South32: Developing nature’s resources

south32

developing nature’s resources Born out of BHP Billiton in 2015, South32 is a Perth-based mining and minerals company with operations in Australia, South Africa and South America. It maintains a globally diversified mining and metals portfolio producing bauxite, alumina, aluminium, energy and metallurgical coal, manganese, nickel, silver, lead and zinc.

Key to South32’s business is its supplier relationships. In Australia South32 is committed to building strong relationships with its suppliers locally, domestically and globally to seek innovative solutions with a focus on safety, quality and cost. Across the Africa region local procurement is a key focus area for South32. It believes in empowering local communities to be able to provide for as much of its supply chain as possible. Its Enterprise Development programme provides selected local entrepreneurs with the necessary infrastructure and skill sets to develop into viable enterprises, who should be able to feed into the supply chain. South32’s Supplier Development programme grooms key local suppliers to meet supply chain demand, while continuing to provide quality products and services.

Australian Operations

CANNINGTON Cannington mine in North West Queensland, is one of the world’s largest producers of silver and lead. The deposit was first discovered as an anomaly in an aerial survey of the region, nearly 30 years ago. Production at the mine has been underway for 20 years. In that time South32’s Cannington operation has grown to become the world’s largest and lowest cost producer of lead, producing seven per cent of the world’s lead, for use mostly in batteries and increasingly as a power source for electric vehicles. Its silver mining operations account for six per cent of the world’s silver.

GEMCO South32’s Groote Eylandt Mining Company operation (GEMCO) is located on an island in the Gulf of Carpentaria off the Australian coast and produces high-grade manganese ore. Mining starting here more than half a century ago, with a processing plant commissioned on the island not long after. Since then the plant has gone through several expansions, with the

most recent one completed in 2013. It is currently the largest and lowest-cost manganese ore producer in the world, which South32 holds a 60 per cent share in, the remaining 40 per cent being held by Anglo America Plc.

ILLAWARRA METALLURGICAL COAL Illawarra Metallurgical Coal in New South Wales produces high-quality metallurgical coal used for steelmaking, which is shipped around Australia and around the world. Steeped in coal mining history dating back more than 150 years, the region’s first coal mines opened in the early nineteenth century. Soon after, collieries were developed to mine coal for the growing local steel industry and labourers settled into the area, bringing their families with them. Roads, schools and hospitals followed, and communities flourished. Over the years South 32 has modernised coal mining at Illawarra Metallurgical Coal making it safer and more efficient. Its underground mines at Appin and Dendrobium produce high quality metallurgical coal used for steelmaking. Everything is processed at West Cliff and Dendrobium plants before being transported by road and rail down to Port Kembla in Wollongong. From there it is shipped off around Australia-and the world.

TEMCO The Tasmanian Electro Metallurgical Company (TEMCO) operation produces ferromanganese, used for steel making, which is exported to customers in Asia and North America, as well as to steel producers in Australia and New Zealand. For more than half a century TEMCO has been processing manganese at its alloy plant in northern Tasmania. Over time the company has seen many changes as technology has advanced, improving performance by making its furnaces operate at higher loads. TEMCO uses ore shipped from South32’s Groote Eylandt Mining Company operations in the Northern Territory and produces ferromanganese, which is used in the making of steel. Most of the alloy produced is exported to customers in Asia and North America, with the remaining sold to steel producers in Australia and New Zealand.

WORSLEY ALUMINA South32 holds an 86 per cent interest in Worsley Alumina, while Japan Alumina Associates (Australia) Pty Ltd owns 10 per cent and Sojitz Alumina Pty Ltd owns four per cent. Bauxite is mined near the town of Boddington, 130 kilometres south-east of Perth. It is transported by overland conveyor to the alumina refinery near Collie and turned into alumina powder, before being transported by rail to Bunbury Port. It is then shipped to smelters around the world, including South32’s Hillside and Mozal aluminium smelters in Africa.

