ANNUAL
REPORT
2023
ABOUT THIS REPORT
Annual Report 2023
This report is a summary of our operations, activities, performance and financial position as at 30 June 2023.
Our 2023 Annual Reporting Suite
Sustainable
Development Report
Sustainability Databook
Corporate Governance
Statement
Modern Slavery
Statement
Tax Transparency
and Payments
to Governments Report
+ You can view all the documents in our Annual Reporting Suite at www.south32.net
About this report
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 2023 and its financial position as
at 30 June 2023. South32 Limited is the
ultimate holding company of the South32
group of companies. In this report, unless
otherwise stated:
(a) References to South32, the South32
Group, the Group, we, us, our and
similar expressions(2) refer to South32
Limited and its controlled entities and
joint arrangements;
(b) Financial information is presented
on the basis described in note 2 to
the financial statements (Basis of
preparation) on page 110, except for
non-IFRS measures (see below for
further details); and
(c) Metrics describing health, safety,
environment, people and community
related performance in this report are
presented on the basis described in
the “Reporting Boundaries” tab in our
Sustainability Databook available at
www.south32.net.
Unless specified otherwise, the text of this
report does not distinguish between the
activities of the ultimate holding company
and those of its controlled entities and
joint arrangements. Monetary amounts
in this report are expressed in US dollars
unless otherwise stated.
Forward-looking statements
While the forward-looking statements in
this report reflect South32’s expectations
at the date of this report (including
with respect to its strategies and plans
regarding climate change), they may
be affected by a range of variables
which could cause actual outcomes and
developments to differ materially from
those expressed in such statements.
These variables include but are not limited
to: financial and economic conditions in
various countries; fluctuations in demand,
price, or currency; operating results;
development progress including approvals;
risks, including physical, technology
and carbon emissions reductions risks;
industry competition; loss of market for
South32’s products; legislative, fiscal, and
regulatory developments; the conduct of
joint venture participants and contractual
counterparties, and estimates relating to
cost, engineering, reserves and resources.
For further information regarding
South32’s approach to risk, see page 28.
South32 makes no representation,
assurance or guarantee as to the
accuracy, completeness or likelihood
of fulfilment of any forward-looking
statement, any outcomes expressed or
implied in any forward-looking statement
or any assumptions on which a forward-
looking statement is based. Except as
required by applicable laws or regulations,
South32 does not undertake to publicly
update or review any forward-looking
statements. Past performance cannot be
relied on as a guide to future performance.
South32 cautions against reliance on any
forward-looking statements or guidance,
including any disruption arising in
connection with COVID-19.
Non-IFRS
This report includes non-IFRS financial
measures, including underlying measures
of earnings, effective tax rate, returns on
invested capital, cash flow and net cash/
(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 38. The definitions of individual
non-IFRS measures used in this report are
set out in the glossary on page 181.
(1) In this report, references to ‘joint arrangements’ mean operations that are not controlled by South32, such as joint ventures and joint operations. Joint arrangements are
classified in accordance with IFRS 11 Joint Arrangements.
(2) This report also refers to commodities ‘we produce’ and commodities in ‘our portfolio’, which include commodities such as bauxite, alumina, aluminium and copper that may
form part of, or be produced by, joint arrangements that are not operated by South32. References in this report to ‘our operations’, or commodities ‘we produce’ or in ‘our
portfolio’, should be read in this context.
Cover: An operator at Groote Eylandt Mining Company in Australia.
Right: Local farmers from Maputo province in Mozambique.
OPERATING AND FINANCIAL REVIEW
SUSTAINABLE DEVELOPMENT REPORT 2023MODERN SLAVERY STATEMENT 2023TAX TRANSPARENCY AND PAYMENTS TO GOVERNMENTS REPORT 2023CORPORATE GOVERNANCE STATEMENT 2023SUSTAINABILITY DATABOOK 2023 CONTENTS
OPERATING AND FINANCIAL REVIEW
Acknowledgement
We acknowledge and pay our respects to the
Indigenous, Traditional 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,
Traditional and Tribal Peoples have to the lands,
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.
About this report
From the Chair
Our purpose-led approach
Our business explained
About us
Performance highlights
Where we operate
Our business model
Our stakeholders and impact
Our commodities
From the CEO
Our strategy
Our strategy in action
Key performance indicators
Risk management
Financial and operational performance summary
GOVERNANCE
Governance at a glance
Board of Directors
Directors’ report
Lead Team
Remuneration report
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 the financial statements
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
IFC
2
4
6
6
7
8
10
12
14
16
18
20
26
28
38
64
66
71
76
78
105
106
107
108
109
110
162
163
164
169
170
171
178
181
188
SOUTH32 ANNUAL REPORT 2023
1
FROM THE CHAIR
FULFILLING
OUR PURPOSE
South32 has undergone a major transformation over the past eight years
to become a truly global, diversified producer of commodities critical
to a low-carbon future.
We were profoundly shocked and
saddened by the deaths of two of our
colleagues, Mr Cristovão Alberto Tonela
and Mr Alfredo Francisco Domingos João,
at Mozal Aluminium in November 2022. On
behalf of the Board, I express my sincere
and deepest sympathies to their families,
friends and colleagues.
This incident was devastating for everyone
at South32 and has challenged each of us
to ask ourselves every day whether our
decisions and actions guarantee our own
safety and that of our colleagues.
We had already commenced our journey
to fundamentally shift our safety
performance and deliver the cultural
transformation required for sustained
improvement. The tragic loss of our
colleagues at Mozal Aluminium has
demonstrated why this work is of utmost
importance and strengthened our resolve
to eliminate fatalities and serious injuries
from our business.
We believe that supporting all our people
to feel safe, included and respected at
work can enhance individual and collective
performance. The Board, working with the
Lead Team, sets the direction and tone
for our workplace culture and our focus is
on building a culture that aligns with our
purpose, reflects our values and supports
the delivery of our strategy.
Our Board represents a broad cultural,
ethnic, background and geographic mix.
In May we welcomed Mr Carlos Mesquita
and Ms Jane Nelson as independent
Non-Executive Directors, based in the
Americas. The appointments of Carlos
and Jane further enhance the Board’s
broad range of skills and experience,
particularly in major projects, operations
and sustainability. We also farewelled
Mr Guy Lansdown who resigned from our
Board in May. I would like to thank Guy
for his valuable contribution during his
tenure as we expanded our presence in
the Americas.
As part of the Board’s program of regular
meetings, Directors visited Hillside
Aluminium, Hotazel Manganese Mines and
Mozal Aluminium, as well as the Hermosa
project in FY23. These site visits presented
an opportunity to better understand the
local operating context, consider the
challenges and opportunities at each
site, connect with our employees and
contractors, and experience our culture
first-hand. It has been inspiring to see
how our people are making a difference at
each of these locations as we all work to
fulfil our purpose.
Against this volatile and uncertain
backdrop, we set annual production
records at three of our operations and
delivered one of our largest underlying
profit results to date, with Underlying
earnings before interest, tax, depreciation
and amortisation of US$2.5 billion. This
was achieved despite lower commodity
prices and industry-wide inflationary
pressures.
We recorded a statutory loss after tax of
US$173 million following the recognition
of a non-cash impairment expense in
relation to the Taylor Deposit at our
Hermosa project, and ended the financial
year with net debt of US$483 million as we
made record returns to shareholders and
invested in our business.
“We published our first Climate Change Action Plan
in September 2022 and received strong shareholder
support for the Plan."
The global economy has seen two
successive major shocks in a short span
of three years. While the world has re-
opened since the COVID-19 pandemic,
geopolitical tensions remained heightened
throughout FY23, including the ongoing
tragic war in Ukraine and strained ties
between the major economic centres. This
has contributed to market fragmentation
and volatility in a landscape where
policymakers and companies are already
grappling with structural risks including
climate change, higher sovereign debt
levels, ageing demographics and rising
income inequalities.
We returned US$1.2 billion to shareholders
during FY23, including US$1,007 million
in fully-franked ordinary and special
dividends, and US$218 million via our
on-market share buy-back. Reflecting
our disciplined approach to capital
management, the Board has resolved to
further expand our capital management
program to US$2.4 billion, leaving
US$133 million to be returned by
1 March 2024.
One of the central aims of the United
States Inflation Reduction Act is to
increase investment in clean energy,
offering tax incentives for domestic
electric battery vehicle production and
supply chains. The Hermosa project
2
OPERATING AND FINANCIAL REVIEW
With a referendum on an Indigenous Voice
to Parliament taking place in Australia in
October 2023, our hope is that everyone
takes the time to inform themselves
on what this means to the First Nations
Peoples of Australia and the broader
community.
The Board is pleased with the progress
that has been made in FY23, while
acknowledging that we must continue
our critical work to improve our safety
performance. We have much to look
forward to in FY24, as we continue
to transform our portfolio to provide
commodities critical to a low-carbon
future.
On behalf of the Board, I would like to
thank our shareholders, communities
and other key stakeholders for their
ongoing support and reiterate our thanks
to our people for their hard work and
commitment throughout the year.
Karen Wood
Chair
supports this anticipated growth and is
currently the only advanced project in
the United States that could supply two
federally designated critical minerals, zinc
and manganese.
The development of Hermosa is an
important step in our long-term strategy
to reshape our portfolio by increasing
our exposure to commodities critical to
a low-carbon future. Our ambition is for
Hermosa to be our first next generation
mine with the potential to deliver improved
safety and productivity while minimising
our environmental impact and making
a significant contribution to our host
communities and the local economy.
We are progressing the Taylor and Clark
Deposits towards development, with a final
investment decision on Taylor expected by
the end of calendar year 2023.
Taking action to address the risks and
opportunities which climate change
presents is also a long-term focus for our
business. We support the goals of the
Paris Agreement and have a long-term
goal to achieve net zero greenhouse
gas (GHG) emissions by 2050, inclusive
of Scope 1, 2 and 3 emissions. We also
have a medium-term target to halve our
operational GHG emissions (Scope 1 and
2) by 2035 from our FY21 baseline.
We published our first Climate Change
Action Plan in September 2022, which
was the subject of a non-binding advisory
resolution at our 2022 Annual General
Meeting. The Plan received strong
shareholder support, with 89.6 per cent
of votes cast in favour of the resolution.
Subsequent to the meeting, we engaged
with material shareholders that voted
against the Plan to understand areas
they would like to see improved and this
feedback is taken into consideration by
our Board in determining our approach to
climate change going forward.
We have made progress against key
elements of the Plan in FY23, including
updating our 1.5°C scenario to stress-test
the potential impacts of climate change
on our business. We have also progressed
our decarbonisation initiatives with a focus
on the operations which account for the
majority of our GHG emissions profile.
The Board oversees climate change as a
strategic risk and material governance
issue, and we will continue to provide
annual updates on our progress against
our Climate Change Action Plan in our
Sustainable Development Report.
Just as we continue to share our approach
and performance on climate change,
the same is also true for other material
sustainability topics, with the publication
of new or updated approaches for
Indigenous, Traditional and Tribal Peoples
Engagement, Cultural Heritage, Human
Rights, Water Stewardship, and Tailings
Management.
In 2020 we announced our support for
the Uluru Statement from the Heart
as the pathway towards reconciliation
put forward by Australia’s First Nations
Peoples, which includes enshrining a
First Nations Voice to Parliament into the
Australian Constitution.
We are aware that there are many
different views on how to address the
considerable disadvantage of Australia’s
First Nations Peoples. As a Board we have
a duty to act in the best interests of our
company. Those interests include the
way in which we operate on the lands of
First Nations Peoples. It is in our interests
that the communities that support our
operations are thriving and, in our view,
this will be supported by First Nations
Peoples having a say on matters relating
to them.
3
SOUTH32 ANNUAL REPORT 2023 OUR PURPOSE-LED APPROACH
MAKING
A DIFFERENCE...
Our purpose
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 strategy
Our purpose is underpinned by a 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
our stakeholders.
OPTIMISE
UNLOCK
IDENTIFY
+
Learn more in Our strategy
in action on pages 20 to 21.
+
Learn more in Our strategy in
action on pages 22 to 23.
+
Learn more in Our strategy in
action on pages 24 to 25
Sustainability is at the heart of our purpose and underpins the delivery of our strategy.
+ Learn more about our approach to sustainability in our Sustainable Development Report at www.south32.net.
Our values
While our strategy outlines what we do to achieve our purpose, our values guide how we do it.
Every day, our values shape the way we behave and the standards we set for ourselves and others.
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.
+ Learn more about our values at www.south32.net.
Our performance
Our key performance indicators provide a balanced approach to measuring our performance against the
delivery of our strategy, in support of our purpose and aligned with our values.
+ Learn more about our key performance indicators on pages 26 to 27.
4
OPERATING AND FINANCIAL REVIEW
...AND IMPROVING
PEOPLE’S LIVES
Our stakeholders
We are committed to creating value
for our stakeholders. We believe
that, when done sustainably, the
development of natural resources
can change people’s lives for the
better. In delivering our strategy, we
seek to create enduring social,
environmental and economic value,
in a way that aligns with our purpose
and values.
+
+
Learn more about how we are
helping to improve people’s
lives on pages 12 to 13.
Learn more about our stakeholders
in our Sustainable Development
Report at www.south32.net.
Our people
Nothing is more important than the health, safety and wellbeing of our people. We are committed to working together
safely, creating a values-based culture and an inclusive and diverse workforce.
+ Learn more about our approach to health and safety, and people and culture, in our Sustainable Development Report
at www.south32.net.
Our people are fundamental to our success. We seek to attract, develop and retain talented people who have a shared
belief in our purpose and values. Our reward framework aims to reward business and individual performance, as well
as drive ownership behaviours.
+ Learn more about executive reward in our Remuneration report on pages 78 to 103.
5
SOUTH32 ANNUAL REPORT 2023 OUR BUSINESS EXPLAINED > ABOUT US
SOUTH32 IS A GLOBALLY
DIVERSIFIED MINING
AND METALS COMPANY
We produce commodities including bauxite,
alumina, aluminium, copper, silver, lead, zinc, nickel,
metallurgical coal and manganese from 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.
With more than 9,000 employees and a
presence in six continents, we are proud to be
creating opportunities for our people and the
communities in which we operate to benefit
from the development of natural resources.
We are transforming our business to increase
our exposure to commodities critical to a
low-carbon(1) future and are committed to
continuously improving our sustainability
performance, optimising our positive
contributions and minimising adverse impacts.
1,461
Copper equivalent production
(kilotonnes)(2)
(FY22 1,375)
1,616
Underlying EBIT
(US$ million)(3)
(FY22 3,967)
1,225
Shareholder returns
(US$ million)(4)
(FY22 788)
(1) In this report we use particular terminology in relation to climate change. Definitions of the terms 'goal', 'target' and 'low-carbon' when used in the context of climate change
are set out in the Glossary of terms and abbreviations on pages 181 to 187 of this report.
(2) Copper equivalent production was calculated using FY22 realised prices, and includes operated and non-operated operations.
(3) This is a non-IFRS measure. For an explanation of how South32 uses non-IFRS measures, see page 38.
(4) Fully-franked ordinary and special dividends paid in respect of H2 FY22 (US$784M), fully-franked ordinary dividends paid in respect of H1 FY23 (US$223M) and on-market share
buy-back (US$218M).
6
OPERATING AND FINANCIAL REVIEW
OUR BUSINESS EXPLAINED > PERFORMANCE HIGHLIGHTS
OUR PERFORMANCE
AT A GLANCE
〉 Recorded strong production growth in aluminium
(14 per cent), base metals (17 per cent)(5) and
manganese (four per cent), as we realised the benefit
of recent portfolio improvements.
〉 Achieved annual production records at Hillside
Aluminium, Australia Manganese and South Africa
Manganese.
〉 This production growth, coupled with our continued
focus on cost efficiencies, underpinned one of our
largest underlying financial results.
〉 A record US$1.2 billion was returned to shareholders
during FY23(4).
〉 Achieved significant milestones at our Hermosa
project.
〉 Progressed near-term decarbonisation initiatives to
support of delivery of our medium-term target(1)(6).
1.4
Lost Time Injury Frequency
(per million hours worked)(7)
(FY22 2.0)
27.7
Social Investment
(US$ million)(8)
(FY22 31.1)
21.0
Operational greenhouse gas emissions
(Million tonnes CO2-e)(9)
(FY22 21.0)
+
Learn more about our key performance indicators, including historical data, on pages 26 to 27
(5) FY23 growth in copper equivalent production at our base metals operations (Sierra Gorda, Cannington and Cerro Matoso), compared to FY22. Copper equivalent production
was calculated using FY22 realised prices.
(6) Our medium-term target is to reduce our operational greenhouse gas emissions by 50 per cent from FY21 levels by 2035. The FY21 baseline has been adjusted to exclude
emissions from SAEC and TEMCO, which were divested in FY21.
(7) Incidents are included where South32 controls the work location or controls the work activity. Lost time injuries include injuries that result in one or more lost work days after
the day of the event.
(8) Our total social investment comprised US$24.6M in direct investment (including Enterprise Development), US$2.5M in administrative costs, and US$0.6M of in-kind support.
(9) Includes Scope 1 and Scope 2 greenhouse gas emissions.
7
SOUTH32 ANNUAL REPORT 2023 OUR BUSINESS EXPLAINED > WHERE WE OPERATE
A DIVERSIFIED
PORTFOLIO WITH A BIAS
TO BASE METALS
AMBLER METALS
Copper, Lead, Gold, Silver and Zinc
VANCOUVER
South32-operated operation
Non-operated operation
Development option
Exploration program
Office
FY23 Key Commodity Underlying EBIT
US$1.7b(1)
8%
19%
41%
13%
17%
13%
8%
11%
70%
By Commodity
Aluminium value chain
Copper
Silver, Lead, Zinc
Nickel
Metallurgical coal
Manganese
By Geography
Australia
Southern Africa
Americas
HERMOSA
Zinc, Lead, Silver and Manganese
CERRO MATOSO
Nickel
BRAZIL ALUMINA
Bauxite
BRAZIL ALUMINA
Alumina
SIERRA GORDA
Copper, Molybdenum and Gold
BRAZIL ALUMINIUM
Aluminium
+ Read more on Segment Reporting in Note 4 to the financial statements on page 113.
(1) Presented on a proportional consolidation basis and excludes manganese alloys (-US$6 million), Hermosa (-US$19 million), and Group and unallocated costs (-US$50 million).
8
OPERATING AND FINANCIAL REVIEW
Our commodities
Aluminium value chain
Our integrated aluminium value chain consists of high-quality
bauxite resources, large alumina refineries and the two largest
aluminium smelters in Africa.
Copper
We have an interest in a conventional open-cut copper mine in the
prolific Antofagasta region in Chile, producing a commodity critical
to a low-carbon world.
Silver, Lead, Zinc
We are one of the world’s largest producers of silver and lead from
one of our Australian operations that also produces zinc.
Nickel
We are one of the world’s largest ferronickel producers with the
potential to produce intermediary nickel products for electric
vehicle markets.
Metallurgical coal
We produce premium-quality, hard coking coal for domestic and
export steel markets.
Manganese
We are the world’s largest producer of manganese with access
to global markets. We also have the potential to produce battery-
grade manganese at our Hermosa project.
+
Learn more about our commodities in a low-carbon world
on pages 14 to 15.
LONDON
JOHANNESBURG
SOUTH AFRICA
MANGANESE
Manganese ore
MOZAL
ALUMINIUM
Aluminium
HILLSIDE ALUMINIUM
Aluminium
SINGAPORE
CANNINGTON
Silver, Lead and Zinc
AUSTRALIA MANGANESE
Manganese ore
PERTH HEAD OFFICE
WORSLEY ALUMINA
Alumina
ILLAWARRA
METALLURGICAL COAL
Metallurgical coal
9
SOUTH32 ANNUAL REPORT 2023 OUR BUSINESS EXPLAINED > OUR BUSINESS MODEL
CREATING
LONG-TERM VALUE
As a global mining and metals company, we create value by producing commodities that are used in
many aspects of modern life and many of these commodities will play a critical role in a low-carbon
future. Our operations, development options and exploration programs are diversified by commodity
and geography. We work to minimise the impact of our activities and aim to create enduring value for
our stakeholders, at each stage of the mining lifecycle.
The resources
we rely on
What we do
Explore
Develop
Refine/Smelt
Mine/Process
Market
Rehabilitate
and Close
People and expertise
Our global workforce is made up of both
employees and contractors and is our
most important resource, providing
the skills, experience and technical
expertise required to run our business.
Natural resources
The resources and reserves we access
are the primary inputs for our business.
Other natural resources such as water
and energy are also important for
the operation of our facilities, and we
require access to land to conduct our
business activities.
Physical assets
We have a suite of operations including
open-cut and underground mines,
refineries, smelters and associated
infrastructure. We procure equipment
from suppliers globally to support our
operations, development options and
exploration programs.
Finance
Our shareholders and lenders provide
access to financial capital, which we
put to work by operating our existing
facilities and funding our pipeline of
development options and exploration
programs.
Relationships
Trust and transparency are essential to
the way we operate. We seek to build
trust in the communities where we
operate to help realise the potential
of their resources, and we work
with our suppliers and customers to
apply responsible business practices
throughout our value chain.
10
OPERATING AND FINANCIAL REVIEW
Explore
We have a portfolio of more than 25 greenfield exploration options across the world to discover deposits to underpin our next
generation of mines, with a focus on commodities critical to a low-carbon future. Wherever we explore, we work to minimise the
footprint of our activities through the use of technology and well-designed programs.
Develop
Our development options have the potential to provide commodities which support the transition to a low-carbon world and
we have a pipeline of options in feasibility, pre-feasibility and other study phases. As we advance these options we are looking
to reshape the way we would mine at future projects including the Hermosa project to deliver transformational safety, productivity
and emissions outcomes.
Mine/Process
We mine and process bauxite, copper, silver, lead, zinc, nickel, metallurgical coal and manganese. Our most important commitment
at all of our sites is the health, safety and wellbeing of our employees, contractors, visitors and communities. We listen to our
stakeholders and work together with the aim of creating shared value.
Refine/Smelt
We refine bauxite to produce alumina, we smelt alumina to produce aluminium, and we smelt nickel ore to produce ferronickel. We
are also executing decarbonisation initiatives to support delivery of our operational decarbonisation target, focusing on our highest
emitting refineries and smelters.
Market
We generate revenue from the sale of our commodities to a global customer base and purchase raw materials from global markets.
We also analyse commodities and their markets to inform our strategic business planning and investment decisions. We are
building meaningful partnerships with key customers and suppliers to support and co-design emissions reduction programs in the
value chain.
Rehabilitate and Close
From exploration through to closure and beyond, we seek to minimise our adverse impacts on the surrounding communities and
environments. We undertake progressive rehabilitation where possible, our closure plans are informed by the aspirations and
expectations of our host communities and countries, and we aspire to leave a positive legacy.
The outcomes we create
We are committed to creating value for our stakeholders, including our people, communities, suppliers, customers, governments
and the financial community including our shareholders.
+ Learn more about our stakeholders and impact on pages 12 to 13.
11
SOUTH32 ANNUAL REPORT 2023 OUR BUSINESS EXPLAINED > OUR STAKEHOLDERS AND IMPACT
HELPING IMPROVE
PEOPLE’S LIVES
We are committed to creating value for our stakeholders. We believe that, when
done sustainably, the development of natural resources can change people’s lives
for the better. Here are some of the ways we are doing this.
People
9,616
employees globally(1)
US$805M in wages, salaries and other payments(2)
430 graduates, apprentices, trainees and learners
in our talent pipeline
We invest in our people through training and
development to help them realise their career aspirations
Our annual Your Voice employee survey allows us to
understand and continuously improve the employee
experience
+
Learn more about our people and culture in our Sustainable
Development Report at www.south32.net
Communities
US$27.7M
invested in community programs(3)
Our direct social investment spend was across our
four key focus areas - education and leadership
(24 per cent), economic participation (14 per cent), good
health and social wellbeing (50 per cent), and natural
resource resilience (12 per cent)
We work closely with Indigenous, Traditional and Tribal
Peoples to preserve cultural heritage
+
Learn more about how we deliver value to society in our
Sustainable Development Report at www.south32.net
(1) Includes direct employees at Brazil Alumina, Brazil Aluminium and Sierra Gorda.
(2) Includes operations at their respective percentage shareholding, including South32's ownership proportion of our manganese equity accounted investments.
(3) Our total social investment comprised US$24.6M in direct investment (including Enterprise Development), US$2.5M in administrative costs, and US$0.6M of in-kind support.
12
OPERATING AND FINANCIAL REVIEW
Environment and
Climate Change
We have set a medium-term target to halve our
operational greenhouse gas emissions (Scope 1 and 2) by
2035 from an FY21 baseline, and we have set a goal of net
zero operational greenhouse gas emissions by 2050
We have set a goal of net zero Scope 3 greenhouse gas
emissions by 2050
Water use efficiency, which measures water recycled
and reused as a percentage of total water use, was
61.5 per cent in FY23
333 hectares of land rehabilitated in FY23
+
Learn more about our approach to climate change and our
approach to managing our environmental impact in our
Sustainable Development Report at www.south32.net
Financial Community
Our capital management framework prioritises
maintaining safe and reliable operations and an
investment grade credit rating through the cycle, before
distributing a minimum of 40 per cent of underlying
earnings as ordinary dividends
US$1,007M in dividends returned to shareholders during
FY23
US$218M allocated to our on-market share buy-back
during FY23
+
Learn more about our capital management framework in
Our strategy on page 19.
Suppliers and Customers
Governments
US$1,017M
spent on local procurement
US$1,470M
in total taxes and royalties paid(5)
A$30M procured from Aboriginal and Torres Strait
Islander businesses in Australia
US$15M spent on Enterprise and Supplier Development in
South Africa(4)
Underlying effective tax rate of 36.1 per cent
Wherever we operate, we seek to work cooperatively
with governments to help them realise value from natural
resources and transition towards low-carbon economies
We aim to source responsibly and enhance product
stewardship across our value chain, working with
5,623 direct suppliers in 57 countries and 195 customers
in 32 countries
We work with a range of stakeholders and seek to
influence public policy to create an environment that
supports the sustainable development of natural
resources
+
Learn more about our approach to responsible value chains
in our Sustainable Development Report
at www.south32.net
+
Learn more about our approach to tax in our Tax
Transparency and Payments to Government Report, and
our approach to industry associations at www.south32.net
(4) Enterprise and Supplier Development (ESD) consists of two activities, Enterprise Development and Supplier Development. The Enterprise Development component, which was
US$5.2 million in FY23, is captured in both the ESD total and the social investment total.
(5) Includes South32's ownership proportion for equity accounted investments.
13
SOUTH32 ANNUAL REPORT 2023 OUR BUSINESS EXPLAINED > OUR COMMODITIES
HELPING CREATE
A LOW-CARBON FUTURE
Our commodities are used in many aspects of modern life and we are actively
reshaping our portfolio to increase our exposure to the commodities critical
to a low-carbon future. Key market sectors where our commodities have
an important role to play include construction, energy and renewables,
the automotive industry and consumer goods.
Aluminium
Copper
Silver, Lead, Zinc
Aluminium is often referred to as the metal
of the future. It is lightweight, durable,
strong, resistant to corrosion, 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. We have doubled our low-carbon
aluminium(1) capacity and operate the
largest aluminium smelter in the southern
hemisphere.
Copper is a key metal used in electric
vehicles and charging infrastructure.
It is also an excellent conductor of
electricity. As the world moves towards
electrification, copper will increasingly
be used in power-related infrastructure,
including renewable energy. Copper is also
used in kitchen cookware and plumbing as
it conducts heat well and has antimicrobial
properties. In FY22 we acquired an
interest in our first operating copper
mine, which transitioned to 100 per cent
renewable electricity supply in FY23.
Silver is used in solar panels due to its
superior electrical conductivity, and is
also used to make medical appliances
and consumer electronics. Lead is used in
renewable energy storage systems. Zinc
protects metals against corrosion and
will play a key role in green infrastructure
development as a protective coating for
wind turbines and solar panels. In solar
panels zinc oxide coatings help achieve
higher energy conversion. We are a large
producer of silver-rich lead concentrate
and zinc concentrate.
(1) A definition of the term 'low-carbon aluminium' when used in the context of climate change is set out in the Glossary of terms and abbreviations on page 185 of this report.
14
OPERATING AND FINANCIAL REVIEW
FY23 production at a glance
Aluminium (kt)
1,133
Zinc (kt)
59.2
Copper (kt)
70.7
Nickel (kt)
40.8
Silver (koz)
11,813
Lead (kt)
101.7
Metallurgical coal (kt)
Manganese (kwmt)
5,497
5,653
+ Learn more about our portfolio in a low-carbon world in our Sustainable Development Report at www.south32.net
Nickel
Metallurgical coal
Manganese
Nickel is used in stainless steel, which is
used in transportation, manufacturing,
household items and surgical instruments.
Nickel has an important role to play as the
world transitions to a more sustainable
future as it is used as an alloy in wind and
solar power infrastructure. Nickel-rich
batteries are also critical for the rapid
adoption of electric vehicles. We are one of
the world’s largest ferronickel producers
with the potential to produce intermediary
products for electric vehicles.
Currently there is no commercial scale
alternative to metallurgical coal in the
steelmaking process. The use of high-
quality metallurgical coal that we produce
supports greenhouse gas emissions
reduction targets in the steel industry
through improved blast furnace efficiency,
when compared with lower-quality
metallurgical coal. Growth in steel demand
is anticipated for green infrastructure
development and vehicle electrification, as
well as for the establishment of new steel
capacity in emerging markets.
Manganese is used to improve the quality
and strength of steel in major infrastructure
such as hospitals, office towers and
bridges. Manganese also has the potential
to displace cobalt in lithium-ion batteries,
with demand for manganese-rich cathode
chemistries expected to grow. We are
well positioned to meet future demand
as we are the world’s largest producer of
manganese and our Hermosa project has
the potential to produce battery-grade
manganese.
15
SOUTH32 ANNUAL REPORT 2023 FROM THE CEO
DELIVERING NOW
AND FOR THE FUTURE
Our strategy continues to serve us well and we delivered strong growth
in commodities critical to a low-carbon future. We are investing to grow our business,
have made substantial progress at our Hermosa project and are maturing
our decarbonisation efforts.
Nothing is more important than the
health, safety and wellbeing of our people.
Unfortunately, we did not deliver on our
most important commitment in FY23.
In November 2022, we were devastated
by the loss of two of our colleagues,
Mr Cristovão Alberto Tonela and
Mr Alfredo Francisco Domingos João,
who were fatally injured in an incident
while undertaking maintenance work on
a raising girder at Mozal Aluminium. Our
deepest sympathies remain with their
families and colleagues.
I visited Mozal Aluminium following the
incident and its impact caused great
sadness for all of us. Our initial priorities
were to care for those involved, and
respond to the immediate potential
risk for the remaining raising girders by
implementing additional controls at both
Mozal Aluminium and Hillside Aluminium.
We owe it to everyone who has been
affected by the deaths of Mr Tonela and
Mr Domingos to learn from this terrible
event. We worked with the original
equipment manufacturer to identify
further safety improvements, and once
the investigation was completed, key
learnings were shared across our business
and our industry.
Our Lost Time Injury Frequency (LTIF)
decreased by 30 per cent compared to the
FY22 baseline and our Total Recordable
Injury Frequency (TRIF) increased by
11 per cent compared to the FY22
baseline. LTIF is a measure of serious
injuries whereas TRIF is a measure of all
recordable injuries, so although we saw an
increase in recordable injury events, the
frequency of severe events decreased.
Despite this, we recognise that we must
continue to improve our health and safety
performance and everyone, across all
levels of our organisation, are focused
on this.
We continue to implement our multi-
year Safety Improvement Program that
commenced in FY22, which aims to deliver
the cultural transformation required for
sustained improvement. We have also
made changes to the structure of our
health and safety teams to continue to
drive the integration between culture and
health and safety.
Every day, we ask our people to reflect on
whether they can guarantee both their
safety and that of their colleagues when
executing their role. If the answer is no,
then the challenge is to stop work and ask
what would need to be done differently to
provide that guarantee. This is articulated
as our ‘safety guarantee’ and it is used to
create a sense of chronic unease, reduce
complacency, and assist to reduce risk
tolerance. We are working to further embed
our 'safety guarantee' across our business.
We made some changes to our Lead Team
in FY23, with Katie Tovich moving from the
Chief Financial Officer role to become our
Chief Human Resources and Commercial
Officer, and we appointed Sandy Sibenaler
as our new Chief Financial Officer following
an internal promotion. With these
changes, we have 50 per cent female
representation on our Lead Team and
while we continue to focus on increasing
gender balance across the business,
ultimately inclusion and diversity is about
our workforce reflecting the communities
in which we operate.
Inclusiveness extends beyond the
workplace and in Australia, we support an
Indigenous Voice to Parliament as a key
element of the Uluru Statement from the
Heart. We mine on Indigenous lands, and
as part of determining our own position
on the Statement we consulted the
“Recent portfolio improvements have helped us deliver
strong production growth in aluminium, base metals
and manganese.”
In the same way that we are working to
create workplaces that are physically safe,
we are also focused on creating workplaces
that are psychologically safe. We manage
sexual harassment as a material health and
safety risk and have implemented additional
controls and safety measures which aim
to mitigate against the potential for sexual
harassment to occur in our workplaces,
focusing on our highest exposure areas
such as accommodation facilities.
We know that an inclusive and diverse
workforce produces better outcomes
and we are working to instil a culture that
supports a positive employee experience
and a safe and productive workplace.
Traditional Owner Groups and Registered
Indigenous Groups where we operate to
confirm their support of the Statement.
This year we have created opportunities
for discussion and learning, including
panel discussions with Indigenous
Australians from where we operate, so
that when our people decide whether to
support a Voice to Parliament, they do so
in an informed way.
The macroeconomic environment
remained volatile throughout FY23.
Inflationary pressures persisted in
many jurisdictions which lead to an
unprecedented pace of interest rate rises
16
OPERATING AND FINANCIAL REVIEW
by major central banks which impacted
demand, particularly industrial activity.
Although China reopened from its zero-
COVID policy in the second half of the
year, economic growth did not meet initial
expectations.
Despite the challenging operating
environment, we achieved record annual
production at Hillside Aluminium, Australia
Manganese and South Africa Manganese,
and had a strong finish to the year with
Brazil Alumina, Cannington and Illawarra
Metallurgical Coal returning to stable
operations following adverse weather and
other temporary impacts.
Underlying earnings decreased as the
combination of a decline in commodity
prices from record levels in many markets
in the prior period, and higher inflation
and uncontrollable costs, more than offset
higher production volumes.
We continue to prioritise a strong balance
sheet and investment grade credit rating
through all cycles, finishing the period with
net debt of US$483 million as we made
record returns to shareholders during
FY23 and invested to grow our future
production of commodities critical to a
low-carbon future.
Our strategy of optimising the
performance of our operations, unlocking
their potential and identifying new
opportunities to create value for our
stakeholders has helped us navigate
economic cycles over the last eight years.
Recent portfolio improvements have helped
us deliver strong production growth, with
aluminium production increasing by
14 per cent, base metals by 17 per cent
and manganese by 4 per cent in FY23.
We have made substantial progress at
our Hermosa project in the United States.
Hermosa is currently the only advanced
project in the United States that could
supply two federally designated critical
minerals, zinc and manganese, which are
important for a low-carbon future. In May
2023, Hermosa was confirmed as the first
mining project to be added to the FAST-41
process, enabling a more efficient and
transparent federal permitting process for
the project.
We have recognised a non-cash
impairment expense for the Taylor Deposit
at Hermosa with our FY23 financial results,
due to delays from the impact of COVID-19,
the significant dewatering requirements
and current inflationary market
conditions. We continue to see substantial
opportunity to unlock additional value
across the Taylor and Clark Deposits and
our highly prospective regional exploration
package.
In July 2023, we released an updated
Mineral Resource estimate for Taylor,
including a 41 per cent increase in the
Measured Mineral Resource, providing
a compelling base to underpin future
production. In the second half of calendar
year 2023 we expect to complete
the feasibility study and make a final
investment decision for Taylor.
Separately, study work for the Clark
Deposit at Hermosa has confirmed
its potential to supply battery-grade
manganese to the rapidly forming North
American electric vehicle supply chain.
Study work is continuing, pilot plant
production has commenced and decline
construction is expected to commence in
the first half of FY24.
We are encouraged by the exploration
options across our regional land package
at Hermosa, including our high priority
Peake and Flux Prospects, with recent
drilling at Peake delivering our best copper
exploration results to date.
We continue to invest to discover deposits
to underpin our next generation of mines
and during the period we exercised our
earn-in right to acquire a controlling stake
in the Chita Valley copper exploration
project in the highly prospective San Juan
province of Argentina.
Our development options and exploration
activities form part of our approach
to climate change. We published our
first Climate Change Action Plan in
September 2022 and have continued
to mature our decarbonisation efforts,
including commencing the conversion of
Worsley Alumina’s first coal-fired boiler
to natural gas and deploying the AP3XLE
energy efficiency technology at Hillside
Aluminium. In addition, we progressed
decarbonisation studies at Hillside
Aluminium, Worsley Alumina and Illawarra
Metallurgical Coal.
For Hillside Aluminium, while our studies
have confirmed the challenges associated
with developing renewable and low-
carbon energy sources in South Africa,
we continue to investigate a range of
potential solutions including acquiring
energy attributes to reduce the emissions
intensity of its product in the near-term.
At Mozal Aluminium, we are working to
extend the supply of hydro-electric power
beyond 2026.
Despite the headwinds experienced in
FY23, and the expectation of continued
macroeconomic challenges in FY24, we
are continuing to deliver results now and
create value for the future. I would like to
thank all our teams around the world for
their contribution to our performance and
progress as we solidify our position as a
global, diversified producer of commodities
critical to a low-carbon future.
Graham Kerr
Chief Executive Officer
17
SOUTH32 ANNUAL REPORT 2023 OUR STRATEGY
A STRATEGY
TO ACHIEVE
OUR PURPOSE
Our purpose is at the heart of who we are. Every day, in support of our purpose
and underpinned by our approach to sustainability, our people work
to deliver our strategy for the benefit of our stakeholders.
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 a simple yet powerful strategy.
We optimise our business
by working safely, minimising
our impact, consistently
delivering stable and
predictable performance,
and continually improving
our competitiveness.
We unlock the full value
of our business through
our people, innovation,
projects and technology.
We identify and
pursue opportunities to
sustainably reshape our
business for the future,
and create enduring
social, environmental
and economic value.
Sustainability is at the heart of our purpose and underpins the delivery of our strategy.
Our approach to sustainability comprises five interconnected pillars which focus on areas
that are material to our business and stakeholders.
Protecting
and respecting
our people
Delivering
value to
society
Operating
ethically and
responsibly
Managing our
environmental
impact
Addressing
climate change
While our business has many positive impacts, we also recognise that our business activities have the
potential to cause adverse impacts. We are committed to continuously improving our sustainability
performance, optimising our positive contributions and minimising adverse impacts.
+ Learn more about our approach to sustainability in our Sustainable Development Report at www.south32.net.
18
OPERATING AND FINANCIAL REVIEW
Delivering our strategy
We deliver on our purpose and our
strategy by aligning our workforce behind
seven ‘breakthroughs’ – commitments
which shape our annual business planning
process at corporate, operational and
functional levels, enabling us to focus on
what’s important.
Our first breakthrough is ‘we all guarantee
everyone goes home safe and well’, which
asks each person in our workforce to take
responsibility for their own safety and
wellbeing, and that of their colleagues. Our
'safety guarantee' is an internal approach
that is used to create a sense of chronic
unease, reduce complacency, and assist
to reduce risk tolerance.
Risk framework and corporate
governance
We are governed by robust risk
management and corporate governance
frameworks. Learn more in our Risk
management section on pages 28 to
37, and in our Corporate Governance
Statement at www.south32.net.
Climate-related financial
disclosures
Our climate-related financial disclosures,
which we consider to be consistent with
the four recommendations and the 11
recommended disclosures of the Task
Force on Climate-related Financial
Disclosures (TCFD) are set out in the
Addressing Climate Change section of
our Sustainable Development Report and
the Emissions Methodology tab in our
Sustainability Databook, both of which are
available at www.south32.net. In addition,
certain disclosures in connection with the
governance-related recommendations
and recommended disclosures can be
found in our Corporate Governance
Statement which is also available
at www.south32.net.
We have included our TCFD-aligned
disclosures in the separate Sustainable
Development Report and Sustainability
Databook to enable us to provide them
alongside detailed information on our
Climate Change Action Plan and the
progress we have been making, in the
context of our sustainability activities
more widely, and in our Corporate
Governance Statement so that they are
discussed in the context of our corporate
governance arrangements more generally.
This Annual Report should therefore be
read in conjunction with the Sustainable
Development Report, the Sustainability
Databook and the Corporate Governance
Statement.
You can find a table setting out each of
the TCFD's 11 recommended disclosures,
and where information relating to each
recommended disclosure can be found, in
our Sustainability Databook (see the TCFD
Index tab) which is available at
www.south32.net.
Capital management framework
Our simple strategy is underpinned
by a disciplined approach to capital
management.
Our capital management framework
remains unchanged, supporting
investment in our business and rewarding
shareholders as our financial performance
improves.
Our capital allocation priorities are to
maintain safe and reliable operations
and an investment grade credit rating
through the cycle. We intend to distribute
a minimum of 40 per cent of Underlying
earnings as ordinary 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.
We returned US$1,225 million to
shareholders during FY23 via ordinary
dividends, special dividends and our
on-market share buy-back. The Board
further expanded our capital management
program to US$2.4 billion in August 2023,
leaving US$133 million to be returned by
1 March 2024.
Capital allocation since FY16
2%
22%
38%
US$14.7b
allocated
16%
22%
Capital expenditure
(including equity accounted investments)
Ordinary dividends
Capital management program
Acquisitions
Greenfield exploration
SOUTH32 ANNUAL REPORT 2023
19
OUR STRATEGY IN ACTION
Working safely
Our FY23 commitments:
〉 At least 80 per cent senior leader attendance at LEAD Safely Every Day workshops and coaching sessions;
〉 A reported significant hazard frequency of 55;
〉 A 20 per cent reduction in Lost Time Injury Frequency (LTIF)(1) against the FY22 baseline, and a 10 per cent reduction
in Total Recordable Injury Frequency (TRIF)(2) against the FY22 baseline; and
〉 A 20 per cent reduction in potential material health exposures against the baseline.
Progress during the year:
In November 2022, we were devastated by the loss of two of
our colleagues, Mr Cristovão Alberto Tonela and Mr Alfredo
Francisco Domingos João, who were fatally injured in an incident
while undertaking maintenance work on a raising girder at Mozal
Aluminium. Our deepest sympathies remain with the families and
colleagues of the deceased to whom we provided our support
and counselling. An investigation into the incident was completed
and key learnings were shared across our business and our
industry.
Every day, we ask our people to reflect on whether they can
guarantee both their safety and that of their colleagues when
executing their role. If the answer is no, then the challenge is
to stop work and ask what would need to be done differently
to provide that guarantee. This is articulated as our ‘safety
guarantee’ and it is used to create a sense of chronic unease,
reduce complacency, and assist to reduce risk tolerance. We
are working to further embed our 'safety guarantee' across our
business.
We also disclose fatalities for contractor activities that are
associated with our operations, but that take place in locations
where we do not have control. In FY23, an employee from a
company contracted by South Africa Manganese lost their life in
an off-site road trucking accident.
We recognise that we must continue to improve our health
and safety performance. We are focused on building a culture
of safety and continuously improving our safety leadership,
behaviours, processes, and systems to eliminate fatalities, serious
injuries and illnesses.
We continue to implement our Group-wide Safety Improvement
Program, a multi-year global program of work launched in FY22
and designed with the aim of enhancing our safety culture and by
changing mindsets and behaviours, achieving a step change in
our safety performance.
One of the key focus areas of the Safety Improvement Program
is shifting mindsets through leadership. To help achieve this,
in FY23 we rolled out a program called LEAD Safely Every Day,
which comprises workshops and coaching for senior leaders,
managers, superintendents and supervisors across all operations
and functions. With 99 per cent of our senior leaders completing
the workshops and coaching sessions in FY23, in FY24 we plan
to extend the roll out of the LEAD Safely Every Day program
to frontline employees and frontline contractors. Learn more
about the LEAD Safely Every Day program in our Sustainable
Development Report at www.south32.net.
Proactive hazard reporting is an important part of our approach
to safety, and we exceeded our target with a reported significant
hazard frequency of 92, indicating a positive reporting culture and
increased hazard awareness and identification.
Our LTIF decreased by 30 per cent compared to the FY22
baseline, exceeding our target, and our TRIF increased by
11 per cent compared to the FY22 baseline, falling short of our
target. This outcome is primarily attributed to an increase in
recordable injuries reported during the financial year. Although
we saw an increase in recordable injury events, the number of lost
time injury events decreased, resulting in our lowest ever LTIF.
The number of people potentially exposed to material health
exposures against the baseline increased by one per cent,
falling short of our target. While we saw a significant reduction
in potential material exposures at some operations, an increase
in employee numbers in certain exposed job groups, as well
as production factors, led to an increase in potential material
exposures at others.
(1) Per million hours worked. Incidents are included where South32 controls the work location or controls the work activity. Lost time injuries include injuries that result in one or
more lost work days after the day of the event.
(2) Per million hours worked. Incidents are included where South32 controls the work location or controls the work activity.
20
OPERATING AND FINANCIAL REVIEW
OPTIMISE OUR BUSINESS
Stable and predictable performance while minimising impact
Our FY23 commitments:
〉 Revenue equivalent production within 97 to 102 per cent of budget(3);
〉 Controllable costs within US$50 million of budget (adjusted for foreign exchange, price-linked costs and other
adjustments)(3);
〉 Capital expenditure (excluding growth projects) within five per cent of budget (adjusted for foreign exchange) and fewer
than 20 per cent break-in capital projects(3);
〉 Capital expenditure on growth projects within 10 per cent of budget (adjusted for foreign exchange) and schedule(3); and
〉 Achieve budget adjusted return on invested capital (ROIC)(4).
Progress during the year:
We achieved 95 per cent of budgeted revenue equivalent
production. We achieved record annual production volumes
at Hillside Aluminium, Australia Manganese and South Africa
Manganese, and we had a strong finish to the year with other
operations including Cannington and Illawarra Metallurgical Coal
returning to stable operations following adverse weather and
other temporary impacts. For more information on our operating
performance, see pages 48 to 58.
Controllable costs were US$28 million above budget,
predominantly due to higher contractor and maintenance costs.
Capital expenditure excluding growth projects was
94 per cent of budget, as we invested in the Appin mine at
Illawarra Metallurgical Coal and progressed productivity and
decarbonisation initiatives at Worsley Alumina and other
operations; and there were 70, or 14 per cent, break-in capital
projects.
Capital expenditure on growth projects, which was focused on
the Hermosa project, was 88 per cent of budget and delivered
on schedule, as we progressed studies for the Taylor and Clark
Deposits and developed essential infrastructure. The adjusted
ROIC was 26.4 per cent against the budget of 28.1 per cent.
+
Learn more about how we seek to minimise our impact in
Create social, environmental and economic value on page 24.
Robot Dog to Help Improve Safety and Productivity
At Cannington we are working with a technology provider to develop
and test light detection and ranging (LiDAR) scanning and automation
technology.
‘Spot’ the Robot Dog was put through its paces at Cannington in FY23
to trial its capabilities in a real underground mining environment.
The technology has the potential to improve safety and productivity by
deploying the autonomous capabilities of Spot in various scenarios, with
different data capture tools including scanning, video recording and
heat sensing.
The focus of the trial was to test Spot's capabilities in post blast re-
entry scenarios and emergency response. With an integrated LiDAR
scanner, Spot autonomously navigated sections of the mine, travelling
through uneven and wet ground, exploring unlit areas and producing a
three dimensional point cloud map of the area.
Since the initial trial, Spot has returned to Cannington for further
scenario testing, including gas detection and additional post blast
re-entry.
(3) Excludes non-operated entities.
(4) This is a non-IFRS measure. For an explanation of how South32 uses non-IFRS measures, see page 38.
21
SOUTH32 ANNUAL REPORT 2023 OUR STRATEGY IN ACTION CONTINUED
Our people are connected
and engaged
Technology and innovation
unlock value
Our FY23 commitments:
Our FY23 commitments:
〉 Meet the targets for our eight inclusion and diversity
〉 At least 75 per cent of agreed initiative milestones met
measurable objectives;
for the Next Generation Mine Mission.
Progress during the year:
Technology and innovation are key enablers of our transition
towards a low-carbon future and to realising our objective of safer,
cleaner and more productive operations. To focus our innovation
investment in the areas that matter most, in FY21 we established
Innovate32, our strategy-aligned, value-creating approach to
better enable innovation at South32.
One of Innovate32’s strategic focus areas is the Next Generation
Mine Mission, which seeks to reshape the way we mine and
operate, with a specific focus on future projects including the
Hermosa project, to strive to deliver transformational safety,
productivity and emissions outcomes.
In FY23, eight priority initiatives were progressed across
automation, electrification, sensing, advanced analytics, orebody
knowledge, and high impurity processing technologies, with six,
or 75 per cent, fully delivered and two partially delivered.
Another area of focus for Innovate32 is the Low Footprint Mission
which aims to actively reduce our footprint with respect to energy
and water use, waste generation and biodiversity impact. In
FY23 we refreshed our competitive ambition and roadmap of
opportunities, and doubled our portfolio of funded initiatives.
We actively collaborate with other companies, industry groups
and research organisations to complement our innovation and
technology programs through initiatives such as the Electric
Mine Consortium, BluVein, Amira, the Heavy Industry Low-Carbon
Transition Cooperative Research Centre, the Long Duration
Energy Storage Council, the Think and Act Differently industry
joint venture, and a partnership with Unearthed to source ideas
and solutions to unsolved problems. Learn more about these
partnerships in our Sustainable Development Report at
www.south32.net.
〉 Deliver the annual Inclusion and Diversity Action Plan;
〉 Maintain or improve our inclusion index score; and
〉 Maintain or improve our employee engagement score.
Progress during the year:
Our inclusion and diversity measurable objectives provide a series
of targets and actions aimed at improving inclusion and diversity
in our workplace. In FY23, we met the target for four of our eight
measurable objectives.
There are five measurable objectives for representation
of employees and senior leaders who are women. The
representation of women in our overall workforce improved,
increasing to 20 per cent from 19 per cent in FY22, but falling
short of our FY23 target of 22 per cent. The representation of
women on our Lead Team increased to 50 per cent from
37.5 per cent in FY22 and exceeded our FY23 target of
38 per cent, the representation of women in our Senior
Leadership Team decreased to 30 per cent from 32 per cent in
FY22 and fell short of our FY23 target of 34 per cent, and the
representation of women in our Operational Leadership Team(1)
improved to 29 per cent from 20 per cent in FY22 and met our
FY23 target of 28 per cent. The representation of women on
our Board increased to 44 per cent from 37.5 per cent in FY22,
meeting our FY23 target of at least 40 per cent.
We maintained the representation of Black People in our
workforce in South Africa, reaching 87 per cent and meeting our
target of 85 per cent or more, however the representation of Black
People in management roles in South Africa decreased to 55 per
cent, below our target of 60 per cent or more. We continue to
target pay equity for our employees with respect to gender and
ethnicity and completed our annual equity pay review, investing
US$338,000 to improve pay equity and narrowly missing our
target of reducing spend year-on-year to close the pay gap.
Our FY23 Inclusion and Diversity Action Plan consisted of four
priority areas – managing sexual harassment as a material health
and safety risk, providing safe and respectful workplaces for our
people, establishing inclusion and diversity networks at all our
locations, and delivering the 'Living our Code' discussion series,
with substantial progress made in each area.
In FY23, 7,358 individuals, or 78 per cent of employees, completed
our annual Your Voice employee survey, the highest participation
rate since South32 was formed in 2015. The survey tested
five dimensions – safety, leadership, employee engagement,
employee experience and workplace conduct, with respondents
reporting an improvement in performance against all five
dimensions. Based on the survey responses, our inclusion index
score improved from 80 per cent in FY22 to 81.5 per cent in FY23
and our employee engagement score improved from 78 per cent
in FY22 to 79 per cent in FY23.
(1) In FY23 we have revised the Operational Leadership Team definition and calculation methodology to better reflect our organisational structure. FY22 data displayed is based
on previous methodology as disclosed in the 2022 Sustainability Databook.
22
OPERATING AND FINANCIAL REVIEW
UNLOCK THE FULL VALUE OF OUR BUSINESS
Project execution
Our FY23 commitments:
〉 Complete the Taylor Deposit feasibility study;
〉 Complete the construction of Hermosa Water Treatment Plant 2 and commence commissioning;
〉 Complete the Clark Deposit pre-feasibility selection study; and
〉
Identify battery partner options and advance discussions.
Progress during the year:
We have made substantial progress at our Hermosa project,
which is currently the only advanced project in the United States
that could supply two federally designated critical minerals,
zinc and manganese, which are important commodities for a
low-carbon future. In May, Hermosa was confirmed as the first
mining project to be added to the FAST-41 process, enabling a
more efficient and transparent federal permitting process for
the project. In July 2023, we announced an update to the Mineral
Resource estimate for the Taylor Deposit at Hermosa, including a
41 per cent increase in the Measured Mineral Resource(2).
We have recently completed study work that confirmed that
the Taylor Deposit and the Clark Deposit can be developed
independently and have since recognised a non-cash impairment
expense for the Taylor Deposit within our FY23 financial results,
driven by delayed first production as a result of COVID-19 related
restrictions and significant dewatering requirements, as well as
capital cost escalation in line with industry-wide inflation. We
continue to see substantial opportunity to unlock additional value
across the Hermosa land package.
We now expect to complete the feasibility study for the Taylor
Deposit in the second half of calendar year 2023, as we undertake
additional engineering studies to align the mine development
schedule for a federal permitting process under FAST-41 and
incorporate current market cost estimates, followed by a final
investment decision expected by the end of calendar year 2023.
Dewatering activity is progressing, enabling access to both
the Taylor and Clark Deposits. The construction of Hermosa
Water Treatment Plant 2 was completed in early June and
commissioning is well advanced.
Study work for the Clark Deposit has confirmed its potential
to supply battery-grade manganese to the rapidly forming
North American electric vehicle supply chain. The pre-feasibility
selection study was completed in FY23 and has defined the
potential for an underground mining operation and a separate
plant to produce high-purity manganese sulphate monohydrate.
Further study work is underway, pilot plant production has
commenced and construction of an exploration decline is
expected to commence in the first half of FY24. We continue to
engage with potential customers, supported by multiple non-
binding, non-exclusive memorandums of understanding for the
future potential supply of battery-grade manganese.
Hermosa also offers a highly prospective regional land package
with the potential for future discoveries. Recent drilling results at
the Peake Prospect include our best intercept to date(2). Further
exploration drilling at Peake, along with drilling at the Flux
Prospect, is planned in the first half of FY24.
We have unlocked value at our existing operations in FY23
with the commissioning of the Ore Sorting and Mechanical Ore
Concentration project at Cerro Matoso, which underpinned a
15-year extension to Cerro Matoso’s mining contract to 2044,
and with the approval of the Eastern Lease South life extension
project at Groote Eylandt Mining Company. At Cerro Matoso we
are studying the potential to produce incremental volume in the
form of intermediary nickel products for battery markets. We also
announced our decision not to proceed the Dendrobium Next
Domain project at Illawarra Metallurgical Coal.
Rig Simulator Facility Helps Build New Skills
Hotazel Manganese Mines (HMM) is unlocking value with the
implementation of several growth projects at the Wessels
underground mine.
The projects include the implementation of new generation rigs,
which aim to increase drilling depths to achieve a better advance per
blast, and a fleet automation journey to help improve the safety and
productivity of drilling and underground support processes.
To support the introduction of the new rigs, a virtual production
machine and rig simulators have been installed to train employees
to operate them. As well as increasing advance per blast, the new rig
technology offers improved data gathering and analysis.
The establishment of these facilities in the Wessels training centre
is helping equip our workforce with new skills which will benefit both
them, and the operation, as the new technology is deployed.
(2) Refer to market release dated 24 July 2023 at www.south32.net.
23
SOUTH32 ANNUAL REPORT 2023 OUR STRATEGY IN ACTION CONTINUED
Create social, environmental and economic value
Our FY23 commitments:
〉
Implement social investment plans for each operation and increase the proportion of social investment allocated to
strategic investments;
〉 Develop economic development plans which include local employment and procurement targets at each operation; and
〉 Deliver contextual water target milestones and achieve water use efficiency target.
Progress during the year:
Social investment plans were implemented for each operation and
we invested US$27.7 million in community initiatives(1). Our direct
social investment spend was across our four key focus areas -
education and leadership (24 per cent), economic participation
(14 per cent), good health and social wellbeing (50 per cent),
and natural resource resilience (12 per cent). We increased the
proportion of social investment allocated to strategic investments
with long-term objectives from 82 per cent in FY22 to 90 per cent
in FY23.
The economic value of our presence in communities is an
important part of our societal contribution and we develop
economic development plans as outlined in our internal social
performance standard. These are complementary to our social
investment plans and identify opportunities to contribute to
local communities through employment, procurement, business
development, and regional economic development. In FY23,
economic development plans were developed for all operations.
We believe that growing and developing small, medium, and
micro enterprises (SMMEs) is fundamental to the transformation
of the South African economy. We collaborate with SMMEs
on Enterprise and Supplier Development (ESD) and in FY23
we exceeded our target for ESD with a total spend of
US$15 million(2). In Australia, we remain committed to providing
genuine access and support to build the capability and capacity
of Aboriginal and Torres Strait Islander businesses where we have
a presence, and our direct spend increased by 18 per cent to
A$30 million. Learn more about how we are creating value for our
stakeholders on pages 12 to 13.
We continue to look for opportunities to improve water use. We
have identified water-related material risks at five operations
and have set contextual water targets for each, with two targets
achieved and the others remaining on track. Currently, we have
four operations in areas defined as having baseline water stress
and for these a target was set in FY22 to achieve at least a
10 per cent improvement in water use efficiency by FY27, from
an FY21 baseline. Cumulatively across these four operations,
we achieved more than two per cent improvement in FY23,
exceeding the target of more than one per cent improvement
during the year.
Around the world we have land holdings of 602,057 hectares.
Cumulatively, we have disturbed approximately three per cent of
our landholdings for operational reasons, of which approximately
33 per cent has been rehabilitated(3). We aim to achieve no net
loss outcomes for all new projects and major expansions to
existing projects, and in FY23 worked in partnership with others
to pilot the adoption of the Taskforce on Nature-related Financial
Disclosures, an emerging disclosure framework.
We are also committed to implementing the Global Industry
Standard on Tailings Management (GISTM) at all South32-
operated tailings storage facilities and recently published our first
GISTM report for our ‘very high’ consequence facilities, which are
only at Worsley Alumina.
