South32 Ltd (SHTLF) 2025 Full Year Earnings Call: Key Highlights of Robust Financial Results and...

Financial Performance

• Underlying EBITDA: Increased by 7% to USD 1.9 billion, indicating strong operational efficiency.
• Underlying Earnings: Rose to USD 666 million, reflecting improved profitability.
• Operating Free Cash Flow: Increased by USD 272 million, showcasing enhanced cash generation capabilities.
• Net Cash Position: Improved by USD 885 million to USD 123 million, strengthening the company's financial stability.
• Dividend Announcement: A fully franked ordinary dividend of USD 117 million or USD 3.06 per share was declared, highlighting robust financial health.

Production and Investment

• Production Growth: Achieved a 20% increase in copper production and a 6% increase in aluminum production, supporting the global energy transition.
• Investment in Future Production: USD 517 million invested to enhance base metals production at the Hermosa project, indicating a commitment to future growth.

Shareholder Returns and Capital Management

• Shareholder Returns: USD 350 million returned to shareholders, reflecting a strong commitment to returning value.
• Remaining Capital Management Program: USD 144 million still available to be returned to shareholders, suggesting ongoing shareholder-focused strategies.

Operational Challenges and Future Plans

• Safety Concerns: The tragic loss of a colleague at Cerro Matoso underscores ongoing safety challenges despite improvements in safety performance.
• Electricity Supply Issues: Uncertainty in electricity supply has halted pot relining at Mozal Aluminum, with potential care and maintenance expected in March 2026.
• Cannington Challenges: Complex underground conditions necessitate cost savings and mine life extension strategies.
• Sierra Gorda Project Delays: Delays due to the need for joint venture partner approval and technical challenges with thickeners.

Strategic Insights from Leadership

• Sierra Gorda Production Pathway: CEO Graham Kerr discussed the need for shareholder approval for the fourth grinding line, aiming for increased throughput to 58 million tonnes per annum, with a three-year timeline post-approval.
• Cannington Ore Production: The decision to derate ore production is due to complex conditions, but there are opportunities to process lower-grade stockpiles.
• GEMCO Mine Life Extension: GEMCO has an estimated 8.5 to 9 years of life based on current reserves, with exploration efforts underway to extend this.
• Taylor Project Progress: The project is on track with 33% of the capital spent, despite concerns about inflation impacts on costs.
• Mozal Power Contract Negotiations: Challenges persist regarding price and quantity of power supply, contrasting with the more stable Hillside contract.

Manganese Business Perspective

• Core Asset Evaluation: While open to selling assets at the right price, CEO Graham Kerr emphasized that GEMCO is a high-margin asset and a leader in the industry, with potential interest in acquiring Anglo's stake if it adds value.