing to General Manager
and later CEO in 1996.
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1
Mr Rumble has been a Non-Executive Director of a variety of private
companies, including Platinum Mining Corporation of India PLC,
Barplats Holdings Limited, Western Platinum (Pty) Limited, Eastern
Platinum (Pty) Limited and Sarplat Investments Limited. He was also an
independent Non-Executive Director at BHP Billiton plc, BHP Limited
and at JSE listed Aveng Limited.
In November 2019, Mr Rumble retired as a Member of Board of
Governors, Rhodes University and was appointed an Honorary Life
Governor (Rhodes University).
Mr Rumble completed the Stanford (US) Executive Program in 1990.
Other Directorships and Offices:
– Director, Acetologix Pty Limited;
– Director, Enzyme Technologies (Pty) Limited;
– Director, Elite Wealth (Pty) Limited; and
– Trustee, World Wildlife Fund, South Africa.
South32 Annual Report 2021Governance Directors’ report
This report is presented by our Directors,
together with the Group’s Financial report,
for the financial year ended 30 June 2021.
The report is prepared in accordance with
the requirements of the Corporations Act,
with the following information forming part
of the report:
– Operating and financial review on the
inside front cover to page 57;
– Director biographical information on
pages 58 to 61 and Company Secretary
biographical information on page 64;
– Remuneration report on pages 68 to 93;
– Note 19 (a) Financial risk management
objectives and policies on pages 126 to
129;
– Note 20 Share capital on page 134;
– Note 21 Auditor’s remuneration on page
135;
– Note 23 Employee share ownership
plans on pages 136 to 139;
– Directors’ declaration on page 147;
– Auditor’s independence declaration on
page 148;
– Resources and Reserves on pages 153
to 160;
– Shareholder information on pages 161
to 163; and
– Corporate directory (inside back cover).
2
6
Directors and meetings
At the date of this report, the Directors in
office were:
Karen Wood
Appointed 1 November 2017
Graham Kerr
Appointed 21 January 2015
Frank Cooper AO
Appointed 7 May 2015
Guy Lansdown
Appointed 2 December 2019
Dr Xiaoling Liu
Appointed 1 November 2017
Dr Ntombifuthi (Futhi) Mtoba
Appointed 7 May 2015
Wayne Osborn
Appointed 7 May 2015
Keith Rumble
Appointed 27 February 2015
Board and Committee meetings
and Director attendance
There are nine regularly scheduled
meetings of the Board each year. Six of
these are usually held face-to-face over
three days and are held in one of our main
geographic areas of operation to allow
Directors to conduct site visits. Committee
meetings are also held during this time.
A further three meetings are convened
each year to consider annual disclosures,
including half and full year results, and are
usually held virtually. Additional meetings
are convened as required to address
business critical issues.
During FY21 there were a total of 19
Board meetings. The additional meetings
were held to receive regular updates on
management’s response to COVID-19,
oversee the divestment of the South
Africa Energy Coal (SAEC) business and
consider other business critical issues and
continuous disclosure obligations. Two
strategy sessions were held, in January and
June 2021.
Our continued response to the COVID-19
pandemic, and related travel disruptions,
has seen our virtual format continue for
all Board and Committee meetings. This
practice will likely continue until such
time that travel and social distancing
restrictions are eased. Our Board has also
used a hybrid approach (ie. physical and
virtual format) to bring some Directors
together for meetings in jurisdictions
where it has been possible to do so.
Although our Board was unable to conduct
any site visits during FY21, it continued
to stay connected with our operations by
way of operational overviews and briefing
sessions conducted as part of the Board
programs.
To help it carry out its responsibilities, our
Board has established four standing Board
Committees. From time to time, the Board
creates other committees to address
important matters and areas of focus for
the business. For example, a committee
was established to oversee the divestment
of the SAEC business.
All Non-Executive Directors have a
standing invitation to attend all Committee
meetings, with the consent of the relevant
Committee Chair. In practice, all Directors
generally attend all meetings.
You can find information about our
Directors’ qualifications, experience, special
responsibilities and other directorships on
pages 58 to 61.
You will find the number of Board and
Committee meetings held in FY21, as well
as the Directors who attended them, in
Table 1.1.
Our Chair sets the agenda for each Board
meeting, with the CEO and the Company
Secretary. The meetings typically include:
– Minutes of the previous meeting and
matters arising;
– Report from our Chair;
– Update on various governance matters;
– CEO’s report;
– Finance report;
– Commercial report;
– Reports on major projects and strategic
matters;
– Board Committee Chair reports;
– Continuous disclosure checkpoint; and
– Closed sessions with Directors and
closed sessions with Non-Executive
Directors only.
In between meetings, our Board receives
regular reports from senior management
on matters, including (but not limited to):
– Sustainability (including health and
safety) performance;
– Financial and production performance;
and
– Government relations and political
affairs.
Further, our Board receives updates on
emerging issues such as climate change,
cultural heritage, community matters,
business integrity and litigation. It also
receives regular reports for discussion
on operational, culture and leadership,
corporate governance and other business
matters, including market updates, market
research and investor relations activities.
As part of their ongoing education
and training, during FY21 our Board
received external briefings on various
matters including climate change, human
rights, Indigenous and Tribal Peoples’
engagement including cultural heritage
and cultural awareness, remuneration
matters and evolving ESG matters.
South32 Annual Report 2021Governance Table 1.1 Board and Committee Meeting Attendance in FY21
Director
K Wood
G Kerr (CEO)
F Cooper
X Liu
G Lansdown
N Mtoba
W Osborn
K Rumble
Board
Nomination and
Governance Committee
Remuneration
Committee
Risk and Audit
Committee
Sustainability
Committee
Eligible(1)
Attended(2)
Eligible(1)
Attended(2)
Eligible(1)
Attended(2)
Eligible(1)
Attended(2)
Eligible(1)
Attended(2)
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
3
-
3
3
3
3
3
3
3
3
3
3
3
3
3
3
7
-
7
-
-
-
7
7
7
7
7
7
7
7
7
7
-
-
14
14
14
14
-
-
14
14
14
14
14
14
14
14
7
-
-
7
7
-
7
7
7
7
7
7
7
-
7
7
Member
Chair
(1) Indicates the number of meetings held during FY21 while the Director was a member of the Board or Committee.
(2) Indicates the number of meetings the Director attended during FY21.
Principal activities, state of affairs
and review of operations
Principal activities
In FY21, the principal activities of the
Group were mining and metal production,
from a portfolio of assets that included
alumina, aluminium, bauxite, energy
coal, metallurgical coal, manganese ore,
manganese alloy, nickel, silver, lead and
zinc.
On 4 January 2021, Groote Eylandt Mining
Company Pty Ltd legally completed the
sale of its shareholding in Tasmanian
Electro Metallurgical Company Pty Ltd
(TEMCO) to an entity within GFG Alliance.
On 1 June 2021, the Group also completed
the sale of its shareholding in SAEC to
Seriti Resources Holdings Pty Ltd and two
trusts for the benefit of employees and
communities.
There were no other significant changes in
the Group’s principal activities during the
year.
State of affairs
There were no significant changes in the
Group’s state of affairs during the year,
other than the divestment of the Group’s
interests in TEMCO and SAEC, and as set
out in the Operating and financial review
and Shareholder information on the inside
front cover to page 57, and 161 to 163
respectively.
Review of operations
We’ve set out a review of the Group’s FY21
operations in the Operating and financial
review on the inside front cover to page
57. It includes likely developments in the
Group’s operations in future financial years
and expected results.
Dividends
We paid the following dividends during
FY21:
Remuneration and share interests
Table 1.2 Directors’ Relevant Interests in
South32 Limited Shares
Total
dividend
Payment
date
US$48
million
8 October
2020
US$67
million
8 April
2021
Dividend
Final dividend of US
1 cent per share (fully
franked) for the year
ended 30 June 2020
Interim dividend of US
1.4 cents per share
(fully franked) for the
half year ended
31 December 2020
Matters since the end of the
financial year
On 19 August 2021, the Directors resolved
to pay a fully franked final dividend of US
3.5 cents per share (US$164 million) and
a fully franked special dividend of US 2.0
cents per share (US$93 million) in respect
of the 2021 financial year. The dividends
will be paid on 7 October 2021. The
dividends have not been provided for in the
consolidated financial statements and will
be recognised in the 2022 financial year.
On 19 August 2021, the Group also
announced an increase to the existing
capital management program, announced
on 27 March 2017, of US$120 million to a
total of US$2.0 billion. This leaves US$252
million expected to be returned by
2 September 2022.
No other matters or circumstances have
arisen since the end of the financial year
that have significantly affected, or may
significantly affect, the operations, results
of operations or state of affairs of the
Group in subsequent accounting periods.
Director
K Wood
G Kerr (CEO)(1)
F Cooper
G Lansdown
X Liu
N Mtoba
W Osborn
K Rumble
Number of shares in which a
relevant interest is held as at
the date of this Directors’
report
367,825
9,928,233
128,010
80,000
60,000
69,386
174,104
161,380
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3
(1) At the date of this Directors’ report, Mr Kerr’s total
interest includes 3,804,621 South32 Limited ordinary
shares and 6,123,612 rights over South32 Limited
ordinary shares held under the South32 Equity
Incentive Plan.
Rights and options over South32
Limited shares
No rights or options over South32 Limited
ordinary shares are held by any of our Non-
Executive Directors.
Our Chief Executive Officer and Managing
Director, Graham Kerr, holds rights over
South32 Limited ordinary shares, granted
under the South32 Equity Incentive Plan.
You can find more details about this in the
Remuneration report on page 83. Graham
Kerr does not hold any options over
South32 Limited shares.
The total number of rights over South32
Limited ordinary shares on issue as at
30 June 2021 is set out in note 23 Employee
share ownership plans to the financial
statements on pages 136 to 139.
There were no options on issue as at
30 June 2021.
No options or rights have been granted
since the end of FY21.
South32 Annual Report 2021Governance
Directors’ report continued
As of the date of this report, the total
number of rights over South32 Limited
ordinary shares on issue is 48,656,835.
The Remuneration report contains details
of rights on issue. No shares have been
issued on vesting of rights during or since
the end of FY21.
Company Secretaries
Kelly O’Rourke LLB, BCom, MAICD
Kelly O’Rourke was appointed to the role of
Chief External Affairs Officer in November
2020. Kelly’s role was subsequently
expanded to Chief Legal and External
Affairs Officer with effect from 1 July 2021
and she was also appointed Joint Company
Secretary on this date. You can find out
more about Kelly on page 67.
Claire Tolcon LLB, BComm, GCertCorpMgt,
FGIA
Claire Tolcon is our Manager Company
Secretariat & Corporate Counsel. She was
appointed Joint Company Secretary on
30 October 2020. Before joining South32 in
2017, Claire held the role of General Counsel
and Company Secretary for a number of
ASX listed entities, prior to which she was
a partner of a corporate law firm in Perth.
She holds a Bachelor of Laws and Bachelor
of Commerce from Murdoch University and
a Graduate Diploma of Applied Finance and
Investment from Kaplan.
Nicole Duncan BA (Hons), LLB, MAICD,
FGIA, FCG
Nicole Duncan was the Chief Legal Officer
of South32 Limited during FY20 and was
appointed as Company Secretary on
21 January 2015. Nicole left the business
in July 2021 and resigned as Company
Secretary with effect from 1 July 2021.
Indemnities and insurance
We support and hold harmless Directors
and employees, including employees
appointed as Directors of a Group
company, who incur personal liability to
others as a result of working for us (while
acting in good faith), to the extent we are
able under law.
Rule 10.2 of the South32 Constitution
requires that we indemnify each Director
and each Company Secretary on a
full indemnity basis and to the extent
permitted by law against liability incurred
by them in their capacity as an officer of
any member of the Group. The Directors
and the Company Secretaries named
in this report have the benefit of this
indemnity (as do individuals who formerly
held one of these positions).
As permitted by our Constitution, South32
Limited has entered into Deeds of
Indemnity, Access and Insurance with each
of our Directors, Company Secretaries and
the CFO under which we agree to indemnify
those persons on a full indemnity basis
and to the extent permitted by law. We
purchase Directors' and Officers' liability
insurance which insures against certain
liabilities (subject to exclusions) in respect
of current and former Directors and
Officers of the Group.
Due to confidentiality obligations and
undertakings of the insurance, we can’t
disclose any further details about the
premium or insurance.
During FY21 and as at the date of this
Directors’ report, no indemnity in favour of
a current or former Director or Officer of
the Group has been called on.
Corporate Governance
Under ASX Listing Rule 4.10.3,
ASX listed entities are required to
benchmark their corporate governance
practices against the fourth edition
of the ASX Corporate Governance
Council’s Corporate Governance
Principles and Recommendations (ASX
Recommendations).
South32 is compliant with all relevant
fourth edition ASX Recommendations.
Our Corporate Governance Statement is
available at www.south32.net/who-we-
are/risk-governance. It also contains the
information required under the UK Financial
Conduct Authority’s Disclosure Guidance
and Transparency Rules (DTR).
Auditor
Our External Auditor has provided an
independence declaration in accordance
with the Corporations Act, which is set out
on page 148 and forms part of this report.
The External Auditor also provides
our Directors with an independent
assurance conclusion. This relates to
certain sustainability information, and
is in accordance with the International
Standards on Assurance Engagements
ISAE 3000 Assurance Engagement other
than the Audits and Reviews of Historical
Financial Information and ISAE 3410
Assurance of Greenhouse Gas Statements.
We’ve included a copy of the External
Auditor’s assurance report in the
Sustainability Databook, available at
www.south32.net.
4
6
Non-audit services
All non-audit services provided by our
External Auditor are considered and
approved in accordance with the process
set out in our Provision of Non-Audit
Services Policy.
No non-audit services were undertaken
by, and no amounts for non-audit services
were paid to, our External Auditor. Refer to
note 21 Auditor's remuneration to the
financial statements on page 135.
Political donations and community
investment
Our Code of Business Conduct sets out
our approach to political donations and
community investment.
In FY21, we didn’t contribute funds to any
politician, elected official or candidate for
public office in any country. On occasion,
our representatives attend political
functions that charge an attendance fee
where attendance is approved beforehand
in accordance with our internal approval
requirements. We record the details of
attendances and the relevant costs at a
corporate level.
In FY21, we contributed US$22.2 million for
the purposes of supporting community
programs that comprised direct investment,
in-kind support and administrative costs.
For more information on our community
investment, please visit www.south32.net/
community-society/community-investment.
Proceedings on behalf of South32
No proceedings have been brought
or intervened in on our behalf, nor any
application made under section 237 of the
Corporations Act.
Environmental performance
Performance in relation to
environmental regulation
We seek to be compliant with all applicable
environmental laws and regulations
relevant to our operations.
We classify environmental incidents
based on actual and potential impact type
as defined by our internal material risk
management standards.
In FY21, we had no environmental events
that resulted in a major impact to the
environment.
Fines and prosecutions
We received a $15,000 fine for pollution
of water associated with our Illawarra
Metallurgical Coal operation. The fine,
issued by the NSW Environment Protection
Authority, was in response to the pollution
event that occurred at our Kemira Valley
Coal Loading Facility in August 2020.
Refer to the Water Section of our 2021
Sustainable Development Report for more
details in relation to the event.
South32 Annual Report 2021Governance Rounding of amounts
We’ve applied the Australian Securities
and Investments Commission (ASIC)
Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191 to
this report. This means the amounts in the
financial statements have been rounded to
the nearest million US dollars, unless stated
otherwise.
Responsibility statement
The Directors state that to the best of their
knowledge:
a) The consolidated financial statements
and notes on pages 95 to 146 were
prepared in accordance with applicable
accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit and loss
of the Group and the undertakings
included in the consolidation taken as a
whole; and
b) The Directors’ report includes a
fair review of the development
and performance of the business
and the position of the Group and
the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties they face.
This Directors’ report is made in
accordance with a resolution of the Board.
Karen Wood
Chair
Graham Kerr
Chief Executive Officer
and Managing Director
Date: 2 September 2021
6
5
South32 Annual Report 2021Governance Lead Team
Graham Kerr
BBUS, FCPA, 50
Chief Executive Officer
and Managing Director
See page 58 for Graham Kerr’s
qualifications and experience.
6
6
Mike Fraser
BCom, MBL, 56
Chief Operating Officer
Mike Fraser became our Chief
Operating Officer in April 2018,
having been Chief Operating
Officer for the Africa region
from January 2015. He is
responsible for the Group’s
aluminium and manganese
operations in Africa and the
Cerro Matoso operation in
Colombia.
Before joining us, Mike was
President, Human Resources
with BHP. Before this, he was
Asset President of Mozal
Aluminium in Mozambique. He
has also worked in various roles
in BHP’s coal, manganese and
aluminium businesses. During
his career, Mike held leadership
roles in a large internationally
diversified industrial business,
and has worked in Australia,
Mozambique, South Africa and
the United Kingdom.
Mike holds a Master of Business
Leadership and a Bachelor of
Commerce from the University
of South Africa.
Katie Tovich
BCom, CA, GAICD, 51
Chief Financial Officer
Katie Tovich became our Chief
Financial Officer in May 2019,
having been Vice President
Corporate Affairs and Investor
Relations, as well as Head of
Treasury. She is responsible for
Financial Reporting, Financial
Analysis, Treasury, Business
Evaluation, Tax, Investor
Relations, Risk and Group
Assurance. Her responsibility
for Corporate Affairs, including
Community, transitioned to
our new Chief External Affairs
Officer on 1 November 2020.
Katie brings more than 25 years
of global experience in the
resources sector. Before joining
us, she held senior finance
and marketing roles at BHP in
Australia and Asia, including
Vice President Corporate
Finance, Head of Finance
Worsley Alumina and Vice
President Finance Marketing
– Carbon Steel Materials.
Earlier in her mining career, she
held finance and marketing
leadership positions at WMC
Resources Limited in Australia
and North America.
Katie holds a Bachelor of
Commerce from the University
of Tasmania and is a member
of Chartered Accountants
Australia and New Zealand.
Jason Economidis
MBA (Executive), 52
Chief Operating Officer
Jason Economidis became our
Chief Operating Officer in July
2020, assuming accountability
for Australia Manganese,
Cannington, Illawarra
Metallurgical Coal and Worsley
Alumina. Prior to this, Jason
was Vice President Operations
at Illawarra Metallurgical Coal.
Jason is an experienced mining
executive having worked in the
sector in Australia and overseas
for more than 25 years. He
joined South32 from Orica,
where he held the position of
Vice President Coal and was
responsible for 25 mining
operations across Queensland
and New South Wales.
Jason has held several other
senior positions in the industry
including General Manager of
the Coppabella and Moorvale
Complex for Peabody Energy,
Chief Operating Officer of
Vale Coal Australia, General
Manager of Goonyella-Riverside
and Caval Ridge, Vice President
Health, Safety, Environment and
Community for BHP, and Chief
Operating Officer of Discovery
Metals, based in Botswana.
Jason holds a Master of
Business Administration
(Executive) from the
Australian Graduate School of
Management.
South32 Annual Report 2021Governance Vanessa Torres
BSc (Chemical), MEng, DEng, 51
Chief Technical Officer
Vanessa Torres became our
Chief Technical Officer in
July 2020. She is responsible
for Technology, Innovation,
Business Optimisation, Risk
Management, Capital Projects
as well as Health, Safety,
Environment and Technical
Stewardship.
Vanessa joined South32
in August 2018 as Chief
Technology Officer. Before
this, she was Vice President
Operational Infrastructure for
BHP Western Australia Iron Ore.
She has over 28 years of global
mining experience across
Australia, Canada, Brazil, Peru
and New Caledonia, and has
held various senior roles at BHP
and Vale in strategy, projects,
business development, and
operations.
Vanessa holds Doctorate and
Master degrees in Minerals
Engineering from the University
of Sao Paulo, and a Bachelor
of Science from the Federal
University of Minas Gerais,
Brazil. She was also a Visiting
Scholar at the University of
British Columbia, Canada,
where her research focused
on the application of artificial
intelligence to the mining
industry.
Brendan Harris
BSc, CPA, 49
Chief Human Resources and
Commercial Officer
Brendan Harris became our
Chief Human Resources
and Commercial Officer
in November 2020 and is
responsible for our Human
Resources, Marketing and
Supply functions. Before his
role was expanded, Brendan
was our Chief Commercial
Officer between January and
November 2020.
Brendan joined South32 as
our inaugural Chief Financial
Officer, looking after Financial
Reporting, Management
Reporting, Treasury, Business
Evaluation, Tax, Corporate
Affairs, Investor Relations,
Risk and Assurance, and Brazil
Alumina. Brendan played a
key role in the Demerger from
BHP in 2015 and South32’s
public listing in three countries,
in addition to developing
our capital management
framework.
Before joining us, Brendan
was Head of Investor Relations
at BHP, based in the United
Kingdom and then Australia,
having been Vice President
Investor Relations Australasia.
During his career, he also held
roles in investment banking,
including Executive Director
Metals and Mining Research at
Macquarie Equities.
Brendan holds a Bachelor
of Science in Geology and
Geophysics from Flinders
University.
Kelly O’Rourke
LLB, BCom, MAICD, 42
Chief Legal and External Affairs
Officer
Kelly O’Rourke was appointed
to the role of Chief Legal and
External Affairs Officer in
July 2021 and is responsible
for Legal, Company
Secretary, Business Integrity,
Communications, Community,
Government and Sustainability
Strategy. Prior to this, Kelly
was our Chief External Affairs
Officer, having been appointed
to the Lead Team in November
2020.
Kelly joined South32 in 2016
as Head of Corporate Affairs
and Investor Relations and
later became Vice President
Corporate Affairs. She
previously worked at BHP for
nine years where she held
senior roles in Legal, Business
Development, Mergers and
Acquisitions and the Office of
the Chief Executive.
Kelly has more than
15 years’ experience in
the mining industry across
legal, commercial, business
development, mergers and
acquisitions, corporate affairs
and community roles, and has
worked in Australia, the United
Kingdom, Asia, Europe, Africa
and the Americas.
Kelly holds a Bachelor of Laws
(Distinction) from The University
of Western Australia and a
Bachelor of Commerce from
Curtin University.
Simon Collins
BE (Mining), MBA, 48
Chief Development Officer
Simon Collins has been our
Chief Development Officer
since October 2018. He is
responsible for Greenfields
Exploration, Projects
and Industry Evaluation,
Acquisitions and Divestments,
Brazil Alumina and the Hermosa
project. He also represents
South32 on the Board of
Directors of Ambler Metals
LLC and TSX-V listed Elemental
Royalties Corp.
Simon brings over 25 years’
experience in the resources
industry in senior leadership
and business development
roles. Before joining South32, he
worked for BHP for more than
a decade, providing leadership
to the business development
teams in Australia, Belgium,
Singapore and the United
Kingdom. He began his career
in mine operations initially in
Australia and then South Africa.
Simon holds a Master of
Business Administration from
London Business School and
a Bachelor of Engineering
(Mining) from the University of
New South Wales.
6
7
South32 Annual Report 2021Governance Remuneration report
Letter from our Remuneration Committee Chair
Dear Shareholders,
On behalf of the Board, I am pleased to present the Remuneration report for the financial
year to 30 June 2021 (FY21).
Remuneration Policy Review
The Board and Remuneration Committee believe our remuneration policy has served
stakeholders well since Demerger . Our policy has always aimed to strike the right
balance, where remuneration outcomes incentivise and reward our Executives, while
ensuring they reflect overall business performance and the shareholder experience. Our
actual pay outcomes, being the realised value of rewards received since Demerger , are
testament to this alignment, as illustrated in diagram 1.2.
It is, however, appropriate for us to regularly review our remuneration arrangements to ensure they deliver on their intended purpose.
The Remuneration Committee has considered our strategic commitments to further reshape our portfolio and halve our operational
carbon emissions (Scope 1 and 2) by 2035 compared to our FY21 baseline, as these elements will underpin the long-term success of our
business and delivery of value to shareholders.
Following extensive review, the Remuneration Committee has approved specific enhancements to our Reward Framework to further
connect strategy, long-term shareholder value creation and executive remuneration, whilst also recognising the need for even greater
restraint. From FY22, important changes to variable pay include:
– A 33 per cent reduction in the face value of the long-term incentive (LTI) for all Executive key management personnel (KMP). This
means the face value of the CEO’s LTI reduces from 300 per cent to 200 per cent of Fixed Remuneration, which results in a
19 per cent decrease in Total Reward (based on face value) for the CEO from FY22;
– The incorporation of two strategic measures for 20 per cent of our LTI, directly linking executive remuneration to our ambitious but
realistic approach to climate change and the transition of our portfolio towards the base metals required for a low-carbon future;
– An increase in the weighting of the financial measures in the short-term incentive (STI) to achieve an appropriate balance of measures
across the elements of variable pay, given the inclusion of strategic measures in the LTI; and
– A shift from an index to a constituent group of companies for the global mining comparator group in the LTI, against which two-thirds
of relative total shareholder return performance is measured, to better align our approach to market practice.
8
6
Notwithstanding these changes which have resulted in a material reduction in Total Reward (as outlined in more detail on page 87),
there will be no adjustment to the quantum of Fixed Remuneration or target STI.
We have appreciated the opportunity to engage with a number of investors and other external stakeholders ahead of making these
changes and acknowledge the constructive feedback that we have taken on board.
Our performance
We delivered a strong operating result in FY21, including record production at Worsley Alumina, Brazil Alumina, and Australia
Manganese, and exceeded our initial production guidance at South Africa Manganese, Cerro Matoso and Cannington. Our teams worked
hard to control costs and working capital, successfully mitigating increasing signs of inflationary pressure.
Our teams showed incredible resilience to the impacts of COVID-19, particularly in Southern Africa, Colombia and Brazil. Our response to
the COVID-19 pandemic rightly remained our priority as we focused on keeping our people safe and well, maintaining safe and reliable
operations, and supporting our communities.
Together, these efforts underpinned a significant increase in the Group’s profitability. Underlying EBIT grew by 89 per cent to
US$844 million (US$446 million in FY20) and free cash flow increased by 42 per cent to US$825 million(1) (US$583 million in FY20).
US$670 million was returned to shareholders in respect of the period via the distribution of fully franked dividends and the continuation
of our on-market share buy-back.
We also significantly reshaped our portfolio with the divestment of both South Africa Energy Coal (SAEC) and the TEMCO manganese
alloy smelter, and the decision to place the Metalloys manganese alloy smelter on care and maintenance. In parallel we continued to
advance studies at Hermosa, our base metals development option in Arizona, and build upon our global exploration footprint that is
designed to add longer-term development options.
Having met our multi-year objective to maintain Scope 1 emissions below our FY15 baseline, we set a medium-term goal to halve our
operational carbon emissions by 2035 compared to our FY21 baseline. We also recognise the need to contribute to the communities
where we operate. Our contribution takes many forms and in FY21 it included investment of US$22.2 million.
Despite a reduction in recordable injuries for the period, and four of our operations recording their lowest Total Recordable Injury
Frequency (TRIF) to date, our TRIF increased by two per cent to 4.3 and did not meet our 20 per cent year-on-year reduction target.
While our TRIF outcome at a Group level was disappointing, we made good progress in proactive hazard reporting which is key to our
approach to improving safety outcomes.
The collective strength of our performance across the year has been recognised in our Business Scorecard, where an overall outcome of
101 per cent (out of a possible 150 per cent) was achieved (refer to pages 78 to 79 for additional detail).
(1) Free cash flow from operations including net distributions from our manganese equity accounted investments (EAI).
South32 Annual Report 2021Governance Application of the Business Modifier
The Business Modifier component of the STI considers overall business outcomes or other factors that are not specifically contemplated
in the Business Scorecard, such as the shareholder experience or unexpected material external events.
For FY21, the Board considered a number of factors, including:
– The loss of our colleague, Mr Petros Sibeko, in May 2021 when he was fatally injured while working as a contractor at South Africa
Energy Coal; and
– The response of our teams to COVID-19, notably their resilience and resourcefulness that underpinned our strong operating results
and positive shareholder experience across the year.
Notwithstanding our strong results, the Board decided to apply a negative Business Modifier to reflect the fatality as this is a failure to
meet our commitment that our people will return home safely from their shift every day. This reduced the Business Scorecard outcome
by 20 per cent for the CEO and the COO Africa, and five per cent for all other Executive KMP.
As part of its deliberations, the Board also contemplated the impairment at Illawarra Metallurgical Coal that led to a statutory loss
at the Group Level (see page 80). The Board concluded that the uncertainty in the current approvals landscape, that resulted in the
impairment, was beyond management’s control. In addition, the Board considered the shareholder experience during the year, including
our strong cash generation that enabled the payment of dividends, the continuation of our capital management program and strong
share price appreciation. Consequently, the Board elected not to further penalise Executive KMP by increasing the negative impact of
the Business Modifier.
As a result, the CEO’s overall STI outcome was 81 per cent (or 54 per cent of maximum). The Board believes this to be a fair outcome,
taking all factors into account, including overall reward for FY21 (see page 81).
LTI failed to meet vesting thresholds
The LTI is the component of executive remuneration most closely linked to the shareholder experience as it rewards Executives for the
delivery of returns that exceed peer benchmarks across a four-year period.
South32 delivered TSR of 31 per cent over the four-year performance period of the FY18 LTI, which fell short of the threshold level
required for vesting, meaning the FY18 LTI awards lapsed in full.
Continued restraint applied for FY22
The CEO will not receive an increase in his Fixed Remuneration for FY22 and Fees for the Non-Executive Directors will also remain
unchanged. The rates for our Director travel allowance have also been adjusted lower and will be applied when mobility increases as
the global economy reopens. Discretionary increases in Fixed Remuneration have, however, been granted to Katie Tovich and Jason
Economidis to reflect their continued development in their roles.
6
9
The Remuneration Committee is confident that our long-standing approach to remuneration will be enhanced by the changes being
made from FY22. The addition of the strategic measures in the LTI and the increased weighting being applied to the financial measures
in the STI are designed to focus the organisation on those critical activities that will underpin the long-term success of the business.
The Remuneration Committee has also shown restraint and a willingness to apply discretion where needed and will continue to do so, to
ensure executive remuneration reflects overall business performance, the creation of long-term value and the shareholder experience.
We thank you, our shareholders, for your ongoing support.
Wayne Osborn
Chair, Remuneration Committee
South32 Annual Report 2021Governance Remuneration report continued
FY21 at a glance
Record production at:
Worsley Alumina
Brazil Alumina
Australia Manganese
Underlying EBIT up 89% on FY20(1)
FY21 Total Shareholder Return(2)
US$844m
42.3%
Total Shareholder Return (TSR)(2)
Diagram 1.1 – South32 TSR relative to comparator groups
CEO Remuneration Outcomes
Diagram 1.2 – South32 share price (A$) vs. CEO Actual pay
(A$'000)(3)
150%
100%
50%
0%
-50%
FY17
0
7
$
A
e
c
i
r
p
e
r
a
h
S
$5.00
$4.00
$3.00
$2.00
$1.00
$-
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
South32
Sector Index
World Index
South32
Sector Index
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
FY21
(1) This number has not been prepared in accordance with IFRS.
(2) Rolling 22-day average.
(3) See page 72 for further information on actual pay.
The following table outlines historic business performance outcomes.
Table 1.1 – Business performance
Performance measures(1)
Underlying EBIT (US$M)
Underlying earnings (US$M)
Closing net cash/(debt) (US$M)
Movement in adjusted ROIC (percentage point)(2)
Closing share price on 30 June (A$)
Dividends/special dividends paid (US cents)
Total Recordable Injury Frequency (per million hours worked)
FY21
844
489
406
0.7
2.93
2.4
4.3
FY20
446
193
298
0.0
2.04
5.0
4.2
FY19
1,440
992
504
(1.4)
3.18
13.0
4.6
FY18
1,774
1,327
2,041
(6.8)
3.61
13.7
5.1
FY17
1,648
1,146
1,640
(1.1)
2.68(3)
4.6
6.1
(1) The financial information in this table has not been prepared in accordance with IFRS. Refer to page 108 of the Annual Report for a reconciliation to statutory earnings.
(2) The movement in adjusted ROIC is by reference to the previous performance period and removes the effect of changes in commodity prices, commodity price linked costs,
market traded consumables, foreign exchange rates and movements in the Group’s Underlying ETR, including our manganese equity accounted investments on a proportional
consolidated basis, divided by the sum of fixed assets (excluding any rehabilitation asset, the impairment of SAEC and our equity accounted manganese alloy smelters, and
unproductive capital associated with Major project capital) and inventories.
(3) The opening share price on 1 July 2016 was A$1.57.
South32 Annual Report 2021Governance
Executive remuneration aligned to performance
Fixed
Remuneration
No increase was applied to Fixed Remuneration for any Executive KMP during FY21.
FY21 STI
FY18 LTI
In FY21, Management responded quickly to COVID-19 and remained focused on keeping our
people safe and well, maintaining safe and reliable operations and supporting our communities.
We delivered strong operating results while managing costs, made significant progress in
reshaping our portfolio, continued to build our pipeline of opportunities, progressed our
decarbonisation plans and invested US$22.2 million in community initiatives and activities. This
performance has been recognised in the Business Scorecard outcomes.(1)
The Board has, however, determined to apply a negative Modifier for Executive KMP in
recognition of the fatality at SAEC. This included a negative Business Modifier of 20 per cent for
the CEO and COO Africa, and 5 per cent for the COO Australia and CFO.
The overall STI outcome for Executive KMP ranged from 54 per cent to 77 per cent of
maximum, with the CEO receiving 54 per cent.
Although our TSR outcome was 42 per cent for FY21 and 31 per cent over the four-year
performance period (FY18-FY21), it was below the thresholds when measured against the
performance hurdles, resulting in all FY18 LTI rights lapsing.
South32 allows employees who are promoted into Executive KMP roles to retain unvested
awards that had been granted under the Management Share Plan (MSP)(2) while in their prior
role, which are a combination of performance rights and retention rights. South32 does not
offer retention rights to permanent members of the Lead Team, including those that are KMP.
A number of MSP retention rights that were granted to Katie Tovich and Jason Economidis
vested in FY21.
7
1
Actual pay for Executive KMP (see page 72) was below target value for Total Reward, primarily
as a result of the FY18 LTI not vesting and the Board’s decision to apply a negative Business
Modifier in determining the STI outcome.
FY21 Total
Reward
The Board considers all components of remuneration in reviewing the FY21 reward outcomes
to ensure alignment to our Guiding Principles (see page 73) and believes FY21 actual pay is fair
for the Executive KMP and shareholders, based on performance for the year.
Diagram 1.2 illustrates the alignment of CEO actual pay to shareholder experience for the past
five years.
In order to further enhance our Reward Framework and reinforce alignment to our business
strategy, a number of changes will be implemented for Executive KMP from FY22. These
include:
– A reduction of the face value of the LTI by 33 per cent (which also reduces the face value of
Total Reward for the CEO by 19 per cent);
FY22 Reward
Framework
– The introduction of climate change and portfolio management as strategic measures in the LTI
as these elements will underpin the long-term success of our business and delivery of value to
shareholders;
– An increase in the weighting of the financial measures in the STI to achieve an appropriate
balance of measures across the elements of variable pay; and
– A shift from the index to particular constituents of the global mining comparator group for one
element of the relative TSR measure.
See page 87 for details on these changes.
(1) See page 80 for commentary on the impairment recorded in FY21 and the resultant statutory loss.
(2) South32 does not offer retention awards to permanent members of the Lead Team, including those that are KMP. All LTI awards that have been granted to permanent
members of the Lead Team have performance hurdles based on relative Total Shareholder Return (TSR). Roles below the Executive KMP participate in the MSP, that grants a
portion of the awards in performance rights aligned to the Executive KMP LTI, and a portion in retention rights with a service-based hurdle. When individuals are promoted
internally into Executive KMP roles, they retain the unvested MSP awards that will then vest while they are Executive KMP.
South32 Annual Report 2021Governance Remuneration report continued
Actual pay for Executive KMP in FY21
Actual pay is the realised value of reward received by Executive KMP in relation to the financial year, rather than potential pay awarded.
We disclose actual pay to enable our shareholders to better understand the actual reward that is delivered to our Executives through
our Reward Framework (including the application of Board discretion) and how this is aligned to the performance of South32 over time.
The intention of our Reward Framework (see our Guiding Principles on page 73) is to deliver actual pay outcomes that reflect company
performance and the shareholder experience. The Board and Remuneration Committee believe that our actual pay outcomes since
Demerger have achieved this objective, as illustrated in diagram 1.2.
The actual pay for Executive KMP in FY21, as outlined below, includes:
– Fixed Remuneration earned in FY21 (including pension/superannuation);
– Other cash and non-monetary benefits earned in FY21;
– Total FY21 STI earned (including cash and deferred rights) based on performance during this financial year (details on page 81); and
– LTI awards that vested based on performance and/or service conditions to 30 June 2021 (details on page 83).
The amount of actual pay is likely to vary substantially, either up or down, from potential pay and from Target Remuneration (see page
75) because a significant portion of our Executive KMP pay is ‘at risk’ and based on challenging performance measures.
