24 October 2024
South32
Limited
(Incorporated in Australia under the Corporations Act
2001 (Cth))
(ACN 093
732 597)
ASX / LSE
/ JSE Share Code: S32; ADR: SOUHY
ISIN:
AU000000S320
south32.net
SOUTH32 LIMITED
2024 ANNUAL GENERAL MEETING
24 OCTOBER 2024
CHAIR AND CEO ADDRESSES
South32 Limited (ASX / LSE / JSE: S32; ADR: SOUHY)
(South32), in accordance with ASX
Listing Rule 3.13.3, today releases the addresses to shareholders
to be given by the Chair and the Chief Executive Officer at
South32's hybrid Annual General Meeting.
A webcast of the event will be
available to view live via the following link
(https://meetnow.global/S32AGM2024).
A recording of the session will be made available on the
South32 website following its completion.
About us
South32 is a globally diversified mining and
metals company. 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. We produce commodities including
bauxite, alumina, aluminium, copper, zinc, lead, silver, nickel and
manganese from our operations in Australia, Southern Africa and
South America. We also have a portfolio of high-quality development
projects and options, and exploration prospects, consistent with
our strategy to reshape our portfolio toward commodities that are
critical for a low-carbon future.
Further information on South32 can
be found at www.south32.net.
Approved
for release to the market by Graham Kerr, Chief Executive
Officer
JSE Sponsor: The Standard Bank of South Africa Limited
24 October 2024
SOUTH32 LIMITED
2024 Annual General Meeting
24 October 2024
Addresses by Karen Wood,
Chair and
Graham Kerr, Chief Executive Officer
The
Chair acknowledged the Whadjuk people of the Noongar nation,
introduced the Non-Executive Directors and noted the attendance of
the auditor, and the returning officer for the meeting and
scrutineer of the vote.
The
Company Secretary discussed the meeting procedures including the
management of questions and voting.
Karen Wood,
Chair
Once again, it is a pleasure to be with you
today for our Annual General Meeting, and we greatly appreciate
your participation as we look back on one of the most significant
years in our history.
But before we do so, it is with great sadness
that I must reflect on a recent, tragic event. We were devastated
by the news last month that Mr José Luis Pérez, a contractor at our
Cerro Matoso operation in Colombia, suffered fatal injuries after a
fall from height.
José Luis, who was 29 years old, was working as
part of a scaffolding team, undertaking quarterly maintenance work
during a stoppage of Cerro Matoso's production line, when this
incident occurred. He is survived by his partner and two young
children. On behalf of the Board, I express my deepest and
heartfelt sympathies to his family, friends and
colleagues.
Graham has been to Colombia to better
understand the circumstances of this tragedy and an investigation
into the incident is underway. As your Chair, I can assure you that
improving our safety performance has been, and will continue to be,
a critical focus for everyone at South32. What is clear to us is
that shifting our safety performance requires cultural
change.
That change is at the heart of our global,
multi-year Safety Improvement Program which includes the delivery
of our LEAD Safely Every Day program focusing on safety leadership
capability and building a culture where each one of us takes
responsibility for our own safety and those with whom we
work.
During the year each member of the Board
participated in this training. We also continued our regular site
visits which gave each one of us the opportunity to hear from team
members about how they see the impact of the Program in their
operation.
While we are seeing positive trends in our
leading safety indicators - designed to detect and provide advance
warning of latent safety hazards - we can never be truly successful
until each member of our workforce goes home to their loved ones
safe and well at the end of every shift. This means we must support
physical - and indeed psychological - safety for all.
Every member of your Board, Graham and each other
member of the Senior Leadership Team remains steadfastly committed
to this.
During the year, the Board has continued its
work in overseeing the development and implementation of South32's
strategy, a strategy that has led our work since formation. A key
element of that strategy has been the identification and pursuit of
opportunities to sustainably reshape our business for the
future.
I'm pleased to say that we completed two
significant milestones during year, the final investment decision
for the zinc-lead-silver Taylor deposit at Hermosa and the sale of
Illawarra Metallurgical Coal. Through these changes, we have
further streamlined our portfolio towards base metals.
Following the sale of Illawarra Metallurgical
Coal, approximately 90 per cent of our portfolio's underlying
revenue is now expected to come from base metals including our
aluminium value chain, with the remainder from manganese. This
compares to approximately 50 per cent of the portfolio's underlying
revenue that came from these base metals at demerger in
2015.
Graham will shortly provide a detailed summary
of our financial and operating results, but I do want to
acknowledge some significant events and challenges that we faced
during the year. In particular, the impact on GEMCO from Tropical
Cyclone Megan in March and the impairments recorded for Worsley
Alumina and our nickel refinery at Cerro Matoso.