Our approach to climate change is focused on reshaping our
portfolio, decarbonising our operations (with a focus on the four
operations which account for the majority of our operational
emissions profile), responding to the potential physical impacts
of climate change, and working with others to address shared
challenges and decarbonise the value chain.
Our reported Scope 1 and Scope 2 greenhouse gas (GHG)
emissions for FY23 were 21.0 Mt CO2-e, a 0.2 per cent increase
from FY22. Direct emissions from activities at our operations
(Scope 1) increased by 0.5 Mt CO2-e, while there was a decrease of
0.4 Mt CO2-e in emissions from electricity used by our operations
(Scope 2).
We published our first Climate Change Action Plan in September
2022 and have made progress against key elements of the Plan
in FY23, including updating our 1.5°C scenario to stress-test the
potential impacts of climate change on our business.
We commenced the conversion of Worsley Alumina’s first coal-
fired boiler to natural gas and progressed decarbonisation
studies including mud washing and waste heat to digestion.
At Illawarra Metallurgical Coal we progressed a feasibility study
into the commercial scale pilot of CSIRO ventilation air methane
technology.
For Hillside Aluminium, while our studies have confirmed the
challenges associated with developing renewable and low-carbon
energy sources in South Africa, we continue to investigate a
range of potential solutions. We are studying options to acquire
energy attributes to reduce the GHG intensity of its product in the
near-term, while we pursue other low-carbon energy solutions
for the longer term. At Mozal Aluminium, we are working with
key stakeholders to extend the supply of hydro-electric power
beyond 2026 and continue to investigate additional emissions
reduction projects and technologies.
Learn more about how we seek to deliver value to society, operate
ethically and responsibly, manage our environmental impact and
address climate change in our Sustainable Development Report
at www.south32.net.
(1) Our total social investment comprised US$24.6M in direct investment (including Enterprise Development), US$2.5M in administrative costs, and US$0.6M of in-kind support.
(2) Enterprise and Supplier Development (ESD) consists of two activities, Enterprise Development and Supplier Development. The Enterprise Development component, which was
US$5.2 million in FY23, is captured in both the ESD total and the social investment total.
(3) Represents the proportion of land disturbed by South32 which has since been rehabilitated.
24
OPERATING AND FINANCIAL REVIEW
Sustainably reshape our business for the future
IDENTIFY OPPORTUNITIES
Our FY23 commitments:
〉 Develop and pursue opportunities to optimise our portfolio.
Progress during the year:
The substantial changes we made to our portfolio in FY22 to
increase our exposure to the commodities critical to a low-
carbon future have more than doubled our low-carbon aluminium
capacity and introduced copper to the portfolio.
While we remain open to opportunities around the world, our
next phase of growth is expected to come from our development
options in North America. In addition to the Hermosa project, our
portfolio in Alaska includes our 50 per cent interest in the Ambler
Metals Joint Venture which holds two sizeable base metals
deposits including copper, silver, lead, zinc and gold in the highly
prospective Ambler mining district. The Ambler Metals Joint
Venture is focused on consolidating geological knowledge and
advancing engineering studies for the Arctic Deposit.
We continue to invest to discover deposits to underpin our
next generation of mines with over 25 base metals exploration
prospects around the world(4). Consistent with this approach,
during the period we exercised our earn-in right to acquire a
controlling stake in the Chita Valley copper exploration project in
the San Juan province of Argentina, a region which hosts several
copper deposits along a highly prospective mineral belt. At our
wholly owned Roosevelt Project in Alaska, which is located in the
same mineral belt as the Ambler mining district, an expansive
drilling program was commenced in 2023 targeting potential
copper and zinc mineralisation.
In July 2022 we completed the sale of a package of non-core
development-stage base metals royalties for a sale price of up to
US$200 million, a further step forward in unlocking latent value
from our portfolio.
Exploring Opportunities
to Support Host Communities
At the Roosevelt Project in northern Alaska, we are engaging
with the Doyon Native Corporation and five tribal villages
that live in relative proximity to our early-stage exploration
activities.
As part of this engagement, we sponsored the Koyukuk
River Spring Carnival, held at the village of Allaket, in April
2023. A logistical challenge given the remote location, the
sponsorship included funding a fixed wing charter flight to
transport a dog sled team to compete in the main event.
The carnival was an opportunity for people to come together,
particularly after restrictions imposed by the COVID-19
pandemic. In addition to the fiercely competitive dog sled
and snowshoe races, younger generations were exposed
to the traditions and cultural heritage of their elders and
ancestors, a key aspect for the long-term sustainability of
these communities.
(4) Please refer to page 170 for Our exploration, research and development.
25
SOUTH32 ANNUAL REPORT 2023 OUR STRATEGY IN ACTION > KEY PERFORMANCE INDICATORS
A BALANCED APPROACH
TO MEASURING
OUR PERFORMANCE
FINANCIAL
Production
Copper equivalent production (kt)(1)
1,461
FY22: 1,375
FY21: 1,370
Capital expenditure
Investment (US$M)(2)
1,177
FY22: 723
FY21: 637
Earnings
Underlying EBIT (US$M)(3)
1,616
FY22: 3,967
FY21: 1,039
Cash flow
Free cash flow from operations
(US$M)
57
FY22: 2,240
FY21: 639
Shareholders
Shareholder returns (US$M)(4)
1,225
FY22: 788
FY21: 460
Why it matters
Performance in FY23
Provides a baseline to easily benchmark our
production performance against other mining
and metals companies.
Strong production growth in aluminium, base
metals and manganese reflecting recent
portfolio improvements and three annual
production records.
Measures our approach to investing in safe
and reliable operations, improvements and life
extensions, and growth options.
We increased our investment in productivity,
improvement and growth activities across our
portfolio, including at the Hermosa project and
reflecting the inclusion of Sierra Gorda.
Underlying measures of earnings are
important when assessing underlying financial
and operating performance.
Production growth, coupled with our continued
focus on cost efficiencies, supported one of our
largest underlying financial results despite lower
commodity prices and inflationary pressures.
Cash flow measures are important when
assessing underlying financial and operating
performance.
Lower free cash flow reflects higher capital
expenditure and one-off tax payments in
relation to our Sierra Gorda acquisition and
non-core royalty sale.
Provides an indicator for shareholders of how
well their investment is performing.
We delivered record returns to shareholders
during FY23 via ordinary and special dividends
and our on-market share buy-back.
(1) Copper equivalent production was calculated using FY22 realised prices, and includes operated and non-operated operations.
(2) Includes intangibles and capitalised exploration expenditure, and material equity accounted investments on a proportional consolidation basis.
(3) This is a non-IFRS measure. For an explanation of how South32 uses non-IFRS measures, see page 38.
(4) Fully-franked ordinary and special dividends paid in respect of H2 FY22 (US$784M), fully-franked ordinary dividends paid in respect of H1 FY23 (US$223M) and on-market share
buy-back (US$218M).
26
OPERATING AND FINANCIAL REVIEW
KEY
Strategy pillar
Sustainability pillar
Strategic risks
Remuneration
SUSTAINABILITY
Health and safety
Lost Time Injury Frequency
(per million hours worked)(5)
1.4
FY22: 2.0
FY21: 1.7
People
Employee engagement (per cent)
79
FY22: 78
FY21: - (survey did not take place
due to the impact of COVID-19)
Community
Social investment (US$M)(6)
27.7
FY22: 31.1
FY21: 22.2
Environment
Water use efficiency (per cent)(7)
61.5
FY22: 66
FY21: 56
Climate change
Operational greenhouse gas
emissions (Mt CO2-e)(8)
21.0
FY22: 21.0
FY21: 20.7(9)
Why it matters
Performance in FY23
Nothing is more important than the health,
safety and wellbeing of our people.
LTIF reduced by 30 per cent compared to the
FY22 baseline, reflecting a reduction in the
frequency of severe events.
Engaging directly with our people allows us to
understand how they experience all aspects of
South32 and identify areas for improvement.
Our employee engagement score, as measured
in our Your Voice employee survey, improved by
one per cent year-on-year.
We invest in local communities with the aim
of contributing to their social, economic, and
institutional development.
Social investment decreased by 11 per cent
year-on-year, primarily due to social investment
at Hillside Aluminium which is price-linked
under South African legislation.
Water is a valuable resource that we all share
and a critical input for our operations.
Water use efficiency decreased by
four per cent due to challenges faced at
operations such as above average rainfall
and management of excess water.
Human activity is causing climate change
and the impacts are affecting ecosystems,
biodiversity, and communities around the world.
Our reported Scope 1 and Scope 2 greenhouse
gas emissions increased by 0.2 per cent year-
on-year, with Scope 1 emissions increasing by
0.5 Mt CO2-e and Scope 2 emissions decreasing
by 0.4 Mt CO2-e.
(5) Incidents are included where South32 controls the work location or controls the work activity. Lost time injuries include injuries that result in one or more lost work days after
the day of the event.
(6) Our total social investment comprised US$24.6M in direct investment (including Enterprise Development), US$2.5M in administrative costs, and US$0.6M of in-kind support.
(7) Water use efficiency is calculated as the total recycling and reuse divided by the sum of total recycling and reuse and total operational inputs/withdrawal.
(8) Includes Scope 1 and Scope 2 greenhouse gas emissions.
(9) The FY21 baseline has been adjusted to exclude emissions from SAEC and TEMCO, which were divested in FY21.
27
SOUTH32 ANNUAL REPORT 2023
RISK MANAGEMENT
MANAGING OUR RISKS
TO PROTECT AND
UNLOCK 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.
Our approach to risk management is
governed by our risk management
framework. Our internal risk management
standard outlines the minimum mandatory
requirements for the management of
risks that can materially impact our
ability to achieve our purpose, strategy
and business plans. The framework and
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.
Our approach to risk management
applies to all employees, directors and
contractors of South32. Our risks are
regularly assessed and managed at both
a company-wide strategic level and at a
tactical level for operation, project and
function risks.
Risk appetite
Risk appetite is the level of residual risk
that we are willing to take in pursuit of our
strategic objectives, which is established
in relation to our operating environment.
Our Board considers and approves the risk
appetite developed by management. Our
internal Risk Appetite Statements outline
the extent to which we are or are not
willing to engage with higher levels of risk
(both threats and opportunities) in order
to realise greater benefit in the pursuit of
our purpose and strategy and in alignment
with our values and Code of Business
Conduct. Key risk indicators (KRIs) are
set by management and used to monitor
performance against our set risk appetite.
Understanding our risk appetite across
our strategic risks assists in decision-
making across the Group.
Material risks
Strategic risks
Our strategic risks are risks which can
affect our ability to achieve our strategic
objectives. They have the capacity to
affect all, 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, associated KRIs and management
responses are monitored and evaluated
twice per 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 FY23, we
identified 13 strategic risks which could
influence our plans and the sustainability
of our business, each of which is explained
further in subsequent pages.
Strategic risk key
The inherent risk impact or
likelihood has increased over
the past 12 months (i.e. without
considering internal controls or
management responses).
The inherent risk impact or
likelihood has remained constant
over the past 12 months (i.e.
without considering internal
controls or management
responses).
The inherent risk impact or
likelihood has decreased over
the past 12 months (i.e. without
considering internal controls or
management responses).
We apply the three lines operating model
to our system of risk management, which
determines how our structures, processes,
and organisational roles work together
to facilitate strong risk management
and assurance. This approach is used to
manage our material risks and enables us
to:
– Provide stable and consistent
processes, tools and routines to
identify and regularly assess the most
impactful threats and opportunities;
– Deliver predictable outcomes and
prevent unforeseen events with
material impacts;
– Understand our risks and manage these
at all levels of the organisation; and
– Reduce or seek to eliminate risks where
appropriate or improve our processes
using a risk-based approach.
Our material risks are those which can
materially impact our ability to achieve
our purpose, strategy and business
plans. The effective management of our
material risks is routinely assessed by
our Lead Team. An overview of these
risks are reviewed by our Risk and Audit
Committee and Sustainability Committee,
which assist our Board to carry out its role
of 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
business, 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.
28
OPERATING AND FINANCIAL REVIEW
Keeping our people safe and well
Portfolio reshaping
A safe and healthy working environment is fundamental
to living our values.
Risk exposure trend 2023
Risk appetite
Aligned to our purpose and values, we will not take actions
that compromise the health, safety or wellbeing of our people,
contractors and communities.
Opportunities
Keeping our people safe and well underpins 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 and impact shareholder returns, stakeholder
confidence and ultimately our licence to operate.
Our response includes:
– In everything we do, we focus on the health, safety and
wellbeing of our people, contractors and communities;
– We have a system of risk management and 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 value and strive to build inclusion and diversity in our
workplace where everyone is valued and can participate to
achieve their full potential. We do not tolerate any form of
inappropriate conduct which includes bullying, harassment,
discrimination or victimisation;
– We engage, develop and train our people so that our work is
well designed and executed;
– We investigate actual and potential significant events
that could have led to severe injury or higher outcomes,
put controls in place and share the learnings across our
organisation;
– We continuously improve our work environment with the aim of
making it safer, healthier and more productive for our people.
We are implementing our multi-year Group-wide Safety
Improvement Program designed with the aim of enhancing
our safety culture and by changing mindsets and behaviours,
achieving a step change in our safety performance; and
– In line with the three lines operating model, we have assurance
functions independent of our operating activities that provide
assurance against our own comprehensive internal standards.
+
Learn more about our approach to health and safety in our
Sustainable Development Report at www.south32.net.
Our objective is to improve our return on invested capital and
create shareholder value by increasing our 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 and Code of Business Conduct.
Risk exposure trend 2023
Risk appetite
We accept that in actively transforming our portfolio, we need
to take risk to capture opportunities. We will seek to do so in
jurisdictions and commodities where we believe we can operate
or invest in line with our values and Code of Business Conduct.
Opportunities
Increasing our exposure to the commodities critical to a low-
carbon future will position our business for a low-carbon world,
in alignment with our strategy. Acquisitions of operations
or development options (including non-operating and non-
controlling shares in these operations and development options)
present us with opportunities to create shareholder value through
increasing our exposure to these commodities. Partnering with
junior explorers also creates opportunities for us in early-stage
exploration in more challenging jurisdictions.
Threats
Changing global sentiment presents a threat to the sustainability
of our current portfolio mix if we do not act to reshape our
portfolio. In responding to stakeholder expectations, we could
make decisions to dispose of climate or carbon exposed
operations, development options and investments at less than
market value. Increasing demand for the commodities critical to
a low-carbon future may drive higher valuations of operations
and development options that we want to acquire, making
acquisitions challenging and potentially value destructive. A
scarcity of attractive opportunities or a reliance on exploration to
fill our pipeline of opportunities may impact the pace of transition.
Geopolitical developments may also limit those jurisdictions in
which we can operate or those counterparties with which we can
partner or transact.
Our response includes:
– We are actively reshaping our portfolio towards commodities
critical to a low-carbon future;
– We take more risk on early-stage exploration projects,
including jurisdictional risk as well as through joint ventures
and earn-ins, but commensurate with the commercial
exposure;
– We will be flexible on opportunistic acquisitions including non-
controlling and non-operating shareholdings in incorporated or
unincorporated joint ventures; and
– 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. This process is supplemented by tri-annual
updates.
+
Learn more about how we are reshaping our portfolio in Our
strategy in action on page 25.
29
SOUTH32 ANNUAL REPORT 2023 RISK MANAGEMENT CONTINUED
Climate change and environment
Climate change poses physical risks to our business, our people and the infrastructure, communities and environment on which
we rely. The political, social and economic responses to the challenges posed by climate change and the transition to a low-
carbon economy also pose risks to our business performance (i.e. demand for some of our commodities, cost and profit margins,
social licence, regulatory exposure). Learn more about our approach to climate change, including our detailed assessment of the
risks climate change poses to our business, in the Addressing Climate Change section of our Sustainable Development Report
and our Climate Change Action Plan (CCAP), both of which available at www.south32.net.
Our operations also have the potential to impact biodiversity, air, land and water resources. This may result in increased costs to
mitigate or address such impacts, prevent or delay project approvals, and result in reputational damage.
Water is critical to our operations and water scarcity, increased competition for supply or costs to access can impact our
operations, supply chains and communities.
Risk exposure trend 2023
Risk appetite
We recognise the impact our operations have on the environment
due to the extractive nature of our activities and that the
greenhouse gas emissions associated with our activities
contribute to climate change. We also recognise the role our
industry plays in providing the materials that are essential in
the transition to a net zero global economy and we want to be
part of that solution. We acknowledge that we have potential
vulnerabilities to the physical impacts of climate change and
exposure to climate-related transition risk and nature-related
risk. We accept that we need to take risks in order to minimise
our environmental impact and reduce our exposure to physical
and transition climate change risk and nature-related risk. We
seek to take risks that may arise as we transform our portfolio to
maintain competitiveness in a low-carbon world and pursue our
greenhouse gas emissions reduction target and goals.
Opportunities
Aligning our business strategy, including how we operate
and what we produce, with stakeholder expectations, future
technologies and evolving climate and environmental policies
and regulations, contributes to a resilient and high performing
portfolio. We aim to increase the efficiency of our operations and
support business continuity through responsibly assessing and
addressing our climate change and environment-related risks,
dependencies and impacts, and increasing the resilience of our
business, the value chain and communities in which we operate.
Threats
The complex and pervasive nature of climate change means that
climate-related risks and opportunities are reflected across our
risk profile. For further details on the potential impacts of climate
change on our strategic risks, refer to the Addressing Climate
Change section of our Sustainable Development Report and
pages 99 to 101 of our CCAP.
Failure to manage environmental and climate-related risks may
impact our ability to secure development approvals, permits
or licences and increase our legal exposures. It may also limit
our ability to access capital and insurances, develop strategic
partnerships with Indigenous, Traditional and Tribal Peoples
or environmental organisations, attract and retain employees,
deliver our project portfolio, and grow our business in existing and
new jurisdictions.
Our response includes:
– Our approach to managing the transition and physical risks of
climate change is outlined in the Addressing Climate Change
section of our Sustainable Development Report and our CCAP;
– Our sustainability approach, inclusive of our environmental
performance requirements, is guided by the ICMM Mining
Principles, United Nations Global Compact (UNGC) Ten
Principles and United Nations Sustainable Development Goals
and is outlined in our Sustainability Policy and Sustainable
Development Report at www.south32.net;
– We seek to manage water resources using a holistic
approach to promote better water use, effective catchment
management and to contribute to improved water security and
sanitation;
– We establish contextual water targets for operations exposed
to water-related material risks with consideration for broader
stakeholder and catchment needs;
– Our operations address biodiversity impacts with a focus on
minimising our operational impacts through application of
the biodiversity mitigation hierarchy and collaborating with
others to contribute towards biodiversity conservation and
restoration;
– We aim to achieve no net loss outcomes for all new projects
and major expansions to existing projects through a balanced
application of the biodiversity mitigation hierarchy of
avoidance, minimisation, rehabilitation and offsetting;
– We integrate land management and rehabilitation processes
into our business planning and give consideration to
cumulative impacts when developing management controls to
minimise impacts on surrounding ecosystems;
– We manage our waste streams to minimise environmental
impact and realise value through a balanced application of the
waste mitigation hierarchy of prevention, minimisation, reuse,
recycle, recovery and disposal;
– We engage regularly with investors, governments, industry
partners, membership-based sustainability organisations,
environmental, social, and governance (ESG) proxy advisers
and ESG activist groups to identify and monitor emerging
environmental and climate change risks, opportunities and
trends; and
– We are transparent in our disclosure of environment and
climate-related opportunities and threats in our annual
reporting, in accordance with the Global Reporting Initiative
(GRI) Sustainability Reporting Standards and recommendations
of the Task Force on Climate-related Financial Disclosures.
+
Learn more about how we are addressing climate change and
managing our environmental impact in our Sustainable
Development Report at www.south32.net.
30
OPERATING AND FINANCIAL REVIEW
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.
Major external events or natural catastrophes
Our operations and logistics networks can be disrupted by
events such as pandemics, natural disasters and extreme
weather events that could impact people’s safety, wellbeing,
security, the integrity of tailings storage facilities and key
operating infrastructure.
Risk exposure trend 2023
Risk exposure trend 2023
Risk appetite
We are not willing to take risks that inhibit our ability to realise
the potential of the resources and reserves we are entrusted to
develop.
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 future shareholder returns,
the benefits our stakeholders receive and ultimately, the
sustainability of the company
Our response includes:
– We have capital prioritisation, capital allocation and planning
processes which prioritise the highest-value options across our
portfolio;
– We apply an annual planning process that considers the
impact of climate change on our Ore Reserves, with plans
structured to maximise value throughout the life of our
operations;
– Drill plans and budgets are approved as part of our annual
planning cycle and compliance to those plans is reported
monthly. Where there is material deviation to plan, actions are
taken to reduce deviation;
– We apply a rigorous project development process that
includes independent peer review of project risks and approval
tollgates;
– We report Mineral Resources and Ore Reserves (including Coal
Resources and Coal Reserves) in accordance with the JORC
Code as required in the ASX Listing Rules (Chapter 5); and
– We have an internal closure standard which requires that
the full life of operation value incorporates closure and
rehabilitation liabilities.
+
Learn more about resources and reserves (including
governance processes) on pages 169 to 176.
Risk appetite
We are not willing to take risks that compromise our ability to
manage natural catastrophes. However, we accept we operate
in a diverse range of geographic locations, which are exposed to
natural events and other external events.
Opportunities
Achieving stable and predictable performance enhances the
value proposition to our shareholders, 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
aim to 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 access to logistics chains and critical goods
and services, 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 and
environment’ on page 30.
Our response includes:
– When facing potential catastrophes, we put safety and
wellbeing at the heart of everything we do;
– We use our system of risk management in design, construction
and operation phases to analyse risks, and design and
implement actions that aim to prevent or limit business
impacts;
– We utilise climate modelling data to inform our long-term plans
and project pipelines, and conduct physical risk assessments
of our assets every two years;
– We have business continuity and disaster response plans in
place with trigger action response scenarios. We have tested
these to make sure we can respond rapidly to major events
and safely restore our operations, aiming to protect the health
and safety of our people and the communities in which we
operate;
– Consistent with the three lines operating model, we have
assurance functions independent of our operating activities
that provide assurance against our own comprehensive
internal standards including equipment integrity, tailings
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.
31
SOUTH32 ANNUAL REPORT 2023
RISK MANAGEMENT CONTINUED
Maintain competitiveness through technology and innovation
Technology and innovation are advancing at a rapid pace. Companies which are unable to effectively leverage technology and
innovation may 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 licence to operate. The use of ransomware is becoming more prevalent in
cybersecurity incidents across the mining industry.
Our response includes:
– We have a clearly defined approach to innovation,
improvement and technology;
– We deliver specific programs focused on adoption and
improvement of critical technology capabilities across multiple
time horizons;
– 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 coordinate and integrate
technology advances into our growth portfolio;
– We actively manage cybersecurity and loss of critical systems
risks through our system of risk management; and
– We monitor internal customer satisfaction and manage
customer support.
+
Learn more about how technology and innovation are
unlocking value in Our strategy in action on page 22.
Risk exposure trend 2023
Risk appetite
We are not willing to take risks that will result in a loss of data
or disruptions to our operations and projects due to the theft,
disclosure or corruption of information. Aligned to our strategy,
we will pursue technology and innovation that may have a lower
certainty of success where there is commensurate potential for
high return on investment.
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 are identified and delivered through
Innovate32, our strategy-aligned, value-focused, innovation
portfolio. This approach will assist 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. Failure to adopt automation,
electrification and digital systems could result in deteriorating
performance across safety, productivity, returns and greenhouse
gas emissions. Cybersecurity incidents could pose multiple
risks including disruption to new projects and operations, theft,
disclosure or corruption of information.
32
OPERATING AND FINANCIAL REVIEW
Predictable operational performance
Delivery of our project portfolio
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 2023
Delivery of our project portfolio, both brownfield and
greenfield, forms a critical component of our strategy. Delivery
of projects safely, on schedule and within budget allows us to
optimise and unlock the value of our business.
Risk exposure trend 2023
Risk appetite
We are not willing to take risks that compromise the stable and
predictable performance of our operations.
Opportunities
We mature our Operating System to control and continuously
improve our operations and processes, so that we can deliver
stable and predictable performance and unlock 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
External volatility and challenges can impact predictable
performance. These include labour and supply chain tightness
as well as regulatory and geopolitical change. If we are unable
to 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;
– 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 our operating practices
including operational planning, work design and standards,
process control and improvement;
– We actively manage risks to our resources and reserves,
mine and operational planning including reconciliation of Ore
Reserves to production, plan and spatial compliance and
management of geotechnical risks;
– We manage an integrated system of long to short-term
planning and scheduling processes that considers 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 quality assurance programs over our products
and operations.
Risk appetite
Aligned to our strategy of unlocking value in our business, we will
not take actions that compromise the planning and execution of
our major projects. However, we may accept greater levels of risk
to pursue opportunities to extend the life of existing operations
through brownfield projects and in executing decarbonisation
projects for our assets.
Opportunities
Delivery of our project portfolio on time and within budget allows
us to improve reliability, complement our existing assets, extend
the life of our operations, realise our external commitments and
grow volumes into structurally attractive markets.
Threats
Inability to deliver the project pipeline may impact on our
future cash flows, reputation and return on investments.
Known and emerging uncertainties that may challenge the
timely and successful execution of our projects can include
satisfying conditions for regulatory approvals, permitting delays,
supply chain disruptions, high inflation, joint venture partner
misalignment, and activism.
Our response includes:
– A comprehensive and adaptable project management
framework supports disciplined project development and
execution to realise the value of opportunities while mitigating
the risk of suboptimal outcomes;
– We continue to develop our Operating System for major
projects, and mature our performance in delivering projects on
cost and on schedule;
– Our joint venture agreements include mechanisms such
as technical committees and independent peer reviews to
influence project, schedule, and cost outcomes;
– We apply a standardised valuation methodology with
consistent key macroeconomic assumptions;
– We maintain a life of operation annual planning process. By
evaluating the embedded project options in our operations, we
look to optimise value throughout the life of our operations;
– We conduct an annual review of commodity prices and
exchange rates which informs our project budgets. This
process is supplemented by tri-annual updates; and
– Our internal investment framework defines a disciplined
tollgate process with a mature and independent peer
review mechanism which we rigorously follow to inform key
investment decisions.
+
Learn more about our operational performance in Our strategy
in action on page 21.
+
Learn more about our project execution in Our strategy in
action on page 23.
33
SOUTH32 ANNUAL REPORT 2023 RISK MANAGEMENT CONTINUED
Security of supply of logistics chains, and critical goods and services
The inability to secure supply of critical goods and services, such as raw materials, energy, water, gas, equipment and spare
parts, consumables, technology, corporate services, labour and logistics (which includes road, rail and shipping), has the potential
to impact business performance and our strategic objectives.
The procurement of critical goods and services must be undertaken in a manner that aligns to our purpose and values, meets
stakeholder expectations and adheres to the policies and regulations where we operate. This includes sustainable sourcing and
supporting local communities.
The security of our supply chain is heavily impacted by pandemics, jurisdictional unrest, geopolitical tensions and a shift from
globalism towards protectionism.
Risk exposure trend 2023
Risk appetite
Aligned to our strategy of optimising our business, we are not
willing to take undue risks that compromise the security of our
supply chain logistics and critical services. However, we accept
that we have a strong reliance on certain critical suppliers,
particularly to provide energy, logistics, and raw materials to our
operations and we have limited ability to reduce this reliance.
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 the
expectations of our stakeholders.
It also provides us with the ability to influence how others in our
industry approach sustainable sourcing and to position us to
benefit as trade flows respond to rising protectionism, social
consciousness and general trends to de-risk value chains.
Threats
Disruption of our supply chain could materially impact our ability
to deliver on our commitments and meet the expectations
of our stakeholders. 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 36). 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 and environment’ on page 30, and in
the Addressing Climate Change section of our Sustainable
Development Report).
Our response includes:
– We understand, assess and continually monitor the risks in our
supply chains through an integrated system that considers
the supply of critical goods and services. This includes
risks relating to potential shortages, critical suppliers and
categories, vendor liquidity, logistics, climate change and
decarbonisation, and modern slavery;
– Internal and external data is integrated so we have a good
understanding of existing and emerging risks and can take
action to mitigate;
– We use this understanding of risk to deploy controls to support
predictable operations. This includes working closely with our
vendors and operations to match availability with demand;
understanding options for alternative sources of supply and
implementing multi-source supply where required; optimising
inventory levels; flexing commercial terms and maintaining
up-to-date business continuity plans. We continually optimise
our approach between ‘just in case’ and ‘just in time’ as supply
chain risk ebbs and flows;
– We build strong strategic partnerships with key suppliers on a
long-term, mutually beneficial basis;
– We have a clearly defined transformation strategy and
Enterprise Supplier Development program in South Africa
aimed at building and growing small, medium and micro
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 have an established process to assess and mitigate
potential modern slavery risks.
+
Learn more about our responsible value chain activities in our
Sustainable Development Report at www.south32.net.
34
OPERATING AND FINANCIAL REVIEW
Shaping our culture and managing diverse talent
We must actively shape and embed our culture to attract, develop, support, and retain our talented people to deliver safe,
predictable performance and continuously improve.
To align with the evolving needs of our people, business and broader stakeholders, we continuously monitor our culture and seek
feedback to enhance the employee experience.
Risk exposure trend 2023
Risk appetite
People underpin everything we do and we are not willing to
take risks that could negatively impact our culture and the way
our people connect to our purpose. However, we recognise
our size and the competitive labour market in which we
operate and therefore must be willing to take risk to build our
talent and succession pipeline.
Opportunities
By shaping and embedding our aspired culture through our
systems, symbols and behaviours, we will create an employee
experience that engages all our people to better deliver our
strategic objectives, together.
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 may
constrain innovative thinking and impact our ability to attract
and retain talent, which may lead to significant shareholder value
erosion and reputational damage.
Our response includes:
– Our Code of Business Conduct 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 reporting hotline;
– We 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, systems and
processes with innovation and empowerment;
– We measure our employee experience, including at
onboarding, annually through our ‘Your Voice’ employee
survey, and at exit. The Your Voice survey responses are
shared with line leaders to enable team-based conversations
that directly empower improvements to the local employee
experience;
– We have an internal Inclusion and Diversity Policy, standard
and framework which sets out our commitments, strategy,
requirements, measurable objectives and approach to
performance reporting;
– We have a Leadership Model which strengthens alignment to
our preferred culture and behaviours, and is integrated across
our people systems and processes;
– We have a performance and goals process which supports
our reward philosophy, and recognises and rewards aligned
leadership behaviours and performance;
– We design our reward elements in accordance with our global
reward framework taking into consideration local labour
market practices, which enables us to attract appropriate skills
and experience, engage employees and improve performance;
– We routinely review our key talent and critical role successors
globally, creating individualised plans to further their
development and address talent pipeline risks as appropriate.
This includes targeted retention programs for key talent and/or
team members occupying critical roles;
– We support employees who undertake further education and
training related to their current or future career with South32;
and
– We have an internal flexible work procedure which empowers
our leaders to engage with their teams to determine the
ways of working that balance individual, team and business
requirements.
+
Learn more about our people and culture in our Sustainable
Development Report at www.south32.net.
35
SOUTH32 ANNUAL REPORT 2023 RISK MANAGEMENT CONTINUED
Evolving societal expectations
The expectations of resource companies by employees, governments, investors, lenders, host communities, customers, non-
governmental organisations and broader society continue to evolve.
In order to keep pace with these rapidly evolving expectations and understand the potential impact to our business performance,
reputation and delivery of our strategic objectives, we maintain an active stakeholder engagement program and undertake
external monitoring on a wide range of financial and ESG issues, including climate change.
We regularly engage with our stakeholders to understand and respond to their views, which may be divergent, and aim to identify
ways we can create enduring social, environmental and economic value, in a way that aligns with our purpose and values.
Risk exposure trend 2023
Risk appetite
We are not willing to take risks that will result in a failure to meet
societal expectations, in human rights, cultural heritage, modern
slavery and community safety. However, we accept that we will
be required to take some risks in areas such as impacts of mining
(e.g. on the environment) and commodity selection that may not
completely align with societal expectations.
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 or
markets, 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 aim to create
enduring social, environmental and economic value for all our
stakeholders, in a way that aligns with our purpose and values;
– We undertake internal and external stakeholder analysis and
engagement on a wide range of financial and ESG issues,
including an annual materiality process to understand
our material ESG issues. Our approach is aligned with the
ICMM Mining Principles, The UNGC Ten Principles and GRI
Sustainability Reporting Standards;
– We engage with our customers to understand their
requirements and drivers for responsible production, sourcing
and stewardship in the supply chain. We work with certification
bodies such as the Aluminium Stewardship Initiative to seek
certification against their performance standards to help
facilitate continued access to markets;
– We work to build strong, positive and meaningful relationships
with local communities. We regularly complete and review
community perception surveys, human rights impact
assessments, social baseline studies and social impact and
opportunity assessments to improve our understanding of the
communities in which we operate;
– We review and amend our social investment program annually
to align with community and stakeholder priorities. We
measure the outputs and outcomes of our social investments
as it informs future investment decisions and improves social
investment project design;
– We develop economic development plans at all our
operations which contribute to local and regional economic
development through employment, procurement and
business development. These plans include targets informed
by local context, including women and people with diverse
backgrounds;
– We engage with Indigenous, Traditional and Tribal Peoples
across our operations to build mutual understanding and
strengthen cultural heritage management. Our engagement
with Indigenous, Traditional and Tribal Peoples throughout
the life of our operations is sensitive to and respects cultural
protocols; and
– We participate in sustainability reporting transparency
initiatives and ESG rating agency reviews that assess and
score our performance.
+
Learn more about how we are delivering value to society in our
Sustainable Development Report at www.south32.net.
36
OPERATING AND FINANCIAL REVIEW
Political risks, actions by governments
and/or authorities
Changes in legislation, regulation, policy and geopolitical
activity 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, supply chains, renegotiation or nullification of
contracts, leases, permits or agreements, climate change and
emissions reduction requirements 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 having access to specialised
knowledge.
Risk exposure trend 2023
Risk appetite
We have a low appetite for activities that are likely to result in
non-compliance with applicable legal or regulatory requirements.
We maintain programs that seek to comply with those
requirements. However, there can be no guarantee that such
programs will always be effective to identify or prevent breaches
of the law. Further, we operate in certain complex environments
and jurisdictions, which are subject to legislative, regulatory
or government policy changes that may adversely impact our
business. Therefore, there will always be residual risk in relation to
compliance with legal and regulatory requirements and changes
to those requirements that may adversely impact our business.
Opportunities
Proactive engagement leading to strong relationships with
governments and authorities 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 or authorities, particularly relating
to societal expectations, can result in operational disruption,
permitting uncertainty, 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, and legislative and
regulatory changes in the jurisdictions where we operate, and
we also engage with relevant authorities, to understand and
mitigate potential impacts on our business performance;
– 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.
+
Learn more about our approach to tax in our Tax Transparency
and Payments to Government Report at www.south32.net.
Global economic uncertainty and liquidity
We prioritise an investment grade credit rating and a
disciplined approach to allocating capital which aims to 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,
growth options and external opportunities, or by making
returns to shareholders, we aim to maximise total shareholder
returns over time.
Risk exposure trend 2023
Risk appetite
We are not willing to take risks that may limit our ability to
maintain a minimum liquidity balance and/or access to funding on
acceptable terms. We recognise our preferred commodity basket
and our operating costs have the potential for price and exchange
rate volatility outside of our control, and while we accept that as a
resource company we are exposed to this inherent risk, we will act
to reduce its impact by understanding its effect on our business.
Opportunities
By 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. An increase
in volatility, especially when it has an impact on in-bound and
out-bound supply chains, has the potential to increase working
capital requirements, affecting our liquidity. 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, with the aim of remaining resilient 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 and access to a
diverse range of funding sources;
– We adjust our capital allocation plans according to market
conditions;
– We maintain strong relationships with high-quality financial
institutions, 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 are exposed to; and
– We carry out an annual review of commodity prices and
exchange rates, which informs our operational plans. This
process is supplemented by tri-annual updates.
+
Learn more about our capital management framework in Our
strategy on page 19.
37
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY
STRONG GROWTH
IN COMMODITIES
CRITICAL FOR
A LOW-CARBON FUTURE
We increased our supply of commodities critical for a low-carbon future, recording strong production
growth as we realised the benefit of recent portfolio improvements.
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 our 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.
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/
(debt), 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 181.
The basis of the Group’s underlying
financial results is included on page 113
in note 4 to the financial statements,
which reflect the Group’s interest in
material equity accounted joint ventures
on a proportional consolidation basis.
We believe that Underlying earnings
before interest, tax, depreciation and
amortisation (EBITDA), Underlying
earnings before interest and tax (EBIT)
and Underlying earnings 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 EBITDA,
Underlying EBIT and Underlying earnings,
the following items are adjusted as
applicable each period, irrespective of
materiality:
– Exchange rate (gains)/losses on
restatement of monetary items;
– Impairment losses/(reversals);
– (Gains)/losses on disposal and
consolidation of interests in operations;
– (Gains)/losses on non-trading derivative
instruments, contingent consideration
and other investments measured at fair
value through profit or loss;
– Major corporate restructures;
– Joint venture adjustments for material
equity accounted investments;
– Exchange rate variations on net cash/
(debt);
– Tax effect of earnings adjustments; and
– Exchange rate variations on tax
balances.
In addition, items that do not reflect the
underlying operations of the Group, and
are individually, or in combination with
other related earnings adjustments,
significant to the financial statements,
are excluded to determine Underlying
earnings.
38
OPERATING AND FINANCIAL REVIEW
Financial key performance indicators for FY23
Financial highlights
US$M
Revenue
Profit before tax and net finance income/(costs)
Profit/(loss) after tax
Basic earnings per share (US cents)(1)
Ordinary dividends per share (US cents)(2)
Special dividends per share (US cents)
Other financial measures
Underlying revenue(3)
Underlying EBITDA
Underlying EBITDA margin
Underlying EBIT
Underlying EBIT margin
Underlying earnings
Basic Underlying earnings per share (US cents)(1)
ROIC
Ordinary shares on issue (million) at the end of the reporting period
FY23
7,429
198
(173)
(3.8)
8.1
-
9,050
2,534
29.4%
1,616
18.7%
916
20.0
10.0%
4,545
FY22
9,269
3,724
2,669
57.4
22.7
3.0
10,630
4,755
47.1%
3,967
39.4%
2,602
56.0
33.0%
4,628
Change
(20%)
(95%)
N/A
N/A
(64%)
N/A
(15%)
(47%)
(17.7%)
(59%)
(20.7%)
(65%)
(64%)
(23.0%)
(2%)
(1) FY23 basic earnings per share is calculated as Profit/(loss) after tax divided by the weighted average number of shares for FY23 (4,572 million). FY23 basic Underlying earnings
per share is calculated as Underlying earnings divided by the weighted average number of shares for FY23. FY22 basic earnings per share is calculated as Profit after tax
divided by the weighted average number of shares for FY22 (4,647 million). FY22 basic Underlying earnings per share is calculated as Underlying earnings divided by the
weighted average number of shares for FY22.
(2) FY23 ordinary dividends per share is calculated as H1 FY23 ordinary dividend announced (US$224M) divided by the number of shares on issue at 31 December 2022
(4,572 million) plus H2 FY23 ordinary dividend announced (US$145M) divided by the number of shares on issue at 30 June 2023 (4,545 million).
(3) Underlying revenue includes revenue from third party products and services.
External factors and trends
affecting the Group’s result
The following describes the main external
factors and trends that have had a
material impact on the Group’s financial
position and results of operations during
the financial year. Details of the Group’s
most significant risk factors (including
environmental, social and governance
risks), and how they are mitigated can be
found in the Risk management section on
pages 28 to 37.
The Board and management monitor
particular trends arising from external
factors with a view to managing the
potential impact on the Group’s future
financial position and results of operations.
Commodity prices and changes in
product demand and supply
South32 produces metals, concentrates
and ores, for which prices are driven by
global demand and supply for each of
these commodities. Commodity prices
were generally lower in FY23 compared to
FY22 as most physical markets weakened
on the back of global monetary tightening
following the rise in inflation. The prices
that the Group obtains for its products
are a key driver of business performance,
and fluctuations in these markets affect
our results, including cash flows and
shareholder returns.
Estimated impact on Underlying EBIT
of a +/- 10% change in commodity price
US$M
Aluminium(1)
Alumina
Metallurgical coal(2)
Manganese ore
Copper(3)
Nickel
Silver
Lead
Zinc
FY23
287
180
154
88
65
60
22
18
12
(1) Aluminium sensitivity shown without any associated
increase in alumina pricing.
(2) Includes metallurgical and energy coal at Illawarra
Metallurgical Coal.
(3) Includes molybdenum, gold, and silver at Sierra
Gorda.
39
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
The following table shows the quoted market prices of the Group’s most significant commodities in FY23 and FY22. 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)
Copper (LME Cash)(2) (US$/t)
Silver(3) (US$/toz)
Lead (LME Cash)(2) (US$/t)
Zinc (LME Cash)(2) (US$/t)
Nickel (LME Cash)(2) (US$/t)
Metallurgical coal(4) (US$/t)
Manganese ore(5) (US$/dmtu)
Average Value
Closing Value
FY23
340
2,334
8,280
21.7
2,082
2,989
23,924
279
5.19
FY22
Change
382
2,889
9,645
23.6
2,304
3,509
23,547
390
6.16
(11%)
(19%)
(14%)
(8%)
(10%)
(15%)
2%
(28%)
(16%)
FY23
330
2,097
8,210
22.5
2,105
2,363
20,125
233
4.54
FY22
367
2,397
8,245
20.4
1,907
3,252
23,100
302
7.27
Change
(10%)
(13%)
(0%)
10%
10%
(27%)
(13%)
(23%)
(38%)
(1) Platts Alumina Index (PAX) Free on Board (FOB) Australia – market price assessment of calcined metallurgical/smelter grade alumina.
(2) London Metal Exchange (LME) Cash represents the Official Seller price for nickel, copper, lead, zinc, and aluminium.
(3) Daily London Bullion Market Association (LBMA) Silver Fix.
(4) Platts Low-Vol Hard Coking Coal Index FOB Australia – representative of high-quality hard coking coals.
(5) FastMarkets Manganese Ore 44 per cent Mn Cost, Insurance, and Freight (CIF) Tianjin China.
The following summarises the pricing trends of our most significant commodities for FY23. The price change reflects the average
of FY23 over FY22.
Alumina: The average FOB Australia price for FY23 was
11 per cent lower than FY22 driven by the combination of weak
aluminium demand, and supply capacity being added from
alumina refinery expansions within China.
Aluminium: The average LME cash settlement price for FY23 was
19 per cent lower than FY22. The price decrease was driven by
subdued global demand, and lower cost of aluminium production
stemming from falling energy costs, in some regions.
Copper: The FY23 average LME cash settlement price was
14 per cent lower than FY22. The price decrease was underpinned
by weak global demand and expected strong supply growth in
the next few years.
Silver: The FY23 average LBMA silver price was eight per cent
lower than FY22. The price fall was underpinned by the rising
interest rates which tempered investment appetite for silver.
Weaker industrial activity globally, including in China, also
impacted demand for silver as an industrial metal.
Lead: The FY23 average LME cash settlement price was
10 per cent lower than FY22. Despite improved global
automotive output, price declines were driven by an uncertain
macroeconomic outlook and rising interest rates which impacted
market sentiment and smelter restarts in the world ex-China,
leading to higher refined lead availability.
Zinc: The FY23 average LME cash settlement price was
15 per cent lower than FY22. Weaker global demand, including
softer industrial activity in China and Europe led to a decline
in prices amidst expectation of higher refined production as
smelters restart in Europe.
Nickel: The FY23 average LME cash settlement price was two
per cent higher than FY22. Prices strengthened in the first half
of FY23 due to trading activity and strong demand for nickel-
in-batteries. In the second half of FY23, prices declined due to
growing supply in Class I nickel (which contains a minimum of
99.8 per cent nickel), slower than expected demand recovery
in Chinese stainless steel, and concerns over rapid new supply
growth over the next few years.
Metallurgical coal: The FY23 average Platts Premium Low-Vol
Hard Coking Coal price was 28 per cent lower than FY22. Price
declined as the market rebalanced due to improved seaborne
supply, particularly from Australia in Q4 FY23 after the end of
the La Niña weather impacts, while demand outlook weakened
with Chinese steel demand recovery underperforming market
expectations.
Manganese ore: The FY23 average Manganese Ore Metal Bulletin
44 per cent Mn CIF China price was 16 per cent lower than FY22.
Despite supply disruptions, weak global demand resulted in
oversupply of ore and high Chinese port inventories, contributing
to the price decline.
40
OPERATING AND FINANCIAL REVIEW
Exchange rates
Global risk sentiment, central bank monetary policy and commodity prices continue to be key drivers of currency markets. In FY23,
producer currencies saw mixed results against the United States (US) dollar. The US dollar started to weaken in the second half of FY23
as various central banks were pushed into raising interest rates, reducing the rate differentials between the US and major economies.
On average, the Brazilian real strengthened two per cent over FY23 on a record trade surplus and better economic outlook after the
government published a new fiscal framework. The Australian dollar, South African rand, Colombian peso, and Chilean peso weakened
against the US dollar over FY23 mainly driven by lower commodity prices which negatively impacted the countries’ export earnings and
terms of trade.
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, South African rand, Brazilian real, Colombian
peso, and Chilean peso.
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 142 to 149.
The following table indicates the estimated impact on FY23 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
South African rand
Brazilian real
Colombian peso
Chilean peso
FY23
212
112
39
28
17
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)
South African rand(3)
Colombian peso(3)
Brazilian real(3)
Chilean peso(3)
Average Value
Closing Value
FY23
0.67
17.76
4,593
5.16
863
FY22
0.73
15.22
3,903
5.24
812
Change
(8%)
(17%)
(18%)
2%
(6%)
FY23
0.66
18.75
4,191
4.82
803
FY22
0.69
16.26
4,127
5.24
924
Change
(4%)
(15%)
(2%)
8%
13%
(1) Positive per cent change in foreign exchange indicates strengthening currency relative to US$.
(2) Displayed as US$ per A$ based on common convention.
(3) Displayed as local currency per US$.
41
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
2023 Financial year summary
Performance summary
The Group reported a statutory loss of
US$173 million in FY23, following the
recognition of a non-cash impairment
expense of US$1,300 million in relation to
the Taylor Deposit at our Hermosa project,
a decrease of US$2,842 million from FY22.
We increased our supply of commodities
critical for a low-carbon future, recording
strong production growth in aluminium
(14 per cent), base metals (17 per cent),
and manganese (four per cent), as we
realised the benefit of recent portfolio
improvements and achieved annual
production records at Hillside Aluminium,
Australia Manganese and South Africa
Manganese.
Underlying earnings were US$916 million,
a decrease of US$1,686 million from FY22,
as lower commodity prices, higher inflation
and uncontrollable costs, more than offset
higher production volumes at some of our
operations.
Underlying EBITDA decreased by
US$2,221 million to US$2,534 million in
FY23, for a Group operating margin of
29 per cent. This represented one of
our largest Underlying EBITDA results,
despite lower commodity prices and
uncontrollable cost impacts. Our
investments in Sierra Gorda and increased
ownership in Mozal Aluminium contributed
Underlying EBITDA of US$240 million.
Free cash flow from operations, including
equity accounted investment distributions,
was US$244 million, impacted by a build in
inventories and one-off cash tax payments
in relation to our Sierra Gorda acquisition
and non-core royalty sale.
We returned a record US$1,225 million to
shareholders during FY23, with
US$1,007 million in fully-franked ordinary
and special dividends, and US$218 million
via our on-market share buy-back. We
have announced a fully-franked final
ordinary dividend of US$145 million
(US 3.2 cents per share) in respect of
H2 FY23, and expanded our capital
management program by US$50 million
leaving US$133 million to be returned by
1 March 2024, reflective of our disciplined
approach to capital management.
We continue to prioritise a strong balance
sheet and investment grade credit
rating through all cycles. We finished the
period with net debt of US$483 million,
following the return of record amounts
to shareholders and our investments to
grow production volumes of commodities
critical for a low-carbon future. This strong
platform and our disciplined approach
to capital management provides us with
the flexibility to continue to return capital
to shareholders in the most efficient and
value accretive manner, while investing in
our growth options.
Specific highlights for FY23 included:
– Record annual production at three
operations;
– Embedded portfolio improvements in
copper and low-carbon aluminium;
– Fifteen per cent production growth in
aluminium and base metals;
– Record US$1.2 billion returned to
shareholders, equivalent to 11 per cent
of our current market capitalisation;
– Advanced our portfolio of high-quality
growth options, progressing work to
support planned investment decisions
for the development of Hermosa’s
Taylor zinc-lead-silver Deposit and the
Sierra Gorda copper expansion in FY24;
– Confirmed the opportunity to produce
battery-grade manganese from
Hermosa’s Clark Deposit and signed
multiple non-binding, non-exclusive
memorandums of understanding for
future potential supply into North
American markets;
– Consolidated our position in San Juan,
Argentina, exercised our earn-in right
for a 50.1 per cent interest in the Chita
Valley copper prospect and acquired
a strategic interest in Aldebaran
Resources Inc;
– Advanced near-term decarbonisation
programs to support our target to
halve operational greenhouse gas
(GHG) emissions by 2035 from an FY21
baseline(1), with Worsley Alumina on-
track to convert its first onsite boiler
from coal to natural gas in Q1 FY24;
– Transitioned Sierra Gorda to cost
efficient, 100 per cent renewable
electricity supply from January 2023;
and
– Progressed partnerships to address
value chain emissions and expanded
our climate change goals to include net
zero Scope 3 GHG emissions by 2050.
(1) FY21 baseline adjusted to exclude GHG emissions from SAEC and TEMCO, which were divested in FY21.
42
OPERATING AND FINANCIAL REVIEW
Earnings
US$M
Profit/(loss) after tax
Total adjustments to derive Underlying EBIT
Total adjustments to derive Underlying net finance costs
Total adjustments to derive Underlying income and royalty related tax expense
Underlying earnings
FY23
(173)
1,418
(203)
(126)
916
FY22
2,669
243
(124)
(186)
2,602
The Group’s statutory profit after tax decreased by US$2,842 million to a loss of US$173 million in FY23, including the US$1,300 million
non-cash impairment of Hermosa’s Taylor Deposit, while Underlying earnings decreased by US$1,686 million to US$916 million.
Consistent with our accounting policies, various items are excluded from the Group’s statutory profit/(loss) to derive Underlying
earnings. Total adjustments to derive Underlying EBIT (US$1,418 million), include:
– Net impairment loss of non-financial assets (+US$1,300 million): non-cash impairment expense of Hermosa’s Taylor Deposit, as
announced on 24 July 2023. The impairment reflected the impact of delays due to COVID-19, significant dewatering requirements,
and current inflationary pressures;
– Significant items (-US$186 million): gain on disposal of non-core base metal royalties to Ecora Resources PLC (-US$189 million pre-
tax) and recognition of other income in relation to the indemnity for Chilean mining tax changes negotiated as part of our acquisition
of Sierra Gorda (-US$48 million pre-tax), partially offset by a non-cash asset write-off following our decision not to proceed with the
Dendrobium Next Domain (DND) project at Illawarra Metallurgical Coal (+US$51 million pre-tax);
– Sierra Gorda (+US$144 million) and Manganese (+US$147 million) joint venture adjustments: adjustments to reconcile the statutory
equity accounting position to a proportional consolidation basis; and
– Net impairment loss of financial assets (+US$71 million): periodic revaluation of the shareholder loan receivable from Sierra Gorda
reflecting copper price and other macroeconomic assumptions. An offsetting amount is recorded in the Sierra Gorda joint venture
adjustments noted above.
Further information on these earnings adjustments is included on page 118.
The Group’s Underlying EBIT decreased by US$2,351 million (or 59 per cent) to US$1,616 million, as Underlying depreciation and
amortisation increased by US$130 million to US$918 million primarily due to the inclusion of Sierra Gorda in our portfolio.
The following key factors influenced Underlying EBIT in FY23, relative to FY22.
Reconciliation of movements in Underlying EBIT (US$M)(1)(2)(3)
Uncontrollable
Net finance
costs and tax
(1,781)
5,000
4,000
3,000
2,000
3,967
1,000
(174)
369
(271)
(539)
(28)
113
(40)
(188)
(512)
1,616
916
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(1) Sales price variance reflects the revenue impact of changes in commodity prices, based on the FY23 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. 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 FY23 results, not year-on-year variances.
(3) South32’s ownership shares of operations are presented as follows: Worsley Alumina (86 per cent share), Brazil Alumina (36 per cent share), Brazil Aluminium (40 per cent
share), Hillside Aluminium (100 per cent), Mozal Aluminium (63.7 per cent share, noting that the FY22 Income statement reflects only one month of our increased ownership
at 63.7 per cent following the completion of the acquisition for an additional 16.6 per cent shareholding on 31 May 2022), Sierra Gorda (45 per cent share), Cannington
(100 per cent), Hermosa (100 per cent), Cerro Matoso (99.9 per cent share), Illawarra Metallurgical Coal (100 per cent), Australia Manganese (60 per cent share), South Africa
Manganese ore (54.6 per cent share) and South Africa Manganese alloy (60 per cent share).
43
SOUTH32 ANNUAL REPORT 2023
FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
Earnings continued
Earnings analysis
US$M
Commentary
FY22 Underlying EBIT
Change in sales price
3,967
(1,781)
Lower average realised prices for our commodities, including:
Aluminium (-US$631 million) and alumina (-US$124 million)
Metallurgical coal (-US$550 million) and energy coal (-US$11 million)
Nickel (-US$209 million)
Manganese ore (-US$181 million)
Zinc (-US$63 million), lead (-US$13 million) and silver (+US$1 million)
Net impact of price-linked
costs
(174)
Higher aluminium smelter raw material input prices (-US$115 million), including pitch and
coke
Change in exchange rates
Change in inflation
Change in sales volume
Controllable costs
Portfolio changes
Other
Higher coal, fuel oil and diesel prices (-US$76 million)
Higher caustic soda prices at Brazil Alumina (-US$36 million) and Worsley Alumina
(-US$33 million)
Higher electricity prices (-US$33 million) at Cerro Matoso and Illawarra Metallurgical Coal
Partially offset by lower freight and distribution costs (+US$93 million) and lower price-linked
royalties (+US$16 million)
Weaker South African rand (+US$166 million), Australian dollar (+US$157 million) and
Colombian peso (+US$48 million)
Inflation-linked indexation of our Southern African aluminium smelter electricity prices
(-US$82 million)
General inflation across Australia (-US$120 million), Southern Africa (-US$36 million) and
Colombia (-US$24 million)
Lower volumes, including Illawarra Metallurgical Coal (-US$133 million), Cannington
(-US$119 million), Worsley Alumina (-US$96 million), Brazil Alumina (-US$83 million) and Mozal
Aluminium (-US$48 million)
Inventory and volume related movements (+US$137 million) including a build in stocks at
Australia Manganese, and higher inventory levels at Illawarra Metallurgical Coal
Higher contractor and maintenance costs (-US$112 million) to support planned maintenance
at Worsley Alumina, at Australia Manganese to support higher volumes, and at Cerro Matoso
to deliver the Ore Sorting and Mechanical Ore Concentration (OSMOC) project
Higher labour costs (-US$48 million) to support increased activity
Improved profitability following our first full year of ownership of Sierra Gorda
(+US$142 million), partially offset by Brazil Aluminium (-US$38 million) as the smelter
continued to ramp-up following the restart of all three potlines
Higher profit from our equity interest in Mineração Rio do Norte (MRN), and non-core
royalties received, more than offset by higher depreciation and amortisation primarily at
Illawarra Metallurgical Coal and Australia Manganese
369
(271)
(539)
(28)
113
(40)
FY23 Underlying EBIT
1,616
Further analysis of operations performance is outlined on pages 48 to 58.
Net finance income/(costs)
The Group’s FY23 Underlying net finance costs of US$188 million primarily comprise the unwinding of the discount applied to our closure
and rehabilitation provisions (US$113 million), interest on lease liabilities (US$56 million) largely for our multi-fuel co-generation facility
at Worsley Alumina, and interest on our US$700 million of senior unsecured notes (US$31 million) issued in FY22 to partly fund the Sierra
Gorda acquisition.
Tax expense
The Group’s Underlying income tax expense, which includes our material equity accounted investments, was US$512 million in FY23,
for an Underlying ETR of 36.1 per cent. Our Group Underlying ETR reflects our geographical earnings mix and the corporate tax rates
of the jurisdictions in which we operate. The impact of the recent changes in Colombian tax legislation, with dividend withholding tax
increasing from 10 per cent to 20 per cent and income tax deductions no longer available for royalty payments, has increased Cerro
Matoso’s effective tax rate.
The Underlying ETR for our manganese business was 43.7 per cent in FY23, including the royalty related tax at Australia Manganese.
The Underlying ETR for our Sierra Gorda equity accounted investment was 46.0 per cent in FY23, including royalty related tax. As
anticipated, reforms to the Chilean Mining Tax were enacted in August 2023 and will be effective from 1 January 2024, resulting in higher
royalty related tax in future periods. Sierra Gorda has a tax stability agreement to December 2028 which defers the effective start date
of the mining tax reforms until 1 January 2029. In addition, we have an indemnity from the vendors of our Sierra Gorda acquisition for
mining tax changes enacted prior to December 2025, to mitigate the impact of these reforms. We have recorded a receivable of US$48
million (pre-tax) in relation to the indemnity and expect to recover this amount from the vendors in FY24.
The Group’s cash tax paid in FY23, excluding equity accounted investments, was US$818 million. This reflected the lagged effect of
higher profitability in the prior period, as well as one-off cash taxes paid in relation to our Sierra Gorda acquisition (US$115 million) and
non-core royalty sale (US$32 million).
44
OPERATING AND FINANCIAL REVIEW
Third party product sales
The Group differentiates the sale of its production from the sale of third party products due to a significant difference in profit margin
earned on these sales. The table below shows the breakdown between the Group’s production and third party products:
US$M
Group Production
Underlying revenue
Related operating costs (net of other income)
Group Production Underlying EBIT
Underlying EBIT margin on Group production
Third party products
Underlying revenue
Related operating costs (net of other income)(1)
Third party Underlying EBIT
Underlying EBIT margin on third party products
Group underlying results
Underlying revenue
Related operating costs (net of other income)
Underlying EBIT
(1) Includes depreciation and amortisation.
FY23
FY22
8,511
(6,918)
1,593
18.7%
539
(516)
23
4.3%
9,050
(7,434)
1,616
10,030
(6,083)
3,947
39.4%
600
(580)
20
3.3%
10,630
(6,663)
3,967
The Group engages in third party trading for the following reasons:
– To seek to provide 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.
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 which aim to create value. In FY23 the Group continued to prioritise capital for the
safety and reliability of our operations, to progress life extension, innovation and improvement projects, and to fund our current and
future growth projects.
