South32 Regulatory News (S32)

APPENDIX 4D

SOUTH32 LIMITED

(ABN 84 093 732 597)

RESULTS FOR ANNOUNCEMENT TO THE MARKET

This page and the accompanying 54 pages comprise the half year end financial information given to the Australian Securities Exchange (ASX) under Listing Rule 4.2A. This statement includes the consolidated results of the South32 Group for the half year ended 31 December 2019 (H1 FY20) compared with the half year ended 31 December 2018 (H1 FY19) on a statutory basis.

The half year report should be read in conjunction with the Financial Report for the year ended 30 June 2019.

Net tangible assets per share

Net tangible assets per ordinary share were US$1.98 as at 31 December 2019 (US$1.98 as at 30 June 2019).

Dividends

The Board has resolved to pay an interim dividend of US 1.1 cents per share (fully franked) for the half year ended31 December 2019 and a special dividend of US 1.1 cents per share (fully franked).

The record date for determining entitlements to dividends is 6 March 2020; payment date is 2 April 2020.

13 February 2020

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 Limited

Financial Results and Outlook Half Year ended 31 December 2019

South32 maintains strong operating performance and continues returns to shareholders

"Against a challenging backdrop for our key commodities we delivered another strong operating result with production for the majority of our operations tracking on or ahead of schedule. Our operating costs trended down in the half and we have lowered our cost guidance across most of our operations.

"We delivered record production at Brazil Alumina and maintained higher output rates at Worsley Alumina. We responded to lower manganese prices at South Africa Manganese, cutting higher cost trucking.

"Investing in exploration to create shareholder value is integral to our Group's strategy as we work to reshape and improve our portfolio. We have continued to embed high quality development options including the Ambler Metals Joint Venture in Alaska while investing in our portfolio of more than 20 exploration projects targeting base metals in prospective jurisdictions.

"We also entered into a binding conditional agreement for the sale of our South Africa Energy Coal business and progressed the review of our manganese alloy smelters.

"We advanced our pre-feasibility study at Hermosa and increased exploration across the broader land package.

"Demonstrating our strong financial position, track record of returning excess capital to shareholders and positive outlook for our business, today we announced a fully franked interim dividend of US$54 million and a US$180 million increase to our capital management program, including US$54 million which will be returned via a fully franked special dividend."

Graham Kerr, South32 CEO

Safety

The most important commitment we make at South32 is to ensure everyone goes home safe and well. Built on a strong culture of care and accountability we are creating an inclusive workplace where all work is well-designed and we continuously improve and learn. Our internal safety standards and risk management system provide clear global expectations as to how our operations can proactively identify and manage safety risk. Our Total Recordable Injury Frequency (TRIF)(9)(10) improved by 13% to 3.9 per million hours worked in H1 FY20 from 4.5 in FY19.

Performance summary

The Group's statutory profit after tax decreased by 84% to US$99M and Underlying earnings by 80% to US$131M in H1 FY20 as volatile macro-economic conditions impacted the prices of our key commodities and a temporary increase in our Underlying effective tax rate, more than offset weaker producer currencies and initiatives that have delivered lower Operating unit costs for the majority of our operations. We remain focussed on identifying and embedding further opportunities to improve our operating and cost performance in a sustainable way, to maximise margins. Following our strong start to the year in this regard and our outlook for currency markets, we have lowered our FY20 Operating unit cost guidance for the majority of our operations. Separately we have lowered our Sustaining capital expenditure guidance, including EAI, by US$25M to US$580M as we defer activity to open up new mining areas at South Africa Energy Coal in response to market conditions.

Specific highlights for H1 FY20 included:

We finished the period with a net cash balance of US$277M, having generated free cash flow from operations, including distributions from our manganese EAI, of US$284M. Notwithstanding the volatile external environment, our strong financial position and disciplined approach to capital management supported the return of US$300M to shareholders in respect of the period including:

Having established a strong track record of returning excess capital to shareholders in a timely and efficient manner and demonstrating our confidence in the outlook for our business, the Board has also expanded our capital management program by US$180M to US$1.43B, leaving US$198M expected to be returned by 4 September 2020, following payment of the special dividend.

Subsequent to the end of the period, we also formed a 50:50 Joint Venture (JV) with Trilogy Metals Inc. (TMX:TMQ) for the Upper Kobuk Mineral Projects (Ambler Metals JV). The project is located in northwest Alaska and we have subscribed for our interest with a payment of US$145M to the JV in February 2020. Trilogy contributed all of its assets associated with the Upper Kobuk Mineral Projects and the JV will loan US$57.5M of the subscription payment back to South32 with the balance retained to fund its activities and exploration programs. Formation of the Ambler Metals JV comes following a three year exploration partnership, with our share of the JV's assets, liabilities, income and expenses to be recognised on a proportionally consolidated basis, commencing with the FY20 South32 Group accounts.

Earnings

The Group's statutory profit after tax declined by US$536M (or 84%) to US$99M in H1 FY20. Consistent with our accounting policies, various items are excluded from the Group's statutory profit to derive Underlying earnings including: exchange rate losses on restatement of monetary items (US$3M pre-tax); losses on fair value movements of non-trading derivative instruments and other investments (US$39M pre-tax); exchange rate gains associated with the Group's non US dollar denominated net debt (US$5M pre-tax), and the tax expense benefit for all pre-tax earnings adjustments and exchange rate variations on tax balances (US$5M). Further information on these earnings adjustments is included in note 4.

The Group's Underlying EBITDA declined by US$627M (or 48%) to US$678M, for an operating margin of 24%. Lower realised prices for our key commodities contributed to a US$595M reduction in Revenue. The Group's Operating unit costs remained well controlled with the on-going realisation of benefits associated with initiatives across our labour, energy and materials usage, combining with lower raw material prices and weaker producer currencies to offset general inflation. However, total costs rose with an increase in sales volumes being the main driver of higher controllable costs. Depreciation and amortisation increased by a modest US$5M to US$385M, meaning that Underlying EBIT decreased by US$632M (or 68%) to US$293M. Underlying earnings declined by US$511M (or 80%) to US$131M as the derecognition of tax assets at South Africa Energy Coal, associated with its potential divestment, led to a temporary increase in our Underlying effective tax rate (ETR)(12) to 75.0%.

Earnings analysis

The following key factors influenced Underlying EBIT in H1 FY20, relative to H1 FY19.