At GEMCO we have commenced a phased return to
mining activities and continue to work towards resuming ore export
shipments.
The impairment expense recorded at Worsley
followed the increased uncertainty created by recommended
conditions for the Mine Development Project approval and associated
challenging operating conditions. We continue to engage with the
West Australian Government and seek approval of the Project on
conditions that we believe are reasonable, having regard to the
necessary environmental protections and the facilitation of this
important industry in south west WA, an area we have been working
in responsibly for decades.
At Cerro Matoso, we recorded an impairment
expense of US$264 million, reflecting structural changes in the
nickel market which are expected to continue to place pressure on
nickel prices. We continue to progress our strategic review of this
operation in response to these issues and expect to provide
information on the outcomes of this review in the second half of
FY25.
I want to acknowledge the work of our teams who
continue to work tirelessly to deliver the best possible outcomes
for our business. Despite these challenging events, we finished the
year strongly, achieving two annual production records.
We delivered Underlying earnings of US$380
million in respect of Financial Year 2024 and returned US$198
million to shareholders, including US$163 million in fully franked
ordinary dividends and US$35 million via on-market share
buy-backs.
Reflecting the Group's strengthened financial
position and our disciplined approach to capital management, in
August, the Board resolved to allocate US$200 million to our
ongoing capital management program, to be returned to shareholders
via our on-market share buy-back which we started following
completion of the sale of Illawarra Metallurgical Coal.
Against the backdrop of prevailing geopolitical
tensions and uncertainty, we expect some of the global volatility
that has impacted the prices of some of our key commodities will
continue. We are focused on what we can control, which is to remain
disciplined in how we allocate capital to protect our balance sheet
while maintaining safe and reliable operations and continuing to
transform our portfolio for long-term value creation.
Just as we are working to build and maintain a
diverse workforce to foster greater collaboration, innovation, and
performance, your Board, too, represents a broad cultural and
ethnic background and geographic mix. During the year we welcomed
Sharon Warburton as an independent Non-Executive Director, further
enhancing the Board's range of skills and experience. Sharon is the
third new Director to join the Board in the past two years, in line
with our succession planning process which ensures we appropriately
plan for the future.
And today, we farewell Keith Rumble who is
stepping down as a Non-Executive Director, a role he has held since
the formation of South32 in 2015. Keith has been a highly valued
member of our board. His deep operational skills have
contributed to our deliberations and, as chair of the
Sustainability Committee, Keith has overseen how we incorporate
important sustainability considerations into our strategy. I would
like to take this opportunity to formally thank Keith for his
contribution to South32.
We have three remaining founding directors with
succession plans in place for all three positions. As you might
expect we will stagger retirements to ensure the valuable
institutional knowledge each bring is not lost at the same
time.
Arguably the Board's most important task is to
oversee succession planning for senior management, including the
CEO, to ensure we have the right leadership for your company. This
process does not stop and involves identifying talent, both
internally and externally, and overseeing development plans. We are
fortunate to have a quality leadership team led by Graham who
together have transformed our business, including through the
significant portfolio decisions made during the year. Your Board
continues to plan for the future and you can be assured we have the
processes in place to secure the leadership skills needed to
continue to deliver our strategy to best position South32 for the
future.
During the year we continued to focus on the
areas of sustainability that are material to our stakeholders, our
business and our long-term future, the most material of which is
responding to the imperative to address climate change. As
shareholders know we support the Paris Agreement objectives to
limit global temperature rise to well below 2oC this
century, and to pursue efforts to limit the increase to
1.5oC. In early 2025, Government Parties to the Paris
Agreement will set their 2035 Nationally Determined Contributions
for emissions reduction.
In setting these contributions we encourage an
ambitious approach to align with limiting temperature increases to
1.5oC, but in so doing we also encourage appropriate
policy settings and commitments that recognise specific sector,
commodity, and geographic decarbonisation challenges to support a
just transition. This is a challenge that needs to be considered on
a global basis and in a way that does not drive businesses to
jurisdictions without the checks and balances needed for a genuine
reduction in global emissions.
In 2022 we published our goals and targets in
our first Climate Change Action Plan. At that time, we
committed to update the plan and put it to shareholders again for
consideration in 2025. Work is well underway on the 2025
Plan, including engaging with shareholders and other stakeholders
for input. Graham will talk to the work taking place to decarbonise
operations within our aluminium value chain, where the majority of
our operational greenhouse gas emissions are generated.
Our approach to environmental stewardship,
alongside climate change, is a material strategic and governance
issue for South32 that is overseen by your Board. As stewards of
the lands and waters upon which South32 operates, it is our
responsibility to minimise our impacts to the natural environment.
