South32 Limited

South32 reported FY26 underlying EBITDA of $2.5 billion, up 28% year over year, and underlying earnings of $1 billion, up 55%. Group free cash flow increased by $352 million to $610 million, after investing $700 million to grow future base metals production from Hermosa. The balance sheet ended with net cash of $283 million after returning $327 million to shareholders. The Board declared a fully franked ordinary dividend of $0.054 per share, or $242 million, and the capital management program was extended to September 2027 with $209 million remaining to be returned. Looking ahead, management said Sierra Gorda production is expected to grow 5% in FY27 and a further 2% in FY28, while the fourth grinding line is expected to increase production by approximately 30% from 2031. Hermosa’s Taylor project remains on track under the updated schedule, and Cannington has been lifted by inclusion of low-grade stockpiles; the aluminium value chain sale to Alcoa is expected to complete in 2H FY27.

Matt Daley framed FY26 as a strong year operationally and financially, driven by base metals and active cost management despite inflationary pressure. He emphasized a strategic repositioning toward a simpler, higher-margin, base-metals-focused business after the Alcoa transaction, with a strong balance sheet and a pipeline that could drive substantial growth and returns. His tone was upbeat on project execution, especially Hermosa, Sierra Gorda, Cannington and Ambler, but he also made safety central after acknowledging the fatality at Worsley.

Sandy Sibenaler focused on capital allocation and shareholder returns. He said the current capital management framework stays in place until deal completion, with a 40% payout of underlying earnings including aluminium value chain earnings through that point, then a transition to a framework more aligned with the post-transaction business and a greater focus on growth projects, with dividends and other shareholder returns competing for excess capital. He also disclosed a lockbox balance of around $100 million at 30 June and noted the company has a $1.6 billion franking credit balance, part of which will be distributed through the upfront in-specie distribution of Alcoa stock; future dividends are expected to be franked as appropriate.

Analysts focused on Hermosa’s shaft sinking progress, project contingency, and whether budgets were still intact; management said both shafts are tracking to the updated schedule, the contingency is still intact, and major surface infrastructure is now being installed. On Cannington, management said roughly 200,000 tonnes of low-grade stockpiles were processed last year as a test, recoveries and paste fill interactions looked good, and the plant has potential to exceed the ~2.1 million tonne guide. Questions also addressed GEMCO water and life-of-mine: management said permit work is underway to allow larger water discharge volumes, additional piping is the main capital work, and current modeled life is about 6 years to 2033 with some upside from northern, eastern and southern options.