Interest in bauxite mining in the South West of Australia stretches back to the 1960s. However, mining and refining the ore didn’t get underway until the 1980s. At the time, building the mine, conveyor belt and processing plant was Australia’s most expensive capital project, costing AUD$1.2 billion and employing 3500 people. Over the past three decades production has increased

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four-fold, making Worsley Alumina one of the largest and lowest-cost alumina producers in the world.

South African Operations

SOUTH AFRICA MANGANESE South32’s South African manganese mines are found in the manganese rich Kalahari Basin, in the country’s northern cape, which is home to 80 per cent of the world’s manganese ore body. This manganese business is made up of two manganese mines and an alloy smelter.

The open-cut Mamatwan mine started operating more than half a century ago, with the underground Wessels

mine following a few years later. The Metalloys alloy smelter was built by industry pioneer Dr H J van der Bijl back in 1939 in the city of Vereeniging, before being relocated to a site near Meyerton, where it still operates today. The Metalloys alloy smelter is one of the largest smelters in the world, producing high and medium carbon ferromanganese alloy. The smelter has the capacity to process up to one million tonnes a year of the HMM’s manganese products.

The two mines are part of the Hotazel Manganese Mines (HMM) consortium, in which South32 holds a 44.4 per cent interest; the remaining is held by Anglo America Plc and Broad-Based Black Economic Empowerment entities. The Wessels mine has vertical and incline

“South32 began construction of the Mozal operations nearly 20 years ago and included a new berth at the nearby port of Matola, access roads and a bridge. Not long after the smelter opened in late 2000 expansion plans were already underway to double its capacity”

shafts and uses the mechanized bord and pillar mining method. While the Mamatwan mine uses the terrace mining method.

About 3,000 people - both full-time employees as well as contractors - work on South African manganese projects.

SOUTH AFRICA ENERGY COAL (SAEC) Located in the coalfields of Mpumalanga, SAEC includes four collieries and three processing plants, producing energy coal for the domestic and export market. The SAEC operations are located near the towns of eMalahleni (previously known as Witbank) and Middelburg, in the coalfields of Mpumalanga. Coal mining has long been part of this region, with

the name eMalahleni translating to ‘place of coal’. On 30 April 2018, SAEC became a stand-alone business to be managed separately from the rest of the South32 Group.

SAEC includes four coal mining operations, Khutala Colliery, Klipspruit Colliery, Middelburg Colliery and the Wolvekrans Colliery, as well as three processing plants, producing energy coal for the domestic and export market. The Khutala Colliery is an underground bord and pillar operation while the Klipspruit, Middelburg and Wolvekrans collieries are opencast mines using dragline, as well as truck and shovel operations, to extract coal. South32 owns 92 per cent of South Africa Energy Coal, with the remaining eight per cent held by a Broad-Based Black Economic Empowerment consortium, led by Phembani Holdings.

MOZAL ALUMINIUM The Mozal Aluminium operation is made up of a smelter and transport infrastructure, just west of the Mozambique capital city Maputo. The land where the smelter sits was originally farming land and through negotiation, the farmers agreed to be relocated with compensation and new dwellings. Mozal Aluminium is the largest industrial employer in the country, making a significant contribution to the local economy. More than half a million tonnes of aluminium are produced here every year and recently South32 also started supplying Mozambique’s first downstream aluminium business. Developing this downstream industry will boost the local economy.

South32 began construction of the Mozal operations nearly 20 years ago and included a new berth at the nearby port of Matola, access roads and a bridge. Not long after the smelter opened in late 2000 expansion plans were already underway to double its capacity. Backed by a US$2 billion investment, the smelter was the largest private investment in the country and the first large, direct foreign investment, helping rebuild Mozambique after a period of unrest. South32 owns 47.1 per cent of Mozal Aluminium, while Mitsubishi Corporation Metals Holding GmbH holds 25 per cent, Industrial Development Corporation of South Africa Limited owns 24 per cent and the Government of the Republic of Mozambique holds 3.9 per cent (through preference shares).