During the year, we worked to deepen our understanding of
nature-related impacts, dependencies, risks and opportunities, with
this program of work shaping our approach to addressing
nature-related risks and opportunities, which we plan to publish in
2025.
As we look ahead to our 10th year and beyond,
we have much to be proud of and much to look forward to as a
global, diversified producer of commodities critical for a
low-carbon future. On behalf of the Board, I would like to thank
our people for their hard work and dedication throughout the year,
as well as the communities where we work, our shareholders and all
our other stakeholders for their ongoing support.
I will now hand over to Graham.
Graham Kerr, Chief Executive
Officer
Thank you for joining us
today.
Financial year 2024 was a pivotal
period for South32. Building on our previous milestones, the
portfolio improvements we executed during the year strengthened and
streamlined our business.
I will go into further details about
our work during financial year 2024 but before I do so, I want to
talk about the steps we are taking to improve our safety
performance which, I regret to say, is still not where we need it
to be.
As Karen outlined, everyone at
South32 was devastated by the death of José Luis Pérez, a contractor who suffered fatal
injuries on September 17 while working at Cerro Matoso. The loss of
this young man's life is heartbreaking, and our thoughts continue
to be with José Luis' family, friends and colleagues.
An investigation into the incident is underway,
so we can understand what happened and how similar incidents can be
prevented in the future. We will share learnings across the
business and take time to reflect on what we can all do differently
- no family should experience the kind of loss that José Luis'
family has suffered.
These incidents can, and must, be
prevented.
During financial year 2024, we
continued to implement our Safety Improvement Program, now in its
fourth year, and we continue to embed our safety guarantee. The
safety guarantee is designed to create a sense of chronic unease,
reduce complacency and assist in the reduction of risk tolerance in
relation to safety and health.
We do this by asking 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',
the expectation is that they stop and ask what needs to be done
differently to provide that guarantee.
We assess our safety performance through a
range of both leading and lagging indicators. Our significant
hazard frequency, a leading indicator, increased by 34 per cent
compared to FY23, indicating a positive reporting culture and
increased hazard awareness.
Conversely, our lost time injury frequency, a
lagging indicator, increased by 19 per cent compared to FY23,
underscoring that while we had no fatalities at our operations in
FY24, we are still seeing too many serious injuries and we must be
relentless in our pursuit of a safer workplace.
At all levels of our business, we are united in
our belief that everyone can go home safe and well at the end of
their shift. We have more work to do and remain committed to
pursuing continuous improvements in our safety
performance.
We made two changes to our Lead Team in
financial year 2024. Vanessa Torres was appointed Chief Operating
Officer Australia, with accountability for Cannington, GEMCO and
Worsley Alumina. Vanessa was previously Chief Technical Officer
and, in that role, led our multi-year Safety
Improvement Program since its inception. At the same time,
Erwin Schaufler was promoted to Chief Technical Officer,
having previously served as Vice President Operations at Worsley
Alumina. Vanessa and Erwin will play key roles in driving improved
operational performance and better safety outcomes, as well as
leading in their other areas of accountability.
Turning now to our portfolio. During
the year, we achieved two major milestones that have transformed
our business.
First, we announced final investment
approval for the Taylor zinc-lead-silver deposit at Hermosa. Taylor
offers the potential for a long-life, low-cost, low-carbon
operation that is expected to deliver value for our shareholders
over multiple decades. It has the potential to be a top 10 global
zinc producer and with primary zinc demand growth expected to
outpace production to 2032, we expect higher incentive zinc prices
as Taylor ramps up to nameplate capacity.
Our investment at Taylor unlocks
value for future growth options at Hermosa by establishing
significant shared infrastructure. These options include the Clark
manganese deposit, which is currently the only advanced project in
the United States with a clear pathway to produce battery-grade
manganese from locally sourced ore for the North American electric
vehicle battery market.
Recognising Clark's potential,
Hermosa was recently selected for a US$166 million award
negotiation from the US Department of Energy which will support the
potential development of a commercial-scale manganese production
facility. While subject to further study, construction of the
facility and the development of Clark represents a significant
opportunity to establish a North American supply chain of
battery-grade manganese in a phased approach in line with market
development.
In addition to Taylor and Clark, we
are continuing further exploration programs at the Peake prospect
to test the potential for a continuous copper system connecting
Peake and Taylor.
Shortly after the Taylor final
investment decision, we announced the sale of Illawarra
Metallurgical Coal for up to US$1.65 billion. This transaction
completed in August and unlocked significant value for our
shareholders. It has simplified our business, strengthened our
balance sheet and reduced capital intensity, unlocking capital to
invest in our high-quality growth options in base
metals.
