[Ferro-Alloys.com] South32 Manganese Ore Financial Results and Outlook Half Year 2025

South32 transforms portfolio, delivers earnings growth and increases shareholder returns

"We delivered a strong start to FY25, off the back of our improved operating performance and transformed portfolio.

"The sale of Illawarra Metallurgical Coal has unlocked significant value and streamlined our portfolio to be focused on minerals and metals critical to the world's energy transition. The sale has also simplified our business, lowered our sustaining capital intensity and strengthened our balance sheet, enabling us to self-fund our growth in zinc and copper.

"We invested to grow our future production during the period, as we continued construction of our large-scale, long-life Taylor zinc-lead-silver project at Hermosa in Arizona, United States, and expanded our pipeline of copper exploration options in highly prospective regions.

"We achieved strong operating results across our portfolio in H1 FY25, including increasing aluminium production by 5 per cent and copper production by 16 per cent. This enabled the Group to capitalise on improved commodity prices, with Underlying EBITDA increasing by 44 per cent to US$1 billion in H1 FY25.

"FY25 production guidance remains unchanged, except for Mozal Aluminium where we have updated production guidance as we continue to mitigate the impact of civil unrest in Mozambique. Our operating discipline and weaker producer currencies are expected to support lower operating unit costs for the majority of our guided operations in H2 FY25.

"Demonstrating our strong financial position, track record of returning excess capital to shareholders and positive outlook for the business, today we announced a fully-franked interim ordinary dividend of US$154 million (US 3.4 cents per share) and the continuation of our capital management program, with US$171 million remaining to be returned to shareholders.

"We are focused on continuing our strong operating performance into the second half, unlocking value from our growth pipeline and continuing to reward shareholders as our financial performance improves."

Graham Kerr, South32 CEO

Manganese

Australia Manganese

Australia Manganese continued to implement its operational recovery plan following the impact of Tropical Cyclone Megan in Q3 FY24.

A substantial dewatering program continued during H1 FY25, which has enabled access to certain mining pits and a phased restart of mining activities. Production from the primary concentrator resumed in Q2 FY25 with saleable production of 639kwmt. FY25 production guidance remains unchanged at 1,000kwmt, with production expected to continue at limited rates in H2 FY25.

We also progressed the demolition of undersea structures and commenced installing pilings for the new wharf. While we have experienced some weather related delays, we are looking to mitigate these through pilings installation productivity improvements.

Subject to further potential impacts from the wet season, export sales are expected to progressively increase over Q4 FY25.

Capital expenditure was US$47M in H1 FY25 and guidance remains unchanged at US$125M in FY25 as we invest in infrastructure to deliver the operational recovery plan.

Australia Manganese has received external insurance payments of US$250M (100% basis) to date(34). We continue to work with our insurers to assess the timing and value of further recoveries in relation to the impact of Tropical Cyclone Megan.

Underlying EBITDA was a loss of US$31M in H1 FY25 due to the impact of Tropical Cyclone Megan. Separately, we incurred idle capacity and other remediation costs of US$74M that were excluded from Underlying EBITDA as an earnings adjustment.

South Africa Manganese

South Africa Manganese production decreased by 3% to 1,082kwmt in H1 FY25, as we reduced our use of higher cost trucking and undertook a temporary shut at our Wessels mine in Q2 FY25, in response to market conditions. While FY25 production guidance remains unchanged at 2,000kwmt, we will continue to monitor and respond to market conditions.

Underlying EBITDA(23) increased by US$14M to US$28M in H1 FY25, for an operating margin of 15%, as higher average realised manganese

prices, more than offset a stronger South African rand and local inflationary pressures.

AUSTRALIA MANGANESE

Location: Northern Territory, Australia

South32 share: 60 per cent

Australia Manganese consists of Groote Eylandt Mining Company (GEMCO) in the Northern Territory, Australia. GEMCO is an open-cut mining operation that produces

high-grade manganese ore.

Volumes

Australia Manganese continued to implement its operational recovery plan following the impact of Tropical Cyclone Megan in Q3 FY24.

We continued a substantial dewatering program which has enabled access to certain mining pits and a phased restart of mining activities. We resumed production from the primary concentrator in Q2 FY25 with saleable production of 639kwmt.

