South32 (LON:S32) reported what management described as a strong financial half, supported by higher prices for base and precious metals and steady operating performance across its portfolio. On its earnings call, the company also highlighted improving safety indicators, reiterated production unit guidance across operated assets for FY2026, and outlined progress and key decision points for several growth projects including Hermosa (Taylor), Sierra Gorda, and Cannington.
Safety and operating performance
Chief Executive Officer Graham Kerr opened the call by pointing to improvements in safety performance, including what he characterized as a “significant improvement” in significant hazard frequency during the half. Management said this reflected improved hazard awareness and a more proactive reporting culture, alongside “positive reductions” across lagging indicators. Kerr emphasized the company remains focused on continuing to improve.
Financial results and shareholder returns
For the half, South32 reported underlying EBITDA of $1.1 billion, a group operating margin of 28.2%, and growth in underlying earnings of $435 million. The company ended the period with net debt of $25 million, which management said supports investment in growth alongside shareholder returns.
Management said commodity price tailwinds and a planned drawdown of inventories at Mozal are expected to contribute to cash generation in the second half.
South32 announced a fully franked ordinary dividend of $175 million (described on the call as in respect of H2 FY2026) and a $100 million increase in its $2.6 billion capital management program. Kerr also cited $209 million in “managed returns” to shareholders.
Hermosa (Taylor) construction update and permitting timeline
On the Hermosa development in the U.S., Kerr said construction continues at the large-scale, long-life Taylor zinc-lead-silver project and that the company has also returned further high-grade copper exploration results from the Peak deposit, supporting the potential for a continuous copper system connecting to Taylor.
As part of scheduled project execution, South32 plans an assessment of project milestones and capital expenditure in H2 FY2026, informed by pricing for additional underground and surface infrastructure packages expected to be awarded during that period.
In response to analyst questions on progress against budget and timelines, Kerr said total spend to date was “just over $1+ billion,” representing about 48% of the budget schedule. He said the first two surface packages came in at expected pricing and noted mobile equipment procurement was also tracking as expected.
On shaft development, Kerr said the company had completed the first piece of lateral development on the 3,680 level for the bench shaft, executed slightly ahead of budget and on cost. He reported the bench shaft was about 56% complete (459 meters of 824), with sinking set to resume in Q3 FY2026, while the main shaft was about 41% complete (370 meters of 898). He cited some challenges on the bench shaft including steel supply, water conditions (though less than expected), and underperformance by contractor Redpath, while noting the main shaft had incorporated lessons learned and was making better progress.
While Kerr said schedule trend lines did not indicate major changes to expected dates, production, or capital costs, he cautioned that time-and-materials contracts for shaft sinking create uncertainty “until we get to the bottom of those shafts.” He also flagged tariffs as an ongoing unknown, though he said the company had not seen material impacts to date.
On permitting, Kerr said the draft Environmental Impact Statement (EIS) was issued in the fourth quarter of FY2025, with the final EIS expected in South32’s second half of FY2026. He said the company still expects a “record decision” and full federal permits for Taylor, Clark, and Peak in the first half of FY2027.
Regarding labor availability, Kerr said turnover among professional staff has been low and the company has continued to attract talent as the project advances toward commissioning and operations. He also said that while many U.S. projects are discussed, relatively few are in active execution at the same scale.
Sierra Gorda: leadership changes, growth options, and oxide project work
South32 discussed multiple value opportunities at Sierra Gorda, including the proposed fourth grinding line, oxide material opportunities, and exploration upside. Kerr said an exploration target has been defined at Catabela Northeast adjacent to the Catabela pit, ranging from 1.1 to 2.9 billion tons, highlighting potential for mine-life extension.
Management said the feasibility study for the fourth grinding line is nearing completion, with an independent review to be conducted by joint venture partners to support a potential joint final investment decision in mid-calendar 2026.
