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

ILLAWARRA METALLURGICAL COAL - COAL RESERVES UPDATE

South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) announces changes to its estimates of Coal Reserves for Illawarra Metallurgical Coal following the conclusion of a commercial agreement to relinquish a portion of its Mining Lease in the Appin area.

Coal Reserves for the Bulli seam have been reduced by 22Mt[1] to 114Mt following the change. The Coal Reserves for the Wongawilli seam are unchanged.

Illawarra Metallurgical Coal (IMC) consists of two underground coal mines (Appin and Dendrobium) and two coal processing facilities. It is 100% owned by South32 and is located 80 kilometres south of Sydney, in New South Wales.

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.

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

Update on estimates of Coal Reserves for Illawarra Metallurgical Coal

South32 confirms a reduction of 22Mt to its Coal Reserves estimate as at 31 May 2019 for Illawarra Metallurgical Coal. The decrease relates to the partial relinquishment of Consolidated Coal Lease 767 from the Appin area of the Illawarra Metallurgical Coal project and modifications to the mine layout. The partial lease relinquishment was the result of a commercial arrangement with a land holder within the lease area.

The Coal Resources and Coal Reserves estimates as at 31 May 2019, are presented in Appendix 1, Table 1 and Table 3. A comparison to previously published Coal Resources and Coal Reserves estimates (as at 30 June 2018) are presented in Appendix 1, Table 2 and Table 4.

The estimates of Coal Resources and Coal Reserves have been 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 into the specific JORC Code categories is contained in the Appendix 1 Tables. This report also summarises the information contained in the JORC Code Table 1, which is included in Appendix 2 of this report.

Estimate of Coal Reserves

The declared Coal Reserve estimates are based on the Illawarra Metallurgical Coal (IMC) Coal Resource estimates as at 31 May 2019.

Material and economic assumptions

IMC's Appin mine (Appin) has been operating since 1962. The run-of-mine (ROM) coal is processed onsite before being transported by truck to domestic customers and the Port Kembla Coal Terminal for export.

Sufficient studies have been undertaken to enable the Coal Resource to be converted to Coal Reserve based on current operating methods and practices.

Capital costs are based on the expected future development of the mine, processing and sustaining capital requirements. The costs have been accounted for in the operation's valuation models. Operating costs are estimated as part of South32's internal budgeting process, which also considers transport costs including current truck, conveyor and contractor rates. Other economic assumptions used for the valuation reflect South32's internal views of demand, supply, volume forecasts and competitor analysis and are commercially sensitive.

Coal Reserve classification

Proved and Probable Coal Reserves are derived from the respective Coal Resource classifications in accordance with the JORC Code.

The Reserve Life reported as of 31 May 2019 reflects the scheduled extraction period in years for the total Coal Reserve in the current approved life of operation plan.

Mining method and assumptions

The Appin mining operation is centred on existing surface accesses and infrastructure in the area around the Appin township.

Underground longwall extraction methods have been utilised at Appin for over 50 years to efficiently extract coal from the Bulli seam. This mining method is used to model and report the 31 May 2019 Coal Reserve estimate.

The Coal Reserve is reported within mine layouts, generated using mine design assumptions, including limiting factors (i.e. geological features, predicted subsidence impacts, mining constraints etc.), which are applied to the reserve model.

The dilution estimates are determined using historical ROM ash values recorded for comparable areas. Average dilution across IMC operations is 10% and typical coal loss is around 1.5%.

Processing method and assumptions

IMC produces washed and sized coal for delivery to customers. The processes utilised are industry standard flotation and gravity separation.

Predicted recoveries at the processing plants are derived using a model based on historical data and simulated sample results over the life of the operation. The average recovery for the Bulli seam is 84%.

Cut-off parameters

There was no seam thickness cut-off grade applied because the minimum thickness within the mine layout is economic.

Estimation methodology

The Coal Reserve as at 31 May 2019 was estimated using updated mine layouts, applying the current mining parameters, constraints, and exclusions, which were then confirmed in an economic mine schedule.

Material modifying factors

The reported Coal Reserve is within the mine layout, using current mining methods and practices. These are fully contained within South32 mining and exploration tenements. The Coal Reserve is scheduled to be extracted within the expiration date of current Development Consents.

IMC is an operating asset which has all the required infrastructure and environmental approvals required to operate its existing mine sites. The requirement for future infrastructure and approvals has been considered in the mine schedule and assumes no outstanding or foreseeable issues with material legal agreements or regulatory approvals. Long-term marketing arrangements are in place.

Competent Persons Statements

The information in this report that relates to estimates of Coal Resources for IMC is presented on a 100% basis and represents an estimate as at 31 May 2019. It is based on, and fairly represents, information and supporting documentation compiled by Jasmine Gale.

The information in this report that relates to estimates of Coal Reserves for IMC is presented on a 100% basis and represents an estimate as at 31 May 2019. It is based on, and fairly represents, information and supporting documentation compiled by Matthew Rose.

Ms Gale and Mr Rose are full time employees of South32. Both individuals are members of the Australasian Institute of Mining and Metallurgy. Ms Gale and Mr Rose have 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'. Each Competent Person consents to the inclusion in this report of the matters based on their information in the form and context in which it appears.

Additional information is contained in Appendix 1 and Appendix 2.