(The reconciliation of movements in Underlying EBIT graph can be found within the National Storage Mechanism version of the release)

Net finance cost

The Group's Underlying net finance cost, excluding EAI, was US$69M in H1 FY20, and largely reflects the unwinding of the discount applied to our closure and rehabilitation provisions (US$54M) and interest on lease liabilities (US$26M), primarily at Worsley Alumina.

Tax expense

The Group's Underlying income tax expense, which excludes tax associated with EAI, was US$93M for an Underlying ETR of 75.0% in H1 FY20. The elevated ETR during the half year was mostly driven by the loss made at South Africa Energy Coal, following the de-recognition of tax assets associated with its potential divestment. Following its divestment we expect our ETR to more closely reflect the corporate tax rates applicable to the Group(16).

The Underlying income tax expense for our manganese EAI was US$90M, including royalty related taxation of US$31M at GEMCO (Australia Manganese), for an Underlying ETR of 46.0% (H1 FY19: 38.8%). The elevated ETR during the half year was mostly driven by the higher proportion of profit in our Australian business during H1 FY20 and associated royalty expenses.

Cash flow

The Group generated free cash flow from operations of US$124M despite a 21% reduction in the average realised prices for our commodities. We also received (net) distributions totalling US$160M from our manganese EAI, comprising dividends of US$195M and a net drawdown in shareholder loans (-US$35M). Net distributions from our manganese EAI include US$69M returned from the sale of a legacy shareholding in an unlisted entity during Q2 FY20 for US$93M (South32 share).

Total capital expenditure(17), excluding EAI, increased by US$116M to US$422M with Major capital, excluding EAI, rising US$65M to US$155M as we advanced the Klipspruit Life Extension (KPSX) project(18) at South Africa Energy Coal (+US$18M to US$73M) and ramped-up activity at Hermosa (+US$37M to US$70M). Sustaining capital expenditure, excluding EAI, increased by US$32M to US$238M with spend at Illawarra Metallurgical Coal rising to support an increase in development rates and complete work that was previously deferred during the Appin mine's extended outage in FY18.

Increased spend on Intangibles and capitalisation of exploration expenditure reflects a greater investment in technology to support our operations and US$18M on exploration, including US$12M at Hermosa. Total capital expenditure associated with our EAI was largely unchanged at US$54M as we continued our investment in additional tailings storage capacity at Australia Manganese.

Working capital decreased by US$216M as lower realised prices, receipt of the initial insurance award for the Klipspruit dragline outage and the collection of receipts from elevated sales in June 2019 contributed to a US$290M decline in trade and other receivables. Our debtor days remained broadly unchanged at 22 (FY19: 24 days). Provisions and trade and other payables partially offset the benefit of lower receivables, declining by US$41M and US$53M respectively as raw material input prices fell for supplies purchased by our aluminium smelters and we continued our investment in progressive rehabilitation at South Africa Energy Coal.

Balance sheet, dividends and capital management

The Group's FY19 net cash position reduced by US$140M to US$364M on 1 July 2019 following the adoption of AASB 16 Leases. While the Group generated free cash flow from operations, including distributions from our manganese EAI, of US$284M during

H1 FY20, our net cash balance decreased to US$277M as we returned US$331M to shareholders in the period, comprising our US$139M FY19 final ordinary dividend and US$192M directed to our on-market share buy-back program.

Reflecting our strong financial position and demonstrating the disciplined and flexible approach we are taking to our capital management program, our Board has resolved to pay a fully franked interim dividend of US$54M, representing 41% of Underlying earnings in H1 FY20 and a fully franked special dividend of US$54M.

Our capital management framework remains unchanged and having established a strong track record of returning excess capital to shareholders in a timely and efficient manner, and reflecting its confidence in the outlook for the business, the Board has also increased our capital management program by US$180M to US$1.43B. This leaves US$198M to be returned by 4 September 2020 following payment of the US$54M special dividend.

Consistent with our commitment to maintain an investment grade credit rating, Standard and Poor's and Moody's reaffirmed their respective BBB+ and Baa1 credit ratings for the Group.

South32 shareholders registered on the South African branch register will not be able to dematerialise or rematerialise their shareholdings between 4 and 6 March 2020 (both dates inclusive), nor will transfers to/from the South African branch register be permitted between 27 February and 6 March 2020 (both dates inclusive).

Details of the currency exchange rates applicable for the dividend will be announced to the relevant stock exchanges. Further dividend information is available on our website (www.south32.net).

South32 American Depositary Receipts (ADRs) each represent five fully paid ordinary shares in South32 and ADR holders will receive dividends accordingly, subject to the terms of the Depositary Agreement.

Outlook

Production

The Group's production guidance remains unchanged with the exception of South Africa Energy Coal which has been adjusted to the bottom end of its prior range and remains subject to market conditions.

Costs and capital expenditure

Operating unit cost performance

Broad appreciation of the US dollar and a strong operating performance resulted in Operating unit costs declining sequentially at the majority of our operations in H1 FY20. Further to our strong start to the year, we remain on-track to deliver US$50M in annual savings from lower functional support costs, following the simplification of the Group's support structures, and realise the benefits from our labour, energy and materials usage that were embedded in our original FY20 Operating unit cost guidance.

(a) H1 FY20 adjusted is restated to reflect price and foreign exchange rate assumptions used for FY20 prior guidance (refer to footnote 21).

(b) FY20 prior guidance includes commodity price and foreign exchange rate forward curves or our internal expectations (refer to footnote 21).

(c) US dollar per tonne of ore to kiln.

(d) US dollar per tonne of ore processed. Periodic movements in finished product inventory may impact Operating unit costs as related marketing costs may change.

Operating unit cost guidance

Updated FY20 Operating unit cost guidance primarily reflects revised currency and price assumptions as production guidance has been maintained for the majority of our operations. That being said, we expect to continue to realise the benefits from our initiatives in labour, energy and materials usage across H2 FY20, further supporting lower FY20 Operating unit cost guidance for the majority of our operations. While operating unit cost guidance is not provided for our aluminium smelters or our non-operated Brazil Alumina refinery, lower raw material prices are expected to benefit their costs in H2 FY20.

(a) FY20 prior guidance includes commodity price and foreign exchange rate forward curves or our internal expectations (refer to footnote 21).

(b) FY20 adjusted guidance is FY20 prior guidance, restated to reflect price and foreign exchange rate assumptions used for FY20 new guidance (refer to footnote 22).