US$M
Safe and reliable capital expenditure
Improvement and life extension capital expenditure
Growth capital expenditure
Intangibles and the capitalisation of exploration expenditure
Total capital expenditure (excluding equity accounted investments)
Equity accounted investments capital expenditure(1)
Total capital expenditure (including equity accounted investments)
FY23
(470)
(64)
(256)
(104)
(894)
(283)
(1,177)
FY22
(367)
(58)
(97)
(37)
(559)
(164)
(723)
(1) Equity accounted investments capital expenditure reflects the Group’s interest in material equity accounted joint ventures and is presented on a proportional consolidation
basis.
Total capital expenditure, excluding equity accounted investments, increased by US$335 million to US$894 million in FY23 as we
increased our investment in productivity, improvement and growth activities across our portfolio:
– Safe and reliable capital expenditure increased by US$103 million to US$470 million as we invested in Illawarra Metallurgical Coal’s
transition to a more efficient single longwall configuration at Appin from FY25, and additional ventilation capacity to enable mining in
Appin’s Area 7 until at least 2039;
– Improvement and life extension capital expenditure increased by US$6 million to US$64 million as we progressed productivity and
decarbonisation projects primarily at Worsley Alumina and Brazil Alumina;
– Growth capital expenditure increased by US$159 million to US$256 million at Hermosa as we installed critical path dewatering
infrastructure and advanced studies for both Taylor and Clark Deposits; and
– Intangibles and capitalised exploration increased by US$67 million to US$104 million, as we extended Cerro Matoso’s mining contract
to 2044, and completed multiple exploration programs across our portfolio focused on base metals.
Our share of capital expenditure for our material equity accounted investments increased by US$119 million to US$283 million in FY23,
reflecting the inclusion of Sierra Gorda in our portfolio. Capital expenditure for our Sierra Gorda equity accounted investment was
US$199 million, as the operation invested in deferred stripping and additional tailings storage infrastructure. It also invested to grow
future potential copper volumes, executing the plant de-bottlenecking project and progressing study work for the fourth grinding line
expansion.
Capital expenditure for our manganese equity accounted investments was US$84 million as we invested in additional mining equipment
and completed the feasibility study for Australia Manganese’s Eastern Lease South life extension project.
45
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
Cash flow
The Group generated free cash flow from operations of US$57 million and received net distributions of US$187 million from our equity
accounted investments in FY23. Group free cash flow reflected higher expenditure on productivity, improvement and growth projects
(+US$335 million) and one-off tax payments in relation to our Sierra Gorda acquisition and non-core royalty sale (+US$147 million).
Working capital was largely unchanged over the financial year. The increase in inventories of US$126 million in FY23 reflected a
permanent increase related to the restart of Brazil Aluminium, as well as temporary impacts at Mozal Aluminium.
Net distributions from our equity accounted investments comprised US$173 million from our manganese equity accounted investments
and US$14 million from our Sierra Gorda equity accounted investment. At Sierra Gorda we invested in projects to increase potential
copper production, implementing the plant de-bottlenecking project, and progressed studies for the fourth grinding line expansion to
support a planned final investment decision in H2 FY24.
Free cash flow from operations
US$M
Profit from operations
Non-cash or non-operating items
Share of (profit)/loss from equity accounted investments
Working capital movement
Cash generated from operations
Total capital expenditure, excluding equity accounted investments, including intangibles and capitalised
exploration
Operating cash flows generated from operations after capital expenditure
Net interest paid(1)
Income tax paid
Free cash flow from operations
(1) Net interest paid excludes distributions from material equity accounted investments.
Working capital movement
US$M
Trade and other receivables
Inventories
Trade and other payables
Provisions and other liabilities
Working capital movement
FY23
198
1,852
(246)
10
1,814
(894)
920
(45)
(818)
57
FY23
178
(126)
(45)
3
10
FY22
3,724
694
(272)
(428)
3,718
(559)
3,159
(51)
(868)
2,240
FY22
(300)
(206)
160
(82)
(428)
Balance sheet and capital management
The Group finished the period with a net debt balance of US$483 million as we delivered a record US$1,225 million to shareholders
during FY23, paying fully-franked ordinary and special dividends of US$1,007 million, and a further US$218 million via our on-market
share buy-back.
Consistent with our commitment to maintain an investment grade credit rating, during the year our current BBB+/Baa1 credit ratings
were re-affirmed by S&P Global Ratings and Moody’s, respectively.
Our capital management framework remains unchanged, and is designed to promote competition for capital through investment
in high returning options or to protect portfolio value, as well as to reward shareholders as our financial performance improves.
Demonstrating this, the Board has resolved to pay a fully-franked final ordinary dividend of US 3.2 cents per share (US$145 million) in
respect of H2 FY23, representing 41 per cent of Underlying earnings. The Board has also further expanded our capital management
program by US$50 million, leaving US$133 million to be returned by 1 March 2024.
46
OPERATING AND FINANCIAL REVIEW
Net debt and sources of liquidity
Our policies on debt and treasury management are as follows:
– Commitment to maintain an investment grade credit rating;
– Diversification of funding sources; and
– Generally maintain borrowings and holdings of excess cash in US dollars.
Gearing and net (debt)/cash
The table below presents net (debt)/cash and net assets of the Group, based on the balance sheet as at 30 June 2023:
US$M
Cash and cash equivalents
Current external debt
Non-current external debt
Net (debt)/cash
Net assets
Gearing(1)
FY23
1,258
(365)
(1,376)
(483)
9,375
4.9%
FY22
2,365
(402)
(1,425)
538
10,779
(5.3%)
(1) Gearing is the ratio of (Net debt/(cash)) to (Net debt/(cash)) plus Net assets.
Funding sources
In addition to cash flow from operations as a primary source of funding, the Group has US$700 million of senior unsecured notes
outstanding, which are due in 2032 and accrue interest at a rate of 4.35 per cent per annum. We also retain access to significant liquidity,
through an undrawn, sustainability-linked revolving credit facility, to have available capacity of US$1.4 billion to December 2026, and
US$1.2 billion to December 2027. This facility is a standby arrangement to the Group’s US dollar commercial paper program and is not
subject to financial covenants at the Group’s current credit rating. Certain financing facilities in relation to specific operations are the
subject of covenants that vary from facility to facility; however, these are considered normal for such facilities.
Additional information regarding the maturity profile of the Group’s debt obligations and details of our major standby agreement is
included in note 19 to the financial statements on pages 142 to 149.
Operations analysis
A summary of the underlying performance of the Group’s operations is presented below and more detailed analysis is presented on
pages 48 to 58.
Operations table (South32 share)(1)
US$M
Worsley Alumina
Brazil Alumina
Brazil Aluminium
Hillside Aluminium
Mozal Aluminium
Sierra Gorda
Cannington
Hermosa
Cerro Matoso
Illawarra Metallurgical Coal
Australia Manganese
South Africa Manganese
Third party products and services(2)
Inter-segment / Group and unallocated
South32 Group
Underlying Revenue
Underlying EBIT
FY23
1,363
456
166
1,823
886
684
542
–
698
1,643
688
344
539
(782)
9,050
FY22
1,625
524
–
2,254
924
241
736
–
929
2,338
848
419
600
(808)
10,630
FY23
68
(45)
(136)
191
56
217
142
(19)
189
692
266
45
23
(73)
1,616
FY22
386
89
(44)
666
271
75
315
(14)
463
1,388
402
58
20
(108)
3,967
(1) South32’s ownership share of operations is as per footnote (3) on page 43.
(2) FY23 Third party products and services sold comprise US$86 million for aluminium, US$25 million for alumina, US$140 million for coal, US$106 million for freight services,
US$149 million for raw materials and US$33 million for manganese. Underlying EBIT on third party products and services comprise (US$1 million) for aluminium, US$13 million
for alumina, US$11 million for coal, (US$1 million) for freight services, US$1 million for raw materials and nil for manganese. FY22 Third party products and services sold
comprise US$110 million for aluminium, US$25 million for alumina, US$115 million for coal, US$145 million for freight services, US$165 million for raw materials and
US$40 million for manganese. Underlying EBIT on third party products and services comprise US$8 million for aluminium, US$8 million for alumina, US$7 million for coal,
(US$3 million) for freight services, nil for raw materials and nil for manganese.
47
SOUTH32 ANNUAL REPORT 2023
FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
WORSLEY ALUMINA
Location: Western Australia, Australia
South32 share: 86 per cent
South32 holds an 86 per cent share in Worsley
Alumina, while Japan Alumina Associates (Australia)
Pty Ltd owns 10 per cent and Sojitz Alumina Pty Ltd
owns four per cent.
Bauxite is mined near the town of Boddington, 130 kilometres
south-east of Perth. It is transported by overland conveyor to
the alumina refinery near Collie and turned into alumina powder,
before being transported by rail to Bunbury port. It is then
shipped to smelters around the world, including our Hillside
Aluminium and Mozal Aluminium smelters in southern Africa.
We are executing decarbonisation and energy security initiatives
at Worsley Alumina, including commencing the conversion of the
first coal-fired boiler to natural gas.
South32 share
Alumina production (kt)
Alumina sales (kt)
Realised sales price (US$/t)
Operating unit cost (US$/t)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Social investment
FY23
3,839
3,817
357
291
FY23
1,363
251
68
2,457
82
49
33
1.1
FY22
3,991
3,974
409
265
FY22
1,625
571
386
2,571
55
47
8
1.6
Safety
Lost Time Injury Frequency (LTIF) at Worsley Alumina was 0.6
in FY23, a 63 per cent decrease year-on-year. Total Recordable
Injury Frequency (TRIF) was 8.6 in FY23, a 32 per cent increase
year-on-year.
Volumes
Worsley Alumina saleable production decreased by four per
cent (or 152kt), from record levels in FY22, to 3,839kt in FY23.
The refinery successfully managed short-term energy supply
challenges and completed planned calciner maintenance in Q1
and Q3 FY23, finishing the year with production rates above
nameplate capacity in Q4 FY23.
Operating costs
Operating unit costs increased by 10 per cent to US$291/t in FY23,
as the benefit of a weaker Australian dollar was more than offset
by higher uncontrollable costs including an increase in caustic
soda (FY23: US$659/t, FY22: US$581/t) and coal prices.
Financial performance
Underlying EBIT decreased by 82 per cent (or US$318 million),
to US$68 million in FY23, as a 13 per cent decrease in the
average realised price of alumina (-US$198 million), lower sales
volumes (-US$64 million) and higher inflation and uncontrollable
costs (-US$74 million), more than offset the benefit of a weaker
Australian dollar (+US$50 million). The operation also incurred
additional contractor costs (-US$18 million) to deliver planned
maintenance activity.
Capital expenditure
Safe and reliable capital expenditure was US$49 million in FY23
as we invested in infrastructure to enable access to new mining
areas and continued to invest in additional bauxite residue
disposal capacity.
Improvement and life extension capital expenditure was
US$33 million in FY23 as we advanced decarbonisation projects at
the refinery.
Social investment
We invested US$1.1 million in communities around Worsley
Alumina in FY23, with a focus on natural resource resilience,
economic development, good health and social wellbeing, and
education and leadership programs.
+
Learn more about Worsley Alumina at www.south32.net.
48
OPERATING AND FINANCIAL REVIEW
BRAZIL ALUMINA
Location: Pará and Maranhão, Brazil
South32 investment: Bauxite - 33 per cent
South32 share: Alumina - 36 per cent
South32 holds a 33 per cent interest in the non-
operated Mineração Rio do Norte (MRN) bauxite mine.
Vale holds 40 per cent, Rio Tinto Alcan holds 12 per
cent, Companhia Brasileira de Aluminio S.A. holds
10 per cent and Hydro holds five per cent.
The MRN mine is an open-cut strip mining operation. Mined ore is
hauled to primary crushers and then transported by conveyor belt
to the beneficiation plant. A feasibility study is underway for the
West Zone project at MRN, with the potential to extend the mine
life by more than 20 years.
The bauxite produced from the MRN mine is sold to its
shareholders. Our share of bauxite produced from MRN is
supplied to the Alumar alumina refinery.
We govern our share of MRN through participation in MRN’s
Board, the main governance forum responsible for the strategic
direction and oversight of MRN.
We also hold a 36 per cent share of the non-operated Alumar
alumina refinery. Alcoa holds 54 per cent and Rio Tinto Alcan
holds 10 per cent. A de-bottlenecking project at the refinery is
expected to lift capacity from FY26.
The alumina produced from the refinery is exported through the
Alumar port and supplied to the co-located Alumar aluminium
smelter.
We govern our share of Alumar through participation in the
Supervisory Committee, the main governance forum responsible
for the strategic direction and oversight of Alumar.
South32 share
Alumina production (kt)
Alumina sales (kt)
Realised sales price (US$/t)
Operating unit cost (US$/t)(1)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
FY23
1,262
1,237
369
368
FY23
456
7
(45)
738
58
45
13
FY22
1,297
1,299
403
288
FY22
524
150
89
696
51
51
–
Volumes
Brazil Alumina saleable production decreased by three per cent
(or 35kt) to 1,262kt in FY23 as the refinery reduced output in Q4
FY23 to manage temporary port infrastructure outages.
Operating costs
Operating unit costs increased by 28 per cent to US$368/t in
FY23, with a significant rise in uncontrollable costs accounting
for more than 70 per cent of this increase, together with one-off
costs associated with the port infrastructure outages.
Uncontrollable cost inflation, including higher caustic soda prices
(FY23: US$722/t, FY22: US$425/t), coal-linked energy prices, and
bauxite costs linked to alumina and aluminium prices on a trailing
basis, was most acute in H1 FY23, with these input prices all
trending lower in H2 FY23.
Financial performance
Underlying EBIT decreased by US$134 million, to a loss of
US$45 million in FY23, as an eight per cent decrease in the
average realised price of alumina (-US$38 million), lower sales
volumes (-US$30 million) and higher uncontrollable costs
(-US$72 million), more than offset higher profit from our equity
accounted interest in MRN (+US$10 million).
Capital expenditure
Safe and reliable capital expenditure decreased by US$6 million to
US$45 million in FY23 as we continued our investment in bauxite
residue disposal capacity.
Improvement and life extension capital expenditure was
US$13 million in FY23 as the refinery progressed work on the
de-bottlenecking project.
+
Learn more about Brazil Alumina at www.south32.net.
(1) Excludes the profit from our equity accounted interest in MRN.
49
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
BRAZIL ALUMINIUM
Location: Maranhão, Brazil
South32 share: 40 per cent
Volumes
Brazil Aluminium saleable production was 68.9kt in FY23 following
the restart of all three potlines at the smelter. Lower overhead
crane availability in Q4 FY23 delayed pot restart activities and
metal production.
Operating costs
Brazil Aluminium recorded gross operating costs of
US$295 million in FY23 as the smelter continued to ramp-up
and raw material input prices remained elevated across the
industry.
Financial performance
Underlying EBIT was a loss of US$136 million in FY23, as sales
revenue (+US$166 million) was more than offset by costs to
support the smelter’s restart and ramp-up of all three potlines
(-US$258 million).
Capital expenditure
Safe and reliable capital expenditure was US$9 million in FY23 as
the restart of the Aluminium smelter progressed.
+
Learn more about Brazil Aluminium at www.south32.net.
South32 holds a 40 per cent share in the non-
operated Alumar aluminium smelter, which was
restarted during FY22 after being on care and
maintenance since 2015. Alcoa Corporation holds a
60 per cent share.
Following the restart, first production was achieved in the June
2022 quarter, with nameplate capacity from the smelter’s three
potlines expected to be achieved in FY26. It has a solid metal
production capacity of 447kt per year (on a 100 per cent basis)
and produces standard aluminium ingots for the domestic and
export markets.
Our share of Brazil Aluminium is powered by 100 per cent cost
efficient renewable power.
We govern our share of Alumar through participation in the
Supervisory Committee, the main governance forum responsible
for the strategic direction and oversight of Alumar.
South32 share
Aluminium production (kt)
Aluminium sales (kt)
Realised sales price (US$/t)
Operating unit cost (US$/t)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
FY23
FY22
68.9
67.7
2,452
4,357
FY23
166
(129)
(136)
28
9
9
0.3
–
–
–
FY22
–
(43)
(44)
46
1
1
50
OPERATING AND FINANCIAL REVIEW
HILLSIDE ALUMINIUM
Location: KwaZulu-Natal, South Africa
South32 share: 100 per cent
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 sell products in the
domestic and export markets.
Following the completion of a trial of the AP3XLE energy
efficiency technology in FY22, Hillside Aluminium commenced
deploying the technology, converting 18 per cent of pots in FY23.
South32 share
Aluminium production (kt)
Aluminium sales (kt)
Realised sales price (US$/t)
Operating unit cost (US$/t)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Social investment
FY23
719
719
2,535
2,178
FY23
1,823
257
191
845
18
16
2
9.1
FY22
714
713
3,161
2,137
FY22
2,254
730
666
927
24
20
4
13.1
Safety
LTIF at Hillside Aluminium was 1.7 in FY23, a 55 per cent increase
year-on-year. TRIF was 3.0 in FY23, a 131 per cent increase year-
on-year.
Volumes
Hillside Aluminium saleable production increased by one per cent
(or 5kt) to a record 719kt in FY23 as the smelter continued to test
its maximum technical capacity, despite the impact of elevated
load-shedding.
Operating costs
Operating unit costs increased by two per cent to US$2,178/t in
FY23, as the benefit of a weaker South African rand and lower
alumina prices, was more than offset by elevated smelter raw
material input prices (including coke, pitch and aluminium tri-
fluoride), and inflation-linked indexation of energy costs.
Financial performance
Underlying EBIT decreased by 71 per cent (or US$475 million), to
US$191 million in FY23, as the benefit of a weaker South African
rand (+US$106 million) and higher sales volumes (+US$18 million),
was more than offset by a 20 per cent reduction in the average
realised price of aluminium (-US$449 million) and higher raw
material input prices (-US$56 million) and energy costs
(-US$66 million).
Ninety-six pots were relined at a cost of US$281,000 per pot
in FY23 (FY22: 162 pots at US$274,000 per pot). The smelter is
deploying AP3XLE technology in its pot relining program, which is
expected to enhance the smelter’s energy efficiency and reduce
GHG emissions.
Capital expenditure
Capital expenditure was US$18M in FY23 as the smelter invested
in plant upgrades and continued to roll-out the AP3XLE energy
efficiency technology in its pot relining program.
Social investment
We invested US$9.1 million in communities around Hillside
Aluminium in FY23, with a focus on enterprise development,
education, and development of sustainable agricultural practices.
+
Learn more about Hillside Aluminium at www.south32.net.
51
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
MOZAL ALUMINIUM
Location: Maputo, Mozambique
South32 share: 63.7 per cent
South32 holds a 63.7 per cent share of Mozal
Aluminium. The Industrial Development Corporation
of South Africa Limited holds 32.4 per cent and the
Government of the Republic of Mozambique holds
3.9 per cent (through preference shares).
Safety
Tragically, two of our colleagues, Mr Cristovão Alberto Tonela
and Mr Alfredo Francisco Domingos João, lost their lives in a fatal
incident at Mozal Aluminium in November 2022. Our deepest
sympathies remain with their families and colleagues to whom we
have provided support and counselling.
Mozal Aluminium is located 20 kilometres west of Mozambique’s
capital city Maputo and has a solid metal production capacity of
580kt per year (on a 100 per cent basis).
LTIF at Mozal Aluminium was 0.4 in FY23, a 100 per cent increase
year-on-year. TRIF was 1.5 in FY23, a 67 per cent increase year-on-
year.
Mozal Aluminium is the only aluminium smelter in Mozambique
and the second largest aluminium smelter in Africa (behind our
Hillside Aluminium smelter in South Africa). It produces standard
aluminium ingots for the domestic and export markets.
To support the development of the downstream aluminium
industry in Mozambique a portion of liquid metal is supplied to
Midal Cables, a local company that sells products in the domestic
and export markets.
Deployment of the AP3XLE energy efficiency technology is well
advanced at Mozal Aluminium and expected to conclude in FY24.
South32 share
Aluminium production (kt)
Aluminium sales (kt)
Realised sales price (US$/t)
Operating unit cost (US$/t)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Social investment
FY23
345
334
2,653
2,329
FY23
886
108
56
578
17
16
1
1.8
FY22(1)
278
276
3,348
2,243
FY22(1)
924
305
271
615
11
10
1
1.6
Volumes
Mozal Aluminium saleable production increased by 24 per cent (or
67kt) to 345kt in FY23, following our acquisition of an additional
16.6 per cent interest in May 2022. During FY23, production
volumes were impacted by the safe recovery plan in response
to the fatal incident in November 2022, as well as wet weather
impacts experienced in Q3 FY23.
Operating costs
Operating unit costs increased by four per cent to US$2,329/t in
FY23, as the benefit of a weaker South African rand and lower
alumina prices, was more than offset by elevated smelter raw
material input prices (including coke, pitch and aluminium tri-
fluoride), and inflation-linked indexation of energy costs.
Financial performance
Underlying EBIT decreased by 79 per cent (or US$215 million),
to US$56 million in FY23, as the benefit of our additional interest
in Mozal Aluminium and a weaker South African rand
(+US$26 million), was more than offset by a 21 per cent decrease
in the average realised price of aluminium (-US$182 million), lower
sales volumes (-US$48 million) and higher raw material input
prices (-US$8 million) and energy costs (-US$17 million).
Eighty-two pots were relined in FY23 at a cost of US$318,000 per
pot as the pot relining schedule was modified with the smelter’s
recovery plan (FY22: 127 pots at US$266,000 per pot). The smelter
is deploying AP3XLE technology in its pot relining program, which
is expected to deliver incremental production benefits, with no
associated increase in power consumption.
Capital expenditure
Capital expenditure was US$17 million in FY23 as the smelter
invested in plant upgrades and continued to roll-out the AP3XLE
energy efficiency technology in its pot relining program.
Social investment
We invested US$1.8 million in communities around Mozal
Aluminium in FY23, with a focus on education and skills
development, health, sanitation, community wellbeing, and
development of sustainable agricultural practices.
+
Learn more about Mozal Aluminium at www.south32.net.
(1) The results reflect the completion of our acquisition of an additional 16.6 per cent shareholding in the smelter on 31 May 2022, taking our ownership to 63.7 per cent. Prior
period numbers have not been restated for this change in ownership (presented on a 47.1 per cent basis).
52
OPERATING AND FINANCIAL REVIEW
SIERRA GORDA
Location: Antofagasta, Chile
South32 share: 45 per cent
South32 holds a 45 per cent share in the Sierra Gorda
copper mine in Chile via the Sierra Gorda S.C.M.
incorporated Joint Venture, alongside 55 per cent
joint venture partner KGHM Polska Miedz.
Sierra Gorda is a large scale, open-pit mine in the prolific
Antofagasta copper mining region and produces copper,
molybdenum, gold and silver. Ore processing includes crushing,
grinding, flotation, thickening and filtering to produce
concentrates. The mine is serviced by established infrastructure,
including renewable power and a seawater pipeline, with freight
rail and a national highway connecting the operation to the ports
of Antofagasta and Angamos.
A de-bottlenecking project is expected to be completed in FY24
and a fourth grinding line expansion study is underway, with the
potential to increase plant throughput and lower operating unit
costs.
South32 has joint control and governance rights alongside KGHM
Polska Miedz under a Joint Venture Agreement. This joint control
is exercised through the Owners Council, the main governance
forum responsible for the strategic direction and oversight of
Sierra Gorda S.C.M., which has an independent management
team.
South32 share
Ore mined (Mt)
Ore processed (Mt)
Ore grade processed (%, Cu)
Payable copper equivalent production (kt)(2)
Payable copper production (kt)
Payable molybdenum production (kt)
Payable gold production (koz)
Payable silver production (koz)
Payable copper sales (kt)
Payable molybdenum sales (kt)
Payable gold sales (koz)
Payable silver sales (koz)
Realised copper sales price (US$/lb)
Realised molybdenum sales price (US$/lb)
Realised gold sales price (US$/oz)
Realised silver sales price (US$/oz)
Operating unit cost (US$/t ore processed)(3)
FY23
26.0
21.2
0.42
86.2
70.7
1.2
28.8
630
71.8
1.3
29.1
639
3.51
21.3
1,821
21.9
15.4
FY22(1)
13.7
7.5
0.42
30.6
25.3
0.4
9.6
253
27.7
0.6
9.9
282
3.50
18.5
1,934
23.5
14.6
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Exploration expenditure
Exploration expensed
Volumes
FY23
684
358
217
1,588
196
151
45
7
4
FY22(1)
241
133
75
1,402
81
36
45
2
1
Sierra Gorda payable copper equivalent production was 86.2kt in
FY23, in our first full year of ownership, with plant throughput of
47.1Mt (100 per cent basis) and an average realised copper grade
of 0.42 per cent.
Operating costs
Operating unit costs were US$15.4/t ore processed in FY23,
following the transition to cost efficient, 100 per cent renewable
electricity from January 2023.
Financial performance
Underlying EBIT was US$217 million in FY23 at a margin of
52 per cent, which improved the Group margin and increased
our exposure to commodities critical for a low-carbon future.
Capital expenditure
Safe and reliable capital expenditure was US$151 million in FY23
as the operation invested in deferred stripping and additional
tailings infrastructure.
Improvement and life extension capital expenditure was
US$45 million in FY23 as the operation progressed the plant
de-bottlenecking project, including the installation of a third
tailings thickener.
+
Learn more about Sierra Gorda at www.south32.net.
(1) Realised sales prices and Operating unit costs presented in the table above reflect the period 1 March 2022 to 30 June 2022, whereas production and sales numbers, and
all Income Statement items reflect the period from first ownership (22 February 2022). Operating unit costs of US$1.42/lb CuEq and realised prices (copper of US$3.18/lb,
molybdenum of US$18.73/lb, gold of US$1,776/oz and silver of US$20.65/oz) reflect the period from first ownership (22 February 2022).
(2) Payable copper equivalent production (kt) was calculated by aggregating revenues from copper, molybdenum, gold and silver, and dividing the total Revenue by the price of
copper. FY22 realised prices for copper (US$3.50/lb), molybdenum (US$18.48/lb), gold (US$1,934/oz) and silver (US$23.5/oz) have been used for FY22 and FY23.
(3) Sierra Gorda Operating unit cost is Underlying revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact
Operating unit costs.
53
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
CANNINGTON
Location: Queensland, Australia
South32 share: 100 per cent
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.
Safety
LTIF at Cannington was 4.3 in FY23, a 187 per cent increase year-
on-year. TRIF was 11.0 in FY23, a 21 per cent increase year-on-
year.
Volumes
Cannington payable zinc equivalent production decreased by
13 per cent to 195.6kt in FY23, as the operation successfully
recovered from severe weather impacts in Q3 FY23.
Operating costs
Operating unit costs increased by 15 per cent to US$153/t in FY23,
as the benefit of a weaker Australian dollar and lower price-linked
royalties was more than offset by lower mill throughput.
Financial performance
Underlying EBIT decreased by 55 per cent (or US$173 million),
to US$142 million in FY23, as lower zinc and lead prices
(-US$75 million) and reduced sales volumes (-US$119 million),
more than offset the benefit of a weaker Australian dollar
(+US$21 million) and lower price-linked royalties (+US$10 million).
Capital expenditure
Capital expenditure increased by US$16 million to US$61 million
in FY23 as we invested in additional tailings storage capacity and
upgrades to water and ventilation infrastructure.
Social investment
We invested US$0.5 million in communities around Cannington
in FY23, with a focus on education, local economic participation,
natural resource resilience, and community wellbeing.
+
Learn more about Cannington at www.south32.net.
Cannington consists of an underground hard rock mine and
surface processing facility, a road-to-rail transfer facility and
a concentrate handling and ship loading facility at the Port of
Townsville.
Silver, lead and zinc are extracted from the ore using grinding,
sequential flotation and leaching techniques that produce high-
grade, marketable lead and zinc concentrates with a high silver
content.
The transition to 100 per cent truck haulage to bring product
to the surface was completed in FY23, bringing forward higher-
grade material. We are studying tailings reprocessing and open
pit options to potentially extend the operation’s life.
South32 share
FY23
FY22
Ore mined (kwmt)
Ore processed (kdmt)
Ore grade processed (g/t, Ag)
Ore grade processed (%, Pb)
Ore grade processed (%, Zn)
Payable zinc equivalent production (kt)(1)
Payable silver production (koz)
Payable lead production (kt)
Payable zinc production (kt)
Payable silver sales (koz)
Payable lead sales (kt)
Payable zinc sales (kt)
Realised silver sales price (US$/oz)
Realised lead sales price (US$/t)
Realised zinc sales price (US$/t)
Operating unit cost (US$/t ore processed)(2)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Exploration expenditure
Exploration expensed
Social investment
2,223
2,156
187
5.6
3.8
195.6
11,183
101.7
59.2
10,739
99.0
58.1
21.1
1,919
2,151
153
FY23
542
213
142
172
61
60
1
8
6
0.5
2,753
2,618
180
5.4
3.5
224.2
12,946
120.6
64.5
12,898
122.2
66.2
21.0
2,046
3,248
133
FY22
736
388
315
141
45
43
2
3
2
0.3
(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. FY22 realised prices
for zinc (US$3,248/t), lead (US$2,046/t) and silver (US$21.0/oz) have been used for FY22 and FY23.
(2) Cannington Operating unit cost is Underlying revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact
Operating unit costs.
54
OPERATING AND FINANCIAL REVIEW
CERRO MATOSO
Location: Córdoba, Colombia
South32 share: 99.9 per cent
Cerro Matoso is an integrated nickel laterite mine and
smelter located in the Córdoba area of northern
Colombia, consisting of a truck and shovel open-cut
mine and a processing plant. South32 owns 99.9 per
cent of Cerro Matoso. Current and former employees
own 0.02 per cent, with the balance of shares held in
a reserve account following a buy-back.
Cerro Matoso is a major producer of nickel contained in ferronickel
which is used to make stainless steel. Ore mined is blended with
ore from stockpiles, which is then dried in rotary kilns and smelted
in two electric arc furnaces where ferronickel is produced.
We commissioned the Ore Sorting and Mechanical Ore
Concentration (OSMOC) project in FY23, which will partly offset
natural nickel grade decline and underpinned a 15-year extension
to Cerro Matoso’s mining contract from 2029 to 2044.
South32 share
Ore mined (kwmt)
Ore processed (kdmt)
Ore grade processed (%, Ni)
Payable nickel production (kt)
Payable nickel sales (kt)
Realised sales price (US$/lb)
Operating unit cost (US$/lb)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Exploration expenditure
Exploration expensed
Social investment
FY23
5,560
2,807
1.62
40.8
40.8
7.76
5.03
FY23
698
246
189
363
38
33
5
2
2
4.8
FY22
4,867
2,703
1.73
41.7
41.8
10.08
4.34
FY22
929
529
463
349
37
18
19
–
–
3.9
Safety
LTIF at Cerro Matoso was 1.3 in FY23, a 19 per cent decrease
year-on-year. TRIF was 1.6 in FY23, a 43 per cent decrease year-
on-year.
Volumes
Cerro Matoso payable nickel production decreased by two per
cent to 40.8kt in FY23, as the benefits of the OSMOC project were
offset by a temporary access restriction to the higher-grade
Queresas and Porvenir (Q&P) pit. The OSMOC project is expected
to partially offset natural grade decline.
Operating costs
Operating unit costs increased by 16 per cent to US$5.03/lb
in FY23, as the benefit of a weaker Colombian peso was more
than offset by higher labour and contractor costs, including the
delivery of the OSMOC project.
Financial performance
Underlying EBIT decreased by 59 per cent (or US$274 million), to
US$189 million in FY23, as a 23 per cent decline in the average
realised nickel price (-US$209 million), reduced sales volumes
(-US$22 million) and increased labour and contractor costs
(-US$20 million), was partially offset by a weaker Colombian peso
(+US$48 million).
Capital expenditure
Safe and reliable capital expenditure increased by US$15 million
to US$33 million in FY23 as we progressed planned furnace
upgrades and invested in a new mobile fleet.
Improvement and life extension capital expenditure decreased
by US$14 million to US$5 million in FY23 following the successful
commissioning of the OSMOC project in H1 FY23.
The extended mining contract underpinned by the OSMOC
project is expected to unlock existing resources and creates an
opportunity to analyse options to optimise our product mix in
the battery supply chain. As part of this, we progressed concept
studies to assess the potential to produce intermediary nickel
products for electric vehicle markets.
Social investment
We invested US$4.8 million in communities around Cerro Matoso
in FY23, with a focus on cultural programs, education, agriculture
projects and community housing.
+
Learn more about Cerro Matoso at www.south32.net.
55
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
ILLAWARRA METALLURGICAL COAL
Location: New South Wales, Australia
South32 share: 100 per cent
Located in the southern coalfields of New South
Wales, Illawarra Metallurgical Coal is 100 per cent
owned by South32 and operates two underground
metallurgical coal mines, Appin mine and
Dendrobium mine, and West Cliff and Dendrobium
coal preparation plants. Illawarra Metallurgical Coal
also manages the Port Kembla Coal Terminal on
behalf of a consortium of partners.
Illawarra Metallurgical Coal produces premium-quality, hard
coking coal for steelmaking, and energy coal. The operation
supports the domestic steelmaking industry by supplying
product to BlueScope Steel’s Port Kembla Steelworks, the largest
steel production facility in Australia.
We are investing to improve productivity and extend the life of
Appin mine, and focusing on optimising the Dendrobium mine
within approved domains.
South32 share
Metallurgical coal production (kt)
Energy coal production (kt)
Metallurgical coal sales (kt)(1)
Energy coal sales (kt)(1)
Realised metallurgical coal sales price
(US$/t)
Realised energy coal sales price (US$/t)
Operating unit cost (US$/t)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Exploration expenditure
Exploration expensed
Social investment
FY23
5,497
1,023
5,402
957
279
144
127
FY23
1,643
833
692
769
248
242
6
17
9
0.9
FY22
5,712
797
5,823
783
381
156
126
FY22
2,338
1,507
1,388
786
189
177
12
11
9
1.2
Safety
LTIF at Illawarra Metallurgical Coal was 3.2 in FY23, a 40 per cent
decrease year-on-year. TRIF was 20.8 in FY23, a 26 per cent
increase year-on-year.
Volumes
Illawarra Metallurgical Coal saleable production was largely
unchanged at 6.5Mt in FY23 (Appin ~3.2Mt, Dendrobium ~3.3Mt).
The operation completed two longwall moves during the year and
overcame challenging mining conditions encountered at Appin in
FY23.
Operating costs
Operating unit costs were largely unchanged at US$127/t in FY23,
as the benefit of a weaker Australian dollar and lower price-linked
royalties was offset by higher local energy costs.
Financial performance
Underlying EBIT decreased by 50 per cent (or US$696 million), to
US$692 million in FY23, with a 27 per cent decline in the average
realised price for metallurgical coal (-US$550 million), lower
volumes (-US$133 million) and higher contractor and labour costs
(-US$23 million). This more than offset the benefit of a weaker
Australian dollar (+US$52 million) and lower price-linked royalties
(+US$43 million).
Depreciation and amortisation increased by US$22 million, to
US$141 million, reflecting higher development rates in FY23.
Capital expenditure
Safe and reliable capital expenditure increased by US$65
million to US$242 million in FY23. We continued our investment
to support the transition to a more efficient single longwall
configuration at Appin and commenced work to install additional
ventilation capacity to enable mining in Area 7.
Improvement and life extension capital expenditure decreased to
US$6 million in FY23 as we ceased activity on the DND project.
Social investment
We invested US$0.9 million in communities around Illawarra
Metallurgical Coal in FY23, with a focus on the local environment,
education, health, community support and services, and
initiatives for Aboriginal and Torres Strait Islander Peoples.
+
Learn more about Illawarra Metallurgical Coal at
www.south32.net.
(1) Volumes and prices do not include any third party trading that may be undertaken independently of equity production.
56
OPERATING AND FINANCIAL REVIEW
AUSTRALIA MANGANESE
Location: Northern Territory, Australia
South32 share: 60 per cent
Australia Manganese consists of Groote Eylandt
Mining Company Pty Ltd (GEMCO) in the Northern
Territory. South32 holds a 60 per cent share in
GEMCO and Anglo American Plc holds the remaining
40 per cent.
GEMCO is an open-cut strip mining operation, producing high-
grade manganese ore and is located in close proximity to Asian
export markets. It is one of the largest manganese ore producers
in the world.
In FY23 we approved the Eastern Lease South life extension
project, which is expected to extend the mine life at GEMCO, with
first ore expected in FY25.
South32 share
Manganese ore production (kwmt)
Manganese ore sales (kwmt)
Realised external manganese ore sales
price (US$/dmtu, FOB)(1)(2)
Ore operating unit cost (US$/dmtu)(2)(3)
South32 share (US$M)
Underlying revenue
Underlying EBITDA
Underlying EBIT
Net operating assets
Capital expenditure
Safe and reliable
Improvement and life extension
Exploration expenditure
Exploration expensed
Social investment
FY23
3,545
3,261
4.59
1.88
FY23
688
369
266
239
58
41
17
1
–
0.8
FY22
3,363
3,372
5.29
1.86
FY22
848
488
402
258
62
56
6
1
–
1.1
Safety
LTIF at Australia Manganese was 1.5 in FY23, a 66 per cent
decrease year-on-year. TRIF was 6.3 in FY23, an 11 per cent
decrease year-on-year.
Volumes
Australia Manganese saleable ore production increased by
five per cent (or 182kwmt) to a record 3,545kwmt in FY23, as
improved yields supported higher primary concentrator output,
and our low-cost PC02 circuit continued to operate above its
design capacity.
Operating costs
Operating unit costs were largely unchanged at US$1.88/dmtu in
FY23, as the operation delivered strong production volumes and
benefitted from a weaker Australian dollar.
Financial performance
Underlying EBIT decreased by 34 per cent (or US$136 million), to
US$266 million in FY23, as the benefit of lower freight rates
(+US$36 million) and a weaker Australian dollar (+US$21 million),
was more than offset by a 13 per cent decline in average realised
manganese ore prices (-US$128 million), higher diesel prices
(-US$14 million) and contractor costs (-US$12 million).
Sales volumes declined (-US$32 million) due to in-land
logistics constraints. We have optimised our road haulage and
implemented alternative shipping solutions to improve our
logistics chain.
Capital expenditure
Safe and reliable capital expenditure decreased by US$15 million
to US$41 million in FY23 as we invested in access infrastructure.
Improvement and life extension capital expenditure increased
by US$11 million to US$17 million in FY23 as we completed the
feasibility study for the Eastern Lease South life extension project.
Social investment
We invested US$0.8 million in communities around Australia
Manganese in FY23, with a focus on education and leadership,
economic development, and health and wellbeing programs for
Aboriginal and Torres Strait Islander Peoples.
+
Learn more about Australia Manganese at www.south32.net.
(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 underlying
revenue less freight and marketing costs, divided by external sales volume.
(2) Australia Manganese FY23 average manganese content of external ore sales was 43.8 per cent on a dry basis (FY22: 44.2 per cent). 96 per cent of FY23 external manganese
ore sales (FY22: 96 per cent) were completed on a CIF basis. FY23 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of
US$62 million (FY22: US$96 million).
(3) FOB ore operating unit cost is Underlying revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume.
57
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
SOUTH AFRICA MANGANESE
Location: Northern Cape and Gauteng, South Africa
South32 share: Ore - 44.4 per cent, Alloy - 60 per cent
South Africa Manganese consists of two manganese
mines and the Metalloys manganese alloy smelter
which was placed on care and maintenance in FY20.
Hotazel Manganese Mines (HMM) is located in the Kalahari Basin.
South32 holds a 60 per cent interest in Samancor Holdings (Pty)
Ltd (Samancor Holdings) and Anglo American Plc holds the
remaining 40 per cent. Samancor Holdings indirectly owns
74 per cent of HMM, which gives South32 its ownership interest
of 44.4 per cent. The remaining 26 per cent of HMM is owned by
Broad-Based Black Economic Empowerment entities.
South32 holds an effective 60 per cent interest in Samancor
Manganese (Pty) Ltd (Metalloys manganese alloy smelter). The
site remains on care and maintenance as we assess future
options for the smelter.
We are studying options to unlock logistics capacity in our South
Africa manganese business and expand our high-grade Wessels
mine.
South32 share(1)
Manganese ore production (kwmt)
Manganese ore sales (kwmt)
Realised external manganese ore sales
price (US$/dmtu, FOB)(2)(3)
Ore operating unit cost (US$/dmtu)(3)(4)
FY23
2,108
2,065
3.58
2.64
FY22
2,069
2,170
3.92
2.73
Safety
LTIF at South Africa Manganese was 0.7 in FY23, a 61 per cent
decrease year-on-year. TRIF was 0.7 in FY23, a 77 per cent
decrease year-on-year.
Volumes
South Africa Manganese saleable production increased by
two per cent (or 39kwmt) to a record 2,108kwmt in FY23, with
increased volumes of premium material from our Mamatwan
mine.
Operating costs
Operating unit costs decreased by three per cent to
US$2.64/dmtu in FY23, as the benefit of a weaker South African
rand more than offset lower sales volumes due to a temporary
reduction in third-party rail and port availability.
Financial performance
Ore Underlying EBIT decreased by 35 per cent (or US$28 million),
to US$51 million in FY23, as the benefit of a weaker South African
rand (+US$32 million) and lower freight rates (+US$25 million), was
more than offset by a nine per cent decline in average realised
manganese ore prices (-US$53 million) and lower sales volumes
(-US$22 million) due to the timing of shipments.
The Metalloys manganese alloy smelter remains on care and
maintenance.
South32 share (US$M)(1)
Underlying revenue
Manganese ore
Manganese alloy
Underlying EBITDA
Manganese ore
Manganese alloy
Underlying EBIT
Manganese ore
Manganese alloy
Net operating assets/(liabilities)
Manganese ore
Manganese alloy
Capital expenditure
Safe and reliable
Improvement and life extension
Exploration expenditure
Exploration expensed
Social investment
FY23
FY22
Capital expenditure
Safe and reliable capital expenditure was US$16 million in FY23
as we invested in mining equipment.
Improvement and life extension capital expenditure was
US$9 million in FY23 as we advanced work to access new mining
areas at our high-grade underground Wessels mine.
Social investment
We invested US$3.2 million in communities around South Africa
Manganese in FY23, with a focus on education, economic
participation, natural resources resilience, health and wellbeing.
+
Learn more about South Africa Manganese at www.south32.net.
344
344
–
66
72
(6)
45
51
(6)
143
195
(52)
25
16
9
1
1
3.2
419
419
–
78
99
(21)
58
79
(21)
135
211
(76)
19
14
5
1
1
3.7
(1) South Africa Manganese ore has been reported as a 54.6 per cent interest reflecting our Metalloys manganese alloy smelter (60 per cent interest) having been placed on care
and maintenance, and aligning with our interest in HMM. South32 has a 44.4 per cent ownership interest in HMM. Twenty-six 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.
(2) Volumes and prices do not include any third party trading that may be undertaken independently of equity production. Realised ore prices are calculated as underlying
revenue less freight and marketing costs, divided by external sales volume.
(3) South Africa Manganese FY23 average manganese content of external ore sales was 39.1 per cent on a dry basis (FY22: 39.7 per cent). 88 per cent of FY23 external manganese
ore sales (FY22: 75 per cent) were completed on a CIF basis. FY23 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of
US$61 million (FY22: US$88 million).
(4) FOB operating unit cost is Underlying revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume.
58
OPERATING AND FINANCIAL REVIEW
Outlook
Information on likely developments in the Group’s business strategies, prospects and operations for future financial years and the
expected results of those operations that could or is likely to 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 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.
Production
Our recent portfolio improvements delivered strong growth in aluminium and base metals in FY23. Looking forward, these investments
are expected to underpin production growth in aluminium and copper of four per cent in FY24 and a further three per cent in FY25.
Production guidance (South32’s share)(1)
FY23
FY24e(2)
FY25e(2)
Key guidance assumptions
Worsley Alumina
Alumina production (kt)
Brazil Alumina (non-operated)
Alumina production (kt)
Brazil Aluminium (non-operated)
Aluminium production (kt)
Hillside Aluminium
Aluminium production (kt)
Mozal Aluminium
Aluminium production (kt)
3,839
4,000
4,000 Expected to sustain nameplate capacity in FY24 and FY25
1,262
1,400
1,420 Expected to increase by 11 per cent in FY24 as the refinery
returns to nameplate capacity, ahead of creeping volumes
in FY25
68.9
100
130 Expected to increase by 45 per cent in FY24 and
30 per cent in FY25 as the smelter ramps-up to nameplate
capacity (179ktpa, 40 per cent basis) in H2 FY26
719
720
720 Expected to test its maximum technical capacity
Guidance remains subject to load-shedding
345
365
372 Expected to increase by six per cent in FY24, returning to
nameplate capacity in Q2 FY24
Guidance remains subject to load-shedding
Sierra Gorda (non-operated)
Ore processed (Mt)
Payable copper equivalent production (kt)(3)
Payable copper production (kt)
Payable molybdenum production (kt)
Payable gold production (koz)
Payable silver production (koz)
Cannington
Ore processed (kdmt)
Payable zinc equivalent production (kt)(4)
Payable silver production (koz)
Payable lead production (kt)
Payable zinc production (kt)
Cerro Matoso
Ore to kiln (kt)
Payable nickel production (kt)
21.2
86.5
70.7
1.2
28.8
630
2,156
259.6
11,183
101.7
59.2
2,807
40.8
21.8
89.0
67.0
2.5
22.5
550
2,300
287.2
12,500
115.0
62.0
2,700
40.5
de-bottlenecking project and planned copper grades of
0.38 per cent and 0.42 per cent in FY24 and FY25,
respectively
21.8 Higher expected throughput following the plant
91.8
71.0
2.2
25.0
550
by 11 per cent in FY24 with improved plant throughput and
higher planned silver and lead grades
2,400 Payable zinc equivalent production expected to increase
275.8
12,000
110.0
60.0
Further increase in plant throughput in FY25, offset by
lower planned grades in accordance with the mine plan
35.0
2,750 OSMOC project expected to partially offset natural grade
decline, with expected processed nickel grade of
1.63 per cent and 1.48 per cent in FY24 and FY25,
respectively
Illawarra Metallurgical Coal
Total coal production (kt)
Metallurgical coal production (kt)
Energy coal production (kt)
Australia Manganese
Manganese ore production (kwmt)
South Africa Manganese
Manganese ore production (kwmt)
6,520
5,497
1,023
5,000
4,400
600
5,500 FY24 production is expected to reduce to 5.0Mt, with the
4,700
800
next longwall at Dendrobium to commence in Q2 FY24
Production is expected to increase by 10 per cent to 5.5Mt
in FY25, consistent with medium-term production
guidance for the complex
3,545
3,400
3,400 Expected to continue its strong performance, subject to
wet season impacts
2,108
2,000 Subject to
demand
We expect to continue to use higher cost trucking to
optimise sales volumes
FY25 guidance is subject to market demand
(1) South32’s ownership share of operations is as per footnote (3) on page 43.
(2) The denotation (e) refers to an estimate or forecast year.
(3) Payable copper equivalent production (kt) was calculated by aggregating revenues from copper, molybdenum, gold and silver, and dividing the total Revenue by the price of
copper. FY23 realised prices for copper (US$3.51/lb), molybdenum (US$21.28/lb), gold (US$1,821/oz) and silver (US$21.9/oz) have been used for FY23, FY24e and FY25e.
(4) 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. FY23 realised prices
for zinc (US$2,151/t), lead (US$1,919/t) and silver (US$21.1/oz) have been used for FY23, FY24e and FY25e.
59
SOUTH32 ANNUAL REPORT 2023
FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
Costs
Operating unit cost performance and guidance(1)(2)
FY23 Operating unit costs were in-line with our expectations, as our strong operating performance to finish the year and continued
focus on cost efficiencies provided partial relief from industry-wide cost pressures.
A planned increase in production volumes across the majority of our operations in FY24 and our ongoing focus on controllable cost
initiatives is expected to partly offset ongoing industry-wide inflationary pressures.
While Operating unit cost guidance is not provided for our aluminium smelters, their cost profile will continue to be influenced by the
price of raw material inputs, which have begun to moderate from elevated levels across the industry in FY23.
Worsley Alumina
(US$/t)
265
291
290
FY22 versus FY23: Benefit of a weaker Australian dollar was more than offset by
higher uncontrollable costs including an increase in caustic soda and coal prices
FY22
FY23
FY24e(3)(4)
Commentary
FY24 key guidance assumptions: Expected to be largely unchanged with lower
caustic soda prices and consumption, to offset higher energy and labour costs
FY22 versus FY23: Significant rise in uncontrollable costs, together with one-off costs
associated with the port infrastructure outages
FY24 key guidance assumptions: Not provided but expected to continue to be
influenced by energy and the price of raw material inputs
FY24 key guidance assumptions: Not provided but expected to be influenced by the
smelter’s ramp-up profile and the price of raw material inputs and energy
FY22 versus FY23: Benefit of a weaker South African rand and lower alumina prices
was more than offset by elevated smelter raw material input prices and energy cost
inflation
FY24 key guidance assumptions: Not provided but expected to continue to be
influenced by the price of raw material inputs, the South African rand and inflation-
linked energy costs
FY22 versus FY23: Benefit of a weaker South African rand and lower alumina prices
was more than offset by elevated smelter raw material input prices and energy cost
inflation
FY24 key guidance assumptions: Not provided but expected to continue to be
influenced by the price of raw material inputs, the South African rand and inflation-
linked energy costs
FY22 versus FY23: Transitioned to cost efficient, 100 per cent renewable electricity
from January 2023
FY24 key guidance assumptions: Expected higher plant throughput and lower
electricity prices, more than offset by higher labour costs
FY22 versus FY23: Benefit of a weaker Australian dollar and lower price-linked
royalties was more than offset by lower mill throughput
FY24 key guidance assumptions: Expected to be largely unchanged with improved
throughput, more than offset by higher labour costs
FY22 versus FY23: Benefit of a weaker Colombian peso was more than offset by
higher labour and contractor costs, including the delivery of the OSMOC project
FY24 key guidance assumptions: Expected to be influenced by lower price-linked
royalties, more than offset by a stronger Colombian peso and higher labour costs
FY22 versus FY23: Benefit of a weaker Australian dollar and lower price-linked
royalties was offset by higher local energy costs
FY24 key guidance assumptions: Expected lower volumes, with four planned
longwall moves in FY24
FY22 versus FY23: Benefit of a weaker Australian dollar was more than offset by
higher diesel prices and contractor costs
Brazil Alumina
(non-operated)
(US$/t)
Brazil Aluminium
(non-operated)
(US$/t)
Hillside Aluminium
(US$/t)
288
368
Not
provided
N/A
4,357
2,137
2,178
Not
provided
Not
provided
Mozal Aluminium
(US$/t)
2,243
2,329
Not
provided
14.6
15.4
16.0
133
153
155
4.34
5.03
5.30
126
127
140
Sierra Gorda
(non-operated)
(US$/t)(5)
Cannington
(US$/t)(5)
Cerro Matoso
(US$/lb)
Illawarra
Metallurgical Coal
(US$/t)
Australia
Manganese ore (FOB)
(US$/dmtu)
South Africa
Manganese ore (FOB)
(US$/dmtu)
1.86
1.88
2.15
2.73
2.64
2.60
FY24 key guidance assumptions: Expected increased mining activity and contractor
costs to deliver planned volumes
FY22 versus FY23: Benefit of a weaker South African rand was partially offset by lower
sales volumes due to a temporary reduction in third-party rail and port availability
FY24 key guidance assumptions: Expected weaker South African rand and lower
price-linked royalties, to more than offset higher in-land logistics costs
(1) South32’s ownership share of operations is as per footnote (3) on page 43.
(2) Operating unit cost is Underlying revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes. Operating cost is Underlying revenue less Underlying
EBITDA excluding third party sales.
(3) FY24 Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY24, including: an
alumina price of US$349/t; an average blended coal price of US$210/t for Illawarra Metallurgical Coal; a manganese ore price of US$4.85/dmtu for 44 per cent manganese
product; a nickel price of US$8.90/lb; a silver price of US$24.5/troy oz; a lead price of US$2,131/t (gross of treatment and refining charges); a zinc price of US$2,446/t (gross of
treatment and refining charges); a copper price of US$3.87/lb (gross of treatment and refining charges); a molybdenum price of US$22.51/lb (gross of treatment and refining
charges); a gold price of US$1,984/troy oz; an AUD:USD exchange rate of 0.65; a USD:ZAR exchange rate of 18.98; a USD:COP exchange rate of 4,033; USD:CLP exchange rate of
876; and a reference price for caustic soda; which reflect forward markets as at July 2023 or our internal expectations.
(4) The denotation (e) refers to an estimate or forecast year.
(5) US dollar per tonne of ore processed, calculated as Underlying revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory
may impact Operating unit costs.
60
OPERATING AND FINANCIAL REVIEW
Capital expenditure
FY24 Group capital expenditure guidance, excluding equity accounted investments, is set at US$860 million as we prioritise safe and
reliable operations and invest to improve productivity and grow future volumes:
– Safe and reliable capital expenditure is expected to increase by US$145 million to US$615 million in FY24, reflecting elevated capital
expenditure at Illawarra Metallurgical Coal as we transition Appin to a more efficient single longwall from FY25, and install additional
ventilation infrastructure to extend Appin’s mine life in Area 7 to at least 2039;
– Improvement and life extension capital expenditure is expected to increase by US$11 million to US$75 million in FY24, as we advance
decarbonisation projects at Worsley Alumina and the de-bottlenecking project at Brazil Alumina; and
– Growth capital expenditure at our Hermosa project is expected to be US$170 million in H1 FY24 as we complete critical path
dewatering activity, invest in early works, and progress studies for both Taylor and Clark Deposits. We expect to provide H2 FY24
guidance following a final investment decision for the development of the Taylor Deposit, planned for H1 FY24.
Our share of capital expenditure for our material equity accounted investments is expected to increase by US$61 million to
US$340 million in FY24:
– Capital expenditure for our manganese equity accounted investments is expected to increase by US$47 million to US$130 million in
FY24 as we continue Australia Manganese’s Eastern Lease South life extension project, with first production expected in FY25; and
– Capital expenditure for our Sierra Gorda equity accounted investment is expected to increase by US$14 million to US$210 million in
FY24, with safe and reliable capital expenditure of US$180 million for deferred stripping and additional tailings capacity. Improvement
and life extension capital expenditure is expected to be US$30 million, including the plant de-bottlenecking project and the feasibility
study for the fourth grinding line expansion. We expect to update FY24 capital expenditure guidance following a final investment
decision for the fourth grinding line expansion, planned for H2 FY24.
Capital expenditure guidance (South32’s share)(1)(2)
US$M
FY22
FY23
FY24e(3)
Worsley Alumina
Brazil Alumina
Brazil Aluminium
Hillside Aluminium
Mozal Aluminium
Cannington
Cerro Matoso
Illawarra Metallurgical Coal
Safe and reliable capital expenditure (excluding equity accounted investments)
Worsley Alumina
Brazil Alumina
Cerro Matoso
Illawarra Metallurgical Coal
Other operations
Improvement and life extension capital expenditure (excluding equity accounted
investments)
Hermosa
Growth capital expenditure
Total capital expenditure (excluding equity accounted investments)
Equity accounted investments capital expenditure
Sierra Gorda
Australia Manganese
South Africa Manganese
Safe and reliable capital expenditure (equity accounted investments)
Sierra Gorda
Australia Manganese
South Africa Manganese
Improvement and life extension capital expenditure (equity accounted investments)
Total capital expenditure (equity accounted investments)
Total capital expenditure (including equity accounted investments)
47
51
1
20
10
43
18
177
367
8
–
19
12
19
58
97
97
522
36
56
14
106
45
6
5
56
162
684
49
45
9
16
16
60
33
242
470
33
13
5
6
7
64
256
256
790
151
41
16
208
45
17
9
71
279
1,069
85
60
10
35
20
40
45
320
615
45
20
-
3
7
75
170(4)
170
860
180
55
30
265
30(4)
35
10
75
340
1,200
(1) South32’s ownership share of operations is as per footnote (3) on page 43.
(2) Total capital expenditure comprises safe and reliable, improvement and life extension (including decarbonisation), and growth capital expenditure, and excludes capitalised
exploration and evaluation expenditure and the purchase of intangibles.
(3) The denotation (e) refers to an estimate or forecast year.
(4) Guidance for Hermosa reflects H1 FY24 estimated expenditure, subject to a planned final investment decision on Hermosa Taylor at the end of calendar year 2023. Guidance
for our Sierra Gorda equity accounted investment is subject to a final investment decision for the fourth grinding line expansion.
61
SOUTH32 ANNUAL REPORT 2023 FINANCIAL AND OPERATIONAL PERFORMANCE SUMMARY CONTINUED
Capitalised exploration guidance (South32’s share)(1)
Capitalised exploration, including equity accounted investments, is expected to be largely unchanged at US$40 million in FY24. This
includes US$23 million at our Hermosa project as we continue to test high priority regional targets, including further drilling at the Peake
copper-lead-zinc-silver Prospect, and a first time drilling program planned at the Flux Prospect.
US$M
Capitalised exploration (excluding equity accounted investments)
Equity accounted investments capitalised exploration
Capitalised exploration (including equity accounted investments)
(1) South32’s ownership share of operations is as per footnote (3) on page 43.
(2) The denotation (e) refers to an estimate or forecast year.
Other expenditure guidance
FY22
FY23
FY24e(2)
33
2
35
39
4
43
35
5
40
Other expenditure guidance items presented below are on a proportional consolidation basis including our manganese and Sierra
Gorda equity accounted investments.
FY23
FY24e(1)
Commentary
Group and unallocated expense in Underlying EBIT
(excluding greenfield exploration and
third party products and services EBIT)
(US$M)
31
100
Underlying depreciation and amortisation
(US$M)
Underlying net finance costs
(US$M)
Greenfield exploration
(US$M)
(1) The denotation (e) refers to an estimate or forecast year.
918
188
42
930
200
30
FY23 includes one-off benefits received. FY24 guidance reflects
a normalised run-rate, including the effect of recent portfolio
changes
FY24 guidance reflects higher depreciation and amortisation
expected at Cannington and Australia Manganese, following
recent investments
FY24 guidance reflects the balance sheet position as at FY23
FY24 guidance reflects targeted activity across our greenfield
exploration programs focused on base metals in the Americas,
Australia and Europe
62
OPERATING AND FINANCIAL REVIEW
GOVERNANCE
Governance at a glance
Board of Directors
Directors’ report
Lead Team
Remuneration report
64
66
71
76
78
SOUTH32 ANNUAL REPORT 2023
63
GOVERNANCE AT A GLANCE
OUR BOARD
IN ACTION
The role of our Board is to represent shareholders and to promote and
protect the interests of the Group. In FY23 our Board met 11 times, hosted
our Annual General Meeting, and engaged with shareholders and other
stakeholders. Directors also conducted site visits to Hillside Aluminium,
Hotazel Manganese Mines, Mozal Aluminium and the Hermosa project.
