South32 Limited

Thank you for standing by and welcome to South32 Half Year Financial Results and Outlook Investor and Analyst Call. All participants are on listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Graham Kerr, CEO. Please go ahead.

Good morning, good afternoon everyone, depending on where you are and thanks for joining us today. On the call with me is our Chief Financial Officer, Sandy Sabanala, our Chief Operating Officers, Jason Economides and Noel Pillay, and our President of the Hermosa Project, Pat Reisner. I'll give a short summary before handing back to the operator for questions. I'd like to begin with our most important commitment, that our people go home safe and well every day. We continue to embed our safety guarantee across our business. to enhance our safety culture and fundamentally shift our safety performance. Quite simply, nothing is more important. Today we've announced a major milestone for our business, the final investment approval to develop the Taylor Zinkled Silver Deposit, the first phase of our regional-scale HOMOSA project in Arizona. Since the merger, we have worked to improve and reshape our portfolio for a low-carbon future. We divested South African energy coal, exited manganese alloys, invested to grow our production of low-carbon aluminium, added copper through the acquisition of Cerro Gorda, and embedded high-quality options to compete for capital. Executing the development of Taylor is an important next step in our strategy that will further improve our portfolio by increasing our production of critical metals needed for the global energy transition. We expect Taylor will lift group margins due to its first quartile battery-grade manganese development option, and exploration prospects in our highly prospective land package, which has already turned high-grade copper and zinc results. The combination of Taylor-Clark and the regional land package gives us a platform at Hermosa to produce critical commodities from multiple different deposits for decades to come. The Taylor Feasibility Study confirmed its potential as one of the world's largest, lowest-cost producers of zinc, a critical commodity for the global energy transition. that we expect will deliver value for our shareholders for decades to come. We expect strong demand market fundamentals for zinc, with global demand growth expected to outpace production by about 3 million tonnes in 2031. An industry challenge of similar magnitude to copper. We expect higher incentive prices for zinc as Taylor ramps up to main plate capacity from FY30. Taylor has been designed to minimise environmental impact We've applied next generation mine design principles using automation and technology to drive efficiencies and lower operational greenhouse gas emissions. In line with our goal of net zero greenhouse gas emissions by 2050. The feasibility study confirmed Taylor's position as a large scale, highly efficient underground mine with conventional processing in the first quartile that the industry's cost curve. The initial operating life has been extended from 22 years to 28 through additional drilling and geological modelling for the first time or reserve underpinning the first 19 years of the operating life. We expect to invest US $2.16 billion in direct and indirect capital expenditures with the first production in the second half of FY27, establishing a modern, long-life operation. Most will benefit from being the first mining project added to the US government's FAST-41 permitting process which is expected to deliver an efficient and transparent process of federal permitting for Taylor and Clark. The construction of Taylor is expected to be funded primarily by the group's operating cash flow. Any required external funding would be consistent with our commitment to a strong balance sheet and an investment-grade credit rating. Turning now to our half-year financial results. Macroeconomic conditions created headwinds for our commodities during the half. We delivered group underlying EBITDA of $708 million US dollars and an operating margin of 19%. Operational highlights included a record half-year aluminium output and sequentially higher zinc and nickel production in the December quarter. We continued our rigorous focus on cost during the period and completed a group-wide review that supported operating cost efficiencies and reduced expenditure. This focus supported FY2 operating unit cost guidance being lowered or held unchanged across the majority of our operations. at a 6% reduction FY24 operational capital expenditure guidance. We remain focused on driving operational performance and cost efficiencies across our business. We continue to prioritise a strong balance sheet and investment grade credit rating through all price cycles. As part of this focus and to maintain our balance sheet position, we have taken the decision to cancel our on-market buyback, which was due to expire on 1st March 2024. Consistent with our unchanged capital management framework and in the context of our financial position, we will continue to assess opportunities to return excess cash to shareholders in the most efficient and value-accreted manner. Despite experiencing some challenges during the period, we are expecting a strong second half. We are well positioned to capture higher margins off the back of our expected 7% production uplift and ongoing focus on cost management, coupled with strengthening market conditions for key commodities to start the calendar year. We continue to invest to unlock value from our high quality operations and growth options in commodities critical for a low-carbon future. In closing, I'd like to thank our teams across the world for their hard work and commitment. Looking ahead, we are committed to safely delivering improved operational performance and cost efficiency across our business, and we are unlocking value in our high quality operations and growth options to further improve our portfolio and strengthen our exposure to the increasing commodity demand required for the global energy transition. Thank you. I'll now hand back to the operator for questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. We'll now pause a moment to allow for questioners to register. Thank you. Your first question comes from Tim Clark with SBG Securities. Please go ahead.