(c) FY20 new guidance includes commodity price and foreign exchange rate forward curves or our internal expectations for the remainder of FY20, as at January 2020 (refer to footnote 22).

(d) US dollar per tonne of ore to kiln.

(e) US dollar per tonne of ore processed. Periodic movements in finished product inventory may impact Operating unit costs as related marketing costs may change.

Other expenditure guidance

Group and unallocated costs, excluding greenfield exploration, of US$30M are now expected in FY20. Our rate of expenditure on corporate costs, including additional functional support for our development options remains unchanged, with H1 FY20 Group and unallocated costs (+US$14M) impacted by the timing of cost recoveries from joint venture partners and inventory related consolidation elimination entries. We also expect to capitalise approximately US$30M of expenditure on information technology systems in FY20 (H1 FY20: US$11M), reflecting an increased rate of expenditure in H2 FY20.

Exploration guidance

FY20 guidance for greenfield exploration expenditure is unchanged at US$30M (H1 FY20: US$10M) with a higher rate of spend expected across our exploration partnerships, including the Ambler Metals JV, in H2 FY20. In addition, US$43M of exploration expenditure, excluding EAI, is expected to be capitalised in FY20 (H1 FY20: US$18M) including US$25M at Hermosa

(H1 FY20: US$12M) to further increase our knowledge of the Taylor deposit and greater land package.

Depreciation and amortisation, and tax expense

FY20 guidance for depreciation and amortisation (excluding EAI) has been increased by US$15M to US$750M (H1 FY20: US$385M) to reflect the adoption of updated assumptions at South Africa Energy Coal and Group volumes tracking ahead of plan. Depreciation and amortisation for our manganese EAI is unchanged at US$95M (H1 FY20: US$48M).

Our geographical earnings mix will have a significant bearing on our ETR given differing country tax rates, while the impact of intragroup agreements, exploration expenditure in foreign entities and other permanent differences will continue to be magnified when margins are compressed or losses are incurred in specific jurisdictions. Until it is sold, South Africa Energy Coal is expected to have an ETR of 0%, with all tax assets de-recognised from 30 June 2019 and no benefit to be recorded for losses made prior to sale. Whilst it is therefore difficult to predict our ETR (excluding EAI), we do expect it to decline in H2 FY20. Following South Africa Energy Coal's divestment we expect our ETR to more closely reflect the primary corporate tax rates applicable to the Group(16).

Capital expenditure guidance

FY20 guidance for Sustaining capital expenditure, including EAI, has been reduced by US$25M to US$580M, reflecting a deferral of development activity to open up new mining areas at South Africa Energy Coal in response to market conditions.

FY20 guidance for Major project capital expenditure is unchanged at US$256M with the rate of spend at Hermosa expected to slow in H2 FY20 following completion of the voluntary remediation program. The program included the establishment of the initial tailings storage facility that is able to support the commencement of future production when production permits are received.

South Africa Energy Coal's KPSX project is 92% complete and remains on schedule and budget for completion in FY21.

(a) The equity accounting adjustment reconciles the proportional consolidation of the South32 manganese operations to the treatment of the manganese operations on an equity accounted basis.

Operations analysis

A summary of the underlying performance of the Group's operations is presented below and more detailed analysis is presented in the following pages. Unless otherwise stated: all metrics reflect South32's share; Operating unit cost is Revenue less Underlying EBITDA excluding third party sales divided by sales volumes; Operating cost is Revenue less Underlying EBITDA excluding third party sales; and Realised sales price is calculated as sales Revenue excluding third party sales divided by sales volume.

(a) The equity accounting adjustment reconciles the proportional consolidation of the South32 manganese operations to the treatment of the manganese operations on an equity accounted basis (including third party product).

Worsley Alumina (86% share)

Volumes

Worsley Alumina saleable production increased by 1% (or 27kt) to 1,933kt in H1 FY20, despite an extended calciner shut, as the refinery continued to benefit from improved calciner availability and we opportunistically sold stockpiled hydrate. FY20 production guidance remains unchanged at 3,965kt with further calciner maintenance scheduled for Q3 FY20.

Operating costs

Operating unit costs decreased by 3% in H1 FY20 to US$225/t as lower caustic soda prices (H1 FY20: US$391/t, H1 FY19: US$535/t) and consumption rates (H1 FY20: 97kg/t, H1 FY19: 101kg/t), and the benefits of lower renegotiated energy prices, more than offset the impact of additional calciner maintenance.

We have lowered FY20 Operating unit cost guidance by US$11/t to US$219/t to reflect lower exchange rate and raw material price assumptions. Calciner maintenance activity to support a sustainable increase in production to nameplate capacity is scheduled to continue in H2 FY20. Exchange rate and price assumptions for FY20 Operating unit cost guidance are detailed in footnote 22.

Financial performance

Underlying EBIT decreased by 72% (or US$246M) in H1 FY20 to US$98M as a 30% decrease in the average realised price of alumina (-US$257M) and spend on initiatives to increase calciner availability (-US$25M), more than offset lower caustic soda costs (price and consumption, +US$34M) and reduced energy prices (+US$13M).

The average realised price for alumina sales in H1 FY20 was a premium of approximately 8% to the Platts Alumina Index(24) on a volume weighted M-1 basis. This mostly reflected the structure of specific legacy supply contracts with our Mozal Aluminium smelter that are linked to the Platts Alumina Index on an M-1 basis, with caps and floors embedded within specific contracts that reset every calendar year. All other alumina sales were at market based prices.

Capital expenditure

Sustaining capital expenditure decreased by US$2M in H1 FY20 to US$23M with spend weighted to H2 FY20 as we continue to invest in additional bauxite residue disposal capacity. Sustaining capital expenditure of US$60M is anticipated in FY20.

(a) H1 FY19 reflects balance as at 30 June 2019.

Brazil Alumina (Alumina 36% share, Aluminium 40% share)

Volumes

Brazil Alumina saleable production increased by 10% (or 66kt) to a record 702kt in H1 FY20 as the refinery benefitted from improved steam generation following the installation of package boilers in Q4 FY19, enabling the benefits of the De-bottlenecking Phase One project to be realised. FY20 production guidance remains unchanged at 1,330kt with maintenance scheduled for Q4 FY20.

Operating costs

Operating unit costs decreased by 12% in H1 FY20 to US$257/t as higher production volumes and lower caustic soda prices (H1 FY20: US$358/t, H1 FY19: US$573/t) and consumption rates, were partially offset as the price of bauxite supplied from Mineração Rio do Norte S.A (MRN) increased and we sourced additional higher cost third party material.