Board Composition as at 30 June 2023
Length of tenure
(Non-Executive Directors)
Gender diversity
Location
(Non-Executive Directors)
Board ethnicity
2
2
4
0-3 years
3-6 years
6-9 years
5
4
Female
Male
2
2
Australia
Southern Africa
Americas
4
1
1
1
6
White British or other White
(including minority-white groups)
Asian/Asian British
Black/African/Caribbean/Black
British
Not specified/prefer not to say
Our Board visits the Hermosa project
As part of its regular program of meetings, in June 2023 our Board
visited the Hermosa project in Arizona, United States. Spread
over three days, the visit provided an opportunity for Directors
to receive the latest updates on project progress, engage with
employees and local communities, and discuss the broader
political context associated with Hermosa’s development.
At the project site, the Board saw first-hand the progress that has
been made on the ground including surface infrastructure and
shafts for the Taylor Deposit, the recently constructed second
water treatment plant and the recently upgraded core processing
facility for geological samples.
At the nearby community of Nogales, which borders Mexico,
Board members immersed themselves in local culture through
food, music and dance, engaged with a cross-section of
community leaders and reaffirmed our commitment to creating
value for Santa Cruz County as the project progresses.
In addition to conducting a full set of Board and Committee
meetings, the Board also heard from a panel of experts that
provided valuable insights into the political environment and
drive for critical minerals in the United States as we advance the
development of the Hermosa project.
64
GOVERNANCE
Board focus areas and activities in FY23
Safety and performance
Strategy
• Maintained oversight of, and a focus on, our approach to
• Maintained oversight of strategy development and
safety and our safety performance;
implementation;
• Actively engaged with management on our response following
the devastating loss of two of our colleagues at Mozal
Aluminium and received regular updates regarding the detailed
investigation and the support provided to those affected;
• Maintained oversight of the findings of the investigation
at Mozal Aluminium, including root causes as well as other
contributing factors, and reviewed actions taken with
management;
• Following a visit by our Chief Executive Officer in November
2022, two Non-Executive Directors visited Mozal Aluminium in
December 2022;
• Maintained oversight of our approach to serious injury risk
reduction through routine significant incident investigation
reviews with management and material safety risk deep-dives
during visits to our operations and projects;
• Monitored and assessed progress of our multi-year Safety
Improvement Program, which aims to fundamentally shift our
safety performance and deliver the culture transformation
required for sustained improvement; and
• Participated in our ‘Living our Code’ training, which is
focused on our employees learning about acceptable
and unacceptable workplace conduct, including sexual
harassment as a material health and safety risk, and fostering
inclusion, diversity and equality in the workplace.
• Participated in a dedicated Strategy Day and engaged with
management on strategic issues, including our health and
safety culture and performance, and our response to the risks
and opportunities of climate change and other environmental,
social, and governance issues;
• Approved our decision not to proceed with an investment in
the Dendrobium Next Domain project at Illawarra Metallurgical
Coal following consideration of study work and extensive
analysis of alternatives;
• Maintained oversight of the progress of the Hermosa project;
• Approved the Eastern Lease South life extension project at
Groote Eylandt Mining Company;
• Approved our inaugural Climate Change Action Plan, including
a review of our climate change positions, greenhouse gas
emissions target and goals and oversaw our pipeline of
decarbonisation initiatives;
• Maintained oversight of the alignment of our remuneration
and benefits framework with our purpose, strategy, values,
and culture;
• Approved increases in our capital management program of
US$206 million to US$2.3 billion and the payment of US$1,007
million in dividends in FY23; and
• Engaged with shareholders and other stakeholders on
financial, operational, remuneration and other matters.
Culture
Governance
• Worked with our Lead Team to set the direction and tone for
a workplace culture that aligns with our purpose, reflects our
values, and supports the delivery of our strategy;
• Governed the Group, having regard to our purpose, strategy,
values and culture, our shareholders as a whole, and the
interests of other stakeholders;
• Monitored culture through visits to our operations and offices,
operational deep-dives, and management presentations,
applying a `Culture Health Check' tool to assess alignment of
our culture with our purpose, strategy and values;
• Discharged the responsibilities of the Board and its four
standing Committees: the Nomination and Governance
Committee, Remuneration Committee, Risk and Audit
Committee and Sustainability Committee;
• Received key observations from leaders on our annual 'Your
Voice' employee survey and evaluated actions taken to
address improvement areas;
• Maintained oversight of our approach to inclusion and
diversity and approved a new Inclusion and Diversity Policy in
July 2023;
• Monitored and assessed progress against our inclusion and
• Maintained oversight of the integration of environmental,
social, and governance considerations, including our response
to the risks and opportunities that climate change presents,
into our strategy and capital allocation, budget, risk oversight
and governance;
• Maintained oversight of the development of a pipeline of
talent for key roles;
diversity measurable objectives; and
• Following an extensive global search, appointed two new
• Visited the Kotulong Community Centre and Rearata Primary
School in South Africa, the Filipe Nyusi Secondary School
in Mozambique and met with community leaders and
representatives from the communities in Santa Cruz County in
Arizona in the United States.
Non-Executive Directors, further enhancing the Board’s broad
range of skills and experience, particularly in major projects,
operations and sustainability; and
• Reported on gender and ethnicity representation on the
Board, confirming that our Board represents a broad cultural,
ethnic, background and geographic mix, and achieves its
gender diversity objectives.
+
Learn more about our key corporate governance policies and practices in our Corporate Governance Statement at www.south32.net
65
SOUTH32 ANNUAL REPORT 2023 BOARD OF DIRECTORS
Committee membership key:
Chair appointment
N
R
Nomination and Governance Committee
Remuneration Committee
RA
Risk and Audit Committee
S
Sustainability Committee
66
GOVERNANCE
N
R
Ms Karen Wood BEd, LLB (Hons), 67
Chair and Independent Non-Executive Director
Appointed: 1 November 2017; Chair: 12 April 2019
Location: Australia
Career summary: Ms Wood has worked in legal practice and
business.
In 2001, Ms Wood joined BHP and held several global executive
leadership roles, including Group Company Secretary, Chief
Governance Officer, Chief People Officer and President People
and Public Affairs (Corporate Affairs). Before joining BHP, she
worked at Bonlac Foods Limited, where she spent five years
as General Counsel and Company Secretary. Following her
retirement in 2014, she continued as an adviser to BHP’s Board
and CEO until 2015. She also chaired the BHP Foundation until
2019, overseeing grant provisions for not-for-profit organisations
to deliver global programs in the areas of natural resource
governance, human capability and social inclusion, and
conserving and sustainably managing natural environments.
Other key positions Ms Wood has held include being a member of
the Takeovers Panel (Australia) from 2000 to 2012, and roles with
the Australian Securities and Investments Commission (Business
Consultative Panel) and the Australian Government’s Business
Regulatory Advisory Group.
External appointments: ASX listed: Ms Wood is currently a
Non-Executive Director of Djerriwarrh Investments Limited
(since July 2016).
Ms Wood is also a Director of the Robert Salzer Foundation,
serves as an ambassador for the Australian Indigenous Education
Foundation and is a member of the Advisory Board of the Sir John
Monash Leadership Academy.
Skills and experience: Ms Wood brings extensive corporate
governance expertise to her roles as Chair of our Board and
the Nomination and Governance Committee. In these roles, her
experienced leadership promotes a cohesive environment of
constructive challenge and oversight. Ms Wood’s substantial
tenure as a global executive within the resources industry
means that she brings a strong understanding of the regulatory
landscape and the key strategic risks and opportunities for a
global mining and metals company. Her expertise in shaping
culture (including through organisational and remuneration
design), public policy, social performance and stakeholder
engagement enables her to bring valuable insights in these areas.
Mr Graham Kerr BBus, FCPA, 52
Chief Executive Officer and Managing Director
Appointed: October 2014 and as Managing Director
on 21 January 2015
Location: Australia
Career summary: Mr Kerr joined BHP in 1994 and held a wide
range of operational and commercial roles across the business,
including Chief Financial Officer Stainless Steel Materials, Vice
President Finance Diamonds and Finance Director for the BHP
Canadian Diamonds Company.
In 2004, Mr Kerr joined Iluka Resources Limited as General
Manager Commercial. He returned to BHP in 2006, leading to his
appointment as President of Diamonds and Specialty Products
where he 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.
Mr Kerr was appointed BHP’s Chief Financial Officer in 2011, a role
which he held until 2015 when he left to lead South32 through its
demerger from BHP and listing in three countries.
External appointments: Director, CEOs for Gender Equity.
Skills and experience: Mr Kerr’s strong track record in resources
development, and global experience as a commercial and
operational leader within the resources industry, means that
he brings deep mining and metals expertise and exceptional
financial acumen. His health and safety expertise, and passion
for promoting diversity and inclusion, are valued contributions to
our Board as it oversees our commitment to elevate our safety
performance and instil a culture where everyone feels safe and
respected at work. Mr Kerr’s strong focus on a purpose-driven
and values-led future for South32 make him a trusted leader as
we progress the next phase of our strategy.
RA
N
R
Mr Frank Cooper AO, BCom, FCA, FAICD, 67
Independent Non-Executive Director
Appointed: 7 May 2015
Location: Australia
Career summary: Mr Cooper qualified as a chartered accountant
in Australia, leading to a 40-year career in the finance and
accounting profession. He has held a number of senior tax
and finance roles, including Partner at Ernst & Young, Partner /
Business Unit Leader, Tax Practice at PricewaterhouseCoopers
and Managing Partner for Arthur Andersen in Perth (for just over
10 years), during which time he specialised in the mining, energy
and utility sectors.
Other key positions Mr Cooper has held include Commissioner
and Chairman of the Insurance Commission of Western Australia
and Pro Chancellor of the University of Western Australia.
Throughout his career, Mr Cooper has had extensive involvement
in community activities, including serving as Commissioner
and Chair of the West Australian Football Commission and as a
Member of the State Health Research Advisory Council (Western
Australia).
In 2014 Mr Cooper was awarded an Officer of the Order of
Australia. He was also named West Australian of the Year in the
Professions category in 2015.
External appointments: ASX listed: Mr Cooper is currently a
Non-Executive Director of Woodside Energy Group Limited (since
February 2013) and Chair of its Audit and Risk Committee.
Mr Cooper is also a Director of St John of God Australia Limited
and Wright Prospecting Pty Ltd.
Skills and experience: Mr Cooper brings exceptional financial
acumen and accounting expertise, a strong understanding of
legal and regulatory compliance and substantial experience in
risk management oversight to our Board, all of which also make
him a highly capable Risk and Audit Committee Chair. His listed
company experience and expertise in capital management
and corporate development are highly valued by our Board as
it oversees the implementation of our strategy, as is his strong
focus on organisational philosophy, values and standards.
67
SOUTH32 ANNUAL REPORT 2023 BOARD OF DIRECTORS CONTINUED
N
RA
S
N
S
Dr Xiaoling Liu BEng (Extractive Metallurgy), PhD (Extractive
Metallurgy), FAusIMM, FTSE, GAICD, 66
Independent Non-Executive Director
Appointed: 1 November 2017
Location: Australia
Mr Carlos Mesquita BEng (MetalEng), MBA, 65
Independent Non-Executive Director
Appointed: 1 May 2023
Location: Chile
Career summary: Dr Liu completed her undergraduate study
in Chongqing University in China and her PhD in Extractive
Metallurgy at Imperial College in the United Kingdom, before
joining the Rio Tinto Group as a senior research scientist in 1988.
Career summary: Mr Mesquita is a qualified Metallurgical
Engineer. He has worked in the mining and metals industry for
more than 40 years and has extensive experience in leading
mining and processing operations and major capital projects.
Over her 26-year career with Rio Tinto, Dr Liu held various roles
in smelting operations, including General Manager Operations
at Bell Bay (Tasmania), leading to other senior operational and
management roles, including Managing Director Technical
Services, where she led Rio Tinto’s global technical services unit.
Prior to her retirement, Dr Liu was President and Chief Executive
Officer of Rio Tinto Minerals, with responsibility for integrated
operations of mining, processing, supply chain, marketing and
sales for its Borates business in the United States, Europe and
Asia.
Dr Liu has served as Vice President of the Board of the Australian
Aluminium Council, a Board Member of the California Chamber
of Commerce, a Director of Melbourne Business School and
Chancellor of Queensland University of Technology. She has also
served as a Non-Executive Director at Newcrest Mining Limited
(September 2015 until November 2020) and Iluka Resources
Limited.
External appointments: ASX listed: Dr Liu is currently a Non-
Executive Director of Incitec Pivot Limited (since November 2019)
and Chair of its Health, Safety, Environment and Community
Committee.
Skills and experience: With her accomplished career as a global
executive in the resources industry, Dr Liu brings to our Board
expertise in mining and processing operations, the execution of
major capital projects and commodity value chain management.
Her high financial acumen, expertise in health and safety and
strong understanding of the key environmental impacts, risks
and opportunities relevant to our operations, make her a valued
contributor to the Committees on which she serves. Dr Liu’s
knowledge and experience in technology and innovation,
together with her technical background, is an asset to our Board
as it oversees our advancement towards a low-carbon future.
Mr Mesquita spent 30 years with BHP where he held various
positions in the company’s base metals and aluminium
businesses, including Asset President of Mozal Aluminium and
Asset President of Escondida – the world’s largest copper mine.
During this time he also served as Vice President Major Projects
where he led the base metals projects program, overseeing more
than US$10 billion in mining investments in countries including
Chile, Australia, and Peru.
Mr Mesquita has also previously advised mining companies and
private equity funds on acquisitions of mining assets in South
America and from 2014 to 2015 he was a Non-Executive Director
of Mineração Serra Verde, a mid-sized rare earth minerals mine in
central Brazil.
In the first half of 2022, Mr Mesquita was a consultant for South32
providing in-country support following our acquisition of a
45 per cent interest in the Sierra Gorda copper mine.
External appointments: None
Skills and experience: Mr Mesquita has extensive experience
in the global mining and metals industry with a particular focus
on base metals and aluminium in the Americas and Africa. His
previous roles and first-hand experience of working at a projects
in an operational capacity means he brings a unique and diverse
perspective to our Board. This, together with his experience in
leading complex operations with responsibility for safety, volume
and costs, support our strategy of optimising our business by
working safely, minimising our impact, consistently delivering
stable and predictable performance, and continually improving
our competitiveness.
68
GOVERNANCE
N
RA
N
S
Dr Ntombifuthi (Futhi) Mtoba CA(SA), DCom (Honoris Causa),
BCompt (Hons), HDip Banking Law, BA (Econ)(Hons), BA (Arts), 68
Independent Non-Executive Director
Appointed: 7 May 2015
Location: South Africa
Ms Jane Nelson BSc Agricultural Economics (Cum Laude), BA MA
(Philosophy, Politics and Economics), 63
Independent Non-Executive Director
Appointed: 1 May 2023
Location: United States
Career summary: Dr Mtoba qualified as a chartered accountant
in South Africa and joined Deloitte and Touche in 1988,
specialising in financial services. She was one of the first African
Black women to be appointed Partner by one of the Big Four
accounting firms, and was later appointed Chairperson of Deloitte
Southern Africa.
Career summary: Ms Nelson was born in Zimbabwe and has a
Bachelor of Science in Agricultural Economics (Cum Laude) from
the University of KwaZulu-Natal in South Africa. She also holds
a Bachelor of Arts and Master of Arts in Philosophy, Politics and
Economics from the University of Oxford in the United Kingdom,
where she was a Rhodes Scholar.
Dr Mtoba is President and founder of TEACH South Africa, which
recruits skilled teachers for underprivileged schools. She has held
several board positions at organisations focused on economic
development and community engagement, including the New
Partnership for Africa’s Development Business Foundation and
the African Union Foundation. Dr Mtoba has also been President
of the Association for the Advancement of Black Accountants and
Business Unity South Africa and chaired the University of Pretoria
Council for over 10 years.
Other positions Dr Mtoba has held include being a member of
the International Monetary Fund Advisory Group of Sub-Saharan
Africa, the World Economic Forum Global Advisory Council, and
the United Nations Global Compact Board as well as a Director of
the International Women's Forum (South Africa). She has received
several awards for contributions to business and society, including
Most Outstanding Leadership Women of the Year (Africa Economy
Builders, 2018).
External appointments: Dr Mtoba is currently a Non-Executive
Director and Deputy Chair of the Public Investment Corporation
Limited and Chair of its Audit Committee, a Director of Discovery
Bank Holdings Limited and Lead Independent Director and Audit
Committee Chair of Discovery Bank Limited, and a Director of
Vumelana Advisory Fund, and a Director of Chapter Zero Southern
Africa (from July 2023).
Skills and experience: Dr Mtoba’s tenure as partner and a leader
at one of Africa’s predominant financial professional services
firms, and the numerous roles she has held in local, regional and
international organisations and forums, means that she provides
our Board with considerable financial, economic and public policy
expertise and leadership. Dr Mtoba brings a strong focus on
culture and her expertise in social performance and community
and stakeholder engagement are an asset to our Board as it
supports our aspiration to contribute social and economic value
where we operate.
Ms Nelson has a well-established 30-year career researching
and advocating for sustainable business practices and is the
founding Director of the Harvard Kennedy School’s Corporate
Responsibility Initiative. She is a non-resident senior fellow in the
Global Economy and Development program at Brookings and a
former senior associate of Cambridge University’s Programme for
Sustainability Leadership.
Ms Nelson served on ExxonMobil's External Sustainability
Advisory Panel from 2010 to 2023, the Independent Advisory
Panel to the ICMM’s Resource Endowment Initiative and on
advisory councils for other companies, the World Bank Group
and the United Nations. She also worked for The Prince of Wales
International Business Leaders Forum in the United Kingdom, the
World Business Council for Sustainable Development in Africa,
FUNDES in Latin America and as a Vice President at Citibank
working in Asia, Europe and the Middle East.
External appointments: NYSE listed: Ms Nelson is currently a
Non-Executive Director of Newmont Mining Corporation (since
2011) and Chair of its Safety and Sustainability Committee.
Ms Nelson is currently a member of the World Economic Forum’s
(WEF) Global Future Council on Good Governance, WEF’s Climate
Governance Community of Experts and WEF’s Stewardship
Council for Food Systems. Ms Nelson is also a Member of the
Business Commission to Tackle Inequality and an Emeritus
Director of the World Environment Center.
Skills and experience: Ms Nelson’s career comprises a portfolio
of roles across academia as well as international policy, business
leadership groups and not-for-profit organisations. She has
expertise in sustainable development including in human
rights, cultural heritage and Indigenous issues and a significant
understanding of climate change and biodiversity issues.
Ms Nelson’s strong focus on sustainable development, together
with her passion for building partnerships between business,
government and civil society, is an asset to our Board given this
is at the heart of our purpose and underpins the delivery of our
strategy.
69
SOUTH32 ANNUAL REPORT 2023 BOARD OF DIRECTORS CONTINUED
R
N
RA
S
S
N
R
Mr Wayne Osborn Dip Elect Eng, MBA, FTSE, 71
Independent Non-Executive Director
Appointed: 7 May 2015
Location: Australia
Mr Keith Rumble BSc, MSc (Geology), 69
Independent Non-Executive Director
Appointed: 27 February 2015
Location: South Africa
Career summary: Mr Osborn worked as an engineer in the
telecommunications and iron ore industries, before joining Alcoa
(Australia) in 1979.
Mr Osborn held several senior management positions with Alcoa
over the course of his career, including having accountability for
its Asia-Pacific manufacturing operations in China, Japan, Korea
and Australia. In 2001 he was appointed Managing Director,
leading an integrated business comprised of bauxite mining,
alumina refining, coal mining, power generation and aluminium
smelting until his retirement in 2008.
Since 2008, Mr Osborn has served as a Non-Executive Director in
the mining, energy and construction industries. Most recently, he
was a Non-Executive Director of Wesfarmers Limited from March
2010 to October 2021.
Other key roles Mr Osborn has held include 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. He is also a recipient of the WA Business
Leader Award (2007) and the Australian Institute of Company
Directors Award for Excellence (2018).
External appointments: None.
Skills and experience: Mr Osborn brings expertise in mining
and smelting operations, large-scale capital projects and
commodity value chain management to our Board. His broad
skills and experience in health and safety management and
strong understanding of the key environmental issues, risks and
opportunities relevant to our operations, are an asset to our
Board as it oversees our commitments to improve our safety
performance, our approach to sustainability-related risks and
opportunities and how we manage our environmental impact.
Mr Osborn’s experience leading large workforces, expertise in
overseeing remuneration design and implementation and strong
focus on sustainability, make him a highly capable Remuneration
Committee Chair.
Career summary: Mr Rumble is a qualified geologist. He joined
Richards Bay Minerals (at that time, a joint venture between
BHP and the Rio Tinto Group) in 1980, working in smelting and
metallurgy, and held various management positions before
becoming CEO in 1996. Prior to that appointment, Mr Rumble
spent just under three years with Rio Tinto’s iron and titanium
business as Director of International Sales and Marketing. He was
appointed President and CEO of Rio Tinto Iron and Titanium Inc. in
Canada in 2000.
In 2001, Mr Rumble joined Impala Platinum, where he held the
role of CEO until 2007 after which he moved to junior miner SUN
Mining (part of the SUN Group), also as CEO.
Since his retirement as an executive in 2008, Mr Rumble has
held Non-Executive Director positions at BHP and South African
infrastructure and resources company, Aveng Limited.
External appointments: Mr Rumble is currently a Director of
Enzyme Technologies (Pty) Limited and Elite Wealth (Pty) Limited.
Skills and experience: With his substantial tenure as an
executive leader in the resources industry, Mr Rumble brings
deep knowledge and experience in mining and smelting
operations. His expertise in geological and geoscience matters
and strong understanding of the key environmental impacts,
risks and opportunities relevant to our business, enhance our
Board’s capability to oversee our sustainability commitments,
risks and impacts. These skills, together with his health and safety
management expertise and proficiency in risk management,
make him a highly capable Sustainability Committee Chair.
70
GOVERNANCE
DIRECTORS' REPORT
This report is presented by the Board of Directors of South32
Limited, together with the Group’s Financial report, for the
financial year ended 30 June 2023.
Mozal Aluminium in Mozambique, Hillside Aluminium and Hotazel
Manganese Mines in South Africa and the Hermosa project in the
United States.
This report is prepared in accordance with the requirements of
the Corporations Act, with the following information forming part
of this report:
– Operating and Financial Review on the inside front cover to
page 62;
– Director biographical information on pages 66 to 70;
– Remuneration report on pages 78 to 103;
– Note 19(b) Financial risk management objectives and policies
on pages 145 to 149;
– Note 20 Share capital on page 149;
– Note 21 Auditor’s remuneration on page 150;
– Note 23 Employee share ownership plans on pages 151 to 155;
– Directors’ declaration on page 162;
– Auditor’s independence declaration on page 163;
– Resources and Reserves on pages 168 to 176;
– Shareholder information on pages 178 to 180; and
– Corporate directory on page 188.
Directors and meetings
At the date of this report, the Directors in office were:
Ms Karen Wood
Mr Graham Kerr
Mr Frank Cooper AO
Dr Xiaoling Liu
Mr Carlos Mesquita
Appointed 1 November 2017
Appointed 21 January 2015
Appointed 7 May 2015
Appointed 1 November 2017
Appointed 1 May 2023
Dr Ntombifuthi (Futhi) Mtoba
Appointed 7 May 2015
Ms Jane Nelson
Mr Wayne Osborn
Mr Keith Rumble
Appointed 1 May 2023
Appointed 7 May 2015
Appointed 27 February 2015
Mr Guy Lansdown was also a Director during FY23, having been
appointed on 2 December 2019 and resigned with effect from
31 May 2023.
You can find information about our Directors’ qualifications,
experience, special responsibilities and other directorships on
pages 66 to 70.
Board and Committee meetings and Director
attendance
There are nine regularly scheduled meetings of our 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 FY23, there were a total of 11 Board meetings. The
additional meetings were held to consider options in relation to
the Dendrobium Next Domain project and Director succession
planning and implementation. The FY23 Board program included
a dedicated strategy day held in April 2023.
Following the easing of COVID-19 related travel and social
distancing restrictions, our Board was able to meet physically five
times throughout the year and Directors conducted site visits to
In addition to the site visits, during FY23 our Board continued
to stay connected with our operations by way of operational
overviews and briefing sessions conducted as part of the Board
program.
To help it carry out its responsibilities, our Board has four standing
Board Committees. From time to time and on an “as needs
basis”, the Board creates other committees to address important
matters and areas of focus for the business.
All Directors have a standing invitation to attend all Committee
meetings, and in practice, all Directors generally attend all meetings.
The number of Board and Committee meetings held in FY23,
as well as the Directors who attended them, can be found in
Table 1.1.
Our Chair sets the agenda for each Board meeting, with the
Chief Executive Officer (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;
– Government relations and political affairs;
– Investor relations hosted engagements (including
environmental, social, and governance updates); and
– Project updates (including pending investment decisions) and
other significant business imperatives.
Further, our Board receives updates from management on
relevant issues such as cybersecurity risks, climate change,
greenhouse gas emissions reduction targets including
information on evolving regulation and policy developments,
sexual harassment in the workplace, culture, inclusion and
diversity, 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 and market
research.
As part of their ongoing education and training, during FY23 our
Board received external briefings on various matters including
cybersecurity risk, climate and biodiversity risk governance and
disclosure matters, work health and safety including workplace
sexual harassment, the political landscape and developments in
North and South America, industrial relations reform in Australia
and evolving regulation and policy developments and shifting
societal expectations in relation to these areas.
71
SOUTH32 ANNUAL REPORT 2023 DIRECTORS' REPORT CONTINUED
Table 1.1 Board and Committee Meeting Attendance in FY23
K Wood(3)
G Kerr (CEO)
F Cooper
X Liu
G Lansdown(4)
C Mesquita(3)(5)
N Mtoba
J Nelson(3)(5)
W Osborn(3)
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)
11
11
11
11
10
1
11
1
11
11
11
11
10
11
10
1
11
1
11
11
8
-
8
8
7
-
8
-
8
8
8
8
8
8
7
1
8
1
8
8
7
-
7
-
6
-
-
-
7
7
7
7
7
7
6
1
7
1
7
7
-
-
9
9
8
-
9
-
-
-
9
9
9
9
8
1
9
1
9
9
7
-
-
7
6
-
-
-
7
7
7
7
7
7
6
1
7
1
7
7
Member
Chair
(1) Indicates the number of meetings held during FY23 while the Director was a member of the Board or Committee.
(2) Indicates the number of meetings the Director attended during FY23.
(3) Effective 1 July 2023, J Nelson and C Mesquita were each appointed members of the Nomination and Governance Committee and the Sustainability Committee, W Osborn was
appointed a member of the Risk and Audit Committee and K Wood ceased to be a member of the Sustainability Committee.
(4) G Lansdown resigned as a Director effective 31 May 2023.
(5) J Nelson and C Mesquita were appointed as Directors effective 1 May 2023.
Diversity representation
Inclusion and diversity is a core element of our culture. We know an inclusive and diverse workforce is safer and allows for greater
collaboration, innovation and performance. Our Inclusion and Diversity Policy was updated and approved by our Board in July 2023 and
is available at www.south32.net.
We are committed to building and maintaining an inclusive and diverse workforce that reflects the communities in which we operate.
Diversity is a key attribute of high performance in a well-functioning Board and Lead Team, and offers benefits including varied thoughts
and perspectives along with unique insights and healthy challenge, which lead to better decision-making as we execute our strategy.
We consider inclusion and diversity in tandem, grounded in mutual respect, where each person’s unique differences are recognised,
valued, and celebrated.
Our vision for diversity considers the broadest definition of difference, including gender, ethnicity, nationality, cultural background,
geographic location, language/accent, religious beliefs, socio-economic background, neurodiversity, disability, physical attributes,
appearance, age, education, family responsibilities and sexuality.
Table 1.2 Gender and ethnicity representation on the Board and Executive Management as at 30 June 2023
Board and Executive Management diversity
Gender identity
Men
Women
Not specified/prefer not to say
Ethnic background
White British or other White (including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Number of
Board
members
Percentage of
the Board
Number of
senior
positions on
the Board
(CEO, CFO, SID
and Chair)(1)
Number in
executive
management(2)
Percentage of
executive
management
5
4
-
6
-
1
1
-
1
55.6%
44.4%
-
66.7%
-
11.1%
11.1%
-
11.1%
1
1
-
2
-
-
-
-
-
4
5
-
5
3
1
-
-
-
44.4%
55.6%
-
55.6%
33.3%
11.1%
-
-
-
(1) The Financial Conduct Authority (FCA) prescribes that the senior positions on the Board are the Chair, CEO, Chief Financial Officer (CFO) and Senior Independent Director (SID).
For South32, the senior positions on the Board are only the Chair and the CEO. In line with market practice for Australian listed companies, the CFO does not sit on the Board
and South32 does not have a SID as this role is not required under the corporate governance code South32 applies, being the ASX Principles and Recommendations.
(2) In accordance with the UK Listing Rules, Executive Management includes the Lead Team (our most senior executive body below the Board) and the Company Secretary,
excluding administrative and support staff.
72
GOVERNANCE
The FCA introduced new rules in 2022 that require listed
companies to publish information on gender and ethnic
representation of the Board and Executive Management. In
addition, the FCA requires listed companies to disclose against
diversity targets, specifically that at least 40 per cent of the
Board are women, at least one of the senior Board positions is a
woman and at least one member of the Board is from a non-white
ethnic minority background. South32 meets or exceeds all of
these targets, as set out in Table 1.2.
The data presented in Table 1.2 was collected via self-reported
questionnaires completed by all members of the Board and
Executive Management that included the definitions prescribed
by the UK Listing Rules.
Principal activities, state of affairs and review of
operations
Principal activities and significant changes during the
financial year
In FY23, the principal activities of the Group were mining and
metals production, from a portfolio of assets that included
bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel,
metallurgical coal and manganese.
There were no significant changes in the Group’s principal
activities during the financial year.
State of affairs
There were no significant changes in the Group’s state of affairs
during the financial year, other than as set out in the Operating
and Financial Review on the inside front cover to page 62.
Review of operations, likely developments and
expected results
A review of the Group’s FY23 operations is set out in the
Operating and Financial Review on the inside front cover to
page 62.
The Operating and Financial Review also includes likely
developments in the Group’s operations in future financial years
and expected results of those operations.
Dividends
We paid the following dividends during FY23:
Final dividend of US 14.0 cents
per share (fully-franked) for the
year ended 30 June 2022
Special dividend of
US 3.0 cents per share
(fully-franked) for the year
ended 30 June 2022
Interim dividend of US 4.9 cents
per share (fully-franked) for
the half-year ended
31 December 2022
Total dividend
Payment date
US$646 million 13 October 2022
US$138 million 13 October 2022
US$223 million
6 April 2023
Matters since the end of the financial year
Capital management
On 24 August 2023, the Directors resolved to pay a fully-franked
final dividend of US 3.2 cents per share (US$145 million) in
respect of the 2023 financial year. The dividends will be paid on
12 October 2023. The dividends have not been provided for in the
consolidated financial statements and will be recognised in the
2024 financial year.
On 24 August 2023, the Group also announced an increase to the
existing capital management program, initially announced in
March 2017, of US$50 million to a total of US$2.4 billion. This leaves
US$133 million expected to be returned by 1 March 2024.
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.
Directors’ relevant interests in shares
Table 1.3 Directors’ Relevant Interests in South32 Limited
Shares
Director
K Wood
G Kerr (CEO)(1)
F Cooper
X Liu
C Mesquita
N Mtoba
J Nelson
W Osborn
K Rumble
Number of South32 Limited shares in which a relevant
interest is held as at the date of this Directors’ Report
367,825
7,221,105
128,010
66,000
177,440
71,386
-
174,104
161,380
(1) At the date of this Directors’ Report, G Kerr’s total interest includes 2,040,944
South32 Limited ordinary shares and 5,180,161 rights over South32 Limited 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 CEO and Managing Director, Graham Kerr, holds rights over
South32 Limited shares, granted under the South32 Equity
Incentive Plan. You can find more details about this in the
Remuneration report on page 101.
The total number of rights over South32 Limited shares on issue
as at 30 June 2023 is set out in note 23 to the financial statements
(Employee share ownership plans) on pages 151 to 155. No rights
have been granted since the end of FY23. As of the date of this
report, the total number of rights over South32 Limited shares on
issue is 34,788,550.
No shares have been issued on vesting of rights during or since the
end of FY23.
South32 Limited did not have any options on issue during or since
the end of FY23.
73
SOUTH32 ANNUAL REPORT 2023 DIRECTORS' REPORT CONTINUED
Company Secretary
Claire Tolcon
LLB, BComm, FGIA, GAICD
Claire Tolcon is our Company Secretary and was appointed to
this position on 30 October 2020. Claire joined South32 in 2017
and was a corporate lawyer in our legal team before moving
into Company Secretariat. Prior to South32, Claire held the role
of General Counsel and Company Secretary for a number of
Australian Securities Exchange (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, a Graduate Diploma of Applied Finance and
Investment from Kaplan and is a Fellow of the Governance
Institute of Australia.
Indemnities and insurance
The South32 Limited Constitution requires that we indemnify
each Director and Company Secretary (as well as employees
appointed as directors and secretaries of a Group company) 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
Group company. The Directors and the Company Secretary
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 the
Company’s Directors, Company Secretary 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 other 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 FY23 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 ASX Recommendations.
Our Corporate Governance Statement is available at
www.south32.net. It also contains the information required under
the United Kingdom FCA's Disclosure Guidance and Transparency
Rules.
Auditor
Our External Auditor has provided an independence declaration
in accordance with the Corporations Act, which is set out on
page 163 and forms part of this report.
Non-audit services
No non-audit services were undertaken by, and no amounts in
respect of such services were paid or are payable to, our External
Auditor during FY23. Refer to note 21 to the financial statements
(Auditor’s remuneration) on page 150.
Political donations and social investment
Our Code of Business Conduct sets out our approach to political
donations and social investment.
In FY23, we made no political donations to any political party,
politician, political party official, elected official or candidate for
public office in any country. On occasion, our representatives
attend political events 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 FY23, we contributed US$27.7 million in social investment that
comprised direct investment, administrative costs and in-kind
support. For more information on our social investment, please
visit our Sustainable Development Report, available at
www.south32.net.
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
standard. In FY23, there were no environmental events that
resulted in a major impact to the environment.
Fines and prosecutions
In FY23, while we recorded no fines or prosecutions relating
to environmental performance, we did record one significant
non-compliance related to environment laws and regulations.
In June 2023, Illawarra Metallurgical Coal (IMC) entered into an
enforceable undertaking with the New South Wales Natural
Resources Access Regulator for an alleged breach of the Water
Management Act 2000 associated with incidental surface water
taken as a result of carrying out operations at the Dendrobium
mine. IMC agreed to implement various environmental protection
works and activities at the mine, worth approximately
A$2.9 million, in order to regularise its surface water take.
Rounding of amounts
South32 Limited is an entity to which the Australian Securities
and Investments Commission (ASIC) Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191 (ASIC
Instrument 2016/191) applies. We have rounded amounts in this
report in accordance with ASIC Instrument 2016/191. This means
the amounts in this report and the financial statements have been
rounded to the nearest million US dollars, unless stated otherwise.
74
GOVERNANCE
Responsibility statement
The Directors state that to the best of their knowledge:
a) The consolidated financial statements and notes on pages
105 to 161 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 and the responsibility statement are made
in accordance with a resolution of the Board.
Karen Wood
Chair
Graham Kerr
Chief Executive Officer and
Managing Director
Date: 7 September 2023
75
SOUTH32 ANNUAL REPORT 2023 LEAD TEAM
Graham Kerr
BBUS, FCPA, 52
Chief Executive Officer
and Managing Director
See page 67 for Graham Kerr’s
qualifications and experience.
76
GOVERNANCE
Noel Pillay
NHDP Mech Eng, 55
Chief Operating Officer Africa
and Colombia
Noel Pillay became our Chief
Operating Officer in October
2021 and is responsible for
our operations in Africa and
Colombia.
Prior to this role, Noel was
Vice President Operations at
Worsley Alumina where he was
responsible for the operation’s
safety, production and cost
performance. Before his time
at Worsley Alumina, Noel was
Vice President Operations at
Hillside Aluminium in South
Africa.
Before joining South32, Noel
worked for BHP from 1994 as
a Maintenance Engineer at
Hillside Aluminium and has
held several leadership roles
in Maintenance, Production,
Business Improvement and
Human Resources in South
Africa and Australia.
Noel is a trained Mechanical
Engineer and holds a National
Higher Diploma from the
University of Johannesburg.
Sandy Sibenaler
BCom, MFin, CA, GAICD, 41
Chief Financial Officer
Sandy Sibenaler joined
South32 in 2021 and became
our Chief Financial Officer in
April 2023, with responsibility
for Financial Reporting,
Management Reporting,
Treasury, Business Evaluation,
Tax, Investor Relations and
Group Assurance. Prior to
this role, Sandy was our Vice
President Finance.
Sandy has more than 20
years of treasury, finance
and commercial experience
in the resources sector. Prior
to joining South32, she held
a number of senior finance
and commercial roles at
Woodside and BHP including
Vice President of Treasury
and Insurance, General
Manager Logistics and Finance
Reporting Manager.
Sandy holds a Bachelor of
Commerce from the University
of Western Australia, a Master
of Finance from Kaplan
Business School, is a Fellow
of Chartered Accountants
Australia and New Zealand and
a Graduate of the Australian
Institute of Company Directors.
Jason Economidis
MBA (Executive), GAICD, 54
Chief Operating Officer
Australia
Jason Economidis became
our Chief Operating Officer
in July 2020, assuming
responsibility for Australia
Manganese, Cannington,
Illawarra Metallurgical Coal and
Worsley Alumina. Prior to this
role, 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 and is a
Graduate of the Australian
Institute of Company Directors.
Vanessa Torres
BSc (Chemical), MEng, DEng, 53
Chief Technical Officer
Katie Tovich
BCom, CA, GAICD, 53
Chief Human Resources and
Commercial Officer
Kelly O’Rourke
LLB, BCom, MAICD, 44
Chief Legal and External
Affairs Officer
Simon Collins
BE (Mining), MBA, 50
Chief Development Officer
Vanessa Torres became our
Chief Technical Officer in
July 2020. She is responsible
for Technology, Innovation,
Business Optimisation, Global
Business Services, Capital
Projects as well as Health,
Safety, Environment and
Technical Stewardship.
Vanessa joined South32
in August 2018 as Chief
Technology Officer. Before this
role, she was Vice President
Operational Infrastructure
for BHP Western Australia
Iron Ore. She has over 30
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.
Katie Tovich joined South32
in 2015 and became our
Chief Human Resources and
Commercial Officer in April
2023, with responsibility for our
Human Resources, Marketing
and Supply functions. Katie
was our Chief Financial Officer
from May 2019 to March 2023
and prior to this role, was Vice
President Corporate Affairs
and Investor Relations, as well
as Head of Treasury.
Katie brings more than 25
years of global experience in
the resources sector. Before
joining South32, 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, is a member
of Chartered Accountants
Australia and New Zealand and
is a Graduate of the Australian
Institute of Company Directors.
Kelly O'Rourke was appointed
to the Lead Team in November
2020, initially as our Chief
External Affairs Officer
and subsequently as Chief
Legal and External Affairs
Officer in July 2021, where
she is responsible for Legal,
Company Secretariat, Business
Integrity, Communications,
Community, Government and
Sustainability Strategy.
Kelly joined South32 in 2016
as Vice President of Corporate
Affairs and Investor Relations.
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
20 years’ experience in
the mining industry across
legal, commercial, business
development, mergers and
acquisitions, external affairs
and community roles across
Australia, the United Kingdom,
Asia, Europe, Africa and the
Americas.
Kelly holds a Bachelor of
Laws (Distinction) from
The University of Western
Australia, a Bachelor of
Commerce from Curtin
University and is a Member
of the Australian Institute of
Company Directors.
Simon Collins has been our
Chief Development Officer
since October 2018. He is
responsible for Greenfields
Exploration, Corporate
Development, Brazil Alumina,
Brazil Aluminium, Sierra Gorda
and the Hermosa project.
He also represents South32
on the Board of Directors of
Ambler Metals LLC.
Simon has nearly 30 years of
experience in the resources
industry in senior leadership,
commercial and business
development roles. Before
joining South32, he worked
for BHP for more than a
decade, providing leadership
to commercial and business
development teams in
Australia, Africa and the
Americas. 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.
77
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT
LETTER FROM
OUR REMUNERATION
COMMITTEE CHAIR
Dear Shareholders
On behalf of the Board, I’m pleased to present the Remuneration report for the year ended 30 June 2023 (FY23).
The Remuneration Committee assists the Board to oversee the remuneration and benefits framework for South32, providing assurance
that remuneration arrangements support the delivery of our purpose and strategy, and are aligned to our values and the long-term
interests of our shareholders.
FY23 performance
Nothing is more important than the health, safety and wellbeing of our people. The loss of our colleagues, Mr Cristovão Alberto
Tonela and Mr Alfredo Francisco Domingos João, who were fatally injured while undertaking maintenance work at Mozal Aluminium
in November 2022, has been felt deeply across our business. We have reflected on this tragic event and have captured and shared
learnings across our business and industry, implemented additional controls at our aluminium smelters and identified further safety
improvement opportunities.
Throughout FY23, we continued to implement our multi-year Safety Improvement Program designed with the aim of enhancing our
safety culture and achieving a step change in our safety performance. While we exceeded several of our safety performance lead
measures, notably in risk management and safety leadership, our Total Recordable Injury Frequency did not meet target, increasing by
11 per cent to 5.9 per million hours worked. For more information on our health and safety performance in FY23, and FY24 focus areas,
please refer to our Sustainable Development Report available at www.south32.net.
Other important sustainability measures include our water performance and social investment. In FY23 we achieved more than
two per cent improvement in water use efficiency collectively across our four operations in areas defined as having baseline water
stress, and we invested US$27.7 million in community programs. As part of the evolution of our approach to social performance we also
developed economic development plans, which include local employment and procurement targets, at all operations for the first time.
We know that an inclusive and diverse workforce produces better outcomes and is an important enabler to further embed our 'safety
guarantee' across our business. This year we increased the representation of women on our Lead Team to 50 per cent and Operational
Leadership Team to 29 per cent, and in the total workforce to 20 per cent. In addition, we progressed initiatives to create a more
inclusive workplace, in which any form of inappropriate conduct is not tolerated.
Against a volatile global backdrop, in FY23 we delivered strong production growth in aluminium, base metals and manganese,
underpinned by our recent portfolio improvements and annual production records at three of our operations. This strong production
growth supported one of our largest underlying profit results to date, with Underlying EBITDA of US$2.5 billion, notwithstanding lower
commodity prices and industry-wide inflationary pressures. This, in turn, supported continued strong shareholder returns in respect of
FY23, including dividends totalling US$369 million and a further US$218 million returned via our ongoing on-market share buy-back.
We continue to reshape our portfolio toward commodities that are critical in the transition to a low carbon world and in FY23 we
progressed work to support planned investment decisions for the development of the Hermosa project’s Taylor zinc-lead-silver Deposit
and confirmed the opportunity to produce battery-grade manganese from Hermosa’s Clark Deposit.
Our performance across the year is recognised in our FY23 Business Scorecard, where an overall outcome of 83.8 per cent (out of a
possible 150 per cent) was achieved. See page 89 for more information.
Application of the Business Modifier
The Business Modifier is an integral component of the short-term incentive (STI) that considers overall business outcomes or other
factors that are not specifically contemplated in the Business Scorecard, to ensure unintended reward outcomes are avoided.
When considering the application of the Business Modifier for FY23, the Board primarily focused on two matters, the tragic loss of our
two colleagues who were fatally injured in the incident at Mozal Aluminium, and the non-cash impairment expense of US$1.3 billion
recognised in our FY23 financial results in relation to the Taylor Deposit at Hermosa.
In recognition of these events, the Board chose to exercise its discretion by reducing the overall STI outcome for the CEO by 25 per cent.
A reduction ranging from 5 to 20 per cent has also been applied to the STI outcome of other Executive key management personnel
(KMP) and members of the Lead Team. The application of the Business Modifier reflects our commitment to everyone going home safe
and well and overall reward outcomes that reflect our performance and the shareholder experience.
78
GOVERNANCE
FY23 reward outcomes
Our executive reward framework remained unchanged for FY23 following strong support at our 2022 Annual General Meeting, with over
98 per cent of shareholders voting in favour of the 2022 Remuneration report. The reward framework consists of fixed remuneration, STI
and long-term incentives (LTI).
In September 2022, fixed remuneration increases were applied for the CEO and Executive KMP following our annual benchmarking
exercise. These increases were aligned to the broader workforce and recognised the extensive skill sets of our CEO and Executive KMP.
The intent of the STI is to focus our executives on what they can influence in the performance year, so we remove the impacts of
external factors such as commodity price volatility and foreign exchange rate movements. Taking into consideration the FY23 Business
Scorecard outcome, including the Business Modifier, the CEO STI was 42 per cent of maximum, with other Executive KMP ranging from
40 to 74 per cent of maximum (see page 92).
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. While South32 delivered a total shareholder return (TSR) of
41 per cent over the four-year performance period of the FY20 LTI, our TSR fell short of the threshold required for vesting. As a result, all
FY20 LTI awards lapsed in full for the fourth consecutive year.
We only grant performance tested LTI awards to permanent members of the Lead Team, including those designated as KMP. However,
we do not penalise executives when they are promoted to the Lead Team and allow them to retain awards granted when they were in
prior management roles, with the respective vesting conditions. As a result, our Chief Financial Officer and Chief Operating Officers
continue to hold service-based awards that were previously granted to them prior to their permanent promotion to the Lead Team,
which the Board approved to vest in August 2023. For more information on LTI, see pages 93 and 94.
Continuing from last year, we have included an update for our strategic measures highlighting key activities in FY23 (refer to page 95 for
this update). This year, for the first time, we have also disclosed our CEO pay ratio in line with the Global Reporting Initiative and ICMM
requirements. Our FY23 CEO pay ratio is 26:1. For more information on how this is calculated, see page 82.
Looking forward to FY24
In order to continue to pay executives appropriately, we annually benchmark KMP remuneration against similar-sized Australian listed
companies and global mining companies that reflect the size, commodity mix, complexity and global presence of South32. Following
completion of this process, the Board decided to award a four and a half per cent increase to the fixed remuneration of our CEO in
recognition of his extensive experience and skill set after eight years in the role and consistent with the approach taken with the broader
workforce. Fees for Non-Executive Directors will remain unchanged. See page 99 for further information about changes to Executive
KMP fixed remuneration in FY24.
Following the adjustments made to the reward framework effective from FY22, no major changes are being made for FY24. We are,
however, strengthening the link between safety and reward through an increased weighting in the Business Scorecard. See page 99 for
our FY24 STI performance metrics and weightings.
We look forward to continuing to engage with shareholders and sharing in the future success of South32.
Thank you for your support.
Wayne Osborn
Chair, Remuneration Committee
79
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
FY23 at a glance
Record annual production at:
Hillside Aluminium
Australia Manganese
South Africa Manganese
Underlying EBIT(1):
US$1,616M
41%
Four-year total shareholder return(2):
Total Shareholder Return (TSR)(3)
Diagram 1.1 – Four-year South32 TSR relative to LTI comparator
groups (AUD)
Diagram 1.2 - Four-year South32 TSR relative to key indices (AUD)
125%
100%
75%
50%
25%
0%
-25%
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
125%
100%
75%
50%
25%
0%
-25%
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
-50%
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
-50%
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
South32
Sector Index
World Index
South32
ASX100
FTSE100
S&P500
(1) This number has not been prepared in accordance with International Financial Reporting Standards (IFRS).
(2) TSR calculation uses June 2019 average return at the start and June 2023 average return at the end of the measured period.
(3) Rolling 22-day average TSR.
The following table outlines historic business performance outcomes.
Table 1.1 – Business performance
Performance measures(1)
Underlying earnings before interest and tax (EBIT) (US$M)(2)
Underlying earnings (US$M)(2)
Closing net cash/(debt) (US$M)
Movement in Adjusted ROIC (percentage)(3)
Closing share price on 30 June (A$)(4)
Dividends/special dividends paid (US cents per share)
Total Recordable Injury Frequency (TRIF) (per million hours worked)
FY23
1,616
916
(483)
(6.6%)
3.76
21.9
5.9
FY22
3,967
2,602
538
0.4%
3.94
14.2
5.3
FY21
1,039
489
406
0.7%
2.93
2.4
4.3
FY20
622
193
298
0.0%
2.04
5.0
4.2
FY19
1,797
992
504
(1.4%)
3.18
13.0
4.5
(1) The financial information in this table has not been prepared in accordance with IFRS.
(2) The underlying information reflects the Group’s interest in material equity accounted investments and is presented on a proportional consolidation basis. Refer to pages
113 to 120 of the Annual Report for the basis of the underlying information and a reconciliation to statutory earnings.
(3) The movement in Adjusted ROIC (FY23: (6.6%)) is calculated as the difference between Adjusted ROIC for the current performance period (FY23: 26.4%) less ROIC from the
previous performance period (FY22: 33.0%), and represents the impacts of sales volumes (FY23: (6.0%)) and other business performance impacts (FY23: (0.6%)) on ROIC. ROIC
is calculated as Underlying EBIT (FY22: US$3,967 million) less the discount on rehabilitation provisions included in net finance costs, tax effected by the Group’s Underlying
effective tax rate (ETR) including our material equity accounted investments on a proportional consolidation basis (FY22: US$1,315 million), divided by the sum of the average
balance of fixed assets and inventories (FY22: US$9,887 million) (excluding the average balance of any rehabilitation assets, the impact of impairment and impairment reversal,
and unproductive capital (FY22: US$(3,117) million) including our material equity accounted investments on a proportional consolidation basis (FY22: US$1,265 million). Refer to
pages 113 to 120 of the Annual Report for the basis of underlying information and a reconciliation to statutory earnings.
(4) The closing share price on 29 June 2018 (the last trading day in FY18) was A$3.61.
80
GOVERNANCE
FY23 Key Management Personnel
Our KMP consist of our Board (including the Chief Executive Officer), and members of the Lead Team who have authority and
responsibility for planning, directing and controlling the activities of the Group directly or indirectly. Table 1.2 below provides an
overview of our KMP in FY23.
Table 1.2 – KMP in FY23
Non-Executive Directors
FY23 Term
Executive KMP
FY23 Term
K Wood(1)
F Cooper AO(1)
G Lansdown(1)
X Liu
C Mesquita
N Mtoba
J Nelson
W Osborn(2)
K Rumble(1)
Full year
Full year
Ceased on 31 May 2023
Full year
Appointed on 1 May 2023
Full year
Appointed on 1 May 2023
Full year
Full year
G Kerr – Chief Executive Officer (CEO)
K Tovich – Chief Financial Officer (CFO)(3)
S Sibenaler – CFO(4)
J Economidis – Chief Operating Officer (COO) Australia Full year
Full year
N Pillay – COO Africa and Colombia
Full year
Ceased on 31 March 2023
Appointed on 1 April 2023
(1) Remuneration Committee member.
(2) Remuneration Committee Chair.
(3) K Tovich ceased to be CFO and a member of Executive KMP on 31 March 2023. Effective 1 April 2023, she was appointed as Chief Human Resources and Commercial Officer
(CHRCO).
(4) S Sibenaler became CFO and a member of Executive KMP on 1 April 2023. Prior to this, she was Vice President Finance.
FY23 Executive remuneration overview
CEO fixed remuneration
increase:
Range of Executive KMP STI outcomes as a
percentage of maximum STI opportunity:
5.0%
40% to 74%
FY20 LTI vesting
outcome:
0.0%
Fixed
remuneration
The Board awarded a five per cent increase to the fixed remuneration of our CEO, Graham Kerr, from
1 September 2022 in recognition of his extensive experience and skill set, and consistent with the approach
taken with the broader workforce. This was his second increase in fixed remuneration since commencing as CEO
in 2015.
Fixed remuneration for other Executive KMP was also increased by between five and six per cent in recognition
of their experience and aligned with the increases applied to the broader workforce in the relevant geographies
(Australia and South Africa).
FY23 STI
In FY23, our performance against our Business Scorecard measures resulted in an outcome of 83.8 per cent (out
of a possible 150 per cent).
Furthermore, the Board determined to apply a negative Business Modifier for all Executive KMP in recognition of
the two fatalities at Mozal Aluminium and, for the CEO, in recognition of the non-cash impairment for the Taylor
Deposit at our Hermosa project. This resulted in a negative Business Modifier of 25 per cent for Graham, 20 per
cent for Noel Pillay, 10 per cent for Jason Economidis and 5 percent for Sandy Sibenaler and Katie Tovich
respectively.
The overall STI outcome for Executive KMP ranged from 40 per cent to 74 per cent of maximum with Graham
receiving 42 per cent.
LTI vesting
in 2023
While South32 delivered TSR of 41 per cent over the four-year performance period, this fell short of the threshold
required for vesting when compared to the two performance benchmarks. As a result, all FY20 LTI rights lapsed.
South32 does not offer retention rights to permanent members of the Lead Team, including those that are
Executive KMP. However, employees who are promoted into Executive KMP roles retain unvested awards
granted under the Management Share Plan (MSP) while in their prior role. These awards are a combination of
performance rights and retention rights. As the service-based condition of the MSP retention rights granted to
Sandy, Jason and Noel prior to their permanent appointment to the Lead Team was met, our Board approved
these awards to vest in full in August 2023.
FY23 realised pay
Realised pay for Executive KMP (see page 82) was below Target Remuneration (see page 86) as the FY20 LTI did
not vest, the Business Scorecard outcome was below target and the Board applied a negative Business Modifier
when determining the STI outcome.
The Board considered all components of remuneration in reviewing the FY23 reward outcomes to align with our
Guiding Principles (see page 83) and believes the FY23 realised pay is fair for Executive KMP and shareholders,
based on performance for the year.
81
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
Realised pay for Executive KMP in FY23
Realised pay is the value of reward received by Executive KMP in relation to the financial year, rather than potential pay that may be
earned or disclosed statutory pay. We publish this information to enable our shareholders to better understand the pay delivered to our
Executive KMP 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 83) is to deliver realised pay outcomes that reflect Company
performance and the shareholder experience. The Board and Remuneration Committee believe that our realised pay outcomes reflect
this objective.
FY23 realised pay for Executive KMP, outlined in Table 1.3, includes:
– Fixed remuneration earned in FY23 (including pension/superannuation);
– Other cash and non-monetary benefits earned in FY23;
– Total FY23 STI earned (including cash and deferred rights) based on performance during this financial year (see page 92); and
– LTI awards that vested based on performance and/or service conditions to 30 June 2023 (see page 94).
Realised pay is likely to vary substantially, either up or down, from statutory remuneration and from Target Remuneration (see page 86)
because a significant portion of our Executive KMP pay is ‘at risk’ and based on challenging performance measures. Furthermore, as the
LTI is measured over a four-year performance period, vesting outcomes will not always correlate to the TSR outcomes for a single year.
In comparison to FY22, FY23 realised pay reflects the lower overall STI outcomes.
Table 1.3 – Realised pay in respect of FY23 (A$’000)
Executive KMP
G Kerr
K Tovich(4)
S Sibenaler(5),(6)
J Economidis
N Pillay(7),(8)
Fixed
remuneration
Other(1)
STI Cash
STI Deferred
LTI(2),(3)
Total Realised
Pay
1,891
1,815
907
863
576
-
812
780
678
651
48
42
15
9
37
-
12
7
26
239
719
1,215
611
691
249
-
352
482
248
352
719
1,215
611
691
84
-
352
482
248
279
-
-
-
170
89
-
372
245
324
214
3,377
4,287
2,144
2,424
1,035
-
1,900
1,996
1,524
1,735
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
(1) Other includes such items as car parking, insurances and tax advice provided to Executive KMP.
(2) Value of LTI is based on a closing share price on 30 June 2023 of A$3.76 (FY23) and 30 June 2022 of A$3.94 (FY22).
(3) LTI includes Management Share Plan awards granted to S Sibenaler, J Economidis and N Pillay prior to their permanent appointment to the Lead Team (see page 93). FY22 LTI
includes the FY20 Transitional LTI award granted to K Tovich on appointment to the Lead Team.
(4) K Tovich ceased to be CFO and a member of Executive KMP on 31 March 2023. Following this, she was appointed as CHRCO. FY23 realised pay reflects nine months as CFO and
three months as CHRCO.
(5) S Sibenaler became CFO and a member of Executive KMP on 1 April 2023. Prior to this, she was Vice President Finance. FY23 realised pay reflects nine months in her prior role
and three months as CFO.
(6) Other for S Sibenaler includes the pro-rated payout of a retention agreement of A$35,500 relating to her service as Vice President Finance that was paid prior to becoming a
member of Executive KMP.
(7) N Pillay became COO Africa and Colombia on 1 October 2021 and a member of Executive KMP on 1 December 2021. Prior to this, N Pillay was Vice President Operations at
Worsley Alumina. FY22 realised pay reflects three months in his prior role and nine months as COO. Salary relating to his time as COO is denominated in ZAR and has been
converted to A$ using an exchange rate of AUD:ZAR 11.96 for FY23 and AUD:ZAR 11.13 for FY22.
(8) FY22 Other amounts for N Pillay include benefits provided to him to assist with his relocation from Australia to South Africa. These include a relocation allowance of
ZAR1,500,000 paid on 25 October 2021 which has been converted to A$ using an exchange rate of AUD:ZAR 10.99.
CEO Pay Ratio
As part of our commitment to pay transparency, we have calculated the ratio of our CEO’s total realised pay to the median total realised
pay for all our employees globally. This results in an FY23 CEO pay ratio of 26:1 which reflects an STI outcome for the CEO that was below
target and no LTI vesting. The pay ratio is expected to vary from year to year, given the significant portion of our CEO's pay which is 'at
risk'.
CEO total realised pay has been calculated in accordance with the method used in Table 1.3. For all other employees realised pay is for
the 12-month period to 30 June 2023 and includes all allowances, annual incentive payments received in the period and the value of
shares that vested, but excludes other non-monetary benefits. Pension contributions have been calculated based on the cost to the
Group of the contributions made in the 12-month period. Internationally mobile employees and employees who joined or left the Group
after 1 July 2022 have been excluded from the calculation.
82
GOVERNANCE
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) (the Act) and audited as required by section 308(3C) of the Act. These sections
relate to those persons who were KMP of South32 during FY23, being the individuals listed in Table 1.2 on page 81.
Remuneration governance
The roles and responsibilities of our Board, Remuneration Committee, management and external advisors in relation to remuneration for
Executive KMP and employees of South32 are outlined below.
Board
Our Board maintains overall responsibility for overseeing the remuneration policy and the principles
and processes that underpin it. It approves 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.
