South32 Limited

I will now hand over to Matt Daley, CEO. Please go ahead.

Thanks, Kayleigh, and good morning, everyone. Thanks for joining us today as we discuss our financial results for FY26, my first to South32 CEO. And of course, on the call today, we have Sandy, our Chief Financial Officer. So it's an exciting time for our business with our positive operating performance and repositioning to base metals driving strong financial results. a clear pathway to substantial value accretive growth in copper and zinc, with 55% production growth expected from projects under construction or approved, and a pipeline of growth and life extension options beyond this that can drive further value and returns for our shareholders. Before I run through our financial results, I do want to talk about safety. The most important measure of our success as a company is the safety of our people. And in FY26, we did not live up to the standards we set ourselves. The death of our colleague Simon Mukwarami in an incident at Worsley Illumina in March 2026 had a profound impact on everyone at South32, particularly our team at Worsley. Simon's family, friends and colleagues very much remain in our thoughts. We've taken steps to further enhance awareness of Worsley's existing procedures and controls for working at heights, and we continue to look at opportunities to design tasks in a way that eliminates or reduces fall from high risks. As South32's CEO, I'm unwavering in my commitment to a workplace free from fatalities. Turning back to our financial results, our base metals business drove strong earnings and cash flow with strong operating performance enabling us to capture the benefit of commodity price tailwinds, while active cost management mitigated the impact of industry-wide inflationary pressures. Group underlying EBITDA increased by 28% to US $2.5 billion and underlying earnings increased by 55% to $1 billion. Group cash flow from operations increased by $352 million to $610 million after investing approximately $700 million to grow future base metals production from Hermosa. Our balance sheet remains strong with net cash of $283 million after returning $327 million to our shareholders during the period. Reflecting our strong financial performance and disciplined approach to capital allocation, the Board has today resolved to pay a fully franked ordinary dividend of $0.054 per share or $242 million in respect of the June 2026 half year. We've also extending our capital management program to September 2027, with $209 million remaining to be returned to shareholders. On the 1st of July, we announced the sale of our aluminium value chain assets to Okowa for an enterprise value of up to $5.6 billion, plus the assumption of related rehabilitation provisions of over $1 billion. The transaction will unlock significant value for our shareholders and repositioned South32 as the leading base metals company on the ASX. We've got high margin assets in tier one jurisdictions, a transformational growth pipeline, and a strong balance sheet to deliver this growth and shareholder returns. We're working with our COA and the stakeholders to satisfy the conditions to the transaction and expect completion within the second half of FY27. Now looking forward to FY27, We're progressing a pipeline of projects under construction, approved and in study phase that are expected to substantially grow our popper and zinc production. At Sierra Gorda, this week we announced a 61% increase in the ore reserve to 1.1 billion tonnes, an extension of the initial reserve life by approximately five years to 19 years. This highlights the scale, the quality, and the long life ore body at Sierra Gorda, which is still open at depth. Sierra Gorda is expected to deliver production growth of 5% in FY27 and a further 2% in FY28, supported by higher planned copper grades. And beyond this, the recently approved fourth grinding line project is expected to increase production by approximately 30% from FY31. At Cunnington, we've upgraded expected ore process with the inclusion of lower grade stockpile material to utilise available plant capacity. Life extension work from both underground and open pit sources is continuing with the open pit development option offering the potential for further ore feed and life extension. At Hermosa, we are focused on delivering our large scale long life paler zinc lead silver project. The sinking of the ventilation shaft is advancing in line with our recent project update. and key processing infrastructure such as the primary and secondary mills and flotation cells have now all been installed. Once completed, Taylor is expected to deliver attractive financial returns for decades to come and support further growth phases at Hermosa. These include peak, where exploration study work is continuing to support the potential for a future copper production within an integrated development with Taylor. We're also progressing an exciting portfolio of exploration options and base metals. AMBLA metals boast district scale exploration potential in Alaska's unexplored and highly prospective AMBLA mining district, where summer field season work is underway, following progress on permitting and stakeholder support for the AMBLA access road. This paves the way to unlock value from AMBLA's high grade copper and zinc options. So in closing, Our operations are performing well. We're generating strong cash flow to underpin our base metals growth and shareholder returns. The sale of our aluminium value chain business will reposition South32 as a much simpler, higher margin business with a strong balance sheet and peer-leading growth, making South32 a leading base metals exposure for investors. I'm going to pause there and happy to take any questions.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Paul Young with Goldman Sachs.