Table 1.2 – Actual Pay in respect of FY21 (A$’000)
Executive KMP
Mr Graham Kerr
Chief Executive Officer
Mrs Katie Tovich
Chief Financial Officer
Mr Mike Fraser
Chief Operating Officer Africa
Mr Jason Economidis(4)
Chief Operating Officer Australia (Acting)
Fixed
Remuneration
Other(1)
STI Cash
STI Deferred
LTI(2)(3)
Actual Pay
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
1,815
1,815
830
830
1,000
1,000
713
-
27
21
12
10
78
40
64
-
879
690
573
383
484
380
273
-
879
690
573
383
484
380
137
-
-
-
163
154
-
-
145
-
3,600
3,216
2,151
1,760
2,046
1,800
1,332
-
(1) Other includes insurances, notional interest on interest free loans, tax advice provided to Executive KMP and a relocation allowance paid to Jason Economidis of A$18,000 to
assist with his relocation from New South Wales to Queensland.
(2) Value of LTI is based on a closing share price on 30 June 2021 of A$2.93 (FY21) and 30 June 2020 of A$2.04 (FY20).
(3) LTI includes Management Share Plan (retention) awards granted to Katie Tovich and Jason Economidis prior to becoming KMP which vested subsequent to their appointment
as KMP (see page 83).
2
7
(4) Jason Economidis was appointed as Acting Chief Operating Officer and became a member of Executive KMP on 1 July 2020. Fixed Remuneration includes base salary of
$500,000, an acting allowance of $125,000 and superannuation contributions of $87,500.
South32 Annual Report 2021Governance Our Reward Framework
The pages of the Remuneration report that follow (together with Table 1.1 – Business Performance) have been prepared in accordance
with section 300A of the Corporations Act 2001 (Cth) (Act) and audited as required by section 308(3C) of the Act. These sections relate to
those persons who were KMP of South32 during FY21, being the Executive KMP named on page 72 and the Non-Executive Directors of
South32 Limited.
Remuneration governance(1)
The roles and responsibilities of our Board, Remuneration Committee, management and external advisors in relation to remuneration for
Executive KMP and employees at South32 are outlined below.
Board
Our Board maintains overall responsibility for overseeing the remuneration policy, and the principles and processes
that underpin it. They approve the remuneration arrangements for our CEO and Non-Executive Directors. Changes
to the Director fee pool and equity grants to the CEO are approved by shareholders.
The Remuneration Committee approves reward arrangements for our Executive KMP (other than the CEO) and
oversees the remuneration and benefits framework for all employees of South32.
Remuneration
Committee
By taking advice from other Board Committees (such as the Sustainability, and Risk and Audit Committees), the
Remuneration Committee helps the Board oversee our remuneration policy, its specific application to the CEO,
Executives and Non-Executive Directors and, in general, our employees.
The Remuneration Committee provides oversight to ensure our remuneration arrangements are equitable and
aligned to the long-term interests of shareholders, operate within our risk framework, and support our purpose,
strategy and values.
CEO and
Management
Our CEO makes recommendations to the Remuneration Committee regarding our Executives, and how the
remuneration policy and framework applies to our employees.
Management provides information and recommendations to the Remuneration Committee to help them consider
and implement approved arrangements.
Exernal Advisors
We may engage external advisors either directly by the Remuneration Committee, or through management. These
advisors provide information on remuneration-related issues, including benchmarking information and market data.
There were no remuneration recommendations received by the Remuneration Committee from external advisors in
relation to KMP in FY21.
We seek information and analysis from a range of data sources. This allows us to make decisions that are informed, objective, weighted
and aligned to the requirements of the company, and consistent with our Guiding Principles.
7
3
(1) See page 84 for further information on our service contracts.
Reward practices and outcomes
Purpose and Strategy
The way we work
Shareholders
Performance
Market
Our Guiding Principles
Our culture is at the core
of how we deliver our
purpose and strategy.
You’ll see it reflected in
our values, the decisions
we take, the courage
we show in challenging
situations and the legacy
we leave.
Supporting this is a
strong belief that culture
can be actively shaped
through a focus on what
we prioritise, what we
measure, what we reward
and who we appoint.
Our Reward Framework
focusses Executives
and management on
delivering superior total
shareholder returns.
We do this through
share ownership
and LTI performance
measures aligned to the
shareholder experience.
We value feedback and
regularly check-in with
investors and proxy
advisors.
We ensure our reward
outcomes are aligned
to performance by
providing a large part
of Executive pay ‘at risk’
based on challenging
financial and non-
financial measures.
STI outcomes reflect
performance over the
financial year, while
LTI outcomes reflect
performance over a four-
year period.
We ensure our reward is
competitive and allows
us to attract and retain
talented Executives.
We benchmark our
reward levels in
consideration of similar
sized companies in the
ASX, as well as our global
mining peer group.
We align short-term and
long-term performance
measures to our purpose
and strategy. This
includes our efforts to:
– Optimise our business
by working safely,
minimising our
impact, consistently
delivering stable
and predictable
performance and
continually improving
our competitiveness;
– Unlock the full value
of our business
through our people,
innovation, projects
and technology;
– Identify and pursue
opportunities to
sustainably reshape
our business for the
future; and
– Achieve sector-
leading total
shareholder returns.
South32 Annual Report 2021Governance Remuneration report continued
Components of our reward for FY21(1)
Our intention
Attract and retain talented
Executives to lead South32
The majority of pay at risk reflects our commitment to pay for performance
and deliver value to shareholders
Reward business and individual
performance in the financial year
Drive long-term performance
and ownership behaviours
Component
Fixed Remuneration
Short-Term Incentive
Long-Term Incentive
The why
The how
4
7
Our approach
in FY21
Fixed Remuneration is set with
reference to the median of our
peer groups, reflecting each
Executive KMP’s
responsibilities, location, skills
and experience.
STI focuses efforts on our key priorities to
ensure success for South32 both in the
financial year and into the future. It
motivates Executive KMP to achieve
challenging performance objectives. Our
STI reflects performance during the year
and measures outcomes within
management’s control.
LTI is aligned to the shareholder
experience and delivery of lasting total
shareholder returns.
Base salary and
superannuation(2).
50 per cent paid in
cash annually.
50 per cent
delivered in rights
to South32 shares,
deferred for two
years.
Rights to receive South32 shares, subject
to TSR performance measured over a
four-year period, relative to two
comparator groups.
We benchmark our Fixed
Remuneration and Total
Reward against two key peer
groups that reflect the
markets in which we operate.
Our peer groups are:
– An ASX peer group based
on companies with half
to double our market
capitalisation (excluding
foreign domiciled entities
and real estate investment
trusts); and
– A global mining peer
group of 14 companies
with a similar market
capitalisation, commodity
mix and/or geographic
spread (see Our Global
Mining Peer Group below).
Quantum (% of Fixed Remuneration):
Quantum (% of Fixed Remuneration):
Target Value Max. Value
Executive KMP(2)
120%
180%
Business Scorecard: The Business
Scorecard reflects a balance of financial
and non-financial measures that are a
priority for us in the financial year.
The financial measures remove the impact
of commodity prices and foreign exchange
to ensure that we reward for items
management can control.
The quantum for FY21(1) was determined
on face value as a percentage of Fixed
Remuneration:
Face Value
Target Value
CEO
Other KMP(2)
300%
120%
200% to 250% 80% to 100%
Comparator groups:
– Two-thirds relative to a mining sector
index (IHS Markit Global Mining Index
with constrained weighting by company
and sector); and
■ Sustainability (25%)
■ Financial: Production, cost and
capital expenditure (25%)
– One-third relative to a world index
(Morgan Stanley Capital International
(MSCI) World Index).
■■ Financial: Adjusted ROIC (25%)
Vesting:
■ Strategic Goals (25%)
100% vesting
Business Modifier: As Scorecard measures
do not always reflect all aspects of
performance across a year, and to mitigate
any unintended reward outcomes, the
Board has the discretion to apply a
Modifier to the Business Scorecard
outcome. The Modifier may be applied to
Executive KMP on an individual or group
basis, having regard to the perspectives of
stakeholders including employees,
shareholders and communities.
Individual Performance and Behaviours:
The Board also considers an Executive
KMP’s individual performance, taking into
account their areas of responsibility and
how outcomes have been achieved
(including alignment with our values).
40% vesting
0% vesting
TSR
= index
TSR > index
by 5.5% pa
There is no retesting if the performance
condition is not met at the end of the
performance period.
Our Global
Mining Peer
Group
The Global Mining Peer Group that we use as one of our reference points for benchmarking Fixed Remuneration and Total
Reward levels includes the following companies:
– Agnico Eagle Mines, Alcoa, Anglo American, Antofogasta, Barrick Gold, Boliden AB, Eramet SA, First Quantum Minerals,
Fortescue Metals Group, Freeport McMoRan, Newcrest Mining, Newmont, Teck Resources and Vedanta
(1) See page 87 for further information on the components of our reward for FY22.
(2) As Jason Economidis is acting in role, he has retained much of his prior reward arrangements. This arrangement provides both the company and Mr Economidis with the
flexibility to move into a permanent Lead Team role or return into a senior management role outside the Lead Team should either of these options be appropriate at the
relevant time. His Fixed Remuneration includes an acting allowance of $125,000. He has a Target STI of 90 per cent of base salary, of which one third is awarded in rights
to South32 shares, deferred for two years. His deferred STI is less than the other Executive KMP as he is also granted Management Share Plan (MSP) retention rights.
Mr Economidis continued to participate in the MSP that grants a portion of the LTI awards in performance rights, aligned to the Executive KMP LTI, and a portion in retention
rights with a service-based hurdle. These MSP retention rights have a face value of A$200,000, being 40 per cent of his base salary of A$500,000. In FY21, recognising that
Mr Economidis is acting in a KMP role, he received an LTI award (i.e. performance rights) that is aligned to that of the other Executive KMP, with a face value of 200 per cent of
his base salary and a target value of 80 per cent.
South32 Annual Report 2021Governance
Target Remuneration for FY21
South32 sets Target Remuneration for each Executive KMP at a competitive level to attract and retain the appropriate talent in the
markets in which we operate. Our Target Remuneration is informed by the South32 Reward Framework (see page 73) that outlines the
key factors the Board takes into consideration in setting executive remuneration and the strategic drivers of pay at South32.
It is important to ensure reward levels fairly reflect the responsibilities and contribution of the Executives and that outcomes are aligned
to performance and the delivery of total shareholder returns. As a result, a portion of our Executive remuneration is at risk, based on
challenging performance measures.
Target Remuneration, as outlined below, assumes on-target performance for the STI and considers the difficulty of achieving LTI
performance hurdles given broader industry and South32-specific share price volatility. The figures reflected in the graph below are
therefore based on STI paid at 100 per cent of target and LTI that is 40 per cent of the face value (see page 74 for details on face value).
Based on these principles, the annualised Target Remuneration as at 30 June 2021 for Executive KMP for a full year is summarised
below.
Diagram 1.3 – FY21 Target Remuneration (A$’000)
Mr G Kerr
1,815
1,089
1,089
2,178
6,171
(71% at risk)
Mrs K Tovich
830
498
498
664
2,490
(67% at risk)
Mr M Fraser
1,000
600
600
1,000
3,200
(69% at risk)
Mr J Economidis(1)
713
300
0
5
1
600
1,763
(60% at risk)
Components
Fixed Remuneration
STI (Cash)
STI (Deferred rights)
LTI
0
2,000
4,000
6,000
(1) Jason Economidis was promoted to Acting Chief Operating Officer on 1 July 2020. As Mr Economidis is acting in the role, his Reward Framework reflects his previous role,
including the award of retention rights as part of the Management Share Plan. He therefore receives proportionately less in Deferred STI (which are also issued as retention
rights). This arrangement provides both the company and Mr Economidis with the flexibility to move into a permanent Lead Team role or return into a senior management role
outside the Lead Team should either of these options be appropriate at the relevant time.
Target remuneration relative
to peer groups (unaudited)
South32 has operations and offices on six
continents and competes for talent in a global pool.
Diagrams 1.4 and 1.5 illustrate the moderate
approach adopted by South32 in positioning CEO
Fixed Remuneration and Total Reward for FY21
compared to relevant benchmarks, being the
ASX peer group and the Global Mining Sector
peer group (see page 74). The level of Fixed
Remuneration for the CEO is below the median for
both of our peer groups.
As an additional reference, we have also included
supplementary peer groups reflecting companies
on the LSE (UK) and in the S&P 500 (US) that are
half to double the market capitalisation of South32
Limited, based on the markets in which we also
compete for executive talent.
7
5
South32
1,815
South32
6,171
Diagram 1.4 – CEO Fixed Remuneration vs. Peers
0
0
0
$
A
’
3,000
2,000
1,000
0
ASX Peers
Global Peers
UK
US
Diagram 1.5 – CEO Total Reward vs. Peers
0
0
0
$
A
’
20,000
15,000
10,000
5,000
0
ASX Peers
Global Peers
UK
US
South32
Median
Upper and lower quartiles
South32 Annual Report 2021Governance Remuneration report continued
Range of possible remuneration outcomes
As actual business and individual achievement over the performance period determines reward outcomes, the amount of actual pay
(see page 72) received by an Executive each year will vary.
The diagram below illustrates the range of possible remuneration outcomes for the CEO, based on several performance outcome
scenarios.
Diagram 1.6 – Range of remuneration outcomes (A$’000)
Minimum
1,815
1,815
(all reward at risk is forfeited)
Target
1,815
2,178
2,178
6,171
(71% at risk)
Outstanding
1,815
3,267
5,445
0
2,000
4,000
6,000
8,000
10,000
Components
Fixed Remuneration
STI (Cash & Deferred rights)
LTI (performance rights)
10,527
(83% at risk)
In the Minimum scenario, no STI or LTI is paid. The CEO would receive Fixed Remuneration, inclusive of superannuation, of A$1.815
million.
A Target outcome would be achieved where the business meets the challenging STI performance hurdles, resulting in STI being paid at
Target levels (i.e. 67 per cent of maximum opportunity, or 120 per cent of Fixed Remuneration, with half deferred into shares) and the LTI
meeting the TSR performance threshold and 40 per cent of shares vesting. Future share price movements are not included in the value
of the Deferred STI or the LTI.
To deliver an Outstanding outcome for the STI (i.e. at maximum STI, or 180 per cent of Fixed Remuneration, with half deferred into
shares) South32 would need to meet the robust stretch targets across all metrics in the Scorecard. For the LTI to vest in full, the South32
TSR would need to outperform both the sector index and the world index by more than 23.9 per cent over the four-year performance
period. Future share price movements are not included in the value of the Deferred STI or LTI.
6
7
Fixed Remuneration for FY21
In FY21, there were no increases to Fixed Remuneration for Graham Kerr, Katie Tovich or Mike Fraser. Jason Economidis commenced in
his current role as Acting Chief Operating Officer on 1 July 2020.
Table 1.3 – Fixed Remuneration for Executive KMP in FY21
Executive KMP
Mr G Kerr
Mrs K Tovich
Mr M Fraser
Mr J Economidis(1)
(1) Fixed Remuneration for Jason Economidis is only shown for the period he was a member of KMP (from 1 July 2020).
FY20 Fixed
Remuneration
(A$)
FY21 Fixed
Remuneration
(A$)
1,815,000
830,000
1,000,000
-
1,815,000
830,000
1,000,000
712,500
Increase
%
0
0
0
-
South32 Annual Report 2021Governance Short-Term Incentive for FY21
Determining STI awards
Diagram 1.7 – Determination of STI Awards
South32
Business Outcome
INDIVIDUAL
Outcome
Overall
STI OUTCOME
x
A1
A2
B
C
x
=
BUSINESS
SCORECARD
0%-150%
Target 100%
BUSINESS
MODIFIER
Discretion +/-
INDIVIDUAL PERFORMANCE
and BEHAVIOURS
(0%-150%)
Max 180%
Target 120%
(of Fixed Remuneration)
As outlined in components of our reward (page 74), the STI is intended to focus and reward Executive KMP for delivering on our key
business priorities and success for South32 both in the financial year and into the future. The overall STI outcome is determined by
assessing three key inputs – the Business Scorecard, the Business Modifier and individual performance and behaviours.
The Business Scorecard, approved by the Board before the financial year begins, includes a balanced range of challenging measures
that consider both our financial and non-financial performance, and helps our Executive KMP focus on outcomes that are within their
control and a priority for the year.
The Business Modifier considers overall business outcomes or other factors that are not specifically contemplated in the Business
Scorecard, such as the shareholder experience, fatalities or other significant safety or environmental events.
7
7
Together, the Business Scorecard and the Business Modifier determine the South32 Business Outcome.
Individual performance is measured based on delivery against the relevant operations’, projects’ or functions’ business plans. Our
people are also assessed on demonstrated behaviour aligned with our values (i.e. both on what is achieved and how it is achieved).
What this means in practice
Including STI performance measures that are within the control
of the Executives means that the Business Scorecard outcomes
will not always mirror underlying South32 financial outcomes.
However, the Board has designed the STI, including the use
of the Business Modifier and Individual Outcomes, to ensure
Executives are rewarded for delivering strong performance
across areas within their control throughout the cycle, taking
into account overall business performance and shareholder
experience.
Diagram 1.8 demonstrates the disciplined approach to STI
Outcomes applied by the Board over the past five years.
Diagram 1.8 – CEO STI outcome vs. South32 Underlying Earnings
x
a
M
f
o
%
100%
75%
50%
25%
0%
64%
58%
55%
54%
42%
1400
1200
1000
800
600
400
200
-
M
$
S
U
FY17
FY18
FY19
FY20
FY21
South32 Underlying Earnings US$M
STI % of Max
South32 Annual Report 2021Governance
Remuneration report continued
A1 FY21 Business Scorecard
Table 1.4 – FY21 Business Scorecard outcomes
Weight
Scorecard measure
Performance
Sustainability
Safety:
25%
Poor
Outcome (Target = 25%)
Zero
Target Maximum
26%
A 20 per cent reduction in TRIF compared to FY20.
We saw a reduction in recordable injuries for the period and four of our operations
recorded their lowest TRIF to date. However, our TRIF increased by two per cent to 4.3
meaning our year-on-year performance did not meet our 20 per cent reduction target.
We are deeply saddened that a contractor working at SAEC was fatally injured in an
incident involving the use of an elevated work platform in May 2021. South32 recognises
the fatality in our STI through the Business Modifier (see page 80).
Significant Events and Hazards:
Good
Ensure 90 per cent of significant event
investigations completed and signed off within the
allocated timeframe plus achieve a significant
hazard frequency of "30".
Eighty-three per cent of significant event investigations were signed off within the
allocated timeframe.
Delivered a good significant hazard frequency of "41".
Health:
Fair
A 10 per cent reduction in material exposures from
the baseline, plus develop an FY22 plan to reduce
by 20 per cent the number of workers exposed
above 200 per cent of the OEL.
Material exposures reduced by six per cent compared to the baseline(1). Plans have been
developed to reduce the number of workers exposed above 200 per cent of the OEL by
15 per cent in FY22.
Environment:
Excellent
Achieve Scope 1 and 2 emissions forecast of
24,649kt CO2-e(2) and Scope 1 emissions below
10,653kt CO2-e(2) (10 per cent below FY15 baseline).
Define our public target and glidepath narrative
and progress the critical decarbonisation studies,
energy planning and offsets approach.
In FY21, our combined Scope 1 and 2 emissions(3) were below our FY21 forecast, and our
Scope 1 emissions were more than 15 per cent below our FY15 baseline.
In May 2021, we released our medium-term target to halve our operational carbon
emissions (Scope 1 and 2) by 2035, stepping up our ambition on climate change and
pathway to net zero.
We have progressed studies for our decarbonisation and energy transition projects at
our most carbon intensive operations.
8
7
Community:
Excellent
Implement Operational and Strategic Community
Investment Plans on time and on budget. Mature
our ‘outcome’ and ‘impact’ measurement through
the continued implementation of the Community
Investment Impact Measurement Framework.
Demonstrate an improvement in community
outcomes across the four key ‘outcome’ indicators:
education and leadership, economic participation,
natural resource resilience, and good health and
social wellbeing.
FY21 Community spend was on budget. We matured our approach to measuring the
outputs and outcomes of our community investments through the application of our
Community Investment Impact Measurement Framework.
In FY21, we saw improved outcomes across our four investment priority areas, which are
reported in our Sustainability Development Report.
Critical support was provided to communities and governments during the COVID-19
pandemic.
In addition, a social performance framework was completed and is being piloted.
Risk Management:
Excellent
More than 90 per cent on time completion of
planned control management activities plus deliver
second line assurance over 15 per cent of material
and strategic risks.
In FY21, 93 per cent of controlled management activities were completed on time and
second line assurance was delivered over 40 per cent of material risks.
(1) Baseline for Occupational Exposure Limits (OEL) excludes SAEC and TEMCO. More information can be found on page 14.
(2) FY21 emission forecast and FY15 baseline include the updated methane Global Warming Potential factor in Australia.
(3) A pro-rata calculation was applied for SAEC and TEMCO given their divestment part way through the year so that our emissions performance was not overstated in the FY21
Business Scorecard.
South32 Annual Report 2021Governance Scorecard measure
Weight
Performance
Financial: Production, cost
and capital expenditure
25%
Production:
Good
Outcome (Target = 25%)
Zero
Target Maximum
26%
97 – 103 per cent of revenue equivalent
production.
FY21 revenue equivalent production was 101 per cent.
Cost:
Good
Within US$50 million of FY21 budget (adjusted for
FX, price-linked and other costs).
Cost, adjusted by US$12M for the incremental impact of COVID-19, was US$3M above
budget.
Capital Expenditure:
Fair
Within five per cent of FY21 sustaining capital
expenditure budget (adjusted for FX), within 5 per
cent of FY21 budget and schedule for major capital
projects spend (adjusted for FX), and less than 20
per cent break-in projects.
Financial: Adjusted ROIC
25%
Achieve budget FY21 Adjusted ROIC, consistent
with our cost, production and capital expenditure
targets.
Strategic priorities
25%
Complete the divestment of South Africa Energy
Coal in line with commercial terms.
Execute and announce the divestment of the
Manganese Smelters at TEMCO and Metalloys.
Progress portfolio optimisation sequence and
plan.
Progress pre-feasibility (PFS) and feasibility studies
at Hermosa and the independent peer review at
Eagle Downs. Determine and proceed with plan.
Achieve FY21 Inclusion and Diversity targets and
implement activities to increase engagement
above pre-COVID-19 levels.
In FY21, both sustaining capital expenditure and major capital projects expenditure were
84 per cent of budget. Break-in projects were at 18 per cent.
Good
In FY21, adjusted ROIC was 3.1 per cent against the budget level of 3.1 per cent.
25%
24%
Fair
Transaction completed on 1 June 2021 broadly in line with commercial terms.
Good
TEMCO divestment completed on 4 January 2021 and the Metalloys smelter placed on
care and maintenance.
7
9
Good
Progress made on a number of projects in addition to SAEC and TEMCO.
Fair
At Hermosa, the PFS was delayed given the impact of COVID-19. An updated mineral
resource estimate for Taylor was released, with positive indicators. At Eagle Downs, the
feasibility study was completed in H1 FY21 and progress has been made in determining
the preferred path.
Good
Met targets with regard to representation of women on our Board, in our Lead Team and
across our organisation(3). Below target for women at some leadership levels and for
Black People in Management in South Africa. Proactive activities undertaken to increase
employee engagement through the COVID-19 impacted period.
Subtotal
Target = 100%
Maximum = 150%
101%
(3) FY21 performance measured against FY20 data that excludes SAEC. More detail can be found on page 16.
South32 Annual Report 2021Governance Remuneration report continued
A2 FY21 Business Modifier
The Business Modifier is an integral component of the STI that considers overall business outcomes or other factors that are not
specifically contemplated in the Business Scorecard, such as:
– the shareholder experience;
– unexpected material external events, including the impact of a global pandemic or significant disruption to global trade;
– fatalities and significant safety or environmental issues;
– significant reputational issues; or
– an assessment of risk, culture or any other item that the Board considers appropriate.
The Modifier, based on Board discretion, ensures that STI outcomes reflect overall business performance, including both what has been
delivered and how it has been achieved. The outcome may also be positive or negative, or may be applied to an Executive KMP on an
individual or a group basis depending on the factors under consideration.
For FY21, the Board considered a number of factors before deciding on the application of the Business Modifier:
– In May 2021, Mr Petros Sibeko, a contractor working on the Klipspruit Extension Project at South Africa Energy Coal was fatally
injured following an incident involving the use of an elevated platform. We are deeply saddened by this event and will never be truly
successful until we eliminate fatalities and significant incidents.
– We delivered strong operating results, including record production at Worsley Alumina, Brazil Alumina and Australia Manganese,
while controlling our costs and reducing capital expenditure. In FY21 the business delivered underlying EBIT of US$844 million
(US$446 million in FY20), free cash flow of US$825 million(1) (US$583 million in FY20) and returned US$670 million to our shareholders
(US$424 million in FY20). Under the circumstances, our strong operating results for FY21 are an excellent achievement.
– Our teams remained resilient to the ongoing challenges provided by COVID-19, which were most acute in Southern Africa, Colombia
and Brazil. Our response to the pandemic is unchanged and we continue to make every effort to keep our people safe and well,
maintain safe and reliable operations and support our communities.
On balance, and considering the actual pay outcomes, encompassing Fixed Remuneration, STI and LTI, the Board applied a negative
Business Modifier to Executive KMP to reflect the fatality. For the CEO and the COO Africa, a Business Modifier of negative 20 per cent
has been applied. For all other Executive KMP, a Business Modifier of negative five per cent has been applied to the overall STI outcome.
0
8
As part of its deliberations, the Board also discussed the impact of the New South Wales (NSW) Independent Planning Commission’s
refusal of our application for the Dendrobium Next Domain (DND) life extension project at Illawarra Metallurgical Coal (IMC). This decision
was unexpected, both for management and other external stakeholders, and reflected a fundamental shift in the approvals landscape.
Subsequently, the NSW State Legislative Council passed a motion requesting that any further development of DND be declared as
state significant infrastructure. Given the resultant level of uncertainty in the approvals process, we impaired the carrying value of
Illawarra Metallurgical Coal by US$728M (post tax ~US$510M), which led to a statutory loss at the Group level in FY21. In light of the
prevailing circumstances, the Board concluded that the contributing factors to the impairment were beyond management’s control. The
Board also considered the shareholder experience during the year, including our strong cash generation that enabled the payment of
dividends, the continuation of our capital management program and strong share price appreciation. Consequently, the Board elected
not to further penalise Executive KMP by increasing the negative impact of the Business Modifier.
Table 1.5 summarises the application of the Business Modifier since FY17.
Table 1.5 – Application of the Business Modifier by the Board (multiplier applied to the Business Scorecard outcome)
CEO:
COO Africa:
Other Executive KMP:
Modifier for
FY21
-20%
-20%
FY20
-30%
-30%
-5%
One fatality in
South Africa and
statutory loss
as a result of the
impairment
-15%
One fatality in South
Africa and a decline
in earnings and
share price
Modifier applied in previous years
FY18
FY19
No modifier
applied
-15%
-15%
-5%
One fatality in South
Africa and the
impact of the Appin
mine suspension
in FY17
FY17
-2.5%
-5%
-
One fatality in
South Africa
(1) Free cash flow from operations including net distributions from our manganese equity accounted investments (EAI).
South32 Annual Report 2021Governance B FY21 individual performance
Our Board determines the Individual Scorecard measures for Executive KMP in relation to what was delivered, as demonstrated in the
performance of the Executive’s portfolio, and how it was delivered, which considers demonstrated leadership and behaviour aligned to
our values, risk framework and governance processes.
While the Board acknowledged FY21 was an excellent year for the CEO under difficult circumstances, when reflecting on Graham Kerr’s
performance the Board agreed not to apply an individual outcome, deeming the overall South32 business outcome to be appropriate
for the CEO.
Individual outcomes were applied to the other Executive KMP, reflecting the performance of their areas of accountability. These
outcomes ranged from 95 per cent to 120 per cent, as indicated in Table 1.6 below.
C Overall FY21 STI outcomes
Overall STI outcomes for FY21 are determined through our Board’s assessment of the Business and Individual Outcomes, as outlined in
Table 1.6.
Table 1.6 – STI earned by Executive KMP in respect of FY21 performance
Executive KMP
Mr G Kerr
Mrs K Tovich
Mr M Fraser
Mr J Economidis(3)
Business
Scorecard
Outcome %
Modifier
+/- %
Individual
Outcome %
Overall
STI Outcome
% of Target
Total
STI Awarded
Cash
(A1)
101
101
101
101
(A2)
-20
-5
-20
-5
(B)
100(2)
120
100
95
A1 x (1+A2) x B
81
115
81
91
(A$’000)
1,758
1,146
968
410
(A$’000)(1)
879
573
484
273
Deferred
Rights
(A$’000)
879
573
484
137
Percentage of maximum STI
Awarded
(%)
Forfeited (%)
54
77
54
61
46
23
46
39
(1) The Cash portion of the STI will be paid in cash in September 2021. The deferred rights to receive South32 shares are anticipated to be granted in or around December 2021
and will be due to vest in August 2023. The rights remain subject to continued service with the South32 Group.
(2) The Board determined to apply the overall South32 Business Outcome to the CEO, Graham Kerr. His Individual Outcome was therefore deemed to be 100.
(3) As Jason Economidis is acting in role, he has retained much of his prior reward arrangements. He has a reduced portion of Deferred STI as he is granted retention rights as part
of the Management Share Plan awards that are applicable to his prior role. See page 74 for further information on Mr Economidis’ reward arrangements.
8
1
South32 Annual Report 2021Governance
Remuneration report continued
Long-Term Incentive
FY18 LTI and Management Share Plan Performance Award
Our FY18 LTI awards were tested for vesting subject to service and performance conditions to 30 June 2021. These awards are subject
to TSR performance conditions over four years, with two-thirds measured in reference to a mining sector index (the IHS Markit Global
Mining Index) and one third with reference to a world index (the MSCI World Index). The four-year period for this award was from 1 July
2017 to 30 June 2021.
For the LTI Awards to vest in full, they would need to outperform both indices by at least 23.9 per cent over the performance period
(5.5 per cent per annum cumulative). Given that our TSR failed to meet the threshold level of performance required against both
comparator indices (see Diagram 1.9 and Table 1.7), these awards lapsed in full in August 2021.
South32 employees in management roles below the Lead Team participate in the Management Share Plan (MSP). We granted Katie
Tovich and Jason Economidis their FY18 MSP Performance Awards before becoming Executive KMP. These awards have the same
performance and vesting conditions as our FY18 LTI Awards and have therefore also lapsed in full in August 2021.
Diagram 1.9 – Indicative TSR performance: South32 vs comparators
Diagram 1.10 – Vesting Outcome
150%
100%
50%
0%
)
R
S
T
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
100% vesting
40% vesting
0% vesting
TSR
= index
TSR > index
by 5.5% pa
Sector Index
World Index
-50%
FY17
2
8
FY18
FY19
FY20
FY21
South32
Sector Index
World Index
Table 1.7 – South32 LTI Award vesting outcome
Sector Index
World Index
TSR performance(1)(2)
Vesting
outcome
Index
weighting
Index (A)
South32 (B)
125%
69%
31%
Required for
100% vesting
Index+23.9%
Index+23.9%
Achieved (B-A)
(94%)
(38%)
(C)
0%
0%
(D)
2/3
1/3
Weighted
vesting
outcome
(C x D)
0%
0%
0%
(1) TSR performance reflects the one-month average return from 30 June 2017 at the start of the performance period, to the one-month average return to 30 June 2021 at the
end of the performance period.
(2) The Board and Remuneration Committee use information from an external provider to inform them of the performance of the relevant index to assess the vesting outcome for
the LTI.
FY19 Management Share Plan Retention Award
While South32 does not offer retention rights to permanent members of the Lead Team, we allow employees who are promoted into
Executive KMP roles to retain unvested awards that had been granted under the Management Share Plan (MSP) while in their prior role.
MSP awards are a combination of performance rights and retention rights.
We granted the FY19 MSP Retention Awards to Katie Tovich and Jason Economidis before they became members of KMP. Given the
retention-focused objective of these awards, the vesting conditions are service-based (with a service condition to 30 June 2021) with no
additional performance conditions. As the service condition was met, our Board approved these awards to vest in full in August 2021.
The structure of the MSP is detailed on page 92.
South32 Annual Report 2021Governance
LTI outcomes in FY21
Table 1.8 – South32 LTI awards vested or lapsed/forfeited
Executive KMP
Award
Mr G Kerr
Mrs K Tovich
Mr M Fraser
Mr J Economidis
FY18 LTI
FY18 MSP Performance
FY19 MSP Retention
FY18 LTI
FY18 MSP Performance
FY19 MSP Retention
Number of
rights granted
Number of
rights vested
Number of
rights lapsed/
forfeited
Value at
grant(1)
(A$’000)
Value lapsed/
forfeited(2)
(A$’000)
2,026,717
189,312
55,725
925,572
73,156
49,481
-
-
55,725
-
-
49,481
2,026,717
189,312
-
925,572
73,156
-
5,310
496
204
2,425
192
181
5,310
496
-
2,425
192
-
Value of Share
price
movement(3)
(A$’000)
Value at
vesting(4)
(A$’000)
-
-
(41)
-
-
(36)
-
-
163
-
-
145
(1) ‘Value at grant’ is the number of rights granted multiplied by the grant determination price in June 2017 of A$2.62 (FY18 LTI/FY18 MSP Performance) and June 2018 of A$3.66
(FY19 MSP Retention), based on the Volume Weighted Average Price (VWAP) over the last 10 trading days in June of the respective year.
(2) ‘Value lapsed/forfeited’ is the number of rights lapsed/forfeited based on performance relative to the performance measures, multiplied by the grant determination price of
A$2.62 (for the FY18 LTI/FY18 MSP Performance).
(3) ‘Value of share price movement’ is the number of shares that vested, multiplied by the difference between the grant determination price of A$3.66 (for the FY19 MSP Retention)
and the share price at 30 June 2021 of A$2.93. This reflects the value added/(lost) due to the change in share price since the start of the performance period.
(4) ‘Value at Vesting’ is the number of shares that vested in August 2021, multiplied by the closing share price of South32 shares on 30 June 2021 of A$2.93.
LTI granted in FY21
As part of our FY21 LTI Plan, we granted performance rights to Executive KMP in December 2020. These awards have a four-year
performance period and are subject to performance hurdles (outlined on page 74).
As Jason Economidis was acting in the COO role in FY21, he continued to participate in the MSP that grants a portion of the LTI awards
in performance rights, aligned to the Executive KMP LTI, and a portion in retention rights with a service-based hurdle. As he receives the
MSP retention rights, he is allocated proportionately less Deferred STI. The FY21 MSP Retention Awards have a three-year service-based
vesting condition only (see Table 1.14 for key terms for the MSP). In recognition that Mr Economidis is acting as a member of Executive
KMP, he was granted the same level of LTI award as the other Executive KMP.
Shareholders approved, under ASX Listing Rule 10.14, the grant of rights for the CEO at the AGM on 29 October 2020.
As outlined in the 2020 Notice of Meeting, in light of the drop in the South32 share price from FY19 to FY20, the Board exercised its
discretion to determine that, for the CEO, the value of the FY21 LTI that can be received in the year of vesting will be limited to twice the
grant value of the award.
8
3
Any value above that level that would otherwise be received based on testing against the performance conditions, will be forfeited or, in
exceptional circumstances and at the Board’s discretion, deferred for a further period. The discretion to defer vesting of a portion of the
award in excess of the maximum value, would be exercised in accordance with our Guiding Principles (set out on page 73) with particular
regard to alignment with the experience of our shareholders.
The vesting outcome applied to the CEO at that time will inform the Board’s application of discretion with regard to the vesting value for
other Executive KMP.
Table 1.9 – FY21 LTI grants
Executive KMP
Award
Mr G Kerr
Mrs K Tovich
Mr M Fraser
Mr J Economidis
FY21 LTI
FY21 LTI
FY21 LTI
FY21 MSP Retention Award
FY21 MSP Performance Award
Reward determination(1)
(calculated at the start of the performance period 1 July 2020)
Grant
(December 2020)
Face Value
(% of Fixed
Remuneration)(2)
Face value
(A$’000)
Target value(3) (%
of Fixed
Remuneration)
Target value
(A$’000)
300
200
250
40
200
5,445
1,660
2,500
200
1,000
120
80
100
40
80
2,178
664
1,000
200
400
Number
of rights
granted(4)
2,695,544
821,782
1,237,623
99,009
495,049
(1) The grant of awards is based on the face value as outlined in Components of our reward (see page 74).
(2) For Jason Economidis, face value is calculated as a percentage of his salary (A$500,000).
(3) The target value considers the difficulty of achieving performance hurdles and anticipated share price volatility.
(4) The number of rights granted to Executive KMP in December 2020 is calculated by dividing the face value by the VWAP of South32 shares traded on the ASX over the last
10 trading days of June 2020 (Grant Price), being A$2.02. The Fair Value at grant for accounting purposes, as calculated by PwC, was A$1.18 per right for the FY21 LTI Award
granted to the CEO, $1.30 per right for FY21 LTI Award granted to other Executive KMP and the FY21 MSP Performance Award, and $2.28 per right for FY21 MSP Retention
Award.
South32 Annual Report 2021Governance
Remuneration report continued
Terms and conditions of rights awarded under equity plans
Type of equity
Dividend and
voting rights
Cessation of
employment
We deliver deferred STI and LTI equity awards (including Transitional Performance and MSP awards) in the form
of share rights. These are rights to receive fully paid ordinary shares in South32 Limited(1) subject to meeting
specific performance and vesting conditions (Rights). As the Rights are an element of remuneration, no amount is
payable by employees to be allocated the Rights. If the Rights vest, no consideration or exercise price is payable
for the allocation of shares. As Rights are automatically exercised, they do not have an expiry date.