While Operating unit cost guidance is not provided as we are not the operator of the refinery, we do expect to benefit from a reduction in bauxite and caustic soda prices in H2 FY20.

Financial performance

Alumina Underlying EBIT decreased by US$105M in H1 FY20 to a loss of US$1M as a 40% decrease in the average realised price of alumina (-US$138M), higher bauxite (-US$15M) and boiler maintenance (-US$5M) costs were partially offset by higher sales volumes (+US$30M) and a reduction in the price of caustic soda (+US$12M).

Aluminium Underlying EBIT increased by US$1M in H1 FY20 to a loss of US$6M as we recognised a provision related to our electricity contract with Eletronorte that was terminated in December 2015.

Capital expenditure

Sustaining capital expenditure increased by US$6M in H1 FY20 to US$22M as we continue to invest in additional bauxite residue disposal capacity. Sustaining capital expenditure of US$35M is anticipated in FY20.

(a) H1 FY19 reflects balance as at 30 June 2019.

Hillside Aluminium (100%)

Volumes

Hillside Aluminium saleable production increased by 1% (or 2kt) to 362kt in H1 FY20 as the smelter continued to test its maximum technical capacity, despite the impact to production from load-shedding and the completion of a major workforce restructure in June 2019. Sales decreased by 3% in H1 FY20 as a shipment slipped into January 2020. FY20 production guidance is unchanged at 720kt, but remains subject to load-shedding.

Operating costs

Operating unit costs decreased by 23% in H1 FY20 to US$1,657/t as the smelter benefitted from lower raw material input prices, lower aluminium price-linked power costs and a major workforce restructure that was concluded in June 2019. Alumina, coke, pitch and aluminium tri-fluoride accounted for 54% of the smelter's cost base in H1 FY20 (H1 FY19: 60%). 32 pots were also relined at a cost of US$246k per pot (H1 FY19: 108 pots at US$233k per pot), while 76 pots are scheduled to be relined across FY20 (prior FY20 guidance 79 pots).

The smelter sources alumina from our Worsley Alumina refinery with prices linked to the Platts alumina index on an M-1 basis, while its power is sourced from Eskom under long-term contracts. The price of electricity supplied to potlines 1 and 2 is linked to the LME aluminium price and the South African rand/US dollar exchange rate. The price of electricity supplied to potline 3 is South African rand based. We have been engaging with Eskom on a new pricing arrangement for Hillside that would cover the entire power supply to the smelter. We have made good progress with Eskom on this, which will be subject to the usual approval by Department of Public Enterprises, National Treasury and National Energy Regulator of South Africa in order to finalise a new power supply agreement.

While Operating unit cost guidance is not provided, the cost profile of the smelter is expected to benefit in H2 FY20 from lower raw material costs and the recently concluded workforce restructure.

Financial performance

Underlying EBIT increased by US$77M in H1 FY20 to US$38M as lower raw material input costs (+US$142M), a reduction in pot relining activity (+US$19M) and lower labour costs (+US$10M) more than offset a 13% decrease in the average realised price of aluminium (-US$100M).

Capital expenditure

Sustaining capital expenditure decreased by US$5M in H1 FY20 to US$7M. Activity at the smelter is weighted to H2 FY20 with FY20 Sustaining capital expenditure guidance unchanged at US$23M.

(a) H1 FY19 reflects balance as at 30 June 2019.

Mozal Aluminium (47.1% share)

Volumes

Mozal Aluminium saleable production decreased by 1% (or 1kt) to 134kt in H1 FY20 as the smelter's operating performance continued to be impacted by load-shedding events. Despite an increase in the frequency of disruptions, FY20 production guidance is unchanged at 273kt, but remains subject to load-shedding.

Operating costs

Operating unit costs decreased by 2% in H1 FY20 to US$1,904/t as the smelter benefited from lower raw material input prices which more than offset a movement in inventory. Alumina, coke and pitch accounted for 47% of the smelter's cost base in H1 FY20 (H1 FY19: 53%). The smelter sources all of its alumina from our Worsley Alumina refinery with approximately 50% priced as a percentage of the LME aluminium index under a legacy contract and the remainder linked to the Platts alumina index on an M-1 basis, with caps and floors embedded within specific contracts that reset every calendar year. As a result of the latter agreement, the smelter's cost of alumina was a significant premium to the index in H1 FY20, reducing the benefit to Mozal Aluminium of lower index prices in the period. 63(25) pots were also relined across H1 FY20 at a cost of US$272k per pot (H1 FY19: 40(25) pots at US$219k per pot), with 123(25) pots scheduled to be relined across FY20.

While Operating unit cost guidance is not provided, the cost profile of the smelter is expected to benefit from lower alumina costs in H2 FY20 as the premium paid to the index in the first half subsides with the reset mechanism at the start of the calendar year. Electricity requirements are largely met by hydroelectric power that is generated by Hidroeléctrica de Cahora Bassa (HCB). HCB delivers power into Eskom's South African grid and Mozal Aluminium sources electricity via the Mozambique Transmission Company (Motraco) under a long-term contract. The price of electricity is South African rand based with the rate of escalation linked to a South Africa domestic producer price index plus a margin.

Financial performance

Underlying EBIT decreased by US$27M in H1 FY20 to a loss of US$14M as a 12% decrease in the average realised price of aluminium (-US$36M), a drawdown in finished goods (-US$14M) and higher pot relining costs (-US$4M) more than offset additional sales volumes (+US$18M) and lower raw material input prices (+US$18M).

Capital expenditure

Sustaining capital expenditure decreased by US$2M in H1 FY20 to US$6M as the smelter continued the roll out of the AP3XLE energy efficiency technology in its pot relining program. The project is 27% complete and expected to deliver a circa 5% (or 10kt pa) increase in annual production with no associated increase in power consumption, improving the smelter's global competitiveness. First incremental production from relined pots is anticipated in H2 FY20, with the full benefit to be realised by FY24. Sustaining capital expenditure of US$12M is anticipated in FY20.

(a) H1 FY19 reflects balance as at 30 June 2019.

South Africa Energy Coal (92% share(15))

Volumes

South Africa Energy Coal saleable production decreased by 3% (or 386kt) to 11.8Mt in H1 FY20 as the operation demobilised contractors in response to market conditions, more than offsetting a 15% increase in export sales volumes following improved dragline availability at Klipspruit.