Yeah, morning, Matt, and morning, Sandy. Hope you're both well. Matt, can we firstly focus on Sierra Gorda and just the outlook, which is pretty positive for 27 to 28 and implying a good improvement on mill throughput and recoveries. And that's actually after a pretty challenging FY26 on both those items. So just asking if you can step through the confidence around the high mill throughput and high recoveries. Is it related to digging into the mine plan a little bit, the changes you've made there, and the fact that Phase 7 and Phase 8 in the pit have less clay?

Yeah, thanks, Paul. Appreciate the questions and you're spot on. So, you know, we've done now around 85,000 metres of drilling, which gives us a lot more confidence in understanding the mine plan and the reserve. It's obviously contributed to the 61% uplift in our reserve that we've announced this morning. And as we move into these phases, into phase seven and eight, and the majority of the tonnes for FY27 and 28 are coming out of phase seven. we're seeing higher copper grades, and we are seeing better mineralogy. So with lower clay, you start to have more favourable processing conditions, which sees an uplift in our ability to push ore through the mill, but also improve our recoveries. And that's giving us the confidence for the next couple of years.

Okay. And just further to that, can you just step through the changes you've made to the mine plan? Because I know that the reserve upgrade wasn't based on a higher copper price. If you could just step through just high level what you've done there.

Yeah, so the real... Yeah, happy to Paul. I guess to reinforce your point, it hasn't been the commodity price change that's given us the increase in reserve. In fact, we've used quite a conservative price that I would say sits below consensus. What's really supported the upgrade now is the additional drilling that we've done over the last couple of years, so 85,000 meters of drilling. That's obviously allowed us to convert and upgrade the confidence from the mineral resource to the mineral reserve. allowed us to run new pit shells, new pushback designs, which have incorporated this high confidence in the ore body. So that gives us both a life extension and it really underpins the decision we've taken around the fourth grinding line. You know, when you have a long reserve life, what you want to do is bring that cash flow forward and the two combined, so bigger reserve, longer life, and now have a high throughput through the mill from FY31, all comes together to improve confidence in the asset. and produces more cash flow over a longer period of time.

Great, thanks, Matt. And just quickly on Cannington, looking at the guidance, it's good that I think you're under-promising on the unit costs, in my view, considering you're processing more low-grade stockpiles. Can you just run through how much low-grade stockpile you have and what's baked into the guidance for 27?

Yes, certainly, Paul. So, I mean, if you step back and just have a look at the full all-body potential at Cannington, we have around 70 million tonnes in resource and only around 11 million tonnes in reserve. So the obvious question there for us is how do we convert more of that resource into reserve? And even is there more potential to look at the resource and how do we start to fill up this mill capacity? So the low grade certainly plays into that strategy. It's part of the puzzle for us. We had really successful trials in last financial year And that's really starting to build the confidence now for us into this financial year. So we'll continue to update the market as that work continues. We do think there's some upside that we'll be able to push through some more tons on an instantaneous basis. We have pushed the mills up now towards that 3 million ton run rate. There's a bit of work just to go through to understand what the low grade does to our pace filling system. But that confidence is building and we'll continue to update the market as we progress through that. along with the more broader studies that we're doing. So at the moment we're progressing the feasibility study on the open cut, and the open cut's been looked at for some time, but what's really different at the moment is we're looking at how we can run the open cut and the underground in parallel. So really integrated mine plan that we believe is going to give us potential to convert more of the underground resource into reserve. and give us a life through the Open Cup that will push well into the end of next decade and maybe even beyond that. So that's the work that's currently underway. The low grade is certainly part of that strategy. When you have a mill that can do 3 million and we're only doing 2.1, there's obvious opportunities there for the push up, push up volumes through the mill, generate more cash for the business. So that's a piece of work that we're very busy on at the moment. We'd like to think we'll be coming back towards the end of the year at the latest at the half year results to update the market on that study work. Right. All right. Excellent. Thanks, Matt.

Your next question comes from Rahul Anand with Morgan Stanley.

Hi. Good morning, Matt and Sandy. Thanks for the call. Two questions from me. First one on Australia manganese, if I may start there. understand the water issues that have been ongoing and were covered a bit in the quarterly report as well. But just wanted to understand, you know, you've obviously had an impact in FY28 as well, Lester, sort of what the critical path items are here in terms of the rectification. And then if you can marry that up with the approvals that you require and sort of what the timelines look like there as well. I'm just trying to think about the assets FY28 and beyond and sort of whether the guidance is conservative or is there more that we need to think about there? Thanks.