Rights carry no entitlement to voting, dividends or dividend equivalent payments.
Unless our Board determines otherwise:
– Resignation or termination for cause: all unvested Rights lapse;
– Death, serious injury, disability or illness that prevents continued employment or total permanent disability: all
unvested Rights vest immediately; and
– Other circumstances, generally:
– Deferred STI awards vest immediately;
– LTI and MSP Performance awards are pro-rated and the reduced portion remains on foot and eligible for
vesting in the ordinary course, subject to any applicable performance hurdles; and
– MSP Retention awards are pro-rated and the reduced portion vests immediately.
Change of control
Our Board can determine the level of vesting (if any) having regard to the portion of the vesting period elapsed,
performance to date against any applicable performance conditions and other factors they deem appropriate.
Malus and
clawback
Our Board can reduce or clawback all vested and unvested STI and LTI awards in certain circumstances to ensure
Executives don’t obtain an inappropriate benefit. These circumstances are broad, and can include:
– An Executive engaging in misconduct;
– A material misstatement of our accounts results in vesting;
– Behaviours of Executives that bring us into disrepute; and
– Any other factor our Board deems justifiable.
4
8
Rights
to participate
in new issues
A participant can’t take part in new issues of securities in relation to their unvested Rights. However, the relevant
plan rules include specific provisions dealing with rights issues, bonus issues and corporate actions, and other
capital reconstructions.
(1) References in this Remuneration report to ‘South32 shares’ are references to fully paid ordinary shares in South32 Limited.
Minimum Shareholding Requirements and service contracts
Minimum
Shareholding
Requirement
A Minimum Shareholding Requirement (MSR), equal to 100 per cent of Fixed Remuneration for Executive KMP,
drives a long-term focus and alignment with our shareholders. The MSR applies to all Executive KMP and must
be obtained within five years of appointment as a KMP(1).
See page 92 for current shareholdings of our Executive KMP.
Contracts are entered into by Executive KMP in their personal capacity. The key terms are consistent for all
Executive KMP, and include:
– No fixed term;
– Six months’ notice by either party or payment by the company in lieu of notice; or
– Termination without notice for serious misconduct; or
Our service
contracts
– Two months’ notice by the Executive where a fundamental change occurs that materially diminishes their
status, duties, authority or terms and conditions (receiving payment in lieu of six months’ notice)(2).
The maximum payment in lieu of notice won’t exceed six months’ Fixed Remuneration. Executive KMP will be
subject to several post-employment restraints for a period of up to six months after their employment with
the Group ends. Shareholder approval was granted at the 2018 Annual General Meeting (AGM) in relation
to termination benefits for Executive KMP for a further three years and further shareholder approval will be
sought to refresh this approval at the 2021 AGM.
(1) The minimum shareholding requirement does not apply to Jason Economidis as he is acting in role.
(2) As Jason Economidis is acting in role, the clause does not form part of his contract.
South32 Annual Report 2021Governance Non-Executive Director remuneration
Remuneration policy
As a global company, it’s important that we offer competitive Director fees to help us attract the appropriate level of experience from
a diverse global pool. These fees reflect the size, complexity and global nature of our business and acknowledge the responsibilities of
serving on our Board.
To ensure the independence of our Non-Executive Directors, their remuneration does not have an ‘at risk’ element.
We pay committee fees to recognise the additional responsibilities associated with participating on a Board Committee.
We pay a fixed fee to our Board Chair for all responsibilities, including participation on any Board Committees.
FY21 Non-Executive Director fees and fee pool
We review fees every year and may get external advice to help us do so. We based the review of FY21 fees on data provided by external
consultants, which resulted in no increase in the Chair and Non-Executive Directors’ fees for FY21. Committee fees also remained
unchanged.
The maximum aggregate amount we can pay our Non-Executive Directors is still A$3.9 million per annum (Fee Pool). Before making any
changes to this, we will always seek shareholder approval.
The table below outlines the fee levels for FY21.
Table 1.10 – FY21 Board fees (effective 1 September 2020)
Fee
Description
Board Fees
Committee Fees
Board of Directors
Chair of the Board
Other Non-Executive Directors
Risk and Audit, Remuneration and Sustainability Committees
Committee Chair
Members
FY21 fee
(A$ per annum)
Increase %
578,000
189,250
46,000
23,000
0
0
0
0
Minimum shareholding requirements
Each Non-Executive Director is required to accumulate a minimum shareholding level of one year’s base fees within a reasonable period.
You can find more details of their current shareholdings in Table 1.15.
Travel allowance
As a global company, our Board meetings are ordinarily held in Australia, South Africa and other locations, where travel restrictions allow
(see page 63 for more details). Site visits are also an important part of our usual Board program, giving Directors:
– A better understanding of workplace culture through interactions with site-based employees;
8
5
– An improved understanding of local and operational risks;
– A chance to participate in continuous education; and
– On-the-ground experience.
As these meetings, site visits and other engagements take time and commitment, particularly if they’re in remote locations, we would
usually give our Directors an allowance to compensate for this.
However, with COVID-19 and its impact on global travel, our Board has not had the opportunity to all meet physically or undertake site
visits this financial year and as such, no travel-related payments were made in FY21.
Having reviewed Director travel allowances, we have decided to substantially reduce them from FY22 in the event travel is possible (see
page 89 for further details).
South32 Annual Report 2021Governance Remuneration report continued
FY21 Non-Executive Director remuneration
In Table 1.11, we’ve set out the statutory disclosures required under the Corporations Act and in accordance with Australian Accounting
Standards, in respect of FY21 remuneration paid to Non-Executive Directors.
Table 1.11 – Non-Executive Director remuneration (A$’000)
Non-Executive Director
Ms Karen Wood
FY21 term
Full year
Mr Frank Cooper AO
Full year
Mr Guy Lansdown(3)
Full year
Dr Xiaoling Liu
Full year
Dr Ntombifuthi Mtoba
Full year
Mr Wayne Osborn(4)
Full year
Mr Keith Rumble(5)
Full year
TOTAL
Short-term benefits
Post-employment
benefits
Board &
Committee
fees
Non-monetary
benefits(1)
Other cash
allowances &
benefits(2)
Superannuation
556
555
237
237
235
137
214
214
212
208
237
272
305
279
1,996
1,902
-
-
-
-
2
-
-
-
2
2
-
-
2
2
6
4
-
41
-
25
-
34
-
32
-
50
-
49
-
58
-
289
22
21
22
21
-
-
22
21
-
3
22
21
-
3
88
90
Total
578
617
259
283
237
171
236
267
214
263
259
342
307
342
2,090
2,285
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
(1) Includes assistance for tax return preparation in FY20 and FY21.
(2) Includes travel allowance paid in FY20.
(3) Guy Lansdown joined the Board as an independent Non-Executive Director on 2 December 2019. FY20 details reflect this appointment date.
(4) FY20 fees for Wayne Osborn include backpay for FY19, relating to his role as interim Chair of the Nomination and Governance Committee. The total payment made relating to
this role for the period 1 August 2018 to 31 December 2019 was A$35,417 (i.e. A$25,000 per annum).
(5) Keith Rumble received remuneration of ZAR 539,750 for his role as a Non-Executive Director of South32 SA Coal Holdings (Pty) Ltd during FY21 (ZAR 262,889 in FY20). This
figure is included in Board and Committee fees above based on a foreign exchange rate of AUD1:ZAR11.60 (AUD1:ZAR10.51 in FY20).
6
8
South32 Annual Report 2021Governance Looking forward to FY22
Our purpose is to make a difference by developing natural resources, improving people’s lives now and for generations to come. We are
trusted by our owners and partners to realise the potential of their resources.
Our purpose is underpinned by our simple yet powerful strategy which is focused on optimising the performance of our operations,
unlocking their potential and identifying new opportunities to create value for all our stakeholders. This has seen us significantly simplify
and reposition our portfolio for a low carbon future, and we’ve added multiple growth options and a pipeline of greenfield exploration
projects with a bias to base metals. We’re also working hard to minimise our impact as emphasised by our recent commitment to halve
operational carbon emissions (Scope 1 and 2) by 2035.
Our Reward Framework is designed to be fit-for-purpose through the business cycle, allowing the Board to find the right balance
between remuneration outcomes that reward and incentivise our Executives, while also reflecting overall business performance and
shareholder experience.
Although we have maintained a consistent approach to remuneration since Demerger and believe shareholders will be best placed if
we retain the core elements of our Reward Framework, there are now opportunities for enhancement. The recent divestments of SAEC
and TEMCO, the pending completion of the Taylor pre-feasibility study and our aim to halve operational carbon emissions (Scope 1
and 2) by 2035, mean the timing is now right for us to embed those enhancements into our executive Reward Framework from FY22.
These changes, which are outlined below, will further enhance the link between executive remuneration and our business strategy and
priorities.
Long-term incentive
We are enhancing our LTI design for FY22 through three adjustments that are summarised in diagram 1.11.
Diagram 1.11 - South32 Long-Term Incentive - weighting of measures and reduction in value for the CEO from FY21 to FY22
FY21 LTI (CEO)
FY22 LTI (CEO)
300% of FR(1)
A$5,445,000
Relative TSR
vs MSCI Index
Relative TSR
vs Global
Mining Index
Strategic Measures
1
Relative TSR
vs MSCI Index
Relative TSR
vs Global Mining
Constituents
2
LTI face value
reduced by 33%
200% of FR
A$3,630,000
3
1 The introduction of strategic measures
into the LTI, making up 20 per cent of the
performance hurdles for the incentive.
2 A shift from the Index to particular
constituents of the global mining
comparator group from which one element
of relative TSR is measured.
3 A reduction in the face value of the awards.
8
7
(1) Figures reflect reward for South32 CEO, based on Fixed
Remuneration (FR) of A$1,815,000.
Introduction of strategic measures
We will be incorporating two strategic measures into the LTI that are aligned to our long-term business priorities. Namely, our approach
to climate change and the transition of our portfolio towards those future facing base metals, as these elements will underpin the long-
term success of our business and the protection and creation of value for shareholders. The strategic measures will have a weighting of
10 per cent each, for a total weighting of 20 per cent of the LTI performance hurdles.
Climate change measure:
We have announced plans to reduce our operational carbon emissions (Scope 1 and 2) by 50 per cent between FY21 and 2035, relative
to our FY21 baseline, by implementing our Decarbonisation Strategy, which includes:
– The advancement of conceptual projects through our capital investment tollgates, and the successful commissioning of identified
emissions reduction projects;
– The ongoing assessment of new technologies and alternative energy sources; and
– Continued participation and direct investment in research and development partnerships.
Consistent with our purpose, we will work to provide a Just Transition towards net zero in a way that supports our people, local
communities and other stakeholders.
Portfolio management measure:
We are planning to further reshape our business for a low carbon world and increase our exposure to future facing base metals by:
– Building a high-quality portfolio of greenfields and brownfields exploration and development options;
– Optimising our existing portfolio by responsibly transferring ownership of non-core operations or transitioning them to closure;
– Developing or acquiring operations which are cash generative through the cycle, improving the overall quality of our business; and
– Maintaining discipline by adhering to our proven Capital Management Framework.
South32 Annual Report 2021Governance Remuneration report continued
Assessing performance for the strategic measures:
The success of these strategic initiatives will be measured on our ability to make material progress in these areas, whilst protecting
and creating shareholder value as we navigate this business-critical transformation. Transparent disclosure for these two strategic
measures will be provided at the end of each 12-month period in the Remuneration report so that external stakeholders have sufficient
information to track and judge progress.
Key elements of these awards include:
– For FY22, each measure will make up 10 per cent of the LTI;
– Performance will be measured over a four-year performance period; and
– The Board will retain full discretion when determining the final vesting outcome.
Vesting outcomes for the strategic measures will be determined by the Board following the end of the four-year performance period on
30 June 2025. The Board’s rationale in assessing performance and determining these vesting outcomes will be clearly articulated.
Shift from index to constituents for the global mining comparator group
For FY22, 80 per cent of the LTI will continue to be assessed on the basis of our TSR performance when compared to two comparator
groups:
– A global mining comparator group for two thirds of this element.
Where we have used the IHS Markit Global Mining Index in the past, we will shift to a fixed constituent group of companies. This
constituent group will be made up of all companies that comprise the IHS Markit Global Mining Index at the start of the performance
period and will be locked in for the four-year performance period (with Board discretion to make adjustments to take into account
events such as takeovers, mergers or Demergers that may occur during the performance period). The threshold for vesting will be
the median (P50) of this group, with the stretch being the upper quartile (P75). These changes will bring South32’s approach more in
line with market practice; and
– A world comparator group for one third of this element.
We will continue to adopt the Morgan Stanley Capital International (MSCI) World Index over the four-year performance period, with no
change to the vesting criteria.
We believe that maintaining an overall weighting of 80 per cent for TSR performance will ensure the LTI retains its core purpose of
directly aligning CEO and Executive KMP long-term incentive payments with returns received by shareholders.
8
8
Reduction in face value
The face value of the LTI for the CEO will reduce by 33 per cent, from 300 per cent to 200 per cent of Fixed Remuneration from FY22,
with proportionate reductions in the LTI face value for other Executive KMP. These reductions in face value reflect the changes that have
been taking place in the broader market and improve alignment with our Guiding Principles (see page 73).
Notwithstanding the reduction in face value, we will not change the Target LTI or Target Total Reward for the CEO, or other Executive
KMP, as we believe these remain appropriate for their roles (see page 75).
This means that the Total Reward (based on face value) for the CEO will reduce by 19 per cent from FY22. The face value Total Reward
for Executive KMP will reduce by between 12 per cent and 18 per cent.
South32 Annual Report 2021Governance Fixed Remuneration
There will be no increase to Fixed Remuneration in FY22 for Graham Kerr or Mike Fraser. Katie Tovich and Jason Economidis will
receive modest Fixed Remuneration increases to A$870,000 and A$730,740, respectively. The CEO’s Fixed Remuneration will remain at
A$1,815,000 per annum.
Short-term incentive
The value of the STI will remain unchanged from FY21. However, with the inclusion of climate change and portfolio management as
strategic measures in the LTI, we have reviewed the STI measures and weightings to ensure that:
– There is no double-counting between STI and LTI measures;
– We have an appropriate balance of measures across the elements of variable pay; and
– We align the performance measures with the most appropriate performance period.
For FY22, the overall design and key performance metrics of the STI will remain unchanged, with our Business Scorecard focused on
maintaining safe, reliable and profitable operations.
Performance Metrics
Measures
FY21 weighting FY22 weighting
Change to measures
Sustainability
Financial
Safety, Health, Risk Management &
Community
Adjusted Return on Invested Capital
Production, cost and capital expenditure
Strategic Items
Key elements of the FY22 Business Plan
25%
25%
25%
25%
28.3%
28.3%
28.3%
15%
Adjusted to increase the
weighting of the financial
measures in the STI given the
inclusion of the strategic
measures in the LTI for FY22.
X
Business Modifier
Consider factors that are not specifically
contemplated in the Scorecard
+/-
+/-
=
South32 Business Outcome Reflects our performance over the financial year
Director fees
There will be no increase to Non-Executive Director fees in FY22.
As from FY22, the travel allowance has been reduced by at least 36 per cent. Other than for domestic travel to a regularly scheduled
Board meeting, where air travel to a Board commitment is greater than three hours but less than 10 hours to the destination, a one-off
allowance of A$5,000 per trip now applies (FY21 was A$7,840). Where air travel is greater than 10 hours to the destination, the allowance
per trip is now A$10,000 (FY21 was A$16,800).
The travel allowance is only paid where travel is undertaken.
8
9
South32 Annual Report 2021Governance Remuneration report continued
Statutory disclosures
Statutory remuneration table for Executive KMP
In the following table, we’ve set out the statutory disclosures required under the Corporations Act and in accordance with the Australian
Accounting Standards. The amounts shown reflect the remuneration for each member of Executive KMP that relates to their service
in FY21.
Table 1.12 – Statutory remuneration of Executive KMP in FY21 (A$’000)
Executive KMP
Mr G Kerr
Mr M Fraser
Mrs K Tovich
FY21
FY20
FY21
FY20
FY21
FY20
Mr J Economidis(5) FY21
FY20
FY21
FY20
TOTAL
Short-term benefits
Post
employment
benefits
Termination
benefits
Other
long-term
benefits(3)
Share based
payments(4)
Total
Remuneration
Cash
bonus(1)
Non-
monetary
benefits(2) Superannuation
879
690
573
383
484
380
273
-
2,209
1,453
27
21
12
10
78
40
46
-
163
71
23
21
25
25
21
21
88
-
157
67
Salary
1,765
1,713
755
772
905
888
624
-
4,049
3,373
LTI
2,746
3,856
618
632
1,296
1,794
425
-
5,085
6,282
STI
798
833
324
159
430
451
43
-
1,595
1,443
165
166
74
74
92
91
46
-
377
331
6,403
7,300
2,381
2,055
3,306
3,665
1,545
-
13,635
13,020
-
-
-
-
-
-
-
-
-
-
Percentage
of total
remuneration
which is
performance
tested
69%
74%
64%
57%
67%
72%
48%
-
(1) STI is provided half in cash (which is included in the cash bonus column of the table) in September 2021 following the end of the performance period and half in deferred rights
(which is included in the share-based payments column of the table). The value of the deferred equity portion is amortised over the vesting period. As Jason Economidis is
currently acting in the COO role, 66.7 per cent of his STI is provided in cash in September 2021 with the remaining 33.3 per cent paid in deferred rights.
(2) Non-monetary benefits are non-pensionable and include such items as insurances and personal tax assistance.
(3) Other long-term benefits is the accounting expense of annual and long-service leave accrued in FY21.
(4) The related awards were not actually provided to the Executive KMP during FY21. The figures are calculated in accordance with Australian Accounting Standards and are the
amortised fair values of equity and equity-related instruments that have been granted to Executive KMP. See page 91 for information on awards outstanding during FY21.
(5) Fixed Remuneration for Jason Economidis is only shown for the period he was appointed as a member of KMP (1 July 2020).
0
9
South32 Annual Report 2021Governance Details of rights held by Executive KMP
In the following table, we’ve set out more information about the rights over South32 shares held by Executive KMP, including the
movements in rights held during FY21. See page 84 for terms and conditions about our Equity Incentive Plans.
Table 1.13 – Detail and movement of rights over South32 shares held by Executive KMP during FY21
Award(1)(2)
Executive KMP
Mr G Kerr
FY20 Deferred STI (S)
FY21 LTI (P)
FY19 Deferred STI (S)
FY20 LTI (P)
FY18 Deferred STI (S)
FY19 LTI (P)
FY18 LTI (P)
FY17 LTI (P)
Mrs K Tovich
FY20 Deferred STI (S)
FY21 LTI (P)
FY19 Deferred STI (S)
FY20 LTI (P)
FY20 Transitional LTI (P)
FY19 MSP Retention (S)
FY19 MSP Performance (P)
FY18 MSP Retention (S)
FY18 MSP Performance (P)
FY17 MSP Performance (P)
Mr M Fraser
FY20 Deferred STI (S)
FY21 LTI (P)
FY19 Deferred STI (S)
FY20 LTI (P)
FY18 Deferred STI (S)
FY19 LTI (P)
FY18 LTI (P)
FY17 LTI (P)
Mr J Economidis
FY21 MSP Retention (S)
FY21 MSP Performance (P)
FY20 MSP Retention (S)
FY20 MSP Performance (P)
FY19 MSP Retention (S)
FY19 MSP Performance (P)
FY18 MSP Retention (S)
FY18 MSP Performance (P)
Opening
Balance
Number
9,129,396
-
-
352,097
1,696,261
325,725
1,450,819
2,026,717
3,277,777
1,434,750
-
-
27,518
517,133
129,283
55,725
139,314
75,725
189,312
300,740
4,233,533
180,724
778,816
176,645
674,863
925,572
1,496,913
493,671
-
62,305
155,763
49,481
123,704
29,262
73,156
Grant
Date
Granted in
FY21(3)
Vested in FY21
Forfeited or other
change in FY21
Closing
balance
Anticipated
vesting date
Number
Number(4)
04-Dec-20
04-Dec-20
06-Dec-19
06-Dec-19
07-Dec-18
07-Dec-18
13-Dec-17
02-Dec-16
04-Dec-20
04-Dec-20
06-Dec-19
06-Dec-19
06-Dec-19
07-Dec-18
07-Dec-18
13-Nov-17
13-Nov-17
17-Nov-16
04-Dec-20
04-Dec-20
06-Dec-19
06-Dec-19
07-Dec-18
07-Dec-18
13-Dec-17
02-Dec-16
04-Dec-20
04-Dec-20
06-Dec-19
06-Dec-19
07-Dec-18
07-Dec-18
07-May-18
07-May-18
2,976,532
280,988
2,695,544
-
-
-
-
-
-
977,812
156,030
821,782
-
-
-
-
-
-
-
-
1,392,437
154,814
1,237,623
-
-
-
-
-
-
594,058
99,009
495,049
-
-
-
-
-
-
325,725
-
-
-
-
325,725
-
-
-
75,725
-
-
-
-
-
-
-
75,725
-
-
176,645
-
-
-
-
176,645
-
-
-
29,262
-
-
-
-
-
-
29,262
-
%(5)
9
-
-
-
-
100
-
-
-
20
-
-
-
-
-
-
-
100
-
-
11
-
-
-
-
100
-
-
-
100
-
-
-
-
-
-
100
-
Number
3,277,777
-
-
-
-
-
-
-
3,277,777
300,740
-
-
-
-
-
-
-
-
-
300,740
1,496,913
-
-
-
-
-
-
-
1,496,913
-
-
-
-
-
-
-
-
-
%(5)
91
-
-
-
-
-
-
-
100
80
-
-
-
-
-
-
-
-
-
100
89
-
-
-
-
-
-
-
100
0
-
-
-
-
-
-
-
-
Number
8,502,426
280,988
2,695,544
352,097
1,696,261
-
1,450,819
2,026,717
-
2,036,097
156,030
821,782
27,518
517,133
129,283
55,725
139,314
-
189,312
-
3,952,412
154,814
1,237,623
180,724
778,816
-
674,863
925,572
-
1,058,467
99,009
495,049
62,305
155,763
49,481
123,704
-
73,156
Aug-22
Aug-24
Aug-21
Aug-23
Aug-20
Aug-22
Aug-21
Aug-20
Aug-22
Aug-24
Aug-21
Aug-23
Aug-22
Aug-21
Aug-22
Aug-20
Aug-21
Aug-20
Aug-22
Aug-24
Aug-21
Aug-23
Aug-20
Aug-22
Aug-21
Aug-20
Aug-23
Aug-24
Aug-22
Aug-23
Aug-21
Aug-22
Aug-20
Aug-21
(1) At the time of vesting, the quantum of all awards that vest based on performance and/or service conditions will automatically convert to ordinary South32 shares for nil
consideration in the participant’s name. Any Rights that do not vest will immediately lapse, hence there is no expiry date associated with the awards. (S) - Service only or (P) -
Performance and Service conditions apply. As Rights are subject to service and/or performance conditions, the minimum possible total value of Rights granted under South32
Equity Plans for future financial years is nil and the maximum possible total value is the number of Rights multiplied by the market price of South32 shares on the date of
vesting.
(2) Further details regarding each of the prior year equity grants are described in past South32 Annual Reports.
(3) The fair value for awards granted in FY21 is the grant date fair value for accounting purposes being A$2.37 for the FY20 Deferred STI Award, A$1.18 for the FY21 LTI Award
granted to the CEO, A$1.30 for the FY21 LTI Award and FY21 MSP Performance Award granted to other KMP and A$2,28 for the FY21 MSP Retention Award. Shareholders
approved, under ASX Listing Rule 10.14, the grant of rights for the CEO at the AGM on 29 October 2020.
(4) Rights converted to ordinary South32 shares for nil consideration on 21 August 2020. The South32 closing share price on this date was A$2.23.
(5) Percentage based on the maximum number of Rights available to vest in FY21.
9
1
South32 Annual Report 2021Governance
Remuneration report continued
Details of awards for Katie Tovich and Jason Economidis
Before becoming Executive KMP, Katie Tovich and Jason Economidis already held several awards granted under the MSP. Jason
Economidis continues to participate in the MSP as Acting Chief Operating Officer (see page 83 for further details).
The details of these awards and the Transitional Performance Award (LTI) granted to South32 employees promoted into the Lead Team
are outlined in Table 1.14. For additional terms of the rights granted under the two plans, see Terms and conditions of rights awarded
under equity plans (page 84).
Table 1.14 – Key terms and performance conditions of awards(1)
Award
Key Terms and Performance Conditions
Management
Share Plan
The Management Share Plan is our LTI plan for eligible management employees below Lead Team level. The Plan has
two elements:
– Retention rights with a three-year vesting and service period from 1 July to 30 June, vesting in August three years
from grant provided employees remain employed by us; and
– Performance rights with a four-year performance and service period from 1 July to 30 June, vesting in August four
years from grant, subject to the same performance and vesting conditions as our LTI for Executive KMP (see page
74). There is no retesting if the performance condition is not met and any rights that don’t vest will immediately
lapse/be forfeited.
Rights won’t attract any entitlement to voting, dividends or dividend equivalent payments.
Katie Tovich participated in the Management Share Plan prior to being appointed to the Lead Team. As Acting Chief
Operating Officer, Jason Economidis continues to participate in the Management Share Plan and this has been used
to deliver his FY21 LTI award.
This one-off award is granted to cover the gap in vesting on appointment as a member of the Lead Team and is due
to the transition from the Management Share Plan (three-year retention rights and four-year performance rights) to
the LTI plan for Executive KMP (four-year performance rights).
Transitional
Performance
Award
This award is subject to the same TSR performance conditions as our LTI awards for Executive KMP (see Components
of our Reward on page 74), namely two-thirds relative to a mining sector index (IHS Markit Global Mining Index) and
one-third relative to a world index (MSCI Word Index), except this award has a three-year performance period, from
1 July 2019 to 30 June 2022 for Katie Tovich.
2
9
For the award to vest in full, it would need to outperform both indices by 17.4 per cent (5.5 per cent per annum
cumulative).
There is no retesting if the performance condition is not met and any rights that don’t vest will immediately lapse/be
forfeited.
Rights won’t attract any entitlement to voting, dividends or dividend equivalent payments.
(1) See page 84 for key terms of the LTI.
Shareholdings of KMP
The Minimum Shareholding Requirement for Executive KMP is summarised on page 84.
For Non-Executive Directors, the approach used to determine the Minimum Shareholding Requirement of one year’s base fee, is the
cost to the Non-Executive Director to acquire the shares. Apart from Guy Lansdown (who was appointed in December 2019), all Non-
Executive Directors meet this requirement. The percentage of fees reflected in the table below is based on our share price at 30 June
2021.
Table 1.15 – South32 shares held directly, indirectly or beneficially by each KMP, including their related parties
Non-Executive Directors
Ms K Wood
Mr F Cooper AO
Mr G Lansdown
Dr X Liu
Dr N Mtoba
Mr W Osborn
Mr K Rumble
Executive KMP
Mr G Kerr
Mrs K Tovich
Mr M Fraser
Mr J Economidis
Held at
30 June 2020
Received on
vesting of
rights
Received as
remuneration
Other net
change(1)
Held at
30 June 2021
% of Board Fees/
fixed
remuneration(2)
367,825
128,010
-
60,000
69,386
125,704
161,380
-
-
-
-
-
-
-
3,292,285
356,541
3,228,249
-
325,725
75,725
176,645
29,262
-
-
-
-
-
-
-
-
-
-
-
-
-
45,000
-
-
48,400
-
-
-
367,825
128,010
45,000
60,000
69,386
174,104
161,380
3,618,010
432,266
(79,491)
3,325,403
-
29,262
186
198
70
93
107
270
250
584
153
974
17(3)
(1) Other net change includes purchases and sales of vested shares to cover tax liabilities.
(2) Based on the closing share price of South32 shares as at 30 June 2021 of A$2.93.
(3) Expressed as a percentage of base salary (A$500,000).
South32 Annual Report 2021Governance Additional information
Transactions with KMP
There are no amounts payable to any KMP at 30 June 2021.
On 22 June 2021 an interest free loan of A$823,906 was made to Mike Fraser in relation to South African income tax payable on
his South32 remuneration. There is no maturity date for this loan. The most recent official rate of interest published by the South
African Revenue Service for loan fringe benefits to South African employees is 4.50 per cent. As at 30 June 2021, the full loan remains
outstanding.
Otherwise during FY21, there were no transactions between KMP or their close family members and the South32 Group.
There are no loans with any other KMP.
A number of Directors of the Group have control or joint control of other entities (also known as personal entities). There have been no
transactions between those entities and no amounts were owed by or to the South32 Group during the year.
This Remuneration report was approved by our Board on 2 September 2021.
9
3
South32 Annual Report 2021Governance Financial report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to financial statements – Basis of preparation
1. Reporting entity
2. Basis of preparation
3. New standards and interpretations
Notes to financial statements – Results for the year
4. Segment information
5. Expenses
6. Tax
7. Dividends
8. Earnings per share
Notes to financial statements – Operating assets
and liabilities
9. Trade and other receivables
10. Inventories
11. Property, plant and equipment
12. Intangible assets
13. Impairment of non-financial assets
14. Trade and other payables
15. Provisions
4
9
Notes to financial statements – Capital structure
and financing
16. Cash and cash equivalents
17.
Interest bearing liabilities
18. Net finance costs
19. Financial assets and financial liabilities
20. Share capital
Notes to financial statements – Other notes
21. Auditor’s remuneration
22. Pension and other post-retirement obligations
23. Employee share ownership plans
24. Contingent liabilities
25. Subsidiaries
26. Equity accounted investments
27.
Interests in joint operations
28. Key management personnel
29. Related party transactions
30. Parent entity information
31. Discontinued operation
32. Subsequent events
Directors' declaration
Lead auditor’s independence declaration
Independent auditor’s report
95
96
97
98
99
100
100
100
101
102
102
110
110
113
113
114
114
114
115
118
119
122
123
125
125
125
126
126
134
135
135
135
136
139
140
140
142
142
143
144
144
146
147
148
149
South32 Annual Report 2021Financial Report Consolidated income statement
for the year ended 30 June 2021
US$M
Continuing operations
Revenue:
Group production
Third party products and services
Other income
Expenses excluding net finance costs
Share of profit/(loss) of equity accounted investments
Profit/(loss) from continuing operations
Comprising:
Group production
Third party products and services
Profit/(loss) from continuing operations
Finance expenses
Finance income
Net finance costs
Profit/(loss) before tax from continuing operations
Income tax (expense)/benefit
Profit/(loss) after tax from continuing operations
Discontinued operation
Profit/(loss) after tax from a discontinued operation
Profit/(loss) for the year
Attributable to:
Equity holders of South32 Limited
Profit/(loss) from continuing operations for the year attributable to the equity holders of
South32 Limited:
Basic earnings per share (cents)
Diluted earnings per share (cents)
Profit/(loss) for the year attributable to the equity holders of South32 Limited:
Basic earnings per share (cents)
Diluted earnings per share (cents)
(1) Refer to note 31 Discontinued operation.
The accompanying notes form part of the consolidated financial statements.
Note
FY21
FY20
Restated(1)
4
4
5
26
18
6
31
8
8
8
8
5,102
374
5,476
157
(5,571)
141
203
193
10
203
(178)
17
(161)
42
100
142
(337)
(195)
4,670
340
5,010
123
(4,788)
93
438
440
(2)
438
(129)
35
(94)
344
(186)
158
(223)
(65)
(195)
(65)
3.0
3.0
(4.1)
(4.1)
9
5
3.2
3.2
(1.3)
(1.3)
South32 Annual Report 2021Financial Report Consolidated statement of comprehensive income
for the year ended 30 June 2021
US$M
Profit/(loss) for the year
Other comprehensive income
Items not to be reclassified to the Consolidated Income Statement:
Investments in equity instruments designated as fair value through other comprehensive income
(FVOCI):
Net fair value gains/(losses)
Income tax (expense)/benefit
Equity accounted investments – share of other comprehensive income/(loss), net of tax
Gains/(losses) on pension and medical schemes
Income tax (expense)/benefit recognised within other comprehensive income
Total items not to be reclassified to the Consolidated Income Statement
Total other comprehensive income/(loss)
Total comprehensive income/(loss)
Attributable to:
Equity holders of South32 Limited
The accompanying notes form part of the consolidated financial statements.
Note
FY21
(195)
FY20
(65)
26
15
47
(15)
(3)
1
-
30
30
(165)
(65)
20
21
2
-
(22)
(22)
(87)
(165)
(87)
6
9
South32 Annual Report 2021Financial Report Consolidated balance sheet
as at 30 June 2021
US$M
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Current tax assets
Other
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Inventories
Property, plant and equipment
Intangible assets
Equity accounted investments
Deferred tax assets
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Current tax payables
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Deferred tax liabilities
Provisions
Deferred income
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Treasury shares
Reserves
Retained earnings/(accumulated losses)
Total equity attributable to equity holders of South32 Limited
Non-controlling interests
Total equity
The accompanying notes form part of the consolidated financial statements.
Note
FY21
FY20
16
9
19
10
9
19
10
11
12
26
6
14
17
19
15
14
17
6
15
20
20
1,613
527
15
716
13
38
2,922
259
121
74
8,938
189
380
348
11
10,320
13,242
777
408
11
27
239
-
1,462
2
799
265
1,759
1
2,826
4,288
8,954
13,597
(22)
(3,567)
(1,053)
8,955
(1)
8,954
1,315
531
19
735
27
36
2,663
303
172
77
9,680
248
460
123
11
11,074
13,737
627
355
1
9
274
5
1,271
3
662
339
1,899
1
2,904
4,175
9,562
13,943
(49)
(3,566)
(765)
9,563
(1)
9,562
9
7
South32 Annual Report 2021Financial Report Consolidated cash flow statement
for the year ended 30 June 2021
US$M
Operating activities
Profit/(loss) before tax from continuing operations
Profit/(loss) before tax from a discontinued operation
Adjustments for:
Non-operating significant items
Depreciation and amortisation expense
Impairment losses
Employee share awards expense
Net finance costs
Share of (profit)/loss of equity accounted investments
Loss on disposal of a discontinued operation
(Gains)/losses on derivative instruments and other investments measured at fair value through
profit or loss (FVTPL)
Other non-cash or non-operating items
8
9
Changes in assets and liabilities:
Trade and other receivables
Inventories
Trade and other payables
Provisions and other liabilities
Cash generated from operations
Interest received
Interest paid
Income tax (paid)/received
Dividends received
Dividends received from equity accounted investments
Net cash flows from operating activities
Investing activities
Purchases of property, plant and equipment
Exploration expenditure
Exploration expenditure expensed and included in operating cash flows
Purchase of intangibles
Investment in financial assets
Acquisition of interest previously held by non-controlling interests
Acquisition of subsidiaries and jointly controlled entities, net of their cash
Disposal of a discontinued operation, net of their cash
Cash outflows from investing activities
Proceeds from sale of property, plant and equipment and intangibles
Proceeds from financial assets
Net cash flows from investing activities
Financing activities
Proceeds from interest bearing liabilities
Repayment of interest bearing liabilities
Purchase of shares by ESOP Trusts
Share buy-back
Dividends paid
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, net of overdrafts, at the beginning of the financial year
Foreign currency exchange rate changes on cash and cash equivalents
Cash and cash equivalents, net of overdrafts, at the end of the financial year
(1) Refer to note 31 Discontinued operation.
The accompanying notes form part of the consolidated financial statements.
Note
FY21
FY20
Restated(1)
42
(340)
(55)
720
772
32
204
(133)
159
(44)
(6)
(156)
(142)
264
95
1,412
26
(70)
(163)
3
197
1,405
(536)
(54)
25
(1)
(152)
-
-
(70)
(788)
40
140
(608)
12
(52)
-
(346)
(115)
(501)
296
1,315
2
1,613
344
(222)
-
739
-
29
139
(100)
-
152
7
367
208
(184)
(104)
1,375
44
(69)
(335)
1
349
1,365
(676)
(61)
28
(36)
(259)
(3)
(73)
-
(1,080)
1
206
(873)
31
(55)
(23)
(269)
(246)
(562)
(70)
1,406
(21)
1,315
16
South32 Annual Report 2021Financial Report Consolidated statement of changes in equity
for the year ended 30 June 2021
Attributable to equity holders of South32 Limited
US$M
Balance as at 1 July 2020
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners:
Dividends
Shares bought back and cancelled
Accrued employee entitlements for
unvested awards, net of tax
Employee share awards forfeited, net of tax
Sale of shares by ESOP Trusts
Employee share awards vested and lapsed
Tax recognised for employee awards
vested and lapsed
Balance as at 30 June 2021
Balance as at 1 July 2019
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners:
Acquisition of interest previously held by
non-controlling interests
Dividends
Shares bought back and cancelled
Accrued employee entitlements for
unvested awards, net of tax
Employee share awards forfeited, net of tax
Purchase of shares by ESOP Trusts
Employee share awards vested and waived
Tax recognised for employee awards vested
and waived
Balance as at 30 June 2020
Share
capital
Treasury
shares
Financial
assets
reserve(1)
Employee
share
awards
reserve(2)
13,943
-
-
-
-
(346)
-
-
-
-
-
13,597
14,212
-
-
-
-
-
(269)
-
-
-
-
-
13,943
(49)
-
-
-
-
-
-
-
3
24
-
(22)
(105)
-
-
-
-
-
-
-
-
(23)
79
-
(49)
(54)
-
32
32
-
-
-
-
-
-
-
(22)
(9)
-
(45)
(45)
-
-
-
-
-
-
-
-
(54)
81
-
-
-
-
-
31
(5)
-
(66)
7
48
109
-
-
-
-
-
-
21
(10)
-
(39)
-
81
Retained
earnings/
(accumulated
losses)
(765)
(195)
(2)
(197)
(115)
-
-
-
-
32
Other
reserves(3)
(3,593)
-
-
-
-
-
-
-
-
-
Total
9,563
(195)
30
(165)
(115)
(346)
31
(5)
3
(10)
-
(3,593)
(8)
(1,053)
(1)
8,955
(3,590)
-
-
-
(3)
-
-
-
-
-
-
(448)
(65)
23
(42)
-
(246)
-
-
-
-
(42)
10,169
(65)
(22)
(87)
(3)
(246)
(269)
21
(10)
(23)
(2)
Non-
controlling
interests
(1)
-
-
-
-
-
-
-
-
-
-
(1)
(1)
-
-
-
-
-
-
-
-
-
-
Total
equity
9,562
(195)
30
(165)
(115)
(346)
31
(5)
3
(10)
(1)
8,954
10,168
(65)
(22)
(87)
(3)
(246)
(269)
21
(10)
(23)
(2)
-
(3,593)
13
(765)
13
9,563
-
(1)
13
9,562
(1) Represents the fair value movement in financial assets designated as FVOCI.