Remuneration Committee
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.
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 gain assurance that remuneration arrangements
are equitable and aligned to the long-term interests of shareholders, operate within risk appetite 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.
External advisors
Independent external advisors may be engaged either directly by the Remuneration Committee,
or via management. These advisors provide information on remuneration-related issues, including
benchmarking information and market data.
The Remuneration Committee did not receive recommendations from external advisors, including
remuneration consultants, in relation to KMP in FY23.
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.
Reward practices and outcomes
Our Guiding Principles
Purpose
and Strategy
The way
we work
Shareholders
Performance
Market
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; and
– Identify and pursue
opportunities to sustainably
reshape our business for the
future, and create enduring
social, environmental and
economic value.
Our culture is grounded
in our values and 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
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
focuses executives and
management on
delivering superior TSR.
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.
Our reward outcomes
align 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.
Our reward is
competitive and
designed to attract and
retain talented
executives.
We benchmark our
reward levels in
consideration of similar
sized companies on the
Australian Securities
Exchange (ASX), as well
as our global mining
peer group.
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SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
Components of our reward for FY23
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
Fixed remuneration is
set with reference to
the median of our peer
groups, reflecting each
member of Executive
KMP’s responsibilities,
location, skills and
experience.
STI focuses efforts on our key priorities both
in the financial year and into the future. It
aims to motivate Executive KMP to achieve
challenging performance objectives. Our STI
reflects performance during the year and
measures outcomes within management’s
control.
LTI is directly linked to:
– Relative TSR so that Executive KMP pay outcomes are
aligned with the shareholder experience over the longer-
term; and
– Two strategic measures so that Executive KMP pay
outcomes are aligned to the business priorities that we
believe will underpin the long-term success of South32.
The how
Base salary and
superannuation.
Our
approach
in FY23
We benchmark our
fixed remuneration
and Target
Remuneration against
two key peer groups
that reflect our profile
as a Company and 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
– An international
mining peer
group of 18
companies with
a similar market
capitalisation,
commodity mix
and/or global
presence to
South32 (see Our
global mining peer
group below).
Fifty per
cent paid
in cash
annually.
Fifty per cent delivered in
rights to receive South32
shares(1), deferred for two
years(2).
Quantum (percentage of fixed
remuneration):
Target Value
Maximum
Opportunity
Executive KMP
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 so
that we reward for items management can
control.
Performance measures:
■ Sustainability (28.3%)
■ Financial: Production, cost and
capital expenditure (28.3%)
■ Financial: Adjusted ROIC (28.3%)
■ Strategic priorities (15%)
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 Business
Modifier to the Business Scorecard outcome.
The Business 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 each member of
Executive KMP’s individual performance,
taking into account their areas of
responsibility and the alignment of their
behaviours with our values (i.e. how
outcomes have been achieved).
Rights to receive South32 shares that are subject to meeting
performance conditions over the four-year performance
period.
Quantum (percentage of fixed remuneration):
The quantum for FY23 was determined by multiplying fixed
remuneration by the following face value percentages:
CEO
Other KMP
Performance measures:
Target Value
Face Value
120%
80%
200%
133%
■ TSR relative to EMIX Global Mining Index constituents
(53.3%)
■ TSR relative to MSCI World Index (26.7%)
■ Climate change strategic measure (10%)
■ Portfolio management strategic measure (10%)
TSR performance: Eighty per cent of the LTI is assessed based
on our TSR performance compared to two comparator groups,
being:
– Two-thirds, or 53.3 per cent of the total award, is tested
relative to the TSR performance of the companies that
comprise the EMIX Global Mining Index at the start of each
performance period (i.e. at 1 July 2022 for FY23 LTI award)
(3); and
– One-third, or 26.7 per cent, is tested relative to the TSR of
the MSCI World Index.
Strategic measures: The strategic measures, which each have
a weighting of 10 per cent of the LTI, are:
– Our response to climate change; and
– The transition of our portfolio towards the commodities
critical to a low-carbon future.
More detail on the measures and our progress against them is
outlined on page 95.
Vesting Scale:
Vesting outcome(4)
0%
40%
100%
EMIX Global Mining
Index constituents*
TSR <= 50th
percentile
TSR > 50th
percentile
MSCI World Index*
TSR < Index
TSR = Index
TSR => 75th
percentile
TSR => Index +
23.9%
Vesting outcomes will be determined by the
Board at the end of the performance period.
Strategic
Measures
*Vesting between 40 per cent and 100 per cent is on a straight-line basis.
The the Board has the discretion to adjust the TSR vesting
outcome (both upwards and downwards) so that the overall
vesting outcome is appropriate and aligned with our Guiding
Principles (see page 83). There is no retesting if the
performance condition is not met at the end of the
performance period.
84
GOVERNANCE
Our global
mining peer
group
Minimum
shareholding
requirement
Our service
contracts
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, AngloGold Ashanti, Antofogasta, Barrick Gold, Evolution Mining, First Quantum
Minerals, Fortescue Metals Group, Freeport McMoRan, Gold Fields, Kinross Gold, Lundin Mining, Newcrest Mining, Newmont,
Northern Star Resources, Teck Resources and Vedanta.
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 Lead Team members, including those who are
Executive KMP, and must be obtained within five years of appointment to the Lead Team. The valuation approach applied to
determine the MSR uses the South32 Ltd share price at the time the assessment is made. See page 102 for our Executive KMP
shareholdings.
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;
– Termination without notice for serious misconduct;
– One month’s notice by the Executive KMP(5) where a fundamental change occurs that materially diminishes their status,
duties, authority or terms and conditions (receiving payment in lieu of six months’ notice);
– A maximum payment in lieu of notice of six months’ fixed remuneration; and
– Post-employment restraints for a period of up to six months after their employment with the Group ends.
Shareholder approval was granted at the 2021 Annual General Meeting (AGM) for Executive KMP termination benefits.
(1) References in this Remuneration report to ‘South32 shares’ are references to fully paid ordinary shares in South32 Limited.
(2) The deferred rights are subject to a service condition only as performance conditions are applied during the STI performance year.
(3) The constituent group is fixed for the four-year performance period with Board discretion to adjust the constituent group to take into account events such as takeovers,
mergers or demergers that may occur during the performance period.
(4) The Board and Remuneration Committee use information from an external provider to inform them of the TSR performance of the relevant index and companies to assess the
vesting outcome for the LTI.
(5) Some legacy executive employment contracts, including for the CEO, allow resignation without notice if a fundamental change occurs.
Linking reward and environmental, social and governance (ESG) topics
The ‘at risk’ components of our Executive KMP reward reflects ESG topics that align remuneration outcomes not just with financial
performance but also with our performance against ESG measures that underpin our business outcomes, as explained below.
STI
The Business Scorecard reflects a balance of financial and non-financial measures that reflect the key focus areas for us in the financial
year. From an ESG perspective, 28.3 per cent of the FY23 Business Scorecard was assessed against ‘sustainability’ metrics, which
include safety performance, health, community, risk management and water efficiency.
The overall Business Scorecard outcome is also subject to the Business Modifier. The Business Modifier allows the Board to
appropriately adjust the Business Scorecard outcome to account for ESG-related topics. We have a track record of applying the
Business Modifier to reflect non-financial performance and the overall shareholder experience (see page 91).
Further detail on our STI is included in the Short-Term Incentive for FY23 section starting on page 88.
LTI
Twenty per cent of the FY23 LTI directly links executive reward to climate change and the transition of our portfolio toward the
commodities critical to a low-carbon future. More detail on the strategic measures and our progress against them is outlined on
page 95.
85
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
Target Remuneration for FY23
South32 sets Target Remuneration for each member of Executive KMP at a competitive level to attract and retain appropriate talent in
the markets in which we operate. Our Target Remuneration is informed by the South32 reward framework (see page 83) that outlines
the key factors the Board takes into consideration in setting Executive KMP reward and the strategic drivers of pay at South32.
It is important that reward levels fairly reflect the responsibilities and contribution of the Executive KMP and that outcomes are aligned
to performance and the delivery of TSR. As a result, a meaningful portion of our Executive KMP remuneration is at risk, contingent on
challenging individual and Company performance measures.
Target Remuneration, as outlined below, assumes on-target performance for the STI and considers the difficulty of achieving LTI given
the performance hurdles. The figures reflected in the diagram below are therefore based on the STI paid at 100 per cent of target and
the LTI vesting at 60 per cent of face value (see page 84 for details on face value).
Based on these principles, annual Target Remuneration for Executive KMP as at 30 June 2023 is illustrated in Diagram 1.3.
Diagram 1.3 – Annual FY23 Target Remuneration (A$’000)(1)
G Kerr
1,906
1,144
1,144
2,287
6,481
(71% at risk)
K Tovich
914
548
548
731
S Sibenaler
830
498
498
664
J Economidis
819
491
491
655
2,741
(67% at risk)
2,490
(67% at risk)
2,456
(67% at risk)
N Pillay(2)
685
411
411
548
2,055
(67% at risk)
0
2,000
4,000
6,000
Fixed remuneration
STI (cash)
STI (deferred rights)
LTI
(1) Target Remuneration reflects a full year in the Executive KMP role.
(2) Target Remuneration has been converted from ZAR to A$ using an exchange rate of AUD:ZAR 11.96.
FY23 Target remuneration relative to peer groups (unaudited)
We have operations and offices on six continents and compete for talent in a global pool.
The diagrams below illustrate the measured approach we have adopted in positioning CEO fixed remuneration and Target
Remuneration for FY23 compared to relevant benchmarks, being the ASX peer group and the global mining peer group (see page 85).
CEO fixed remuneration is comparable to the median for both peer groups. CEO Target Remuneration is aligned to the upper quartile
for the ASX peer group, but below the global mining peer group median.
Diagram 1.4 – CEO fixed remuneration vs. Peers
Diagram 1.5 – CEO Target Remuneration vs. Peers
3,000
0
0
0
$
A
’
2,000
1,000
0
South32
1,906
15,000
10,000
0
0
0
$
A
’
5,000
0
ASX Peers
Global Mining Peers
ASX Peers
Global Mining Peers
South32
Median
Upper and lower quartiles
South32
6,481
86
GOVERNANCE
Range of possible remuneration outcomes
As actual Company and individual achievement over the performance period determines reward outcomes, the amount of pay received
by Executive KMP each year will vary.
Diagram 1.6 illustrates the range of possible remuneration outcomes for the CEO, based on three performance outcome scenarios:
minimum, target and maximum. While the figures in Diagram 1.6 and explanation are for the CEO, similar analysis can be undertaken for
other Executive KMP to assess the minimum and maximum range of pay outcomes.
Diagram 1.6 – Range of CEO remuneration outcomes (A$’000)
Minimum
1,906
1,906
(all reward at risk is forfeited)
Target
1,906
1,144
1,144
2,287
6,481
(71% at risk)
Maximum
1,906
1,715
1,715
3,812
9,148
(79% at risk)
0
2,000
4,000
6,000
8,000
10,000
Fixed remuneration
STI (cash)
STI (deferred rights)
LTI
In the Minimum scenario, no STI or LTI is paid. The CEO would receive fixed remuneration, inclusive of superannuation, of A$1.906
million.
Target outcomes would be achieved where the business meets the challenging STI performance hurdles, resulting in STI being paid at
target levels (67 per cent of maximum opportunity, or 120 per cent of fixed remuneration, with half deferred into rights) and 60 per cent
of the rights granted under the LTI vesting.
To deliver a Maximum outcome for the STI (i.e. 180 per cent of fixed remuneration, with half deferred into rights), South32 would need to
achieve the stretch targets for every metric in the Business Scorecard. For the LTI to vest in full, over the four-year performance period:
– The South32 TSR would need to meet or exceed the TSR of the company at the 75th percentile in the EMIX Global Mining Index
constituent group;
– The South32 TSR would need to exceed the MSCI World Index by 23.9 per cent; and
– The Board would need to assess performance against both strategic measures as outstanding.
Deferred STI and LTI in the Target and Maximum scenarios do not incorporate future share price movements.
Fixed remuneration for FY23
On 1 September 2022, Graham received an increase to fixed remuneration of five per cent from A$1,815,000 to A$1,906,000. This was his
second increase in fixed remuneration since commencing in role in 2015. Katie, Jason and Noel received fixed remuneration increases
of between five and six per cent. Fixed remuneration increases for Executive KMP aligned with the increases applied to the broader
workforce in the relevant geographies (five per cent in Australia and six per cent in South Africa).
Table 1.4 – Fixed remuneration for Executive KMP in FY23, effective 1 September 2022(1)
Executive KMP
G Kerr
K Tovich(2)
S Sibenaler(3)
J Economidis
N Pillay(4)
FY22 fixed
remuneration
A$1,815,000
A$870,000
-
A$780,000
ZAR 7,726,000
FY23 fixed
remuneration
A$1,906,000
A$914,000
A$830,000
A$819,000
ZAR 8,190,000
Increase
%
5.0
5.1
-
5.0
6.0
(1) Fixed remuneration reflects a full year in the Executive KMP role.
(2) Fixed remuneration for K Tovich was effective until she ceased to be CFO and a member of Executive KMP on 31 March 2023.
(3) Fixed remuneration for S Sibenaler was effective from commencing as CFO on 1 April 2023.
(4) Fixed remuneration for N Pillay is denominated in ZAR. Using an exchange rate of AUD:ZAR 11.96, FY23 fixed remuneration in A$ is A$684,783.
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SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
Short-term Incentive for FY23
Determining STI awards
Diagram 1.7 – Determination of STI Awards
South32
Business Outcome
Individual
Outcome
Overall
STI Outcome
x
1A
1B
2
3
x
=
BUSINESS
SCORECARD
BUSINESS
MODIFIER
0%-150%
Target 100%
Discretion +/-
INDIVIDUAL PERFORMANCE
and BEHAVIOURS
(0%-150%)
Maximum 180%
Target 120%
(of fixed remuneration)
As outlined on page 84, the STI is intended to focus and reward Executive KMP for delivering on our key business priorities 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 includes a balanced range of challenging measures that consider both our financial and non-financial
performance, and help 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. The Business 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.
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 to 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 our 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, so that
executives are rewarded for delivering strong performance
across areas within their control, taking into account overall
business performance and shareholder experience.
Diagram 1.8 demonstrates the approach to STI Outcomes
applied by the Board over the past five years.
Diagram 1.8 – CEO STI outcome vs. Underlying earnings
74%
58%
54%
42%
100%
75%
50%
25%
0%
m
u
m
x
a
m
i
f
o
%
I
T
S
3,000
2,500
2,000
42%
1,500
U
S
$
M
1,000
500
-
FY19
FY20
FY21
FY22
FY23
South32 Underlying earnings US$M
STI % of maximum
88
GOVERNANCE
1A FY23 Business Scorecard
In November 2022, we were devastated by the loss of two of our colleagues, who were fatally injured in an incident while undertaking
maintenance work at Mozal Aluminium. The Board recognises this significant safety event in our STI through the Business Modifier which
adjusts the overall Business Scorecard outcome (see page 91). Table 1.5 reflects performance against our stated Business Scorecard
measures.
Table 1.5 – FY23 Business Scorecard outcomes
Scorecard measure
Sustainability
Safety(1):
Target
28.3%
At least 80 per cent senior leader attendance at the LEAD
Safely Every Day workshops and coaching sessions.
A reported significant hazard frequency of 55.
Ensure 90 per cent of significant event investigations are
completed and signed off within the allocated timeframe.
Ensure 90 per cent of significant event actions are completed
on time.
Complete a deep dive review of 20 selected material risks
across all operations.
A 20 per cent reduction in lost time injury frequency (LTIF)
against the baseline.
A 10 per cent reduction in TRIF from the FY22 baseline.
Performance
Outcome Zero
Target Maximum
28.7%
Good as assessed against the stated Business Scorecard measure, but prior
to the Business Modifier adjustment.
FY23 LEAD Safely Every Day program senior leader attendance was 99 per
cent.
The significant hazard frequency for the period was 92 which exceeded
target.
89 per cent of significant event investigations were completed and signed
off within the allocated timeframe.
95 per cent of significant event actions were completed on time.
24 material risk deep dives were completed.
LTIF reduced by 30 per cent compared to the FY22 baseline.
TRIF increased by 11 per cent compared to the FY22 baseline.
Health(1):
Poor
A 20 per reduction in potential material exposures above
200 per cent of the Occupational Exposure Limit (OEL)
compared to the revised FY22 baseline.
Develop and implement a project pipeline to continue to
reduce potential material exposures in excess of 200 per cent
of OEL by FY24.
Potential material exposures above 200 per cent of the OEL increased by 1.1
per cent compared to the revised FY22 baseline.
The pipeline of FY24 projects aims to reduce potential exposures in excess
of 200 per cent of OEL by 28 per cent compared to the FY23 outcome.
Community(1):
Excellent
Implement social investment plans on time and on budget.
FY23 social investment was delivered to plan.
Increase the proportion of social investment allocated to
strategic investment by 10 percentage points up to a
maximum of 90 per cent of the social investment budget.
Implement at least one new strategic multi-year social
investment with targets that support climate, biodiversity or
just transition related outcomes.
Develop economic development plans which include local
employment and procurement targets at all operations.
90 per cent of social investment was allocated to strategic investments (up
8 percentage points from 82 per cent in FY22).
Two strategic investments commenced in FY23; a just transition strategic
investment at Worsley Alumina and a biodiversity strategic investment in
Australia with the Australian Wildlife Conservancy.
Economic development plans were established for all operations, which
include local employment and procurement targets.
Risk management:
Good
Maintain risk routines at more than 95 per cent compliance
with scheduled work.
Increase the percentage of well controlled risks.
Achieve 90 per cent compliance with the risk based assurance
plan.
Risk routines averaged 95 per cent compliance to scheduled work in FY23.
The percentage of the risk profile reported as 'requires significant
improvement' was on target.
96 per cent of the combined assurance plan was delivered to schedule.
Water performance(1):
Fair
Deliver contextual water target milestones, and achieve the
FY23 target water use efficiency outcome as defined within
the Sustainability Linked Loan framework.
The contextual water target for Hillside Aluminium was met. Targets at the
remaining operations remained on track.
FY23 water efficiency targets were met. However, the current identified
pipeline of projects to achieve a 10 per cent improvement in water efficiency
by FY27 compared to the FY21 baseline fell short of the required trajectory.
(1) Further information on this sorecard measure can be found in Our strategy in action section on pages 20 to 25 and our Sustainable Development Report at www.south32.net.
89
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
Scorecard measure
Financial: Production, cost
and capital expenditure
Target
28.3%
Performance
Outcome Zero
Target Maximum
23.4%
Production(2)(3):
Fair
Deliver 97 – 102 per cent of revenue equivalent production.
Revenue equivalent production was 95 per cent.
Controllable cost(2)(3):
Fair
Deliver controllable costs that are within US$50 million of
budget (adjusted for foreign exchange, price-linked costs and
other adjustments).
Adjusted controllable costs were above budget by US$28M.
Capital expenditure(2)(3):
Good
Achieve capital expenditure (excluding growth) that is within
five per cent of budget (adjusted for foreign exchange).
Achieve growth capital expenditure that is within ten per cent
of budget and schedule (adjusted for foreign exchange).
Achieve fewer than 20 per cent break-in safe and reliable
capital projects(4).
Capital expenditure (excluding growth) was 94 per cent of budget.
Growth capital expenditure was 88 per cent compared to budget and was
delivered on schedule.
Break-in projects were at 14 per cent.
Financial: Adjusted ROIC
28.3%
15.1%
Adjusted ROIC(2):
Poor
Achieve budget adjusted ROIC, consistent with our cost,
production and capital expenditure targets.
Adjusted ROIC was 26.4 per cent versus the budget of 28.1 per cent.
Strategic priorities
15.0%
16.6%
Hermosa project(2):
Good
Deliver FY23 Taylor Deposit and Clark Deposit agreed project
milestones.
The feasibility study for the Taylor Deposit is expected to be completed in
the second half of calendar year 2023, as we undertake additional
engineering studies to align the mine development schedule for a federal
permitting process under FAST-41 and incorporate current market cost
estimates. Water Treatment Plant 2 construction was completed on
schedule and commissioning commenced.
The Clark pre-feasibility selection study was completed. Multiple non-
binding, non-exclusive memorandums of understanding were signed for the
future potential supply of battery-grade manganese.
Next generation mine(2):
Good
Deliver at least 75 per cent of the agreed initiative milestones
for the Next Generation Mine mission.
Six of the eight agreed initiatives were fully delivered and two were partially
delivered.
Inclusion and Diversity(5):
Good
Achieve FY23 measurable objectives and deliver the FY23
Inclusion and Diversity action plan.
Inclusion index(2):
Achieve inclusion index scores that are at least equal to FY22
inclusion index scores.
Employee engagement(2):
Achieve employee engagement scores that are at least equal
to FY22 employee engagement scores.
Subtotal
Target = 100%
Maximum = 150%
Inclusion and Diversity: 50 per cent (two out of four) of our female
representation targets and 50 per cent (one out of two) of our targets for
Black People representation in South Africa were met.
Completed our equity pay review, investing US$338,000 to improve pay
equity.
All elements of the Inclusion and Diversity action plan were delivered.
Inclusion index and employee engagement scores exceeded target.
83.8%
(2) Further information on this scorecard measure can be found in Our strategy in action section on pages 20 to 25.
(3) Excludes non-operated entities.
(4) Capital expenditure projects categorised as safe and reliable above US$100,000 that were not included in the FY23 budget.
(5) Further information on this scorecard measure can be found in our Sustainable Development Report at www.south32.net.
90
GOVERNANCE
1B FY23 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:
– Significant safety or environmental events;
– The shareholder experience;
– Unexpected material external events, including the impact of a global pandemic or a significant disruption to global trade;
– Significant reputational issues; and
– An assessment of risk, culture or any other item that the Board considers appropriate.
The Business Modifier, based on Board discretion, adjusts the overall Business Scorecard outcome so that STI outcomes reflect
business performance, including both what has been delivered and how it has been achieved. The outcome may be positive or negative,
and may be applied to Executive KMP on an individual or a group basis depending on the factors under consideration.
In FY23, the Board primarily focused on two matters when considering the application of the Business Modifier for Executive KMP.
The first was the loss of two of our colleagues, Mr Cristovão Alberto Tonela and Mr Alfredo Francisco Domingos João. Nothing is more
important than the health, safety and wellbeing of our people. We will continue to work to improve our safety performance through our
multi-year Safety Improvement Program that commenced in FY22. The program consists of four workstreams and was designed with
the aim of enhancing our safety culture, and by changing mindsets and behaviours, achieving a step change in our safety performance.
As part of the Safety Improvement Program's focus on shifting mindsets through leadership, we conducted our LEAD Safely Every Day
training for senior leaders, managers, superintendents and supervisors across all operations and functions. This comprised workshops,
learning assignments and individual coaching, with 1,322 leaders having commenced the capability training, and 247 leaders having
completed it by 30 June 2023. In addition, we have updated our risk guidance documentation and conducted risk training for our risk
and control owners. We have also finalised our internal safety standard to introduce the Safety System of Work that includes the new
requirements for safety-critical equipment and process safety management.
We have improved and extended our Contractor Management System of Work for our significant contractor workforce and have
extended this into relevant functional departments in addition to operations. In FY24, we expect to launch a dedicated monitoring tool
to better embed contractor management performance and to strengthen compliance with health and safety, and risk management
requirements. More information on our safety initiatives, including our contractor management system of work, can be found in the
Sustainable Development Report at www.south32.net.
The second matter was the non-cash impairment expense for the Taylor Deposit recognised in our FY23 financial results which reflected
the impact of delays due to COVID-19, the significant dewatering requirements and inflationary market pressures. The Board considered
this when determining the negative overall Business Modifier for the CEO.
Table 1.6 outlines the negative Business Modifiers the Board applied to the Business Scorecard for each member of Executive KMP. The
different adjustments for the Executive KMP is intended to reflect the level of accountability each of them had in respect of the matters
outlined above.
Table 1.6 – Application of the Business Modifier by the Board (multiplier applied to the Business Scorecard outcome)
CEO
COO Africa and Colombia
Other Executive KMP
Modifier for
FY23(1)
-25%
-20%
-10%
-5%
FY22(2)
-20%
-20%
-10%
-10%
-5%
Modifier applied in previous years
FY21
-20%
-20%
-5%
FY20
-30%
-30%
-15%
FY19
No Business Modifier
applied
(1) In FY23, the Board decided to apply a Business Modifier of -10 per cent for J Economidis, and a Business Modifier of negative five per cent for K Tovich and S Sibenaler.
(2) In FY22, the Board decided to apply a Business Modifier of -20 per cent for the Chief Operating Officer Africa at the time of the fatality, a Business Modifier of -10 per cent for J
Economidis and N Pillay, and a Business Modifier of negative five per cent for K Tovich.
91
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
2 FY23 individual performance
Our Board considers the individual scorecard outcomes for Executive KMP with regard to what was delivered, as demonstrated in the
performance of each member of Executive KMP’s portfolio, and how it was delivered, which considers leadership behaviours aligned to
our values, risk framework and governance processes.
The board recognises Graham's outstanding leadership in delivering South32's purpose and strategy, but believes an individual
outcome of 100% combined with the application of the Business Modifier is appropriate for FY23.
Individual outcomes applied to the other Executive KMP reflected the performance outcomes in their areas of accountability and
development in their respective roles. These outcomes ranged from 85 per cent to 140 per cent, as indicated in Table 1.7 below.
3 Overall FY23 STI outcome
Overall STI outcomes for FY23 are determined through our Board’s assessment of the business and individual outcomes, as outlined in
Table 1.7.
Table 1.7 – STI earned by Executive KMP in respect of FY23 performance
Executive KMP
G Kerr
K Tovich(2)
S Sibenaler(3)
J Economidis
N Pillay
Business
Scorecard
Outcome %
Business
Modifier
+/- %
Individual
Outcome %
Overall STI
Outcome
(% of Target)
Total STI
Awarded
Cash
Deferred
Rights
Awarded
Forfeited
Percentage of maximum STI
(1A)
83.8
83.8
83.8
83.8
83.8
(1B)
-25
-5
-5
-10
-20
(2)
1A x (1+1B) x (2)
(A$’000)
(A$’000)(1)
(A$’000)(1)
100
140
85
95
90
62.9
111.5
67.7
71.6
60.3
1,438
918
168
704
496
719
459
84
352
248
719
459
84
352
248
(%)
42
74
45
48
40
(%)
58
26
55
52
60
(1) The cash portion of the STI will be paid in September 2023. The deferred rights to receive South32 shares are anticipated to be granted in or around December 2023 and will be
due to vest in August 2025. The deferred rights remain subject to continued service with the Group.
(2) K Tovich ceased to be a member of Executive KMP on 31 March 2023. Details in the above table are for her period as a member of Executive KMP.
(3) S Sibenaler was appointed as a member of Executive KMP on 1 April 2023. Details in the above table are for her period as a member of Executive KMP. S Sibenaler's individual
outcome for the nine months in her prior role as Vice President Finance, which is not reflected in the table, was 120 per cent.
92
GOVERNANCE
Long-term Incentive
FY20 LTI and Management Share Plan (MSP) Performance award
Our FY20 LTI award was tested for vesting subject to service and performance conditions to 30 June 2023. This award is subject to TSR
performance conditions over four years, with two-thirds measured with reference to a global mining sector index (the IHS Markit Global
Mining Constrained Weights Index with additional constraints by sector) and one third with reference to a world index (the MSCI World
Index). The four-year period for this award was from 1 July 2019 to 30 June 2023.
Jason and Noel were granted the FY20 MSP Performance award prior to their appointments as members of Executive KMP. This award
has the same performance and vesting conditions as our FY20 LTI award.
For the LTI and MSP Performance awards to vest in full, they needed to outperform both indices by at least 23.9 per cent over the four-
year performance period (equivalent to 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 1.8), these awards lapsed in full in August 2023.
Diagram 1.9 – South32 TSR relative to comparator groups
Diagram 1.10 – Vesting scale
125%
100%
75%
50%
25%
0%
-25%
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
-50%
Jul-19
100% vesting
40% vesting
0% vesting
Jul-20
Jul-21
Jul-22
Jul-23
South32
Sector Index
World Index
TSR = index
TSR => index
by 23.9%
Table 1.8 – South32 FY20 LTI and MSP Performance award vesting outcomes
Sector Index
World Index
TSR performance(1)(2)
Vesting
outcome
Index
weighting
Weighted
vesting outcome
Index
(A)
86%
53%
South32
(B)
Required for
100% vesting
Achieved
(B-A)
41%
Index+23.9%
Index+23.9%
(45%)
(12%)
(C)
0%
0%
(D)
2/3
1/3
(C x D)
0%
0%
0%
(1) TSR calculation uses June 2019 average return at the start and June 2023 average return at the end of the measured 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.
FY21 MSP Retention award
Although South32 does not offer MSP Retention awards to permanent members of the Lead Team, including those that are Executive
KMP, when individuals are promoted internally to Lead Team roles, they retain any unvested MSP awards that may vest while they are
members of KMP. Sandy, Jason and Noel were granted FY21 MSP Retention awards prior to their appointments as permanent members
of the Lead Team. As the service-based condition of these awards was met, our Board approved these awards to vest in full in August
2023.
The structure of the MSP is detailed on page 102.
93
SOUTH32 ANNUAL REPORT 2023
REMUNERATION REPORT CONTINUED
Summary of LTI outcomes in FY23
Table 1.9 – South32 LTI awards vested or lapsed/forfeited
Executive KMP
Award
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)
Value of share
price
movement(3)
(A$’000)
Value at
vesting(4)
(A$’000)
G Kerr
K Tovich
S Sibenaler
J Economidis
N Pillay
FY20 LTI
FY20 LTI
FY21 MSP Retention
FY20 MSP Performance
FY21 MSP Retention
FY20 MSP Performance
FY21 MSP Retention
1,696,261
517,133
23,762
155,763
99,009
135,708
86,262
-
-
23,762
-
99,009
-
86,262
1,696,261
517,133
-
155,763
-
135,708
-
5,445
1,660
48
500
200
436
174
5,445
1,660
-
500
-
436
-
-
-
41
-
172
-
150
-
-
89
-
372
-
324
(1) ‘Value at grant’ is the number of rights granted multiplied by the grant determination price in June 2019 of A$3.21 (for the FY20 LTI/FY20 MSP Performance) and June 2020 of
A$2.02 (for the FY21 MSP Retention), based on the volume weighted average price (VWAP) of South32 Limited shares traded on the ASX 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$3.21 (for the FY20 LTI/FY20 MSP Performance) and A$2.02 (for the FY21 MSP Retention).
(3) ‘Value of share price movement’ is the number of shares that vested, multiplied by the difference between the grant determination price of A$3.21 (for the FY20 LTI/FY20 MSP
Performance) and A$2.02 (for the FY21 MSP Retention) and the share price at 30 June 2023 of A$3.76. This reflects the value added/(lost) due to the change in share price over
the performance period.
(4) ‘Value at vesting’ is the number of shares that vested in August 2023, multiplied by the closing share price of South32 shares on 30 June 2023 of A$3.76.
LTI granted in FY23
FY23 LTI Plan
Each year we grant performance rights to our Executive KMP. Our FY23 LTI Plan awards, which were granted in December 2022, have
a four-year performance period and are subject to performance hurdles (see page 84). Shareholders approved, under ASX Listing Rule
10.14, the grant of rights for the CEO at the AGM on 27 October 2022.
FY23 MSP award
Sandy was granted awards under the MSP in December 2022 prior to her appointment to the Lead Team and before she became a
member of Executive KMP. The structure of the MSP is detailed on page 102.
Table 1.10 – FY23 LTI and MSP grants
Reward determination(1)
Executive KMP
Award
G Kerr
K Tovich
S Sibenaler
J Economidis
N Pillay(4)
FY23 LTI
FY23 LTI
FY23 MSP Retention
FY23 MSP Performance
FY23 LTI
FY23 LTI
Face Value
(% of fixed
remuneration)
Face value
(A$’000)
Target value(2)
(% of fixed
remuneration)
Target value
(A$’000)
200
133
30
50
133
133
3,812
1,216
131
218
1,089
980
120
80
30
30
80
80
2,287
731
131
131
655
590
Grant (December
2022):
Number of rights
granted(3)
934,313
297,946
32,113
53,522
266,977
240,246
Anticipated
Vesting Date
August 2026
August 2026
August 2025
August 2026
August 2026
August 2026
(1) The grant of awards is based on the face value as outlined in Components of our reward (see page 84).
(2) The target value considers the difficulty of achieving performance hurdles.
(3) The number of awards granted to Executive KMP in December 2022 is calculated by dividing the face value by the VWAP of South32 Limited shares traded on the ASX over the
last 10 trading days of June 2022, being A$4.08. The fair value at grant for accounting purposes, as calculated by an external provider, was A$2.37 per right for the FY23 LTI and
FY23 MSP Performance awards and A$3.85 per right for the FY23 MSP Retention award.
(4) Fixed remuneration for N Pillay used to determine his FY23 LTI award was converted to A$ using an exchange rate of AUD: ZAR 11.11.
94
GOVERNANCE
FY23 LTI Strategic Measures Performance Update
In FY22 we introduced two strategic measures, with a total weighting of 20 per cent of our LTI grant, to directly link executive
remuneration to our approach to climate change and the transition of our portfolio towards the commodities critical for a low-carbon
future.
Vesting outcomes for the strategic measures will be determined by the Board following the end of each four-year performance period
(e.g. on 30 June 2026 for the FY23 LTI award), based on our ability to make material progress in these areas, while aiming to protect
and create shareholder value as we navigate this business-critical transformation. The Board’s rationale in assessing performance
and determining the vesting outcome for each measure will be clearly articulated and shared with shareholders following the Board’s
assessment.
Table 1.11 below summarises the progress made against each four-year strategic measure during FY23.
Table 1.11 – Strategic Measures update for FY23
Measure
Climate change
FY23 progress against Measure
We have announced plans to reduce our operational
greenhouse gas emissions (Scope 1 and 2) by 50 per
cent between FY21 and 2035, by implementing our
decarbonisation framework, 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
In FY23(1), we have continued to mature and accelerate our planned decarbonisation
programs to support our medium-term target and long-term goals. Key milestones
included:
– Commencing the conversion of Worsley Alumina’s first coal-fired boiler to natural
gas, and progressing decarbonisation studies including mud washing, waste heat to
digestion, and coal-alternative steam supply;
– Converting 18 per cent of Hillside Aluminium pots to AP3XLE energy efficiency
technology and progressing studies to transition the smelter's energy source
from coal-based power to secure, reliable and affordable low-carbon energy in the
medium-term;
– Continued participation and direct investment in
– Progressing the commercial scale pilot of CSIRO ventilation air methane technology
research and development partnerships.
into feasibility at Illawarra Metallurgical Coal;
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.
– Transitioning Sierra Gorda to 100 per cent renewable energy;
– Leading the Electric Mine Consortium’s infrastructure workstream and contributing
by trialling light electric vehicles at Cannington; and
– Embedding our just transition guiding principles into our environment and climate
change standard and our social performance standard.
Portfolio management
We are planning to further reshape our portfolio and
increase our exposure to the commodities critical to
a low-carbon future by:
– Building a high-quality portfolio of greenfield and
brownfield exploration and development options;
In FY23, we have continued to make progress in this transformative area. Key
milestones included:
– Embedding our recent investments in Sierra Gorda copper and our expanded low-
carbon aluminium capacity, increasing aluminium production by 14 per cent and
base metals by 17 per cent;
– Optimising our existing portfolio by responsibly
– Progressing multiple exploration programs as we continued work to discover our
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
next generation of base metals mines;
– Consolidating our position in Argentina’s highly prospective San Juan province by
exercising our earn-in right with Minsud Resources for 50.1 per cent of the Chita
Valley copper exploration prospect and acquiring an interest in Aldebaran Resources;
– Commencing our largest greenfield exploration program at our 100 per cent-owned
– Maintaining discipline by adhering to our proven
Roosevelt project in Alaska, targeting copper and zinc mineralisation;
capital management framework.
– Completing the sale of four non-core royalties, unlocking further latent value in our
portfolio; and
– Progressing exploration for copper, in additional to zinc, lead and silver at Hermosa's
Peake prospect. In addition, permit applications have been advanced during the
last 12 months to allow for testing of the Flux Prospect, a high priority target with
similarities to the Taylor Deposit.
(1) Further information on the progress of items listed can be found in our Sustainable Development Report at www.south32.net.
95
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
Terms and conditions of rights awarded under equity plans
Type of equity
Dividend and voting
rights
We deliver deferred STI and LTI equity awards (including Transitional LTI and MSP awards) in the form of share rights.
These are rights to receive fully paid ordinary shares in South32 Limited (or at the Board’s discretion, a cash
equivalent amount) subject to meeting specific performance and vesting conditions. 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 on vesting, 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
Cessation of
employment
unvested rights vest immediately; and
– Other circumstances, generally:
• Deferred STI awards: all unvested rights vest immediately;
• LTI and MSP Performance awards: all unvested rights 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: all unvested rights are pro-rated and the reduced portion vests immediately.
Where awards are pro-rated, the remaining portion lapses.
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.
Our Board can reduce or clawback all vested and unvested STI and LTI awards in certain circumstances so that
executives do not obtain an inappropriate benefit. These circumstances are broad, and can include:
Malus and Clawback
– An executive engaging in misconduct;
– A material misstatement of our accounts that results in vesting;
– Behaviours of executives that bring South32 into disrepute;
– A significant unexpected or unintended consequence or outcome; and
– Any other factor our Board deems justifiable.
Rights to participate
in new issues
A participant cannot 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.
96
GOVERNANCE
Non-Executive Director remuneration
Components of our reward for FY23
Component
Board Fees
Committee Fees
Travel Allowance
We pay Committee fees to recognise
the additional responsibilities
associated with participating on a
Board Committee.
The why
As a global company, it’s important
that we offer competitive Non-
Executive Director fees to help us
attract the appropriate level of
experience from a diverse global pool.
Our Board fees reflect the size,
complexity and global nature of our
business and acknowledge the
responsibilities of serving on our
Board.
To preserve the independence of our
Non-Executive Directors, their
remuneration does not have an ‘at risk’
element.
The how
Board fee inclusive of superannuation. We pay a fixed fee to our Board Chair
for all responsibilities, including
participation on any Board
Committees.
Other Non-Executive Directors receive
Committee Chair and member fees
(where applicable).
Our Board meetings are ordinarily held in
Australia, South Africa and North and South
America (see page 71 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;
– 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 are in remote locations, we
provide our Non-Executive Directors with a
travel allowance.
For air travel to a Board commitment that is
greater than three hours but less than 10 hours
to the destination, a one-off allowance of
A$5,000 per trip applies. Where air travel is
greater than 10 hours to the destination, the
allowance per trip is A$10,000.
The travel allowance is only paid where travel is
undertaken and does not apply to domestic
travel to a regularly scheduled Board meeting.
Fee Pool
The maximum aggregate amount we can pay our Non-Executive Directors remains at A$3.9 million per annum (fee pool). We
will always seek shareholder approval before making any changes to this pool.
Minimum
shareholding
requirement
Each Non-Executive Director is required to accumulate a minimum shareholding level of one year’s Board fees within a
reasonable period. See page 102 for shareholdings of our Non-Executive Directors.
FY23 Non-Executive Director fees
We review fees every year and may get external advice to help us do so. We based the review of FY23 fees on data provided by external
consultants. This resulted in a three per cent increase to Board fees for the Chair and other Non-Executive Directors from 1 September
2022, which were the first increases to Board fees since 1 September 2019.
The table below outlines the fee levels for FY23. There will be no increase to Non-Executive Director fees in FY24.
Table 1.12 – FY23 Board fees, effective 1 September 2022
Fee
Board fees
Committee fees(1)
Description
FY23 fee
(A$ per annum)
Increase %
from FY22 fee
Board of Directors
Chair of the Board
Other Non-Executive Directors
Risk and Audit, Remuneration, and Sustainability Committees
Committee Chair
Members
595,250
195,000
46,000
23,000
3.0
3.0
0
0
(1) No Committee Chair or member fees were paid in FY23 for participation on the Nomination and Governance Committee.
97
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
FY23 Non-Executive Director remuneration
In Table 1.13, we have set out the statutory disclosures required under the Act and in accordance with Australian Accounting Standards,
in respect of FY23 remuneration paid to Non-Executive Directors.
Table 1.13 – Non-Executive Director remuneration (A$’000)
Non-Executive Director
FY23 term
K Wood
Full year
F Cooper AO
Full year
G Lansdown
Ceased on 31 May 2023
X Liu
Full year
C Mesquita
Appointed on 1 May
2023
N Mtoba
Full year
J Nelson
Appointed on 1 May
2023
W Osborn
Full year
K Rumble
Full year
Total
(1) Includes assistance with tax return preparation.
(2) Includes travel allowances paid.
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
Short-term benefits
Post-
employment
benefits
Board and
Committee fees
Non-monetary
benefits(1)
Other cash
allowances and
benefits(2)
Superannuation
567
554
238
235
239
256
215
212
33
-
214
212
33
-
238
235
260
258
2,037
1,962
0
-
0
-
2
1
0
-
0
-
4
-
0
-
0
-
2
2
8
3
20
10
10
10
45
25
30
10
10
-
40
20
5
-
35
10
45
20
240
105
25
24
25
24
3
1
25
24
0
-
3
1
0
-
25
24
3
1
109
99
Total
612
588
273
269
289
283
270
246
43
-
261
233
38
-
298
269
310
281
2,394
2,169
98
GOVERNANCE
Looking forward to FY24
No major changes are proposed for the reward framework for FY24. The Board has confidence in the integrity of the reward framework,
the core elements of which have remained unchanged since demerger, and believes it incorporates the necessary flexibility to reward
our Executive KMP for performance that is aligned with the interests of stakeholders.
Fixed remuneration
The Board approved increases to the fixed remuneration of Executive KMP to maintain fixed remuneration at competitive levels in
alignment with our reward framework (see page 84). These align with the increases applied to the broader workforce in the relevant
geographies (four and a half per cent in Australia and six per cent in South Africa) (see Table 1.14).
Table 1.14 – Fixed remuneration for Executive KMP in FY24, effective 1 September 2023
Executive KMP
G Kerr
S Sibenaler
J Economidis
N Pillay(1)
FY23 fixed
remuneration
(A$)
1,906,000
830,000
819,000
ZAR 8,190,000
FY24 fixed
remuneration
(A$)
1,991,000
867,000
856,000
ZAR 8,680,000
Increase
%
4.5
4.5
4.5
6.0
(1) Fixed Remuneration for N Pillay is denominated in ZAR. Using an exchange rate of AUD:ZAR 11.96, FY24 fixed remuneration in A$ is A$725,750.
Short-term incentive
The structure of our STI plan will remain unchanged for FY24. However, we have adjusted the measures in our Business Scorecard and
their respective weightings (refer Diagram 1.11 for the FY24 STI measures) to reflect the key focus areas of our Executive KMP and other
Lead Team members in FY24. The adjustment will result in an increase in weighting towards Safety and Culture as well as Environment
and Social measures whilst maintaining focus on the financial metrics. Further, we have narrowed our Strategic Delivery measure to
focus on delivery of key Hermosa project milestones, with the 20 per cent weighting in the LTI capturing the delivery of our broader
strategic milestones.
Diagram 1.11 – FY24 STI Business Scorecard Performance Metric Weightings
Measures
Performance metrics
FY24 weighting
Safety and Culture
Safety and health, risk management, people
Environment and Social
Social performance, water performance
Financial
Adjusted return on invested capital, production, cost and capital expenditure
Strategic Delivery
Hermosa
X
25.0%
10.0%
57.5%
7.5%
Business Modifier
Consider factors that are not specifically contemplated in the Business Scorecard
+/-
=
South32 Business Outcome
Reflects our performance over the financial year
Long-term incentive
We are not changing the design of the LTI for FY24. We will continue to measure our performance over a four-year period with 80 per
cent assessed based on TSR performance relative to two comparator groups and 20 per cent assessed against two strategic measures,
climate change and portfolio management, each with a 10 per cent weighting.
Director Fees
There will no increase to Non-Executive Director fees or change to the travel allowances in FY24.
99
SOUTH32 ANNUAL REPORT 2023 REMUNERATION REPORT CONTINUED
Statutory disclosures
Statutory remuneration table for Executive KMP
In the following table, we have set out the statutory disclosures required under the 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 as
KMP in FY23.
Table 1.15 – Statutory remuneration of Executive KMP in FY23 (A$’000)
Short term benefits
Post
employment
benefits
Termination
benefits
Other
long-term
benefits(3) Share based payments(4)
Executive KMP
G Kerr
K Tovich(5)
S Sibenaler(6)
J Economidis
N Pillay(7)
Total
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
Salary
1,651
1,640
609
768
195
-
716
726
631
523
3,802
3,657
Cash
bonus(1)
Non-
monetary
benefits(2) Superannuation
719
1,215
459
691
84
-
352
482
248
217
1,862
2,605
48
42
11
9
1
-
12
7
26
101
98
159
28
25
21
28
6
-
26
40
-
-
81
93
LTI / MSP
2,605
2,500
622
698
49
-
748
637
593
285
4,617
4,120
176
168
62
79
19
-
74
71
79
47
410
365
STI
833
852
425
478
9
-
271
185
151
56
1,689
1,571
-
-
-
-
-
-
-
-
-
-
-
-
Percentage of
total
remuneration
which is
performance
tested
Total
remuneration
69%
71%
68%
68%
39%
-
62%
61%
57%
45%
6,060
6,442
2,209
2,751
363
-
2,199
2,148
1,728
1,229
12,559
12,570
(1) STI is provided half in cash (which is included in the cash bonus column of the table) in September 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.
(2) Non-monetary benefits are non-pensionable and include such items as insurances, car parking and personal tax assistance. FY22 non-monetary benefits for N Pillay also
include relocation benefits provided prior to becoming a member of Executive KMP to assist with his relocation to South Africa.
(3) Other long-term benefits is the accounting expense of annual and long-service leave accrued.
(4) The related awards were not actually provided to the Executive KMP. 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. Refer to Table 1.16 on page 101 in this report for information on awards outstanding
during FY23.
(5) FY23 remuneration for K Tovich is for the period until she ceased to be a member of Executive KMP (31 March 2023).
(6) FY23 remuneration for S Sibenaler is for the period from when she commenced as a member of Executive KMP (1 April 2023).
(7) FY23 salary for N Pillay has been converted to A$ using an exchange rate of AUD: ZAR 11.96. FY22 remuneration for N Pillay is for the period from when he became a member of
Executive KMP (1 December 2021). FY22 salary for N Pillay has been converted to A$ using an exchange rate of AUD: ZAR 11.13 with the exception of a relocation allowance of
ZAR 1,500,000 paid on 25 October 2021 which has been converted to A$ using an exchange rate of AUD: ZAR 10.99.
100
GOVERNANCE
Details of rights held by Executive KMP
In the following table, we have set out more information about the rights over South32 shares held by Executive KMP, including the
movements in rights held during FY23. No closely related parties of any Executive KMP are issued rights over South32 shares.
See page 96 for terms and conditions of rights awarded under our equity plans.
Table 1.16 – Detail and movement of rights over South32 shares held by Executive KMP during FY23
Award(1)(2)
Executive KMP
G Kerr
FY22 Deferred STI (S)
FY23 LTI (P)
FY21 Deferred STI (S)
FY22 LTI (P)
FY20 Deferred STI (S)
FY21 LTI (P)
FY20 LTI (P)
FY19 LTI (P)
K Tovich(6)
FY22 Deferred STI (S)
FY23 LTI (P)
FY21 Deferred STI (S)
FY22 LTI (P)
FY20 Deferred STI (S)
FY21 LTI (P)
FY20 LTI (P)
FY20 Transitional LTI (P)
FY19 MSP Performance (P)
S Sibenaler(7)
FY23 MSP Retention (S)
FY23 MSP Performance (P)
FY22 MSP Retention (S)
FY22 MSP Performance (P)
FY21 MSP Retention (S)
FY21 MSP Performance (P)
J Economidis
FY22 Deferred STI (S)
FY23 LTI (P)
FY21 Deferred STI (S)
FY22 LTI (P)
FY22 Transitional LTI (P)
FY21 MSP Retention (S)
FY21 MSP Performance (P)
FY20 MSP Retention (S)
FY20 MSP Performance (P)
FY19 MSP Performance (P)
N Pillay
FY22 Deferred STI (S)
FY23 LTI (P)
FY22 LTI (P)
FY22 Transitional LTI (P)
FY21 MSP Retention (S)
FY21 MSP Performance (P)
FY20 MSP Retention (S)
FY20 MSP Performance (P)
FY19 MSP Performance (P)
Opening
balance as at
1 July 2022
Number
7,632,787
-
-
242,160
1,267,015
280,988
2,695,544
1,696,261
1,450,819
2,325,220
-
-
157,804
403,874
156,030
821,782
517,133
129,283
139,314
284,124
32,113
53,522
43,246
72,076
23,762
59,405
1,437,646
-
-
37,628
362,094
102,094
99,009
495,049
62,305
155,763
123,704
1,031,024
-
-
329,962
93,034
86,262
215,655
54,283
135,708
116,120
Grant
date
Granted in
FY23(3)
Vested in FY23
Lapsed / forfeited or
other change in FY23
Closing
balance as at
30 June
2023(6)
Anticipated
vesting date(4)
Number
Number(4)
08-Dec-22
08-Dec-22
06-Dec-21
06-Dec-21
04-Dec-20
04-Dec-20
06-Dec-19
07-Dec-18
08-Dec-22
08-Dec-22
06-Dec-21
06-Dec-21
04-Dec-20
04-Dec-20
06-Dec-19
06-Dec-19
07-Dec-18
08-Dec-22
08-Dec-22
06-Dec-21
06-Dec-21
06-May-21
06-May-21
08-Dec-22
08-Dec-22
06-Dec-21
06-Dec-21
06-Dec-21
04-Dec-20
04-Dec-20
06-Dec-19
06-Dec-19
07-Dec-18
08-Dec-22
06-Dec-22
06-Dec-21
06-Dec-21
04-Dec-20
04-Dec-20
06-Dec-19
06-Dec-19
07-Dec-18
1,217,602
283,289
934,313
-
-
-
-
-
-
459,198
161,252
297,946
-
-
-
-
-
-
-
-
-
-
-
-
-
-
379,481
112,504
266,977
-
-
-
-
-
-
-
-
301,582
61,336
240,246
-
-
-
-
-
-
-
280,988
-
-
-
-
280,988
-
-
-
199,124
-
-
-
-
156,030
-
-
43,094
-
-
-
-
-
-
-
-
62,305
-
-
-
-
-
-
-
62,305
-
-
54,283
-
-
-
-
-
-
54,283
-
-
%(5)
16
-
-
-
-
100
-
-
-
47
-
-
-
-
100
-
-
33
-
-
-
-
-
-
-
-
33
-
-
-
-
-
-
100
-
-
32
-
-
-
-
-
-
100
-
-
Number
1,450,819
-
-
-
-
-
-
-
1,450,819
225,503
-
-
-
-
-
-
-
86,189
139,314
-
123,704
-
-
-
-
-
-
-
-
-
123,704
116,120
-
-
-
-
-
-
-
-
116,120
%(5)
84
-
-
-
-
-
-
-
100
53
-
-
-
-
-
-
-
67
100
-
67
-
-
-
-
-
-
-
-
100
68
-
-
-
-
-
-
-
-
100
Number
7,118,582
283,289
934,313
242,160
1,267,015
-
2,695,544
1,696,261
-
2,359,791
161,252
297,946
157,804
403,874
-
821,782
517,133
-
-
284,124
32,113
53,522
43,246
72,076
23,762
59,405
1,631,118
112,504
266,977
37,628
362,094
102,094
99,009
495,049
-
155,763
-
1,162,203
61,336
240,246
329,962
93,034
86,262
215,655
-
135,708
-
Aug-24
Aug-26
Aug-23
Aug-25
Aug-22
Aug-24
Aug-23
Aug-22
Aug-24
Aug-26
Aug-23
Aug-25
Aug-22
Aug-24
Aug-23
Aug-22
Aug-22
Aug-25
Aug-26
Aug-24
Aug-25
Aug-23
Aug-24
Aug-24
Aug-26
Aug-23
Aug-25
Aug-24
Aug-23
Aug-24
Aug-22
Aug-23
Aug-22
Aug-24
Aug-26
Aug-25
Aug-24
Aug-23
Aug-24
Aug-22
Aug-23
Aug-22
(1) At the time of vesting, the quantum of all awards that vest based on performance and/or service conditions will automatically convert to South32 ordinary shares, in the
participant’s name, for nil consideration. 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 FY23 is the grant date fair value for accounting purposes being A$3.99 for the FY22 Deferred STI award, A$2.37 for the FY23 LTI award and
MSP Performance award and A$3.85 for the FY23 MSP Retention award. Shareholders approved, under ASX Listing Rule 10.14, the grant of rights for the CEO at the AGM on
27 October 2022.
(4) Rights that vested in FY23 converted to South32 ordinary shares for nil consideration on 26 August 2022. The South32 closing share price on this date was A$4.23. The vesting
outcome for FY20 LTI awards, FY20 MSP Performance awards and FY21 MSP Retention awards scheduled to vest in August 2023 is summarised on page 94.
(5) The percentage is based on the maximum number of rights available to vest in FY23.
(6) K Tovich ceased to be a member of Executive KMP on 31 March 2023. Closing balance is at this date.
(7) S Sibenaler became a member of Executive KMP on 1 April 2023. Opening balance is as at this date.
101
SOUTH32 ANNUAL REPORT 2023
REMUNERATION REPORT CONTINUED
Details of MSP and Transitional LTI awards
Key terms and conditions of MSP and Transitional LTI awards are outlined below in table 1.17. For additional terms of the rights granted
under the two plans, see Terms and conditions of rights awarded under equity plans on page 96.
Table 1.17 – Key terms and performance conditions of awards(1)
Award
MSP
Key Terms and Performance Conditions
The MSP 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 in the Group(2); 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 the LTI for Executive KMP (see page 84) for that
year. There is no retesting if the performance condition is not met and any rights that don’t vest will immediately lapse/
be forfeited.
Rights do not attract any entitlement to voting, dividends or dividend equivalent payments.
Transitional
LTI plan
Katie, Sandy, Jason and Noel participated in the MSP prior to being permanently appointed to the Lead Team.
When an executive is promoted to a role in the Lead Team, they move from the MSP (three-year retention rights and
four-year performance rights) to the LTI plan for the Lead Team (four-year performance rights). The Transitional LTI is a
one-off award that may be granted to address the potential shortfall in vesting after three years.
These awards have the same TSR performance conditions as LTI awards granted in the same year except these awards
have a three-year performance period.
No Transitional LTI awards were granted or vested for Executive KMP during FY23. Details about Transitional LTI awards
that are currently on foot are outlined above in table 1.16. Further details regarding Transitional LTI awards granted in
earlier years are described in past South32 Annual Reports.
(1) See page 84 for key terms of the LTI.
(2) The retention rights are subject to a service condition. Performance hurdles are factored into the performance rights component of MSP awards.
Shareholdings of KMP
The minimum shareholding requirement for Executive KMP is summarised on page 85.
For Non-Executive Directors, the valuation approach used to determine the minimum shareholding requirement of one year’s Board fee
is the cost to the Non-Executive Director to acquire the shares, except for shares acquired at demerger which are valued based on the
closing South32 Ltd share price on 18 May 2015 (A$2.05). As at 30 June 2023, all Non-Executive Directors except Ms Jane Nelson and
Dr Ntombifuthi (Futhi) Mtoba met this requirement. The percentage of fees reflected in the table below is based on our share price at
30 June 2023.
Table 1.18 – South32 shares held directly, indirectly or beneficially by each KMP, including their related parties
Non-Executive Directors
K Wood
F Cooper AO
G Lansdown(3)
X Liu
C Mesquita(4)
N Mtoba
J Nelson(4)
W Osborn
K Rumble
Executive KMP
G Kerr
K Tovich(5)
S Sibenaler(6)
J Economidis
N Pillay
Held at
1 July 2022
Received
on vesting
of rights
Received as
remuneration
Other net
change(1)
Held at
30 June 2023
% of Board
Fees/ fixed
remuneration(2)
367,825
128,010
80,000
60,000
177,440
71,386
-
174,104
161,380
3,804,621
455,574
-
78,743
292,167
-
-
-
-
-
-
-
-
-
280,988
199,124
-
62,305
54,283
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,000
-
-
-
-
-
367,825
128,010
80,000
66,000
177,440
71,386
-
174,104
161,380
(2,108,837)
(93,590)
-
(29,284)
(24,412)
1,976,772
561,108
-
111,764
322,038
232
247
154
127
342
138
0
336
311
390
231
0
51
177
(1) Other net change includes purchases and sales and transfers of vested shares.
(2) Based on Board fees and fixed remuneration at 30 June 2023 and the closing share price of South32 shares as at that date of A$3.76.
(3) G Lansdown ceased to be a Non-Executive Director on 31 May 2023. Closing balance is as at this date.
(4) C Mesquita and J Nelson were appointed as Non-Executive Directors on 1 May 2023. Opening balance is as at this date.
(5) K Tovich ceased to be a member of Executive KMP on 31 March 2023. Closing balance is at this date.
(6) S Sibenaler became a member of Executive KMP on 1 April 2023. Opening balance is as at this date.
102
GOVERNANCE
Additional information
Transactions with KMP
There are no amounts payable to any KMP at 30 June 2023.
During FY23, there were no transactions between KMP or their close family members and the Group other than as described in this
report.
There are no loans with any KMP.
A number of Directors of the Group have control or joint control of other entities (also known as personal entities). During the year, there
have been no transactions between those entities and the Group, and no amounts were owed by or to the Group from those entities.
This Remuneration report was approved by our Board on 7 September 2023.
103
SOUTH32 ANNUAL REPORT 2023 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 excluding finance costs
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
105
106
107
108
109
110
110
110
112
113
113
121
122
125
125
126
126
126
127
130
131
137
137
Notes to financial statements – Capital structure and financing
16. Cash and cash equivalents
17.
Interest bearing liabilities
18. Net finance income/(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 assets and 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. Subsequent events
Directors’ declaration
Lead auditor’s independence declaration
Independent auditor’s report
140
140
140
141
142
149
150
150
150
151
155
156
157
159
160
160
161
161
162
163
164
104
FINANCIAL REPORT
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
US$M
Revenue:
Group production
Third party products and services
Other income
Expenses excluding finance costs
Share of profit/(loss) of equity accounted investments
Profit from operations
Comprising:
Group production
Third party products and services
Profit from operations
Finance income
Finance costs
Net finance income/(costs)
Profit before tax
Income tax expense
Profit/(loss) for the year
Attributable to:
Equity holders of South32 Limited
Profit/(loss) for the year attributable to equity holders of South32 Limited:
Basic earnings per share (cents)
Diluted earnings per share (cents)
The accompanying notes form part of the consolidated financial statements.