Yeah, thanks Raoul for the question. So Australian Manganese at Gemco, listen, the operation started the year really well but we are in the dry season. We've guided that range due to the uncertainty around water and the weather coming into the next week's season. So we've had a couple of years of really high rainfall and certainly limited access to some mining areas. In response to that right now, we're working with both the NT government and traditional owners to get permits in place to allow us to discharge larger volumes of water through a number of different mechanisms. So those initiatives in some places require some capital and hence some construction work. We're getting some really positive support from the NT government, but these processes do take some time. and hence why we're guiding to that range. The other one to mention, Raoul, is, and you're probably reading about it in the newspapers, there is a Super El Nino that's being forecast. This could have a very positive impact in that we could see a later wet season, which we see is definitely pushed towards the top end of that guidance, but we really have to wait and see how that plays out over the coming years. So a number of moving parts there, weather, El Nino, working on some additional permits, That's why we've guided the range and we'll just keep updating as that work progresses over the coming quarters.

Just a quick follow-up there then. So I take it it's mainly the approvals and the infrastructure and sort of the water discharge-related infrastructure should be fairly quick to build, right? There's nothing major to think about there? Yeah, it really is pipework.

It is the key part of the construction work we're having to do. Quite long and very large volumes of water that we're dealing with. we already have all the principal pumps installed now, so it's really about pipe work outlets. And there's a number of different ways we manage water, a number of different mechanisms by which we discharge it after it's been settled, and that's essentially the work. But that all requires a permitting process. Like I said, really great support, but it does take some time to work through those different options.

That makes sense. Okay, and then the second one's for Sandy. Sandy, slide 19, you put forward your capital allocation framework. You are due to put out an updated framework post-transaction, and I appreciate that. I guess you have mentioned there on the slide that you're looking to design it to maximize per share value over the long term. Just wanted to understand, has there been any further thought go into sort of what you're trying to solve for? Obviously acquisitions, capital returns, buybacks all remain to your disposal, but any further thought that you can provide to us as to how we should think about and how do you solve for long-term value? I mean, does that mean if acquisitions are not available, then you perhaps switch more towards buybacks so that you retain some of that value?

Yeah, thanks Rahul. So you're spot on in saying we have shared our updated capital management framework, which will apply post-completion. So for now, the current framework is in play with our 40% payout ratio and we'll continue with that format right through until completion. Post-completion, when the new capital management framework does kick in, you'll see us continuing to prioritise that safe and reliable capital as we have done and a strong balance sheet. So it's A little bit of a change there in terms of the way we talk about strong balance sheet relative to being investment grade. So we do expect to see a change there in our positioning. And that will reflect the different type of business we'll be on the other side of the transaction. We'll continue to allocate capital, continue towards our committed growth and life extension projects. Of course, for us, that means Taylor, where we do have a significant commitment there. And then as you touched on, we'll have that competition for excess capital. And that'll need to contemplate the particulars at the time, whether or not the best per share value is through dividends or share buybacks or looking at growth and growth options. Of course, we do have a number of organic growth options that we're really committed to pursuing as Matt already touched on. So that'll be an important part of the decisions we have ahead of us.

Got it, okay. And is there at all a net cash balance that you'd solve for or just the investment grade rating, as you said?

We haven't put out a net cash position or pursuit of a net cash position. That's not part of our framework, Rahul. Obviously, it's nice to be sitting in that position right now given the task we have ahead of us. So good to have the strong balance sheet, but not committed to that going forward. We do expect to see the business evolving and really the position is to have a strong balance sheet.

Brilliant. Thank you both. I'll pass it on.

Your next question comes from Kate McCutcheon with Bank of America.

Hi, good morning, Matt. If I look at the 27, 28 outlook, I guess the key asset that is a little bit weaker than expected was around manganese. And you've said that manganese isn't core. Are there any stage gates or catalysts to work through before we... back to strategic review or something similar. Are you expecting the Anglo-Tech merger to change anything, just thinking about the core portfolio moving forward?

Yeah, thanks. Morning, Kate, and thanks for the question. So the focus for us at the moment is really running those assets safe and stably. We've talked around the water challenge at GEMCO. Likewise, we're always managing the logistics constraints that sit in South Africa and That's a combination of rail and trucking. We've very much talked around our preferred commodities being in copper and zinc, and so you'll see capital allocation decisions move towards growth in our preferred commodities in that area. Our focus for manganese is really safe and stable operations.

Okay, got it. And then just the MOU with Spence, are there any kind of expected updates coming or how do we think about, I guess, something quantifiable on that agreement there with the partners?