FY25 production guidance remains unchanged at 1,000kwmt, with production expected to continue at limited rates in H2 FY25 as we progress the operational recovery plan and complete further dewatering.

We also progressed the demolition of undersea structures and commenced installing pilings for the new wharf. While we have experienced some weather related delays, we are looking to mitigate these through pilings installation productivity improvements.

Subject to further potential impacts from the wet season, export sales are expected to progressively increase over Q4 FY25. Australia Manganese has received external insurance payments of US$250M (100% basis) to date(34). We continue to work with our insurers to assess the timing and value of further recoveries in relation to the impact of Tropical Cyclone Megan.

Financial performance

Underlying EBIT was a loss of US$34M in H1 FY25 due to the impact of Tropical Cyclone Megan.

Separately, idle capacity and other remediation costs (US$74M) and insurance recoveries (US$150M) were excluded from Underlying EBIT as earnings adjustments. Our share of costs are expected to be included in Underlying earnings from Q4 FY25,

while insurance recoveries will continue to be classified as a significant item in accordance with our accounting policies.

Depreciation and amortisation recognised in Underlying earnings decreased by U$55M to US$3M in H1 FY25, with US$39M capitalised to inventory and US$11M recognised as earnings adjustments. Underlying depreciation and amortisation is expected to increase in FY26 as we increase sales volumes and drawdown inventory.

Capital expenditure

Capital expenditure was US$47M in H1 FY25 and guidance remains unchanged at US$125M in FY25 as we invest in infrastructure to deliver the operational recovery plan.

(a)  H1 FY24 reflects the balance as at 30 June 2024.

SOUTH AFRICA MANGANESE

Location: Northern Cape and Gauteng, South Africa

South32 share: Ore - 54.6 per cent, Alloy - 60 per cent

South Africa Manganese consists of two manganese mines in the Kalahari Basin, and the Metalloys manganese alloy smelter which was placed on care and maintenance in FY20.

In Q4 FY24, South Africa Manganese entered into a binding agreement to divest the Metalloys manganese alloy smelter(66). South African competition approval of the transaction was received in Q2 FY25. The transaction is expected to complete in Q4 FY25, subject to the satisfaction of the remaining conditions.

Volumes

South Africa Manganese saleable production decreased by 3% (or 29kwmt) to 1,082kwmt in H1 FY25, as we reduced our use of higher cost trucking and undertook a temporary shut at our Wessels mine in Q2 FY25, in response to market conditions.

FY25 production guidance remains unchanged at 2,000kwmt, subject to market conditions.

Operating costs

Operating unit costs increased by 21%, to US$3.13/dmtu in H1 FY25, due to a stronger South African rand and local inflationary pressures.

Our operating margin increased to 15% (H1 FY24: 11%) as a 27% increase in the average realised price of manganese more than offset higher costs.

FY25 Operating unit cost guidance is unchanged at US$3.00/dmtu, with H2 FY25 costs expected to be lower (from H1 FY25) as we target further cost efficiencies, and lower price-linked royalties.

Exchange rate and price assumptions for FY25 Operating unit cost guidance are detailed on page 31, footnote 51.

Financial performance

Ore Underlying EBIT increased by US$13M, to US$19M in H1 FY25, as higher average realised manganese prices (+US$35M) more than offset a stronger South African rand (-US$5M), additional planned maintenance (-US$4M), local inflationary pressures (-US$5M), and an unfavourable inventory movement (-US$15M).

Capital expenditure

Safe and reliable capital expenditure was US$16M in H1 FY25 and is expected to be US$30M (previously US$35M) in FY25 as we invested in rail infrastructure to improve safety and efficiencies, and new mobile fleet.

Improvement and life extension capital expenditure was US$9M in H1 FY25 and is expected to be US$15M in FY25.

(a)  H1 FY24 reflects the balance as at 30 June 2024.            

OUTLOOK

Production

Costs and capital expenditure

Operating unit costs performance and guidance

(a) FY25 prior Operating unit cost guidance includes royalties (where appropriate) and commodity price and foreign exchange rate forward curves or our internal expectations (refer to page 31 footnote 50).

(b) FY25 new Operating unit cost guidance includes royalties (where appropriate) and commodity price and foreign exchange rate forward curves or our internal expectations (refer to page 31 footnote 51).

13 February 2025

Source： South32 report

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