Answering a question about project delays and management changes, Kerr said issues had to be resolved related to “additional thickness” and achieving a solids state of about 62% to advance licensing for expansion. He also said South32 and Sierra Gorda were not satisfied with the project director’s performance, and agreed to make a leadership change about halfway through the last calendar year, bringing in a new asset leader and a new project director. Kerr said the changes brought a “fresh perspective” and that the project is moving in a direction management is “far more comfortable with.”
On the oxide project, Kerr said the company is prioritizing the fourth grinding line first, and that while some early thinking has been done on the oxide material, more work remains. He described roughly 110 million tons of stockpiled oxide material at an approximate grade of 0.38, with a feasibility study underway focused on low-cost heap leaching. He said the company is also evaluating whether to develop its own solution or potentially toll-treat through nearby operators, with more clarity hoped for toward the back end of the calendar year. Kerr acknowledged potential longer-term synergies among nearby mines, though he noted complexity increases with more parties involved.
Mozal power constraints and Hillside contract timeline
Management provided additional detail on the decision to move the Mozal aluminum smelter toward care and maintenance, centering on power availability and pricing. Kerr said Mozal typically draws power from Cahora Bassa (HCB), and that after two years of severe drought, HCB indicated it could not meet Mozal’s power needs. Kerr said it may take at least two years for the basin to recharge, with additional maintenance requirements leaving full power uncertain over the next 2–4 years.
He said the company explored sourcing power from Eskom, but that the only formal offer received was based on “mega flex,” which he said is closer to $100 per U.S. megawatt hour, making continued operation “untenable.” Kerr said South32 decided in December to stop buying certain materials after not seeing a breakthrough on power contracting, and noted the smelter was approaching shortages of pitch and coke with lead times of 5–8 weeks, limiting the ability to keep pots running as the power contract expires.
On costs, Kerr said ongoing care and maintenance would be about $5 million per year on a 100% basis, while the closure and rehabilitation estimate is about $119 million. He said South32 would work closely with the Mozambique government and would not move into full closure mode until the future of the HCB power contract is understood, while acknowledging that restarting a smelter after a multi-year shutdown is difficult.
For Hillside, Kerr said the power contract does not expire until 2031. He said Hillside is powered by Eskom and that the regulatory environment in South Africa includes a “heavy industrial tariff” allowing more flexibility than exporting power to Mozambique. Kerr said interactions with Eskom give the company confidence that Hillside remains an important asset for Eskom going forward.
Cannington reserve increase and extension options
At Cannington, Kerr said South32 announced a 28% increase in underground ore reserves. He described Cannington as a high-value business, citing margins over the past several years of approximately 46%–53% for zinc, lead, and silver, and said that extending the asset’s life is an attractive, lower-cost option given existing infrastructure and workforce.
Kerr said South32 plans to spend roughly $65 million to $80 million over 2027 and 2028 on ventilation, electrical shafts, and infrastructure, which he said could support further underground growth. He stated the ore reserve increased to 13 million tons, adding about two years of underground life, and said the underground resource is about 45 million tons. He also said the company has done work on open-pit options, redesigned pit concepts informed by underground potential, and improved approaches to processing remnant, historically challenging low-grade surface stockpiles.
In closing remarks, Kerr reiterated that South32’s operations are running to plan, costs and production guidance were unchanged, and that the company sees further upside based on spot prices relative to the first half. He said the company remains focused on sustaining momentum into the second half and delivering growth projects in base metals.
About South32 (LON:S32)
South32 Limited operates as a diversified metals and mining company in Australia, India, China, Japan, the Middle East, Mozambique, the Netherlands, Brazil, Russia, South Africa, South Korea, the United States, and internationally. The company operates through Worsley Alumina, Brazil Alumina, Brazil Aluminium, Hillside Aluminium, Mozal Aluminium, Sierra Gorda, Cannington, Hermosa, Cerro Matoso, Illawarra Metallurgical Coal, Australia Manganese, and South Africa Manganese segments. It has a portfolio of assets producing bauxite, alumina, aluminum, copper, silver, lead, zinc, nickel, metallurgical coal, manganese, ferronickel, and other base metals.