Yeah, thanks. Thanks, Kate. We're quite excited about the MOU between our partners. So KGHM is a really strong partner with us on Sierra Gorda and obviously now working with BHP. I've talked about in the past some really great examples of where these industrial synergies play out across mining operations that are very close to each other. We're only 10 kilometres away from Spence and, of course, Caterbella North East sitting between the two, which is a really exciting exploration target for us. I think all the partners right now are directionally aligned to keep moving this opportunity forward. It all starts with the discussions, which are well underway, and then we move into some technical work. So that's very, very pleasing for us. The opportunities, the most obvious sitting there is the oxide opportunity. We've obviously mined and have that stockpiled, and Spence has capacity through their leaching and SXCW plant, but the opportunities are quite varied beyond that. So looking at the sulphides, the complexes as one big infrastructure, also the obvious ones around economy of scale that sit with things like consumables, explosive power, energy-style contracts, and also what we can do with the tailings between the two operations. These things can move slowly until they don't, Kate, but I think what's really important now is all the partners are working really well together to progress this.

Okay, thanks, Matt.

Thanks, Kate.

Your next question comes from Thiago Aria with Citi.

Hi, thanks. Good morning, everyone. My first question, I want to go back to the capital allocation framework, Sandy, if you can. I understand there will be a new framework post the transaction, but should we think that the 40% payout is kind of a flaw going forward as well? And also, thinking back on the Spain's MOU, I understand that probably you're starting with procurement supply, kind of limited scope. You mentioned now tailings. be, you know, going forward, like to use, you know, ore and processing facilities from one another and perhaps even future JV? Like, there is any limitations with KJHM that would prevent you to do future broader JV with Spence? Thank you.

Thanks for that. With regards to the payout ratio, we're not committed to the 40% payout ratio going forward. Of course, that represents a business where South32 was when we demerged and what we've maintained over time, representing the scale of that business and the focus of that business in terms of yield generation. On the other side of this transaction, we are a growth-focused company, critically pursuing the increase in volumes in copper and zinc. And with that, we'll be looking at a different way of allocating our capital and our excess capital. You'll see in the updated framework in our PAC that we will be seeing dividends competing with other growth alternatives for the best value for South32 shareholders going forward. So the 40% payout ratio will not be a flaw. We will not have a fixed payout ratio. We're not intending to have a fixed payout ratio. What we will be doing is looking at that flexibly for the best value for our shareholders. I'll hand to Matt for the second question.

Yeah, thanks, Sandy, and thanks, Diego, for the question. I think your question has a lot of the answers contained within it. Certainly, there's a whole host of opportunities for us to look at, and that's what the MOU starts to set up, that opportunity to work constructively between the two different operations with all the partners aligned. There's some low-hanging fruit, you'd say, around opportunities like consumables and definitely the oxide is one of those opportunities. to understand the full potential that could sit there by sharing the processing infrastructure and having a single mine plan. That requires both teams to put some data into a data room effectively and you start working through whether there's any fatal flaws and then progress to some technical work. So partners recently got together. They've all aligned the direction. There's a logical way you get about doing this. You probably want to get after some quick wins first and that's where we're focused. but certainly we'll progress that work over the coming quarters and we'll be certainly updating as it progresses because I think there's a really exciting opportunity there for the two complexes.

That's clear. Thank you.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Glyn Lockock with Baron Joey.

Hey, Matt. Morning. Maybe just to push you on Kate's question on the manganese sale. Firstly, you did say you were just waiting for Anglo to have the bandwidth to engage on an approach you'd had. Has Anglo now, I mean, they've closed the coal sale. They're only waiting on one deal or one regulatory approval now for the tech deal to close. Have they got the bandwidth to now re-engage with you on a sale of SA manganese?

Yeah. Morning, Glenn. Good to hear from you. We haven't updated since we last talked around Anglo's position on that. We're likely to catch up with Anglo in the coming months at one of the conferences or certainly the ICMN. That'll be an opportunity potentially to have those discussions. But I think they're very focused on closing out the tech deal and we've certainly got our focus on our growth, our operations and closing out the aluminium deal. So at that stage, I'd say there's no real update, Lynne.

No, that's understood. And then just your thoughts, Matt, around, obviously you want to grow the business. I mean, you're not going to have much left post the Ali sale and if you get rid of Manganese as well. Just your thoughts. Could you move now or do you need to at least get the shareholder vote behind you so you know the proceeds are coming? Could you move now or do you need to wait? Thanks.

Yeah, thanks, Glenn, for the question.

