Australia-headquartered diversified miner South32’s group underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 28% year-on-year to $2.5-billion for the financial year ended June 30, while underlying earnings increased by 55% year-on-year to $1-billion owing to a strong operational performance combined with commodity price tailwinds.
“I’m really proud to have started as CEO in such a pivotal time for the company, with our strategic repositioning to base metals driving some of our best financial results on record. A strong operating performance enabled us to capture the benefit of commodity price tailwinds in copper, zinc and silver,” CEO Matt Daley pointed out during a call with the media on August 27.
South32 capitalised on this with a strong operating performance at the Cannington silver/lead mine, in Australia, and at the Sierra Gorda copper mine, in Chile, which supported increased earnings and cash flow from the group’s base metals business.
Group cash flow from operations increased by $352-million to $610-million, after investing $711-million at the Hermosa mine, in the US, to grow the future base metals production.
This enabled the group to maintain a strong balance sheet with net cash of $283-million, while returning $327-million to shareholders during the year.
The board has resolved to pay a fully-franked ordinary dividend of $242-million for the second half of the financial year and to extend its capital management programme to September 2027, with $209-million remaining to be returned to shareholders.
Meanwhile, the group’s South African manganese production decreased by 3% to 2.09-million tonnes, but exceeded guidance, as the operation completed planned maintenance and additional underground development activity at Wessels in the country’s Northern Cape province.
Production will remain at about two-million tonnes a year for 2027 and 2028, subject to the continued use of higher-cost trucking.
The underlying Ebitda for South African manganese decreased by $16-million to $30-million in the year under review, as higher sales volumes were more than offset by a stronger rand, and higher trucking costs and diesel prices.
Further, South32 reports that saleable production from its Hillside Aluminium operation, in KwaZulu-Natal, in South Africa, was largely unchanged at 717 000 t in the period, as the smelter continued to test its maximum technical capacity. Production for the 2027 financial year is expected to be 720 000 t.
South32 in July entered into a binding conditional agreement to sell most of its aluminium value chain assets, including its interest in Worsley Alumina, in Australia, and Hillside Aluminium to NYSE- and ASX-listed Alcoa Corporation, for up to $5.6-billion.
The group’s Mozal Aluminium operation, in Mozambique, will not be sold to Alcoa and remains on care and maintenance.
“The sale of our aluminium value chain assets to Alcoa will simplify and strengthen our portfolio, positioning South32 as a leading base metals-focused company with high-margin assets and a pipeline of compelling growth options in copper, zinc and silver,” Daley avers.
The group is continuing to enhance its copper exposure through Sierra Gorda, which increased its ore reserve estimate by 61% to about 1.1-billion tonnes following successful infill drilling programmes.
Sierra Gorda is expected to deliver production growth of 5% in the 2027 financial year and a further 2% in the 2028 financial year, supported by higher planned copper grades.
Also, the recently sanctioned fourth grinding line project is expected to increase production by about 30% from the 2031 financial year.
“We are advancing construction of the Taylor zinc/lead/silver project at Hermosa, which is expected to deliver attractive returns from its long-life, low-cost production of zinc, silver and lead.
“In addition, exploration results at the adjacent Peake deposit support its potential as a future source of copper production and mine life extension within the Taylor development,” Daley informs.
A positive outlook is anticipated as the group pursues growth in the production of base metals for supply into structurally attractive markets.