(2) Represents the accrued employee entitlements to share awards that have not yet vested.
(3) Primarily consists of the common control transaction reserve of US$3,569 million, which reflects the difference between consideration paid and the carrying value of assets
and liabilities acquired, as well as the gains/losses on disposal of entities as part of the Demerger of the Group in 2015.
The accompanying notes form part of the consolidated financial statements.
9
9
South32 Annual Report 2021Financial Report Notes to financial statements – Basis of preparation
This section sets out the accounting policies that relate to the consolidated financial statements of South32 Limited (referred to as
the Company) and its subsidiaries and joint arrangements (collectively, the Group) as a whole. Where an accounting policy, critical
accounting estimate, assumption or judgement is specific to a note, these are described within the note to which they relate. These
policies have been consistently applied to all periods presented, except as described in note 3 New standards and interpretations.
The Group continues to respond to COVID-19, adjusting to the different phases of the pandemic across the jurisdictions where it
operates, focussing on keeping its people well, maintaining safe and reliable operations and supporting its communities.
The Group generated US$1,405 million net cash flows from operating activities during the year, finishing the period with net cash of
US$406 million (cash and cash equivalents of US$1,613 million less lease liabilities of US$687 million and other interest bearing liabilities
of US$520 million). The Group also has an undrawn US$1,450 million revolving credit facility which supports its strong liquidity position.
The Group has considered the impact of COVID-19 on each of its significant accounting judgements and estimates. Key assumptions
that underpin the assessment of indicators for impairment and impairment reversal of assets continue to be the Group’s main area of
estimation uncertainty and are described in note 13 Impairment of non-financial assets. While no further significant estimates have
been identified as a result of COVID-19, the pandemic has increased the level of uncertainty in all future cash flow forecasts applicable
when considering the valuation of asset, liability and equity balances of the Group.
The consolidated financial statements of the Group for the year ended 30 June 2021 were authorised for issue in accordance with a
resolution of the Directors on 2 September 2021.
1. Reporting entity
South32 Limited is a for-profit company limited by shares incorporated in Australia with a primary listing on the Australian Securities
Exchange (ASX), a standard listing on the London Stock Exchange (LSE) and a secondary listing on the Johannesburg Stock Exchange
(JSE).
The nature of the operations and principal activities of the Group are described in note 4 Segment information.
2. Basis of preparation
The consolidated financial statements are a general purpose financial report which:
– Have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board (AASB), International Financial Reporting Standards
(IFRS) and other authoritative pronouncements of the International Accounting Standards Board (IASB);
– Have been prepared on a historical cost basis, except for derivative financial instruments and certain other financial assets and
liabilities which are required to be measured at fair value;
0
0
1
– Are presented in US dollars, which is the functional currency of the Group’s operations, and all values are rounded to the nearest
million dollars (US$M or US$ million) unless otherwise stated, in accordance with ASIC Corporations Instrument 2016/191;
– Present reclassified comparative information where required for consistency with the current year’s presentation;
– Adopt all new and amended accounting standards and interpretations issued by the AASB that are relevant to the operations of the
Group and effective for reporting periods beginning on or after 1 July 2020. Refer to note 3 New standards and interpretations for
further details; and
– Do not early adopt any accounting standards and interpretations that have been issued or amended but are not yet effective as
described in note 3 New standards and interpretations.
(a) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group. A list of significant controlled entities
(subsidiaries) at year end is contained in note 25 Subsidiaries.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting
policies.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
(b) Foreign currency translation
The functional currency of the Group’s operations is the US dollar as this is assessed to be the principal currency of the economic
environments in which they operate.
Transactions denominated in foreign currencies are initially recorded in the functional currency using the exchange rate ruling at the
date of the underlying transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of
exchange at year end. Exchange gains or losses on retranslation are included in the Consolidated Income Statement, with the exception
of foreign exchange gains or losses on foreign currency provisions for closure and rehabilitation which are capitalised in property, plant
and equipment for operating sites.
The exchange rates used have been obtained from Bloomberg.
South32 Annual Report 2021Financial Report 3. New standards and interpretations
(a) New accounting standards and interpretations effective from 1 July 2020
The following new accounting standards and interpretations have been published that are effective for the 30 June 2021 reporting
period:
– Amendments to AASB 3 - Definition of a Business;
– Amendments to AASB 101 and AASB 108 - Definition of Material; and
– Amendments to references to the Conceptual Framework in IFRS standards.
The Group has reviewed these amendments and concluded that none have a significant impact on the Group.
(b) New accounting standards and interpretations issued but not effective
The following new accounting standards and interpretations have been published that are not effective for the 30 June 2021 reporting
period:
– Amendments to AASB 101 - Classification of Liabilities as Current or Non-current;
– Amendments to AASB 9, AASB 7, AASB 4 and AASB 16 - Interest Rate Benchmark Reform Phase 2;
– Amendments to AASB 137 - Onerous Contracts, Costs to Fulfil a Contract;
– Amendments to AASB 3 - Updating a reference to the Conceptual Framework;
– Amendments to AASB 116 - Property, Plant and Equipment, Proceeds before Intended Use;
– Amendments to AASB 10 and AASB 128 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; and
– Annual Improvements 2018-2020.
The Group has reviewed these amendments and improvements and concluded that none will have a significant impact on the Group.
The Group does not intend to early adopt any of the new standards or interpretations. It is expected that where applicable, these
standards and interpretations will be adopted on each respective effective date.
1
0
1
South32 Annual Report 2021Financial Report Notes to financial statements – Results for the year
This section focuses on the results and performance of the Group. This covers both profitability and the resultant return to shareholders
via earnings per share.
4. Segment information
(a) Description of segments
The operating segments (also referred to as operations) are organised and managed separately according to the nature of products
produced.
Certain members of the Lead Team (the chief operating decision makers) and the Board of Directors monitor the segment results
regularly for the purpose of making decisions about resource allocation and performance assessment. The segment information for the
manganese operations is presented on a proportional consolidation basis, which is the measure used by the Group’s management to
assess their performance.
The principal activities of each operating segment are summarised as follows:
Operating segment
Principal activities
Worsley Alumina
Hillside Aluminium
Mozal Aluminium
Brazil Alumina
Illawarra Metallurgical Coal (IMC)
Eagle Downs Metallurgical Coal
Australia Manganese
South Africa Manganese
Cerro Matoso
Cannington
Hermosa
South Africa Energy Coal (SAEC)(3)
Integrated bauxite mine and alumina refinery in Australia
Aluminium smelter in South Africa
Aluminium smelter in Mozambique
Alumina refinery in Brazil
Underground metallurgical coal mines in Australia
Metallurgical coal exploration and development option in Australia
Integrated producer of manganese ore and alloy(1) in Australia
Integrated producer of manganese ore and alloy(2) in South Africa
Integrated laterite ferronickel mining and smelting complex in Colombia
Silver, lead and zinc mine in Australia
Base metals exploration and development option in the United States
Open-cut and underground energy coal mines and processing operations in South Africa
2
0
1
(1) On 4 January 2021, Groote Eylandt Mining Company Pty Ltd (GEMCO) legally completed the sale of its shareholding in Tasmanian Electro Metallurgical Company Pty Ltd
(TEMCO) to an entity within GFG Alliance (GFG). The effective completion of the sale for accounting purposes was 31 December 2020.
(2) The Metalloys manganese smelter has not recommenced production since the Group’s decision with its joint venture partner to place it on care and maintenance during the
year ended 30 June 2020.
(3) On 1 June 2021, the Group completed the sale of its shareholding in SAEC to a wholly-owned subsidiary of Seriti Resources Holdings Pty Ltd (Seriti) and two trusts for the
benefit of employees and communities. Refer to note 31 Discontinued operation.
All operations are operated by the Group except Brazil Alumina, which is operated by Alcoa.
(b) Segment results
Segment performance is measured by Underlying EBIT and Underlying EBITDA. Underlying EBIT is profit before net finance costs,
tax and other earnings adjustment items including impairments. Underlying EBITDA is Underlying EBIT before depreciation and
amortisation. A reconciliation of Underlying EBIT, Underlying EBITDA and the Group’s consolidated profit after tax is set out on the
following pages. Segment revenue is measured on the same basis as in the Consolidated Income Statement.
The Group separately discloses sales of group production from sales of third party products and services because of the significant
difference in profit margin earned on these sales.
It is the Group’s policy that inter-segment transactions are made on a commercial basis.
Group and unallocated items/eliminations represent group centre functions and consolidation adjustments. Group financing (including
finance expenses and finance income) and income taxes are managed on a Group basis and are not allocated to continuing operating
segments.
Total assets and liabilities for each continuing operating segment represent operating assets and liabilities which predominantly
exclude the carrying amount of equity accounted investments, cash, interest bearing liabilities, tax balances and certain other financial
assets and liabilities. The carrying amount of investments accounted for using the equity method represents the balance of the Group’s
investment in equity accounted investments, with no adjustment for cash, interest bearing liabilities, tax balances and certain other
financial assets and liabilities.
South32 Annual Report 2021Financial Report 4. Segment information continued
(b) Segment results continued
Revenue recognition
Revenue is measured based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of
third parties. Revenue is not reduced for royalties and other taxes payable from group production.
The following is a description of the principal activities from which the Group generates its revenue:
Revenue from the sale of commodities
The Group primarily sells the following commodities: alumina, aluminium, energy coal, metallurgical coal, manganese ore, ferronickel,
silver, lead and zinc. The sales of these commodities are considered to be performance obligations as they are the contractual promises
by the Group to transfer distinct goods to customers.
The transaction price allocated to each performance obligation is recognised as the performance obligation is satisfied. Satisfaction
occurs when control of the promised commodity is transferred to the customer.
For the sale of commodities, revenue is therefore recognised at a point in time, net of treatment and refining charges (where applicable).
The majority of the Group’s sales agreements specify that title passes on the bill of lading date (the date the commodity is delivered
to the shipping agent) and is assessed to be the point of time in which control over the commodity passes to the customer. For these
sales, revenue is recognised on the bill of lading date. For certain sales, title passes and revenue is recognised when the goods have
been delivered to the customer.
For certain commodities, the sales price is determined on a provisional basis at the date of sale and adjustments to the sales price
subsequently occur based on movements in quoted market or contractual prices up to the date of final pricing. The period between
provisional invoicing and final pricing is up to 180 days. Revenue on provisionally priced sales is recognised based on the estimated
fair value of the total consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales
arrangements has the characteristics of a commodity derivative. Accordingly, the fair value of the final sales price adjustment is
re-estimated continuously and changes in fair value are disclosed separately as ‘Other’ revenue. In all cases, fair value is estimated by
reference to forward market prices.
Revenue from the provision of freight services
The Group sells most of its commodities on either FOB or CIF Incoterms. In the case of CIF Incoterms, the Group is responsible for
shipping services after the date at which control of the commodities passes to the customer at the port of loading. The provision of
shipping services in these types of arrangements are a distinct service (and therefore a separate performance obligation) to which a
portion of the transaction price should be allocated and recognised over time as the shipping services are provided. The Group also
provides third party freight services which are recognised as the shipping service is provided.
1
0
3
The Group does not disclose sales revenue from freight services separately as it does not consider this necessary in order to
understand the impact of economic factors on the Group.
South32 Annual Report 2021Financial Report Hillside
Aluminium
Mozal
Aluminium Brazil Alumina
Illawarra
Metallurgical
Coal
Eagle Downs
Metallurgical
Coal
Australia
Manganese(1)
South Africa
Manganese(1)
Cerro Matoso
Cannington
Hermosa
elimination
adjustment(1)
Notes to financial statements – Results for the year continued
4. Segment information continued
(b) Segment results continued
30 June 2021
US$M
Revenue from customers
Other(3)
Total revenue
Group production
Third party products and services(4)
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Comprising:
Group production excluding exploration expensed
Exploration expensed
Third party products and services(4)
Share of profit/(loss) of equity accounted investments(5)
Underlying EBIT
Net finance costs
Income tax (expense)/benefit
Underlying earnings
Earnings adjustments(6)
Profit/(loss) after tax
4
0
1
Worsley
Alumina
1,174
(1)
1,173
605
-
568
1,173
318
(175)
143
143
-
-
-
143
1,507
4
1,511
1,511
-
-
1,511
358
(65)
293
293
-
-
-
293
Exploration expenditure
Capital expenditure(7)
Equity accounted investments
Total assets(8)
Total liabilities(8)
-
55
-
3,674
1,007
-
17
-
1,156
423
577
1
578
578
-
-
578
132
(34)
98
98
-
-
-
98
-
11
-
579
123
400
-
400
400
-
-
400
114
(51)
63
63
-
-
-
63
-
25
-
647
76
748
10
758
758
-
-
758
94
(197)
(103)
(97)
(5)
-
(1)
(103)
14
188
2
997
385
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
-
193
8
Continuing operations
729
1
730
730
-
-
730
385
(81)
304
305
(1)
-
-
304
2
55
-
604
370
369
-
369
364
-
5
369
72
(17)
55
56
(1)
-
-
55
1
16
-
387
205
479
14
493
493
-
-
493
197
(75)
122
122
-
-
-
122
45
-
-
629
224
746
11
757
757
-
-
757
416
(66)
350
352
(2)
-
-
350
2
43
-
510
315
Group and
unallocated
items/
Statutory
(195)
(1,097)
(195)
(1,098)
-
-
378
(573)
(195)
(93)
(28)
(121)
(113)
(18)
10
-
(121)
(1)
(4)
-
(1,094)
(1,098)
(300)
98
(202)
(361)
2
-
157
(202)
-
-
-
-
-
-
-
(6)
(2)
(8)
(8)
-
-
-
(8)
Discontinued
operation
South Africa
Energy Coal(2)
862
(1)
861
735
126
-
861
(123)
(27)
(150)
(153)
-
11
(8)
(150)
(43)
(1)
(194)
(143)
(337)
76
-
-
-
-
Total
5,437
39
5,476
5,102
374
-
5,476
1,687
(693)
994
853
(25)
10
156
994
(109)
(202)
683
(541)
142
54
460
380
Group
6,299
38
6,337
5,837
500
-
6,337
1,564
(720)
844
700
(25)
21
148
844
(152)
(203)
489
(684)
(195)
54
536
380
16
64
-
47
1,972
22
4
-
2,683
1,852
(3)
(71)
378
(789)
(747)
13,242
4,288
13,242
4,288
(1) The segment information reflects the Group’s interest in the manganese operations and is presented on a proportional consolidation basis, which is the measure used by
the Group’s management to assess their performance. The manganese operations are equity accounted in the consolidated financial statements. The statutory adjustment
column reconciles the proportional consolidation to the equity accounting position.
(2) The SAEC operating segment has been classified as a discontinued operation. Refer to note 31 Discontinued operation.
(3) Other revenue predominantly relates to fair value movements on provisionally priced contracts.
(4) Revenue on third party products and services sold from continuing operations comprise of US$43 million for aluminium, US$10 million for alumina, US$23 million for coal,
US$206 million for freight services and US$92 million for aluminium raw materials. Underlying EBIT on third party products and services sold from continuing operations
comprise of US$8 million for aluminium, US$nil for alumina, US$1 million for coal, US$nil for freight services and US$1 million for aluminium raw materials.
(5) Share of profit/(loss) of equity accounted investments includes the impact of earnings adjustments to Underlying EBIT, net of tax.
(6) Refer to note 4(b)(i) Earnings adjustments.
(7) Capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(8) Total assets and liabilities for each operating segment represent operating assets and liabilities which predominantly exclude the carrying amount of equity accounted
investments, cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities.
South32 Annual Report 2021Financial Report 4. Segment information continued
(b) Segment results continued
Revenue from customers
30 June 2021
US$M
Other(3)
Total revenue
Group production
Third party products and services(4)
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Comprising:
Underlying EBIT
Net finance costs
Income tax (expense)/benefit
Underlying earnings
Earnings adjustments(6)
Profit/(loss) after tax
Exploration expenditure
Capital expenditure(7)
Equity accounted investments
Total assets(8)
Total liabilities(8)
Group production excluding exploration expensed
Exploration expensed
Third party products and services(4)
Share of profit/(loss) of equity accounted investments(5)
Worsley
Alumina
1,174
(1)
1,173
605
-
568
1,173
318
(175)
143
143
-
-
-
1,507
4
1,511
1,511
1,511
-
-
-
-
-
358
(65)
293
293
143
293
55
-
-
3,674
1,007
17
-
-
1,156
423
577
1
578
578
-
-
578
132
(34)
98
98
-
-
-
98
11
-
-
579
123
400
400
400
-
-
-
400
114
(51)
63
63
-
-
-
63
25
-
-
647
76
Coal
748
10
758
758
-
-
758
94
(197)
(103)
(97)
(5)
-
(1)
(103)
14
188
2
997
385
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
-
8
193
Hillside
Aluminium
Mozal
Aluminium Brazil Alumina
Illawarra
Metallurgical
Eagle Downs
Metallurgical
Coal
Australia
Manganese(1)
South Africa
Manganese(1)
Cerro Matoso
Cannington
Hermosa
Group and
unallocated
items/
elimination
Statutory
adjustment(1)
Continuing operations
729
1
730
730
-
-
730
385
(81)
304
305
(1)
-
-
304
2
55
-
604
370
369
-
369
364
-
5
369
72
(17)
55
56
(1)
-
-
55
1
16
-
387
205
479
14
493
493
-
-
493
197
(75)
122
122
-
-
-
122
-
45
-
629
224
746
11
757
757
-
-
757
416
(66)
350
352
(2)
-
-
350
2
43
-
510
315
Total
5,437
39
5,476
5,102
374
-
5,476
1,687
(693)
994
853
(25)
10
156
994
(109)
(202)
683
(541)
142
Discontinued
operation
South Africa
Energy Coal(2)
862
(1)
861
735
126
-
861
(123)
(27)
(150)
(153)
-
11
(8)
(150)
(43)
(1)
(194)
(143)
(337)
-
76
-
-
-
Group
6,299
38
6,337
5,837
500
-
6,337
1,564
(720)
844
700
(25)
21
148
844
(152)
(203)
489
(684)
(195)
54
536
380
13,242
4,288
1
0
5
-
-
-
-
-
-
-
(6)
(2)
(8)
(8)
-
-
-
(8)
(195)
-
(195)
-
378
(573)
(195)
(93)
(28)
(121)
(113)
(18)
10
-
(121)
(1,097)
(1)
(1,098)
(1,094)
(4)
-
(1,098)
(300)
98
(202)
(361)
2
-
157
(202)
16
64
-
1,972
47
22
4
-
2,683
1,852
(3)
(71)
378
(789)
(747)
54
460
380
13,242
4,288
South32 Annual Report 2021Financial Report Worsley
Alumina
Hillside
Aluminium
Mozal
Aluminium Brazil Alumina
Illawarra
Metallurgical
Coal
Eagle Downs
Metallurgical
Coal
Australia
Manganese(1)
South Africa
Manganese(1)
Cerro Matoso
Cannington
Hermosa
elimination
adjustment(1)
Group and
unallocated
items/
Statutory
Continuing operations
Notes to financial statements – Results for the year continued
4. Segment information continued
(b) Segment results continued
30 June 2020
US$M
Revenue from customers
Other(3)
Total revenue
Group production
Third party products and services(4)
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Comprising:
Group production excluding exploration expensed
Exploration expensed
Third party products and services(4)
Share of profit/(loss) of equity accounted investments(5)
Underlying EBIT
Net finance costs
Income tax (expense)/benefit
Underlying earnings
Earnings adjustments(6)
Profit/(loss) after tax
6
0
1
1,119
(1)
1,118
568
-
550
1,118
322
(162)
160
160
-
-
-
160
1,276
-
1,276
1,276
-
-
1,276
169
(66)
103
103
-
-
-
103
507
1
508
508
-
-
508
10
(34)
(24)
(24)
-
-
-
(24)
-
11
-
531
95
399
-
399
399
-
-
399
50
(65)
(15)
(15)
-
-
-
(15)
-
34
-
663
95
937
(13)
924
924
-
-
924
243
(191)
52
59
(7)
-
-
52
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16
199
3
1,617
261
2
11
-
184
10
Exploration expenditure
Capital expenditure(7)
Equity accounted investments
Total assets(8)
Total liabilities(8)
-
48
-
3,379
590
-
13
-
1,058
264
(1) The segment information reflects the Group’s interest in the manganese operations and is presented on a proportional consolidation basis, which is the measure used by
the Group’s management to assess their performance. The manganese operations are equity accounted in the consolidated financial statements. The statutory adjustment
column reconciles the proportional consolidation to the equity accounting position.
(2) The SAEC operating segment has been reclassified as a discontinued operation. Refer to note 31 Discontinued operation.
(3) Other revenue predominantly relates to fair value movements on provisionally priced contracts.
(4) Revenue on third party products and services sold from continuing operations comprise of US$42 million for aluminium, US$14 million for alumina, US$33 million for coal,
US$165 million for freight services and US$86 million for aluminium raw materials. Underlying EBIT on third party products and services sold from continuing operations
comprise of US$2 million for aluminium, (US$4) million for alumina, US$nil for coal, (US$2) million for freight services and US$2 million for aluminium raw materials.
(5) Share of profit/(loss) of equity accounted investments includes the impact of earnings adjustments to Underlying EBIT, net of tax.
(6) Refer to note 4(b)(i) Earnings adjustments.
(7) Capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(8) Total assets and liabilities for each continuing operating segment represent operating assets and liabilities which predominantly exclude the carrying amount of equity
accounted investments, cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities.
785
(22)
763
763
-
-
763
400
(72)
328
329
(1)
-
-
328
2
67
-
608
366
346
(4)
342
342
-
-
342
81
(27)
54
55
(1)
-
-
54
1
23
-
438
201
516
3
519
519
-
-
519
189
(82)
107
109
(2)
-
-
107
4
39
-
623
198
497
(21)
476
476
-
-
476
155
(50)
105
109
(4)
-
-
105
4
52
-
457
243
-
-
-
-
-
-
-
(5)
-
(5)
(5)
-
-
-
(5)
(207)
(3)
(210)
-
340
(550)
(210)
(28)
(42)
(70)
(53)
(15)
(2)
-
(70)
19
104
-
1,894
36
16
1
-
2,225
1,541
(1,131)
26
(1,105)
(1,105)
-
-
(1,105)
(283)
99
(184)
(387)
2
-
201
(184)
(3)
(90)
436
(800)
(763)
Discontinued
operation
South Africa
Energy Coal(2)
1,072
(7)
1,065
822
243
-
1,065
(118)
(47)
(165)
(157)
(15)
(165)
(45)
(208)
(15)
(223)
-
7
2
-
164
21
860
1,038
Total
5,044
(34)
5,010
4,670
340
-
5,010
1,303
(692)
611
440
(28)
(2)
201
611
(100)
(110)
401
(243)
158
61
512
439
12,877
3,137
Group
6,116
(41)
6,075
5,492
583
-
6,075
1,185
(739)
446
283
(28)
(17)
208
446
(145)
(108)
193
(258)
(65)
61
676
460
13,737
4,175
South32 Annual Report 2021Financial Report 4. Segment information continued
(b) Segment results continued
Revenue from customers
30 June 2020
US$M
Other(3)
Total revenue
Group production
Third party products and services(4)
Inter-segment revenue
Total revenue
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Comprising:
Underlying EBIT
Net finance costs
Income tax (expense)/benefit
Underlying earnings
Earnings adjustments(6)
Profit/(loss) after tax
Exploration expenditure
Capital expenditure(7)
Equity accounted investments
Total assets(8)
Total liabilities(8)
Worsley
Alumina
1,119
(1)
1,118
568
-
550
1,118
322
(162)
160
160
-
-
-
Hillside
Aluminium
1,276
1,276
1,276
1,276
169
(66)
103
103
-
-
-
-
-
-
48
-
-
3,379
590
13
-
-
1,058
264
507
1
508
508
-
-
508
10
(34)
(24)
(24)
-
-
-
11
-
-
531
95
399
399
399
-
-
-
399
50
(65)
(15)
(15)
-
-
-
34
-
-
663
95
Coal
937
(13)
924
924
-
-
924
243
(191)
52
59
(7)
-
-
52
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16
199
3
1,617
261
2
11
-
184
10
Group production excluding exploration expensed
Exploration expensed
Third party products and services(4)
Share of profit/(loss) of equity accounted investments(5)
160
103
(24)
(15)
Mozal
Aluminium Brazil Alumina
Illawarra
Metallurgical
Eagle Downs
Metallurgical
Coal
Australia
Manganese(1)
South Africa
Manganese(1)
Cerro Matoso
Cannington
Hermosa
Group and
unallocated
items/
elimination
Statutory
adjustment(1)
Continuing operations
785
(22)
763
763
-
-
763
400
(72)
328
329
(1)
-
-
328
2
67
-
608
366
346
(4)
342
342
-
-
342
81
(27)
54
55
(1)
-
-
54
1
23
-
438
201
516
3
519
519
-
-
519
189
(82)
107
109
(2)
-
-
107
4
39
-
623
198
497
(21)
476
476
-
-
476
155
(50)
105
109
(4)
-
-
105
4
52
-
457
243
Total
5,044
(34)
5,010
4,670
340
-
5,010
1,303
(692)
611
440
(28)
(2)
201
611
(100)
(110)
401
(243)
158
Discontinued
operation
South Africa
Energy Coal(2)
1,072
(7)
1,065
822
243
-
1,065
(118)
(47)
(165)
(157)
-
(15)
7
(165)
(45)
2
(208)
(15)
(223)
-
164
21
860
1,038
Group
6,116
(41)
6,075
5,492
583
-
6,075
1,185
(739)
446
283
(28)
(17)
208
446
(145)
(108)
193
(258)
(65)
61
676
460
13,737
4,175
1
0
7
-
-
-
-
-
-
-
(5)
-
(5)
(5)
-
-
-
(5)
(207)
(3)
(210)
-
340
(550)
(210)
(28)
(42)
(70)
(53)
(15)
(2)
-
(70)
(1,131)
26
(1,105)
(1,105)
-
-
(1,105)
(283)
99
(184)
(387)
2
-
201
(184)
19
104
-
1,894
36
16
1
-
2,225
1,541
(3)
(90)
436
(800)
(763)
61
512
439
12,877
3,137
South32 Annual Report 2021Financial Report Notes to financial statements – Results for the year continued
4. Segment information continued
(b) Segment results continued
(i) Earnings adjustments
The following table shows earnings adjustments in determining Underlying earnings:
Year ended 30 June 2021
US$M
Continuing
operations
Discontinued
operation(1)
Adjustments to Underlying EBIT
Significant items(2)
Exchange rate (gains)/losses on restatement of monetary items(3)
Impairment losses(3)(4)
(Gains)/losses on non-trading derivative instruments and other investments measured at FVTPL(3)(5)
Major corporate restructures(3)(6)
Net (gains)/losses on the disposal of interests in operations(1)
Earnings adjustments included in profit/(loss) of equity accounted investments(7)(8)
Total adjustments to Underlying EBIT
Adjustments to net finance costs
Exchange rate variations on net debt
Total adjustments to net finance costs
Adjustments to income tax expense
Tax effect of earnings adjustments to Underlying EBIT
Tax effect of earnings adjustments to net finance costs
Exchange rate variations on tax balances
Total adjustments to income tax expense
Total earnings adjustments
(55)
35
764
9
23
-
15
791
52
52
(247)
7
(62)
(302)
541
-
34
-
(46)
-
159
-
147
-
-
-
-
(4)
(4)
143
Total
(55)
69
764
(37)
23
159
15
938
52
52
(247)
7
(66)
(306)
684
(1) Refer to note 31 Discontinued operation.
(2) Refer to note 4(b)(ii) Significant items.
(3) Recognised in expenses excluding net finance costs in the Consolidated Income Statement. Refer to note 5 Expenses.
(4) Relates to a US$728 million impairment of property, plant and equipment in the IMC segment and a US$36 million impairment of intangible assets included in Group and
unallocated items. Impairment losses exclude a US$8 million impairment of right-of-use lease assets included in major corporate restructures. Refer to note 13 Impairment of
non-financial assets.
8
0
1
(5) Primarily relates to US$8 million included in the Hillside Aluminium segment.
(6) The major corporate restructure costs relate to the simplification of the Group’s functional structures and office footprint and are included in Group and unallocated items.
(7) Recognised in share of profit/(loss) of equity accounted investments in the Consolidated Income Statement. Refer to note 26 Equity accounted investments.
(8) Relates to US$5 million included in the Australia Manganese segment and US$10 million included in the South Africa Manganese segment. Of the US$5 million recorded in the
Australia Manganese segment, US$4 million relates to GEMCO’s loss on disposal of its shareholding in TEMCO.
Year ended 30 June 2020
US$M
Continuing
operations
Discontinued
operation(1)
Adjustments to Underlying EBIT
Exchange rate (gains)/losses on restatement of monetary items(2)
(Gains)/losses on non-trading derivative instruments and other investments measured at FVTPL(2)(3)
Earnings adjustments included in profit/(loss) of equity accounted investments(4)(5)
Total adjustments to Underlying EBIT
Adjustments to net finance costs
Exchange rate variations on net debt
Total adjustments to net finance costs
Adjustments to income tax expense
Tax effect of earnings adjustments to Underlying EBIT
Tax effect of earnings adjustments to net finance costs
Exchange rate variations on tax balances
Total adjustments to income tax expense
Total earnings adjustments
(48)
113
108
173
(6)
(6)
(18)
(2)
96
76
243
(24)
36
-
12
-
-
-
-
3
3
15
Total
(72)
149
108
185
(6)
(6)
(18)
(2)
99
79
258
(1) Refer to note 31 Discontinued operation.
(2) Recognised in expenses excluding net finance costs in the Consolidated Income Statement. Refer to note 5 Expenses.
(3) Primarily relates to US$105 million included in the Hillside Aluminium segment.
(4) Recognised in share of profit/(loss) of equity accounted investments in the Consolidated Income Statement. Refer to note 26 Equity accounted investments.
(5) Relates to US$51 million included in the Australia Manganese segment and US$57 million included in the South Africa Manganese segment. Of the US$108 million, impairment
losses of US$40 million were recorded in the Australia Manganese segment after GEMCO entered into a binding conditional agreement for the sale of its shareholding in
TEMCO, and US$49 million in the South Africa Manganese segment following the decision to place the Metalloys manganese smelter on care and maintenance.
South32 Annual Report 2021Financial Report 4. Segment information continued
(b) Segment results continued
(ii) Significant items
Significant items are those items, not separately identified in note (4)(b)(i) Earnings adjustments, where their nature and amount are
considered material to the consolidated financial statements. There were no such items included within the Group’s profit/(loss) for the
year ended 30 June 2020.
Year ended 30 June 2021
US$M
Disposal of royalties(1)
Total significant items
Gross
(55)
(55)
Tax
-
-
Net
(55)
(55)
(1) Recognised in other income in the Consolidated Income Statement and included in Group and unallocated items.
Disposal of royalties
The Group divested four royalties to a wholly-owned subsidiary of the Elemental Royalties Corporation for US$55 million, which
comprised US$40 million in upfront cash and US$15 million in equity. These royalties were recognised as intangible assets with a US$nil
carrying value. The transaction completed on 9 February 2021 and the Group recognised other income of US$55 million (US$55 million
post tax) in the Consolidated Income Statement.
(c) Geographical information
The geographical information below analyses Group revenue and non-current assets by location. Revenue is presented by the
geographical location of customers and non-current assets are presented by the geographical location of the operations.
US$M
Australia
China
India
Japan
Middle East
Netherlands
North America
Singapore
South America
South Korea
Southern Africa
Switzerland
United Kingdom
Other Asia
Rest of Europe
Unallocated assets(2)
Total
Revenue from external
customers(1)
Non-current assets
FY21
522
421
207
348
213
480
387
902
32
326
1,075
480
236
216
492
-
6,337
FY20
463
537
269
363
261
573
305
953
4
148
862
483
134
290
430
-
6,075
FY21
5,232
-
-
-
-
-
2,049
106
1,092
-
1,371
-
1
-
-
469
10,320
FY20
5,610
-
-
-
-
-
1,967
106
1,107
-
1,985
-
4
-
-
295
11,074
1
0
9
(1) Revenue from external customers comprises revenue from continuing operations of US$5,476 million (FY20: US$5,010 million) and revenue from a discontinued operation of
US$861 million (FY20: US$1,065 million). Refer to note 31 Discontinued operation.
(2) Primarily comprises of other financial assets and deferred tax assets.
South32 Annual Report 2021Financial Report Notes to financial statements – Results for the year continued
5. Expenses
US$M
Changes in inventories of finished goods and work in progress
Raw materials and consumables used(2)
Wages, salaries and redundancies
Pension and other post-retirement obligations
External services (including transportation)
Third party commodity purchases
Depreciation and amortisation
Exchange rate (gains)/losses on restatement of monetary items
(Gains)/losses on derivative instruments and other investments measured at FVTPL(3)
Government and other royalties paid and payable
Exploration and evaluation expenditure incurred and expensed
Impairment losses
Lease rentals(4)
All other operating expenses
Total expenses
Note
FY21
Restated(1)
FY20
(72)
1,771
683
61
905
351
693
35
7
160
25
772
51
129
5,571
191
1,599
615
57
869
330
692
(48)
106
162
28
-
33
154
4,788
13
(1) Refer to note 31 Discontinued operation.
(2) Raw materials and consumables used exclude realised losses on the settlement of derivative instruments related to electricity purchases of US$8 million
(FY20: US$120 million).
(3) Includes (gains)/losses on non-trading derivative instruments and other investments measured at FVTPL of US$9 million (FY20: US$113 million). Refer to note 4(b)(i) Earnings
adjustments.
(4) Includes short-term, low-value and variable lease rentals.
6. Tax
Income tax expense comprises current and deferred tax and is recognised in the Consolidated Income Statement except to the extent
that it relates to items recognised directly in the Consolidated Statement of Comprehensive Income.
(a) Income tax expense
0
1
1
US$M
Current income tax expense/(benefit)
Deferred income tax expense/(benefit)
Total income tax expense/(benefit)
Income tax expense attributable to:
Continuing operations
Discontinued operation(1)
Total income tax expense/(benefit)
(1) Refer to note 31 Discontinued operation.
FY21
196
(299)
(103)
(100)
(3)
(103)
FY20
Restated(1)
130
57
187
186
1
187
Income tax expense/(benefit)
Income tax expense/(benefit) for the period is the tax payable on the current period’s taxable income/(loss) based on the applicable
income tax rate for each jurisdiction adjusted for changes in deferred tax assets and liabilities attributable to temporary differences
and unused tax losses. Current tax is calculated using the tax rates enacted or substantively enacted at period end and includes any
adjustment to tax payable in respect of previous years.
South32 Annual Report 2021Financial Report 6. Tax continued
(b) Reconciliation of prima facie tax expense to income tax expense
US$M
(Profit)/loss before tax from continuing operations
(Profit)/loss before tax from a discontinued operation(1)
Deduct: (Profit)/loss from equity accounted investments included in continuing operations
Deduct: (Profit)/loss from equity accounted investments included in a discontinued operation(1)
(Profit)/loss subject to tax
Income tax on (profit)/loss calculated at 30 per cent
Tax rate differential on non-Australian income
Exchange variations and other translation adjustments
Withholding tax on distributed earnings
Derecognition of future tax benefits
Foreign exploration
Adjustments to prior years
Other
Total income tax expense/(benefit)
(1) Refer to note 31 Discontinued operation.
FY21
(42)
340
(141)
8
431
(129)
(5)
(66)
3
108
-
(10)
(4)
(103)
FY20
Restated(1)
(344)
222
(93)
(7)
(22)
7
18
99
-
58
3
-
2
187
1
1
1
Profit from equity accounted investments has been taxed in companies other than South32 Limited, being the companies whose results
are disclosed as equity accounted investments in the consolidated financial statements.
Refer to note 26 Equity accounted investments for further details of the Group’s equity accounted investments.