You know, our focus, or I guess my focus for the organisation in that

in the coming 12 months is really clear and I'm keeping it really, really simple. So, you know, first and foremost, it's always around running these operations really well. The biggest value creation opportunity in our business comes from running safe, stable and predictable operations. Secondly, for us, it's successfully executing the aluminium value chain transaction, of course. Of part of that, we're resetting the operating models to become a simpler and more focused business. And, you know, there's a number of steps to get through that shareholder vote and then moving through some of the regulatory approvals. And then third, the focus is absolutely on delivering the growth that's in front of us, particularly Hermosa and Sierra Gorda. So that's the focus for us in the near term, really to ensure that we're a high-performing base metals company, which creates lots of value for our shareholders and our employees and our stakeholders. We'll continue to look at opportunities that are out there in the market, but by no means is there a need to replace one asset desperately with another one. For us, it's all about value rather than growth for the sake of growth, and that's the way we're thinking about it.

Yep, no, understood. I mean, it's a very different company and a lot more exciting, I guess. Just on the dividend, I heard Sandy say, you know, obviously no minimum payout anymore, and obviously it'll depend on use of cash, but do you still see yourself as aiming and liking to pay a dividend every six months, or could we now expect periods where if you bought something and the balance sheet is indebted that you would even suspend the dividend, or you still want to be seen as at least a regular paying company? Thanks.

Yeah, that's a great question, Glen. I mean, well, we certainly see the value our shareholders put in that regular return of capital. And it's really important that we're balanced as we think forward in what our shareholders each need. We have been balanced historically in the way we've distributed our cash flows. If you look back over time, we've certainly thought to invest in the business, in growth, and of course, in returning capital to shareholders. We do see that as really important. It creates a great tension point for us as well in terms of excess capital and competition. which our shareholders have valued, right? They want to see us really pushing our business to get good returns. So we certainly see that as an important part going forward of the overall proposition for shareholders, Glenn.

Okay. Thanks, Sandy.

Your next question comes from Lyndon Fagan with JP Morgan.

Good morning, everyone. Just wanted to focus on the Sierra Gorda oxide opportunity. Are you able to quantify the copper production that you're looking at from that?

Morning, Lyndon, and thanks for the question. Not at this stage. It's certainly part of the MOU work that's going on now. I think the market knows quite clearly that Spence, in terms of the oxide, does have capacity through their leaching and SXEW production. that requires some technical work. There's obviously transfer of that. There's commercial elements that have to be worked through. I think from memory there's about 300,000 tonnes of contained copper sitting in the 110 million tonnes of oxide stockpile so it's a very nice opportunity to get after but in terms of what that could look like on a go forward annual basis I can't share that at this time. It really requires us to progress that technical work.

Right and Are you able to give some colour on the Cannington Open Pit project in terms of what we're waiting for? And I guess, you know, again, you know, there's obviously going to be some latent capacity in the process plant, like what sort of incremental silver equivalent production you're looking at?

Yep, yeah. Really exciting project for us. So status of the study at the moment is we're into the final stages of our pre-fee study. Many components in that as you start to look at the ore body, the reserve, the scale of the pit, the sequence. And this is the first time we've actually looked at a parallel integrated plan with the underground. So the underground pit doesn't impact any of the surface infrastructure in terms of the plants or office facilities or existing tailings. it does have an impact on the underground. Obviously you're creating a big funnel for water sitting on top of the underground and you also have some ventilation and power reticulation constraints. So we're working through what that looks like. Also on the permitting front, the real potential we see at the moment basis to study work is to maximize the capacity we've got in the mill through a combination of the underground and the low-grade material. And probably around the end of the decade, you'd look at the open cut coming in and in parallel with the underground. And that's really for us a big life extension opportunity. So the cash flows we're seeing today, you'd like to think you'd keep really strong production out of the combined entity through having higher throughput through the existing mill and pushing out towards the end of the decade. We're at the point now, we're in the final few months of closing out that study work, and like I said, we'd look to update the market probably around the half-year results in terms of what that study's looking like.

Thanks.

There are no further questions at this time. I'll now hand back to Mr Daly for closing remarks.

Thank you, Kayleigh, and just want to thank everyone for joining our call today and for all the questions. I'm really pleased with the results for FY26. We have a lot of positive momentum going into FY27 as we really focus on our key priorities of safe and stable operations, our growth projects and closing out the aluminium value chain transaction into the first half of next calendar year. So we might leave it there and just thanks again everyone for joining.

That does conclude our conference for today. Thank you for participating. You may now disconnect.