FY20 production guidance has been lowered to the bottom end of our guidance range (26.0Mt) and remains subject to market demand.

Operating costs

Operating unit costs increased by 13% in H1 FY20 to US$43/t as the impact of lower sales volumes, demobilisation costs and increased activity to support the Klipspruit dragline's ramp-up towards full utilisation, more than offset our receipt of the final insurance payment awarded for the volume and cost impact of its FY19 outage.

In accordance with our revised production guidance we now expect FY20 Operating unit costs to be US$41/t (previously between US$37/t and US$40/t) with the impact of a stronger South African rand and lower planned volumes, partially offset by the realisation of benefits from demobilising contractors and further improvement in dragline utilisation during H2 FY20. Exchange rate and price assumptions for FY20 Operating unit cost guidance are detailed in footnote 22.

Financial performance

Underlying EBIT decreased by US$119M in H1 FY20 to a loss of US$105M as lower average realised prices (-US$88M), costs to support the ramp-up of activity at Klipspruit (-US$46M), general inflation (-US$21M) and an unfavourable movement in inventory (-US$17M) were partially offset by our receipt of the final insurance payment awarded for the volume and cost impact of the dragline's outage (+US$48M).

Capital expenditure

Sustaining capital expenditure decreased by US$19M in H1 FY20 to US$29M following the prior period's elevated spend to mitigate the impact of the Klipspruit dragline incident and the deferral of new mining area development at the Wolvekrans-Middelburg Complex in response to market conditions. FY20 Sustaining capital expenditure guidance has been reduced by US$25M to US$65M reflecting the lower rate of activity.

We also invested US$73M in Major project capital expenditure in H1 FY20 as we progressed the KPSX project, which was approved by the Board in November 2017. The 8Mt per annum brownfield project extends the life of the colliery by more than 20 years(27). The project is approximately 92% complete and remains on schedule and budget. Major capital expenditure of US$115M is expected in FY20.

(a) H1 FY19 reflects balance as at 30 June 2019.

Illawarra Metallurgical Coal (100% share)

Volumes

Illawarra Metallurgical Coal saleable production decreased by 4% (or 145kt) to 3.7Mt in H1 FY20 following the completion of a longwall move at the Appin mine during Q2 FY20. FY20 production guidance remains unchanged at 7.0Mt with both the Dendrobium and Appin longwalls continuing to perform strongly and a longwall move scheduled at the Dendrobium mine during Q3 FY20.

Operating costs

Operating unit costs increased by 5% in H1 FY20 to US$91/t as additional planned maintenance and development activity was undertaken, and run of mine inventory was drawn down in support of a longwall move, more than offsetting the impact of a weaker Australian dollar.

We have lowered FY20 Operating unit cost guidance by US$4/t to US$93/t to reflect the benefit of continued strong longwall performance, a weaker Australian dollar and lower price-linked royalties. Exchange rate and price assumptions for FY20 Operating unit cost guidance are detailed in footnote 22.

Financial performance

Underlying EBIT decreased by 74% (or US$145M) in H1 FY20 to US$50M as lower average realised prices (-US$163M), a drawdown in run of mine inventory (-US$10M) and increased maintenance costs (-US$8M) were partially offset by a weaker Australian dollar (+US$14M), lower price-linked royalties (+US$7M) and the diversion of coal wash to beneficial uses (+US$7M).

Capital expenditure

Sustaining capital expenditure increased by US$49M in H1 FY20 to US$105M as we continue to invest in infrastructure improvements and increase underground development rates at Appin to support a planned return to a three longwall configuration. Notwithstanding an expected increase in underground development to US$100M in FY20 (previous guidance US$85M) to reflect the higher rate of spend in H1 FY20 (US$51M), FY20 Sustaining capital expenditure guidance is unchanged at US$185M.

We also invested US$7M in H1 FY20 to progress studies for the Dendrobium Next Domain project. While still subject to necessary regulatory approvals, the project has the potential to extend the mine life of Dendrobium to approximately FY36, with a final investment decision anticipated in H2 FY21. Major capital expenditure of US$21M is expected in FY20 as we progress study and permitting work and invest in critical path activities.

(a) H1 FY19 reflects balance as at 30 June 2019.

Australia Manganese (60% share)

Volumes

Australia Manganese saleable ore production decreased by 2% (or 36kwmt) to 1,775kwmt in H1 FY20 as heavy rainfall in late FY19 slowed primary circuit throughput at the start of the period. Separately, with demand for our low cost PC02 product remaining favourable, we continued to operate the circuit above its design capacity, contributing 11% of total production (H1 FY19: 9%).

While we continue to monitor market conditions and the potential impact from the wet season across the remainder of the financial year, FY20 production guidance remains unchanged at 3,560kwmt.

Manganese alloy saleable production decreased by 25% (or 19kt) to 57kt in H1 FY20 as one of the four furnaces was taken offline.

Operating costs

FOB manganese ore Operating unit costs increased by 7% in H1 FY20 to US$1.62/dmtu as the strip ratio increased (H1 FY20: 5.3, H1 FY19: 4.1), and lower primary circuit throughput was partially offset by additional PC02 volumes and a weaker Australian dollar.

We have lowered FY20 Operating unit cost guidance by US$0.05/dmtu to US$1.55/dmtu, reflecting an improvement in equipment productivity during FY20 and the benefit of revised exchange rate and price assumptions. The strip ratio is expected to decline to 5.1 in H2 FY20 in accordance with the mine plan. Exchange rate and price assumptions for FY20 Operating unit cost guidance are detailed in footnote 22.

Manganese alloy Operating unit costs decreased by 7% to US$914/t as lower raw material input prices were partially offset by reduced volumes at our TEMCO smelter. We continue to review options for our manganese alloy smelters including their potential divestment, closure or suspension.

Financial performance

Underlying EBIT decreased by 49% (or US$174M) in H1 FY20 to US$178M as lower realised ore prices (-US$150M), lower alloy volumes (-US$21M) and a drawdown in run of mine inventory (-US$8M) were partially offset by a weaker Australian dollar (+US$7M) and lower price-linked royalties (+US$4M).

Capital expenditure

Sustaining capital expenditure increased by US$1M in H1 FY20 to US$37M (including US$2M for alloys) with FY20 guidance unchanged at US$64M (including US$4M for alloys) as we continue to invest in additional tailings storage capacity.