Note
FY23
FY22
6,795
634
7,429
345
(7,822)
246
198
175
23
198
222
(207)
15
213
(386)
(173)
8,522
747
9,269
183
(6,000)
272
3,724
3,704
20
3,724
79
(110)
(31)
3,693
(1,024)
2,669
(173)
2,669
(3.8)
(3.8)
57.4
57.0
4
5
26
18
6
8
8
105
SOUTH32 ANNUAL REPORT 2023 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
US$M
Profit/(loss) for the year
Other comprehensive income
Items that may be reclassified to the Consolidated Income Statement:
Share of other comprehensive income/(loss) of equity accounted investments
Total items that may be reclassified to the Consolidated Income Statement
Items that will not be reclassified to the Consolidated Income Statement:
Investments in equity instruments designated as fair value through other comprehensive income
(FVOCI):
Net fair value gains/(losses)
Income tax (expense)/benefit
Share of other comprehensive income/(loss) of equity accounted investments
Gains/(losses) on pension and medical schemes
Income tax (expense)/benefit recognised within other comprehensive income
Total items that will not be reclassified to the Consolidated Income Statement
Total other comprehensive income/(loss)
Total comprehensive income/(loss)
Attributable to:
Equity holders of South32 Limited
The accompanying notes form part of the consolidated financial statements.
Note
FY23
(173)
FY22
2,669
26
26
15
6
6
(4)
(4)
(11)
3
-
3
(1)
(6)
-
(173)
(78)
24
1
3
(1)
(51)
(55)
2,614
(173)
2,614
106
FINANCIAL REPORT
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2023
US$M
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Current tax assets
Other assets
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 assets
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
Other financial 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
FY23
FY22
16
9
19
10
9
19
10
11
12
26
6
14
17
19
15
14
17
19
6
15
20
20
1,258
778
1
1,102
54
46
3,239
1,923
118
82
8,050
242
499
390
21
11,325
14,564
985
365
-
10
194
6
1,560
19
1,376
37
210
1,986
1
3,629
5,189
9,375
13,251
(51)
(3,553)
(271)
9,376
(1)
9,375
2,365
844
1
982
4
44
4,240
1,903
64
76
8,988
186
470
394
15
12,096
16,336
989
402
6
308
186
6
1,897
8
1,425
84
307
1,835
1
3,660
5,557
10,779
13,469
(32)
(3,558)
901
10,780
(1)
10,779
107
SOUTH32 ANNUAL REPORT 2023 CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
US$M
Operating activities
Profit before tax
Adjustments for:
Non-cash or non-operating significant items
Depreciation and amortisation expense
Net impairment loss/(reversal) of financial assets
Net impairment loss/(reversal) of non-financial assets
Employee share awards expense
Net finance (income)/costs
Share of (profit)/loss of equity accounted investments
(Gains)/losses on derivative instruments, contingent consideration and other investments
measured at fair value through profit or loss (FVTPL)
Other non-cash or non-operating items
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
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
Proceeds from financial assets
Payments related to the acquisition of subsidiaries and joint operations, net of their cash
Payments related to the acquisition of equity accounted investments
Proceeds from sale of intangibles
Net cash flows from investing activities
Financing activities
Proceeds from interest bearing liabilities
Repayment of interest bearing liabilities
Purchase of shares by Employee Share Ownership Plan (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 year
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents, net of overdrafts, at the end of the year
The accompanying notes form part of the consolidated financial statements.
Note
FY23
FY22
213
3,693
4
7
16
(186)
653
71
1,300
24
(15)
(246)
(6)
(4)
178
(126)
(45)
3
1,814
78
(109)
(818)
3
223
1,191
(790)
(98)
59
(65)
(179)
117
(25)
-
73
(908)
-
(133)
(33)
(218)
(1,007)
(1,391)
(1,108)
2,365
1
1,258
(77)
624
26
145
23
31
(272)
(29)
(18)
(300)
(206)
160
(82)
3,718
66
(70)
(868)
-
224
3,070
(522)
(70)
37
(4)
(222)
230
(114)
(1,430)
-
(2,095)
1,527
(932)
(22)
(128)
(660)
(215)
760
1,613
(8)
2,365
108
FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
Attributable to equity holders of South32 Limited
Share
capital
Treasury
shares
Financial
assets
reserve(1)
Employee
share awards
reserve(2)
Other
reserves(3)
Retained
earnings/
(accumulated
losses)
US$M
Balance as at 1 July 2022
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners:
Dividends
Shares bought back and cancelled
Employee share entitlements for unvested
awards, net of tax
Employee share awards vested and lapsed,
net of tax
Purchase of shares by ESOP Trusts
Balance as at 30 June 2023
Balance as at 1 July 2021
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners:
Dividends
Shares bought back and cancelled
Employee share entitlements for unvested
awards, net of tax
Employee share awards vested and lapsed,
net of tax
Purchase of shares by ESOP Trusts
Transfer of cumulative fair value loss on an
investment in equity instruments
designated as FVOCI(4)
Balance as at 30 June 2022
13,469
-
-
-
-
(218)
-
-
-
13,251
13,597
-
-
-
-
(128)
-
-
-
-
13,469
(32)
-
-
-
-
-
-
14
(33)
(51)
(22)
-
-
-
-
-
-
12
(22)
-
(32)
(3,597)
-
6
6
901
(173)
2
(171)
Total
10,780
(173)
-
(173)
-
-
-
(1,007)
-
(1,007)
(218)
-
29
-
-
(3,591)
(3,593)
-
(4)
(4)
-
-
-
-
-
6
-
(271)
(1,053)
2,669
3
2,672
(2)
(33)
9,376
8,955
2,669
(55)
2,614
(660)
-
(660)
(128)
-
12
-
27
(6)
(22)
Non-
controlling
interests
(1)
-
-
-
-
-
-
-
-
(1)
(1)
-
-
-
-
-
-
-
-
Total
equity
10,779
(173)
-
(173)
(1,007)
(218)
29
(2)
(33)
9,375
8,954
2,669
(55)
2,614
(660)
(128)
27
(6)
(22)
(6)
-
(8)
(8)
-
-
-
-
-
(14)
(22)
-
(54)
(54)
-
-
-
-
-
45
-
-
-
-
-
29
(22)
-
52
48
-
-
-
-
-
27
(30)
-
70
(6)
-
45
-
(3,597)
(70)
901
-
10,780
-
(1)
-
10,779
(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.
(4) Relates to the acquisition of an additional 18.2 per cent shareholding and related rights in Mineração Rio do Norte in FY22.
The accompanying notes form part of the consolidated financial statements.
109
SOUTH32 ANNUAL REPORT 2023 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 consolidated financial statements of the Group for the year
ended 30 June 2023 were authorised for issue in accordance with
a resolution of the Directors on 7 September 2023.
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 general purpose
financial statements 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
post-retirement assets and obligations, derivative financial
instruments and certain other financial assets and liabilities
which are required to be measured at fair value;
– Are presented in US dollars, with all values 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 and IASB that are relevant
to the operations of the Group and effective for reporting
periods beginning on or after 1 July 2022. 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 majority 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 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.
(c) Key estimates, assumptions and judgements
The preparation of the consolidated financial statements
has required management to apply accounting policies and
methodologies that are based on complex and subjective
estimates, assumptions and judgements. Management based
its estimates and judgements on historical experience and
assumptions it believes to be reasonable and realistic based
on the current environment. Actual results may differ from
those reported in these statements due to the uncertainties
that characterise the assumptions and conditions on which the
estimates are based.
Specific sources of uncertainty identified by the Group are set out
on the following pages and/or together with the applicable note,
as follows:
Key estimates, assumptions and judgements
Recognition of deferred taxes
Uncertain tax matters
Useful economic lives of assets
Impairment of non-financial assets
Closure and rehabilitation provisions
Expected credit loss on credit-impaired financial assets
note 6
note 6
note 11
note 13
note 15
note 19
In addition to the specific sources of uncertainty noted above, the
following assumptions are considered pervasive to the financial
statements as a whole:
Climate change-related risks and opportunities
The key estimates, assumptions and judgements made in these
consolidated financial statements take into account the Group’s
expectations of, and approach to, climate change-related risks,
and are consistent with the Group’s reporting on climate-related
matters.
These expectations may affect the Group’s financial results and
financial position in a number of ways, including the following:
– The useful lives of assets, and therefore the depreciation and
amortisation charged in the Consolidated Income Statement,
may be impacted by changes in operational plans (refer to note
11 Property, plant and equipment);
– Asset recoverable amounts may be affected due to changes
in estimated future cash flows driven by, for example, changes
in forecast commodity prices, operating costs, carbon prices
and useful lives of assets (refer to note 13 Impairment of non-
financial assets and note 19(b)(iii) Credit risk: Shareholder loan
receivable from Sierra Gorda);
– The commercial viability of exploration areas of interest may
impact the recoverability of exploration and evaluation assets
(refer to note 13 Impairment of non-financial assets); and
– Timing and cost of closure and rehabilitation activities (refer to
note 15 Provisions).
The carrying amount of the associated deferred tax assets/
liabilities may change due to changes in estimates of the likely
recovery of the related tax benefits.
110
FINANCIAL REPORT
2. Basis of preparation continued
(c) Key estimates, assumptions and judgements
continued
Global transition to a low-carbon world
While we are committed to the goals of the Paris Agreement,
current global signposts continue to point towards a probable
trajectory of at least 2°C warming which forms our base case(1)
for global transition to a low-carbon world. Our base case directly
informs our commodity demand outlook, forecast commodity
prices and carbon prices. Any change in our base case may in
turn impact our Ore Reserve estimates, mine plans, production
volumes and future costs.
The Group’s key estimates, assumptions and judgements with
respect to transition risks and opportunities are based on the
Group’s expectations and assessments at the date of this report,
and actual results may differ. Government policies and market
developments continue to drive uncertainty in commodity and
carbon price outlooks, which may impact the Group’s approach
to climate change and assumptions and judgements, which may
in turn result in material changes to financial results and the
carrying values of assets and liabilities in future reporting periods.
Physical impacts of climate change
The Group’s operations are located in regions that may
experience extreme temperatures, bushfires, flooding and
droughts. The Group has performed a baseline risk assessment of
the physical impacts of climate change on its operated portfolio,
with the assessment based on scenarios RCP4.5 and RCP8.5 as
described by the Intergovernmental Panel on Climate Change
(IPCC)(2).
Longer term assets (including those that move into closure) are
likely to face more significant challenges due to the expected
severity of climate risks manifesting over longer timeframes.
Climate change is likely to exacerbate the risks to water supply,
storage and usage that we currently manage, particularly
for operations in areas of water scarcity and other sensitive
environmental aspects.
The risk of the physical impacts of climate change were
contemplated during the development of our life of operation
plans (including closure estimates) and additional capital and/
or increases to operating costs have been incorporated into
our forward-looking estimates when deemed appropriate. The
Group’s ongoing analysis of reasonable alternative assumptions
with respect to future climate conditions has not identified any
additional indicator that the carrying value of assets cannot be
recovered or that useful lives of assets will be shortened.
The Group’s key estimates, assumptions and judgments with
respect to the physical impacts of climate change are based
on the Group’s expectations and assessments as at the date
of this report, and actual results may differ. The high degree of
uncertainty around the nature, timing and magnitude of weather
events and long-term changes in climate patterns, as well as
the Group’s continued physical risk assessment process and
development of its direct adaptation and mitigation strategies,
may result in material changes to financial results and carrying
value of assets and liabilities in future reporting periods.
Mineral Resources and Ore Reserves
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.
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. 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,
including a consideration of forecast sales prices.
With the exception of Sierra Gorda's mineral reserves, the Group
reports Mineral Resources and Ore Reserves 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. The Sierra Gorda
estimates of mineral reserves are foreign estimates under the
ASX Listing Rules and are not reported in accordance with the
JORC Code. Refer to the Resources and Reserves section of this
report for further information on the qualifying foreign estimates
related to Sierra Gorda.
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 Mineral Resources and Ore Reserves 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.
The Group may also include Exploration Targets in determining
the recoverable amount of a cash generating unit (CGU) or an
exploration area of interest.
Similar to climate-change related risks and opportunities,
changes in the Group's estimates of Mineral Resources and Ore
Reserves, including estimates of exploration potential, may affect
the Group’s financial results and financial position in a number of
ways, including asset recoverable amounts, useful lives of assets,
commercial viability of exploration areas of interest, timing and
cost of closure and rehabilitation activities and the recovery of
any associated deferred tax assets.
(1) By contrast, our FY23 1.5°C scenario, which is primarily based on the International Energy Agency’s Net Zero Emissions 2050 scenario (IEA NZE), is utilised by the Group to
assess the resilience of our portfolio under a rapid global transition. The IEA NZE sets out one credible pathway to achieving a 1.5°C outcome by 2050, providing a set of
general assumptions on commodity demand drivers, scrap availability, material efficiency and carbon prices.
(2) There are four Representative Concentration Pathways (RCPs) representing possible future greenhouse gas emissions and concentration scenarios. RCP4.5 equates to
between 1.1°C and 2.6°C of warming by the end of the century. RCP8.5 equates to between 2.6°C and 4.8°C of warming by the end of the century.
111
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – BASIS OF PREPARATION CONTINUED
3. New standards and interpretations
(a) New accounting standards and interpretations
effective from 1 July 2022
The following new accounting standards and interpretations have
been published and are effective for the year ended 30 June
2023:
– 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; and
– Amendments to AASB 112 – International Tax Reform – Pillar
Two Model Rules.
The Group has reviewed these amendments and concluded that
none have a significant impact on the Group. Refer to note 6(f)
for further details of the impact on the Group as a result of the
international tax reform and the related amendments to AASB
112.
(b) New accounting standards and interpretations
issued but not effective
The following new accounting standards and interpretations
have been published but are not yet effective for the year ended
30 June 2023:
– Amendments to AASB 101 – Classification of Liabilities as
Current or Non-current;
– Amendments to AASB 10 and AASB 128 – Sale or Contribution
of Assets between an Investor and its Associate or Joint
Venture;
– Amendments to AASB 7, AASB 101, AASB 108 and AASB 134 –
Disclosure of Accounting Policies and Definition of Accounting
Estimates;
– Amendments to AASB 1 and AASB 112 – Deferred Tax related
to Assets and Liabilities arising from a Single Transaction;
– Amendments to AASB 16 – Lease Liability in a Sale and
Leaseback; and
– AASB 17 Insurance Contracts.
The Group has reviewed these amendments and improvements
and does not expect them to 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.
112
FINANCIAL REPORT
NOTES TO FINANCIAL STATEMENTS – RESULTS FOR THE YEAR
This section focuses on the financial performance of the
Group, covering both profitability and the resulting 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.
Group financing and income taxes are primarily managed on a
Group basis and are not allocated to operating segments.
Total assets and liabilities for each operating segment represent
operating assets and liabilities which predominantly exclude the
carrying amount of non-material equity accounted investments,
cash, interest bearing liabilities, tax balances and certain other
financial assets and liabilities.
Revenue recognition
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
assessing performance.
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 principal activities of each operating segment are
summarised as follows:
The following is a description of the principal activities from which
the Group generates its revenue:
Operating segment
Principal activities
Worsley Alumina
Brazil Alumina
Brazil Aluminium
Hillside Aluminium
Mozal Aluminium
Sierra Gorda
Cannington
Hermosa
Cerro Matoso
Integrated bauxite mine and alumina
refinery in Australia
Integrated bauxite mine and alumina
refinery in Brazil
Aluminium smelter in Brazil
Aluminium smelter in South Africa
Aluminium smelter in Mozambique
Copper mine in Chile
Silver, lead and zinc mine in Australia
Base metals exploration and development
options in the United States
Integrated laterite ferronickel mine and
smelting complex in Colombia
Metallurgical coal mines in Australia
Illawarra Metallurgical
Coal
Australia Manganese Manganese ore mine in Australia
South Africa
Manganese
Manganese ore mines in South Africa
All operations are operated by the Group except Brazil Alumina,
Brazil Aluminium and Sierra Gorda.
(b) Segment results
The segment information reflects the Group’s interest in
subsidiaries and joint operations, as well as material equity
accounted joint ventures on a proportional consolidation basis.
The segment information includes non-IFRS financial measures.
Segment performance is measured by Underlying EBIT and
Underlying EBITDA. Underlying EBIT is profit before net finance
income/(costs), income tax expense, royalty related tax expense
and other earnings adjustment items. Underlying EBITDA is
Underlying EBIT before depreciation and amortisation.
Reconciliations of the underlying segment information to the
statutory information included in the Group’s consolidated
financial statements are set out in note 4(b)(i) Underlying results
reconciliation, including joint venture adjustments which reconcile
the proportional consolidation of the material equity accounted
joint ventures back to their statutory equity accounting positions.
The Group’s material equity accounted joint ventures are Sierra
Gorda, Australia Manganese and South Africa Manganese, refer to
note 26 Equity accounted investments.
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 an arm’s length basis.
Group and unallocated items/eliminations represent group centre
functions and consolidation adjustments.
Revenue from the sale of commodities
The Group primarily sells the following commodities: alumina,
aluminium, copper, silver, lead, zinc, ferronickel, metallurgical
coal and manganese ore. 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 Free On Board
(FOB) or Cost, Insurance, and Freight (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.
The Group does not separately disclose sales revenue from
freight services as it does not consider this necessary in order to
understand the impact of economic factors on the Group.
113
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – RESULTS FOR THE YEAR CONTINUED
4. Segment information continued
(b) Segment results continued
FY23
US$M
Revenue from customers
Other(2)
Total underlying revenue
Comprising:
Group production
Third party products and services(3)
Inter-segment revenue
Total underlying revenue
Underlying EBITDA
Underlying depreciation and amortisation
Underlying EBIT
Comprising:
Group production
Exploration expensed
Third party products and services(3)
Share of profit/(loss) of equity accounted investments
Underlying EBIT
Underlying net finance costs
Underlying income tax expense
Underlying royalty related tax expense
Underlying earnings
Total adjustments to profit/(loss)(4)
Profit/(loss) for the year
Underlying exploration expenditure
Underlying capital expenditure(5)
Underlying equity accounted investments
Total underlying assets(6)
Total underlying liabilities(6)
Worsley
Alumina
1,364
(1)
1,363
642
-
721
1,363
251
(183)
68
68
-
-
-
68
-
82
-
3,578
1,121
Brazil Alumina
Brazil
Aluminium
Hillside
Aluminium
Mozal
Aluminium
Gorda(1)
Cannington
Hermosa
Cerro Matoso
Coal
Manganese(1)
Illawarra
Metallurgical
Australia
South Africa
Manganese(1)
Group and
unallocated
items/
eliminations
Group
underlying
results(1)
456
-
456
395
-
61
456
7
(52)
(45)
(51)
-
-
6
(45)
-
58
51
880
142
166
-
166
166
-
-
166
(129)
(7)
(136)
(136)
-
-
-
(136)
1,822
1
1,823
1,823
-
-
1,823
257
(66)
191
191
-
-
-
191
-
9
-
91
63
-
18
-
1,156
311
Sierra
682
2
684
684
-
-
684
358
(141)
217
221
(4)
-
-
217
196
7
-
1,811
223
888
(2)
886
886
-
-
886
108
(52)
56
56
-
-
-
56
-
17
-
778
200
554
(12)
542
542
-
-
542
213
(71)
142
148
(6)
-
-
142
8
61
-
575
403
-
-
-
-
-
-
-
(15)
(4)
(19)
(19)
-
-
-
(19)
20
256
-
1,095
96
698
-
698
698
-
-
698
246
(57)
189
191
(2)
-
-
189
2
38
-
581
218
1,664
(21)
1,643
1,643
-
-
1,643
833
(141)
692
696
(9)
-
5
692
17
248
7
1,275
506
720
(32)
688
688
-
-
688
369
(103)
266
266
-
-
-
266
1
58
-
660
421
369
(25)
344
344
-
-
344
66
(21)
45
46
(1)
-
-
45
1
25
-
326
183
(236)
(7)
(243)
-
539
(782)
(243)
(30)
(20)
(50)
(31)
(42)
23
-
(50)
51
3
-
2,709
2,253
9,147
(97)
9,050
8,511
539
-
9,050
2,534
(918)
1,616
1,646
(64)
23
11
1,616
(188)
(457)
(55)
916
(1,089)
(173)
107
1,069
58
15,515
6,140
(1) The segment information reflects the Group’s interest in material equity accounted joint ventures and is presented on a proportional consolidation basis, which is the
measure used by the Group’s management to assess their performance. The Group’s underlying results includes the proportional elimination of revenue and corresponding
expenses relating to freight services provided by the Group to material joint ventures of US$128 million and third party product revenue of US$33 million included in Group and
unallocated items/eliminations. Refer to note 4(b)(i) Underlying results reconciliation for the joint venture adjustments that reconcile the underlying proportional consolidation
to the statutory equity accounting positions included in the Group’s consolidated financial statements.
(2) Underlying other revenue relates to fair value movements on provisionally priced contracts.
(3) Underlying revenue on third party products and services sold comprises US$86 million for aluminium, US$25 million for alumina, US$140 million for coal, US$33 million for
manganese, US$106 million for freight services and US$149 million for raw materials. Underlying EBIT on third party products and services sold comprises US$(1) million for
aluminium, US$13 million for alumina, US$11 million for coal, US$(1) million for freight services and US$1 million for raw materials.
(4) Represents the total of all adjustments made to Profit from operations, Net finance income/(costs) and Income tax expense. Refer to note 4(b)(i) Underlying results
reconciliation for further details.
(5) Underlying capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(6) Total underlying assets and liabilities for each operating segment represent operating assets and liabilities which predominantly exclude the carrying amount of non-material
equity accounted investments, cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities.
114
FINANCIAL REPORT
4. Segment information continued
(b) Segment results continued
FY23
US$M
Other(2)
Revenue from customers
Total underlying revenue
Comprising:
Group production
Third party products and services(3)
Inter-segment revenue
Total underlying revenue
Underlying EBITDA
Underlying depreciation and amortisation
Underlying EBIT
Comprising:
Group production
Exploration expensed
Underlying EBIT
Underlying net finance costs
Underlying income tax expense
Underlying royalty related tax expense
Underlying earnings
Total adjustments to profit/(loss)(4)
Profit/(loss) for the year
Underlying exploration expenditure
Underlying capital expenditure(5)
Underlying equity accounted investments
Total underlying assets(6)
Total underlying liabilities(6)
Third party products and services(3)
Share of profit/(loss) of equity accounted investments
Worsley
Alumina
1,364
(1)
1,363
642
-
721
1,363
251
(183)
68
68
-
-
-
68
-
82
-
3,578
1,121
Hillside
Aluminium
1,822
1,823
1,823
1
-
-
1,823
257
(66)
191
191
-
-
-
166
-
166
166
-
-
166
(129)
(7)
(136)
(136)
-
-
-
-
9
-
91
63
-
18
-
1,156
311
456
-
456
395
-
61
456
7
(52)
(45)
(51)
-
-
6
-
58
51
880
142
(45)
(136)
191
Brazil Alumina
Aluminium
Brazil
Mozal
Aluminium
Sierra
Gorda(1)
Cannington
Hermosa
Cerro Matoso
Illawarra
Metallurgical
Coal
Australia
Manganese(1)
South Africa
Manganese(1)
Group and
unallocated
items/
eliminations
Group
underlying
results(1)
888
(2)
886
886
-
-
886
108
(52)
56
56
-
-
-
56
-
17
-
778
200
682
2
684
684
-
-
684
358
(141)
217
221
(4)
-
-
217
7
196
-
1,811
223
554
(12)
542
542
-
-
542
213
(71)
142
148
(6)
-
-
142
8
61
-
575
403
-
-
-
-
-
-
-
(15)
(4)
(19)
(19)
-
-
-
(19)
20
256
-
1,095
96
698
-
698
698
-
-
698
246
(57)
189
191
(2)
-
-
189
2
38
-
581
218
1,664
(21)
1,643
1,643
-
-
1,643
833
(141)
692
696
(9)
-
5
692
17
248
7
1,275
506
720
(32)
688
688
-
-
688
369
(103)
266
266
-
-
-
266
1
58
-
660
421
369
(25)
344
344
-
-
344
66
(21)
45
46
(1)
-
-
45
1
25
-
326
183
(236)
(7)
(243)
-
539
(782)
(243)
(30)
(20)
(50)
(31)
(42)
23
-
(50)
51
3
-
2,709
2,253
9,147
(97)
9,050
8,511
539
-
9,050
2,534
(918)
1,616
1,646
(64)
23
11
1,616
(188)
(457)
(55)
916
(1,089)
(173)
107
1,069
58
15,515
6,140
115
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – RESULTS FOR THE YEAR CONTINUED
4. Segment information continued
(b) Segment results continued
FY22
US$M
Revenue from customers
Other(2)
Total underlying revenue
Comprising:
Group production
Third party products and services(3)
Inter-segment revenue
Total underlying revenue
Underlying EBITDA
Underlying depreciation and amortisation
Underlying EBIT
Comprising:
Group production
Exploration expensed
Third party products and services(3)
Share of profit/(loss) of equity accounted investments
Underlying EBIT
Underlying net finance costs
Underlying income tax expense
Underlying royalty related tax expense
Underlying earnings
Total adjustments to profit/(loss)(4)
Profit/(loss) for the year
Underlying exploration expenditure
Underlying capital expenditure(5)
Underlying equity accounted investments
Total underlying assets(6)
Total underlying liabilities(6)
Worsley
Alumina
1,626
(1)
1,625
818
-
807
1,625
571
(185)
386
386
-
-
-
386
-
55
-
3,571
1,000
Brazil Alumina
Brazil
Aluminium
Hillside
Aluminium
Aluminium Sierra Gorda(1)
Cannington
Hermosa
Cerro Matoso
Coal
Manganese(1)
Illawarra
Metallurgical
Australia
South Africa
Manganese(1)
Group and
unallocated
items/
eliminations
522
2
524
523
-
1
524
150
(61)
89
92
-
-
(3)
89
-
51
40
805
109
-
-
-
-
-
-
-
(43)
(1)
(44)
(44)
-
-
-
(44)
-
1
-
67
21
2,257
(3)
2,254
2,254
-
-
2,254
730
(64)
666
666
-
-
-
666
-
24
-
1,284
357
Mozal
925
(1)
924
924
-
-
924
305
(34)
271
271
-
-
-
271
280
(39)
241
241
-
-
241
133
(58)
75
76
(1)
-
-
75
-
11
-
764
149
2
81
-
1,614
212
771
(35)
736
736
-
-
736
388
(73)
315
317
(2)
-
-
315
3
45
-
555
414
-
-
-
-
-
-
-
(12)
(2)
(14)
(14)
-
-
-
(14)
19
97
-
67
2,098
927
2
929
929
-
-
929
529
(66)
463
463
-
-
-
-
37
-
592
243
2,336
2
2,338
2,338
-
-
2,338
1,507
(119)
1,388
1,396
(9)
-
1
11
189
2
1,277
491
463
1,388
833
15
848
848
-
-
848
488
(86)
402
402
-
-
-
402
1
62
-
645
387
Group
underlying
results(1)
10,690
(60)
10,630
10,030
600
-
10,630
4,755
(788)
3,967
3,988
(39)
20
(2)
3,967
(155)
(1,151)
(59)
2,602
67
2,669
74
684
42
17,269
6,490
(205)
(3)
(208)
-
600
(808)
(208)
(69)
(19)
(88)
(82)
(26)
20
-
(88)
37
12
-
3,666
2,844
418
1
419
419
-
-
419
78
(20)
58
59
(1)
-
-
58
1
19
-
331
196
(1) The segment information reflects the Group’s interest in material equity accounted joint ventures and is presented on a proportional consolidation basis, which is the
measure used by the Group’s management to assess their performance. The Group’s underlying results includes the proportional elimination of revenue and corresponding
expenses relating to freight services provided by the Group to material joint ventures of US$187 million and third party product revenue of US$40 million included in Group and
unallocated items/eliminations. Refer to note 4(b)(i) Underlying results reconciliation for the joint venture adjustments that reconcile the underlying proportional consolidation
to the statutory equity accounting positions included in the Group’s consolidated financial statements.
(2) Underlying other revenue relates to fair value movements on provisionally priced contracts.
(3) Underlying revenue on third party products and services sold comprises US$110 million for aluminium, US$25 million for alumina, US$115 million for coal, US$40 million for
manganese, US$145 million for freight services and US$165 million for raw materials. Underlying EBIT on third party products and services sold comprises US$8 million for
aluminium, US$8 million for alumina, US$7 million for coal and US$(3) million for freight services.
(4) Represents the total of all adjustments made to Profit from operations, Net finance income/(costs) and Income tax expense. Refer to note 4(b)(i) Underlying results
reconciliation for further details.
(5) Underlying capital expenditure excludes the purchase of intangibles and capitalised exploration expenditure.
(6) Total underlying assets and liabilities for each operating segment represent operating assets and liabilities which predominantly exclude the carrying amount of non-material
equity accounted investments, cash, interest bearing liabilities, tax balances and certain other financial assets and liabilities.
116
FINANCIAL REPORT
4. Segment information continued
(b) Segment results continued
FY22
US$M
Other(2)
Revenue from customers
Total underlying revenue
Comprising:
Group production
Third party products and services(3)
Inter-segment revenue
Total underlying revenue
Underlying EBITDA
Underlying depreciation and amortisation
Underlying EBIT
Comprising:
Group production
Exploration expensed
Underlying EBIT
Underlying net finance costs
Underlying income tax expense
Underlying royalty related tax expense
Underlying earnings
Total adjustments to profit/(loss)(4)
Profit/(loss) for the year
Underlying exploration expenditure
Underlying capital expenditure(5)
Underlying equity accounted investments
Total underlying assets(6)
Total underlying liabilities(6)
Third party products and services(3)
Share of profit/(loss) of equity accounted investments
Worsley
Alumina
1,626
(1)
1,625
818
-
807
1,625
571
(185)
386
386
-
-
-
386
-
55
-
3,571
1,000
522
2
524
523
-
1
524
150
(61)
89
92
-
-
(3)
89
-
51
40
805
109
-
-
-
-
-
-
-
(43)
(1)
(44)
(44)
-
-
-
(44)
-
1
-
67
21
2,257
(3)
2,254
2,254
-
-
2,254
730
(64)
666
666
-
-
-
666
-
24
-
1,284
357
Brazil Alumina
Aluminium
Brazil
Hillside
Aluminium
Mozal
Aluminium Sierra Gorda(1)
Cannington
Hermosa
Cerro Matoso
Illawarra
Metallurgical
Coal
Australia
Manganese(1)
South Africa
Manganese(1)
Group and
unallocated
items/
eliminations
925
(1)
924
924
-
-
924
305
(34)
271
271
-
-
-
271
-
11
-
764
149
280
(39)
241
241
-
-
241
133
(58)
75
76
(1)
-
-
75
2
81
-
1,614
212
771
(35)
736
736
-
-
736
388
(73)
315
317
(2)
-
-
315
3
45
-
555
414
-
-
-
-
-
-
-
(12)
(2)
(14)
(14)
-
-
-
(14)
19
97
-
2,098
67
927
2
929
929
-
-
929
529
(66)
463
463
-
-
-
463
-
37
-
592
243
2,336
2
2,338
2,338
-
-
2,338
1,507
(119)
1,388
1,396
(9)
-
1
1,388
11
189
2
1,277
491
833
15
848
848
-
-
848
488
(86)
402
402
-
-
-
402
1
62
-
645
387
418
1
419
419
-
-
419
78
(20)
58
59
(1)
-
-
58
1
19
-
331
196
(205)
(3)
(208)
-
600
(808)
(208)
(69)
(19)
(88)
(82)
(26)
20
-
(88)
37
12
-
3,666
2,844
Group
underlying
results(1)
10,690
(60)
10,630
10,030
600
-
10,630
4,755
(788)
3,967
3,988
(39)
20
(2)
3,967
(155)
(1,151)
(59)
2,602
67
2,669
74
684
42
17,269
6,490
117
SOUTH32 ANNUAL REPORT 2023
NOTES TO FINANCIAL STATEMENTS – RESULTS FOR THE YEAR CONTINUED
4. Segment information continued
(b) Segment results continued
(i) Underlying results reconciliation
The following tables reconcile the underlying segment information to the statutory information included in the Group’s consolidated
financial statements:
US$M
Underlying EBIT
Significant items(1)
Sierra Gorda joint venture adjustments(2)(3)
Manganese joint venture adjustments(2)(4)
Gains on the consolidation of interests in operations(5)
Exchange rate gains/(losses) on restatement of monetary items(6)
Net impairment (loss)/reversal of financial assets(6)(7)
Net impairment (loss)/reversal of non-financial assets(6)(8)
Gains/(losses) on non-trading derivative instruments, contingent consideration and other investments measured
at FVTPL(6)
Profit from operations
Underlying net finance costs
Sierra Gorda joint venture adjustments(2)
Manganese joint venture adjustments(2)
Exchange rate variations on net cash/(debt)
Net finance income/(costs)
Underlying income tax expense
Underlying royalty related tax expense
Tax effect of significant items(1)
Sierra Gorda joint venture adjustments relating to income tax expense(2)
Sierra Gorda joint venture adjustments relating to royalty related tax expense(2)
Manganese joint venture adjustments relating to income tax expense(2)
Manganese joint venture adjustments relating to royalty related tax expense(2)
Tax effect of other adjustments to Underlying EBIT
Tax effect of other adjustments to Underlying net finance costs
Exchange rate variations on tax balances
Income tax expense
Underlying earnings
Total adjustments to profit/(loss)
Profit/(loss) for the year
FY23
1,616
186
(144)
(147)
-
62
(71)
(1,300)
(4)
198
(188)
167
28
8
15
(457)
(55)
(23)
11
12
85
43
(3)
(3)
4
(386)
916
(1,089)
(173)
FY22
3,967
77
(44)
(216)
9
50
(26)
(145)
52
3,724
(155)
62
22
40
(31)
(1,151)
(59)
(26)
1
4
153
55
32
(13)
(20)
(1,024)
2,602
67
2,669
(1) Refer to note 4(b)(ii) Significant items.
(2) The segment information reflects the Group’s interest in material equity accounted joint ventures and is presented on a proportional consolidation basis, which is the measure
used by the Group’s management to assess their performance. Joint venture adjustments reconcile the proportional consolidation to the statutory equity accounting
positions, recognised in share of profit/(loss) of equity accounted investments in the Consolidated Income Statement.
(3) The Group’s investment in the Sierra Gorda operation is represented by the carrying value of an equity accounted investment of US$101 million (FY22: US$30 million) and
the carrying value of a purchased credit-impaired receivable of US$1,711 million (FY22: US$1,648 million) classified as a loan to an equity accounted investment within trade
and other receivables on the Consolidated Balance Sheet. The earnings adjustments include a revaluation gain of US$71 million (FY22: gain of US$26 million) relating to the
shareholder loan payable that was eliminated from the Group’s Underlying EBIT upon proportional consolidation.
(4) Includes earnings adjustments of US$(3) million (FY22: US$6 million) included in the Australia Manganese segment and US$12 million (FY22: US$8 million) included in the South
Africa Manganese segment.
(5) FY22 gain relates to the acquisition of an additional 16.6 per cent shareholding and related rights in Mozal Aluminium, recognised in other income in the Consolidated Income
Statement.
(6) Recognised in expenses excluding finance costs in the Consolidated Income Statement.
(7) Refer to note 19 Financial assets and financial liabilities.
(8) Refer to note 13 Impairment of non-financial assets.
118
FINANCIAL REPORT
4. Segment information continued
(b) Segment results continued
(i) Underlying results reconciliation continued
FY23
US$M
Total revenue
Depreciation and amortisation
Share of profit/(loss) of equity accounted investments
Exploration expenditure
Capital expenditure
Equity accounted investments
Total assets
Total liabilities
FY22
US$M
Total revenue
Depreciation and amortisation
Share of profit/(loss) of equity accounted investments
Exploration expenditure
Capital expenditure
Equity accounted investments
Total assets
Total liabilities
Group
underlying
results
Sierra Gorda
joint venture
adjustments
Manganese
joint venture
adjustments
9,050
918
11
107
1,069
58
15,515
6,140
(684)
(141)
71
(7)
(196)
101
(450)
(450)
(937)
(124)
164
(2)
(83)
340
(501)
(501)
Group
statutory
results
7,429
653
246
98
790
499
14,564
5,189
Group
underlying
results
Sierra Gorda
joint venture
adjustments
Manganese
joint venture
adjustments
Group
statutory
results
10,630
788
(2)
74
684
42
17,269
6,490
(241)
(58)
30
(2)
(81)
30
(452)
(452)
(1,120)
(106)
244
(2)
(81)
398
(481)
(481)
9,269
624
272
70
522
470
16,336
5,557
119
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – RESULTS FOR THE YEAR CONTINUED
4. Segment information continued
(b) Segment results continued
(ii) Significant items
Significant items are those items, not separately identified in note 4(b)(i) Underlying results reconciliation, whose nature and amount are
considered material to the Group’s consolidated financial statements.
FY23
US$M
Disposal of royalties
Assets write-off
Tax adjustments relating to the Sierra Gorda acquisition
Vendor indemnity relating to the Sierra Gorda acquisition
Total significant items
Disposal of royalties
Gross
189
(51)
-
48
186
Tax
(56)
16
17
-
(23)
Net
133
(35)
17
48
163
On 19 July 2022, the Group divested four royalties to Ecora Resources PLC (formerly known as Anglo Pacific Group PLC) in exchange
for consideration comprising an upfront cash payment of US$48 million, deferred cash consideration of US$55 million, US$78 million
in equity and a variable consideration receivable valued at US$10 million. The equity in Ecora Resources PLC has been recognised as
an investment in equity instruments designated at FVOCI. The variable consideration is payable if certain production and price-linked
conditions are met prior to 2032, up to a maximum of US$15 million.
The royalties were recognised as intangible assets with a nominal carrying value. On completion the Group recognised other income,
net of transaction costs, of US$189 million (US$133 million post-tax) in the Consolidated Income Statement and was included in Group
and unallocated items.
Assets write-off
On 23 August 2022, the Group announced that it would not proceed with an investment in the Dendrobium Next Domain project
at Illawarra Metallurgical Coal following its consideration of recently completed study work and extensive analysis of alternatives
considered for the complex. As a result of the decision in August 2022, the Group wrote off US$51 million (US$35 million post-tax) of
costs previously capitalised in relation to the project which were recognised within expenses excluding finance costs in the Consolidated
Income Statement. The write-off related to capitalised exploration and evaluation assets previously included in property, plant and
equipment on the Consolidated Balance Sheet.
Tax adjustments relating to the Sierra Gorda acquisition
During the year, the Group recognised an income tax benefit of US$31 million relating to tax liabilities recognised on the acquisition of
Sierra Gorda during FY22. The US$31 million benefit comprises a reassessment of US$17 million and a foreign exchange gain of US$14
million which is separately reported as part of exchange variations of tax balances. The tax adjustments relating to the Sierra Gorda
acquisition have been excluded from the Group’s Underlying income tax expense on the basis that they do not relate to assessable
income earned during its ownership.
Vendor indemnity relating to the Sierra Gorda acquisition
On 17 May 2023, Chilean Mining Tax reforms were passed by the Chilean Congress and subsequently enacted in August 2023. As part of
the Group’s acquisition of Sierra Gorda during FY22, the Group has the right to claim an indemnity from the vendors for any mining tax
changes enacted prior to December 2025. As a result of these changes the Group has recognised other income of US$48 million in the
Group’s Consolidated Income Statement and a corresponding receivable of US$48 million from the vendors on the Group’s Consolidated
Balance Sheet in relation to the indemnity.
FY22
US$M
Recognition of indirect tax assets
Total significant items
Recognition of indirect tax assets
Gross
77
77
Tax
(26)
(26)
Net
51
51
Following the Group’s decision to participate in the restart of Brazil Aluminium, the Group recognised indirect tax assets of US$77
million that were previously expensed since the smelter was placed on care and maintenance in 2015. The recognition of the indirect tax
assets has resulted in a significant one-off amount of US$77 million (US$51 million post-tax) being recognised as other income in the
Consolidated Income Statement.
120
FINANCIAL REPORT
4. Segment information continued
(c) Geographical information
The geographical information below analyses statutory Group revenue and non-current assets by location. Revenue is primarily
presented by the geographical destination of the product and non-current assets are presented by the geographical location of the
operations.
Revenue from external customers
Non-current assets
US$M
Australia
China
India
Japan
Middle East
Mozambique
Netherlands(1)
Brazil
Russia
South Africa
South Korea
United States of America
Rest of Asia
Rest of Europe
Rest of North America
Rest of Oceania
Rest of South America
Unallocated assets(2)
Total
(1) Non-current assets include the non-current portion of the shareholder loan receivable from Sierra Gorda.
(2) Comprises other financial assets and deferred tax assets.
5. Expenses excluding finance costs
US$M
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Wages, salaries and redundancies
Pension and other post-retirement obligations
External services (including transportation)
Third party commodity purchases
Depreciation and amortisation
Exchange rate (gains)/losses on restatement of monetary items
(Gains)/losses on derivative instruments, contingent consideration and other investments
measured at FVTPL
Government and other royalties paid and payable
Exploration expenditure incurred and expensed
Net impairment of financial assets
Net impairment of non-financial assets
Short-term, low-value and variable lease rentals
All other operating expenses
Total
FY23
765
728
304
434
326
346
1,079
192
-
495
411
419
850
776
234
70
-
-
7,429
FY22
1,013
776
581
523
283
458
1,255
125
44
633
692
439
967
1,079
278
92
31
-
9,269
Note
19
13
FY23
5,239
-
-
-
-
488
1,604
765
-
882
-
1,193
100
1
1
-
544
508
11,325
FY23
(60)
2,761
690
65
1,175
600
653
(62)
(6)
286
59
71
1,300
69
221
7,822
FY22
5,099
-
-
-
-
497
1,648
695
-
933
-
2,185
102
1
1
-
477
458
12,096
FY22
(133)
2,309
657
60
1,111
718
624
(50)
(29)
295
37
26
145
77
153
6,000
121
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – RESULTS FOR THE YEAR CONTINUED
6. Tax
Income tax expense comprises current and deferred tax and is recognised in the Consolidated Income Statement except to the extent
that it relates to items recognised directly in the Consolidated Statement of Comprehensive Income.
(a) Income tax expense
US$M
Current income tax (expense)/benefit
Deferred income tax (expense)/benefit
Total income tax expense
FY23
(476)
90
(386)
FY22
(1,006)
(18)
(1,024)
Income tax expense
Income tax expense for the period is the tax payable on the current period’s taxable income 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 and deferred 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.
(b) Reconciliation of prima facie tax expense to income tax expense
US$M
Profit before tax
Deduct: Share of profit/(loss) of equity accounted investments
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(1)
Non-deductible impairment charges(1)
Non-deductible Colombian royalty
Tax adjustments relating to the Sierra Gorda acquisition(2)
Change in tax rates
Prior year adjustments
Other
Total income tax expense
FY23
213
246
(33)
10
1
4
(36)
(55)
(333)
(24)
31
-
4
12
(386)
FY22
3,693
272
3,421
(1,026)
72
(20)
(54)
(7)
-
-
-
(3)
(5)
19
(1,024)
(1) Primarily relates to the impairment of the Taylor Deposit at Hermosa, which resulted in the Group derecognising US$53 million of deferred tax assets and incurring
US$315 million of non-deductible tax expenses. Refer to note 13 Impairment of non-financial assets.
(2) Refer to note 4(b)(ii) Significant items.
Profit from equity accounted investments has been taxed in companies other than South32 Limited, being the companies whose results
are disclosed as equity accounted investments in the consolidated financial statements.
Refer to note 26 Equity accounted investments for further details of the Group’s equity accounted investments.
122
FINANCIAL REPORT
6. Tax continued
(c) Movement in deferred tax balances
The composition of the Group’s net deferred tax assets and liabilities recognised in the Consolidated Balance Sheet and the deferred
tax expense (charged)/credited to the Consolidated Income Statement is as follows:
Deferred tax assets
Deferred tax liabilities
Deferred tax (charged)/credited to
the Consolidated Income
Statement
US$M
FY23
FY22
FY23
FY22
FY23
FY22
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(1)
Leases
Other
Total
253
49
234
-
(52)
(95)
15
-
(1)
(13)
390
295
49
208
-
(60)
(94)
6
-
-
(10)
394
261
(12)
(59)
(13)
-
11
(54)
70
(1)
7
210
305
(11)
(51)
(13)
-
12
(7)
64
(1)
9
307
2
1
34
-
8
-
57
(6)
(1)
(5)
90
(29)
(3)
27
(4)
7
29
-
(8)
(10)
(27)
(18)
(1) Our Brazilian subsidiary has received a 75 per cent corporate income tax deferral due to the reinvestment of capital in the North East regions of Brazil. 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.
(d) Unrecognised deferred tax assets and liabilities
The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows:
US$M
FY23
FY22
Unrecognised deferred tax assets
Tax-effected losses(1)
Mineral rights
Impairment of investments in subsidiaries
Closure and rehabilitation
Depreciable assets
Other 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.
58
617
949
48
32
1
1,705
33
33
21
589
945
50
8
-
1,613
39
39
123
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – RESULTS FOR THE YEAR CONTINUED
6. Tax continued
(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.
(f) Future tax developments
The Group continues to monitor the Organisation for Economic Co-operation and Development’s Two Pillar Solution in all countries in
which the Group operates.
Pillar One measures currently apply only to multinational enterprises that have a global turnover exceeding €20 billion and profitability
exceeding 10%, and therefore does not apply to the Group. Pillar Two measures seek to introduce a 15% global minimum tax and
will apply to the Group given its annual turnover exceeds the €750 million threshold. The Group notes that the UK Government has
substantively enacted Pillar Two legislation in June 2023 and the Australian Government has committed to enacting the rules, however
draft legislation is yet to be released.
The Group has adopted the guidance contained in the IASB issued International Tax Reform - Pillar Two Model Rules, which amended
IAS 12 Income Taxes, released in May 2023 and applied the mandatory temporary exception to recognise and disclose information
about deferred tax assets and liabilities related to Pillar Two income taxes. The Group is currently evaluating the cash tax implications
and other impacts of the Pillar Two model rules, and does not expect the impact on the Group to be significant.
(g) Tax transparency report
More detail of the Group’s tax outcomes, including country-by-country reporting is included in the 2023 Transparency and Payments to
Government Report.
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, climate
change-related impacts, Mineral Resources and Ore 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 and Brazil. 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 in 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.
124
FINANCIAL REPORT
7. Dividends
US$M
Prior year final dividend(1)
Prior year special dividend(1)
Interim dividend(2)
Total dividends declared and paid during the year
FY23
646
138
223
1,007
FY22
163
93
404
660
(1) On 25 August 2022, the Directors resolved to pay a fully franked final dividend of US 14.0 cents per share (US$648 million) and a fully franked special dividend of US 3.0 cents
per share (US$139 million) in respect of the 2022 financial year. The dividends were paid on 13 October 2022. In addition to the ESOP Trusts receiving dividends from South32
Limited, a total of 9,665,568 shares were bought back between the declaration and the ex-dividend dates, therefore reducing the dividends paid externally to US$784 million.
(2) On 16 February 2023, the Directors resolved to pay a fully-franked interim dividend of US 4.9 cents per share (US$224 million) in respect of the 2023 financial half year. The
dividend was paid on 6 April 2023. In addition to the ESOP Trusts receiving dividends from South32 Limited, a total of 3,292,746 shares were bought back between the
declaration and the ex-dividend dates, therefore reducing the dividend paid externally to US$223 million.
Franking account
US$M
Franking credits at the beginning of the year
Credits arising from tax paid/payable by South32 Limited(2)
Credits arising from the receipt of franked dividends
Utilisation of credits arising from the payment of franked dividends
Exchange rate variations
Total franking credits available at the end of the year(3)
FY23
678
243
68
(426)
(25)
538
FY22
Restated(1)
344
559
71
(266)
(30)
678
(1) FY22 comparatives have been restated to allow for foreign exchange rate variations, consistent with current year presentation.
(2) Includes the Australian FY23 income tax liability of US$16 million due in December 2023.
(3) The payment of the final franked FY23 dividend declared after 30 June 2023 will decrease the franking account balance by US$62 million. Refer to note 31 Subsequent events.
8. Earnings per share
Basic earnings per share (EPS) amounts are calculated based on profit or loss attributable to equity holders of South32 Limited and the
weighted average number of shares outstanding during the year.
Dilutive EPS amounts are calculated based on profit or loss attributable to equity holders of South32 Limited and the weighted average
number of shares outstanding after adjustment for the effects of all dilutive potential shares.
The following reflects the profit or loss and share data used in the basic and diluted EPS computations:
Profit/(loss) attributable to equity holders
US$M
Profit/(loss) attributable to equity holders of South32 Limited (basic)
Profit/(loss) attributable to equity holders of South32 Limited (diluted)
Weighted average number of shares
Million
Basic EPS denominator(1)
Shares contingently issuable under employee share ownership plans(2)
Diluted EPS denominator
FY23
(173)
(173)
FY23
4,572
-
4,572
FY22
2,669
2,669
FY22
4,647
32
4,679
(1) 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.
(2) The diluted EPS calculation excludes 26,994,090 (FY22: nil) rights which are considered anti-dilutive and are subject to service and performance conditions.
Earnings per share
US cents
Basic EPS
Diluted EPS
FY23
(3.8)
(3.8)
FY22
57.4
57.0
125
SOUTH32 ANNUAL REPORT 2023 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. Assets and 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)(2)
Other receivables
Total current trade and other receivables(3)
Non-current
Loans to equity accounted investments(1)(2)
Other receivables
Total non-current trade and other receivables(3)
FY23
FY22
395
114
269
778
1,790
133
1,923
643
7
194
844
1,793
110
1,903
(1) Refer to note 29 Related party transactions.
(2) Includes a purchased credit-impaired receivable which is classified as current of US$107 million and non-current of US$1,604 million (FY22: non-current of US$1,648 million).
Refer to note 19 Financial assets and financial liabilities.
(3) Net of allowances for expected credit losses of US$2 million (FY22: US$2 million).
Trade receivables generally have terms of up to 30 days. Trade and other receivables which are not held at FVTPL are recognised initially
at fair value and subsequently at amortised cost using the effective interest method, less an allowance for expected credit losses.
10. Inventories
US$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
FY23
FY22
519
333
250
1,102
57
25
82
455
338
189
982
55
21
76
The value of inventories carried at net realisable value as at 30 June 2023 was US$222 million (FY22: US$31 million). Inventory write-
downs of US$18 million (FY22: US$17 million) were recognised in the year.
Inventories are valued at the lower of cost and net realisable value. Cost is determined primarily on the basis of average cost. For
processed inventories, cost is derived on an absorption costing basis. Cost comprises the cost of purchasing raw materials and the cost
of production, including attributable overheads.
126
FINANCIAL REPORT
FY23
US$M
Cost
At the beginning of the year
Additions
Foreign exchange
movements in closure and
rehabilitation provisions(1)
Disposals
Transfers and other
movements
At the end of the year
Accumulated depreciation
and impairments
At the beginning of the year
Depreciation
Net impairments(2)
Disposals
At the end of the year
Net book value at
30 June 2023(3)
FY22
US$M
Cost
At the beginning of the year
Additions
Acquisition of subsidiaries
and joint operations(1)
Foreign exchange
movements in closure and
rehabilitation provisions(2)
Disposals
Transfers and other
movements
At the end of the year
Accumulated depreciation
and impairments
At the beginning of the year
Depreciation
Net impairments(3)
Disposals
Transfers and other
movements
At the end of the year
Net book value at
30 June 2022(4)
11. Property, plant and equipment
Land and buildings
Plant and equipment
Right-of-use
assets
Owned assets
Right-of-use
assets
Owned assets
Other mineral
assets
Assets under
construction
Exploration
and evaluation
37
6
-
-
-
43
15
3
-
-
18
25
2,352
-
943
91
13,204
133
-
(3)
64
2,413
1,438
78
-
-
1,516
897
-
-
(68)
(112)
17
1,051
251
13,408
9,239
402
-
(108)
9,533
316
64
-
-
380
671
4,547
-
-
(140)
63
4,470
2,050
94
1,049
(140)
3,053
815
815
-
-
(395)
1,235
51
-
119
-
170
212
84
-
(51)
-
245
13
-
132
-
145
100
(1) Refer to note 15 Provisions.
(2) Refer to note 13 Impairment of non-financial assets.
(3) Includes US$98 million of land and buildings, US$37 million of plant and equipment, US$580 million of other mineral assets, US$328 million of assets under construction and
US$51 million of exploration and evaluation expenditure that relates to the Hermosa project.
Capital expenditure commitments as at 30 June 2023 were US$193 million (FY22: US$114 million).
3,875
1,417
1,065
Land and buildings
Plant and equipment
Right-of-use
assets
Owned assets
Right-of-use
assets
Owned assets
Other mineral
assets
Assets under
construction
Exploration
and evaluation
50
9
-
-
(22)
-
37
28
7
-
(20)
-
15
22
2,299
-
22
-
(2)
33
2,352
1,396
67
(15)
(2)
(8)
1,438
914
906
57
1
-
(21)
-
943
274
51
7
(17)
1
316
627
13,061
152
95
(127)
(171)
194
13,204
9,001
415
(17)
(167)
7
9,239
3,965
4,468
-
-
-
(25)
104
4,547
1,894
79
102
(25)
-
2,050
2,497
594
547
5
-
-
(331)
815
-
-
51
-
-
51
153
59
-
-
-
-
212
-
-
13
-
-
13
764
199
8,988
(1) Relates to the acquisition of an additional 16.6 per cent shareholding and related rights in Mozal Aluminium in FY22.
(2) Refer to note 15 Provisions.
(3) Refer to note 13 Impairment of non-financial assets.
(4) Includes US$77 million of land and buildings, US$37 million of plant and equipment, US$1,629 million of other mineral assets, US$230 million of assets under construction and
US$122 million of exploration and evaluation related expenditure that relates to the Hermosa project.
127
Total
22,110
1,129
(68)
(306)
-
22,865
13,122
641
1,300
(248)
14,815
8,050
Total
21,531
824
123
(127)
(241)
-
22,110
12,593
619
141
(231)
-
13,122
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OPERATING ASSETS AND LIABILITIES CONTINUED
11. Property, plant and equipment continued
(a) Property, plant and equipment
Property, plant and equipment is held 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 Ore Reserves are estimated 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.
(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 tonnage and grade and/or quality 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 existence of a commercially viable mineral deposit has been established as a result of a reasonable prospect for the eventual
economic extraction; or
– 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 was measured at fair value on acquisition.
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 recognised as a component of property,
plant and equipment at cost less impairment charges. Otherwise, it is recognised 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:
– Capitalised exploration and evaluation expenditure for areas now in production;
– Development expenditure for areas now in production; and
– Mineral rights acquired.
In underground mines, when production and development activity occur 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.
128
FINANCIAL REPORT
11. Property, plant and equipment continued
(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 right-of-use (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, 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 and any adjustments for remeasurement of the lease liability.
The corresponding lease liability is included within interest bearing liabilities. The lease liability is initially measured based on the value
of lease payments not yet paid at the commencement date, discounted to present value 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.
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 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 recognised in the Consolidated Income Statement if the carrying amount of the ROU asset has
been reduced to nil.
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.
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 in the Consolidated Balance Sheet.
Total cash outflows for lease obligations consist of US$98 million (FY22: US$99 million) for lease liabilities recognised in the Consolidated
Balance Sheet and US$69 million (FY22: US$77 million) for short-term, low-value and variable leases recognised in 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 an operation 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 operation or lease.
Category
Useful life
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
Key estimates, assumptions and judgements
Useful economic lives of assets
The useful lives of our property, plant and equipment are often dependent, either directly or indirectly, on the reserve life of the
orebody to which they relate. Changes in economic assumptions used to estimate Ore Reserves and/or the timing of closure of
operations, including the Group’s expectations with respect to climate change-related risks, may impact the estimated useful lives
of the specific assets concerned.
Refer to note 2(c) Key estimates, assumptions and judgements for further details regarding climate change-related risks and
opportunities, and Mineral Resources and Ore Reserves as sources of estimation uncertainty.
129
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OPERATING ASSETS AND LIABILITIES CONTINUED
12. Intangible assets
FY23
US$M
Cost
At the beginning of the year
Additions
Disposals
At the end of the year
Accumulated amortisation and impairments
At the beginning of the year
Amortisation charge for the year
Disposals
At the end of the year
Net book value at 30 June 2023
FY22
US$M
Cost
At the beginning of the year
Additions
Acquisition of subsidiaries and joint operations(1)
At the end of the year
Accumulated amortisation and impairments
At the beginning of the year
Amortisation charge for the year
Impairments for the year
At the end of the year
Net book value at 30 June 2022
Goodwill
Other
intangibles
139
-
-
139
-
-
-
-
139
284
69
(25)
328
237
13
(25)
225
103
Goodwill
Other
intangibles
139
-
-
139
-
-
-
-
139
278
4
2
284
228
5
4
237
47
Total
423
69
(25)
467
237
13
(25)
225
242
Total
417
4
2
423
228
5
4
237
186
(1) Relates to the acquisition of an additional 16.6 per cent shareholding and related rights in Mozal Aluminium in FY22.
(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 fair value of consideration paid, 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 recognised 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:
Category
Software and licences
Contract based intangible assets
Useful life
5 years
up to 35 years
The Group has no identifiable intangible assets for which the expected useful life is indefinite.
130
FINANCIAL 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 CGUs. Impairment tests are carried out annually for CGUs containing goodwill and when there is an indication of impairment or
impairment reversal for all other CGUs. The Group uses discounted cash flow valuation ranges to assess whether there is an indicator of
impairment or impairment reversal for its CGUs. For any resulting 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 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 areas not yet in production, any mineral rights acquired, together with subsequent capitalised exploration and evaluation
expenditure, are 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 an area of interest are demonstrated, exploration and evaluation assets
attributable to that area of interest are tested for impairment.
The Group recognised the following net impairment for the year ended 30 June 2023:
US$M
Impairment
Property, plant and equipment(1)
ROU assets(1)
Intangible assets
Impairment reversal
Property, plant and equipment(2)
Total net impairment
Note
FY23
FY22
11
11
12
11
1,300
-
-
-
1,300
176
7
4
(42)
145
(1) FY23 relates to a US$1,300 million impairment of the Taylor Deposit within the Hermosa segment. FY22 relates to a US$183 million impairment included in Group and
unallocated items in respect of Eagle Downs. This includes a US$176 million impairment of property, plant and equipment and a US$7 million impairment of ROU assets.
(2) FY22 relates to a US$42 million impairment reversal included within the Brazil Aluminium segment.