(c) Movement in deferred tax balances
The composition of the Group’s net deferred tax asset and liability recognised in the Consolidated Balance Sheet and the deferred tax
expense charged/(credited) to the Consolidated Income Statement is as follows:
Deferred tax assets
Deferred tax liabilities
Deferred tax charged/(credited)
to the Consolidated Income
Statement(1)
US$M
FY21
FY20
FY21
FY20
FY21
FY20
Type of temporary difference
Depreciation
Employee benefits
Closure and rehabilitation
Other provisions
Deferred charges
Non tax-depreciable fair value adjustments, revaluations
and mineral rights
Tax-effected losses
Brazil deferral incentive(2)
Leases
Other
Total
420
53
166
3
(150)
(123)
2
-
10
(33)
348
243
49
150
4
(160)
(122)
6
-
(14)
(33)
123
(302)
12
49
14
-
(29)
11
(56)
2
34
(265)
(375)
10
30
17
-
(18)
28
(43)
2
10
(339)
(217)
(15)
(18)
(4)
(10)
(1)
4
14
(24)
(28)
(299)
42
(17)
5
5
(1)
(1)
23
(16)
(3)
20
57
(1) Includes deferred tax expense charged/(credited) to the Consolidated Income Statement relating to a discontinued operation of (US$6) million (FY20: (US$2) million). Refer to
note 31 Discontinued operation.
(2) The Group’s Brazilian subsidiary has received a 75 per cent corporate income tax deferral due to the reinvestment of capital. The tax is deferred until earnings are repatriated
from Brazil.
Deferred tax is provided using the balance sheet liability method, providing for the tax effect of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax assessment or deduction
purposes. The tax effect of certain temporary differences is not recognised, principally with respect to:
– Temporary differences arising on the initial recognition of assets or liabilities (other than those arising in a business combination or in
a manner that initially impacted accounting or taxable profit);
– Temporary differences relating to investments and undistributed earnings in subsidiaries, joint ventures and associates to the extent
that the Group is able to control its reversal and it is probable that it will not reverse in the foreseeable future; and
– Goodwill.
To the extent that an item’s tax base is solely derived from the amount deductible under capital gains tax legislation, deferred tax is
determined as if such amounts are not deductible in determining future assessable income.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reviewed at each balance sheet date and amended to the extent that it is no longer
probable that the related tax benefit will be realised. Deferred tax assets and liabilities are offset when they relate to income taxes
levied by the same tax authority and the Group has both the right and the intention to settle its current tax assets and liabilities on a net
or simultaneous basis.
South32 Annual Report 2021Financial Report Notes to financial statements – Results for the year continued
6. Tax continued
(d) Unrecognised deferred tax assets and liabilities
The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows:
US$M
FY21
FY20
Unrecognised deferred tax assets
Tax-effected losses(1)
Mineral rights
Impairment of investments in subsidiaries
Closure and rehabilitation
Depreciable assets
Other deductible temporary differences
Total unrecognised deferred tax assets
Unrecognised deferred tax liabilities
Taxable temporary differences associated with investments and undistributed earnings in subsidiaries
Total unrecognised deferred tax liabilities
(1) Represents tax losses that have no expiry.
8
588
978
57
8
-
1,639
(39)
(39)
66
620
816
225
148
25
1,900
(45)
(45)
(e) Tax consolidation
South32 Limited and its 100 per cent owned Australian resident subsidiaries have formed a tax consolidated group with effect
from 25 May 2015. South32 Limited is the head entity of the tax consolidated group. Members of the group have entered into a tax
sharing agreement in order to allocate income tax expense to the wholly-owned subsidiaries on a stand-alone basis. The tax sharing
arrangement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment
obligations. The possibility of such a default is considered remote at the date of this report.
Members of the tax consolidated group have also entered into a tax funding agreement. The group has applied its allocation approach
in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. The tax funding
agreement provides for each member of the tax consolidated group to pay or receive a tax equivalent amount to or from the head
entity in accordance with their notional current tax liability or current tax asset. Such amounts are reflected in amounts receivable from
or payable to the head entity in their accounts and are settled as soon as practicable after lodgement of the consolidated return and
payment of the tax liability.
2
1
1
(f) Tax Transparency Report
More detail of the South32 Group’s tax outcomes, including country-by-country reporting is included in the South32 Tax Transparency
and Payments to Government Report 2021.
Key estimates, assumptions and judgements
Deferred tax
Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised in the
Consolidated Balance Sheet. Deferred tax assets are recognised only where it is considered more likely than not that they will be
recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary
differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless
repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future.
Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management’s
estimates of future cash flows. These depend on estimates of future production and sales volumes, commodity prices, reserves,
operating costs, closure and rehabilitation costs, capital expenditure, dividends and other capital management transactions.
Uncertain tax matters
Judgements are required about the application of the inherently complex income tax legislation in Colombia, Brazil and South
Africa. These judgements are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter
expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the Consolidated
Balance Sheet and the amount of other tax losses and temporary differences not yet recognised.
Where the final tax outcomes are different from the amounts that were initially recorded, these differences impact the current
and deferred tax provisions in the period in which the determination is made. Measurement of uncertain tax and royalty matters
considers a range of possible outcomes, including assessments received from tax authorities. Where management is of the view
that potential liabilities have a low probability of crystallising, or it is not possible to quantify them reliably, they are disclosed as
contingent liabilities.
South32 Annual Report 2021Financial Report 7. Dividends
US$M
Prior year final dividend(1)
Interim dividend(2)
Special dividend
Total dividends declared and paid during the year
FY21
48.5
66.5
-
115
FY20
139.0
53.5
53.5
246
(1) On 20 August 2020, the Directors resolved to pay a fully franked final dividend of US 1 cent per share in respect of the 2020 financial year. The dividend was paid on 8 October
2020.
(2) On 18 February 2021, the Directors resolved to pay a fully franked interim dividend of US 1.4 cents per share (US$67 million) in respect of the 2021 financial half year. The
dividend was paid on 8 April 2021. In addition to the ESOP Trusts receiving dividends from South32 Limited, a total of 24,893,905 shares were bought back between the
declaration and the ex-dividend dates, therefore reducing the interim dividend paid externally to US$66.5 million.
Franking Account
US$M
Franking credits at the beginning of the financial year
Credits arising from tax paid/payable by South32 Limited(1)
Credits arising from the receipt of franked dividends
Utilisation of credits arising from the payment of franked dividends
Total franking credits available at the end of the financial year(2)
FY21
268
47
63
(49)
329
FY20
261
24
92
(109)
268
(1) Includes the payment of the Australian FY21 income tax liability of US$10 million due in December 2021.
(2) The payment of the final franked FY21 dividend declared after 30 June 2021 will decrease the franking account balance by US$110 million. Refer to note 32 Subsequent events.
8. Earnings per share
Basic earnings per share (EPS) amounts are calculated based on profit or loss attributable to equity holders of South32 Limited and the
weighted average number of shares outstanding during the year.
Dilutive EPS amounts are calculated based on profit or loss attributable to equity holders of South32 Limited and the weighted average
number of shares outstanding after adjustment for the effects of all dilutive potential shares.
The following reflects the profit/(loss) and share data used in the basic and diluted EPS computations:
Profit/(loss) attributable to equity holders
US$M
Continuing operations
Discontinued operation(1)
Profit/(loss) attributable to equity holders of South32 Limited (basic)
Profit/(loss) attributable to equity holders of South32 Limited (diluted)
(1) Refer to note 31 Discontinued operation.
Weighted average number of shares
Million
Basic EPS denominator(2)
Shares contingently issuable under employee share ownership plans
Diluted EPS denominator
1
1
3
FY21
142
(337)
(195)
(195)
FY21
4,771
14
4,785
FY20
Restated(1)
158
(223)
(65)
(65)
FY20
Restated(1)
4,892
12
4,904
(1) Refer to note 31 Discontinued operation.
(2) The basic EPS denominator is the aggregate of the weighted average number of shares after deduction of the weighted average number of treasury shares outstanding and
shares permanently cancelled through the on-market share buy-back program.
Earnings per Share
US cents
Continuing operations
Basic EPS
Diluted EPS
Attributable to ordinary equity holders of South32 Limited
Basic EPS
Diluted EPS
(1) Refer to note 31 Discontinued operation.
FY21
3.0
3.0
(4.1)
(4.1)
FY20
Restated(1)
3.2
3.2
(1.3)
(1.3)
South32 Annual Report 2021Financial Report Notes to financial statements – Operating assets and liabilities
This section shows the assets used to generate the Group’s trading performance and the liabilities incurred. Liabilities relating to the
Group’s financing activities are addressed in the capital structure and financing section, notes 16 to 20.
9. Trade and other receivables
US$M
Current
Trade receivables
Loans to equity accounted investments(1)
Other receivables
Total current trade and other receivables(2)
Non-current
Loans to equity accounted investments(1)
Interest bearing loans receivable from joint operations
Other receivables
Total non-current trade and other receivables(2)
(1) Refer to note 29 Related party transactions.
(2) Net of allowances for expected credit losses of US$2 million (FY20: US$6 million).
FY21
FY20
433
10
84
527
187
-
72
259
379
15
137
531
177
26
100
303
Trade receivables generally have terms of up to 30 days. Trade and other receivables which are not held at FVTPL are recognised initially
at fair value and subsequently at amortised cost using the effective interest method, less an allowance for expected credit losses.
10. Inventories
US$M
Current
Raw materials and consumables
Work in progress
Finished goods
Total current inventories
Non-current
Raw materials and consumables
Work in progress
Total non-current inventories
4
1
1
FY21
FY20
323
236
157
716
52
22
74
348
227
160
735
54
23
77
Inventories carried at net realisable value as at 30 June 2021 was US$17 million (FY20: US$69 million). Inventory write-downs of
US$42 million (FY20: US$33 million) were recognised in the year.
Inventories are valued at the lower of cost and net realisable value. Cost is determined primarily on the basis of average costs. For
processed inventories, cost is derived on an absorption costing basis. Cost comprises the cost of purchasing raw materials and the cost
of production, including attributable overheads. In respect of minerals inventory, quantities are assessed primarily through surveys and
assays.
South32 Annual Report 2021Financial Report 11. Property, plant and equipment
30 June 2021
US$M
Cost
At the beginning of the financial year
Additions
Foreign exchange movements in closure
and rehabilitation provisions(1)
Disposals
Disposal of a discontinued operation(2)
Transfers and other movements
At the end of the financial year
Accumulated depreciation and
impairments
At the beginning of the financial year
Depreciation charge for the year(3)
Impairments for the year(4)
Disposals
Disposal of a discontinued operation(2)
Transfers and other movements
At the end of the financial year
Net book value at 30 June 2021
Land and buildings
Plant and equipment
Right-of-use
(ROU)
Other
ROU
Other
Other
mineral
assets
Assets under
construction
Exploration
and
evaluation
51
3
-
(4)
-
-
50
13
11
8
(4)
-
-
28
22
2,736
-
-
(5)
(525)
93
2,299
1,766
71
41
(5)
(477)
-
1,396
903
905
24
-
(20)
(3)
-
906
241
53
-
(17)
(3)
-
274
632
15,196
506
238
(104)
(3,082)
307
13,061
10,959
475
394
(101)
(2,660)
(66)
9,001
4,060
4,687
-
-
(42)
(404)
227
4,468
1,761
100
293
(42)
(284)
66
1,894
2,574
764
500
-
-
(33)
(637)
594
-
-
-
-
-
-
-
594
81
62
-
-
-
10
153
-
-
-
-
-
-
-
153
(1) Refer to note 15 Provisions.
(2) Refer to note 31 Discontinued operation.
(3) Includes depreciation relating to a discontinued operation of US$23 million. Refer to note 31 Discontinued operation.
(4) Refer to note 13 Impairment of non-financial assets.
Capital expenditure commitments as at 30 June 2021 were US$83 million (FY20: US$140 million).
30 June 2020
US$M
Cost
At the beginning of the financial year
AASB 16 transition adjustment
Additions
Foreign exchange movements in closure
and rehabilitation provisions
Disposals
Acquisition of subsidiaries and jointly
controlled entities
Transfers and other movements
At the end of the financial year
Accumulated depreciation and
impairments
At the beginning of the financial year
Depreciation charge for the year(1)
Disposals
At the end of the financial year
Net book value at 30 June 2020
Land and buildings
Plant and equipment
ROU
Other
ROU
Other
Other
mineral
assets
Assets under
construction
Exploration
and
evaluation
-
49
2
-
-
-
-
51
-
13
-
13
38
2,669
-
-
-
(12)
-
79
2,736
1,695
74
(3)
1,766
970
798
86
21
-
-
-
-
905
186
55
-
241
664
15,045
-
113
(175)
(15)
-
228
15,196
10,510
463
(14)
10,959
4,237
4,501
-
-
-
-
73
113
4,687
1,646
115
-
1,761
2,926
592
-
596
-
-
-
(424)
764
-
-
-
-
764
28
-
49
-
-
-
4
81
-
-
-
-
81
Total
24,420
1,095
238
(175)
(4,047)
-
21,531
14,740
710
736
(169)
(3,424)
-
12,593
8,938
Total
23,633
135
781
(175)
(27)
73
-
24,420
14,037
720
(17)
14,740
9,680
(1) Includes depreciation relating to a discontinued operation of US$44 million. Refer to note 31 Discontinued operation.
(a) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment charges. Cost is the fair value of
consideration given to acquire the asset at the time of its acquisition or construction and includes the direct cost of bringing the asset
to the location and condition necessary for operation and its estimated future cost of closure and rehabilitation.
(b) Assets under construction
When reserves are determined and development of commercial production is approved, capitalised exploration and evaluation
expenditure is reclassified to assets under construction. All subsequent development expenditure is capitalised and classified as assets
under construction, provided commercial viability conditions continue to be satisfied.
All assets included in assets under construction are reclassified to other categories in property, plant and equipment when the asset is
available and ready for use in the location and condition necessary for it to be capable of operating in the manner intended.
1
1
5
South32 Annual Report 2021Financial Report Notes to financial statements – Operating assets and liabilities continued
11. Property, plant and equipment continued
(c) Exploration and evaluation expenditure
Exploration is defined as the search for potential mineralisation after the Group has obtained legal rights to explore in a specific area
and includes topographical, geological, geochemical and geophysical studies and exploratory drilling, trenching and sampling.
Evaluation is defined as the determination of the technical feasibility and commercial viability of a particular prospect. Activities
conducted during the evaluation phase include the determination of the volume and grade of the deposit, examination and testing of
extraction methods and metallurgical or treatment process, surveys of transportation and infrastructure requirements, and market and
finance studies.
Exploration and evaluation expenditure (including amortisation of capitalised licence and lease costs) is charged to the Consolidated
Income Statement as incurred except in the following circumstances, in which case the expenditure may be capitalised:
– The exploration and evaluation activity is within an area of interest which was previously acquired as an asset acquisition or in a
business combination and measured at fair value on acquisition; and
– The existence of a commercially viable mineral deposit has been established.
In addition, drilling costs incurred at a producing mine for the purpose of improving confidence of the existing resource may be
capitalised when the following criteria are satisfied:
– The drilling occurs within the existing physical boundaries of the area defined as the resource; and
– The drilling costs are incurred in resources which are economically recoverable.
Capitalised exploration and evaluation expenditure considered to be a tangible asset is recorded as a component of property, plant
and equipment at cost less impairment charges. Otherwise, it is recorded as an intangible asset (such as certain licence and lease
arrangements). In determining whether the purchase of an exploration licence or lease is an intangible asset or a component of
property, plant and equipment, consideration is given to the substance of the item acquired and not its legal form. Licences or leases
purchased which allow exploration over an extended period of time meet the definition of an intangible exploration lease asset where
they cannot be reasonably associated with a known Mineral Resource.
(d) Other mineral assets
Other mineral assets comprise:
6
1
1
– Capitalised exploration, evaluation and development expenditure (including development stripping) for properties now in production;
– Mineral rights acquired; and
– Capitalised production stripping.
Development expenditure
In underground mines, when production and development activity occurs concurrently, development activity is separated from
production activity, and is capitalised as development expenditure in other mineral assets. Underground mine development activity
includes the cost associated with gaining access to an ore deposit which gives rise to a substantive change in the future productive
capacity of the mine.
Development and production stripping
The process of removing overburden and other mine waste materials to access mineral deposits is referred to as stripping. In open-pit
mining, stripping costs are accounted for separately for each component of an ore body. A component is a specific section within an ore
body that is made more accessible by the stripping activity. The identification of components is dependent on the mine plan and will
often comprise a separate pushback or phase identified in the plan.
There are two types of stripping activity:
– Development stripping is the initial overburden removal during the development phase to obtain access to a mineral deposit that will
be commercially produced; and
– Production stripping is the interburden removal during the normal course of production activity. Production stripping commences
after the first saleable minerals have been extracted from the component.
Development stripping costs are capitalised as a development stripping asset when:
– It is probable that future economic benefits associated with the asset will flow to the entity; and
– The costs can be measured reliably.
Production stripping can give rise to two benefits, being the extraction of ore in the current period and improved access to the ore body
component in future periods. To the extent that the benefit is the extraction of ore, the stripping costs are recognised as an inventory
cost. To the extent that the benefit is improved access to future ore, the stripping costs are recognised as a production stripping asset if
the following criteria are met:
– It is probable that the future economic benefit (improved access to ore) will flow to the entity;
– The component of the ore body for which access has been improved can be identified; and
– The costs relating to the stripping activity can be measured reliably.
South32 Annual Report 2021Financial Report 11. Property, plant and equipment continued
(d) Other mineral assets continued
Production stripping costs are allocated between the inventory produced and the production stripping asset using a life-of-component
waste to ore (or mineral contained) strip ratio. When the current strip ratio is greater than the life-of-component strip ratio a portion of
the stripping costs is capitalised to the production stripping asset.
The development and production stripping assets are depreciated on a units of production basis based on the Ore Reserves of the
relevant components.
(e) Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group recognises a ROU asset and a lease liability at the lease commencement date. The ROU asset is initially measured at cost,
which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred and estimated future cost of closure or rehabilitation, less any lease incentives received. The ROU
asset is subsequently measured at cost less accumulated depreciation, impairment charges and any adjustments for remeasurements
of the lease liability.
The corresponding lease liability is included within interest bearing liabilities. The lease liability is initially measured at the present
value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the lessee’s incremental borrowing rate. The lessee’s incremental borrowing rate is the rate of
interest that a lessee would have to pay to borrow over a similar term, and with similar security, the funds necessary to obtain an asset
of a similar value to the ROU asset in a similar economic environment.
Lease payments included in the measurement of the lease liability comprise of the following:
– Fixed payments, including in-substance fixed payments;
– Variable lease payments that depend on a rate or an index, initially measured using the rate or index as at the commencement date;
– Amounts expected to be payable under a residual value guarantee; and
– The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal
period if the Group is reasonably certain to exercise an extension option and penalties for early termination of a lease if the Group is
reasonably certain to terminate early.
The lease liability is subsequently measured at amortised cost using the effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in a rate or an index, if there is a change in the Group’s estimate of the amount
expected to be payable under a residual guarantee, or if the Group changes its assessment of whether it will exercise a purchase,
extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of
the ROU asset, or is recorded in the Consolidated Income Statement if the carrying amount of the ROU asset has been reduced to nil.
1
1
7
The nature of the Group’s leases predominantly relates to mining equipment and assets supporting the operations in line with the
Group’s principal activities, as well as real estate in the form of office buildings.
Leased assets are pledged as security for the related lease liabilities.
Short-term, low-value and variable leases
The Group has elected not to recognise ROU assets and lease liabilities for short-term and low-value leases. Short-term leases are
leases with a lease term of 12 months or less, while low-value leases are leases where the underlying asset is considered low value.
Variable leases are leases with lease payments which are variable but do not depend on a rate or an index. The Group recognises the
lease payments associated with these leases as an expense in the Consolidated Income Statement on a straight-line basis over the
lease term. If variable leases have a fixed component, these would be recognised on the Consolidated Balance Sheet.
Total cash outflows for lease obligations consist of US$104 million (FY20: US$96 million) for lease liabilities recognised on the Consolidated
Balance Sheet and US$73 million (FY20: US$40 million) for short-term, low-value and variable leases recognised on the Consolidated
Income Statement.
(f) Depreciation and amortisation
The carrying amounts of property, plant and equipment are depreciated to their estimated residual values over the estimated useful
lives of the specific assets concerned. Estimates of residual values and useful lives are reassessed annually and any change in estimate
is taken into account in the determination of remaining depreciation charges. Depreciation commences on the date of commissioning.
The major categories of property, plant and equipment are depreciated on a units of production or straight-line basis using the
estimated lives indicated below. However, where assets are dedicated to a mine or lease and are not readily transferable, the below
useful lives are subject to the lesser of the asset category’s useful life and the life of the mine or lease:
Buildings
Land
Plant and equipment
ROU assets
Mineral rights
Capitalised exploration, evaluation and development expenditure
25 to 40 years straight-line
not depreciated
3 to 30 years straight-line
based on the shorter of the useful life or the lease term (straight-line)
based on Ore Reserves on a units of production basis
based on Ore Reserves on a units of production basis
South32 Annual Report 2021Financial Report Notes to financial statements – Operating assets and liabilities continued
12. Intangible assets
30 June 2021
US$M
Cost
At the beginning of the financial year
Additions
Disposals
Disposal of a discontinued operation(1)
At the end of the financial year
Accumulated amortisation and impairments
At the beginning of the financial year
Amortisation charge for the year(2)
Disposals
Disposal of a discontinued operation(1)
Impairments for the year
At the end of the financial year
Net book value at 30 June 2021
(1) Refer to note 31 Discontinued operation.
(2) Includes amortisation relating to a discontinued operation of US$4 million. Refer to note 31 Discontinued operation.
30 June 2020
US$M
Cost
At the beginning of the financial year
Additions
At the end of the financial year
Accumulated amortisation and impairments
At the beginning of the financial year
Amortisation charge for the year(1)
At the end of the financial year
Net book value at 30 June 2020
Goodwill
Other
intangibles
193
-
-
(54)
139
54
-
-
(54)
-
-
139
325
1
(28)
(20)
278
216
10
(28)
(6)
36
228
50
Goodwill
Other
intangibles
193
-
193
54
-
54
139
291
34
325
197
19
216
109
Total
518
1
(28)
(74)
417
270
10
(28)
(60)
36
228
189
Total
484
34
518
251
19
270
248
(1) Includes amortisation relating to a discontinued operation of US$3 million. Refer to note 31 Discontinued operation.
(a) Goodwill
Where the fair value of consideration paid for a business combination exceeds the fair value of the Group’s share of the identifiable net
assets acquired, the difference is treated as purchased goodwill. Where the fair value of the Group’s share of the identifiable net assets
acquired exceeds the cost of acquisition, the difference is immediately recognised in the Consolidated Income Statement. Goodwill is
not amortised, however, its carrying amount is assessed annually against its recoverable amount.
(b) Other intangible assets
Amounts paid for the acquisition of identifiable intangible assets, such as software, licences and contract based intangible assets are
capitalised at the fair value of consideration paid and are recorded at cost less accumulated amortisation and impairment charges.
Identifiable intangible assets with a finite life are amortised on a straight-line basis over their expected useful life from when the asset is
ready for use. The useful lives are as follows:
Software and licences
Contract based intangible assets
5 years
up to 35 years
The Group has no identifiable intangible assets for which the expected useful life is indefinite.
8
1
1
South32 Annual Report 2021Financial Report 13. Impairment of non-financial assets
In testing for indications of impairment and performing impairment calculations, assets are considered as collective groups and referred
to as cash generating units (CGUs). CGUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate
cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Formal impairment tests are carried
out annually for CGUs containing goodwill. In addition, formal impairment tests are performed for all other CGUs when there is an
indication of impairment. The Group uses discounted cash flow valuations to assess all its CGUs for impairment or impairment reversal
indicators. For any resultant formal impairment testing, and for CGUs containing goodwill, the Group uses the higher of fair value less
cost of disposal (FVLCD) and its value in use to assess the recoverable amount. If the carrying value of the CGU exceeds its recoverable
amount, the CGU is impaired, and an impairment loss is charged to the Consolidated Income Statement.
Previously impaired CGUs are reviewed for possible reversal of a previous impairment at each reporting date. Impairment reversals
cannot exceed the carrying value that would have been determined (net of depreciation) had no impairment loss been recognised for
the CGU. Goodwill is not subject to impairment reversal.
For properties not yet in production, any mineral rights acquired, together with subsequent capitalised exploration and evaluation
expenditure, are regularly reviewed to determine the appropriateness of continuing to carry forward costs in relation to that area of
interest. Once the technical feasibility and commercial viability of the extraction of Ore Reserves in an area of interest are demonstrated,
exploration and evaluation assets attributable to that area of interest are first tested for impairment before being reclassified to other
mineral assets.
The Group recorded the following pre-tax impairments for the year ended 30 June 2021:
US$M
Property, plant and equipment
Right-of-use lease assets(1)
Intangible assets
Total impairment
Note
11
11
12
FY21
728
8
36
772
FY20
-
-
-
-
(1) Included in the major corporate restructures earnings adjustments. Refer to note 4(b)(i) Earnings adjustments.
No impairment or impairment reversal was recognised for the year 30 June 2020.
(a) Recognised impairment – 30 June 2021
Illawarra Metallurgical Coal
On 5 February 2021, the Group was advised that the New South Wales (NSW) Independent Planning Commission (IPC) refused the
application for the Dendrobium Next Domain (DND) life extension project at IMC. The Group has since scaled back activity on the DND
project while it considers alternative options following the IPC decision. This includes proceedings which have been commenced in the
Land and Environment Court of NSW for a judicial review of the decision and the potential submission of an alternate mine plan to the
NSW Minister for Planning and Public Spaces for determination of the project as state significant infrastructure. The decision by the IPC
has introduced uncertainty over the future of the DND project, the IMC complex and the DND project’s value contribution to the IMC
CGU recoverable amount assessment.
1
1
9
The Group has since assessed the potential implications of the IPC decision and reviewed the optimised IMC CGU and the resultant
impact on the carrying value of its assets as at 30 June 2021. The IMC CGU, which is also a reporting segment, consists of the Appin and
Dendrobium underground metallurgical coal mines, and the West Cliff and Dendrobium coal preparation plants. The Group recognised
an impairment of property, plant and equipment at its IMC CGU of US$728 million which is included in expenses excluding net finance
costs in the Consolidated Income Statement. This charge reflects the increased approval uncertainty created by the IPC’s decision to
refuse the application for the DND life extension project and the resultant impact on the economics of the broader IMC complex. The
recoverable amount of the IMC CGU was determined as US$550 million based on its FVLCD and reflects judgements in relation to the
likelihood of future mine life extension projects for, and the Group’s major long-term coal supply arrangements connected with, the IMC
complex. The fair value measurement is categorised as a Level 3 fair value based on the inputs in the valuation technique (refer to note
19 Financial assets and financial liabilities).
In the short to medium-term we have applied an actual enacted carbon price less allowable abatements based on existing regulations
with the expectation that existing allowances will reduce over time as Australia strengthens its climate policies. In the long-term
we assume a single global carbon price, based on an assessment of policy-driven costs, evolution of technological innovation and
abatement costs. Our long-term global carbon price of US$40 per tonne is applied to all Scope 1 and 2 emissions and assumes no
carbon exemptions or allowances are employed.
In determining the FVLCD, a real US$ post tax discount rate range of between 6 and 8 per cent was applied to discount future cash
flows. The recoverable amount was informed by a production profile and costs based on management’s planning processes. The long-
run metallurgical coal prices, energy coal prices and exchange rates used in the FVLCD determinations are within the following ranges
as published by market commentators:
Metallurgical coal (US$/t)
Energy coal (US$/t)
Foreign exchange rates (AU$ to US$)
Assumptions used in FVLCD
112 to 160
58 to 78
0.71 to 0.77
South32 Annual Report 2021Financial Report Notes to financial statements – Operating assets and liabilities continued
13. Impairment of non-financial assets continued
(b) Impairment test for CGUs containing goodwill
For the purpose of impairment testing, goodwill has been allocated to CGUs that are expected to benefit from the synergies of the
business combination and which represent the level at which management will monitor and manage the goodwill.
The carrying amount of goodwill has been allocated to the following CGU:
US$M
Hillside Aluminium
Total goodwill
Note
12
FY21
139
139
FY20
139
139
Hillside Aluminium
The goodwill arose from the acquisition of Alusaf in Hillside Aluminium (Pty) Ltd and has been allocated to the Hillside Aluminium CGU
which comprises the Hillside aluminium smelter. The recoverable amount of the Hillside Aluminium CGU was determined based on a
FVLCD calculation and was categorised as a Level 3 fair value based on the inputs in the valuation technique (refer to note 19 Financial
assets and financial liabilities). The impairment test for the Hillside Aluminium CGU indicated that no impairment was required. The
determination of FVLCD was most sensitive to:
– Production volumes;
– Aluminium and alumina prices;
– Foreign exchange rates;
– Carbon pricing and timing; and
– Discount rate.
Production volumes – estimated production volumes are based on the life of the smelter as determined by management as part of the
long-term planning process. Production volumes are influenced by production input costs such as electricity prices, jurisdiction based
carbon pricing, and the selling price of aluminium.
Aluminium and alumina prices, and foreign exchange rates – key assumptions for aluminium and alumina prices are comparable to
market consensus forecasts for each of the years of the life of operation. Foreign exchange rates are aligned with forward market rates
in the short-run and thereafter are within the range published by market commentators.
0
2
1
The table below shows the amount by which these assumptions must change in isolation in order for the estimated recoverable amount
to be equal to the carrying amount of the Hillside Aluminium CGU, including goodwill. Owing to the complexity of the relationships
between each key assumption, the analysis was performed for each assumption individually.
Aluminium prices (US$/t)
Alumina prices (US$/t)
Foreign exchange rates (ZAR to US$)
Assumptions used in FVLCD
Change required for the carrying amount to equal
recoverable amount
1,552 to 2,866
288 to 400
14.5 to 16.0
decrease of 10%
increase of 34%
ZAR strengthening of 20%
Carbon pricing and timing – in determining the FVLCD, the current jurisdiction enacted carbon price, in real terms, of ZAR133 to
ZAR136 per tonne CO2e is applied for the life of operation for Scope 1 and 2 emissions, net of operation specific abatement allowances.
Discount rate – in determining the FVLCD, a real post-tax discount rate of 7 per cent (FY20: 7.5 per cent), and a country risk premium of
up to 2 per cent (FY20: up to 2 per cent) are applied to the post-tax cash flows expressed in real terms.
South32 Annual Report 2021Financial Report 13. Impairment of non-financial assets continued
Key estimates, assumptions and judgements
An assessment as to whether there is any indication of impairment and the calculation of a CGU’s recoverable amount requires
management to make estimates and assumptions about expected production and sales volumes, commodity prices (considering
current and historical prices, price trends and related factors), foreign exchange rates, Ore Reserves, Mineral Resources, regulatory
approvals, operating costs, closure and rehabilitation costs, future capital expenditure, allocation of corporate costs, specific
jurisdiction based carbon prices, where relevant, and global carbon pricing. These estimates and assumptions are subject to
risk and uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which may impact
the recoverable amount. In such circumstances, some or all of the carrying amount may be impaired or a previously recognised
impairment charge may be reversed with the impact recorded in the Consolidated Income Statement.
The key estimates and assumptions used in the assessment of impairment indicators are as follows:
Future production
Commodity prices
Exchange rates
Discount rates
Regulatory approvals
Carbon prices
Life of operation plans based on Proved and Probable Ore Reserve estimates, Mineral Resource
(excluding Inferred Mineral Resources) estimates, economic life of smelters and refineries and, in
certain cases, expansion projects, including future cost of production.
Forward market and contract prices, and longer-term price protocol estimates which includes an
assessment of the impact carbon price assumptions might have.
Observable forward market foreign exchange rates, and longer-term price protocol estimates.
Cost of capital risk-adjusted and appropriate to the resource.
Life of operation plans include assumptions associated with the successful application of ongoing
and future regulatory approvals.
Actual enacted schemes less allowable abatements, where applicable, and a long-term base case
estimate of US$40 per tonne (real) applied to all Scope 1 and 2 emissions.
The cost and benefit of achieving the Group’s emissions reduction strategy is included when the Group has a high degree of
confidence that a project will achieve a reduction, which typically aligns with the related capital project being internally approved.
The Group’s commodity prices and other key assumptions represent management’s expectations on likely outcomes, with a base
case estimation of at least a 2°C climate related warming scenario.
Where impairment testing is undertaken, a range of external sources are considered as further input to the above assumptions.
When assessing for impairment and impairment reversal indicators, the fundamental characteristics of previously impaired CGUs
are relevant to their sensitivity to key estimates and assumptions. For previously impaired CGUs these include:
– CGUs with higher operating margins and with life of operation plans longer than 10 years which are less sensitive to short-term
commodity prices and foreign exchange rates, for example Worsley Alumina;
– CGUs with lower operating margins which are highly sensitive to movements in commodity prices and foreign exchange rates,
for example South Africa Manganese and IMC; and
– CGUs with higher operating margins, shorter life of operation plans and exposure to commodities that display greater price
volatility, for example Australia Manganese.
The operating assets for previously impaired CGUs are included in note 4(b) Segment results.
For properties not yet in production, acquired mineral rights together with subsequent capitalised exploration and evaluation
expenditure require judgement to determine the likelihood of future economic benefits from future development, and whether
sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of
the exploration and evaluation asset is unlikely to be recovered in full. When facts and circumstances suggest that the carrying
amount exceeds the recoverable amount, an impairment test will be required which may result in an adjustment to the carrying
value of acquired mineral rights together with subsequent capitalised exploration and evaluation expenditure.
1
2
1
South32 Annual Report 2021Financial Report Notes to financial statements – Operating assets and liabilities continued
13. Impairment of non-financial assets continued
Key estimates, assumptions and judgements continued
An Ore Reserve is the economically mineable part of the Measured and/or Indicated Mineral Resource that can be legally
extracted, or where there is a reasonable expectation that approvals for extraction will be granted, from the Group’s properties.
In order to estimate Ore Reserves, consideration is required for a range of modifying factors, including mining, processing,
metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental. When reporting Ore Reserves,
the relevant studies, to at least a pre-feasibility level, must demonstrate that, at the time of reporting, extraction could be
reasonably justified. Management will form a view of forecast sales prices, based on current and long-term historical average price
trends.
Estimating the quantity and/or grade of Mineral Resources requires the location, quantity, grade (or quality), continuity and other
geological characteristics to be known, estimated or interpreted from specific geological evidence and knowledge, including
sampling in order to satisfy the requirement that there are reasonable prospects for eventual economic extraction. This process
may require complex and difficult geological assessments to interpret the data.
The Group reports Ore Reserves and Mineral Resources in accordance with the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (JORC Code), and the ASX Listing Rules Chapter 5: Additional reporting on mining
and oil and gas production and exploration activities.
Because the economic assumptions used to estimate the Ore Reserves change from period to period, and because additional
geological data is generated during the course of operations, estimates of the Ore Reserves and Mineral Resources may change
from period to period. The Group’s planning processes consider the impacts of climate change on its Ore Reserves, including
assessments of operating costs and the impact of extreme weather events on the expectation of economic extraction. Changes in
reported Ore Reserves may affect the Group’s financial results and financial position in a number of ways, including the following:
– Asset recoverable amounts may be affected due to changes in estimated future cash flows;
– Depreciation, depletion and amortisation charged in the Consolidated Income Statement may change on a units of production
basis, or where the useful economic lives of assets change;
– Development and production stripping costs recorded on the Consolidated Balance Sheet or charged to the Consolidated
Income Statement may change with stripping ratios or on a units of production basis of depreciation; and
– Decommissioning, closure and rehabilitation provisions may change where estimated Ore Reserves affect expectations about
the timing or cost of these activities.
The carrying amount of associated deferred tax assets may change due to changes in estimates of the likely recovery of the tax
benefits.
2
2
1
14. Trade and other payables
US$M
Current
Trade creditors
Other creditors
Total current trade and other payables
Non-current
Other creditors
Total non-current trade and other payables
FY21
FY20
663
114
777
2
2
558
69
627
3
3
Trade and other payables generally represent liabilities for goods and services provided to the Group prior to the end of the financial
year which were unpaid at the end of the financial year. These amounts are unsecured. Trade and other payables are included in current
liabilities, except for those liabilities where payment is not due within 12 months from the reporting date, which are classified as non-
current liabilities.
Trade and other payables, other than financial guarantee contracts and financial liabilities held at FVTPL, are stated at their amortised
cost and are non-interest bearing. The carrying value of these trade and other payables is considered to approximate fair value due to
the short-term nature of the payables.
South32 Annual Report 2021Financial Report 15. Provisions
US$M
Current
Employee benefits
Closure and rehabilitation
Other
Total current provisions
Non-current
Employee benefits
Closure and rehabilitation
Post-retirement employee benefits
Other
Total non-current provisions
30 June 2021
US$M
At the beginning of the financial year
Charge/(credit) for the year to the Consolidated Income Statement:
Employee
benefits
Closure and
rehabilitation
188
1,830
Underlying
Discounting(1)
Change in discount rate(2)(3)
Net interest expense(4)
Exchange rate variations
Released during the year
Amounts capitalised for change in costs and estimates
Amounts capitalised for change in discount rate(3)
Foreign exchange amounts capitalised
Amounts taken to retained earnings
Utilisation
Disposal of a discontinued operation(5)
Transfers and other movements
At the end of the financial year
184
-
-
-
21
(2)
-
-
-
-
(152)
(38)
-
201
16
120
(23)
-
51
(3)
271
235
238
-
(21)
(997)
-
1,717
Note
FY21
FY20
195
15
29
239
6
1,702
41
10
1,759
Other
78
22
3
-
-
8
(4)
-
-
-
-
(33)
(30)
(5)
39
184
40
50
274
4
1,790
77
28
1,899
Total
2,173
223
123
(23)
8
96
(9)
271
235
238
(1)
(213)
(1,125)
2
1,998
1
2
3
22
Post-
retirement
employee
benefits
77
1
-
-
8
16
-
-
-
-
(1)
(7)
(60)
7
41
(1) Includes amounts relating to a discontinued operation of US$64 million. Refer to note 31 Discontinued operation.