(a) H1 FY19 reflects balance as at 30 June 2019.

South Africa Manganese (Ore 44.4% share, Alloy 60% share)

Volumes

South Africa Manganese saleable ore production decreased by 3% (or 37kwmt) to 1,038kwmt in H1 FY20 as we responded to market conditions in Q2 FY20, reducing our use of higher cost trucking and undertaking an extended maintenance shut at our Wessels underground mine. FY20 production guidance remains unchanged at 2,100kwmt, however will be adjusted in response to market demand.

Manganese alloy saleable production increased by 3% (or 1kt) to 34kt in H1 FY20.

Operating costs

FOB manganese ore Operating unit costs decreased by 1% in H1 FY20 to US$2.60/dmtu as lower price-linked royalties were partially offset by costs associated with the increased use of higher cost trucking in Q1 FY20 to take advantage of favourable market conditions.

We have lowered FY20 Operating unit cost guidance by US$0.04/dmtu to US$2.40/dmtu reflecting a stronger South African rand offset by lower price-linked royalties and reduced trucking activity in response to market conditions. Exchange rate and price assumptions for FY20 Operating unit cost guidance are detailed in footnote 22.

Manganese alloy Operating Unit costs increased by 1% to US$1,179/t as higher power costs offset a weaker South African rand. We continue to review options for our manganese alloy smelters including their potential divestment, closure or suspension.

Financial performance

Underlying EBIT decreased by 75% (or US$75M) in H1 FY20 to US$25M as lower realised ore prices (-US$80M) and an increase in trucking activity (-US$6M) that was curtailed in Q2 FY20 were partially offset by a favourable movement in alloy inventory (+US$10M) and lower price-linked royalties (+US$8M).

Capital expenditure

Sustaining capital expenditure was largely unchanged at US$17M (including US$2M for alloys) in H1 FY20 and is expected to increase to US$26M (including US$4M for alloys) in FY20.

(a) H1 FY19 reflects balance as at 30 June 2019.

Cerro Matoso (99.9% share)

Volumes

Cerro Matoso payable nickel production decreased by 2% (or 0.5kt) to 20.6kt in H1 FY20 following a planned increase in the contribution of lower grade stockpiled ore feed. FY20 production guidance remains unchanged at 35.6kt with the operation scheduled to undertake a major furnace refurbishment in Q4 FY20.

Operating costs

Operating unit costs decreased by 6% in H1 FY20 to US$3.80/lb as a result of a weaker Colombian peso and the realisation of benefits from of our energy procurement and usage optimisation approach.

We have lowered FY20 Operating unit cost guidance by US$0.12/lb to US$3.88/lb with the strong production start to the year and a weaker Colombian peso more than offsetting an increase in price-linked royalties from a higher nickel price. Exchange rate and price assumptions for FY20 Operating unit cost guidance are detailed in footnote 22.

Our ferronickel product sells with reference to the LME Nickel index price on a M+1 or M+2 basis and attracts product discounts that have widened in the current market.

Financial performance

Underlying EBIT increased by US$82M in H1 FY20 to US$92M as a 30% rise in the average realised nickel price (+US$72M), a weaker Colombian peso (+US$12M) and lower energy costs (+US$8M) were partially offset by lower sales volumes (-US$11M).

Capital expenditure

Sustaining capital expenditure increased by US$11M in H1 FY20 to US$24M with activity weighted to H2 FY20 as we commence a major furnace refurbishment in Q4 FY20. Sustaining capital expenditure of US$55M is expected in FY20.

(a) H1 FY19 reflects balance as at 30 June 2019.

Cannington (100% share)

Volumes

Cannington payable zinc equivalent production(19) increased by 12% (or 12.7kt) to 120.1kt in H1 FY20 as the operation drew down run of mine stocks to a normalised level and recorded a higher average zinc grade in Q1 FY20, that more than offset lower silver grades across the period.

Processed silver, lead and zinc grades met our expectations in H1 FY20 and FY20 production guidance remains unchanged (silver 11,200koz, lead 104.0kt and zinc 59.0kt) with sequentially lower lead and silver grades expected in H2 FY20. Higher payable zinc sales in H1 FY20 reflect timing differences following significant floods in North Queensland in Q3 FY19 that caused an extended outage of a third party rail line connecting Cannington to the Townsville port.

Operating costs

Operating unit costs increased by 1% to US$121/t in H1 FY20 as the benefit of a weaker Australian dollar and increased mill throughput were more than offset by a movement in inventory.

We have lowered FY20 Operating unit cost guidance by US$4/t to US$115/t to reflect the strong operating performance in H1 FY20, and the benefit of revised exchange rate assumptions. Exchange rate and price assumptions for FY20 Operating unit cost guidance are detailed in footnote 22.

Financial performance

Underlying EBIT increased by 13% (or US$6M) in H1 FY20 to US$53M as an increase in sales volumes (+US$26M) and a weaker Australian dollar (+US$8M) were partially offset by inventory movements (-US$14M) and higher depreciation resulting from increased mill throughput (-US$7M).

Capital expenditure

Sustaining capital expenditure decreased by US$6M in H1 FY20 to US$22M. Guidance is unchanged at US$55M in FY20 with expenditure weighted to H2 FY20 as we invest in underground development and additional tailings storage capacity.

(a) H1 FY19 reflects balance as at 30 June 2019.

Notes

(1) Revenue includes revenue from third party products and services.

(2) H1 FY20 basic earnings per share is calculated as Profit/(loss) after tax divided by the weighted average number of shares for H1 FY20 (4,941 million).

H1 FY20 basic Underlying earnings per share is calculated as Underlying earnings divided by the weighted average number of shares for H1 FY20

H1 FY19 basic earnings per share is calculated as Profit/(loss) after tax divided by the weighted average number of shares for H1 FY19 (5,079 million).

H1 FY19 basic Underlying earnings per share is calculated as Underlying earnings divided by the weighted average number of shares for H1 FY19.

(3) H1 FY20 ordinary dividends per share is calculated as H1 FY20 ordinary dividend announced (US$54M) divided by the number of shares on issue at 31 December 2019 (4,900 million).

(4) H1 FY20 special dividends per share is calculated as H1 FY20 special dividend announced (US$54M) divided by the number of shares on issue at 31 December 2019 (4,900 million). Paragraph 16.26(i) of the Johannesburg Stock Exchange (JSE) listing rules states that the requisite exchange control authority from the Financial Surveillance Department of the South African Reserve Bank (SARB) is required to be provided to the JSE before the JSE can approve payment of special dividends to South African shareholders.