(a) Recognised impairments - 30 June 2023
Hermosa – Taylor Deposit
In August 2018, the Group completed its acquisition of the Hermosa project located in Arizona, United States. The Hermosa project
comprises the zinc-lead-silver sulphide deposit (Taylor Deposit), the manganese-zinc-silver oxide deposit (Clark Deposit) and a land
package with the potential for further polymetallic and copper mineralisation (Land Package). In FY23, the Group advanced the
feasibility study for the Taylor Deposit, completed a pre-feasibility selection study for the Clark Deposit and announced that the US
Federal Permitting Improvement Steering Council, an independent federal agency, had confirmed the Hermosa project as the first
mining project added to the FAST-41 process. Since acquisition, the fair value of the Taylor Deposit has been negatively impacted by
delayed first production as a result of COVID-19 related restrictions and significant dewatering requirements, as well as capital cost
escalation in line with industry-wide inflation.
Recently completed study work confirmed that the Taylor Deposit and the Clark Deposit can be developed independently. As a result,
the Group identified three separate areas of interest within the Hermosa project: the Taylor Deposit, the Clark Deposit and the Regional
Land Package. On separation into three separate areas of interest, the Group allocated the carrying value of the previous single
Hermosa area of interest to each of the newly identified and separate areas of interest.
As a result of the study work to date, the Group identified an impairment indicator for the Taylor Deposit and recognised a resulting
impairment of property, plant and equipment of US$1,300 million in FY23 within expenses excluding finance costs in the Consolidated
Income Statement. The impairment of US$1,300 million includes US$1,049 million recognised in other mineral assets, US$119 million
recognised in assets under construction and US$132 million recognised in exploration and evaluation. The recoverable amount of the
Taylor Deposit was determined as US$482 million based on its FVLCD.
131
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OPERATING ASSETS AND LIABILITIES CONTINUED
13. Impairment of non-financial assets continued
(a) Recognised impairments - 30 June 2023 continued
Hermosa – Taylor Deposit continued
The fair value measurement was categorised as a Level 3 fair value based on the inputs in the discounted cashflow valuation model
(refer to note 19 Financial assets and financial liabilities). The recoverable amount was informed by inputs from the feasibility study in
progress for the Taylor Deposit, including the expected technical performance of the deposit as well as expected capital and operating
costs for the life of the operation. The determination of FVLCD was most sensitive to:
– Zinc, lead and silver prices;
– Pre-production capital expenditure;
– Mineral Resource estimation;
– Development approvals; and
– Discount rate
Zinc, lead and silver prices - The long-run zinc, lead, and silver prices, in real terms, used in the FVLCD determinations were within the
following ranges:
FY23
Zinc (US$/t)
Lead (US$/t)
Silver (US$/oz)
Assumptions used
2,700 to 3,200
2,000 to 2,100
20 to 22
Pre-production capital expenditure – The calculation of FVLCD includes an estimate of pre-production capital to support the
development of the Taylor Deposit to its nameplate capacity of up to 4.3 million tonnes per annum. Key inputs including steel, cement
and electrical components are subject to uncertainties, including industry-wide inflation.
Mineral Resource estimation - The Mineral Resource estimate of the Taylor Deposit is reported in accordance with the JORC Code, and
the ASX Listing Rules (Chapter 5): Additional reporting on mining and oil and gas production and exploration activities. Refer to the
Mineral Resources and Ore Reserves section of note 2(c) for further information on these estimates.
Development approvals – Construction is planned to commence in late FY24, subject to a final investment decision for the Taylor
Deposit. The addition of the Hermosa project to the FAST-41 process has reduced the expected timing of Federal environmental
approvals and permits by approximately two years. A Record of Decision (RoD) to permit surface disturbance and additional tailings
storage on unpatented land will require completion of the National Environmental Policy Act process with the United States Forest
Service. The ramp-up to planned nameplate production could be impacted if the RoD is delayed as production will have to be slowed
due to tailings capacity restrictions on patented lands.
Discount rate - 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 expressed in real terms.
The following table illustrates the sensitivity of the recoverable amount of the Taylor Deposit based on a reasonably possible change
in key assumptions. Owing to the complexity of the relationships between each key assumption, the analysis was performed for each
assumption individually (all other assumptions held constant).
FY23
US$M
Zinc prices
Lead prices
Silver prices
Pre-production capital expenditure
Discount rate
Change in key
assumption
10%
10%
10%
10%
100 basis points
Impact on profit/(loss) after tax
Favourable
Unfavourable
235
200
120
205
335
(235)
(200)
(120)
(205)
(275)
132
FINANCIAL REPORT
13. Impairment of non-financial assets continued
(b) Recognised impairments - 30 June 2022
Eagle Downs Metallurgical Coal
In October 2021, the Group announced the commencement of a process to investigate the potential divestment of our interest in the
Eagle Downs Metallurgical Coal development option. In December 2021, as part of the negotiation for sale, the Group received non-
binding offers from external parties which, in combination with the long-term market outlook for metallurgical coal demand and prices,
resulted in the recognition of an impairment of US$79 million for the Eagle Downs area of interest. The impairment was recognised
within expenses excluding finance costs in the Consolidated Income Statement.
In April 2022, a preferred bidder withdrew from the negotiations and the Group revised its recoverable amount of the Eagle Downs area
of interest to US$nil, bringing the total impairment recognised for the Eagle Downs area of interest in FY22 to US$183 million.
The long-run metallurgical coal prices and exchange rates, in real terms, used as part of the Group’s FVLCD determinations at 30 June
2022 were within the following ranges as published by market commentators:
FY22
Metallurgical coal (US$/t)
Foreign exchange rates (A$ to US$)
Assumptions
used
135 to 175
0.71 to 0.80
The fair value measurement was categorised as a Level 3 fair value based on the inputs in the discounted cashflow valuation model in
combination with the use of the market approach (refer to note 19 Financial assets and financial liabilities). In determining the FVLCD,
a real US$ post tax discount rate range of between six and eight per cent was applied to discount future cash flows expressed in real
terms.
In addition to the impairment of ROU assets of US$7 million, the impairment of US$176 million for property, plant and equipment of
Eagle Downs includes US$3 million recognised in land and buildings, US$7 million recognised in plant and equipment, US$102 million
recognised in other mineral assets, US$51 million recognised in assets under construction, and US$13 million recognised in exploration
and evaluation.
Brazil Aluminium
On 6 January 2022, the Group announced its decision to participate in a restart of the Brazil Aluminium smelter. The Group assessed the
implications of the restart decision and reviewed the impact on the carrying value of the Brazil Aluminium CGU as at 31 December 2021.
At 31 December 2021, the Group reversed the full impairment that was recognised when the smelter was placed on care and
maintenance in 2015, limited to the carrying amount that would have been determined (net of amortisation and depreciation) had
no impairment loss been recognised at such time. The recoverable amount remains significantly higher than the carrying amount
recorded.
The recoverable amount was based on the smelter’s FVLCD and was informed by the Group’s production profile and cost profile which
were consistent with the Group’s commitments to long-term power agreements. The key assumptions used for commodity prices were
comparable to market consensus forecasts and foreign exchange rates were aligned with forward market rates.
The fair value measurement was categorised as a Level 3 fair value based on the inputs in the discounted cashflow valuation model
(refer to note 19 Financial assets and financial liabilities). In determining the FVLCD, a real US$ post tax discount rate range of between
six and eight per cent, and a country risk premium of two per cent, was applied to discount future cash flows expressed in real terms.
The impairment reversal of US$42 million includes US$18 million recognised in land and buildings and US$24 million recognised in plant
and equipment, both within property, plant and equipment. The impairment reversal was recognised within expenses excluding finance
costs in the Consolidated Income Statement. In addition, the Group recognised indirect tax assets of US$77 million that had been
expensed since the smelter was placed on care and maintenance in 2015. Refer to note 4(b)(ii) Significant items.
133
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OPERATING ASSETS AND LIABILITIES CONTINUED
13. Impairment of non-financial assets continued
(c) Impairment test for CGUs containing goodwill
For the purpose of impairment testing, goodwill has been allocated to CGUs that are expected to benefit from the synergies of the
business combination and which represent the level at which management will monitor and manage the goodwill.
The carrying amount of goodwill has been allocated to the following CGU:
US$M
Hillside Aluminium
Total goodwill
Note
12
FY23
139
139
FY22
139
139
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 its
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 – the ranges of aluminium prices, alumina prices and exchange rates, in real
terms, used in the FVLCD determinations, together with the potential effect of using reasonably possible alternative assumptions on the
recoverable amount, based on unfavourably changing these assumptions by 10 per cent whilst holding all other variables constant, are
shown in the table below:
FY23
Aluminium prices (US$/t)
Alumina prices (US$/t)
Foreign exchange rates (US$ to ZAR)
Assumptions used
2,238 to 2,510
343 to 426
16.1 to 19.1
Impact on recoverable
amount (US$M)
(683)
(214)
(304)
Carbon pricing and timing – in determining the FVLCD, the current jurisdiction enacted carbon price, in real terms, of ZAR186 to ZAR474
per tonne CO2-e (FY22: ZAR143 to ZAR150 per tonne CO2-e) is applied for the life of operation for Scope 1 and 2 emissions, net of
operation specific abatement allowances.
Discount rate – in determining the FVLCD, a real US$ post tax discount rate range of between six and eight per cent (FY22: range of
between six and eight per cent), and a country risk premium of two per cent (FY22: two per cent) was applied to discount future cash
flows expressed in real terms.
The impairment test for the Hillside Aluminium CGU indicated that no impairment was required. At 30 June 2023 the carrying value
approximates its recoverable amount. As such any material long-term unfavourable change in the aforementioned key assumptions
could lead to the carrying value exceeding the recoverable amount. The relationships between each key assumption are complex, such
that a change in one may cause a change in several other inputs.
134
FINANCIAL 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, foreign
exchange rates, Mineral Resources and Ore Reserves, regulatory approvals, operating costs, closure and rehabilitation costs,
future capital expenditure, allocation of corporate costs, jurisdiction-specific carbon prices and global carbon pricing. These
estimates and assumptions are subject to risk and uncertainty. 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 recognised in the Consolidated Income
Statement.
The key estimates and assumptions used in the assessment of impairment indicators are as follows:
Future production
Commodity prices
and market traded
consumables
Exchange rates
Discount rates
Regulatory approvals
Carbon prices
Life of operation plans based on Mineral Resource and Ore Reserve estimates, economic life of
smelters and refineries and, in certain cases, Exploration Targets and expansion projects, including
future cost of production. Refer to note 2(c) Key estimates, assumptions and judgements for further
details regarding Mineral Resources and Ore Reserves as sources of estimation uncertainty.
Forward market and contract prices, and longer-term price estimates which includes an assessment
of the impact carbon price assumptions might have.
Forward market foreign exchange rates, and longer-term price protocol estimates.
Risk-adjusted cost of capital and appropriate to the resource.
Life of operation plans include assumptions associated with the successful application, and timing
thereof, of ongoing and future regulatory approvals.
Actual enacted schemes less allowable abatements, where applicable, and a long-term base case
estimate of US$64 per tonne CO2-e (real) applied to all Scope 1 and 2 emissions from FY40 onwards.
Where impairment testing is undertaken, a range of external sources are considered as further input to the above assumptions.
Exploration and evaluation expenditure
For areas 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 is required which may result in an adjustment to the carrying value
of acquired mineral rights together with subsequent capitalised exploration and evaluation expenditure.
At or before the final investment decision for a given area of interest, and once technical feasibility and commercial viability
has been demonstrated, the Group assess the carrying value of that area of interest for impairment or, for an area of interest
previously impaired, impairment reversal.
135
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OPERATING ASSETS AND LIABILITIES CONTINUED
13. Impairment of non-financial assets continued
Key estimates, assumptions and judgements continued
Climate change-related risks and opportunities
The Group’s forecast commodity prices and other key assumptions represent management’s expectations on likely outcomes,
with a base case estimation of at least 2°C warming. When assessing whether there is any indication of impairment or impairment
reversal, management performs a sensitivity analysis by considering a range of possible scenarios, with no one scenario being
conclusive in isolation. Our sensitivity analysis shows that our FY23 1.5°C scenario would result in an increased risk of impairment
at the Hillside Aluminium and Illawarra Metallurgical Coal CGUs.
The full costs and benefits of decarbonisation projects are included in the Group’s valuations when it has a high degree of
confidence that a project will achieve an emissions reduction, which typically aligns with the related capital project being internally
approved, or when it is critical for meeting regulatory licensing requirements. The Group’s valuations include the cost and
benefit of initiatives necessary to meet its medium-term target to halve its operational greenhouse gas (GHG) emissions by 2035
compared to its FY21 baseline. ‘Target’ is defined as an intended outcome in relation to which we have identified one or more
pathways for delivery of that outcome, subject to certain assumptions or conditions. The decarbonisation pathway to meet our
goal of net zero GHG emissions by 2050 is not yet fully defined and, as such, the cost and benefit of all associated initiatives are
not included in the Group’s valuations. ‘Goal’ is defined as an ambition to seek an outcome for which there is no current pathway(s),
but for which efforts will be pursued towards addressing that challenge, subject to certain assumptions or conditions.
The Group utilises an internal price on carbon to inform decision-making and valuations, based on actual enacted schemes less
allowable abatements, where applicable, and a long-term base case estimate of US$64 per tonne CO2-e (real) applied to all Scope
1 and 2 emissions from FY40 onwards. In developing forecast global carbon prices, the Group considers policy and market-driven
carbon prices as well as abatement costs, weighted across developed and developing countries.
When assessing for impairment indicators, the Group has considered the sensitivity of operations to changes in carbon prices.
The Group’s operations are not uniformly impacted by carbon prices. The impact is influenced by the amount of Scope 1 and 2
emissions the operation generates and the jurisdiction in which it operates, in combination with the respective life of operation
plans. The Group’s CGUs with a higher carbon sensitivity include Worsley Alumina, Hillside Aluminium, Mozal Aluminium and
Illawarra Metallurgical Coal.
Previously impaired areas of interest and CGUs
When assessing for impairment reversal indicators, the fundamental characteristics of previously impaired areas of interest and
CGUs are relevant to their sensitivity to key estimates and assumptions. For previously impaired areas of interest and CGUs these
include:
– Areas of interest that are subject to ongoing study and evaluation, for example the Taylor Deposit at Hermosa;
– 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
– CGUs with higher operating margins, shorter life of operation plans and exposure to commodities that display greater price
volatility, for example Australia Manganese.
Mozal Aluminium
The Group jointly controls Mozal Aluminium together with the Industrial Development Corporation of South Africa Limited and the
Government of the Republic of Mozambique. Electricity supplied to Mozal Aluminium is generated by Hidroeléctrica de Cahora
Bassa, a hydro-electric power generator, and supplied via Eskom, the South African state-owned entity which owns and operates
South Africa’s national electricity grid. Eskom also provides back-up energy to Mozal Aluminium for periods when Hidroeléctrica
de Cahora Bassa produces less than its contractual minimum supply of hydro-electric power.
The Group is working with key stakeholders to extend the supply of power from Hidroeléctrica de Cahora Bassa for Mozal
Aluminium beyond 2026. Although an extension and pricing of the existing arrangement with Eskom is uncertain, the Group has
made a reasonable assumption that an extension to 2030 can be achieved on mutually acceptable commercial terms. Failure to
extend the supply of power from Hidroeléctrica de Cahora Bassa will have a material impact on the recoverable amount of Mozal
Aluminium.
136
FINANCIAL REPORT
14. Trade and other payables
US$M
Current
Trade creditors
Other creditors
Total current trade and other payables
Non-current
Trade creditors
Other creditors
Total non-current trade and other payables
FY23
FY22
854
131
985
18
1
19
813
176
989
7
1
8
Trade and other payables generally represent liabilities for goods and services provided to the Group prior to the end of the year which
were unpaid at the end of the 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 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.
15. Provisions
US$M
Current
Employee benefits
Closure and rehabilitation
Other
Total current provisions
Non-current
Employee benefits
Closure and rehabilitation
Post-retirement employee benefits
Other
Total non-current provisions
Note
FY23
FY22
177
7
10
194
6
1,931
33
16
1,986
171
8
7
186
4
1,785
34
12
1,835
22
137
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OPERATING ASSETS AND LIABILITIES CONTINUED
15. Provisions continued
FY23
US$M
At the beginning of the year
Charge/(credit) for the year to the Consolidated Income Statement:
Underlying
Discounting
Net interest expense
Exchange rate variations
Released during the year
Amounts capitalised for change in costs and estimates
Amounts capitalised for change in discount rate
Foreign exchange amounts capitalised
Amounts taken to retained earnings
Utilisation
At the end of the year
FY22
US$M
At the beginning of the year
Charge/(credit) for the year to the Consolidated Income Statement:
Underlying
Discounting
Change in discount rate
Net interest expense
Exchange rate variations
Released during the year
Amounts capitalised for change in costs and estimates
Amounts capitalised for change in discount rate
Foreign exchange amounts capitalised
Amounts taken to retained earnings
Utilisation
Acquisition of subsidiaries and joint operations(1)
At the end of the year
Employee
benefits
Closure and
rehabilitation
175
1,793
167
-
-
(7)
(1)
-
-
-
-
(151)
183
16
91
-
(15)
(7)
149
(16)
(68)
-
(5)
1,938
Employee
benefits
Closure and
rehabilitation
201
1,717
156
-
-
-
(14)
(8)
-
-
-
-
(160)
-
175
3
67
(2)
-
(19)
(8)
167
(15)
(127)
-
(9)
19
1,793
Post-
retirement
employee
benefits
34
5
-
3
(3)
-
-
-
-
(3)
(3)
33
Post-
retirement
employee
benefits
41
1
-
-
3
(4)
-
-
-
-
(3)
(4)
-
34
Other
19
7
-
-
1
-
-
-
-
-
(1)
26
Other
39
6
-
-
-
(3)
(19)
-
-
-
-
(4)
-
19
Total
2,021
195
91
3
(24)
(8)
149
(16)
(68)
(3)
(160)
2,180
Total
1,998
166
67
(2)
3
(40)
(35)
167
(15)
(127)
(3)
(177)
19
2,021
(1) Relates to the acquisition of an additional 16.6 per cent shareholding and related rights in Mozal Aluminium in FY22.
(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.
(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; the operating licence conditions; and the environment in which the operation operates. Expenditure may occur before and after
closure, and can continue for an extended period of time depending on closure and rehabilitation requirements.
138
FINANCIAL REPORT
15. Provisions continued
(b) Closure and rehabilitation continued
Closure and rehabilitation provisions are measured based on 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.
Discount rates used are risk-free interest rates specific to the country in which the operations are located and the expected timing of
the closure and rehabilitation expenditure. Material changes in country specific risk-free interest rates may affect the discount rates
applied. The Group reviews its discount rates used periodically, with any corresponding change in the provision as a result of revising
discount rates capitalised as an asset in the case of open sites or charged/(credited) to the Consolidated Income Statement in the case
of closed sites.
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 costs.
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 carrying value is reduced to nil and the remaining adjustment is recognised in 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 schemes. Refer to note 22 Pension and other
post-retirement 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 physical and climate conditions.
These uncertainties may result in future actual expenditure differing from the amounts currently provided.
The Group’s expectations and approach in relation to climate change-related risks and opportunities are reflected in the
estimates and assumptions noted above. For example, our base case estimation of at least 2°C climate-related warming impacts
our life of operations plans, which in turn impacts assumptions regarding timing and cost of closure and rehabilitation activities.
Physical impacts of climate change have been considered in the estimation of closure and rehabilitation costs, including timing of
relinquishment based on the Group’s assessment to date. These estimates will continue to be refined as the Group progresses its
assessment of physical risks and development of direct adaptation and mitigation strategies.
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 (in real terms), the provision would increase by approximately
US$261 million.
139
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – CAPITAL STRUCTURE AND FINANCING
This section outlines how the Group manages its capital and related financing activities.
16. Cash and cash equivalents
Cash and cash equivalents include cash at bank and on hand as well as short-term deposits.
US$M
Cash
Short-term deposits
Cash and cash equivalents(1)(2)
FY23
611
647
1,258
FY22
763
1,602
2,365
(1) Cash and cash equivalents include US$6 million (FY22: US$4 million) which is restricted by legal or contractual arrangements.
(2) Cash and cash equivalents include US$287 million (FY22: US$335 million) consisting of short-term deposits and cash managed by the Group on behalf of its equity accounted
investments. The corresponding amount payable is included in note 17 Interest bearing liabilities.
17. Interest bearing liabilities
US$M
Current
Lease liabilities
Unsecured loans from equity accounted investments(1)
Unsecured other
Total current interest bearing liabilities
Non-current
Lease liabilities
Senior unsecured notes
Unsecured other
Total non-current interest bearing liabilities
FY23
FY22
51
287
27
365
623
690
63
1,376
40
335
27
402
610
689
126
1,425
(1) Refer to note 16 Cash and cash equivalents and note 29 Related party transactions.
On 14 April 2022, the Group completed the issuance of US$700 million of senior unsecured notes pursuant to Rule 144A and Regulation
S of the United States Securities Act of 1933. The Group utilised the cash proceeds from the offering, together with cash on hand, for
the repayment in full of the amounts drawn down under its acquisition bridge facility used to partly fund the acquisition of a 45 per cent
interest in Sierra Gorda in FY22. The notes will pay interest on 14 April and 14 October each year at a rate of 4.35 per cent per annum and
mature in 2032.
All borrowings are initially recognised at their fair value net of directly attributable transaction costs. Subsequent to initial recognition,
interest bearing liabilities are measured at amortised cost using the effective interest method. Gains and losses are recognised in the
Consolidated Income Statement when the liabilities are derecognised. Interest bearing liabilities are classified as current liabilities,
except when the Group has an unconditional right to defer settlement for at least 12 months after the reporting date, in which case the
liabilities are classified as non-current.
140
FINANCIAL REPORT
17. Interest bearing liabilities continued
A reconciliation of movements in interest bearing liabilities to cash flows arising from financing activities is set out below:
FY23
US$M
At the beginning of the year
Cash movements:
Repayment of interest bearing liabilities
Interest paid
Non-cash movements:
Interest expense
Net increase/(decrease) in interest bearing liabilities(1)
Effect of foreign exchange rate changes
At the end of the year
Lease liabilities
Other interest
bearing
liabilities
Total interest
bearing
liabilities
650
1,177
1,827
(46)
(52)
52
93
(23)
674
(87)
(57)
59
(41)
16
1,067
(133)
(109)
111
52
(7)
1,741
(1) The non-cash decrease in other interest bearing liabilities relates to an agreement with a subsidiary of Seriti Resources Holdings Pty Ltd (Seriti) to settle the vendor loan
facility, previously recognised within other financial assets, against the related rehabilitation fund liability. Both facilities were originally provided to Seriti as part of the
divestment of South Africa Energy Coal. Refer to note 19(a)(iv) Measurement of fair value.
FY22
US$M
At the beginning of the year
Cash movements:
Proceeds from interest bearing liabilities
Repayment of interest bearing liabilities
Interest paid
Non-cash movements:
Interest expense
Net increase/(decrease) in interest bearing liabilities
Effect of foreign exchange rate changes
At the end of the year
18. Net finance income/(costs)
US$M
Finance income
Interest on loans to equity accounted investments
Other interest income
Total finance income
Finance costs
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
Exchange rate variations on net cash/(debt)
Total finance costs
Net finance income/(costs)
Lease liabilities
687
-
(46)
(53)
53
66
(57)
650
Other interest
bearing
liabilities
Total interest
bearing
liabilities
520
1,207
1,527
(886)
(17)
24
-
9
1,177
1,527
(932)
(70)
77
66
(48)
1,827
FY23
FY22
162
60
222
(68)
(52)
(92)
-
(3)
8
(207)
15
63
16
79
(31)
(53)
(65)
2
(3)
40
(110)
(31)
141
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – CAPITAL STRUCTURE AND FINANCING CONTINUED
19. Financial assets and financial liabilities
The following table presents the financial assets and liabilities by class at their carrying amounts:
FY23
US$M
Financial assets
Cash and cash equivalents
Trade and other receivables(1)
Other financial assets:
Derivative contracts
Total current financial assets
Trade and other receivables(1)
Other financial assets:
Investments in equity instruments designated as FVOCI
Contingent consideration receivable
Total non-current financial assets
Total financial assets
Financial liabilities
Trade and other payables(2)
Interest bearing liabilities
Total current financial liabilities
Trade and other payables(2)
Interest bearing liabilities
Other financial liabilities:
Contingent consideration payable
Total non-current financial liabilities
Total financial liabilities
Note
Held at FVTPL
Designated
as FVOCI
Amortised
cost
16
9
9
14
17
14
17
-
105
1
106
-
-
10
10
116
6
-
6
-
-
37
37
43
-
-
-
-
-
108
-
108
108
-
-
-
-
-
-
-
-
1,258
532
-
1,790
1,802
-
-
1,802
3,592
962
365
1,327
18
1,376
-
1,394
2,721
Total
1,258
637
1
1,896
1,802
108
10
1,920
3,816
968
365
1,333
18
1,376
37
1,431
2,764
(1) Excludes current input taxes of US$141 million and non-current input and other taxes of US$121 million included in other receivables. Refer to note 9 Trade and other
receivables.
(2) Excludes current input taxes of US$17 million and non-current input and other taxes of US$1 million included in other creditors. Refer to note 14 Trade and other payables.
FY22
US$M
Financial assets
Cash and cash equivalents
Trade and other receivables(1)
Other financial assets:
Derivative contracts
Total current financial assets
Trade and other receivables(1)
Other financial assets:
Investments in equity instruments designated as FVOCI
Vendor loan facility
Total non-current financial assets
Total financial assets
Financial liabilities
Trade and other payables(2)
Interest bearing liabilities
Other financial liabilities:
Derivative contracts
Total current financial liabilities
Trade and other payables(2)
Interest bearing liabilities
Other financial liabilities:
Contingent consideration payable
Total non-current financial liabilities
Total financial liabilities
Note
Held at FVTPL
Designated
as FVOCI
Amortised
cost
16
9
9
14
17
14
17
-
143
1
144
-
-
39
39
183
20
-
6
26
-
-
84
84
110
-
-
-
-
-
25
-
25
25
-
-
-
-
-
-
-
-
-
2,365
561
-
2,926
1,806
-
-
1,806
4,732
929
402
-
1,331
7
1,425
-
1,432
2,763
Total
2,365
704
1
3,070
1,806
25
39
1,870
4,940
949
402
6
1,357
7
1,425
84
1,516
2,873
(1) Excludes current input taxes of US$140 million and non-current input and other taxes of US$97 million included in other receivables. Refer to note 9 Trade and other
receivables.
(2) Excludes current input taxes of US$40 million and non-current input and other taxes of US$1 million included in other creditors. Refer to note 14 Trade and other payables.
142
FINANCIAL REPORT
19. Financial assets and financial liabilities continued
(a) Accounting classification and fair value
(i) Financial assets
Financial assets are held at FVTPL, amortised cost or designated as FVOCI based on the business model for managing the financial
assets and the contractual terms of the cashflows.
Classification
Held at FVTPL
Amortised cost
Designated as FVOCI
Initial recognition and subsequent measurement
Financial assets held at FVTPL, including derivative financial assets, are initially recognised at fair value, with
transaction costs recognised immediately in the Consolidated Income Statement.
Financial assets held at FVTPL are subsequently remeasured through the Consolidated Income Statement,
including any interest income, dividend income and foreign exchange gains and losses, unless hedge
accounting is applied.
At initial recognition, trade receivables that do not have a significant financing component are recognised at
their transaction price. Other financial assets held at amortised cost are initially recognised at fair value plus
related transaction costs.
Financial assets subsequently measured at amortised cost are measured using the effective interest method
and reduced by any impairment losses. Interest income, foreign exchange gains and losses, impairments and
any gain or loss on derecognition, are recognised in the Consolidated Income Statement.
For certain investments in equity instruments, the Group has made an irrevocable election to present fair
value changes in other comprehensive income.
Investments in equity instruments designated as FVOCI are subsequently remeasured through other
comprehensive income and are not reclassified to the Consolidated Income Statement. Dividends are
recognised as other income in the Consolidated Income Statement unless the dividend clearly represents a
recovery of part of the cost of the investment.
(ii) Financial liabilities
Financial liabilities are held at FVTPL or amortised cost.
Classification
Held at FVTPL
Amortised cost
Initial recognition and subsequent measurement
Financial liabilities held at FVTPL, including derivative financial liabilities, are initially recognised at fair value,
with transaction costs recognised immediately in the Consolidated Income Statement.
Financial liabilities held at FVTPL are subsequently remeasured through the Consolidated Income Statement,
including any interest expense and foreign exchange gains and losses, unless hedge accounting is applied.
Financial liabilities held at amortised cost are recognised initially at fair value, net of transaction costs
incurred.
Financial liabilities held at amortised cost are subsequently measured using the effective interest method.
Interest expense and foreign exchange gains and losses are recognised in the Consolidated Income
Statement. Any gain or loss on derecognition is also recognised in the Consolidated Income Statement.
(iii) 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.
143
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – CAPITAL STRUCTURE AND FINANCING CONTINUED
19. Financial assets and financial liabilities continued
(a) Accounting classification and fair value continued
(iv) Measurement of fair value
The carrying values of the Group’s financial assets and liabilities measured at amortised cost are equal to or approximate their
respective fair values, except for senior unsecured notes, which have a fair value of US$617 million (FY22: US$650 million), and lease
liabilities, for which a fair value has not been determined. The fair value of the Group’s senior unsecured notes is estimated based on
quoted market prices at the reporting date and are classified as Level 1 on the fair value hierarchy as shown below.
For financial assets and liabilities measured at fair value, the Group uses quoted marked prices in active markets for identical assets
where available. Where no price information is available from a quoted market source, alternative market mechanisms or recent
comparable transactions, the fair value is estimated based on the Group’s views on relevant future prices, net of valuation allowances to
accommodate liquidity, modelling, credit and other risks implicit in such estimates.
The following table shows the Group’s financial assets and liabilities carried at fair value with reference to the nature of valuation inputs
used:
Level 1 Valuation is based on unadjusted quoted prices in active markets for identical financial assets and liabilities.
Level 2
Valuation is based on inputs (other than quoted prices included in Level 1) that are observable for the financial asset or liability,
either directly (i.e. as unquoted prices) or indirectly (i.e. derived from prices).
Level 3 Valuation includes inputs that are not based on observable market data.
FY23
US$M
Financial assets and liabilities
Trade and other receivables
Trade and other payables
Derivative contract assets
Investments in equity instruments designated as FVOCI
Contingent consideration receivable
Contingent consideration payable
Total
FY22
US$M
Financial assets and liabilities
Trade and other receivables
Trade and other payables
Derivative contract assets
Derivative contract liabilities
Investments in equity instruments designated as FVOCI
Vendor loan facility
Contingent consideration payable
Total
Level 1
Level 2
Level 3
Total
-
-
1
101
-
-
102
105
(6)
-
-
-
-
99
-
-
-
7
10
(37)
(20)
105
(6)
1
108
10
(37)
181
Level 1
Level 2
Level 3
Total
-
-
1
(6)
25
-
-
20
143
(20)
-
-
-
-
-
123
-
-
-
-
-
39
(84)
(45)
143
(20)
1
(6)
25
39
(84)
98
FY23
FY22
(45)
15
(39)
-
47
2
(20)
52
(97)
-
(5)
52
(47)
(45)
The following table shows the movements in the Group’s Level 3 financial assets and liabilities:
US$M
At the beginning of the year
Addition of financial assets/(liabilities)
Reclassification of financial asset from level 3 to level 2(1)
Derecognition of financial assets/(liabilities)
Unrealised gains/(losses) recognised in the Consolidated Income Statement(2)
Unrealised gains/(losses) recognised in the Consolidated Statement of Comprehensive Income(3)
At the end of the year
(1) The valuation of the vendor loan facility provided to Seriti as part of the Group’s divestment of South Africa Energy Coal no longer included inputs that are based on
unobservable market data. This financial asset was subsequently settled through agreement with the vendor to offset this facility against the related rehabilitation fund
liability, recognised within unsecured other interest bearing liabilities. Refer to note 17 Interest bearing liabilities.
(2) Recognised in expenses excluding finance costs in the Consolidated Income Statement.
(3) Recognised in the financial assets reserve in the Consolidated Statement of Comprehensive Income.
144
FINANCIAL REPORT
19. Financial assets and financial liabilities continued
(b) 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.
(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.
The Group’s activities expose it to market risks associated with movements in interest rates, foreign currencies and commodity prices.
The Group predominantly manages 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 Group’s strategy, financial instruments may be employed for risk mitigation purposes within 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 had the following exposure to interest rate risk:
US$M
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Interest bearing liabilities
Net exposure
FY23
FY22
1,218
153
-
(286)
1,085
2,306
102
39
(334)
2,113
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of financial assets and
liabilities affected. With all other variables held constant, the Group’s profit/(loss) after tax would increase/(decrease) as follows:
US$M
Increase of 100 basis points
Decrease of 100 basis points
Impact on profit/(loss) after tax
FY23
8
(8)
FY22
16
(13)
The sensitivity analysis assumes that the change in interest rates is effective from the beginning of the year and the fixed/floating mix
and balances are constant over the year. However, interest rates and the profile of the Group’s financial assets and liabilities may not
remain constant over the coming year and therefore such sensitivity analysis should be used with care.
145
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – CAPITAL STRUCTURE AND FINANCING CONTINUED
19. Financial assets and financial liabilities continued
(b) Financial risk management objectives and policies continued
(i) Market risk continued
Foreign currency risk
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.
The functional currency of the Group’s operations is primarily the US dollar. 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 following table shows the principal foreign currency risk arising from financial assets and liabilities by currency of denomination:
US$M
Australian dollar
Brazilian real
Colombian peso
South African rand
FY23
(946)
(103)
(70)
74
FY22
(860)
(63)
(47)
98
Based on the Group’s net financial assets and liabilities as at 30 June, a weakening of the US dollar against these currencies as
illustrated in the table below, with all other variables held constant, would increase/(decrease) the Group’s profit/(loss) after tax, as
follows:
US$M
10% movement in Australian dollar
10% movement in Brazilian real
10% movement in Colombian peso
10% movement in South African rand
Impact on profit/(loss) after tax
FY23
FY22
(67)
(10)
(7)
7
(60)
(6)
(5)
10
The Group’s other comprehensive income is not exposed to any significant fluctuations as a result of foreign exchange risk arising from
financial assets and liabilities.
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 not recognised
in the Consolidated Balance Sheet.
146
FINANCIAL REPORT
19. Financial assets and financial liabilities continued
(b) Financial risk management objectives and policies continued
(i) Market risk continued
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 as other revenue in the Group’s segment results, refer to note 4(b) Segment results. The Group’s
exposure at 30 June 2023 to the impact of movements in commodity prices on provisionally invoiced sale and purchase volumes was
predominantly around nickel, silver, lead, zinc, metallurgical coal and aluminium.
The Group had 3.7kt of nickel, 2.6Moz of silver, 24.4kt of lead, 5.4kt of zinc, 30.0kt of metallurgical coal, 10.0kt of aluminium and 31.5kt
of alumina exposure at 30 June 2023 (FY22: 2.3kt of nickel, 1.8Moz of silver, 30.0kt of lead, 5.7kt of zinc, 27.1kt of aluminium) that was
provisionally priced. The final price of these sales or purchases will be determined during the first half of FY24. 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$19
million (FY22: US$18 million). The relationship between commodity prices and foreign currencies is complex and foreign exchange rates
and commodity prices may move concurrently in response to market conditions. These sensitivities should therefore be used with care.
(ii) Liquidity risk
The Group’s liquidity risk arises from the possibility that it may not be able to settle or meet its obligations as they fall due. Operational,
capital and regulatory requirements are considered in the management of liquidity risk, in conjunction with short and long-term
forecast information.
In line with the Group’s policy on counterparty credit exposure, the Group only uses counterparties of a high credit standing for the
investment of any excess cash.
The entities in the Group are funded by a combination of cash generated by the Group’s operations, working capital facilities and
intercompany loans provided by the Group. Intercompany loans may be funded by a combination of cash, short and long-term debt.
Details of the Group’s major standby arrangement are as follows:
FY23
US$M
Revolving credit facility(1)
Available
1,400
Used
-
Unused
1,400
(1) The Group has an undrawn revolving credit facility which was extended in December 2022 by one year to December 2027, with the size of the facility in the final year reduced to
US$1,200 million.
Maturity profile of financial liabilities
The maturity profiles of financial liabilities, based on the contractual amounts, are as follows:
FY23
US$M
Trade and other payables(1)
Senior unsecured notes
Lease liabilities
Other interest bearing liabilities
Other financial liabilities – contingent consideration payable
Total
Carrying
amount
986
690
674
377
37
2,764
On demand
or less than
1 year
1 to 5 years
More than
5 years
968
30
102
315
-
1,415
-
122
331
68
48
569
18
822
715
-
-
1,555
Total
986
974
1,148
383
48
3,539
(1) Excludes current input taxes of US$17 million and non-current input and other taxes of US$1 million included in other creditors. Refer to note 14 Trade and other payables.
FY22
US$M
Trade and other payables(1)
Senior unsecured notes(2)
Lease liabilities
Other interest bearing liabilities
Other financial liabilities – contingent consideration payable
Other financial liabilities – derivative contracts
Total
Carrying
amount
956
689
650
488
84
6
2,873
On demand
or less than
1 year
1 to 5 years
More than
5 years
949
30
90
362
-
6
1,437
7
122
314
85
109
-
637
-
852
745
60
-
-
1,657
Total
956
1,004
1,149
507
109
6
3,731
(1) Excludes current input taxes of US$40 million and non-current input and other taxes of US$1 million included in other creditors. Refer to note 14 Trade and other payables.
(2) The maturity profile of senior unsecured notes was restated to include future coupon payments, consistent with current year presentation.
147
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – CAPITAL STRUCTURE AND FINANCING CONTINUED
19. Financial assets and financial liabilities continued
(b) Financial risk management objectives and policies continued
(iii) Credit risk
Credit risk management
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. Credit limits are
established for customers and reviewed annually or with the release of new information materially impacting the customer’s
creditworthiness.
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. Mitigation methods include credit exposure management and overdue accounts monitoring. In addition, leading
key risk indicators are actively monitored for all customers to identify any emerging risks.
There are no material concentrations of credit risk, either with individual counterparties or groups of counterparties, by industry or
geography. The carrying amounts of financial assets represent the maximum credit exposure.
Expected credit losses
Impairment allowances are based on a forward-looking expected credit loss model. 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. Where there has been a significant increase in credit
risk, a loss allowance for lifetime expected credit losses is recognised.
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 (S&P Global Ratings) is used, on the basis that there is no support that it is investment grade, nor is there
any evidence of default.
Shareholder loan receivable from Sierra Gorda
Purchased credit-impaired financial assets are initially recognised at fair value. They are subsequently measured at amortised cost
using the credit-adjusted effective interest method, less an allowance for changes in lifetime expected credit losses since initial
recognition. The credit-adjusted effective interest rate is determined at initial recognition and not amended for subsequent changes to
lifetime expected credit losses since acquisition. Changes in lifetime expected credit losses are recognised as impairment and reversals
of impairment of financials assets.
The Group’s investment in the Sierra Gorda operation is represented by the carrying value of an equity accounted investment of US$101
million (FY22: US$30 million), and the carrying value of a purchased credit-impaired receivable of US$1,711 million (FY22: US$1,648
million) classified as a loan to an equity accounted investment within trade and other receivables on the Consolidated Balance Sheet.
The loan has a contractual interest rate of 8 per cent and the repayment of the loan by the Sierra Gorda operation is dependent on its
financial performance. At 30 June 2023, the Group updated its estimated timing of the loan repayments and as a result recognised
an impairment of US$71 million (FY22: impairment of US$26 million) which is included in expenses excluding finance costs in the
Consolidated Income Statement. The net present value of the expected future cash flows of the loan was determined as US$1,711
million (FY22: US$1,648 million) using a measurement methodology consistent with a Level 3 fair value based on the inputs in the
valuation technique.
The following table shows the movement in the carrying amount of this receivable:
US$M
At the beginning of the financial year
Acquisition
Interest accrued
Net impairment
Repayments
At the end of the financial year
FY23
1,648
-
148
(71)
(14)
1,711
FY22
-
1,687
55
(26)
(68)
1,648
The future loan repayments were informed by a production profile and costs based on management’s planning processes. Refer to the
Mineral Resources and Ore Reserves section of note 2(c) for further information on the estimates which underpin the production profile.
An effective interest rate of nine per cent, as determined on the date of acquisition, was applied to discount the future loan repayments.
Determining the net present value requires management to make certain key estimates, assumptions and judgements, which are
consistent with those outlined in note 13 Impairment of non-financial assets.
148
FINANCIAL REPORT
19. Financial assets and financial liabilities continued
(b) Financial risk management objectives and policies continued
(iii) Credit risk continued
Shareholder loan receivable from Sierra Gorda continued
The net present value of the expected future cash flows of the loan is most sensitive to the Group’s copper price assumption, with
a range of US$3.81/lb to US$4.11/lb used, in real terms. The potential effect of using a reasonably possible alternative copper price
assumption on the carrying value of the loan, based on changing this assumption by 10 per cent while holding all other variables
constant, is shown in the following table:
FY23
US$M
Trade and other receivables
Loans to equity accounted investments
Face value Carrying value
Favourable
Unfavourable
Impact on profit/(loss) after tax
2,185
1,711
90
(164)
(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.
20. Share capital
Share capital
At the beginning of the year
Shares bought back and cancelled
At the end of the year
Treasury shares
At the beginning of the year
Purchase of shares by ESOP Trusts
Employee share awards vested
At the end of the year
FY23
FY22
Shares
US$M
Shares
US$M
4,628,431,584
(83,017,889)
4,545,413,695
13,469
(218)
13,251
4,674,538,013
(46,106,429)
4,628,431,584
(11,467,507)
(11,676,773)
5,880,807
(17,263,473)
(32)
(33)
14
(51)
(11,676,185)
(6,379,586)
6,588,264
(11,467,507)
13,597
(128)
13,469
(22)
(22)
12
(32)
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 issuance of shares, net of any income tax effects, are
recognised as a deduction from equity.
149
SOUTH32 ANNUAL REPORT 2023 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) Primarily comprises assurance services in respect of the Group's sustainability and tax reporting.
22. Pension and other post-retirement obligations
FY23
FY22
4,207
705
4,912
4,448
625
5,073
The Group operates or participates in a number of pension and medical (including superannuation) schemes throughout the world. The
funding of the schemes complies with local regulations. The assets of the schemes are generally held separate from those of the Group
and are administered by trustees or management boards. Full actuarial valuations are prepared for the schemes.
Defined contribution pension schemes
The Group contributed US$60 million (FY22: US$59 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 2023, the Group had defined benefit obligations of US$61 million (FY22: US$57 million) and defined benefit scheme assets
with a fair value of US$45 million (FY22: US$46 million) with a net liability recognised in the Consolidated Balance Sheet of US$16 million
(FY22: US$11 million).
The fair value of scheme assets by major asset class is as follows:
US$M
Bonds(1)
Equities
Cash and cash equivalents
Other(2)
Total
FY23
FY22
32
5
2
6
45
31
6
3
6
46
(1) Comprises Fixed Interest Government bonds of US$7 million (FY22: US$6 million), Index Linked Government bonds of US$21 million (FY22: US$20 million) and Corporate bonds
of US$4 million (FY22: US$5 million).
(2) Primarily comprises property and alternative investments in Australia.
Defined benefit post-retirement medical schemes (closed schemes)
At 30 June 2023, the Group had post-retirement medical scheme obligations of US$17 million (FY22: US$23 million). The post-retirement
medical scheme is unfunded.
Weighted average maturity profile of schemes
The weighted average duration of the defined benefit obligations is eight years (FY22: seven years) and nine years (FY22: 10 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.
150
FINANCIAL REPORT
23. Employee share ownership plans
At 30 June 2023, the Group had the following employee share ownership plans:
Awards granted to Lead Team members(1)
Long-Term Incentive Plan(2)
Deferred Short-Term Incentive Plan(3)
Executive Transitional Award Plan(2)
Management Share Plan(2)(4)
FY20, FY21, FY22, FY23
FY21, FY22
FY21, FY22
FY21
(1) Awards granted on 6 December 2019, 4 December 2020, 6 December 2021 and 8 December 2022.
(2) Awards subject to performance and service conditions.
(3) Awards subject to service conditions only.
(4) During FY21, Jason Economidis, as acting Chief Operating Officer, participated in the Management Share Plan and not the Long-Term Incentive Plan.
Awards granted to eligible employees(1)
Management Share Plan(2)
AllShare Plan(3)
Management Transitional Award Plan(2)
FY20, FY21, FY22, FY23
2020, 2021, 2022
FY20
(1) Awards granted on 6 December 2019, 15 May 2020, 4 December 2020, 7 December 2020, 6 May 2021, 6 December 2021, 9 May 2022, 8 December 2022 and 15 May 2023.
(2) Awards subject to performance and service conditions.
(3) Awards subject to service conditions only.
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. Performance conditions include total shareholder return relative to peer groups and, for FY22 and FY23 Long-
Term Incentive Plan and Management Share Plan awards, climate change and portfolio management performance hurdles. Further
information on the vesting conditions of performance rights granted in FY23 is disclosed in the Remuneration report. A portion of the
2020, 2021 and 2022 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.
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.
151
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OTHER NOTES CONTINUED
23. Employee share ownership plans continued
(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 Chief Executive Officer and by the Board of Directors for all other awards.
FY20, FY21, FY22 and FY23 Long-Term Incentive Plan
The Long-Term Incentive Plan is the Group’s long-term incentive plan for Lead Team members.
Awards have a four-year performance period from 1 July 2019 to 30 June 2023, 1 July 2020 to 30 June 2024, 1 July 2021 to 30 June 2025
and 1 July 2022 to 30 June 2026 respectively.
The FY21 Long-Term Incentive Plan award granted to the Chief Executive Officer 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.
FY21 and FY22 Deferred Short-Term Incentive Plan
The Deferred Short-Term Incentive Plan is the Group’s short-term incentive plan for Lead Team members. Awards vest in August 2023
and August 2024 respectively, provided participants remain employed by the Group.
FY20, FY21, FY22 and FY23 Management Share Plan
The 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 2023, August 2024 and August 2025 provided participants remain employed by the Group; and
– Performance rights vesting in August 2023, August 2024, August 2025 and August 2026 subject to performance conditions and
provided participants remain employed by the Group.
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.
2020, 2021 and 2022 AllShare Plan
The 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 2023, August 2024 and August 2025; and
– Participants elsewhere: August 2023 and August 2024.
(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.
FY21 and FY22 Executive Transitional Award Plan
The 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 2020 to 30 June 2023 and 1 July 2021 to 30 June 2024 respectively.
FY20 Management Transitional Award Plan
The 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. The Management Transitional Award Plan has the same conditions as the
Management Share Plan and comprises both service and performance conditions.
152
FINANCIAL REPORT
23. Employee share ownership plans continued
(b) 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 Broad-Based Black Economic Empowerment
(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.
(c) 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 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.
The fair value of market-based 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 and other non-market-based performance 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.
153
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OTHER NOTES CONTINUED
23. Employee share ownership plans continued
(c) Measurement of fair values continued
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payments plans were as follows:
FY23
Recurring plans
FY23 Long-Term Incentive Plan
FY22 Deferred Short-Term Incentive Plan
FY23 Management Share Plan – Retention rights
FY23 Management Share Plan – Performance rights
2022 AllShare Plan
FY22
Recurring plans
FY22 Long-Term Incentive Plan
FY21 Deferred Short-Term Incentive Plan
FY22 Management Share Plan – Retention rights
FY22 Management Share Plan – Performance rights
2021 AllShare Plan
Transitional plan
FY22 Executive Transitional Award Plan
Fair value at
grant date
(US$)
Share price at
grant date
(US$)
Expected
volatility (%)
Expected life
(in years)
Risk-free
interest rate
based on
government
bonds (%)
1.74
2.68
2.59 – 2.63
1.74 – 1.77
2.68 – 2.90
2.76
2.76
2.76 – 2.85
2.76 – 2.85
2.76 – 2.85
35
35
35
35
35
4
2
3
4
2 - 3
3.14
3.09
3.12 – 8.32
3.14 – 8.85
3.09 – 8.32
Fair value at
grant date
(US$)
Share price at
grant date
(US$)
Expected
volatility (%)
Expected life
(in years)
1.65
2.36
2.25 - 2.26
1.65 - 1.66
2.36 - 2.57
2.60
2.60
2.34 - 2.60
2.34 - 2.60
2.34 - 2.60
1.68
2.60
30
30
30
30
30
30
Risk-free
interest rate
based on
government
bonds (%)
0.85
0.01
0.43 - 5.17
0.85 - 5.61
0.01 - 5.17
4
2
3
4
2 - 3
3
0.43
The fair value at grant date, expected life, and risk-free interest rates shown represent the ranges based on the amounts 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.
Expected volatility is based on the historical South32 Limited share price volatility at the grant date. The risk-free interest rate and
expected volatility does not materially impact service-based awards.
154
FINANCIAL REPORT
23. Employee share ownership plans continued
(d) Reconciliation of outstanding share awards
None of the awards listed below have an exercise price or are exercisable at 30 June 2023.
FY23
Number of rights
Recurring plans
FY19 Long-Term Incentive Plan
FY20 Long-Term Incentive Plan
FY21 Long-Term Incentive Plan
FY22 Long-Term Incentive Plan
FY23 Long-Term Incentive Plan
FY20 Deferred Short-Term Incentive Plan
FY21 Deferred Short-Term Incentive Plan
FY22 Deferred Short-Term Incentive Plan
FY19 Management Share Plan - Performance rights
FY20 Management Share Plan - Retention rights
FY20 Management Share Plan - Performance rights
FY21 Management Share Plan - Retention rights
FY21 Management Share Plan - Performance rights
FY22 Management Share Plan - Retention rights
FY22 Management Share Plan - Performance rights
FY23 Management Share Plan - Retention rights
FY23 Management Share Plan - Performance rights
2019 AllShare Plan
2020 AllShare Plan
2021 AllShare Plan
2022 AllShare Plan
Transitional plans
FY20 Executive Transitional Award Plan
FY21 Executive Transitional Award Plan
FY22 Executive Transitional Award Plan
FY19 Management Transitional Award Plan
FY20 Management Transitional Award Plan
Total awards
24. Contingent assets and liabilities
Rights at
beginning of
the year
4,145,497
4,765,759
6,957,349
3,743,629
-
851,180
907,232
-
4,313,892
1,502,428
5,124,843
2,702,433
7,366,059
2,224,932
3,599,229
-
-
1,958,385
6,115,200
4,323,740
-
Granted during
the year
Vested during
the year
Forfeited
during the year
Lapsed during
the year
Rights at end
of the year
-
-
-
-
2,494,503
-
-
949,257
-
-
-
-
-
-
-
1,907,751
3,198,587
-
-
-
4,610,840
-
-
-
-
-
(851,180)
(178,242)
-
-
(1,502,428)
-
(65,227)
-
(26,731)
-
(2,947)
-
(1,942,655)
(3,695,200)
(59,360)
(24,440)
-
(432,477)
(673,913)
(313,351)
-
-
-
-
-
-
(224,230)
(155,832)
(430,437)
(166,623)
(290,913)
(74,912)
(126,329)
(15,730)
(132,800)
(276,660)
(169,520)
(4,145,497)
-
-
-
-
-
-
-
(4,313,892)
-
-
-
-
-
-
-
-
-
-
-
-
-
4,333,282
6,283,436
3,430,278
2,494,503
-
728,990
949,257
-
-
4,900,613
2,481,374
6,935,622
2,031,578
3,308,316
1,829,892
3,072,258
-
2,287,200
3,987,720
4,416,880
129,283
154,702
195,128
190,959
89,670
61,361,529
-
-
-
-
-
13,160,938
(43,094)
-
-
-
(14,209)
(8,405,713)
-
-
-
-
(543)
(3,484,270)
(86,189)
-
-
(190,959)
-
-
154,702
195,128
-
74,918
(8,736,537) 53,895,947
Contingent assets and liabilities not otherwise provided for in the consolidated financial statements are categorised as arising from:
US$M
Actual or potential litigation
Total contingent liabilities
Actual or potential litigation
Total contingent assets
FY23
519
519
143
143
FY22
427
427
156
156
Actual or potential litigation liabilities primarily relate to numerous tax assessments or matters relating to transactions in prior years in
Colombia and Brazil.
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.
Actual or potential litigation assets primarily relate to potential recovery of pre-closing tax liabilities in respect of the Sierra Gorda
acquisition, with allocation of liability for these pre-closing tax liabilities being disputed with the vendors.
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.
155
SOUTH32 ANNUAL REPORT 2023 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 profit/(loss) after tax or net
assets, are as follows:
Effective interest %
Significant subsidiaries
African Metals (Pty) Ltd
South32 Hermosa 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 Finance 1 B.V.
South32 Finance 2 B.V.
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 Investments Ltd
South32 SA Ltd
South32 Sierra Gorda SpA
South32 Treasury Ltd
South32 USA Exploration Inc.
Country of incorporation
Principal activity
South Africa
United States
Colombia
Australia
Australia
South Africa
Australia
Australia
Netherlands
Netherlands
Australia
Australia
Australia
Australia
Australia
Australia
Netherlands
Singapore
Brazil
United Kingdom
South Africa
Chile
Australia
United States
Investment holding company
Exploration and development
Integrated laterite ferronickel mine and
smelting complex
Metallurgical coal mine
Metallurgical coal mine
Aluminium smelter
Investment holding company
Coal washery, rail and road transportation
Financing company
Financing company
Investment holding company
Interest in a joint operation
Interest in a joint operation
Silver, lead and zinc mine
Interest in a joint operation
Administrative, management and support
services
Interest in a joint operation
Sales, marketing and distribution
Interest in a joint operation
Investment holding company
Administrative, management and support
services
Investment holding company
Financing company
Exploration
FY23
100
100
99.9
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
FY22
100
100
99.9
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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.
156
FINANCIAL REPORT
26. Equity accounted investments
The Group’s interests in equity accounted investments with the most significant contribution to the Group’s net profit/(loss) after tax or
net assets, are as follows:
Significant joint ventures
Australia Manganese(1)
South Africa Manganese(2)
Sierra Gorda(3)
Country of
incorporation
Australia
South Africa
Chile
Principal activity
Acquisition date
FY23
FY22
Manganese ore mine
Manganese ore mines
Copper mine
8 May 2015
3 February 2015
22 February 2022
60
60
45
60
60
45
(1) Australia Manganese consists of an investment in Groote Eylandt Mining Company Pty Ltd (GEMCO).
(2) The Group holds a 60 per cent interest in Samancor Holdings (Pty) Ltd (Samancor). Samancor indirectly owns 74 per cent of Hotazel Manganese Mines (Pty) Ltd (HMM), which
gives the Group its indirect ownership interest of 44.4 per cent. The remaining 26 per cent of HMM is owned by B-BBEE entities, of which 17 per cent of the interests 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, the Group’s
interest in HMM is accounted for at 54.6 per cent.
(3) Sierra Gorda consists of an investment in Sierra Gorda Sociedad Contractual Minera.
A reconciliation of the carrying amount of the equity accounted investments is set out below:
Ownership interest %
US$M
At the beginning of the year
Share of profit/(loss)
Share of other comprehensive income/(loss)
Dividends received from equity accounted investments
Acquisition of an equity accounted investment
At the end of the year
Carrying amount of equity accounted investments
US$M
Australia Manganese
South Africa Manganese
Sierra Gorda
Individually immaterial(1)
Total
FY23
470
246
6
(223)
-
499
FY23
95
173
101
130
499
FY22
380
272
(3)
(224)
45
470
FY22
143
180
30
117
470
(1) Individually immaterial consists of investments in Samancor Marketing Pte Ltd (60 per cent), Mineração Rio do Norte (33 per cent) and Port Kembla Coal Terminal Ltd (16.7 per
cent).
Share of profit/(loss) of equity accounted investments
US$M
Australia Manganese
South Africa Manganese
Sierra Gorda
Individually immaterial(1)
Total
FY23
120
36
71
19
246
FY22
211
31
30
-
272
(1) Individually immaterial consists of investments in Samancor Marketing Pte Ltd (60 per cent), Mineração Rio do Norte (33 per cent) and Port Kembla Coal Terminal Ltd
(16.7 per cent).
157
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OTHER NOTES CONTINUED
26. Equity accounted investments continued
The following table summarises the financial information relating to each significant equity accounted investment:
FY23
US$M
Reconciliation of the 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
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
Share of profit/(loss) of equity accounted investments
Other balances of equity accounted investments presented on a 100% basis
Cash and cash equivalents(1)
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
Sierra Gorda
351
837
(235)
(794)
159
95
95
1,028
200
120
120
-
(263)
(167)
4
(39)
(127)
231
514
(94)
(255)
396
173
173
512
64
36
36
32
(8)
(32)
9
(11)
(37)
590
4,437
(322)
(4,481)
224
101
101
1,521
158
71
71
180
(4,331)
(314)
3
(385)
(62)
(1) South Africa Manganese cash and cash equivalents includes US$32 million, on a 100 per cent basis, which is restricted by legal or contractual arrangements.
FY22
US$M
Reconciliation of the 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
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
Share of profit/(loss) of equity accounted investments
Other balances of equity accounted investments presented on a 100% basis
Cash and cash equivalents(1)
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
Sierra Gorda
328
836
(260)
(665)
239
143
143
1,239
351
211
211
-
(173)
(136)
-
(20)
(208)
258
516
(81)
(290)
403
180
180
602
59
31
31
27
(19)
(26)
3
(13)
(63)
485
4,252
(367)
(4,303)
67
30
30
535
67
30
30
154
(4,177)
(129)
-
(139)
(23)
(1) South Africa Manganese cash and cash equivalents includes US$27 million, on a 100 per cent basis, which is restricted by legal or contractual arrangements.
158
FINANCIAL REPORT
26. Equity accounted investments continued
The Group’s share of contingent liabilities and capital expenditure commitments of significant equity accounted investments as at
30 June 2023 was US$3 million (FY22: US$6 million) and US$58 million (FY22: US$27 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. A separate vehicle, not the parties, will have the rights to the assets and obligations for 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.
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 investees’ 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.
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) after tax
or net assets, are as follows:
Significant joint
operations
Country of
operation
Principal activity
Effective interest %
Acquisition date
FY23
FY22
Ambler Metals
Brazil Alumina
Brazil Aluminium
Eagle Downs
Metallurgical Coal
Mozal Aluminium(1)
Worsley Alumina(1)
United States
Brazil
Brazil
Australia
Mozambique
Australia
Base metals exploration and development options
Integrated bauxite mine and alumina refinery
Aluminium smelter
Metallurgical coal exploration and
development option
Aluminium smelter
Integrated bauxite mine and alumina refinery
11 February 2020
3 July 2014
3 July 2014
14 September
2018
27 March 2015(2)
8 May 2015
50
36
40
50
63.7
86
50
36
40
50
63.7
86
(1) While the Group holds a greater than 50 per cent interest in Worsley Alumina and Mozal Aluminium, participants jointly approve certain matters and are entitled to receive their
share of output from the arrangement.