(2) Includes amounts relating to a discontinued operation of (US$17) million. Refer to note 31 Discontinued operation.
(3) The Group has reviewed its discount rates applied to closure and rehabilitation provisions. The corresponding net increase in the provision is capitalised as an asset or charged
to the Consolidated Income Statement in the case of closed sites.
(4) Includes amounts relating to a discontinued operation of US$5 million. Refer to note 31 Discontinued operation.
(5) Refer to note 31 Discontinued operation.
30 June 2020
US$M
At the beginning of the financial year
Charge/(credit) for the year to the Consolidated Income Statement:
Underlying
Discounting(1)
Net interest expense(2)
Exchange rate variations
Released during the year
Amounts capitalised for change in costs and estimates
Foreign exchange amounts capitalised
Amounts taken to retained earnings
Utilisation
At the end of the financial year
Employee
benefits
Closure and
rehabilitation
203
1,868
143
-
-
(10)
(16)
-
-
-
(132)
188
16
102
-
(48)
(9)
106
(175)
-
(30)
1,830
Post-
retirement
employee
benefits
92
2
-
8
(17)
-
-
-
(2)
(6)
77
Other
74
37
-
-
(14)
(3)
-
-
-
(16)
78
Total
2,237
198
102
8
(89)
(28)
106
(175)
(2)
(184)
2,173
(1) Includes amounts relating to a discontinued operation of US$48 million. Refer to note 31 Discontinued operation.
(2) Includes amounts relating to a discontinued operation of US$5 million. Refer to note 31 Discontinued operation.
South32 Annual Report 2021Financial Report Notes to financial statements – Operating assets and liabilities continued
15. Provisions continued
(a) Employee benefits
Liabilities for unpaid wages and salaries are recognised in other creditors. Current entitlements to annual leave and accumulating sick
leave accrued for services up to the reporting date are recognised in the provision for employee benefits and are measured at the
amounts expected to be paid. Entitlements to non-accumulated sick leave are recognised when the leave is taken.
The current liability for long service leave (for which settlement within 12 months of the reporting date cannot be deferred) is recognised
in the current provision for employee benefits and is measured in accordance with annual leave described above. The non-current
liability for long service leave is recognised in the non-current provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date.
(b) Closure and rehabilitation
The mining, extraction and processing activities of the Group normally give rise to obligations for site closure or rehabilitation. Closure
and rehabilitation works can include facility decommissioning and dismantling, removal or treatment of waste materials, site and land
rehabilitation.
Provisions for the cost of each closure and rehabilitation program are recognised at the time that environmental disturbance occurs.
When the extent of disturbance increases over the life of an operation, the provision is increased accordingly. Costs included in the
provision encompass all closure and rehabilitation activity expected to occur progressively over the life of the operation and at, or
after, the time of closure, for disturbance existing at the reporting date. Routine operating costs that may impact the ultimate closure
and rehabilitation activities, such as waste material handling conducted as an integral part of a mining or production process, are not
included in the provision. Costs arising from unforeseen circumstances, such as the contamination caused by unplanned discharges, are
recognised as an expense and liability when the event gives rise to an obligation which is probable and capable of reliable estimation.
The timing of the actual closure and rehabilitation expenditure is dependent upon a number of factors such as: the life and nature of the
asset, which is informed by the demand for commodities, carbon pricing and other variables; the operating licence conditions; and the
environment in which the mine operates. Expenditure may occur before and after closure and can continue for an extended period of
time depending on closure and rehabilitation requirements.
Closure and rehabilitation provisions are measured at the expected value of future cash flows, discounted to their present value and
determined according to the probability of alternative estimates of cash flows occurring for each operation.
4
2
1
Discount rates used are risk-free interest rates specific to the country in which the operations are located. Material changes in country
specific risk-free interest rates may affect the discount rates applied.
When provisions for closure and rehabilitation are initially recognised, the corresponding cost is capitalised as an asset, representing
part of the cost of acquiring the future economic benefits of the operation. The capitalised cost of closure and rehabilitation activities
is recognised in property, plant and equipment and depreciated accordingly. The value of the provision is progressively increased over
time due to the effect of discounting unwind and inflation, creating an expense recognised in finance expenses.
Closure and rehabilitation provisions are also adjusted for changes in costs and estimates. Those adjustments are accounted for as a
change in the corresponding capitalised cost, except where a reduction in the provision is greater than the depreciated capitalised cost
of the related assets, in which case the capitalised cost is reduced to nil and the remaining adjustment is recognised first against other
items in property, plant and equipment, and subsequently to the Consolidated Income Statement. In the case of closed sites, changes
to estimated costs are recognised immediately in the Consolidated Income Statement. Changes to the capitalised cost result in an
adjustment to future depreciation. Adjustments to the estimated amount and timing of future closure and rehabilitation cash flows are a
normal occurrence in light of the significant judgements and estimates involved.
(c) Post-retirement employee benefits
This relates to the provision for post-employment defined benefit pension and medical plans. Refer to note 22 Pension and other post-
retirements obligations.
Key estimates, assumptions and judgements
The recognition of closure and rehabilitation provisions requires judgement and is based on significant estimates and assumptions
such as:
– the requirements of the relevant local legal and regulatory framework;
– the magnitude of possible contamination;
– the timing, extent, and cost of required closure and rehabilitation activity; and
– potential changes in climate conditions.
These uncertainties may result in future actual expenditure differing from the amounts currently provided.
The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the
time.
In addition to the uncertainties noted above, certain closure and rehabilitation activities may be subject to legal disputes and
depending on the ultimate resolution of these disputes, the final liability for such matters could vary.
If risk-free interest rates were decreased by 0.5 per cent, the provision would increase by approximately US$298 million.
South32 Annual Report 2021Financial Report Notes to financial statements – Capital structure and financing
This section outlines how the Group manages its capital and related financing activities.
16. Cash and cash equivalents
Cash and cash equivalents include cash at bank and on hand as well as short-term deposits.
US$M
Cash
Short-term deposits
Cash and cash equivalents(1)(2)
FY21
596
1,017
1,613
FY20
465
850
1,315
(1) Cash and cash equivalents include US$5 million (FY20: US$16 million) which is restricted by legal or contractual arrangements.
(2) Cash and cash equivalents include US$285 million (FY20: US$284 million) consisting of short-term deposits and cash managed by the Group on behalf of its equity accounted
investments. The corresponding amount payable is included in note 17 Interest bearing liabilities.
17. Interest bearing liabilities
US$M
Current
Lease liabilities
Unsecured loans from equity accounted investments(1)
Unsecured other
Total current interest bearing liabilities
Non-current
Lease liabilities
Unsecured other
Total non-current interest bearing liabilities
FY21
FY20
37
285
86
408
650
149
799
42
284
29
355
609
53
662
(1) Refer to note 16 Cash and cash equivalents and note 29 Related party transactions.
Bank overdrafts, bank loans and other borrowings are initially recognised at their fair value net of directly attributable transaction costs.
Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost using the effective interest method. Gains
and losses are recognised in the Consolidated Income Statement when the liabilities are derecognised. Interest bearing liabilities are
classified as current liabilities, except when the Group has an unconditional right to defer settlement for at least 12 months after the
reporting date, in which case the liabilities are classified as non-current.
(a) Reconciliation of movements in liabilities to cash flows arising from financing activities
US$M
At the beginning of the financial year
Changes from financing cash flows:
Net repayment of lease liabilities
Net receipt/(repayment) of other interest bearing liabilities
Total changes from financing cash flows
The effect of changes in foreign exchange rates
Increase/(decrease) in lease and other interest bearing liabilities
Disposal of a discontinued operation(1)
Other changes:
Interest expense
Interest paid
At the end of the financial year
(1) Refer to note 31 Discontinued operation.
Lease liabilities
Other interest
bearing
liabilities
Total interest
bearing
liabilities
651
366
1,017
(49)
-
(49)
58
27
-
55
(55)
687
-
9
9
(4)
5
144
15
(15)
520
(49)
9
(40)
54
32
144
70
(70)
1,207
1
2
5
South32 Annual Report 2021Financial Report Notes to financial statements – Capital structure and financing continued
18. Net finance costs
US$M
Finance expenses
Interest on borrowings
Interest on lease liabilities
Discounting on provisions and other liabilities
Change in discount rate on closure and rehabilitation provisions
Net interest expense on post-retirement employee benefits
Fair value change on financial assets
Exchange rate variations on net debt
Finance income
Interest income
Net finance costs
(1) Refer to note 31 Discontinued operation.
FY21
FY20
Restated(1)
15
55
59
(6)
3
-
52
178
17
161
18
51
54
-
3
9
(6)
129
35
94
Interest income and expense are recognised using the effective interest method.
19. Financial assets and financial liabilities
(a) Financial risk management objectives and policies
The Group is exposed to market, liquidity and credit risk. These risks are managed in accordance with the Group’s portfolio risk
management strategy which supports the delivery of the Group’s financial targets while protecting its future financial security
and flexibility by taking advantage of the natural diversification of the Group’s operations and activities. A Cash Flow at Risk (CFaR)
framework is used to capture the benefits of diversification and to measure the aggregate impact of financial risks on those financial
targets. CFaR is measured on a portfolio basis and is defined as the expected reduction from projected business plan cash flows over a
one-year horizon in a pessimistic case. In addition to the CFaR framework, deterministic analysis of a range of operational, commodity
price and foreign exchange rate scenarios is also used to measure the potential impact on financial targets.
6
2
1
(i) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises interest rate risk, foreign currency risk and other price risk, such as equity price risk and commodity price risk.
Financial instruments affected by market risk include loans and borrowings, deposits, investments in equity instruments designated as
FVOCI, other investments held at FVTPL and derivative financial instruments.
Group activities expose it to market risks associated with movements in interest rates, foreign currencies and commodity prices. The
Group predominantly manages financing costs, currency impacts, input costs and commodity prices on a floating or index basis. This
strategy gives rise to a risk of variability in earnings which is measured under the CFaR framework.
In executing the strategy, financial instruments may be employed for risk mitigation purposes with a strict Board of Directors approved
mandate, or to align the total Group exposure to the relevant index target in the case of commodity sales, operating costs or debt
issuances.
Interest rate risk
The Group is exposed to interest rate risk on its cash and cash equivalents, trade and other receivables, embedded derivatives, trade
and other payables and interest bearing liabilities from the possibility that changes in interest rates will affect future cash flows or the
fair value of financial instruments.
The Group had the following exposure to interest rate risk:
US$M
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivative contracts
Financial liabilities
Trade and other payables
Interest bearing liabilities
Net exposure
FY21
FY20
1,608
131
-
(14)
(314)
1,411
1,299
150
9
-
(340)
1,118
South32 Annual Report 2021Financial Report 19. Financial assets and financial liabilities continued
(a) Financial risk management objectives and policies continued
(i) Market risk continued
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of borrowings and
financial assets affected. With all other variables held constant, the Group’s profit/(loss) after tax is affected through the impact on
floating rate borrowings and investments, as follows:
Increase/decrease in basis points
+100
–100
Impact on profit/(loss) after tax
US$M
FY21
15
(4)
FY20
8
(1)
The sensitivity analysis assumes that the change in interest rates is effective from the beginning of the financial year and the fixed/
floating mix and balances are constant over the year. For the purpose of the sensitivity analysis, the decrease of 100 basis points is
applied to the extent that the underlying interest rates do not fall below zero per cent. However, interest rates and the net debt profile of
the Group may not remain constant over the coming financial year and therefore such sensitivity analysis should be used with care.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign
exchange rates. The functional currency of the Group’s operations is the US dollar. The Group’s potential currency exposures comprise:
– Translational exposure in respect of non-functional currency monetary items; and
– Transactional exposure in respect of non-functional currency expenditure and revenues.
Certain operating and capital expenditure is incurred by operations in currencies other than their functional currency. To a lesser
extent, certain sales revenue is earned in currencies other than the functional currency of the operation, and certain exchange control
restrictions may require funds to be maintained in currencies other than the operations functional currency. When required, the Group
may enter into forward exchange contracts.
The principal non-functional currencies to which the Group is exposed to are the Australian dollar, Brazilian real, Canadian dollar,
Colombian peso, and South African rand. The following table shows the foreign currency risk arising from financial assets and liabilities,
which are denominated in these currencies:
Net financial assets/(liabilities) – by currency of denomination
1
2
7
US$M
Australian dollar
Brazilian real
Canadian dollar
Colombian peso
South African rand
FY21
(847)
58
19
9
(172)
FY20
(856)
7
(25)
(15)
38
Based on the Group’s net financial assets and liabilities as at 30 June, a weakening of the US dollar against these currencies as
illustrated in the table below, with all other variables held constant, would increase/(decrease) profit/(loss) after tax and other
comprehensive income, net of tax, as follows:
30 June 2021
Currency movement
US$M
10% movement in Australian dollar
10% movement in Brazilian real
10% movement in Canadian dollar
10% movement in Colombian peso
10% movement in South African rand
30 June 2020
Currency movement
US$M
10% movement in Australian dollar
10% movement in Brazilian real
10% movement in Canadian dollar
10% movement in Colombian peso
10% movement in South African rand
Profit/(loss) after tax
Other comprehensive
income, net of tax
(60)
(1)
1
1
(17)
-
7
1
-
-
Profit(loss) after tax
Other comprehensive
income, net of tax
(60)
(2)
(3)
(2)
4
-
3
-
-
-
South32 Annual Report 2021Financial Report Notes to financial statements – Capital structure and financing continued
19. Financial assets and financial liabilities continued
(a) Financial risk management objectives and policies continued
(i) Market risk continued
Commodity price risk
Contracts for the sale and physical delivery of commodities are executed whenever possible on a pricing basis intended to achieve a
relevant index target. Where pricing terms deviate from the index, the Group may choose to use derivative commodity contracts to
realise the index price. Contracts for the physical delivery of commodities are not typically financial instruments and are carried in the
Consolidated Balance Sheet at cost (typically at nil).
Provisionally priced commodity sales and purchases contracts
Provisionally priced sales or purchases contracts are those for which price finalisation, referenced to the relevant index, is outstanding
at the reporting date. Provisional pricing mechanisms embedded within these sales and purchases arrangements have the character of
a commodity derivative and are carried at FVTPL as part of trade receivables or trade creditors. Fair value movements on provisionally
priced sale contracts are disclosed in ‘Other’ revenue. Refer to note 4(b) Segment results. The Group’s exposure at 30 June 2021 to the
impact of movements in commodity prices on provisionally invoiced sale and purchase volumes was predominantly around nickel, silver,
lead, zinc, aluminium and alumina.
The Group had 3.6kt of nickel, 3.0Moz of silver, 32.0kt of lead, 9.6kt of zinc, 4.0kt of aluminium and 64.2kt of alumina exposure at 30 June
2021 (FY20: 2.5kt of nickel, 2.0Moz of silver, 28.8kt of lead, 7.8kt of zinc, 18.7kt of aluminium and 11.6kt of alumina) that was provisionally
priced. The final price of these sales or purchases will be determined during the first half of FY22. A 10 per cent change in the realised
price of these commodities, with all other factors held constant, would increase or decrease profit/(loss) after tax by US$26 million
(FY20: US$16 million). The relationship between commodity prices and foreign currencies is complex and foreign exchange rates and
commodity prices may move concurrently in response to market conditions. These sensitivities should therefore be used with care.
(ii) Liquidity risk
The Group’s liquidity risk arises from the possibility that it may not be able to settle or meet its obligations as they fall due. Operational,
capital and regulatory requirements are considered in the management of liquidity risk, in conjunction with short and long-term
forecast information.
The Group’s policy on counterparty credit exposure ensures that only counterparties of a high credit standing are used for the
investment of any excess cash.
8
2
1
Standby arrangements and unused credit facilities
The entities in the Group are funded by a combination of cash generated by the Group’s operations, working capital facilities and
intercompany loans provided by the Group. Intercompany loans may be funded by a combination of cash, short and long-term debt and
equity market raisings. Details of the Group’s major standby arrangement are as follows:
30 June 2021
US$M
Revolving credit facility(1)
Available
1,450
Used
-
Unused
1,450
(1) The Group has an undrawn revolving credit facility which is a standby arrangement to the US commercial paper program. This facility was extended in July 2020 by one year
and expires in February 2023.
Maturity profile of financial liabilities
The maturity profiles of financial liabilities, based on the contractual amounts, are as follows:
30 June 2021
US$M
Trade and other payables(1) – financial guarantee contract
Trade and other payables(2) – other
Other interest bearing liabilities
Lease liabilities
Other financial liabilities – derivative contracts
Total
Carrying
amount
15
754
520
687
11
1,987
On demand or
less than 1
year
1 to 5 years
More than 5
years
93
752
372
91
11
1,319
-
2
98
320
-
420
-
-
75
853
-
928
Total
93
754
545
1,264
11
2,667
(1) Refer to note 31 Discontinued operation.
(2) Excludes current input taxes of US$10 million included in other creditors. Refer to note 14 Trade and other payables.
30 June 2020
US$M
Trade and other payables(1)
Other interest bearing liabilities
Lease liabilities
Other financial liabilities – derivative contracts
Total
Carrying
amount
624
366
651
1
1,642
On demand or
less than 1
year
1 to 5 years
More than 5
years
621
315
92
1
1,029
3
43
294
-
340
-
18
840
-
858
Total
624
376
1,226
1
2,227
(1) Excludes current input taxes of US$6 million included in other creditors. Refer to note 14 Trade and other payables.
South32 Annual Report 2021Financial Report 19. Financial assets and financial liabilities continued
(a) Financial risk management objectives and policies continued
(iii) Credit risk
The Group has credit risk management policies in place covering the credit analysis, approvals and monitoring of counterparty
exposures. As part of these processes the ongoing creditworthiness of counterparties is regularly assessed.
Mitigation methods are defined and implemented for higher-risk counterparties to protect revenues, with more than half of the Group’s
sales of physical commodities occurring via secured payment terms including prepayments, letters of credit, guarantees and other risk
mitigation instruments. The methods include credit exposure management and overdue accounts monitoring. The cadence on these
mitigation methods has been maintained since it was increased in the wake of changes in market conditions due to COVID-19.
There are no material concentrations of credit risk, either with individual counterparties or groups of counterparties, by industry or
geography.
The Group’s exposure to credit risk is influenced by the individual characteristics of each counterparty or customer. However,
management also consider other factors that may influence the credit risk of its counterparty or customer base. Where there is credit
exposure for a new customer, they are assessed for creditworthiness before the Group’s standard payment and delivery terms and
conditions are offered. For these customers, credit limits are established and reviewed annually or with the release of new information
materially impacting the customer’s creditworthiness. The Group’s review includes external credit ratings, if available, credit agency
information, as well as financial institution and industry information.
The carrying amounts of financial assets represent the maximum credit exposure.
Expected credit loss assessment as at 30 June 2021
For trade receivables, the Group uses the simplified approach to recognise impairments based on the lifetime expected credit loss. For
other receivables, the Group applies the general approach and recognises impairments based on a 12-month expected credit loss.
Impairment allowances are based on a forward-looking expected credit loss model. Where there has been a significant increase in
credit risk, a loss allowance for lifetime expected credit losses is required.
An analysis has been performed for each financial asset subject to the expected credit loss assessment to take into consideration any
increased credit risk exposure as a result of COVID-19 and the likelihood of recoverability.
Exposures are grouped by external credit rating and security options and an expected credit loss rate is calculated accordingly. Where
applicable, actual credit loss experience is also taken into account. For remaining receivables without an external credit rating or
security option, a rating of BB (Standard and Poor’s) is used, on the basis that there is no support that it is investment grade, nor is there
any evidence of default.
1
2
9
Impairments on loans to equity accounted investments have been measured on the 12-month expected credit loss basis, per the
general approach.
(b) Accounting classification and fair value
(i) Recognition and initial measurement
All financial assets (with the exception of trade and other receivables without a significant financing component) and financial liabilities are
initially recognised at fair value plus transaction costs directly attributable to its acquisition or issue (for all items except those classified as
FVTPL). Trade and other receivables without a significant financing component are initially measured at the transaction price.
(ii) Financial assets: Classification and subsequent measurement
On initial recognition, financial assets are either measured at amortised cost or at fair value.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as FVTPL:
– It is held within a business model whose objective is to hold assets to collect contractual cash flows; and
– Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
Financial assets that are held for trading and whose performance is evaluated on a fair value basis are measured at FVTPL.
On initial recognition, the Group may irrevocably designate a financial asset to be held at FVTPL that otherwise meets the requirements
to be measured at amortised cost or for designation as FVOCI, if doing so eliminates or significantly reduces an accounting mismatch
that would otherwise arise.
On initial recognition of an investment in an equity instrument not held for trading, the Group may also irrevocably elect to present
subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-
investment basis.
All financial assets not measured at amortised cost or designated as FVOCI are measured at FVTPL. This includes all derivative financial
assets.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing
financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the
change in the business model.
South32 Annual Report 2021Financial Report Notes to financial statements – Capital structure and financing continued
19. Financial assets and financial liabilities continued
(b) Accounting classification and fair value continued
(ii) Financial assets: Classification and subsequent measurement continued
Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined
as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular
period and for other basic lending risks and costs (for example, liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual
terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or
amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:
– Contingent events that would change the amount or timing of cash flows;
– Terms that may adjust the contractual coupon rate, including variable rate features;
– Prepayment and extension features; and
– Terms that limit the Group’s claim to cash flows from specified assets (for example, non-recourse features).
Financial assets: Subsequent measurement and gains and losses
Classification
Held at FVTPL
Amortised cost
Investments in equity instruments –
designated as FVOCI
0
3
1
Subsequent measurement
Financial assets held at FVTPL are subsequently measured at fair value. Net gains and losses,
including any interest, dividend income or movements in provisionally priced sales agreements, are
recognised in the Consolidated Income Statement.
Forward exchange contracts and interest rate swaps held for hedging purposes are accounted for as
either cash flow or fair value hedges. Any derivative instrument fair value change that does not qualify
for hedge accounting is recognised immediately in the Consolidated Income Statement.
Financial assets held at amortised cost are subsequently measured at amortised cost using the
effective interest method. The amortised cost is reduced by impairment losses. Interest income,
foreign exchange gains and losses and impairments are recognised in the Consolidated Income
Statement. Any gain or loss on derecognition is recognised in the Consolidated Income Statement.
Investments in equity instruments designated as FVOCI are subsequently measured at fair value.
Dividends are recognised as income in the Consolidated Income Statement unless the dividend clearly
represents a recovery of part of the cost of the investment. Other net gains and losses are recognised
in other comprehensive income and are not reclassified to the Consolidated Income Statement.
The measurement of fair value of financial assets is based on quoted market prices in active markets for identical assets. Where
no price information is available from a quoted market source, alternative market mechanisms or recent comparable transactions,
fair value is estimated based on the Group’s views on relevant future prices, net of valuation allowances to accommodate liquidity,
modelling, credit and other risks implicit in such estimates.
(iii) Financial liabilities: Classification and subsequent measurement
Financial liabilities are classified as FVTPL, financial guarantee contracts or as measured at amortised cost. A financial liability is
classified as FVTPL if it is classified as held for trading, it is a derivative, or it is designated as such on initial recognition. Financial
liabilities held at FVTPL are measured at fair value, and net gains and losses, including any interest expense, are recognised in the
Consolidated Income Statement. Financial guarantee contracts are initially measured at fair value and subsequently measured at the
higher of the expected credit loss and the amount initially recognised less the cumulative amount of guarantee fee income recognised,
with changes in value recognised in the Consolidated Income Statement. Other financial liabilities are subsequently measured at
amortised cost using the effective interest method. Interest expense and foreign exchange gains or losses are recognised in the
Consolidated Income Statement. Any gain or loss on derecognition is also recognised in the Consolidated Income Statement.
(iv) Embedded derivatives
A derivative embedded within a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted
for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the
same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at FVTPL.
Embedded derivatives are measured at fair value with changes in fair value recognised in the Consolidated Income Statement.
A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset
host together with the embedded derivative is required to be classified in its entirety as a financial asset held at FVTPL.
(v) Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights
to receive the contractual cash flows in a transaction in which substantially all risks and rewards of ownership of the financial asset are
transferred. Any interest in such derecognised financial asset that is created or retained by the Group is reported as a separate asset or
liability.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Group also
derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in
which case a new financial liability based on the modified terms is recognised at fair value.
South32 Annual Report 2021Financial Report 19. Financial assets and financial liabilities continued
(b) Accounting classification and fair value continued
The following table presents the financial assets and liabilities by class at their carrying amounts which approximates their fair value:
30 June 2021
US$M
Financial assets
Cash and cash equivalents
Trade and other receivables(1)
Loans to equity accounted investments
Other financial assets:
Derivative contracts
Other investments – held at FVTPL(2)
Total current financial assets
Trade and other receivables(1)
Loans to equity accounted investments
Other financial assets:
Investments in equity instruments – designated as
FVOCI
Total non-current financial assets
Total financial assets
Financial liabilities
Trade and other payables(3)
Lease liabilities
Unsecured other
Other financial liabilities:
Derivative contracts
Total current financial liabilities
Trade and other payables
Lease liabilities
Unsecured other
Total non-current financial liabilities
Total financial liabilities
Note
Held at FVTPL
Designated
as FVOCI
Amortised
cost
Financial
guarantee
contracts
16
9
9
9
9
14
17
17
14
17
17
-
120
-
9
6
135
-
-
-
-
135
18
-
-
11
29
-
-
-
-
29
-
-
-
-
-
-
-
-
121
121
121
-
-
-
-
-
-
-
-
-
-
1,613
365
10
-
-
1,988
10
187
-
197
2,185
734
37
371
-
1,142
2
650
149
801
1,943
-
-
-
-
-
-
-
-
-
-
-
15
-
-
-
15
-
-
-
-
15
Total
1,613
485
10
9
6
2,123
10
187
121
318
2,441
767
37
371
11
1,186
2
650
149
801
1,987
1
3
1
(1) Excludes current input taxes of US$32 million and non-current input and other taxes of US$62 million included in other receivables. Refer to note 9 Trade and other receivables.
(2) Other investments - held at FVTPL include US$6 million which is restricted by legal or contractual arrangements.
(3) Excludes current input taxes of US$10 million included in other creditors. Refer to note 14 Trade and other payables.
South32 Annual Report 2021Financial Report Notes to financial statements – Capital structure and financing continued
19. Financial assets and financial liabilities continued
(b) Accounting classification and fair value continued
30 June 2020
US$M
Financial assets
Cash and cash equivalents
Trade and other receivables(1)
Loans to equity accounted investments
Other financial assets:
Derivative contracts
Total current financial assets
Trade and other receivables(1)(2)
Loans to equity accounted investments
Interest bearing loans receivable from joint operations
Other financial assets:
Investments in equity instruments – designated as FVOCI
Other investments – held at FVTPL
Total non-current financial assets
Total financial assets
Financial liabilities
Trade and other payables(3)
Lease liabilities
Unsecured other
Other financial liabilities:
Derivative contracts
Total current financial liabilities
Trade and other payables
Lease liabilities
Unsecured other
Total non-current financial liabilities
Total financial liabilities
2
3
1
Note
Held at FVTPL
FVOCI Amortised cost
Total
Designated as
16
9
9
9
9
9
14
17
17
14
17
17
-
80
-
19
99
-
-
-
-
113
113
212
-
-
-
1
1
-
-
-
-
1
-
-
-
-
-
-
-
-
59
-
59
59
-
-
-
-
-
-
-
-
-
-
1,315
393
15
-
1,723
6
177
26
-
-
209
1,932
621
42
313
-
976
3
609
53
665
1,641
1,315
473
15
19
1,822
6
177
26
59
113
381
2,203
621
42
313
1
977
3
609
53
665
1,642
(1) Excludes current input taxes of US$43 million and non-current input taxes of US$33 million included in other receivables. Refer to note 9 Trade and other receivables.
(2) Excludes a reimbursable right asset in relation to the closure and rehabilitation provision at SAEC of US$61 million included in other receivables. Refer to note 9 Trade and other
receivables.
(3) Excludes input taxes of US$6 million included in other creditors. Refer to note 14 Trade and other payables.
Measurement of fair value
The following table shows the Group’s financial assets and liabilities carried at fair value with reference to the nature of valuation inputs
used:
Level 1 Valuation is based on unadjusted quoted prices in active markets for identical financial assets and liabilities.
Level 2
Valuation is based on inputs (other than quoted prices included in Level 1) that are observable for the financial asset or liability,
either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices).
Level 3 Valuation includes inputs that are not based on observable market data.
30 June 2021
US$M
Financial assets and liabilities
Trade and other receivables
Trade and other payables
Derivative contract assets
Derivative contract liabilities
Investments in equity instruments – designated as FVOCI
Other investments – held at FVTPL
Total
30 June 2020
US$M
Financial assets and liabilities
Trade and other receivables
Derivative contract assets
Derivative contract liabilities
Investments in equity instruments – designated as FVOCI
Other investments – held at FVTPL
Total
Level 1
Level 2
Level 3
Total
-
-
9
(11)
55
-
53
120
(4)
-
-
-
6
122
-
(14)
-
-
66
-
52
120
(18)
9
(11)
121
6
227
Level 1
Level 2
Level 3
Total
-
11
(1)
32
-
42
80
-
-
-
113
193
-
8
-
27
-
35
80
19
(1)
59
113
270
South32 Annual Report 2021Financial Report 19. Financial assets and financial liabilities continued
(b) Accounting classification and fair value continued
Level 3 financial assets and liabilities
The following table shows the movements in the Group’s Level 3 financial assets and liabilities:
US$M
At the beginning of the financial year
Addition of financial assets/(liabilities)
Realised gains/(losses) recognised in the Consolidated Income Statement(1)
Unrealised gains/(losses) recognised in the Consolidated Income Statement(1)
Unrealised gains/(losses) recognised in the Consolidated Statement of Comprehensive Income(2)
At the end of the financial year
(1) Recognised in expenses excluding net finance costs in the Consolidated Income Statement.
(2) Recognised in the financial assets reserve in the Consolidated Statement of Comprehensive Income.
FY21
35
(14)
(8)
-
39
52
FY20
189
-
(120)
15
(49)
35
Sensitivity analysis
The carrying amount of financial assets and liabilities that are valued using inputs other than observable market data are calculated
using appropriate valuation models, including discounted cash flow modelling, with inputs such as commodity prices, foreign exchange
rates and inflation. The potential effect of using reasonably possible alternative assumptions in these models, based on changes in the
most significant inputs by 10 per cent while holding all other variables constant, is shown in the following table:
30 June 2021
US$M
Financial assets and liabilities
Investments in equity instruments –
designated as FVOCI(1)
Trade and other payables(1)
Total
Carrying
amount
Significant inputs
10% increase in
input
10% decrease
in input
10% increase in
input
10% decrease
in input
Profit/(loss) after tax
Other comprehensive income,
net of tax
Alumina price(2)
Aluminium price(2)
Foreign exchange rate(2)
Coal price(3)
Export volumes(3)
66
(14)
52
-
12
12
-
(8)
(8)
35
-
35
(39)
-
(39)
1
3
3
(1) Sensitivity analysis is performed assuming all inputs are directionally moving unfavourably and favourably.
(2) Aluminium and alumina prices are comparable to market consensus forecasts and foreign exchange rates are aligned with forward market rates.
(3) Coal prices are comparable to market consensus forecasts and export volumes are based on future production estimates.
30 June 2020
US$M
Financial assets and liabilities
Derivative contracts
Investments in equity instruments –
designated as FVOCI
Total
Carrying
amount
Significant inputs
10% increase in
input
10% decrease
in input
10% increase in
input
10% decrease
in input
Profit/(loss) after tax
Other comprehensive income,
net of tax
Aluminium price
Foreign exchange rate
Electricity price
Alumina price
Aluminium price
Foreign exchange rate
8
27
35
(3)
-
(3)
3
-
3
-
34
34
-
(37)
(37)
(c) Capital management
The Group allocates capital in line with its strategy and capital management framework. The Group’s priorities for cash flow are to:
– Maintain safe and reliable operations and an investment grade credit rating through the cycle;
– Distribute a minimum of 40 per cent of Underlying earnings as dividends to shareholders following each six month reporting period;
and
– Maximise total shareholder returns through other alternatives including special dividends, share buy-backs and high return
investment opportunities which compete for capital.
South32 Annual Report 2021Financial Report Notes to financial statements – Capital structure and financing continued
20. Share capital
Share capital
At the beginning of the financial year
Shares bought back and cancelled
At the end of the financial year
Treasury shares
At the beginning of the financial year
Sale/(purchase) of shares by ESOP Trusts
Employee share awards vested
At the end of the financial year
FY21
FY20
Shares
US$M
Shares
US$M
4,846,267,883
(171,729,870)
4,674,538,013
(22,495,193)
262,531
10,556,477
(11,676,185)
13,943
(346)
13,597
5,005,503,575
(159,235,692)
4,846,267,883
(49)
3
24
(22)
(40,483,171)
(13,118,707)
31,106,685
(22,495,193)
14,212
(269)
13,943
(105)
(23)
79
(49)
Shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of shares
held. On a show of hands every holder of shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each
share is entitled to one vote.
Incremental costs directly attributable to the issue of shares, net of any income tax effects, are recognised as a deduction from equity.
4
3
1
South32 Annual Report 2021Financial Report Notes to financial statements – Other notes
21. Auditor’s remuneration
The auditor of the Group is KPMG.
US$’000
Fees payable to the Group’s auditor for assurance services
Audit and review of financial statements
Other assurance services(1)
Total auditor’s remuneration
(1) Mainly comprises assurance in respect of the Group’s sustainability reporting.
FY21
FY20
4,452
550
5,002
4,116
580
4,696
22. Pension and other post-retirement obligations
The Group operates or participates in a number of pension (including superannuation) schemes throughout the world. The funding of
the schemes complies with local regulations. The assets of the schemes are generally held separately from those of the Group and are
administered by trustees or management boards. Post the divestment of SAEC, the Group continues to operate one post-retirement
medical scheme in South Africa. Full actuarial valuations are prepared for the schemes.
Defined contribution pension schemes
The Group contributed US$76 million (FY20: US$73 million) to defined contribution plans and multi-employer defined contribution plans.
These contributions are expensed as incurred.
Defined benefit pension schemes (closed schemes)
At 30 June 2021 the Group had defined benefit obligations of US$68 million (FY20: US$67 million) and defined benefit scheme assets
with a fair value of US$54 million (FY20: US$61 million) with a net liability recognised in the Consolidated Balance Sheet of US$14 million
(FY20: US$6 million).
The fair value of scheme assets by major asset class is as follows:
Asset class
US$M
Bonds(1)
Equities
Cash and cash equivalents
Other(2)
Total
Fair value
FY21
FY20
38
6
4
6
54
39
7
8
7
61
1
3
5
(1) Comprises Fixed Interest Government bonds of US$9 million (FY20: US$8 million), Index Linked Government bonds of US$22 million (FY20: US$21 million) and Corporate bonds
of US$7 million (FY20: US$10 million).
(2) Primarily comprises of property and alternative investments in Australia.
Defined benefit post-retirement medical schemes (closed schemes)
At 30 June 2021 the Group had post-retirement medical scheme obligations of US$27 million (FY20: US$71 million). The post-retirement
medical scheme is unfunded.
Weighted average maturity profile of schemes
The weighted average duration of the defined benefit obligations are 9 years (FY20: 9 years) and 10 years (FY20: 11 years) for the
defined benefit pension schemes and post-retirement medical scheme respectively.
Risks associated with defined benefit pension and post-retirement medical schemes
The Group’s defined benefit pension and post-retirement medical schemes expose the Group to the risks pertaining to asset value
volatility, uncertainty in future benefit payments and uncertainty in future contribution requirements.
South32 Annual Report 2021Financial Report Notes to financial statements – Other notes continued
23. Employee share ownership plans
At 30 June 2021 the Group had the following employee share ownership arrangements:
Awards granted to Lead Team members(1)
Long-Term Incentive Plan
Deferred Short-Term Incentive Plan
Executive Transitional Award Plan
Management Share Plan
FY18, FY19, FY20, FY21
FY19, FY20
FY19, FY20, FY21
FY21
(1) Awards granted on 13 December 2017, 7 December 2018, 6 December 2019 and 4 December 2020.
Awards granted to eligible employees(1)
Management Share Plan
AllShare Plan
Management Transitional Award Plan
FY18, FY19, FY20, FY21
2018, 2019, 2020
FY18, FY19, FY20
(1) Awards granted on 13 November 2017, 7 May 2018, 7 December 2018, 17 May 2019, 6 December 2019, 15 May 2020, 4 December 2020, 7 December 2020 and 6 May 2021.
All awards take the form of rights to receive one share in South32 Limited for each right granted, subject to performance and/or service
conditions being met. A portion of the 2018, 2019 and 2020 AllShare Plan awards (participants located in Colombia and Mozambique)
take the form of rights to receive a cash payment equivalent to the value of South32 Limited shares at the time of payment. Employees
in Africa are granted rights on the JSE and all other employees are granted rights on the ASX.