(5) Underlying EBIT is profit before net finance costs, tax and any earnings adjustment items, including impairments. Underlying EBIT is reported inclusive of South32's share of net finance costs and tax of EAI. Underlying EBITDA is Underlying EBIT, before depreciation and amortisation. Underlying earnings is Profit/(loss) after tax and earnings adjustment items. Underlying earnings is the key measure that South32 uses to assess the performance of the South32 Group, make decisions on the allocation of resources and assess senior management's performance. In addition, the performance of each of the South32 operations and operational management are assessed based on Underlying EBIT. In order to calculate Underlying earnings, Underlying EBIT and Underlying EBITDA, the following items are adjusted as applicable each period, irrespective of materiality:

·; Exchange rate (gains)/losses on restatement of monetary items;

·; Impairment losses/(reversals);

·; Net (gains)/losses on disposal and consolidation of interests in businesses;

·; Fair value (gains)/losses on non-trading derivative instruments and other investments;

·; Major corporate restructures; and

·; Earnings adjustments included in profit/(loss) of EAI.

In addition, items that do not reflect the underlying operations of South32, and are individually significant to the financial statements, are excluded to determine Underlying earnings. Significant items are detailed in the Financial Information.

(6) Comprises Underlying EBITDA excluding third party product EBITDA, divided by revenue excluding third party product revenue. Also referred to as operating margin.

(7) Comprises Underlying EBIT excluding third party product EBIT, divided by revenue excluding third party product revenue.

(8) Return on invested capital (ROIC) is a key measure that South32 uses to assess performance. ROIC is calculated as Underlying EBIT less the discount on rehabilitation provisions included in net finance cost, tax effected by the Group's Underlying effective tax rate (ETR), divided by the sum of fixed assets (excluding any rehabilitation asset, the impairment of South Africa Energy Coal and unproductive capital associated on Major projects) and inventories. Manganese is included in the calculation on a proportional consolidation basis.

(9) To ensure that incident classification definitions are applied uniformly across our workforce, we have adopted the Occupational Safety and Health Administration of the United States Department of Labor (OSHA) guidelines for the recording and reporting of occupational injuries and illnesses.

(10) Total Recordable Injury Frequency (TRIF): The sum of (fatalities + lost-time cases + restricted work cases + medical treatment cases) x 1,000,000÷ actual hours worked, for employees and contractors. Stated in units of per million hours worked.

(11) Refer to the market announcement "Agreement to Divest South Africa Energy Coal" dated 6 November 2019.

(12) Underlying ETR is Underlying income tax expense, excluding royalty related tax, divided by Underlying profit before tax; both the numerator and denominator exclude EAI.

(13) Sales price variance reflects the revenue impact of changes in commodity prices, based on the current period's sales volume. Price-linked costs variance reflects the change in royalties together with the change in input costs driven by changes in commodity prices or market traded consumables. Foreign exchange reflects the impact of exchange rate movements on local currency denominated costs and sales. Volume variance reflects the revenue impact of sales volume changes, based on the comparative period's sales prices. Controllable costs variance represents the impact from changes in the Group's controllable local currency cost base, including the variable cost impact of production volume changes on expenditure, and period-on-period movements in inventories. The controllable cost variance excludes earnings adjustments including significant items.

(14) Underlying net finance cost and Underlying income tax expense are actual H1 FY20 results, not half-on-half variances.

(15) South32's ownership share of operations are presented as follows: Worsley Alumina (86% share), Hillside Aluminium (100%), Mozal Aluminium (47.1% share), Brazil Alumina (Alumina 36% share, Aluminium 40% share), South Africa Energy Coal (100% share until Broad-Based Black Economic Empowerment (B-BBEE) vendor loans are repaid), Illawarra Metallurgical Coal (100%), Australia Manganese (60% share), South Africa Manganese (60% share), Cerro Matoso (99.9% share), Cannington (100%), Hermosa (100%) and Eagle Downs Metallurgical Coal (50% share).

(16) The primary corporate tax rates applicable to the Group for H1 FY20 include: Australia 30%, South Africa 28%, Colombia 33%, Mozambique 0% and Brazil 34%. The Colombian corporate tax rate is 32% in CY20 and will decrease on an annual basis by a percent each year, stabilising at 30% from 1 January 2022. The Mozambique operations are subject to a royalty on revenues instead of income tax.

(17) Total capital expenditure comprises Capital expenditure, the purchase of intangibles and capitalised exploration expenditure. Capital expenditure comprises Sustaining capital expenditure and Major projects capital expenditure. Sustaining capital expenditure comprises Stay-in-business (SIB), Minor discretionary and Deferred stripping (including underground development) capital expenditure.

(18) Refer to the market announcement "South32 approves Klipspruit Life Extension Project" dated 27 November 2017.

(19) Payable zinc equivalent (kt) was calculated by aggregating revenues from payable silver, lead and zinc, and dividing the total Revenue by the price of zinc. FY19 realised prices for zinc (US$2,122/t), lead (US$1,754/t) and silver (US$14.4/oz) have been used for H1 FY19, FY19, H1 FY20, FY20e and FY21e.

(20) Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales, divided by sales volumes. Operating cost is Revenue less Underlying EBITDA excluding third party sales. Additional manganese disclosures are included in footnotes 30 and 34. 

(21) FY20 prior Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY20, including: an alumina price of US$348/t; an average blended coal price of US$158/t for Illawarra Metallurgical Coal; a manganese ore price of US$5.64/dmtu for 44% manganese product; a nickel price of US$5.54/lb; a thermal coal price of US$69/t (API4) for South Africa Energy Coal; a silver price of US$15.82/troy oz; a lead price of US$1,921/t (gross of treatment and refining charges); a zinc price of US$2,483/t (gross of treatment and refining charges); an AUD:USD exchange rate of 0.70; a USD:ZAR exchange rate of 15.06; a USD:COP exchange rate of 3,112; and a reference price for caustic soda; all of which reflected forward markets as at June 2019 or our internal expectations.

