South32 Limited

South32 reported underlying EBITDA of $2.5 billion, up 28%, and underlying earnings of $1 billion, up 55%. Group free cash flow was $610 million, up by $352 million, after $700 million invested to grow future base metals production at Hermosa. Net cash was $283 million after $327 million returned to shareholders, and the board declared a fully franked ordinary dividend of $0.054 per share, or $242 million. Looking ahead, management said the approved/under-construction base metals pipeline is expected to drive 55% production growth, with Sierra Gorda expected to grow production 5% in FY27 and a further 2% in FY28, and the fourth grinding line expected to add about 30% from 2031. They also said the Alcoa transaction is expected to complete in the second half of FY27, and the current capital management framework remains in place until deal completion.

Matt Daley framed FY26 as a strong year operationally and financially, emphasizing that base metals is now driving the business and that the portfolio is being repositioned into a simpler, higher-margin company. He sounded optimistic about the growth pipeline, pointing to Hermosa, Sierra Gorda, Cannington and Ambler as sources of future production and value. He also acknowledged a safety lapse in FY26 after the fatality at Worsley Alumina, saying the company is focused on eliminating or reducing from-height risks.

Sandy Sibenaler focused on capital allocation and the transition period around the Alcoa deal. He said the lockbox balance at 30 June was around $100 million, the current capital management framework stays in place until completion, and investors should expect a 40% payout of underlying earnings until then. Post-completion, he said capital priorities will shift to committed growth projects first, then excess capital for dividends, acquisitions and other shareholder returns; he also noted South32 has a $1.6 billion franking credit balance, part of which will be distributed through the upfront in-specie distribution.

Analysts pressed on Hermosa execution, asking about shaft-sinking cycle times, budget consumption and contingency. Management replied that the shafts are on track with the updated schedule, the ventilation shaft is close to bottom, the main shaft is tracking well, and contingency remains intact. On Cannington, management said about 200,000 tonnes of low-grade stockpiles were processed last year as a test, grades are roughly 2 to 2.5:1 versus underground ore, and the material is already mined and near the crusher, creating low-cost upside. On GEMCO, questions centered on water, dewatering and mine life; management said permit work is underway to allow larger water discharge volumes, and current life of mine is modeled to 2033.