HILLSIDE ALUMINIUM Hillside Aluminium is a smelter in Richards Bay using alumina imported from South32’s Worsley Alumina operation in Australia and produces high-quality, primary aluminium. To support the development of the downstream aluminium industry in South Africa, a portion of liquid metal is supplied to Isizinda Aluminium which in turn supplies aluminium slab to Hulamin, a local company that produces products for the domestic and export markets.

Aluminium is made by crushing and refining bauxite - an aluminium ore - into a white alumina powder then smelting the white alumina powder into aluminium metal. The smelter uses alumina predominantly imported from Worsley Alumina in Australia to produce high-quality, primary aluminium for the export and domestic markets. Hillside’s capacity of 720 kilotonnes a year makes it the largest producer of primary aluminium in the southern hemisphere.

South American Operations

CERRO MATOSO South32 operates one of the world’s largest producers of ferronickel, located in Northern Colombia, the Cerro Matoso open-cut mine.

For more than 30 years South32 has operated in Cordoba, but nickel was first discovered in the region way back in the 1950s. Cerro Matoso is an important driving force of the local economy and the mine has helped to shape the region. Since mining began at Cerro Matoso South32 has improved and expanded its operations.

The nickel laterite mine and smelter is a major producer of ferronickel and nickel iron alloy which is used to make stainless steel used in everyday household items. An impressive 95 per cent of water used in the mining operations is recycled.

BRAZIL ALUMINA At its Brazil Alumina operation South32 is involved in each stage of aluminium production, including bauxite mining, refining bauxite into alumina and smelting alumina into aluminium metal. For nearly 40 years bauxite mining has been underway at the Mineracao Rio do Norte (MRN) mine, in Porto Trombetas, in northern Brazil. Ore produced at the MRN mine is supplied to South32’s Alumar refinery and smelter in Sao Luis, north-eastern Brazil, which has been operating since the mid-eighties. MRN’s open-cut strip mine produces 18 million tonnes of bauxite a year, supplying the Alumar refinery (capacity of 3.5 Mtpa) and smelter (440 kilotonnes a year).

Development and Exploration

Alongside this established portfolio of operations, South32 is continually seeking new growth opportunities. It is investing in exploration activities inside

“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”

and outside of its portfolio, helping the company to keep growing and diversifying. Exploration activities are carefully selected to have a high chance of success and are spread around the world, including places South32 has not operated in before. It looks to partner and invest with junior miners, allowing access to attractive opportunities while reducing operational risk.

EAGLE DOWNS In September 2018 South32 completed the acquisition of a 50 per cent interest in the Eagle Downs metallurgical coal project and assumed operatorship with the other 50 per cent interest in the project held by Aquila Resources, a subsidiary of China’s largest steel producer, BaoWu. Located approximately 25 kilometres southeast of the town of Moranbah in Queensland’s Bowen Basin, the project is an attractive development option within the company’s growing portfolio. South32 is planning to commence a

final feasibility study which will seek to optimise the mine’s design and development. Subject to the outcome of the feasibility study and receipt of requisite approvals, the intention is to construct a multi-seam underground longwall metallurgical coal mine and processing plant with a dedicated rail spur and train loadout facility.

HERMOSA In August 2018 South32 completed the acquisition of Hermosa in the Patagonia Mountains, about 80 kilometres southeast of Tucson, Arizona. Hermosa comprises two major mineral deposits, Taylor and Clark. The Taylor deposit is a greenfield development option that has a reported resource of 155 million tonnes, averaging 3.39% zinc, 3.67% lead and 69 g/t silver. Hermosa strongly complements South32’s existing portfolio and provides an opportunity to leverage the underground mining and processing methods used at its Cannington operation in Queensland, Australia.

Recently, South32 carried out the first blast at the twin exploration declines to welcome in a new phase of development which will allow it to drill test extensions and enhance its understanding of the Project’s existing high-grade resource. This milestone comes as South32 works towards further optimising the design and development of Hermosa.

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 derisked 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.”