(2) The Group initially acquired a 47.1 per cent interest on 27 March 2015 and subsequently acquired a further 16.6 per cent interest on 31 May 2022.
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.
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.
159
SOUTH32 ANNUAL REPORT 2023 NOTES TO FINANCIAL STATEMENTS – OTHER NOTES CONTINUED
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
FY23
5,419
128
276
-
4,246
10,069
FY22
6,321
137
293
428
4,764
11,943
(b) Transactions with key management personnel
There were no transactions with key management personnel during the year ended 30 June 2023 (FY22: US$nil).
(c) Loans to key management personnel
On 22 June 2021, the Group made an interest free loan of US$620 thousand to Mike Fraser in relation to his South African income tax
payable on his Group remuneration. The final instalment to repay the loan in full was made on 24 November 2021. There were no other
loans with any key management personnel as at 30 June 2023 (FY22: US$nil).
(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 2023 (FY22: US$nil).
29. Related party transactions
(a) Parent entity
The ultimate parent entity of the Group is South32 Limited, which is domiciled and incorporated in Australia.
(b) Subsidiaries, joint ventures and associates
The interests in subsidiaries, joint ventures and associates are disclosed in note 25 Subsidiaries and note 26 Equity accounted
investments.
(c) Key management personnel
The compensation of, and loans to, key management personnel are disclosed in note 28 Key management personnel.
(d) Pension and other post-retirement obligations
The pension and other post-retirement obligations are disclosed in note 22 Pension and other post-retirement obligations.
(e) Transactions with related parties
Transactions with related parties
US$’000
Sales of goods and services
Purchases of goods and services
Interest income
Dividend income
Interest expense
Increase/(decrease) in short-term financing arrangements
Increase/(decrease) in loans with related parties
Outstanding balances with related parties
US$’000
Trade and sundry amounts owing to related parties
Other amounts owing to related parties(1)
Trade and sundry amounts owing from related parties
Loan amounts owing from related parties(2)(3)(4)
Joint ventures
Associates
FY23
FY22
FY23
271,141
531
160,288
223,468
14,977
(47,726)
113,587
360,674
-
60,661
224,424
2,109
49,530
1,619,366
3,863
163,096
-
-
-
-
(9,117)
Joint ventures
Associates
FY23
FY22
928
286,804
29,993
1,863,753
748
334,530
30,114
1,750,166
FY23
18,393
-
312
40,302
FY22
3,961
53,107
-
-
-
-
(17,237)
FY22
973
-
769
49,419
(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 was paid based
on the three-month London Inter-Bank Offer Rate (LIBOR) less a margin of 0.05 per cent and the one-month Johannesburg Inter-Bank Agreed Rate. From 1 July 2023 the three-
month LIBOR was replaced by the three-month Chicago Mercantile Exchange Term Secured Overnight Financing Rate (CME Term SOFR) plus a margin of 0.21 per cent.
(2) Loan amounts owing from GEMCO include an interest bearing loan which is repayable by 2 January 2026. Interest was paid based on the three-month LIBOR plus a margin of
three per cent. From 1 July 2023 the three-month LIBOR was replaced by the three-month CME Term SOFR plus a margin of 3.26 per cent.
(3) Loan amounts owing from Sierra Gorda include a purchased credit-impaired loan which has a face value of US$2,185 million (FY22: US$2,073 million) and incurs interest at a
contractual rate of eight per cent per annum. The loan is repayable by 15 December 2024, subject to review and agreement between the joint venture parties. Refer to note 19
Financial assets and financial liabilities.
(4) Loan amounts owing from Port Kembla Coal Terminal include an interest free loan which is repayable by 30 June 2030.
Sales to, and purchases from, related parties are transactions at market prices and on commercial terms, or under terms and prices
that are no less favourable to the Group than those arranged with third parties.
Outstanding balances at year end are unsecured and settlement mostly occurs in cash.
160
FINANCIAL REPORT
29. Related party transactions continued
(e) Transactions with related parties continued
South32 Limited has guaranteed its equivalent 45 per cent share of the repayment of a US$700 million revolving credit facility entered
into by Sierra Gorda. At the end of the year, the facility was drawn down by US$400 million (FY22: US$400 million). The facility extends to
30 September 2024. No other guarantees are provided for or have been received from any related party.
30. Parent entity information
(a) Summary financial information
The individual financial statements for the parent entity, South32 Limited, show the following aggregate amounts:
US$M
Result of parent entity
Profit/(loss) after tax for the year
Total comprehensive income/(loss)
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)
Accumulated losses
Total equity
FY23
FY22
(995)
(995)
445
12,056
(1,375)
(1,383)
10,673
13,251
(47)
32
3,816
(6,379)
10,673
3,879
3,879
652
13,006
(100)
(108)
12,898
13,469
(28)
24
4,823
(5,390)
12,898
(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 and South32 SA Investments Ltd have jointly and severally, fully and unconditionally guaranteed the payment of the
principal and premium, if any, and interest, including certain additional amounts that may be payable in respect of the notes issued
by South32 Treasury Ltd, a 100 per cent owned finance subsidiary of the parent entity. The parent entity and South32 SA Investments
Ltd have guaranteed the payment of such amounts when they become due and payable, whether on an interest payment date, at the
stated maturity of the notes, by declaration or acceleration, call for redemption or otherwise. At 30 June 2023, the guaranteed liabilities
in respect of the notes amounted to US$690 million (FY22: US$689 million).
The parent entity has also guaranteed a US commercial paper program and a Group revolving credit facility of US$1,400 million. The
Group revolving credit facility remains undrawn as at 30 June 2023, refer to note 19 Financial assets and financial liabilities for further
details.
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.
31. Subsequent events
Capital management
On 24 August 2023, the Directors resolved to pay a fully-franked final dividend of US 3.2 cents per share (US$145 million) in respect of
the 2023 financial year. The dividends will be paid on 12 October 2023. The dividends have not been provided for in the consolidated
financial statements and will be recognised in the 2024 financial year.
On 24 August 2023, the Group also announced an increase to the existing capital management program, announced in March 2017, of
US$50 million to a total of US$2.4 billion. This leaves US$133 million expected to be returned by 1 March 2024.
No other matters or circumstances have arisen since the end of the 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.
161
SOUTH32 ANNUAL REPORT 2023
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 105 to 161 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 2023 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 year ended 30 June 2023.
3. The Directors draw attention to note 2 to the financial statements on page 110, 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 7 September 2023
162
FINANCIAL 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 2023 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.
KPMG
Graham Hogg
Partner
Perth
7 September 2023
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.
163
SOUTH32 ANNUAL REPORT 2023 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).
The Financial Report comprises:
• Consolidated balance sheet as at 30 June 2023;
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 2023 and of its financial performance for the year ended
on that date; and
• Complying with Australian Accounting Standards and the
Corporations Regulations 2001.
• 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; and
• 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.
Basis for opinion
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
these requirements.
Key Audit Matters
The Key Audit Matters we identified are:
• Asset valuation; and
• Closure and rehabilitation provision.
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.
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.
164
FINANCIAL REPORT
INDEPENDENT AUDITOR’S REPORT
Asset valuation (Property, plant and equipment US$8,050m, Intangible assets US$242m and
Equity accounted investments US$499m)
Refer to Note 13 Impairment of non-financial assets and Note 26 Equity Accounted Investments to the Financial Report
The key audit matter
How the matter was addressed in our audit
The assessment of the existence of impairment or reversal indicators
and the Group’s impairment testing of Cash Generating Units (CGU)
and Areas of Interest (AOI), where required, was a key audit matter. This
is due to the size of property, plant and equipment, intangible assets
and equity accounted investments, and the sensitivity of valuations to
certain assumptions.
The Group had previously impaired the carrying value of several CGUs
to equate to their recoverable amount, as required by accounting
standards. Combined with the volatility in both commodity and foreign
exchange markets, this increases the sensitivity of the current carrying
values of these CGUs to potential impairment or reversal.
The Group has recorded an impairment charge of US$1,300m in the
Hermosa – Taylor deposit AOI resulting from identification of an
impairment indicator.
This further increased our audit effort in this key audit area.
The Group uses sophisticated models to perform their assessment of
impairment or reversal indicators and fair value less cost of disposal for
impairment testing, where required.
The Group’s models use life of operation and project plans, approved
budgets, and a range of external sources as inputs to the assumptions.
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 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, which increases 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 plans for development,
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
of longer-term pricing and timing in the jurisdictions they operate
and transact in.
We involved valuation specialists to supplement our senior audit team
members in assessing this key audit matter.
Our procedures included:
• We considered the appropriateness of the fair value less cost
of disposal method applied by the Group to perform the annual
test for impairment against the requirements of the accounting
standards.
• 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 formulas and consistency of modelling to the prior year.
• We assessed the Group’s view of the indicators leading to
impairment testing for the Hermosa – Taylor deposit AOI. We
recalculated the impairment charge and compared to the
amounts recognised.
• 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 plans incorporated
in the approved budgets and study estimates incorporated in
project plans. We assessed the accuracy of the Group’s previous
forecasts to assist with this assessment.
• We considered the sensitivity of the models by varying key
assumptions, such as forecast commodity prices, foreign
exchange rates, carbon pricing, discount rates, pre-production
capital expenditure and risking applied to future development
projects for probability, within a reasonably possible range. We did
this to identify those CGUs at higher risk of impairment or reversal
and to focus our further procedures.
• We assessed the scope, objectivity and competence of the
Group’s internal experts responsible for preparation of key
resource and reserve estimates and compared these estimates to
those incorporated in the life of operation and project plans where
applicable.
• We checked the preparation of key resource and reserve
estimates against key requirements of the JORC code, including
testing controls over the appointment of Competent Person and
checking declarations made.
• We challenged the Group’s significant forecast operating cash
flow, capital expenditure and production volume assumptions.
We compared key events to the Board approved plan and
strategy. We applied increased scepticism to forecasts in the
areas where previous forecasts were not achieved. We compared
key forecast expenditure to published studies of industry
trends and expectations, and considered differences for the
Group’s operations. We used our knowledge of the Group, their
past performance, business and customers, and our industry
experience.
• 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 forecast 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 involved our sustainability specialists and inquired of key
members of the Group’s climate team on their progress of
climate-related strategy. We compared those areas identified by
the Group having an impact on asset valuation to our knowledge
of their industry and business. We tested key climate-related
assumptions incorporated into the financial modelling of carbon
pricing assumptions against locally enacted country specific
schemes and longer term published industry views.
• We assessed the disclosures in the Financial Report using
our understanding obtained from our testing and against the
requirements of the accounting standards.
165
SOUTH32 ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT
Closure and rehabilitation provision (US$1,938m)
Refer to Note 15 Provisions to the Financial Report.
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 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 using their closure and rehabilitation
plans:
• Nature and extent of activities required at 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 particularly in an
inflationary economy, 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:
• Comparing the basis for recognition and measurement of
the closure and rehabilitation provision for consistency with
environmental and regulatory requirements and criteria in the
accounting standards.
• Evaluating the methodology applied by the Company’s expert in
determining the nature and extent of closure and rehabilitation
activities by comparison to industry practice.
• Evaluating 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 a
sample of 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.
• Assessing the scope, objectivity and competence of the
Group’s internal and external experts to provide closure and
rehabilitation cost estimates.
• Comparing a sample of cost estimates of the activities,
incorporating allowance for uncertainties, to historical
experience and underlying documentation, the Group’s
external expert estimates, and our knowledge of the Group,
forecast economic conditions and its industry.
Involving our sustainability closure specialists, we tested key
climate and environment-related assumptions incorporated
into the financial modelling of closure cost activities against
environmental laws and regulations and industry guidelines.
•
• Working with our valuation specialists, comparing country
specific discount rate assumptions to market observable data,
including risk free rates.
• Assessing the disclosures in the Financial Report using our
understanding obtained from our testing against the requirements
of the accounting standard.
166
FINANCIAL 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; and
• 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.
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 2023, 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 83 to 103
of the Directors’ report for the year ended 30 June 2023.
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
7 September 2023
167
SOUTH32 ANNUAL REPORT 2023 RESOURCES
AND RESERVES
Information
Competent Persons
Accompanying tables
169
170
171
168
RESOURCES AND RESERVES
INFORMATION
As required by Chapter 5 of the
Australian Securities Exchange (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 (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
of 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 have
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 170. 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
2023. 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 is important to note that Mineral
Resources and Ore Reserves are
estimations, not precise calculations.
We have 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 estimates, 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
At a glance - Resources and Reserves (as at 30 June 2023)
Operations and development options
Worsley Alumina
Brazil Alumina (MRN)
Sierra Gorda
Cannington
Taylor
Clark
Peake
Arctic
Bornite
Cerro Matoso
Australia Manganese
South Africa Manganese(2)
Illawarra Metallurgical Coal(2)(3)
Eagle Downs
Total Ore/Coal
Reserve (Mt)
Reserve Life
Years(1)
Total Mineral/
Coal Resource
(Mt)
217
39
15
33
49
99
99
13
4.0
6.0
9.0
4.7
41
23
1,100
448
1,890
73
153
55
3.3
37
148
316
140
201
1,190
1,140
(1) Scheduled extraction period in years for the total Ore Reserves in the approved Life of Operation Plan.
(2) 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 each of the remaining operations is stated in
the detailed disclosures that follow.
(3) Coal Reserves in this table are presented as Marketable Coal Reserves. Process recoveries are reported in the
detailed disclosures that follow for each coal operation.
the current production schedules. These
Ore Reserves may include areas where
additional approvals are required, and it
is expected that such approvals will be
obtained within the timeframe needed for
the current production schedule.
Foreign estimate
In the market announcement “South32 to
Acquire a 45 per cent Interest in the Sierra
Gorda Copper Mine” dated 14 October
2021, we reported on the estimates of
mineral resources and mineral reserves
for the Sierra Gorda copper mine. These
estimates of mineral resources and
mineral reserves are foreign estimates
under the ASX Listing Rules and are not
reported in accordance with the JORC
Code. We completed the acquisition on
22 February 2022 and in accordance with
ASX Listing Rule 5.14.1, our technical team
has been reviewing available information
in collaboration with the Sierra Gorda
operational team to verify the foreign
resource and reserve estimates, with the
intention of enabling these estimates to
be reported in accordance with the JORC
Code.
Following review of all information, we
have updated the Mineral Resource
estimate in accordance with the JORC
Code and it is included in page 172.
With respect to the mineral reserve
estimate, we are not in possession of any
new information or data relating to the
foreign estimate that materially impacts
on the reliability of the estimates or our
ability to verify the foreign mineral reserve
estimates as Ore Reserves in accordance
with the JORC Code. We confirm that the
information contained in our 14 October
2021 market announcement in relation
to the mineral reserve foreign estimates
continues to apply and has not materially
changed. The Competent Person has not
done sufficient work to classify the foreign
estimates as Ore Reserves in accordance
with the JORC Code and it is uncertain
at this time whether, following evaluation
and further exploration, the foreign
estimates will be able to be reported as
Ore Reserves in accordance with the JORC
Code.
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 with respect to Mineral
Resources and Ore Reserves, our
governance processes are managed by
the Resource and Reserve Governance
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 Exploration
Results, Mineral Resources or Ore
Reserves that are new or have
materially changed.
169
SOUTH32 ANNUAL REPORT 2023 RESOURCES AND RESERVES CONTINUED
In FY23, we undertook two independent
assurance audit of Exploration Results,
Mineral Resource or Ore Reserve
estimates and three internal mine
planning and Ore Reserve assurance
audits. The frequency and scope of
the audits are generally a function of
the perceived risks and uncertainties
associated with a particular Mineral
Resource and Ore Reserve.
The accompanying tables, on pages 171
to 176, outline our Mineral/Coal Resources
and Ore/Coal Reserves holdings.
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 FY23 we continued to expand our
global exploration footprint. We funded
greenfield exploration in Australia, Peru,
Argentina, Ireland, Canada and the
United States of America. Our exploration
expenditure for FY23 was US$107 million
(FY22: US$74 million) of which
US$36 million related to brownfield
and US$71 million related to greenfield
(FY22: US$18 million and US$56 million
respectively).
Competent Persons
Mineral Resources
Worsley Alumina: P Soodi Shoar, MAusIMM
Brazil Alumina:
Mineração Rio Do Norte (MRN): R Aglinskas, MAusIMM, employed by
Projel Engenharia Especializada
Sierra Gorda: Omar Cortès, MAusIMM, employed by Sierra Gorda SCM;
Ian Glacken, FAusIMM (CP) employed by Snowden Optiro
Cannington: P Soodi Shoar, MAusIMM
Hermosa:
Taylor, Clark and Peake: P Richardson, SME
Ambler Metals Joint Venture:
Arctic: D F Machuca Mory, PEng., employed by SRK Consulting (Canada);
T Fouet, MAusIMM (CP)
Bornite: S Khosrowshahi, MAusIMM (CP) employed by WSP Global;
T Fouet, MAusIMM (CP)
Cerro Matoso: I Espitia, MAusIMM (CP)
Australia Manganese:
Groote Eylandt Mining Company (GEMCO): J Harvey, MAusIMM
South Africa Manganese:
Wessels and Mamatwan: L Lautze, Pr. Sci. Nat., SACNASP, employed by
SRK Consulting
Ore Reserves
Worsley Alumina: G Burnham, MAusIMM
Brazil Alumina:
MRN: J P M Franco, MAusIMM, independent consultant
Cannington: R Muller, MAusIMM
Cerro Matoso: R Perez, MAusIMM
Australia Manganese:
GEMCO: M Bryant, MAusIMM, employed by The Minserve Group
South Africa Manganese:
Wessels and Mamatwan: D Takalani, SAIMM, employed by Consulting Evolution
Mining
Coal Resources
Illawarra Metallurgical Coal:
Bulli and Wongawilli: M Krejci, MAusIMM
Eagle Downs: M Blaik, MAusIMM, employed by JB Mining Services
Coal Reserves
Illawarra Metallurgical Coal:
Bulli and Wongawilli: M Rose, MAusIMM
170
RESOURCES AND RESERVES
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171
SOUTH32 ANNUAL REPORT 2023
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RESOURCES AND RESERVES
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INFORMATION
Shareholder information
Glossary of terms and abbreviations
Corporate directory
178
181
188
SOUTH32 ANNUAL REPORT 2023
177
SHAREHOLDER INFORMATION
Voting rights for shares
South32 Limited ordinary shares carry voting rights of one vote per share.
Shareholders may hold a beneficial entitlement to South32 Limited dematerialised ordinary shares, 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 of 4 August 2023, South32 Limited has two substantial shareholders who, together with their associates, hold five per cent or more of
the voting rights in South32 Limited, as notified to South32 Limited under the Corporations Act.
Name
BlackRock Group
Vanguard Group
Date notice received
Number of shares in notice
Percentage of capital in notice
8 December 2021
23 June 2022
318,403,413
235,364,454
6.84
5.077
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 of 4 August 2023.
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
120,611
89,096
25,806
23,306
773
259,592
57,870,635
218,585,330
189,469,549
532,516,783
3,546,971,398
4,545,413,695
1.27
4.81
4.17
11.72
78.03
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 of 4 August 2023.
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
813
5,769
26
114
72
6,794
422,770
7,636,640
194,403
5,536,194
37,328,051
51,118,058
0.83
14.94
0.38
10.83
73.02
100.00
178
INFORMATION
Twenty largest shareholders in South32 Limited
The following table sets out the 20 largest shareholders of ordinary shares listed on the South32 Limited share register and the details
of their shareholding as of 4 August 2023.
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
South Africa Control A/C\C
Computershare Clearing Pty Ltd
National Nominees Limited
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited
CPU Share Plans Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd ACF Clearstream
Netwealth Investments Limited
Neweconomy Com Au Nominees Pty Limited <900 Account>
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Merrill Lynch (Australia) Nominees Pty Limited
Number of fully paid shares
Percentage of capital
1,246,770,087
746,119,979
389,982,815
256,286,669
135,083,433
113,192,678
106,439,505
88,211,690
80,477,054
31,183,864
19,162,986
16,074,527
14,979,445
13,766,925
12,790,017
11,046,007
9,360,817
8,290,529
7,083,756
6,356,721
3,312,659,504
27.43
16.41
8.58
5.64
2.97
2.49
2.34
1.94
1.77
0.69
0.42
0.35
0.33
0.30
0.28
0.24
0.21
0.18
0.16
0.14
72.88
Restricted and escrowed
securities
As of 4 August 2023, South32 Limited
does not have any restricted securities or
securities subject to voluntary escrow on
issue.
Shareholders with less than a
marketable parcel
As of 4 August 2023, there were 9,907
shareholders on the Australian South32
Limited register holding less than a
marketable parcel (A$500) based on the
closing market price of A$3.94.
On-market purchases of South32
Limited securities for employee
incentive plans
The Group purchases South32 Limited
ordinary shares on-market through the
Company’s employee share plan trusts
for the purposes of the South32 Equity
Incentive Plans. During FY23, 11,620,000
shares were purchased on-market for the
Australian ESOP Trust. The average price
at which the shares were purchased was
A$4.08. No shares were purchased for the
South African ESOP Trust during FY23.
In addition, 56,768 shares were purchased
on-market and immediately distributed
to Canadian based employees on vesting
of rights. The average price at which the
shares were purchased was A$4.35.
(1) Numbers in this section are subject to rounding.
Dividend policy
Our dividend policy is determined by the
Board at its discretion. Our priorities for
cash flow are to maintain safe and reliable
operations and an investment grade credit
rating through the cycle.
Our current dividend policy is that South32
Limited intends to distribute a minimum
of 40 per cent of Underlying earnings as
ordinary dividends to our shareholders
following each six-month reporting period.
South32 Limited intends to distribute
dividends with the maximum practicable
franking credits for the purposes of the
Australian dividend imputation system.
Dividend determination and
payment
Our dividends are determined in US
dollars.
Dividends for shareholders of South32
Limited on the Australian register are paid
by direct credit into their nominated bank
account in Australian dollars, UK pounds
sterling, New Zealand dollars or US dollars,
provided direct credit details and currency
election information is submitted no later
than close of business on the dividend
record date as stated in the relevant
Australian Securities Exchange (ASX)
announcement.
Dividends for shareholders of South32
Limited on the South African branch
register and UK Depositary Interest
holders are paid by direct credit in South
African rand and UK pounds sterling,
respectively.
Refer to the Investors section at
www.south32.net for further information
about dividends.
Capital management program(1)
In August 2022, we expanded our capital
management program by US$156 million
and in February 2023, we expanded our
capital management program again by
a further US$50 million to US$2.3 billion,
comprising a US$1.8 billion on-market
share buy-back and special dividends
of US$154 million (paid in 2018),
US$85 million (paid in 2019), US$53.5
million (paid in 2020), US$93 million (paid
in 2021) and US$139 million (paid in 2022).
As of 30 June 2023, we had returned
a total value of US$2.2 billion to
our shareholders under our capital
management program. Subsequent to
30 June 2023, the Board has expanded
the capital management program by a
further US$50 million to US$2.4 billion
and extended the execution window for
the remaining program by six months to
1 March 2024.
The on-market share buy-back was
initially announced on 27 March 2017 and
purchasing commenced on 19 April 2017.
During the year ended 30 June 2023,
South32 Limited purchased 83 million
shares under the on-market share buy-
back, which represented two per cent
of share capital at the beginning of the
financial year. Total consideration paid
for these shares was US$218 million. The
shares have no par value.
179
SOUTH32 ANNUAL REPORT 2023 Branches
In accordance with DTR 4.1.11R(5), South32
Limited, through various subsidiaries,
has established branches in different
jurisdictions in which the business
operates.
Registered office
South32 Limited’s Registered Office is
Level 35, 108 St Georges Terrace, Perth
WA 6000, Australia. Information regarding
South32’s other office locations is included
in the Corporate directory on page 188.
Electronic communications
Shareholders are encouraged to
access all South32 communications
electronically. Shareholders that wish to
receive electronic communications can
update their preferences online or by
telephoning the relevant Computershare
Investor Centre. Refer to the Investors
section at www.south32.net for further
details on how to receive shareholder
communications.
SHAREHOLDER INFORMATION CONTINUED
Share registries
Australia
Computershare Investor Services Pty
Limited
Yarra Falls 452 Johnston Street
Abbotsford Victoria 3067
Australia
Telephone (Australia):
1800 019 953
Telephone (International): +61 3 9415 4169
+61 3 9473 2500
Facsimile:
South Africa
Computershare Investor Services (Pty)
Limited
Rosebank Towers, 15 Biermann Avenue
Rosebank, 2196
South Africa
Telephone:
Facsimile:
Email enquiries:
web.queries@computershare.co.za
+27 11 373 0033
+27 11 688 5217
Holders of shares dematerialised into
Strate should contact their Central
Securities Depository Participant or
stockbroker.
United Kingdom
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Telephone:
Facsimile:
Email enquiries:
web.queries@computershare.co.uk
+44 370 873 5884
+44 370 703 6101
ADR
ADR holders should deal directly with
Citibank Shareholder Services.
Citibank Shareholder Services
PO Box 43077 Providence,
Rhode Island 02940-3077
Telephone:
+1 877 248 4237
(+1-877-CITIADR) (toll-free within US)
+1 781 575 4555 (outside of US)
Facsimile:
Email enquiries:
citibank@shareholders-online.com
Website: www.citi.com/dr
+1 201 324 3284
Between the commencement of
purchasing under the on-market share
buy-back on 19 April 2017 and 30 June
2023, South32 Limited has purchased
a total of 778 million shares, which
represented 15 per cent of share capital
at the commencement of the program.
The total consideration paid for the shares
bought back up to 30 June 2023 was
US$1.7 billion.
The shares purchased by South32 Limited
under the on-market share buy-back have
been cancelled.
Annual General Meeting (AGM)
Our 2023 AGM is scheduled to be held on
Thursday 26 October 2023 at 12.00pm
(midday) Australian Western Standard
Time as a hybrid meeting, providing
shareholders with the opportunity
to attend physically or online. If it
becomes necessary or appropriate to
make alternative or supplementary
arrangements, we will provide an update.
Further details regarding the AGM will be
made available in September 2023, and
shareholders are encouraged to monitor
securities exchange releases and www.
south32.net for information and updates.
Addresses delivered at the AGM, together
with the results of voting, will be provided
to all stock exchanges and will be available
at www.south32.net.
Stock exchanges
As of 4 August 2023, South32 Limited has
a primary listing on the ASX, a secondary
listing on the Johannesburg Stock
Exchange, is admitted to the standard
segment of the Official List of the UK
Listing Authority and its ordinary shares
are traded on the London Stock Exchange.
South32 Limited also has a Level 1
American Depositary Receipts (ADR)
program, which trades in the United States
over-the-counter market.
Shareholder enquiries
Shareholders can access their current
holding details as well as their transaction
history, view dividend statements and
payments made, download statements
and documents, change their address,
update their communication preferences
and banking details, and check their tax
details online via Computershare’s Investor
Centre at www.computershare.com.
Alternatively, refer to the following
contacts:
180
INFORMATION
GLOSSARY OF TERMS AND ABBREVIATIONS
Mining related terms
Alumina
Aluminium oxide (Al₂O₃). Alumina is
produced from bauxite in the Bayer
refining process. It’s then converted
(reduced) in an electrolysis cell to produce
aluminium metal.
Ash
Inorganic material remaining after
combustion of coal.
ASX Listing Rules (Chapter 5)
This chapter of the ASX Listing Rules sets
out additional reporting and disclosure
requirements for mining entities, oil and
gas entities, as well as other entities
reporting on mining and oil and gas
activities.
Bauxite
Principal commercial ore of aluminium.
Beneficiation
The process of physically separating
ore from gangue to produce a mineral
concentrate prior to subsequent
processing.
Brownfield
An exploration or development project
located within an existing mineral
province, which can share infrastructure
and management with an existing
operation.
Coal Reserve
The same meaning as Ore Reserve, but
specifically concerning coal.
Coal Resource
The same meaning as Mineral Resource,
but specifically concerning coal.
Coking coal
Used in the manufacture of coke, which is
used in the steelmaking process by virtue
of its carbonisation properties. Coking
coal is a form of, and may also be referred
to as, metallurgical coal.
Competent Person
A minerals industry professional who is
a Member or Fellow of The Australasian
Institute of Mining and Metallurgy, or of the
Australian Institute of Geoscientists, or of
a ‘Recognised Professional Organisation’,
as included in a list available on the JORC
and ASX websites. These organisations
have enforceable disciplinary processes,
including the powers to suspend or expel
a member.
A Competent Person must have a
minimum of five years’ relevant experience
in the style of mineralisation or type of
deposit under consideration and in the
activity that the person is undertaking
(JORC Code).
Cut-off grade
The lowest grade, or quality, of mineralised
material that qualifies as economically
mineable and available in a given deposit.
It may be defined on the basis of economic
evaluation, or on physical or chemical
attributes that define an acceptable
product specification (JORC Code).
Energy attributes
Energy attributes represent information
about the energy generated, such
as its GHG emissions factor, but not
the energy itself. Attributes may be
conveyed in the form of certificates, tags,
credits, generator declarations or other
contractual instruments.
Energy coal
Used as a fuel source in electrical power
generation, cement manufacture and
various industrial applications. Energy coal
may also be referred to as steaming or
thermal coal.
Exploration Results
Exploration Results include data and
information generated by mineral
exploration programs that might be of use
to investors but which do not form part of
a declaration of Mineral Resources or Ore
Reserves (JORC Code).
Exploration Target
An Exploration Target is a statement or
estimate of the exploration potential of
a mineral deposit in a defined geological
setting where the statement or estimate,
quoted as a range of tonnes and range of
grade (or quality), relates to mineralisation
for which there has been insufficient
exploration to estimate a Mineral
Resource.
FAusIMM (CP)
Fellow of the Australasian Institute
of Mining and Metallurgy. Accredited
Chartered Professional status of members
of the AusIMM. These members have
undergone an assessment of their
competencies, which are maintained
through continuing professional
development activities.
Flotation
A method of selectively recovering
minerals from finely ground ore using a
froth created in water by specific reagents.
In the flotation process, certain mineral
particles are induced to float by becoming
attached to bubbles of froth and the
unwanted mineral particles sink.
Foreign Estimate
An estimate of quantity and grade
of mineralisation that was prepared
using a mineral resources classification
and reporting standard from another
jurisdiction prior to an entity acquiring,
or entering into an agreement to acquire,
an interest in a mining tenement that
contains the deposit, and which the entity
has not verified as mineral resources or
ore reserves in accordance with JORC
Code. (ASX Listing Rules).
Grade
Any physical or chemical measurement
of the characteristics of the material of
interest in samples or product (JORC
Code).
Greenfield
An exploration or development project
that refers to a new venture or operation,
without any association or proximity to a
current operation.
Indicated Mineral Resource
That part of a Mineral Resource for which
quantity, grade (or quality), densities,
shape and physical characteristics are
estimated with sufficient confidence.
This allows the application of Modifying
Factors in sufficient detail to support mine
planning and evaluation of the economic
viability of the deposit (JORC Code).
Inferred Mineral Resources
That part of a Mineral Resource for
which quantity and grade (or quality)
are estimated on the basis of limited
geological evidence and sampling.
Geological evidence is sufficient to imply
but not verify geological and grade (or
quality) continuity (JORC Code).
JORC
Joint Ore Reserves Committee comprising
representatives of The Australasian
Institute of Mining and Metallurgy
(AusIMM), Australian Institute of
Geoscientists (AIG) and Minerals Council
of Australia (MCA) as well as the Australian
Securities Exchange (ASX), the Financial
Services Institute of Australasia (FinSIA)
and the accounting profession.
JORC Code
The Australasian Code for reporting of
Exploration Results, Mineral Resources
and Ore Reserves 2012 Edition prepared
by the JORC.
Laterite
A residual soil or deposit formed by the
leaching of silica from rocks under specific
climatic conditions.
Leaching
The process by which a soluble metal can
be economically recovered from minerals
in ore by dissolution.
Life of Operation Plan
The combination of an Optimised Base
Plan and incremental opportunities
available to the operation for maximising
value.
181
SOUTH32 ANNUAL REPORT 2023 Sands
Tailings produced as a by-product during
beneficiation of ore.
SME
Registered member of the Society for
Mining, Metallurgy and Exploration.
Stockpile (SP)
An accumulation of ore or mineral built
up when demand slackens or when
the treatment plant or beneficiation
equipment is incomplete or temporarily
unable to process the mine output; any
heap of material formed to create a buffer
for loading or other purposes, or material
dug and piled for future use.
Tailings
The left-over materials that remain after
the target mineral is extracted from ore.
TSF
Tailings Storage Facility
Total Mineral Resources
The sum of Inferred Mineral Resources,
Indicated Mineral Resources and
Measured Mineral Resources.
Total Ore Reserves
The sum of Proved Ore Reserves and
Probable Ore Reserves.
UG
Underground working in which the
working area is below the surface of the
earth.
Yield
The percentage of material of interest
that is extracted during mining and/
or processing. A measure of mining or
processing efficiency (JORC Code). When
used in reference to the Mineral Resource
estimate yield refers to the sample mass
recovery following beneficiation.
GLOSSARY OF TERMS AND ABBREVIATIONS CONTINUED
Mining related terms continued
Marketable Coal Reserves
Represents beneficiated or otherwise
enhanced coal product where
modifications due to mining, dilution and
processing have been considered (JORC
Code).
MAusIMM
Member of the Australasian Institute of
Mining and Metallurgy.
MAusIMM (CP)
Accredited Chartered Professional
status of members of the AusIMM.
These members have undergone an
assessment of their competencies,
which are maintained through continuing
professional development activities.
Measured Mineral Resource
That part of a Mineral Resource for which
quantity, grade (or quality), densities,
shape and physical characteristics are
estimated with confidence sufficient to
allow the application of Modifying Factors
to support detailed mine planning and
final evaluation of the economic viability of
the deposit (JORC Code).
Metallurgical coal
A broader term than coking coal that
includes all coals used in steelmaking,
such as coal used for the pulverised coal
injection process.
Mineral reserve
A mineral reserve is the economically
mineable part of a measured and/or
indicated mineral resource. It includes
diluting materials and allowances for
losses, which may occur when the material
is mined or extracted and is defined by
studies at pre-feasibility or feasibility level
as appropriate that include application
of Modifying Factors. Such studies
demonstrate that, at the time of reporting,
extraction could reasonably be justified.
(CIM Standard)
Mineral Resource
A concentration or occurrence of solid
material of economic interest in or on
the Earth’s crust in such form, grade
(or quality), and quantity that there
are reasonable prospects for eventual
economic extraction. The location,
quantity, grade (or quality), continuity
and other geological characteristics of a
Mineral Resource are known, estimated
or interpreted from specific geological
evidence and knowledge, including
sampling. Mineral Resources are sub-
divided, in order of increasing geological
confidence, into Inferred, Indicated and
Measured categories (JORC Code).
Mineralisation
Any single mineral or combination of
minerals occurring in a mass, or deposit, of
economic interest (JORC Code).
Modifying Factors
Considerations used to convert
Mineral Resources to Ore Reserves.
These include, but are not restricted
to, mining, processing, metallurgical,
infrastructure, economic, marketing, legal,
environmental, social and governmental
factors (JORC Code).
Net smelter return
An estimate of revenue derived from
the sale of products and concentrates
following the application of metallurgical
recoveries and deducting transport costs,
treatment and refining charges, penalties
and royalties. For Sierra Gorda, mining
cost is also included in the calculation.
Ore Reserve
The economically mineable part of a
Measured and/or Indicated Mineral
Resource. It includes diluting materials and
allowances for losses, which may occur
when the material is mined or extracted
and is defined by studies at Prefeasibility
or Feasibility level as appropriate that
include application of Modifying Factors.
Such studies demonstrate that, at the time
of reporting, extraction could reasonably
be justified (JORC Code).
PEng
A licenced member of Professional
Engineers of Ontario (PEO).
Probable Ore Reserve
The economically mineable part of an
Indicated and, in some circumstances,
a Measured Mineral Resource. The
confidence in the Modifying Factors
applying to a Probable Ore Reserve is
lower than that applying to a Proved Ore
Reserve (JORC Code).
Proved Ore Reserve
The economically mineable part of a
Measured Mineral Resource. A Proved
Ore Reserve implies a high degree of
confidence in the Modifying Factors (JORC
Code).
Pr.Sci.Nat.
Professional Natural Scientist of the South
African Council for Natural Scientific
Professions.
Reserve Life
The scheduled extraction period in years
for the Total Ore Reserves in the approved
Life of Operation Plan.
ROM (Run of Mine product)
Product mined in the course of regular
mining activities.
SACNASP
South African Council for Natural Scientific
Professions
SAIMM
Member of the Southern African Institute
of Mining and Metallurgy.
182
INFORMATION
Finance, marketing and
general terms
AASB
Australian Accounting Standards Board.
Adjusted return on invested capital
(ROIC)
Calculated as Underlying EBIT, adjusted
for uncontrollable and one-off impacts in
the current financial year, less the discount
on rehabilitation provisions included in net
finance cost, tax effected by the Group’s
prior period Underlying effective tax
rate (ETR) including our material equity
accounted investments on a proportional
consolidated basis, divided by the sum of
fixed assets (excluding any rehabilitation
assets, the impairment reversal of Brazil
Aluminium, and unproductive capital) and
inventories. Underlying EBIT is adjusted
by excluding the current period impacts
of foreign currency on revenue and cost,
and commodity prices on revenue and
associated price-linked costs, less the
discount on rehabilitation provisions
included in net finance cost, and tax
effected by the Group’s prior period
Underlying effective tax rate.
AGM
Annual General Meeting.
AO
Officer of the Order of Australia.
ASX
ASX Limited or Australian Securities
Exchange.
ASX Listing Rules
The rules governing the listing of an entity
and the quotation of its securities on the
ASX.
Australian Securities and Investments
Commission (ASIC)
The independent Australian Government
body that is Australia’s integrated
corporate, markets, financial services and
consumer credit regulator.
B-BBEE
Broad-Based Black Economic
Empowerment.
BHP
BHP, formerly known as BHP Billiton, is
the group of companies headed by, and
including, BHP Group Ltd and BHP Group
plc.
Biodiversity
Refers to the variety of life on Earth – the
different animals, plants and micro-
organisms, their genetic diversity and the
ecosystems of which they are a part.
Black People
As defined in the Broad-Based Black
Economic Empowerment Amendment
Act 2013 (South Africa), a generic term
meaning Africans, Coloureds and Indians
who are citizens of the Republic of South
Africa by birth or descent; or who become
citizens of the Republic of South Africa by
naturalisation before 27 April 1994 or on
or after 27 April 1994 and who would have
been entitled to acquire citizenship by
naturalisation prior to that date.
Board
The Board of Directors of South32 Limited.
Catchment
The area of land from which all surface
runoff and subsurface water flows
through a sequence of streams, rivers,
aquifers and lakes into the sea or another
outlet at a single river mouth, estuary,
or delta. Catchments include associated
groundwater areas and might include
portions of waterbodies (such as lakes
or rivers). In different parts of the world,
catchments are also referred to as
‘watersheds’ or ‘basins’ (or sub-basins).
CCAP
Climate Change Action Plan contained in
the 2022 Sustainable Development Report
available at www.south32.net.
CEO
Chief Executive Officer.
CFO
Chief Financial Officer.
CO2-e
Carbon dioxide equivalent.
Contextual water target
A contextual water target is a specific
timebound target that is set to deliver
an intended outcome based on the
environmental and social context of the
local catchment.
Contractor
A contractor is an employee of a company
contracted by the employer to do work
on its behalf and under its control with
respect to location, work practices and
application of health and safety standards.
COO
Chief Operating Officer.
Copper equivalent production
Copper equivalent production is
calculated by accumulating revenue using
average realised prices for all operations
and dividing by the average realised price
of copper.
Corporations Act
Corporations Act 2001 (Cth).
Cost, Insurance, and Freight (CIF)
A contractual term defining
responsibilities and division of cost and
risk between buyer and seller, in which
the seller is responsible for clearing the
goods for export and bears the cost of
freight and insurance to the named port
of destination. The buyer assumes all risks
and costs for unloading the goods and
clearing the goods for import. Risk passes
from seller to buyer once the goods are on
board the vessel at the port of shipment.
COVID-19
Coronavirus disease (COVID-19) is an
infectious disease caused by the SARS-
CoV-2 virus.
CTO
Chief Technical Officer.
Decarbonisation
Avoiding or reducing the greenhouse gas
emissions associated with an activity.
Demerger
The separation of assets from BHP
effected in May 2015 to create a separate
entity South32 Limited, listed on the ASX,
LSE and JSE.
Dewatering
Aquifer interception and removal of water
from beneath the earth’s surface. Does
not include the removal of sea water.
DND
Dendrobium Next Domain.
DTR
UK Financial Conduct Authority’s
Disclosure Guidance and Transparency
Rules. A reference to DTR followed by a
number is a specific rule under the DTR.
EBIT
Earnings before interest and tax.
EBITDA
Earnings before interest, tax, depreciation
and amortisation.
Effective tax rate (ETR)
Income tax expense/benefit divided by
profit/loss subject to tax.
Employee
Any person in full-time, part-time or casual
employment engaged by South32 on a
temporary or permanent basis pursuant
to a contract of service.
Employee Share Ownership Plan (ESOP)
Trusts
The trusts which purchase and hold
South32 Limited shares for the purpose
of the South32 Equity Incentive Plans.
South32 has an Australian ESOP Trust and
South African ESOP Trust.
183
SOUTH32 ANNUAL REPORT 2023 GLOSSARY OF TERMS AND ABBREVIATIONS CONTINUED
Finance, marketing and
general terms continued
Environmental incident
Any event with an impact to land,
biodiversity, ecosystem services, water
resources or air.
ESG
Environmental, social and governance.
EthicsPoint
A 24/7 confidential reporting hotline that is
serviced by an independent provider.
Executive KMP
Lead Team members who are classified
as KMP.
External Auditor
KPMG.
Fatality
A health or safety event where an injury or
occupational illness has caused the death
of one or more person(s).
Free cash flow
Free cash flow represents operating cash
flows including distributions received from
equity accounted investments, and after
interest (paid)/received, tax (paid)/received
and capital expenditure.
Free On Board (FOB)
A contractual term defining
responsibilities and division of cost and
risk between buyer and seller, in which the
seller is responsible for clearing the goods
for export and loading them on board the
vessel at the named port of shipment.
The buyer assumes all risks and costs for
goods from this moment forward Including
the cost of freight and insurance.
FX
Foreign exchange.
FYXX
Refers to the financial year ending 30 June
20XX, where XX is the two-digit number
for the year.
Gearing
The ratio of (net debt/(cash)) to (net debt/
(cash)) plus net assets.
GEMCO
Groote Eylandt Mining Company.
GHG
Greenhouse gas.
Global Reporting Initiative (GRI)
GRI is an international independent
organisation that has established an
international framework and standards for
sustainability reporting. South32 prepares
our Group-level annual Sustainable
Development Report in accordance
with the GRI Sustainability Reporting
Standards.
Goal
The use of this term in the context of
climate change in this report means
an aspiration to deliver an outcome for
which we have not identified a pathway
for delivery, but for which efforts will be
pursued towards achieving that outcome,
subject to certain assumptions or
conditions.
Greenhouse gas (GHG) emissions
For our reporting purposes, GHG
emissions are the combined
anthropogenic emissions of carbon
dioxide (CO2), methane (CH4), nitrous
oxide (N2O), perfluorocarbons (PFCs)
and sulphur hexafluoride (SF6). They are
measured in carbon dioxide equivalent
(CO2-e). Hydrofluorocarbons (HFCs) GHG
emissions are currently not relevant for
our reporting purposes.
- Scope 1 emissions - GHG emissions
from our own operations, including the
electricity we generate at our sites.
- Scope 2 emissions - Indirect GHG
emissions from the generation of
purchased electricity.
- Scope 3 emissions - GHG emissions in
the value chain.
HMM
Hotazel Manganese Mines.
ICMM
ICMM, previously referred to as the
International Council on Mining and
Metals, is an international organisation
that leads through collaboration to
enhance the contribution of mining and
metals to sustainable development. As a
corporate member, South32 commits to
implementing and reporting on the ICMM
Mining Principles and its Performance
Expectations, which define environmental,
social and governance requirements.
IMC
Illawarra Metallurgical Coal.
Indigenous, Traditional and Tribal
Peoples
We use the defined term ‘Indigenous,
Traditional and Tribal Peoples’ as per the
definition and guidance set out in the
Indigenous and Tribal Peoples Convention,
1989 (No. 169). We use this term inclusively
to encompass the diversity of worldwide
Indigenous, Traditional and Tribal Peoples,
including but not limited First Nations,
Native Americans, Traditional Owners,
Aboriginal and Torres Strait Islander
Peoples and other land connected
communities. We recognise that no single
definition can fully capture the diversity of
Indigenous, Traditional and Tribal Peoples.
Injury
An occupational injury occurs during a
single work shift or a single exposure
to an agent(s) causing an acute toxic
effect, which can be identified by time
and place resulting from direct contact
with an object following an instantaneous
event. Examples include cut, puncture,
laceration, abrasion, fracture, bruise,
contusion, chipping tooth, amputation,
insect bite, electrocution, or a thermal,
chemical, electrical or radiation burn.
Sprain and strain injuries to muscles joints
connective tissue are classified as injuries
when they result from a slip, trip, fall or
other similar accidents.
International Financial Reporting
Standards (IFRS)
Accounting standards as issued by the
IASB (International Accounting Standards
Board).
JSE
Johannesburg Stock Exchange.
Just transition
A fair, equitable and inclusive social
transition towards a low-carbon economy.
KMP
Key management personnel are people
who have authority and responsibility for
planning, directing and controlling the
activities of South32 either directly or
indirectly.
LBMA
London Bullion Market Association.
Lead Team
All Chief positions within South32.
LME
London Metal Exchange.
Local procurement
Local procurement is the direct purchase
of goods and services within the local
communities in which South32 operates.
Suppliers are deemed as local based on
their proximity to our local communities,
including boundaries defined by local
government areas, provinces and states.
Lost time injury
The sum of work-related (fatalities
+ injuries that caused permanent
impairment >30 per cent of body + lost
time injuries). Lost time injuries include
injuries that result in one or more lost work
day after the day of the event.
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INFORMATION
Lost Time Injury Frequency (LTIF)
The sum of (Lost Time injuries x 1,000,000)
÷ exposure hours, for employees and
contractors. This is stated in units of per
million hours worked for employees and
contractors. We adopt the United States
Government Occupational Safety and
Health Administration (OSHA) guidelines
for the recording and reporting of
occupational injuries and illnesses.
Low-carbon
Refers to lower levels of GHG emissions
when compared to the current state.
Where used in relation to South32’s
products or portfolio, it refers to
enhancement of existing methods,
practices and technologies to substantially
lower the level of embodied GHG
emissions as compared to the current
state.
Low-carbon aluminium
Aluminium produced in a process that
results in less than 4t CO2-e Scope 1 and
Scope 2 GHG emissions per tonne of
aluminium produced.
LSE
London Stock Exchange.
LTI
Long-term incentive.
Management Roles
Management roles are leaders with an
identified job grading of 13 or higher
based on the requirements of their role.
Margin on third party products
Comprises Underlying EBIT on third
party products and services, divided
by underlying revenue on third party
products and services.
Material Health Exposures
Material health exposures include
potential exposure to carcinogens and
airborne contaminants.
Material sustainability topic
Topic that reflects a reporting
organisation’s significant economic,
environmental, and social impacts or that
substantively influences the assessments
and decisions of stakeholders.
Modern slavery
The term modern slavery is used to
describe situations where coercion,
threats or deception are used to exploit
victims and undermine or deprive them of
their freedom.
As defined by the Australian Modern
Slavery Act 2018 (Cth) modern slavery
include eight types of serious exploitation:
trafficking in persons; slavery; servitude;
forced marriage; forced labour; debt
bondage; deceptive recruiting for labour
or services; and the worst forms of child
labour. The worst forms of child labour
means situations where children are
subjected to slavery or similar practices, or
engaged in hazardous work.
MRN
Mineração Rio do Norte.
Net cash
Comprises cash and cash equivalents less
interest-bearing liabilities.Net debt
Comprises interest bearing liabilities less
cash and cash equivalents.
Net operating assets
Represents operating assets net of
operating liabilities which predominantly
exclude the carrying amount of non-
material equity accounted investments,
cash, interest bearing liabilities, tax
balances and certain other financial assets
and liabilities.
Net zero
Net zero greenhouse gas emissions are
reached when anthropogenic emissions of
greenhouse gases to the atmosphere are
balanced by anthropogenic removals over
a specified period.
No net loss
The impacts on biodiversity caused as a
result of a development project/activities
are balanced (so that no net loss remains)
by rigorous application of the mitigation
hierarchy:
1) Avoid;
2) Minimise and mitigate negative
impacts;
3) Rehabilitate or restore affected areas;
and
4) Offset the residual impacts.
Occupational Exposure Limit (OEL)
The concentration of a substance or
agent, exposure to which, according to
current knowledge, should not cause
adverse health effects nor cause undue
discomfort to nearly all workers.
Occupational illness
An occupational illness is any abnormal
condition or disorder, other than one
resulting from an occupational injury,
caused or aggravated by exposures to
factors associated with employment.
It includes acute or chronic illnesses
or diseases which may be caused by
inhalation, absorption, ingestion, or direct
contact.
Operational GHG emissions
Scope 1 and 2 GHG emissions from our
operated assets.
Operational Leadership Team
All General Managers and Managers
reporting to Vice President Operations
including Functional Managers such as
Human Resources, Finance and Supply,
etc. (limited to one per function).
Our people
As defined in our Code of Business
Conduct, our people includes South32
Directors, executive management,
employees and contractor staff.
Paris Agreement
A legally binding international treaty on
climate change that aims to bring all
nations into a common cause to undertake
ambitious efforts to combat climate
change and adapt to its effects, with
enhanced support to assist developing
countries to do so.
Recordable injuries
The sum of work-related (fatalities
+ injuries that caused permanent
impairment >30 per cent of body + lost
time injuries + restricted work injuries +
medical treatment injuries).
Return on invested capital (ROIC)
Calculated as Underlying EBIT less the
discount on rehabilitation provisions
included in net finance costs, tax effected
by the Group’s Underlying effective tax
rate (ETR) including our material equity
accounted investments on a proportional
consolidation basis, divided by the sum of
fixed assets (excluding any rehabilitation
assets, the impairment reversal of Brazil
Aluminium, and unproductive capital) and
inventories.
SAEC
South Africa Energy Coal.
'Safety guarantee'
Our 'safety guarantee' is our internal
approach to creating a sense of chronic
unease to enhance our safety culture.
Every day, we ask our people to reflect on
whether they can guarantee both their
safety and that of their colleagues when
executing their role. If the answer is no,
then the challenge is to stop and ask
what would need to be done differently to
provide that guarantee.
Scope 1 emissions
GHG emissions from our own operations,
including the electricity we generate at
our sites.
Scope 2 emissions
Indirect GHG emissions from the
generation of purchased electricity.
Scope 3 emissions
GHG emissions in the value chain.
185
SOUTH32 ANNUAL REPORT 2023 GLOSSARY OF TERMS AND ABBREVIATIONS CONTINUED
Finance, marketing and
general terms continued
Senior Leadership Team
Presidents and Vice Presidents reporting
to members of the South32 Lead Team.
Shared value
The identification of opportunities
that create economic value while also
advancing the environmental and social
outcomes of the communities and regions
in which we operate.
SMMEs
Small, medium and micro enterprises.
Social investment
Contributions made to support
communities where we operate or have an
interest. Our contributions to community
programs comprise direct investment, in-
kind support and administrative costs.
South32 Equity Incentive Plan
An equity incentive plan that allows the
Board to make offers to employees to
acquire securities in South32 Limited and
to otherwise incentivise employees.
South32, South32 Group or Group
Refers to South32 Limited and its
controlled entities and joint arrangements,
unless otherwise stated.
STI
Short-term incentive.
Supply Chain
The global network of suppliers
that support South32’s operations,
development options and exploration
programs through the flow of goods,
services and information.
Sustainability, sustainable development,
sustainably
Our approach to sustainability aims
to balance environmental, social and
economic considerations in a way
that creates enduring value for our
stakeholders. We recognise that in
many cases these considerations will
be interdependent or may compete or
conflict with each other. In delivering
our strategy we aim to understand and
balance the environmental, social and
economic impacts of our business in a
way that seeks to create value overall.
References to sustainability (including
sustainable development and sustainably)
in the suite or other disclosures do not
mean that there will be no adverse impact,
or an absolute outcome, in any one area.
Target
An intended outcome in relation to which
we have identified one or more pathways
for delivery of that outcome, subject to
certain assumptions or conditions.
Taskforce on Climate-Related Financial
Disclosures (TCFD)
The TCFD has issued climate-related
financial disclosure recommendations
designed to help companies provide
better information to support informed
capital allocation.
Taskforce on Nature-Related Financial
Disclosures (TNFD)
A taskforce to develop and deliver a risk
management and disclosure framework
for organisations to report and act on
evolving nature-related risks.
TEMCO
Tasmanian Electro Metallurgical Company
Total Recordable Injury Frequency (TRIF)
(The sum of recordable injuries x
1,000,000) ÷ exposure hours, for
employees and contractors. This is stated
in units of per million hours worked for
employees and contractors. We adopt the
United States Government Occupational
Safety and Health Administration (OSHA)
guidelines for the recording and reporting
of occupational injuries and illnesses.
Total Recordable Illness Frequency
(TRILF)
(The sum of recordable illnesses
x 1,000,000) ÷ exposure hours, for
employees and contractors. This is stated
in units of per million hours worked for
employees and contractors. We adopt the
United States Government Occupational
Safety and Health Administration (OSHA)
guidelines for the recording and reporting
of occupational injuries and illnesses.
Total Shareholder Return (TSR)
TSR measures the return delivered
to shareholders over a certain period
through the change in share price and
any dividends paid. It is a measure used
to compare our performance to that of
relevant peer groups under the LTI.
Transformation
A national strategy in South Africa aimed
at attaining national unity, promoting
reconciliation through negotiated
settlement and non-racism.
TSX
Toronto Stock Exchange.
Underlying earnings
Underlying earnings is profit after tax
and earnings adjustment items. Earnings
adjustments represent items that don’t
reflect our underlying operations. We
believe that Underlying earnings provides
useful information, but shouldn’t be
considered as an indication of, or an
alternative to, profit or attributable profit
as an indicator of operating performance.
Underlying EBIT
Underlying EBIT is profit before net
finance costs, tax and after any earnings
adjustment items, impacting profit.
The underlying information reflects
the Group’s interest in material equity
accounted joint ventures and is presented
on a proportional consolidation basis. It
is not an IFRS measure of profitability,
financial performance or liquidity and
may be defined and used in differing
ways by different entities. We believe
that Underlying EBIT provides useful
information, but should not be considered
as an indication of, or alternative to, profit
or attributable profit as an indicator of
operating performance.
Underlying EBIT margin
Comprises Underlying EBIT excluding third
party product EBIT, divided by underlying
revenue excluding third party product
revenue.
Underlying EBITDA
Underlying EBIT before underlying
depreciation and amortisation.
Underlying effective tax rate (ETR)
Underlying income tax expense/benefit
divided by underlying profit/loss subject
to tax.
Value Chain
The interrelated activities and systems
involving the full lifecycle and added
value of our products and processes, in
which South32 explore and develop our
commodities, through to processing,
refining and smelting, and finally to sale
and distribution to customers and closure
of the mines.
Water scarcity
Water scarcity refers to the volumetric
abundance, or lack thereof, of freshwater
resources.
Water stress
Water stress refers to the ability, or lack
thereof, to meet the human and ecological
demand for freshwater. Stress comprises
three primary components: availability,
quality, and accessibility and is based
on subjective elements and is assessed
differently depending on societal values,
such as the suitability of water for drinking
or the requirements to be afforded to
ecosystems.
Water use efficiency
Water use efficiency is calculated as the
total water recycled and reused divided by
the sum of total water recycled and reused
and total operational inputs/withdrawal.
186
INFORMATION
Units of measure continued
US$/oz
US dollars per ounce
US$/t
US dollars per tonne
Terms used in resources and
reserves
A.Al₂O₃
available alumina
Ag
Silver
Au
Gold
Cu/TCu
Copper/ total copper
Fe
iron
Met
metallurgical coal
Mn
manganese
Mo
molybdenum
Ni
nickel
OC
open-cut/open-pit/opencast
Pb
lead
R.SiO₂
reactive silica
S
sulphur
Th
thermal coal
VM
Volatile Matter
Zn
zinc
Units of measure
%
percentage or per cent
A$/t
Australian dollars per tonne
dmtu
dry metric tonne unit
g/t
grams per tonne
ha
hectare
Kcal/kg
thousand calories per kilogram
kdmt
thousand dry metric tonne
kL
kilolitre
km
kilometre
koz
thousand ounces
ktpa
kilotonnes per annum
kt
kilotonnes (metric)
kW
kilowatt
kwmt
thousand wet metric tonnes
ML
megalitre
m
metre
Moz
million ounces
Mt
million metric tonnes
Mtpa
Million metric tonnes per annum
oz
ounce
t
Metric tonne
tpa
Metric tonnes per annum
tpd
Metric tonnes per day
tph
Metric tonnes per hour
US$/lb
US dollars per pound
187
SOUTH32 ANNUAL REPORT 2023 CORPORATE DIRECTORY
Group Headquarters
108 St Georges Terrace
Perth WA 6000
Australia
Telephone: +61 8 9324 9000
+61 8 9324 9200
Facsimile:
Company.Secretary@south32.net
Email:
South Africa Office
39 Melrose Boulevard
Melrose Arch
Melrose, Johannesburg 2076
South Africa
PO Box 61820
Marshalltown 2107
Telephone: +27 11 376 2000
Singapore Marketing Office
16 Collyer Quay
#18-00, Collyer Quay Centre
Singapore 049318
Singapore
Telephone: +65 6679 2600
+65 6679 2500
Facsimile:
London Marketing Office
Nova North
11 Bressenden Place
London SW1E 5BY
United Kingdom
Telephone: +44 20 7798 1700
+44 20 7798 1701
Facsimile:
North America Office
1066 West Hastings Street
Vancouver V6E 3X1
British Colombia
Canada
Telephone: +1 604 915 5680
Share Registrars and Transfer Offices
Contact details for the Company’s share registries in Australia,
South Africa and the United Kingdom are included on page 180.
Information about the American Depositary Receipts Depositary,
Transfer Agent and Registrar can also be found on page 180.
Printed copies of this Annual Report will only be
posted to those shareholders who have requested a
printed copy. Other shareholders are notified when
the Annual Report becomes available and given
details of where to access it electronically.
188
INFORMATION
This Annual Report is printed on paper that is
FSC® (Forest Stewardship Council) certified and
manufactured from plantation-grown timber.
Both the paper manufacturer and printer are certified
to the highest possible internationally recognised
standard for environmental management.
www.south32.net