Performance conditions are based on the Group’s Total Shareholder Return (TSR) measured separately against two comparator indices
over the performance period as follows:
– One third of performance rights are measured against the Morgan Stanley Capital International (MSCI) World Index; and
– Two thirds of performance rights are measured against the IHS Markit Global Mining Index.
Performance rights vest when the Group’s TSR equals or outperforms the comparator index. Full vesting of performance rights occur
if the Group’s TSR outperforms both indices by at least 23.9 per cent (5.5 per cent per annum cumulative) over four years. To the extent
that the performance conditions are not met, awards lapse and no retesting is performed.
Awards do not confer any dividend or voting rights until they convert into shares at vesting. In addition, the awards do not confer any
rights to participate in a share issue, however, there is discretion under the plans to adjust the awards in response to a variation in
South32 Limited’s share capital.
The AllShare JSE plan is eligible to receive a payment equal to the dividend amount that would have been earned on the underlying
shares awarded to those participants (Dividend Equivalent Payment). The Dividend Equivalent Payment is made to participants once the
underlying shares are issued or transferred to them. No Dividend Equivalent Payment is made in respect of awards that have lapsed or
have been forfeited. No other awards are eligible for a Dividend Equivalent Payment.
6
3
1
(a) Description of share-based payment arrangements
(i) Recurring share-based payment plans
The awards listed below are subject to the general conditions noted above and may be granted annually subject to approval by
shareholders at the annual general meeting for awards to the CEO and by the Board of Directors for all other awards.
FY18, FY19, FY20 and FY21 Long-Term Incentive Plan
The Long-Term Incentive Plan is the Group’s long-term incentive plan for Lead Team members. During the year Jason Economidis, as
acting Chief Operating Officer, participated in the Management Share Plan and not the Long-Term Incentive Plan.
Awards have a four year performance period from 1 July 2017 to 30 June 2021, 1 July 2018 to 30 June 2022, 1 July 2019 to 30 June 2023
and 1 July 2020 to 30 June 2024, respectively.
The FY21 Long-Term Incentive Plan award granted to the CEO is subject to a specific vesting cap imposed by the Board of Directors. For
other Lead Team members, the Board of Directors retains the discretion to apply a vesting cap to limit the value of the rights which may
vest in the ordinary course.
FY19 and FY20 Deferred Short-Term Incentive Plan
The Deferred Short-Term Incentive Plan is the Group’s short-term incentive plan for Lead Team members including Jason Economidis.
FY19 and FY20 Deferred Short-Term Incentive Plan Awards vest in August 2021 and August 2022 respectively, provided participants
remain employed by the Group.
FY18, FY19, FY20 and FY21 Management Share Plan
The FY18, FY19, FY20 and FY21 Management Share Plan is the Group’s long-term incentive plan for eligible employees below the Lead
Team. The Management Share Plan comprises two elements:
– Retention rights vesting in August 2021, August 2022 and August 2023 provided participants remain employed by the Group; and
– Performance rights vesting in August 2021, August 2022, August 2023 and August 2024 subject to performance conditions.
For the FY21 Management Share Plan awards, the Board of Directors retains the discretion to apply a vesting cap to limit the value of
the rights which may vest in the ordinary course.
South32 Annual Report 2021Financial Report 23. Employee share ownership plans continued
(a) Description of share-based payment arrangements continued
(i) Recurring share-based payment plans continued
2018, 2019 and 2020 AllShare Plan
The 2018, 2019 and 2020 AllShare Plan is the Group’s employee share plan for employees not eligible to participate in the other
employee share plans. Awards to the value of at least US$1,250 per employee are granted annually. Awards will vest provided
participants remain employed by the Group. The vesting period depends on the participants’ location at the grant date:
– Participants in Africa: August 2021, August 2022 and August 2023; and
– Participants elsewhere: August 2021 and August 2022.
(ii) Transitional share-based payment plans
The awards listed below are subject to the general conditions noted above and are either one-off or will not be granted on an ongoing
basis.
FY19, FY20 and FY21 Executive Transitional Award Plan
The FY19, FY20 and FY21 Executive Transitional Award Plan is a one-off grant made to Lead Team members in recognition of their
adjustment from the Management Share Plan (three year retention rights and four year performance rights) to the four year plan at the
Group. Awards have a three year performance period from 1 July 2018 to 30 June 2021, 1 July 2019 to 30 June 2022 and 1 July 2020 to
30 June 2023, respectively.
FY18, FY19 and FY20 Management Transitional Award Plan
The FY18, FY19 and FY20 Management Transitional Award Plan is a grant made to certain eligible employees to bridge the gap between
their total target reward at BHP and their total target reward at the Group. FY20 was the last year in which transition awards were made.
The FY18, FY19 and FY20 Management Transitional Award Plan has the same conditions as the FY18, FY19 and FY20 Management
Share Plan and comprises both service and performance conditions.
(b) Modifications to share-based payment arrangements
As a result of the divestment of TEMCO and SAEC, adjustments were made to unvested awards. The Group has amended the service
period for the 2018 and 2019 AllShare awards granted to participants impacted by the divestments and accelerated the vesting of all
awards. The SAEC employees who participated in the 2018 and 2019 AllShare plans received a cash payment, inclusive of a Dividend
Equivalent Payment, based on the share price of the South32 Limited shares they would have received shortly before divestment. For
the FY18, FY19 and FY20 Management Share Plans, the retention rights were vested at divestment on a pro-rata basis determined by
service between the start and end of the performance period. Performance rights were partially lapsed at divestment on a pro-rata
basis determined by service not performed between the start and end of the performance period. The remaining rights on foot are to
be performance tested against TSR metrics at the end of the relevant performance period.
1
3
7
(c) Employee Share Ownership Plan Trusts
The South32 Limited Employee Incentive Plans Trust (the Australian Trust) and the South32 South African AllShare Trust (the South
African Trust) are discretionary trusts for the benefit of employees of South32 Limited and its subsidiaries.
The trustee for the Australian Trust (CPU Share Plans Pty Ltd) is an independent company, resident in Australia. The trustees for the
South African Trust are made up of employer and employee representatives per the B-BBEE requirements under South African law. The
Trusts use funds provided by South32 Limited and/or its subsidiaries to acquire shares to enable awards to be made or satisfied under
the Group employee share ownership plans.
The shares may be acquired by purchase in the market or by subscription at not less than nominal value.
(d) Measurement of fair values
The fair value at grant date of equity-settled share awards is charged to the Consolidated Income Statement, net of tax, over the period
for which the benefits of employee services are expected to be derived. The corresponding accrued employee entitlement is recorded
in the employee share awards reserve.
Where awards are forfeited because non-market based vesting conditions are not satisfied, the expense previously recognised is
proportionally reversed. If awards do not vest due to a market performance condition not being met, the expense is recognised in
full and the share awards reserve is released to retained earnings. Where awards are waived because the participant voluntarily
relinquishes their right to receive shares, any expense not yet recognised for the awards are recognised immediately and the accrued
employee entitlement previously recognised in the employee share awards reserve is released to retained earnings. Where shares in
South32 Limited are acquired by on-market purchases prior to settling the vested entitlement, the cost of the acquired shares is carried
as treasury shares and deducted from equity. Where awards are satisfied by delivery of acquired shares, any difference between their
acquisition cost and the cumulative remuneration expense recognised is charged directly to retained earnings, net of tax.
South32 Annual Report 2021Financial Report Notes to financial statements – Other notes continued
23. Employee share ownership plans continued
(d) Measurement of fair values continued
The fair value of performance rights is measured using a Monte Carlo methodology. This model considers the following:
– Expected life of the award;
– Current market price of the underlying shares;
– Expected volatility (of the individual company and of each peer group);
– Expected dividends;
– Risk-free interest rate; and
– Market based performance hurdles.
The fair value of retention rights is measured using a Black Scholes methodology. This model considers the following:
– Expected life of the award;
– Current market price of the underlying shares;
– Expected volatility;
– Expected dividends; and
– Risk-free interest rate.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payments plans were as follows:
Year ended
30 June 2021
Fair value
at grant date
(US$)(1)
Share price
at grant date
(US$)
Expected
volatility
(%)(2)
Expected life
(in years)(1)
Risk-free interest
rate based on
government bonds
(%)(1)
Recurring plans
FY21 Long-Term Incentive Plan(3)
FY20 Deferred Short-Term Incentive Plan(3)
FY21 Management Share Plan - Retention rights(4)
FY21 Management Share Plan - Performance rights(4)
2020 AllShare Plan(3)
Transitional plans
FY21 Executive Transitional Award Plan(3)
8
3
1
0.88 – 0.97
1.76
1.69 – 1.74
0.97 – 1.01
1.76 – 1.89
1.94
1.94
1.94 – 1.95
1.94 – 1.95
1.94 – 1.95
0.98
1.94
35
35
35
35
35
35
4
2
3
4
2 – 3
3
0.25
0.07
0.16 – 5.17
0.25 – 5.77
0.07 – 5.17
0.16
(1) Represents the range of grant date fair values, expected life, and risk-free interest rates based on the amount of rights granted on the ASX or the JSE during the year, and the
variations in offer terms and grant dates of each plan where applicable. The risk-free interest rate and expected volatility does not materially impact service based awards.
(2) Expected volatility is based on the historical South32 Limited share price volatility at the grant date.
(3) Grant date 4 December 2020.
(4) Grant date 4 December 2020, 7 December 2020 and 6 May 2021.
Year ended
30 June 2020
Recurring plans
FY20 Long-Term Incentive Plan
FY19 Deferred Short-Term Incentive Plan
FY20 Management Share Plan - Retention rights
FY20 Management Share Plan - Performance rights
2019 AllShare Plan
Transitional plans
FY20 Executive Transitional Award Plan
FY20 Management Transitional Award Plan
Fair value
at grant date
(US$)
Share price
at grant date
(US$)
Expected
volatility
(%)
Expected life
(in years)
Risk-free interest
rate based on
government bonds
(%)
0.63
1.68
1.58 – 1.61
0.63
1.68 – 1.76
0.58
0.63 – 1.61
1.73
1.73
1.73
1.73
1.73
1.73
1.73
30
30
30
30
30
30
30
4
2
3
4
2 – 3
3
3 – 4
0.77
0.75
0.70 – 7.33
0.77 – 7.60
0.75 – 7.33
0.70
0.70 – 7.60
South32 Annual Report 2021Financial Report 23. Employee share ownership plans continued
(e) Reconciliation of outstanding share awards
None of the awards listed below have an exercise price or are exercisable at 30 June 2021.
Number of Rights
Recurring plans
FY17 Long-Term Incentive Plan
FY18 Long-Term Incentive Plan
FY19 Long-Term Incentive Plan
FY20 Long-Term Incentive Plan
FY21 Long-Term Incentive Plan
FY18 Deferred Short-Term Incentive Plan
FY19 Deferred Short-Term Incentive Plan
FY20 Deferred Short-Term Incentive Plan
FY17 Management Share Plan - Performance rights
FY18 Management Share Plan - Retention rights
FY18 Management Share Plan - Performance rights
FY19 Management Share Plan - Retention rights(1)
FY19 Management Share Plan - Performance rights(1)
FY20 Management Share Plan - Retention rights(1)
FY20 Management Share Plan - Performance rights(1)
FY21 Management Share Plan - Retention rights
FY21 Management Share Plan - Performance rights
2017 AllShare Plan(1)
2018 AllShare Plan(1)
2019 AllShare Plan(1)
2020 AllShare Plan
Transitional plans
FY18 Executive Transitional Award Plan
FY19 Executive Transitional Award Plan
FY20 Executive Transitional Award Plan
FY21 Executive Transitional Award Plan
FY17 Management Transitional Award Plan
FY18 Management Transitional Award Plan
FY19 Management Transitional Award Plan
FY20 Management Transitional Award Plan
FY19 Sign-on Award Plan
Total awards
(1) Retrospective grants related to prior year plans.
Rights at
beginning of
the period
Granted during
the period
Vested during
the period
Forfeited
during the
period
Cancelled
during the
period
Rights at end
of the period
7,845,617
5,766,758
4,906,971
6,365,727
-
1,131,116
1,519,690
-
10,168,647
2,176,175
6,121,556
2,624,957
5,314,766
3,023,809
7,156,355
-
-
3,420,060
5,744,650
9,548,110
-
-
-
-
-
8,221,730
-
-
1,124,803
-
-
-
21,378
53,447
5,091
12,728
3,496,922
8,989,919
1,530
475
37,895
7,068,000
-
-
-
-
-
(1,131,116)
(448,204)
-
-
(2,151,118)
-
(913,157)
-
(657,839)
-
(23,182)
-
(3,417,000)
(4,312,525)
(3,614,325)
(68,800)
-
(352,564)
(581,392)
(1,098,061)
-
-
-
-
-
(25,057)
(295,728)
(310,277)
(808,699)
(458,954)
(1,480,416)
(109,490)
(288,245)
(4,590)
(119,700)
(375,375)
(216,800)
(7,845,617)
-
-
-
-
-
-
-
(10,168,647)
-
-
-
-
-
-
-
-
-
-
-
-
-
5,414,194
4,325,579
5,267,666
8,221,730
-
1,071,486
1,124,803
-
-
5,825,828
1,422,901
4,559,514
1,912,107
5,688,667
3,364,250
8,701,674
-
1,312,900
5,596,305
6,782,400
245,840
81,967
129,283
-
1,644,776
829,372
352,603
210,299
257,000
86,586,104
-
-
-
154,702
-
-
-
-
-
-
-
-
-
-
(173,637)
(23,158)
(9,211)
(257,000)
29,188,620 (17,200,272)
(245,840)
-
-
-
-
(33,540)
(44,522)
(57,905)
-
(6,907,155)
-
-
-
-
(1,644,776)
-
-
-
-
-
81,967
129,283
154,702
-
622,195
284,923
143,183
-
(19,659,040) 72,008,257
1
3
9
24. Contingent liabilities
Contingent liabilities not otherwise provided for in the consolidated financial statements are categorised as arising from:
US$M
Actual or potential litigation
Total contingent liabilities
FY21
427
427
FY20
409
409
Actual or potential litigation primarily relates to numerous tax assessments or matters relating to transactions in prior years in Colombia
and Brazil. Additionally, there are a number of legal claims or potential claims against the Group, the outcome of which cannot be
foreseen at present, and for which no amounts have been disclosed.
Prior to the Demerger, the Group entered into a Separation Deed with BHP, which deals with matters arising in connection with the
Demerger. The Separation Deed principally covers the following key terms: assumption of liabilities, limitations and exclusions from
indemnities and claims, contracts, financial support, Demerger costs and litigation. Actual or potential litigation excludes amounts
indemnified by BHP, as per the Separation Deed.
The Group has entered into various counter-indemnities of bank and performance guarantees related to its own future performance,
which are in the normal course of business. Additionally, the Group has provided indemnities against certain liabilities as part of
agreements for the disposal of business operations. Having taken appropriate legal advice, the Group believes that a material liability
arising from the indemnities provided is remote.
South32 Annual Report 2021Financial Report Notes to financial statements – Other notes continued
25. Subsidiaries
Significant subsidiaries of the Group, which are those with the most significant contribution to the Group’s net profit/(loss) or net assets,
are as follows:
Significant subsidiaries
Country of incorporation
Principal activity
African Metals Pty Ltd
Arizona Minerals Inc.
Cerro Matoso SA
Dendrobium Coal Pty Ltd
Endeavour Coal Pty Ltd
Hillside Aluminium Pty Ltd
Illawarra Coal Holdings Pty Ltd
Illawarra Services Pty Ltd
South32 Aluminium (Holdings) Pty Ltd
South32 Aluminium (RAA) Pty Ltd
South32 Aluminium (Worsley) Pty Ltd
South32 Cannington Pty Ltd
South32 Eagle Downs Pty Ltd
South32 Group Operations Pty Ltd
South32 Investment 1 B.V.
South32 Marketing Pte Ltd
South32 Minerals SA
South32 SA Coal Holdings Pty Ltd(1)
South32 SA Investments Ltd
South32 SA Ltd
South32 Treasury Ltd
South32 USA Exploration Inc.
South Africa
United States
Colombia
Australia
Australia
South Africa
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Netherlands
Singapore
Brazil
South Africa
United Kingdom
South Africa
Australia
United States
Investment holding company
Exploration and development
Ferronickel mining and smelting
Coal mining
Coal mining
Aluminium smelting
Investment holding company
Coal preparation plant
Investment holding company
Interest in a joint operation
Interest in a joint operation
Silver, lead and zinc mining
Interest in a joint operation
Administrative services
Interest in a joint operation
Commodity marketing and trading
Interest in a joint operation
Coal mining
Investment holding company
Administrative services
Financing company
Exploration
Effective interest %
FY21
100
100
99.9
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
FY20
100
100
99.9
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
4
1
(1) On 1 June 2021, the Group completed the sale of its shareholding in SAEC to Seriti and two trusts for the benefit of employees and communities. Refer to note 31 Discontinued
operation.
Subsidiaries are entities controlled by the parent entity. Control exists where the parent entity is exposed or has rights to variable
returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. A
parent entity has power over the subsidiary, when it has existing rights to direct the relevant activities of the subsidiary which are those
which significantly affect the subsidiary’s returns. The financial statements of subsidiaries are included in the consolidated financial
statements for the period they are controlled.
26. Equity accounted investments
The Group’s interests in equity accounted investments with the most significant contribution to the Group’s net profit/(loss) or net
assets, are as follows:
Significant
joint ventures
Australia
Manganese(1)(2)
South Africa
Manganese(1)(4)
Country
of incorporation
Australia
South Africa
Principal activity
Reporting date
Acquisition date
FY21
FY20
Integrated producer of
manganese ore and alloy(3)
Integrated producer of
manganese ore and alloy(5)
30 June 2021
8 May 2015
30 June 2021
3 February 2015
60
60
60
60
(1) While the Group holds a greater than 50 per cent interest in the joint ventures, joint control is contractually achieved as joint venture parties unanimously consent on decisions
over the joint venture’s relevant activities.
(2) Australia Manganese consists of an investment in GEMCO.
(3) On 4 January 2021, GEMCO legally completed the sale of its shareholding in TEMCO.
(4) South Africa Manganese consists of an investment in Samancor Holdings Pty Ltd.
(5) The Metalloys manganese alloy smelter has not recommenced production since the Group’s decision with its joint venture partner to place it on care and maintenance during
the year ended 30 June 2020.
Ownership interest %
A reconciliation of the carrying amount of the equity accounted investments is set out below:
Investment in equity accounted investments
US$M
At the beginning of the financial year
Share of profit/(loss)(1)(2)
Other comprehensive income/(loss), net of tax
Dividends received from equity accounted investments
Disposal of a discontinued operation(3)
At the end of the financial year
FY21
460
133
(3)
(197)
(13)
380
FY20
688
100
21
(349)
-
460
(1) Includes earnings adjustments of US$15 million (FY20: US$108 million). Refer to note 4(b)(i) Earnings adjustments.
(2) Includes a share of profit/(loss) relating to a discontinued operation of (US$8) million (FY20: US$7 million). Refer to note 31 Discontinued operation.
(3) Refer to note 31 Discontinued operation.
South32 Annual Report 2021Financial Report 26. Equity accounted investments continued
Carrying amount of equity accounted investments
US$M
Australia Manganese and South Africa Manganese
Individually immaterial(1)
Total
(1) Individually immaterial consists of investments in Samancor Marketing Pte Ltd (60 per cent) and Port Kembla Coal Terminal Ltd (16.7 per cent).
Share of profit/(loss) of equity accounted investments
US$M
Australia Manganese and South Africa Manganese
Individually immaterial(1)
Total
FY21
295
85
380
FY21
135
(2)
133
FY20
350
110
460
FY20
88
12
100
(1) Individually immaterial consists of investments in Samancor Marketing Pte Ltd (60 per cent), Richards Bay Coal Terminal Pty Ltd (21.1 per cent) and Port Kembla Coal Terminal
Ltd (16.7 per cent). The share of profit/(loss) from Richards Bay Coal Terminal Pty Ltd (US$8) million (FY20: US$7 million) was included in the disposal of a discontinued operation.
Refer to note 31 Discontinued operation.
The following table summarises the financial information relating to each significant equity accounted investment:
US$M
Reconciliation of carrying amount of equity accounted investments
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets – 100%
Net assets – the Group’s share
Consolidation adjustments
Carrying amount of equity accounted investments
Reconciliation of share of profit/(loss) of equity accounted investments
Revenue – 100%
Profit/(loss) after tax – 100%
Profit/(loss) after tax – the Group’s share
Consolidation adjustments
Share of profit/(loss) of equity accounted investments
Other balances of equity accounted investments presented on a 100% basis
Cash and cash equivalents
Non-current financial liabilities (excluding trade and other payables and provisions)
Depreciation and amortisation
Interest income
Interest expense
Income tax (expense)/benefit (excluding royalty related tax)
Joint ventures
Australia
Manganese
South Africa
Manganese(1)
Australia
Manganese
South Africa
Manganese(1)
FY21
FY20
271
812
(233)
(673)
177
106
-
106
1,096
192
115
-
115
-
(222)
(133)
-
(23)
(179)
237
539
(89)
(277)
410
190
(1)
189
524
37
20
-
20
26
(28)
(26)
3
(24)
(8)
374
750
(238)
(661)
225
135
-
135
1,163
182
109
1
110
-
(200)
(117)
3
(27)
(157)
1
4
1
287
554
(123)
(264)
454
218
(3)
215
506
(33)
(24)
2
(22)
20
(31)
(39)
20
(23)
(6)
(1) South Africa Manganese includes a 60 per cent interest in Samancor Manganese Pty Ltd and 54.6 per cent interest in Hotazel Manganese Mines Pty Ltd.
The Group’s share of contingent liabilities and capital expenditure commitments of significant equity accounted investments as at
30 June 2021 was US$6 million (FY20: US$2 million) and US$18 million (FY20: US$29 million) respectively.
The Group uses the term ‘equity accounted investments’ to refer to associates and joint ventures collectively.
Associates are entities in which the Group holds significant influence. If the Group holds 20 per cent or more of the voting power of an
entity, it is presumed that the Group has significant influence, unless it can be clearly demonstrated that this is not the case. Significant
influence can also arise when the Group has less than 20 per cent of the voting power but it can be demonstrated that the Group has
the power to participate in the financial and operating policy decisions of the associate. Investments in associates are accounted for
using the equity method.
Joint ventures are joint arrangements in which the parties with joint control of the arrangement have rights to the net assets of the
arrangement. Joint arrangements exist when two or more parties have joint control. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the
parties sharing control. A separate vehicle, not the parties, will have the rights to the assets and obligations to the liabilities, relating to
the arrangement. If more than an insignificant share of output from a joint venture is sold to third parties, this indicates that the joint
venture is not dependent on the parties to the arrangement for funding and that the parties to the arrangement have no obligation for
the liabilities of the arrangement. Joint ventures are accounted for using the equity method.
South32 Annual Report 2021Financial Report Notes to financial statements – Other notes continued
26. Equity accounted investments continued
Equity accounted investments are initially recorded at cost, including the value of any goodwill on acquisition. In subsequent periods,
the carrying amount of the investment is adjusted to reflect the share of post-acquisition profit or loss and other comprehensive
income. After application of the equity method, including recognising the Group’s share of the joint ventures’ results, the value of the
investment will be assessed for impairment if there is objective evidence that an impairment of the investment may have occurred.
Where the carrying value of an equity accounted investment is reduced to nil after having applied equity accounting principles (and
the Group has no legal or constructive obligation to make further payments, nor has made payments on behalf of the associate or
joint venture), dividends received from the associate or joint venture will be recognised as a ‘Share of profit/(loss) of equity accounted
investments’.
27. Interests in joint operations
Significant joint operations of the Group, which are those with the most significant contributions to the Group’s net profit/(loss) or net
assets, are as follows:
Effective interest %
Significant joint operations
Country of operation
Principal activity
Acquisition date
FY21
FY20
Ambler Metals(1)
Brazil Alumina
Eagle Downs Metallurgical
Coal
Mozal Aluminium(1)
Worsley Alumina(2)
United States
Brazil
Australia
Mozambique
Australia
Development studies, resource
drilling and regional exploration
Alumina refining
Metallurgical coal exploration and
development option
Aluminium smelting
Bauxite mining and alumina refining
11 February 2020
3 July 2014
14 September 2018
27 March 2015
8 May 2015
50
36
50
47.1
86
50
36
50
47.1
86
(1) This joint arrangement is an incorporated entity. It is classified as a joint operation as the participants are entitled to receive output, not dividends, from the arrangement.
(2) While the Group holds a greater than 50 per cent interest in Worsley Alumina, participants jointly approve certain matters and are entitled to receive their share of output from
the arrangement.
Joint operations are joint arrangements in which the parties with joint control have rights to the assets and obligations for the liabilities
relating to the arrangement. The activities of a joint operation are primarily designed for the provision of output to the parties to the
arrangement, indicating that:
– The parties have the rights to substantially all the output and economic benefits of the assets of the arrangement; and
– All liabilities are satisfied by the joint participants through their purchases of that output. This indicates that, in substance, the joint
participants have an obligation for the liabilities of the arrangement.
2
4
1
The consolidated financial statements of the Group include its share of the assets and liabilities, revenues and expenses arising jointly
or otherwise from those operations and its revenue derived from the sale of its share of the output from the joint operation. All such
amounts are measured in accordance with the terms of each arrangement, which are usually in proportion to the Group’s interest in the
joint operation.
The assets in these joint operations are restricted to the extent that they are only available to be used by the joint operation itself and
not by other operations of the Group. For certain joint operations, the Group has also either pledged, mortgaged or provided a cross
charge to joint operation partners over assets within the joint operation.
28. Key management personnel
(a) Key management personnel compensation
US$’000
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total
FY21
6,942
182
286
-
4,611
12,021
FY20
5,759
192
268
316
6,664
13,199
(b) Transactions with key management personnel
There were no transactions with key management personnel during the year ended 30 June 2021 (FY20: US$nil).
(c) Loans to key management personnel
On 22 June 2021, the Group made an interest free loan of US$620 thousand to Mike Fraser in relation to his South African income tax
payable on his Group remuneration. As at 30 June 2021, the full loan remains outstanding and there is no maturity date for this loan.
There are no other loans with any key management personnel (FY20: US$nil). Refer to the Remuneration report for further details.
(d) Transactions with key management personnel related entities
There were no transactions with entities controlled or jointly controlled by key management personnel and there were no outstanding
amounts with those entities as at 30 June 2021 (FY20: US$nil).
South32 Annual Report 2021Financial Report 29. Related party transactions
(a) Parent entity
The ultimate parent entity of the Group is South32 Limited, which is domiciled and incorporated in Australia.
(b) Subsidiaries, joint ventures and associates
The interests in subsidiaries, joint ventures and associates are disclosed in notes 25 to 26.
(c) Key management personnel
The compensation of, and loans to, key management personnel are disclosed in note 28.
(d) Pension and other post-retirement obligations
The pension and other post-retirement obligations are disclosed in note 22.
(e) Transactions with related parties
Transactions with related parties
US$’000
Sales of goods and services
Purchases of goods and services
Interest income
Dividend income
Interest expense
Increase/(decrease) in short-term financing arrangements with related parties
Increase/(decrease) in loans with related parties
Outstanding balances with related parties
US$’000
Trade amounts owing to related parties
Other amounts owing to related parties(1)
Trade amounts owing from related parties
Loan amounts owing from related parties(2)(3)
Joint ventures
Associates
FY21
239,670
2
4,912
197,164
1,816
1,000
10,800
FY20
205,880
-
7,814
348,664
7,593
(14,855)
35,965
FY21
4,148
51,489
-
-
-
-
(5,759)
Joint ventures
Associates
FY21
206
285,000
31,539
130,800
FY20
549
284,000
57,901
120,000
FY21
176
-
318
66,656
FY20
3,126
80,887
197
-
-
-
(15,864)
FY20
161
-
422
72,415
(1) Other amounts owing to joint ventures relate to short-term deposits and cash managed by the Group on behalf of its equity accounted investments. Interest is paid based on
the three month London Inter-Bank Offer Rate less a margin of 0.125 per cent and the one month Johannesburg Inter-Bank Agreed Rate.
(2) Loan amounts owing from joint ventures include an interest bearing loan to GEMCO which is repayable by 2 January 2024. Interest is paid based on the three month London
Inter-Bank Offer Rate plus a margin of 3 per cent.
(3) Loan amounts owing from associates include an interest free loan to Port Kembla Coal Terminal Ltd which is repayable by 30 June 2030.
1
4
3
Terms and conditions
Sales to, and purchases from, related parties are transactions at market prices and on commercial terms.
Outstanding balances at year end are unsecured and settlement mostly occurs in cash.
No guarantees are provided or received for any related party receivables or payables.
No expense has been recognised in respect of expected credit losses from related parties in FY21.
South32 Annual Report 2021Financial Report Notes to financial statements – Other notes continued
30. Parent entity information
(a) Summary financial information
The individual financial statements for the parent entity, South32 Limited, show the following aggregate amounts:
US$M
Result of parent entity
Profit/(loss) after tax for the year
Total comprehensive income
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of the parent entity
Share capital
Treasury shares
Other reserves
Profit reserve(1)
Retained earnings/(accumulated losses)
Total equity
FY21
FY20
(818)
(818)
30
10,825
1,003
1,014
9,811
13,597
(17)
28
1,604
(5,401)
9,811
514
514
47
11,579
483
500
11,079
13,943
(34)
58
1,719
(4,607)
11,079
(1) Prior year profits, net of dividends paid, have been appropriated to a profit reserve for future dividend payments.
(b) Parent company guarantees
The parent entity has guaranteed a US commercial paper program. The parent entity has also guaranteed a Group revolving credit
facility of US$1,450 million, which backs the US commercial paper program and remains undrawn as at 30 June 2021. This facility was
extended in July 2020 by one year and expires in February 2023.
The parent entity is party to a Deed of Support with the effect that the Company guarantees debts in respect of South32 Group
Operations Pty Ltd.
4
4
1
31. Discontinued operation
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area
of operations that has been disposed of or is held for sale. Classification as a discontinued operation occurs upon disposal or when the
operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as discontinued, the comparative
income statement is restated as if the operation had been discontinued from the start of the comparative period.
South Africa Energy Coal
During the 2018 financial year, the Group established SAEC as a standalone business and managed it separately from the rest of the
Group with tailored functional support, systems and governance processes. On 6 November 2019, the Group announced a binding
conditional agreement for the sale of its shareholding in SAEC to a wholly-owned subsidiary of Seriti and two trusts which will acquire
and hold equity on behalf of employees and communities.
The transaction was subject to a number of material conditions which precluded the classification of SAEC as held for sale until the
conditions were satisfied on 15 May 2021. On 1 June 2021, the Group completed the sale of its shareholding in SAEC to Seriti and two
trusts for the benefit of employees and communities.
The discontinued operation represents the entire SAEC operating segment which consists of: the Khutala colliery, an underground
bord and pillar mining operation; the Klipspruit colliery, a single dragline multi seam open-cut mine that is combined with a truck and
shovel mini pit; the Wolvekrans Middelburg Complex (WMC); and other SAEC corporate assets. The WMC consists of the Ifalethu and
Wolvekrans collieries, which are open-cut mines with a number of active pits and are mined using draglines combined with truck and
shovel operations.
South32 Annual Report 2021Financial Report 31. Discontinued operation continued
(a) Results of the discontinued operation
US$M
Revenue
Group production
Third party products and services
Other income
Expenses excluding net finance costs
Loss on disposal of the discontinued operation
Share of profit/(loss) of equity accounted investments
Profit/(loss) from the discontinued operation
Finance expenses
Finance income
Net finance costs
Profit/(loss) before tax from the discontinued operation
Income tax (expense)/benefit
Profit/(loss) after tax from the discontinued operation
FY21
FY20
735
126
861
58
(1,049)
(159)
(8)
(297)
(52)
9
(43)
(340)
3
(337)
822
243
1,065
75
(1,324)
-
7
(177)
(54)
9
(45)
(222)
(1)
(223)
Other comprehensive income:
Gains/(losses) on pension and medical schemes
Income tax (expense)/benefit recognised within other comprehensive income
Total other comprehensive income/(loss) from the discontinued operation attributable to the equity
holders of South32 Limited
-
-
3
(1)
(337)
(221)
Basic EPS (cents)
Diluted EPS (cents)
(b) Cash flows from the discontinued operation
US$M
Net cash flows from operating activities
Net cash flows from investment activities
Net cash flows from financing activities
Net decrease in cash and cash equivalents
(c) Effect of disposal on the financial position of the Group
US$M
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Property, plant and equipment
Intangible assets
Equity accounted investments
Trade and other payables
Interest bearing liabilities
Provisions
Deferred income
Deferred tax liabilities
Decrease in net assets
Consideration received, net of transaction costs, satisfied in cash
Cash and cash equivalents disposed of
Net cash outflow
(7.1)
(7.1)
FY21
(180)
(149)
(3)
(332)
1
4
5
(4.5)
(4.5)
FY20
(58)
(176)
(2)
(236)
FY21
(58)
(235)
(167)
(164)
(623)
(14)
(13)
122
(144)
1,125
1
23
(147)
(12)
(58)
(70)
South32 Annual Report 2021Financial Report Notes to financial statements – Other notes continued
31. Discontinued operation continued
(c) Effect of disposal on the financial position of the Group continued
The Group has committed to provide additional support to underpin the sustainability of the SAEC business under the ownership of
Seriti. This support includes:
– Providing US$200 million to fund rehabilitation activity at the SAEC operations, by way of 10 annual instalments with the first
US$27.5 million payment made in July 2021. The liability is interest free and has been discounted to a net present value of
US$176 million based on a market equivalent interest rate. The financial liability is included in Interest bearing liabilities and is
measured at amortised cost;
– Entering into a US$50 million facility with a subsidiary of Seriti, that will primarily fund costs to be incurred for the restructure of
certain loss-making mining areas. The commitment to provide the facility had a fair value of US$14 million on divestment. The loan
commitment is included in Trade and other payables and is classified as FVTPL. The facility was drawn in full by Seriti on 1 July 2021;
and
– Providing a guarantee to support Seriti upon entering into a five year working capital facility of up to US$93 million with a South
African commercial bank. The commitment to provide the guarantee had a fair value of US$15 million on divestment and includes a
risked value assigned to security provided by SAEC. The commitment is included in Trade and other payables and is classified as a
financial guarantee contract.
32. Subsequent events
On 19 August 2021, the Directors resolved to pay a fully franked final dividend of US 3.5 cents per share (US$164 million) and a fully
franked special dividend of US 2.0 cents per share (US$93 million) in respect of the 2021 financial year. The dividends will be paid on
7 October 2021. The dividends have not been provided for in the consolidated financial statements and will be recognised in the 2022
financial year.
On 19 August 2021, the Group also announced an increase to the existing capital management program, announced on 27 March 2017,
of US$120 million to a total of US$2.0 billion. This leaves US$252 million expected to be returned by 2 September 2022.
No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly
affect, the operations, results of operations or state of affairs of the Group in subsequent accounting periods.
6
4
1
South32 Annual Report 2021Financial Report Directors’ declaration
In accordance with a resolution of the Directors of the Company, we state that:
1. In the opinion of the Directors:
(a) The consolidated financial statements and notes that are set out on pages 95 to 146 of the Annual Report are in accordance with
the Corporations Act, including:
(i) Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year ended on that
date; and
(ii) Complying with Australian Accounting Standards and Corporations Regulations 2001.
(b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
2. The Directors have been given the declarations required by Section 295A of the Corporations Act from the Chief Executive Officer
and Chief Financial Officer for the financial year ended 30 June 2021.
3. The Directors draw attention to note 2 to the financial statements on page 100, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the Board of Directors.
Karen Wood
Chair
Graham Kerr
Chief Executive Officer and Managing Director
Dated 2 September 2021
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South32 Annual Report 2021Financial Report Lead Auditor’s Independence Declaration
under Section 307C of the Corporations Act 2001
To the Directors of South32 Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of South32 Limited for the financial year ended 30 June
2021 there have been:
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
Graham Hogg
Partner
Perth
2 September 2021
KPMG
8
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KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks
used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under
Professional Standards Legislation.
South32 Annual Report 2021Financial Report Independent Auditor’s Report
To the shareholders of South32 Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of South32 Limited (the
Company).
In our opinion, the accompanying Financial Report of the Company
is in accordance with the Corporations Act 2001, including:
• giving a true and fair view of the Group’s financial position as at
30 June 2021 and of its financial performance for the year ended
on that date; and
• complying with Australian Accounting Standards and the
Corporations Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated balance sheet as at 30 June 2021
• Consolidated income statement, Consolidated statement of
comprehensive income, Consolidated statement of changes in
equity and Consolidated cash flow statement for the year then
ended
• Notes including a summary of significant accounting policies
• Directors’ declaration.
The Group consists of the Company and the entities it controlled at
the year-end or from time to time during the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report
section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the
Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with
the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• Asset valuation
• Closure and rehabilitation provision
• Divestment of South Africa Energy Coal
Key Audit Matters are those matters that, in our professional
judgement, were of most significance in our audit of the Financial
Report of the current period.
These matters were addressed in the context of our audit of the
Financial Report as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
1
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9
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks
used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under
Professional Standards Legislation.
