South32 Regulatory News (S32)

17 June 2019

South32 Limited

(Incorporated in Australia under the Corporations Act 2001)

(ACN 093 732 597)

ASX / LSE / JSE Share Code: S32 ADR: SOUHYISIN: AU000000S320

south32.net

South32 Limited

hermosa project - mineral resource declaration

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) is pleased to report for the first time a Mineral Resources estimate for the Taylor Deposit which forms part of its 100% owned Hermosa Project located in Arizona, USA (Appendix 1 - Figure 1). The Mineral Resource (Table A) is reported in accordance with the JORC Code (2012)[1] guidelines at 155 million tonnes, averaging 3.39% zinc, 3.67% lead and 69 g/t silver with a contained 5.3 million tonnes of zinc, 5.7 million tonnes of lead and 344 million ounces of silver. The Mineral Resource remains open at depth and laterally, with multiple targets to be tested as we continue our extensive surface drilling program.

72% of the Mineral Resource is in the Measured and Indicated categories (Table A), including 21 million tonnes in the Measured category at 4.07% zinc, 3.61% lead and 51 g/t silver, providing a compelling base from which to advance the Hermosa Project's pre-feasibility study and target additional mineralisation. To demonstrate the deposit's optionality, a range of tonnages and grades for the Mineral Resource at different NSR[2] cut-offs is included in Table B. The Mineral Resource estimate does not include the zinc-manganese-silver oxide Clark Deposit[3].

South32 Chief Executive Officer, Graham Kerr said "Our declaration of a Mineral Resource for the Taylor Deposit for the first time in accordance with the JORC Code represents a key milestone as we progress one of the most exciting base metals projects in the industry. The ongoing drilling program, and the resampling and relogging activity undertaken since our acquisition of the Taylor Deposit has significantly de-risked our investment, increased our confidence in the project and confirmed its ability to deliver strong returns to our shareholders over many decades. We expect to conclude our pre-feasibility study for the project before the end of the 2020 financial year."

The Hermosa Project is a polymetallic development option located in Santa Cruz county, Arizona which is 100% owned by South32. It comprises the zinc-lead-silver Taylor Deposit, the zinc-manganese-silver oxide Clark Deposit and an extensive, highly prospective land package with potential for discovery of polymetallic and copper mineralisation.

Full details of this update are contained in the attached report.

Appendices prepared in connection with this report have been submitted to UK Listing Authority (UKLA) national storage mechanism and are available for inspection at http://www.morningstar.co.uk/uk/NSM or are otherwise available on South32's website at http://www.south32.net.

Foreign Estimate for the Clark Deposit

Information that relates to estimates of Mineral Resources for the Clark Deposit (Arizona Mining Inc) are foreign estimates under ASX Listing Rules and are not reported in accordance with the JORC Code. Reference should be made to the clarifying statement on Mineral Resources in the market announcement "South32 to acquire Arizona Mining in agreed all cash offer" dated 18 June 2018, in accordance with ASX Listing Rule 5.12. South32 is not in possession of any new information or data relating to the foreign estimate that materially impacts on the reliability of the estimates or has the ability to verify foreign estimate as Mineral Resources in accordance with the JORC Code. South32 confirms that the supporting information contained in the clarifying statement in the 18 June 2018 market announcement continues to apply and has not materially changed. Competent Persons have not done sufficient work to classify the foreign estimates as Mineral Resources in accordance with JORC Code. It is uncertain that following evaluation and further exploration that the foreign estimates will be able to be reported as Mineral Resources or Ore Reserves in accordance with the JORC Code. South32 intends to conduct a work program to increase confidence in the resource to ensure that resources are reported in accordance with the JORC Code.

About South32

South32 is a globally diversified mining and metals company. We produce bauxite, alumina, aluminium, energy and metallurgical coal, manganese, nickel, silver, lead and zinc at our operations in Australia, Southern Africa and South America. We are also the owner of a high grade zinc, lead and silver development option in North America and have several partnerships with junior explorers with a focus on base metals. Our purpose is to make a difference by developing natural resources, improving people's lives now and for generations to come, and to be trusted by our owners and partners to realise the potential of their resources.

Further information

JSE Sponsor: UBS South Africa (Pty) Ltd17 June 2019

Table A: Mineral Resources for the Taylor Deposit as at 31 May 2019 in 100% terms2 

Million dry metric tonnes2, % Zn- Percent zinc, % Pb- Percent lead, g/t Ag- grams per tonne of silver.

Table B: Mineral Resources for the Taylor Deposit as at 31 May 2019 in 100% terms2

Notes:

1. Cut-off grade: NSR of US90$/t for both UG Sulphide and UG Transition.

Input parameters for the NSR calculation are based on South32's long term forecasts for zinc, lead and silver pricing; haulage, treatment, shipping, handling and refining charges. Metallurgical recovery assumptions differ for geological domains and vary from 85% to 92% for zinc, 90% to 94% for lead, and 75% to 83% for silver.

2. All masses are reported as dry metric tonnes (dmt). All tonnes and grade information have been rounded to reflect relative uncertainty of the estimate, hence small differences may be present in the totals.

Estimate of Mineral Resources for Hermosa

South32 confirms the first time reporting of the Mineral Resource estimate for the Taylor carbonate replacement deposit (CRD) as at 31 May 2019 (Table A).

The estimates of Mineral Resources are reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 (JORC Code) and the Australian Securities Exchange Listing Rules. The breakdown of the total estimates of Mineral Resources into the specific JORC Code categories is contained in Table A. This report summarises the information contained in the JORC Code Table 1 which is included in Appendix 1 to this report.