(22) FY20 new Operating unit cost guidance includes royalties (where appropriate) and the influence of exchange rates, and includes various assumptions for FY20, including: an alumina price of US$283/t; an average blended coal price of US$137/t for Illawarra Metallurgical Coal; a manganese ore price of US$4.58/dmtu for 44% manganese product; a nickel price of US$6.65/lb; a thermal coal price of US$78/t (API4) for South Africa Energy Coal; a silver price of US$17.60/troy oz; a lead price of US$2,004/t (gross of treatment and refining charges); a zinc price of US$2,319/t (gross of treatment and refining charges); an AUD:USD exchange rate of 0.69; a USD:ZAR exchange rate of 14.58; a USD:COP exchange rate of 3,364; and a reference price for caustic soda; all of which reflected forward markets as at January 2020 or our internal expectations.

(23) H1 FY20 Third party products and services sold comprise US$19M for aluminium, US$12M for alumina, US$162M for coal, US$100M for freight services, US$44M for aluminium raw materials and nil for manganese. H1 FY20 Underlying EBIT on third party products and services comprise US$2M for aluminium, -US$2M for alumina, -US$14M for coal, nil for freight services, US$1M for aluminium raw materials and nil for manganese. H1 FY19 Third party products and services sold comprise US$33M for aluminium, US$16M for alumina, US$241M for coal, US$129M for freight services, US$61M for aluminium raw materials and US$7M for manganese. H1 FY19 Underlying EBIT on third party products and services comprise nil for aluminium, US$3M for alumina, US$27M for coal, -US$3M for freight services, US$1M for aluminium raw materials and nil for manganese.

(24) The quarterly sales volume weighted average of the Platts Alumina Index (FOB Australia) on the basis of a one month lag to published pricing (Month minus one or "M-1") was US$299/t in H1 FY20.

(25) Presented on a 100% basis.

(26) South Africa Energy Coal Revenue includes domestic and export sales Revenue.

(27) The information in this report that relates to Coal Reserve estimates for Klipspruit was declared as part of South32's Annual Resource and Reserve declaration in the Annual Report 2019 (www.south32.net) issued on 5 September 2019 and prepared by P Mulder in accordance with the requirements of the JORC Code. South32 confirms that it is not aware of any new information or data that materially affects the information included in the original announcement. All material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. South32 confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.

(28) Illawarra Metallurgical Coal Revenue includes metallurgical coal and energy coal sales Revenue.

(29) Realised ore prices are calculated as external sales Revenue less freight and marketing costs, divided by external sales volume. Realised alloy prices are calculated as sales Revenue, including sinter Revenue, divided by alloy sales volume. Ore converted to sinter and alloy, and sold externally, is eliminated as an intracompany transaction.

(30) Manganese Australia H1 FY20 average manganese content of external ore sales was 45.0% on a dry basis (H1 FY19: 45.8%). 96% of H1 FY20 external manganese ore sales (H1 FY19: 95%) were completed on a CIF basis. H1 FY20 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of US$28M (H1 FY19: US$25M), consistent with our FOB cost guidance.

(31) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume. Alloy operating unit cost is Revenue less Underlying EBITDA divided by alloy sales volumes and includes costs associated with sinter sold externally.

(32) Revenues associated with sales from GEMCO to TEMCO are eliminated as part of the consolidation.

(33) Realised ore prices are calculated as external sales Revenue less freight and marketing costs, divided by external sales volume. Realised alloy prices are calculated as sales Revenue, divided by alloy sales volumes. Ore converted to sinter and alloy, and sold externally, is eliminated as an intracompany transaction. Manganese ore sales are grossed-up to reflect a 60% accounting effective interest.

(34) Manganese South Africa H1 FY20 average manganese content of external ore sales was 40.0% on a dry basis (H1 FY19: 40.3%). 71% of H1 FY20 external manganese ore sales (H1 FY19: 71%) were completed on a CIF basis. H1 FY20 realised FOB ore prices and Operating unit costs have been adjusted for freight and marketing costs of US$20M (H1 FY19: US$20M), consistent with our FOB cost guidance.

(35) FOB ore operating unit cost is Revenue less Underlying EBITDA, freight and marketing costs, divided by ore sales volume. Alloy operating unit cost is Revenue less Underlying EBITDA divided by alloy sales volumes.

(36) Revenues associated with sales from Hotazel Manganese Mines (HMM) to Metalloys are eliminated as part of the consolidation.

(37) Consistent with the presentation of South32's segment information, South Africa Manganese ore production and sales have been reported at 60%. South32 has a 44.4% ownership interest in HMM. 26% of HMM is owned by a B-BBEE consortium comprising Ntsimbintle Mining (9%), NCAB Resources (7%), Iziko Mining (5%) and HMM Education Trust (5%). The interest owned by NCAB Resources, Iziko Mining and HMM Education Trust were acquired using vendor finance with the loans repayable via distributions attributable to these parties, pro rata to their share in HMM. Until these loans are repaid, South32's interest in HMM is accounted at 54.6%.

(38) Cerro Matoso realised nickel sales price is inclusive of by-products. Realised sales price is calculated as sales Revenue divided by sales volume.

(39) Cerro Matoso Operating unit cost per tonne is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact operating unit costs as related marketing costs may change.

(40) Cannington Operating unit cost is Revenue less Underlying EBITDA divided by ore processed. Periodic movements in finished product inventory may impact operating unit costs as related marketing costs may change.

Figures in Italics indicate that an adjustment has been made since the figures were previously reported. The denotation (e) refers to an estimate or forecast year.

The following abbreviations may be used throughout this report: US$ million (US$M); US$ billion (US$B); December half year (H1 FY20); calendar year (CY); grams per tonne (g/t); tonnes (t); thousand tonnes (kt); thousand tonnes per annum (ktpa); million tonnes (Mt); million tonnes per annum (Mtpa); ounces (oz); thousand ounces (koz); million ounces (Moz); thousand wet metric tonnes (kwmt); million wet metric tonnes (Mwmt); million wet metric tonnes per annum (Mwmt pa); thousand dry metric tonnes (kdmt); dry metric tonne unit (dmtu); pound (lb); megawatt (MW); and equity accounted investments (EAI).

South32 Financial Information

For the half year ended 31 December 2019

CONSOLIDATED INCOME STATEMENT

for the half year ended 31 December 2019

The accompanying notes form part of the half year consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the half year ended 31 December 2019

The accompanying notes form part of the half year consolidated financial statements.

CONSOLIDATED BALANCE SHEET

as at 31 December 2019

The accompanying notes form part of the half year consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT

for the half year ended 31 December 2019

The accompanying notes form part of the half year consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the half year ended 31 December 2019