South32 Annual Report 2021Financial Report Independent Auditor’s Report
Asset valuation
Refer to Note 13 Impairment of non-financial assets and Note 26 Equity Accounted Investments to the Financial Report. As at 30 June 2021
the Group’s balance sheet includes property, plant and equipment of US$8,938m, intangible assets of US$189m, and equity accounted
investments of US$380m, which were assessed for impairment purposes as part of their respective cash generating units (CGUs). The
Group recognised US$772m of impairment expense during the year.
The key audit matter
How the matter was addressed in our audit
Our procedures included:
We assessed management’s view of the indicators leading to
impairment testing for Illawarra Metallurgical Coal CGU. We
recalculated the impairment charges to the Illawarra Metallurgical Coal
CGU and compared to the impairment expense recognised.
We assessed the integrity and consistency of the models used for
impairment testing and assessment of impairment or reversal
indicators on a sample basis, including the accuracy of the underlying
calculation formulas and consistency of modelling to the prior year.
We assessed the scope, objectivity and competence of the Group’s
experts responsible for preparation of the resource and reserve
estimates and compared these estimates to those incorporated in the
life of operation and development plans where applicable.
We compared the forecast operating cash flows, production volumes,
capital expenditure and reserve and resource estimates contained in
the models to the life of operation and development plans
incorporating the approved budgets. We assessed the accuracy of the
Group’s previous forecasts to assist with this assessment.
Using our knowledge of the Group and our industry experience, and
considering the Group’s strategy and past performance, we assessed
the feasibility of the forecast operating cash flows, capital expenditure
and production volumes.
Working with our valuation specialists, and considering the risk factors
specific to the Group, we compared the discount rates to publicly
available market data for comparable entities. We also compared
foreign exchange rates to published views of market commentators.
We compared forecast commodity prices to published views of market
commentators on future trends and long-term supply agreements.
We compared carbon assumptions to locally enacted country specific
schemes and longer term published industry views.
We considered the sensitivity of the models by varying key
assumptions, such as forecast commodity prices, foreign exchange
rates, carbon pricing and discount rates, within a reasonably possible
range, to identify those CGUs at higher risk of impairment or reversal
and to focus our further procedures.
We assessed the disclosures in the Financial Report using our
understanding obtained from our testing and against the requirements
of the accounting standards.
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The assessment of the existence of impairment or reversal indicators
and impairment testing of CGUs, where required, was a key audit
matter given the size of property, plant and equipment, intangible
assets and equity accounted investments, and the sensitivity of
valuations to certain assumptions.
Following the identification of an impairment indicator and subsequent
impairment testing, the Group recognised an impairment in the
Illawarra Metallurgical Coal CGU.
Historically the Group has impaired the carrying value of several CGUs
to recoverable amount. Combined with the volatility in both commodity
and foreign exchange markets, this increases the sensitivity of the
carrying value of the Group’s CGUs to potential impairment and
reversal.
The Group uses sophisticated models to perform their assessment of
impairment or reversal indicators and impairment testing, where
required. Our testing included the one CGU which contains goodwill
(Hillside Aluminium) and Illawarra Metallurgical Coal for which an
impairment indicator was identified. The models are developed
in-house, and use life of operation and development plans, approved
budgets, and a range of external sources as inputs to the assumptions.
Complex modelling using forward-looking assumptions tends to be
prone to greater risk for potential bias, error and inconsistent
application. These conditions necessitate additional scrutiny by us, in
particular to address the objectivity of inputs, and their consistent
application.
We focused on the significant forward-looking assumptions the Group
applied in their models, including:
•
•
forecast commodity prices and foreign exchange rates – the
current economic climate has resulted in significant volatility in
forecast commodity prices across the Group. The Group’s models
are sensitive to small changes in these price assumptions, as
well as changes to foreign exchange rates, particularly the South
African Rand and the Australian Dollar, increasing forecasting risk
forecast operating cash flows, production volumes, capital
expenditure and reserve and resource estimates – these are
determined by the Group based on historical performance
adjusted for expected changes or development plans, including
consideration of regulatory approvals. This drives additional audit
effort specific to the feasibility of the forecasts and consistency
with the Group’s strategy
• discount rates - these are complicated in nature and vary
according to the conditions and environment the CGUs are subject
to from time to time
• carbon price – the Group incorporates carbon price assumptions
in its modelling based on enacted local schemes and assumptions
around global longer-term pricing and timing.
The Group uses fair value less cost of disposal models to assess
recoverable amount when testing for impairment.
We involved valuation specialists to supplement our senior audit team
members in assessing this key audit matter.
South32 Annual Report 2021Financial Report Independent Auditor’s Report
Closure and rehabilitation provision
Refer to Note 15 Provisions to the Financial Report. As at 30 June 2021 the Group’s balance sheet includes current and non-current closure
and rehabilitation provisions of US$1,717m.
The key audit matter
How the matter was addressed in our audit
Closure and rehabilitation provisioning was a key audit matter due to
the size of the provision and the judgement we used to audit the
provision estimates across the multiple sites the Group operates.
Closure and rehabilitation activities are governed by Group policies
based on legal and regulatory requirements, which differ across
multiple jurisdictions.
We focused on the following assumptions the Group applied in
determining the provisions in accordance with the closure and
rehabilitation plans:
• nature and extent of activities required across the multiple
•
•
sites, including the magnitude of possible contamination and
disturbance, which are inherently challenging to assess
timing of when closure and rehabilitation will take place, which
increases estimation uncertainty given the unique nature of each
site and long timeframes involved
forecast cost estimates incorporating historical experience,
which may not be a reliable predictor of such costs, and risk
adjustments. The Group engages external experts periodically to
assist in their determination of these estimates
• economic assumptions, including country specific discount rates,
which are complicated in nature.
Our procedures included:
We assessed the scope, objectivity and competence of the Group’s
internal and external experts to provide rehabilitation cost estimates.
We evaluated key assumptions used in the closure and rehabilitation
provision, relevant to the jurisdictions of the sites the Group operates,
by:
• comparing the nature and extent of activities costed to the
Group’s closure and rehabilitation plans and relevant regulatory
requirements
• comparing the timing of closure and rehabilitation activities to
the Group’s resources and reserve estimates and the expected
production profile contained in the life of operation plans
• comparing a sample of cost estimates of the activities,
incorporating risk adjustments, to historical experience and
underlying documentation, the Group’s external expert estimates,
and against our knowledge of the Group and its industry
• working with our sustainability closure specialists to assess the
reasonableness and completeness of closure activities on a
sample basis
• working with our valuation specialists, comparing country specific
discount rate assumptions to market observable data, including
risk free rates.
Divestment of South Africa Energy Coal
Refer to Note 31 Discontinued Operation to the Financial Report. The effect of disposal on the financial position of the Group was $147m
and a loss after tax from the discontinued operation of $337m has been recognised for the year ended 30 June 2021.
The key audit matter
How the matter was addressed in our audit
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On 6 November 2019, the Group announced an agreement to divest
its shareholding in South32 SA Coal Holdings Proprietary Limited
(SAEC) to a whole-owned subsidiary of Seriti Resources Holdings
Proprietary Limited (Seriti) and two trusts for the benefit of
employees and communities (jointly referred to as the Purchasers).
Several regulatory and third-party approvals needed to be satisfied
prior to completion of the sale. The divestment completed on 1 June
2021 following satisfaction of these approvals.
The financial results of SAEC are presented as discontinued
operations in the Financial Report.
As part of the sale agreement the Group has committed to provide
additional support to the Purchasers, including:
• US$200 million to fund rehabilitation activity at SAEC operations
over a period of time
• US$50m facility to fund restructure costs
• Guarantee to a working capital facility of up to US$93m with a
South African commercial bank.
The fair value of these financial assets and liabilities were
recognised as part of the net assets and liabilities disposed of.
The divestment is considered a key audit matter due to the:
•
•
•
financial significance of SAEC to the Group
judgement applied by the Group in the identification of the
disposal group and the presentation of its results as discontinued
operations including the resulting loss on disposal
judgement involved in determining the fair value of financial
assets and liabilities recognised at the date of disposal. The
level of judgement increases where internal models, as opposed
to quoted market prices are used to determine fair value of
an instrument, or where inputs to the internal models, such as
discount rates and probabilities of default loss are not observable.
Our procedures in relation to the divestment of SAEC included:
• Reading the relevant transaction documents to understand the
terms and conditions of the divestment
• Checking the consideration paid for the divestment to the
transaction documents and underlying financial records
• Obtaining an understanding of the process for identifying net
liabilities disposed of. This included walking through the process
with the Group’s respective business and finance teams to check
our understanding of the approach and procedures adopted
• Using our tax specialists, evaluating the associated tax
implications against the requirements of the tax legislation
• Using our valuation specialists, challenging the Group’s valuation
models for the Financial assets and liabilities recognised on
disposal. We compared the Group’s valuation methodology to
industry practice and the criteria in the accounting standards
• Testing key inputs used in valuation models to comparable data in
the market, including quoted prices and available alternatives
• Checking the integrity and accuracy of the Group’s loss on sale
calculations
• Assessing the discontinued operations treatment and disclosures
in the report against the requirements of the accounting
standards.
South32 Annual Report 2021Financial Report Independent Auditor’s Report
Other Information
Other Information is financial and non-financial information in South32 Limited’s annual reporting which is provided in addition to the Financial
Report and the Auditor's Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the
Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have
performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act
•
2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error
• assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is
appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or
error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing
Standards will always detect a material misstatement when it exists.
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Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board
website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of South32 Limited for the
year ended 30 June 2021, complies with Section 300A of the
Corporations Act 2001.
Directors’ responsibilities
The Directors of the Company are responsible for the preparation and
presentation of the Remuneration Report in accordance with Section
300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in pages 73 to 93
of the Directors’ report for the year ended 30 June 2021.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian
Auditing Standards.
KPMG
Graham Hogg
Partner
Perth
2 September 2021
South32 Annual Report 2021Financial Report Resources and Reserves
As required by Chapter 5 of the ASX
Listing Rules, we report Mineral
Resources and Ore Reserves (including
Coal Resources and Coal Reserves) in
accordance with the 2012 Edition of the
Australasian Code for Reporting of
Exploration Results, Mineral Resources
and Ore Reserves (the JORC Code).
In this report, information relating to
Mineral Resources and Ore Reserves is
based on, and fairly represents, information
and supporting documentation prepared
by our Competent Persons.
A Competent Person is defined in the
JORC Code. They must have a minimum
five years of relevant experience in the
style of mineralisation or type of deposit
under consideration and the activity being
undertaken.
Each of our Competent Persons has given
consent to the inclusion of the information
in this report in the form and context in
which it appears. You can find more details
on each of their professional affiliations,
employer and areas of accountability on
page 154. Unless we state otherwise, all
Competent Persons listed are full-time
employees at South32, or at one of our
related entities.
We report Mineral Resources and Ore
Reserves in 100 per cent terms and
represent estimates as at 30 June 2021.
Our Mineral Resource estimations include
Measured and Indicated Mineral Resources
which, after the application of all Modifying
Factors, and development of a mine plan,
have been classified as Ore Reserves.
We report all quantities as dry metric
tonnes, unless stated otherwise.
It’s important to note that Mineral
Resources and Ore Reserves are
estimations, not precise calculations. We’ve
rounded tonnes and grade information
to reflect the relative uncertainty of the
estimate, which is why minor computational
differences may be present in the totals.
Our long-range forecasts are the basis for
the commodity prices and exchange rates
used to estimate the economic viability
of Ore Reserves. Our planning processes
consider the impacts of climate change on
our Ore Reserves, including assessments of
operating costs and the impact of extreme
weather events on the expectation of
economic extraction.
Our Ore Reserves are within existing
permitted mining tenements. Our mineral
leases are of sufficient duration, or convey
a legal right to renew the tenure, to enable
all Ore Reserves on the leased properties
to be mined in accordance with the current
production schedules. These Ore Reserves
may include areas where additional
At a glance - Resources and Reserves (as at 30 June 2021)
Operations and development options
Worsley Alumina
Brazil Alumina (MRN)
Eagle Downs
Illawarra Metallurgical Coal(2)(3)
Cerro Matoso
Australia Manganese
South Africa Manganese(3)
Cannington
Taylor
Clark
Arctic
Bornite
Total Ore/Coal
Reserve (Mt)
Reserve Life
Years(1)
Total Mineral/
Coal Resource
(Mt)
242
17
108
31
51
109
20
14
1.3
22
8.0
4.9
44
9.0
1,140
471
1,140
1,210
328
157
224
72
138
55
37
148
(1) Scheduled extraction period in years for the Total Ore Reserves in the approved Life of Operation Plan.
(2) Coal Reserves in this table are presented as Marketable Coal Reserves. Process recoveries are reported in the
following detailed disclosures for each coal operation.
(3) Reserve Life for Illawarra Metallurgical Coal and South Africa Manganese is reported as the life of scheduled
Coal/Ore Reserves for Bulli and Wessels respectively. The Reserve Life for the remaining operations are stated in
the following detailed disclosures.
Our exploration, research
and development
Our operations carry out exploration,
research and development necessary
to support our activities. Our brownfield
exploration activities target the delineation
and categorisation of mineral deposits
connected or adjacent to our existing
operations. Our greenfield exploration
activities focus on the discovery and
delineation of opportunities outside of our
operational footprint, with a bias to base
metals.
During FY21 we continued to expand our
global exploration footprint. We funded
greenfield exploration in Australia, Peru,
Colombia, Argentina, Ireland, Mexico,
Canada and the United States. Our
exploration expenditure for FY21 was
US$57 million (FY20: US$64 million) of
which US$19 million related to brownfield
and US$38 million related to greenfield
(FY20: US$27 million and US$37 million
respectively).
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approvals are required, and it’s expected
that such approvals will be obtained within
the timeframe needed for the current
production schedule.
Our governance arrangements
and internal controls
We have internal standards and
governance arrangements that cover
regulatory requirements for public
reporting. To ensure correct and accurate
public reporting our governance processes
are managed by the Technical Stewardship
function in coordination with the Company
Secretariat function.
Our comprehensive review and audit
program is aimed at assuring our Mineral
Resource and Ore Reserve estimates. This
includes:
– Annual review of Mineral Resources and
Ore Reserves declarations and reports;
– Annual review of reconciliation
performance metrics for operating
mines;
– Periodic internal mine planning and Ore
Reserve audits; and
– Independent audits of Mineral
Resources or Ore Reserves that are new
or have materially changed.
In FY21, we undertook three independent
assurance audits of Mineral Resource
estimates and an internal mine planning
and Ore Reserve assurance audit. The
frequency and scope of the audits are
a function of the perceived risks and
uncertainties associated with a particular
Mineral Resource and Ore Reserve.
The accompanying tables, on pages 155
to 160, outline our Mineral/Coal Resources
and Ore/Coal Reserves holdings.
South32 Annual Report 2021Resources and Reserves Resources and Reserves continued
Competent persons
Mineral Resources
Worsley: P Soodi Shoar, MAusIMM
Mineração Rio Do Norte (MRN):
M A H Monteiro, MAusIMM, employed by
Mineração Rio do Norte S.A.
Cerro Matoso: I Espitia, MAusIMM (CP)
GEMCO: J Harvey, MAusIMM
Mamatwan & Wessels:
L Lautze, Pr. Sci. Nat., SACNASP
Cannington: P Boamah, MAusIMM (CP)
Taylor: M Hastings, MAusIMM (CP),
employed by SRK Consulting (US) Inc
Clark: M Hastings, MAusIMM (CP),
employed by SRK Consulting (US) Inc
Arctic: D F Machuca Mory, PEng.,
employed by SRK Consulting (Canada) Inc;
T Fouet, MAusIMM (CP)
Bornite: S Khosrowshahi, MAusIMM (CP)
employed by Golder Associates Pty Ltd;
T Fouet, MAusIMM (CP)
Ore Reserves
Worsley: G Burnham, MAusIMM
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Mineração Rio Do Norte (MRN):
J P M Franco, MAusIMM, independent
consultant
Cerro Matoso: A Quiroz, MAusIMM
GEMCO: U Sandilands, MAusIMM
Mamatwan & Wessels:
A R Maier, Pr. Eng., MSAIMM
Cannington: A Spong, MAusIMM (CP),
employed by Mining Plus Pty Ltd
Coal Resources
Eagle Downs: M Blaik, MAusIMM,
employed by JB Mining Services Pty Ltd
Bulli & Wongawilli: M Krejci, MAusIMM
South Africa Energy Coal (SAEC):
S Kara, Pr. Sci. Nat., SACNASP, employed by
Seriti Coal Pty Ltd
Coal Reserves
Bulli & Wongawilli: M Rose, MAusIMM
South Africa Energy Coal (SAEC):
P Mulder, MSAIMM, employed by Seriti Coal
Pty Ltd
South32 Annual Report 2021Resources and Reserves Alumina
Mineral Resources
As at 30 June 2021
Deposit(1)
Worsley
MRN(2)
Ore Reserves
As at 30 June 2021
Deposit(1)(6)
Worsley(3)
MRN(2)(4)(5)
(1) Cut-off grade
Measured Mineral Resources
Indicated Mineral Resources
Inferred Mineral Resources
Total Mineral Resources
Material Type
Laterite
MRN Washed
Mt
350
294
% A.Al2O3 % R.SiO2
28.4
49.6
1.4
4.4
Mt
383
43
% A.Al2O3 % R.SiO2
29.2
48.9
2.1
5.0
Mt
405
134
% A.Al2O3 % R.SiO2
Mt
% A.Al2O3 % R.SiO2
28.7
49.9
2.2
3.7
1,140
471
28.7
49.6
1.9
4.2
As at 30 June 2020
South32
Interest
%
86
14.8
Total Mineral Resources
Mt
% A. Al2O3 % R.SiO2
1,140
481
28.8
49.6
1.9
4.2
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Reserve Life
Ore Type
Laterite
MRN Washed
Mt
236
15
% A.Al2O3 % R.SiO2
27.7
48.0
1.7
5.9
Mt
6.5
2.1
% A.Al2O3 % R.SiO2
27.9
48.5
1.8
5.1
Mt
242
17
% A.Al2O3 % R.SiO2
Years
27.7
48.1
1.7
5.8
14
1.3
As at 30 June 2020
South32
Interest
%
86
14.8
Total Ore Reserves
Reserve Life
Mt
257
28
% A.Al2O3 % R.SiO2
Years
27.7
48.3
1.7
5.3
15
2.2
Worsley
MRN
Mineral Resources
Variable ranging from 22-25% A.Al2O3, ≤3.5% R.SiO2 and ≥1m thickness.
≥46% A.Al2O3, ≤7% R.SiO2, ≥1m thickness and ≥30% recovery on weight per cent basis.
Ore Reserves
Variable ranging from 22.5-28% A.Al2O3, ≤3.5% R.SiO2 and ≥1m thickness (except Marradong West ≥2m thickness).
≥46% A.Al2O3, ≤7% R.SiO2, ≥1m thickness and ≥30% recovery on weight per cent basis.
(2) MRN Washed tonnes and grades represent the expected product based on forecast beneficiation yield.
(3) Ore delivered to Worsley refinery.
(4) Ore delivered to Alumar refinery.
(5) Reserve Life for FY20 restated to 2.2 years following review of calculation using MRN washed tonnes.
(6) Metallurgical recovery:
Worsley 91.9%
Alumar 92%
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South32 Annual Report 2021Resources and Reserves
Resources and Reserves continued
Metallurgical Coal
Australia Metallurgical Coal
Coal Resources
As at 30 June 2021
Deposit(1)
Mining
Method
Illawarra Metallurgical Coal(3)(4)
Measured Coal Resources
Indicated Coal Resources
Inferred Coal Resources
Total Coal Resources
Coal Type
Mt
% Ash
% VM
% S
Mt
% Ash
% VM
% S
Mt
% Ash
% VM
% S
Mt
% Ash
% VM
% S
As at 30 June 2020
Total Coal Resources
Mt
% Ash
% VM
% S
South32
Interest
%
100
Bulli
Wongawilli
Eagle Downs(2)
Coal Reserves
As at 30 June 2021
UG
UG
UG
Met/Th
Met/Th
Met
172
57
759
11.3
28.6
29.4
24.0
23.5
15.0
0.36
0.59
0.46
297
240
201
12.3
29.7
28.7
23.6
22.2
14.7
0.36
0.57
0.48
320
130
183
13.6
29.7
30.0
22.9
22.4
14.8
0.36
0.57
0.47
789
426
1,140
12.6
29.5
29.4
23.4
22.4
14.9
0.36
0.57
0.47
783
428
50
1,140
12.6
29.5
29.4
23.5
22.4
14.9
0.36
0.57
0.47
Proved
Coal
Reserves
Probable
Coal
Reserves
Total
Coal
Reserves
Proved Marketable
Coal Reserves
Probable Marketable
Coal Reserves
Total Marketable
Coal Reserves
Reserve
Life
South32
Interest
Total Marketable
Coal Reserves
Reserve
Life
As at 30 June 2020
6
5
1
Deposit(1)(5)(6)(7)
Mining
Method
Coal
Type
Illawarra Metallurgical Coal
UG
Bulli
UG
Wongawilli
UG
UG
(1) Cut-off grade
Met
Met/Th
Met
Th
Mt
14
6.9
Mt
Mt
Mt
% Ash % VM % S
Mt
% Ash % VM % S
Mt
% Ash % VM % S
Years
102
7.2
116
14
12
8.9
24.3
0.36
85
8.9
24.6
0.35
97
8.9
24.6
0.35
22
3.4
4.1
1.4
10.8
28.0
23.9
0.60
4.0
1.6
10.8
28.0
23.3
0.59
8.1
3.0
10.8
28.0
23.6
0.59
Mt
% Ash % VM % S
Years
%
100
99
8.9
24.5
0.35
24
3.0
7.4
2.7
10.8
27.5
24.2
0.60
Coal Resources
No seam thickness cut-off applied, minimum thickness is economic, partial exception for south Bulli.
Coal Reserves
No seam thickness cut-off applied, minimum thickness within the mine layout is economic.
(2) Coal Resources tonnes are reported on an in situ moisture basis, Ash, VM and S reported as raw.
(3) Coal Resources tonnes are reported on an in situ moisture basis, Ash is reported as raw, VM and S are reported as potential product on air-dried basis.
(4) Coal Resources classification changes due to additional drilling and updated resource model.
(5) Total Coal Reserves are at the moisture content when mined (6% Bulli, 7% Wongawilli), Total Marketable Coal Reserves are the tonnes of coal available at moisture content (8.5% Bulli, 15% Wongawilli Met, 6% Wongawilli Th) and air-dried qualities after the
beneficiation of the Total Coal Reserves.
(6) Coal delivered to wash plant.
(7) Process recoveries:
Bulli
84%
Wongawilli 78%
South32 Annual Report 2021Resources and Reserves
Energy Coal
South Africa Energy Coal
Coal Resources
As at 30 June 2021
Deposit(1)
Operating mines
Khutala
Klipspruit
Wolvekrans
Middleburg
Complex (WMC)
Projects
Davel
Leandra
UG
OC
OC
OC
SP
UG
UG
Th
Th
Th
Th
Th
Th
Th
Naudesbank
OC & UG Th
Pegasus
OC
Th
Coal Reserves
As at 30 June 2021
Measured Coal Resources
Indicated Coal Resources
Inferred Coal Resources
Total Coal Resources
Mining
Method
Coal
Type
Mt % Ash % VM % S
KCal/kg
CV
Mt % Ash % VM % S
KCal/kg
CV
Mt % Ash % VM % S
KCal/kg
CV
Mt % Ash % VM % S
KCal/kg
CV
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
As at 30 June 2020
South32
Interest
Total Coal Resources
%
-
-
Mt
% Ash % VM
% S
KCal/kg
CV
117
1,098
706
804
5.0
222
1,799
244
14
32.3
31.7
29.7
26.4
30.0
22.8
29.0
24.6
27.0
21.1
22.4
22.1
22.8
20.8
27.2
22.1
25.5
21.3
1.09
1.15
1.20
1.13
0.84
1.49
1.02
1.06
1.35
4,690
4,800
5,090
5,520
5,140
5,790
4,780
5,630
5,390
As at 30 June 2020
1
5
7
Proved
Coal
Reserves
Probable
Coal
Reserves
Total
Coal
Reserves
Proved Marketable
Coal Reserves
Probable Marketable
Coal Reserves
Total Marketable
Coal Reserves
Reserve
Life
South32
Interest
Total Marketable
Coal Reserves
Reserve
Life
Deposit(1)
Mining
Method
Coal
Type
Mt
Mt
Mt
Mt
%
Ash
%
VM
%
S
KCal/kg
CV
Mt
%
Ash
%
VM
%
S
KCal/kg
CV
Mt
%
Ash
%
VM
%
S
KCal/kg
CV
Years
Operating mines
UG
Khutala
OC
Klipspruit
OC
OC
OC
OC
OC
SP
Wolvekrans
Middelburg
Complex
(WMC)
Th
Th Export
Th
Th Eskom
Th Export
Th Domestic
Th
Th
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
Ash
%
VM
%
S
KCal/kg
CV
Mt
Years
%
-
33.8 21.6 1.07 4,650
59
14.8 22.7 0.69 6,000
65
29.0 21.5 0.90 4,670
80
57
37.6 19.9 0.79 4,310
172 18.9 24.6 0.59 6,220
25.3 22.2 0.93 5,510
58
12
30
24
(1) South Africa Energy Coal was divested from South32 on 1st June 2021.
South32 Annual Report 2021Resources and Reserves Resources and Reserves continued
Nickel
Cerro Matoso
Mineral Resources
As at 30 June 2021
Deposit(1)
Cerro Matoso
Ore Reserves
As at 30 June 2021
Deposit(1)(4)(5)
Cerro Matoso(6)
(1) Cut-off grade
Measured Mineral Resources
Indicated Mineral Resources
Inferred Mineral Resources
Total Mineral Resources
Material Type
Laterite(2)
SP
MNR - Ore(3)
Mt
115
14
-
% Ni
1.0
1.0
-
Mt
126
39
-
% Ni
0.8
0.8
-
Mt
34
-
% Ni
0.8
-
Mt
275
53
-
% Ni
0.9
0.9
-
South32
Interest
%
99.9
As at 30 June 2020
Total Mineral Resources
Mt
247
43
17
% Ni
0.9
0.9
0.2
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Reserve Life
Ore Type
Laterite
SP
Mt
14
7.7
% Ni
1.3
1.1
Mt
1.8
6.8
% Ni
1.4
1.1
Mt
16
15
% Ni
1.3
1.1
Years
8.0
As at 30 June 2020
South32
Interest
%
99.9
Total Ore Reserves
Reserve Life
Mt
14
16
% Ni
1.2
1.1
Years
8.9
8
5
1
Laterite
SP
Mineral Resources
0.6% Ni
0.6% Ni
Ore Reserves
0.6% Ni
0.6% Ni
(2) Changes to Mineral Resources due to additional drilling and changes in estimation methodology and economic assumptions.
(3) MNR no longer satisfy the criteria of "Reasonable Prospects for Eventual Economic Extraction (RPEEE)".
(4) Ore delivered to process plant.
(5) Global recovery: 83%.
(6) Changes to Ore Reserves due to implementation of Ore Sorting and Mechanical Ore Concentration (OSMOC) project.
South32 Annual Report 2021Resources and Reserves Manganese
Mineral Resources
As at 30 June 2021
Deposit(1)
Material Type
Australia Manganese
GEMCO
ROM(2)(3)
Sands(4)
South Africa Manganese(4)
Lower Body
Upper Body
M, C, N Zones
X Zone
Top Cut (balance I&O)
Wessels
Mamatwan
Ore Reserves
As at 30 June 2021
Deposit(1)(7)
Ore Type
Australia Manganese
GEMCO(5)
ROM
Sands
South Africa Manganese(6)
Lower Body
Upper Body
M, C, N Zones
X Zone
Wessels
Mamatwan
(1) Cut-off grade
GEMCO
Wessels
Mamatwan
Measured Mineral Resources
Indicated Mineral Resources
Inferred Mineral Resources
Total Mineral Resources
% Mn
% Yield
Mt
% Mn
% Yield
Mt
77
Mt
27
19
2.3
9.5
% Mn
% Yield
45.0
49
% Mn
% Fe
43.3
13.1
37.1
37.5
30.1
4.4
4.6
6.1
Mt
42
10
Mt
21
73
33
2.3
13
% Mn
% Yield
41.1
19.6
47
Mt
28
44.2
45
% Mn
% Fe
Mt
% Mn
% Fe
42.5
41.0
37.0
35.9
29.3
13.8
18.8
4.6
4.6
6.0
3.8
19
0.3
0.1
44.5
40.1
38.0
15.2
19.7
5.1
30.0
6.2
147
10
Mt
52
92
52
4.6
23
43.7
19.6
47
% Mn
% Fe
43.1
40.8
37.0
36.7
29.6
13.6
19.0
4.5
4.6
6.1
South32
Interest
%
60
44.4
As at 30 June 2020
Total Mineral Resources
Mt
% Mn
% Yield
138
10
Mt
53
90
56
5.0
22
43.4
20.6
48
% Mn
% Fe
43.0
40.8
37.0
36.5
29.5
13.3
19.0
4.5
4.6
6.2
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Reserve Life
% Mn
% Yield
Mt
% Mn
% Yield
Mt
% Mn
% Yield
Years
Mt
37
42.9
61
Mt
% Mn
% Fe
4.0
43.9
10.6
17
-
36.5
-
4.4
-
44
7.1
Mt
14
46
49
-
43.2
40.0
59
20
% Mn
% Fe
43.3
40.9
36.4
-
13.3
18.7
4.5
-
4.9
44
15
7.0
7.1
Mt
9.9
46
31
-
45.0
40.0
51
20
% Mn
% Fe
43.0
40.9
36.3
-
14.5
18.7
4.6
-
Ore Reserves
≥40% Mn washed product.
No cut-off grade applied.
≥ 37.5% Mn
No cut-off grade applied.
ROM
Sands
M, C, N Zones
X Zone
Top Cut (balance I&O)
Mineral Resources
≥35% Mn washed product.
No cut-off grade applied.
≥37.5% Mn
No cut-off grade applied.
≥35% Mn
≥28% Mn
(2) Mineral Resource tonnes are stated as in situ, manganese grades are stated as per washed ore samples and should be read together with their respective mass recovery expressed as yield.
(3) Changes to Inferred Mineral Resources due to addition of new areas.
(4) Mineral Resource tonnes and manganese grades are stated as in situ.
(5) Ore Reserves tonnes are stated as delivered to process plant, manganese grades are stated as expected product and should be read together with their respective mass yields.
(6) Ore delivered to process plant.
(7) Metallurgical/Plant recoveries for the operations:
See yield in Ore Reserves Table.
GEMCO
Wessels
88%
Mamatwan 96%
South32
Interest
%
60
44.4
As at 30 June 2020
Total Ore Reserves
Reserve Life
Mt
% Mn
% Yield
Years
1
5
9
51
6.1
Mt
15
47
47
2.2
43.4
40.0
61
22
% Mn
% Fe
43.2
40.6
36.6
37.3
13.1
18.9
4.5
4.8
5.7
45
15
South32 Annual Report 2021Resources and Reserves
Resources and Reserves continued
Base Metals
Mineral Resources
As at 30 June 2021
Deposit(1)
Material Type
Mt
g/t Ag
% Pb
% Zn
Mt
g/t Ag
% Pb
% Zn
Mt
g/t Ag
% Pb
% Zn
Mt
g/t Ag
% Pb
% Zn
Measured Mineral Resources
Indicated Mineral Resources
Inferred Mineral Resources
Total Mineral Resources
Cannington
Cannington
Deposit(1)
Hermosa
Taylor(3)
Clark
UG Sulphide
OC Sulphide
39
24
180
108
5.15
3.28
3.24
2.51
3.6
3.3
111
74
3.79
2.75
2.39
1.81
0.4
1.2
90
55
3.26
2.68
1.97
1.33
43
29
174
102
5.02
3.20
3.16
2.38
Measured Mineral Resources
Indicated Mineral Resources
Inferred Mineral Resources
Total Mineral Resources
Material Type
Mt
% Zn % Pb % Mn g/t Ag
Mt
% Zn % Pb % Mn g/t Ag
Mt
% Zn % Pb % Mn g/t Ag
Mt
% Zn % Pb % Mn g/t Ag
29
4.10
4.05
57
UG Sulphide
UG Transition
UG Oxide
82
3.7
33
3.65
6.11
2.49
4.45
4.21
9.39
88
60
57
23
1.4
22
3.62
5.55
2.04
3.82
3.91
8.64
93
64
110
133
5.1
55
3.74
5.95
2.31
4.26
4.13
9.08
82
61
78
Deposit(1)
Material Type
Mt % Cu % Zn % Pb g/t Ag g/t Au Mt % Cu % Zn % Pb g/t Ag g/t Au Mt % Cu % Zn % Pb g/t Ag g/t Au Mt % Cu % Zn % Pb g/t Ag g/t Au
Measured Mineral Resources
Indicated Mineral Resources
Inferred Mineral Resources
Total Mineral Resources
As at 30 June 2020
Total Mineral Resources
Mt
g/t Ag
% Pb
% Zn
49
30
166
96
4.82
3.07
3.06
2.30
Total Mineral Resources
Mt
% Zn
% Pb
% Mn
g/t Ag
162
5.0
55
3.31
4.50
2.31
3.86
3.39
9.08
72
44
78
Total Mineral Resources
Mt
% Cu % Zn % Pb g/t Ag g/t Au
South32
Interest
%
100
South32
Interest
%
100
South32
Interest
%
50
33 3.14 4.43 0.80
40 1.06
49
0.63
4.7 2.55 3.34 0.57
38 1.03
70 2.29
37
0.38
37 3.06 4.30 0.77
78 1.04
70 2.29
47
0.60
37
78
70
3.06 4.30 0.77
1.04
2.29
47
0.60
Deposit(1)(2)(4)
Ore Type
Mt
g/t Ag
% Pb
% Zn
Mt
g/t Ag
% Pb
% Zn
Mt
g/t Ag
% Pb
% Zn
Years
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Reserve Life
UG Sulphide
18
176
5.29
3.33
1.2
166
5.25
1.97
20
175
5.28
3.24
9.0
20
173
5.35
3.28
11
As at 30 June 2020
Total Ore Reserves
Reserve Life
Mt
g/t Ag
% Pb
% Zn
Years
South32
Interest
%
100
0
6
1
Ambler
Arctic
Bornite
OC Sulphide
OC Sulphide
UG Sulphide
Ore Reserves
As at 30 June 2021
Cannington
Cannington
(1) Cut-off grade
Ore Reserves
Net smelter return in A$/t
145
Cannington
UG Sulphide
OC Sulphide
Taylor
UG Sulphide
UG Transition
Clark
UG Oxide
Arctic
OC Sulphide
Bornite
OC Sulphide
UG Sulphide
Mineral Resources
Net smelter return in A$/t
130
58
Net smelter return in US$/t
80
80
Net smelter return in US$/t
175
Net smelter return in US$/t
63.4
0.5% Cu
1.5% Cu
(2) Ore delivered to process plant.
(3) Changes to Mineral Resources due to revision in geological model, estimation approach and project economics.
(4) Metallurgical recoveries: 85% Ag, 87% Pb and 83% Zn.
South32 Annual Report 2021Resources and Reserves Shareholder information
Voting rights
South32 Limited ordinary shares carry voting rights of one vote per share.
Shareholders may hold a beneficial entitlement to dematerialised ordinary shares in South32 Limited, UK Depositary Interests and
American Depositary Shares (ADS) through the Central Securities Depositories of Strate (Strate), CREST and the Depository Trust
Company respectively. Each share held dematerialised in Strate, or as a Depositary Interest held in CREST, entitles the holder to one
vote. Each ADS is represented by five ordinary shares, with ADS voting managed by South32 Limited’s ADS Depositary.
Substantial shareholders
As at 23 July 2021, South32 Limited has three substantial shareholders who, together with their associates, hold five per cent or more of
the voting rights in South32 Limited, as notified to South32 under the Australian Corporations Act.
Name
Date notice received
Number of shares in notice
Percentage of capital in notice
Schroder Investment Management Australia Limited
BlackRock Group
The Vanguard Group
3 December 2020
11 March 2020
5 July 2021
359,970,206
287,969,025
234,998,773
7.44
5.09
5.027
Distribution of shareholdings and number of shareholders
The following table shows the distribution of South32 Limited shareholders by size of shareholding and number of shareholders and
shares as at 23 July 2021.
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of shareholders
Number of shares
Percentage of capital
123,905
82,962
20,401
18,263
615
246,146
60,157,663
197,220,114
149,074,472
415,858,324
3,852,227,440
4,674,538,013
1.29
4.22
3.19
8.90
82.41
100.00
Distribution of rights holdings and number of rights holders
The following table shows the distribution of rights holders in South32 Limited by size of rights holding and number of rights holders and
rights as at 23 July 2021.
Size of holding
0 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Number of rights holders
Number of rights
Percentage of rights on issue
658
5,911
23
131
93
6,816
522,285
9,793,257
164,125
5,995,458
50,441,581
66,916,706
0.781
14.635
0.245
8.960
75.380
100.00
I
n
f
o
r
m
a
t
i
o
n
1
6
1
South32 Annual Report 2021 Shareholder information continued
Twenty largest shareholders in South32 Limited
The following table sets out the 20 largest shareholders of ordinary shares listed on our shareholder register and the details of their
shareholding as at 23 July 2021.
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Ltd
Computershare Clearing Pty Ltd
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