Geology and geological interpretation

The Taylor Deposit within the Hermosa Project is a CRD style zinc-lead-silver massive sulphide deposit. It is hosted in Permian carbonates of the Pennsylvanian Naco Group of south-eastern Arizona (Appendix 1 - Figure 3).

The Taylor Deposit comprises the upper Taylor Sulphide and lower Taylor Deeps domains that have a general northerly dip of 300 and are separated by a low angle thrust fault. Mineralisation within the stacked profile of the thrusted host stratigraphy extends 1200m from near-surface and is open at depth. Mineralisation is modelled for thirteen litho-structural domains for an approximate strike of 2500m and width of 1900m. (Appendix 1 - Figure 5).

Drilling techniques

The Mineral Resource estimate is based on data from 251 surface diamond drill holes of HQ (95.6mm) or NQ (75.3mm) diameter (Appendix 1 - Figure 4). Vertical drilling was undertaken for 146 of 251 holes used in this resource estimate. Since August 2018, holes have been drilled between 600 and 750 dip to maximise the angle at which mineralisation is intersected. Oriented drilling was introduced in October 2018 to incorporate structural measurements into geological modelling for stratigraphy and fault interpretation.

Sampling and sub-sampling techniques

All 289,660m of drilling used for geology, geometallurgy and geotechnical purposes is diamond core. The drill half cores were sampled at either 1.5m (5') intervals or terminated at litho-structural boundaries. Samples were submitted for preparation at an external ISO-17025 certified laboratory, Australian Laboratory Services (ALS), in Tucson. Preparation involved crushing to 2mm, a rotary split to 250g and pulverisation to 85% passing 75µm from which a 25g pulp was measured for assay. The mineralised intersections were verified by geologists throughout each drilling program and reviewed independently against core photos by an alternate geologist prior to geological interpretation.

Sample analysis method

Samples of 1g taken from 25g pulp were processed at ALS in Vancouver where they were digested using a four-acid leach method. This was followed by Inductively Coupled Plasma - Atomic Emission Spectroscopy (ICP-AES) determination for 33 elements. A range of certified reference materials (CRM) were routinely submitted to monitor assay accuracy, with low failure rates within expected ranges for this deposit style, demonstrating reliable laboratory accuracy.

External third-party laboratory pulp duplicate and CRM checks indicate no significant bias was determined for the primary assay laboratory. Results of routinely submitted field duplicates to monitor sample representivity, coarse crush and laboratory pulp duplicates to quality control sample preparation homogeneity, and certified blank submissions to detect cross-contamination were all within an acceptable range for resource modelling.

Estimation methodology

Resource estimation was performed by ordinary kriging interpolation for four elements of economic interest (Zn, Pb, Ag, Cu), two potentially deleterious elements (As, Mn) and four tonnage estimation elements (Fe, Ca, S, Mg). Search estimation criteria are consistent with geostatistical models developed for each estimation domain according to the appropriate geological controls. Validation includes statistical analysis, swath plots and visual inspection.

Specific gravity measurements from drill cores were used as the basis for estimating dry bulk density in tonnage calculations for both mineralised and non-mineralised material.

Mineral Resource classification

Mineral Resource classification criteria are based on the level of data informing both the geological model and grade estimation. Grade estimation confidence is overlain on the geological modelling classification criteria whereby kriging variance is matched to block estimation conditions - that relates to the number and distance of data informing the estimate in relation to semivariogram models for Zn, Pb and Ag. Measured Resources are interpolated from data within a range equivalent to a likely grade control drill spacing of 30m to 50m. Indicated Resources are estimated from data spacing within approximately 180m, 120m and 15m in the maximum, intermediate and short-range grade continuity directions. Inferred Resources are constrained by the reporting of estimates to within demonstrated grade and geological continuity ranges, and generally to a maximum of 400m beyond data.

Mining and metallurgical methods and parameters

Reasonable prospects for eventual economic extraction have been determined through assessment of the Mineral Resource at a scoping study level for processes, ranging from stope optimisation and mine scheduling through to mineral processing and detailed financial modelling. Underground mining factors and assumptions for longhole stoping on a sub- or full-level basis with subsequent paste backfill are made based on industry benchmark mining production and project related studies, calibrated against South32's Cannington zinc, lead and silver mine production.

Cut-off grade

The Taylor Deposit of the Hermosa Project is a polymetallic deposit which uses an equivalent net smelter return (NSR) value as a grade descriptor. Input parameters for the NSR calculation are based on South32's long term forecasts for zinc, lead and silver pricing; haulage, treatment, shipping, handling and refining charges. Metallurgical recovery assumptions differ for geological domains and vary from 85% to 92% for zinc, 90% to 94% for lead, and 75% to 83% for silver.

A dollar equivalent cut-off of NSR US$90/dmt forms the basis of assessment for reasonable prospects for eventual economic extraction, supported by scoping level studies.

Competent Person's Statement

The information in this report that relates to Mineral Resources for the Taylor Deposit is presented on a 100% basis, represents an estimate as at 31 May 2019, and is based on information compiled by Matthew Readford.

Mr. Readford is a full-time employee of South32 and is a member and Chartered Professional of the Australasian Institute of Mining and Metallurgy. Mr. Readford has sufficient experience relevant to the style of mineralisation and type of deposit under consideration, and to the activities being undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. The Competent Person consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

Additional information is contained in Appendix 1.