As Karen mentioned, financial year 2024 was not
without challenges. From a global perspective, the period was
marked by a mix of recovery and volatility. Interest rates remained
high and inflationary pressures persisted in some regions. Severe
weather also affected our business, with Cannington impacted by
Tropical Cyclone Kirrily in January and Australia Manganese being
significantly impacted by Tropical Cyclone Megan in March,
resulting in the temporary suspension of operations on Groote
Eylandt.
Cyclone Megan was a severe weather system, which
resulted in widespread flooding and significant damage to critical
infrastructure, including wharf and port infrastructure, and a
critical bridge connecting northern pits of the Western Leases
mining area and the processing plant.
Implementation of our operational recovery plan at
GEMCO is ongoing. We continued to progress a substantial dewatering
program and a phased mining restart, and remain on track to resume
production from the primary concentrator this quarter. We also
continued our investment in mine repairs and infrastructure,
including a critical bridge and the wharf. Subject to maintaining
construction productivity during the upcoming wet season, sales
volumes are expected to progressively increase over the fourth
quarter of FY25.
Since 2019, the Worsley Mine Development
Project has been subject to a comprehensive State and Commonwealth
environmental approval and public review process. Throughout this
process Worsley Alumina has consulted extensively with Government,
the community and other stakeholders outlining in detail how we
will minimise our impacts to the environment, and rehabilitate
areas that we do disturb. We have listened, responded to concerns
and altered the project in response to feedback. We know we have an
important role to play in environmental stewardship, responsibly
managing land and supporting biodiversity, balanced with the need
to develop the resources that will support the transition to a
low-carbon future.
In July, the WA Environmental Protection
Authority published its recommendation that the Project be
approved, subject to conditions. If imposed in the form
recommended, several conditions would create significant operating
challenges. We have lodged an appeal in relation to the WA
EPA assessment report.
On October 15, the Western Australian State
Government announced that it would defer regulation of greenhouse
gas emissions to the Federal Government's Safeguard
Mechanism. The change will remove policy inconsistencies that
currently exist between the State and Federal Government with
regard to greenhouse gas emissions, and is expected to be addressed
as part of the appeals process for the Project.
We continue to work collaboratively with the
Western Australian Government to enable Worsley Alumina to continue
to meet the State's robust environmental standards. The Western
Australian Environment Minister is expected to consider approval of
the Project in December 2024, with required Federal approvals
expected shortly thereafter.
Despite these challenges, I am pleased to
report a strong finish to the year, with improved operating
performance, a strengthened financial position and the commencement
of the on-market share buyback. We set consecutive annual
production records at Hillside Aluminium and South Africa
Manganese, and lifted production at Cannington by 10 per cent. We
recorded Underlying EBITDA of US$1.8 billion in respect of FY24,
with Underlying earnings and free cash flow increasing in the
second half of the year.
Looking ahead, we expect volume growth in
copper and low-carbon aluminium in 2025 and 2026. Construction of
Taylor is progressing to plan, and we are also progressing a
pipeline of prospects in targeted regions through the drill bit,
with exploration activity this year including consolidating our
position in the highly prospective San Juan region of
Argentina.
Reshaping our portfolio is a key element of our
approach to climate change, as is decarbonising our operations. The
majority of our operational greenhouse gas emissions are generated
in our aluminium value chain which is where we are focusing our
decarbonisation efforts.
During the year, we converted two coal-fired
boilers to natural gas at Worsley Alumina, expected to reduce
Worsley Alumina's operational greenhouse gas emissions by around 10
per cent against FY21 levels. At our aluminium smelters in South
Africa and Mozambique, we continue to work with stakeholders and
governments on identifying and securing long-term, low-carbon
energy solutions and I'm pleased that we reported a six per cent
decrease in operational greenhouse gas emissions in FY24, compared
to FY23 levels.
As we enter our 10th year, the
South32 of today looks very different to the one we established in
2015 and is focused on copper, zinc and our aluminium value chain
representing an attractive commodity mix from which we believe we
can grow.
Our outlook is positive as we continue to
optimise our business and seek to capitalise on our transformed
portfolio which, more than ever, is focused on commodities critical
for a low-carbon future.
In closing, I would like to thank our teams
around the world for their hard work during the year - one of the
most significant in our history - and reiterate our unwavering
commitment to improving our safety performance.
Thank you.
I'll now hand back to our Chair.
The
Chair then conducted the formal items of
business.
Approved
for release to the market by Graham Kerr, Chief Executive
Officer
JSE Sponsor: The Standard Bank
of South Africa Limited
24 October 2024
