Company Overview

South32 (ASX: S32) is a diversified mining and metals company producing alumina, aluminium, manganese, copper, silver and zinc across operations in Australia and internationally.

Core Assets, Reserves & Resource Life

Sierra Gorda Copper Mine – Chile

South32 owns 45% of Sierra Gorda, a large open-pit copper mine producing copper, molybdenum, gold and silver. At July 2026, its Mineral Resources totalled 1.87 billion tonnes (Mt), grading 0.37% copper, while Ore Reserves reached 1.1 billion tonnes at 0.39% copper, equivalent to approximately 4.29Mt of contained copper. FY2026 attributable copper production was 69.2kt. The fourth grinding line expansion is expected to increase copper-equivalent production by approximately 30% from FY2031, with reserves supporting operations to 2045.

Cannington Mine – Queensland, Australia

South32 owns 100% of Cannington, an underground silver, lead and zinc operation. Its Mineral Resources comprise 53Mt underground and 25Mt open-pit material, compared with underground Ore Reserves of 10Mt supporting approximately six years of reserve life. FY2026 production included 8.91Moz of silver, 82.9kt of lead and 39.2kt of zinc. Processing grades averaged 150g/t silver, 4.6% lead and 2.6% zinc. South32 is investigating open-pit development and additional underground opportunities to extend the mine's operating life.

Hermosa – Taylor Zinc-Lead-Silver Project, USA

South32 owns 100% of the Hermosa project in Arizona, where the Taylor deposit is under development. Its Mineral Resources total 169Mt at 3.51% zinc, 3.88% lead and 76g/t silver; these figures include Ore Reserves. The 99Mt Ore Reserve grades 3.95% zinc, 4.50% lead and 77g/t silver, containing approximately 3.91Mt zinc, 4.46Mt lead and 245Moz silver before recovery losses. First production is expected in H2 FY2028, with an initial operating life of approximately 33 years and steady-state production of 123kt zinc, 155kt lead and 8.2Moz silver annually.

Other Operations – Manganese, Alumina, Aluminium and Copper-Nickel

South32’s remaining portfolio includes Australia Manganese and South Africa Manganese, which produced 3.03Mt and 2.09Mt of manganese ore, respectively, in FY2026. Worsley Alumina in Western Australia produced 3.72Mt of alumina, while Brazil Alumina contributed 1.41Mt. Hillside Aluminium in South Africa produced 717kt of aluminium.

Growth & Divestment Projects

South32 Sells Aluminium Assets to Alcoa, Retaining Core Metal Mines

South32 agreed to sell its interests in Worsley Alumina (86%), Hillside Aluminium (100%), Brazil’s MRN bauxite mine (33%), Brazil Alumina (36%) and Brazil Aluminium (40%) to Alcoa for an enterprise value of up to US$5.6 billion. Consideration includes US$3.1 billion cash, approximately US$1.0 billion in Alcoa shares and up to US$750 million in contingent payments. Alcoa will also assume approximately US$1.2 billion in rehabilitation provisions. Completion is expected in FY2027, subject to approvals. Sierra Gorda (copper), Cannington (silver, lead and zinc), Hermosa (zinc, lead and silver) and the manganese operations remain in South32’s portfolio. Mozal Aluminium is excluded and remains under care and maintenance.

Financials

From FY2020–FY2025, South32’s revenue peaked at US$9.3bn in 2022, when net profit margin reached 29%. Losses followed in 2023–24, before profitability recovered in 2025.

Balance sheet Trends

From FY2020 to FY2026, South32’s total assets increased from US$13.74bn to US$14.49bn (5.5%), while total liabilities rose from US$4.18bn to approximately US$4.78bn (14.4%). Liabilities grew faster than assets, although both remained relatively stable overall. The balance sheet remains equity-funded, with shareholders’ equity reaching US$9.71bn in FY2026.

Last Report overview FY2026

Earnings Growth and Financial Performance

In FY2026, underlying revenue increased 7% to US$8.11 billion. Underlying EBITDA rose 28% to US$2.46 billion, while underlying earnings increased 55% to US$1.03 billion. Net profit attributable to shareholders reached US$1.09 billion. Higher commodity prices were a major driver of improved profitability.

Aluminium Asset Sale to Alcoa

South32 agreed to sell its aluminium value chain assets to Alcoa for an enterprise value of up to US$5.6 billion. Alcoa will also assume approximately US$1.1 billion in rehabilitation provisions. Completion is expected in H2 FY2027, subject to conditions including shareholder approval. The transaction could provide substantial capital for growth projects and shareholder returns.

Cash Flow and Capital Investment

Free cash flow from operations, excluding earnings adjustment items, was US$107 million, down from US$192 million in FY2025. South32 invested US$711 million in the Hermosa development project. Net distributions from equity-accounted investments reached US$503 million, compared with US$66 million a year earlier, highlighting the importance of joint-venture cash distributions.

Sierra Gorda — Copper Growth Driver

Sierra Gorda’s payable copper-equivalent production reached 87.1kt in FY2026. Underlying EBITDA increased by US$276 million to US$758 million, with a 66% operating margin. The fourth grinding line expansion, requiring approximately US$725 million in total project capital expenditure, is expected to increase copper-equivalent production by around 30% from FY2031.

Hermosa — Long-Term Growth and Cost Risks

The Taylor project’s expected operating life increased to approximately 33 years, with first production targeted for H2 FY2028. However, expected growth capital expenditure increased to approximately US$3.3 billion. The project offers significant potential to expand zinc, lead and silver production, but higher construction costs and execution risks remain important considerations.

Cannington — Strong Margins but Limited Reserve Life

Cannington generated US$451 million in underlying EBITDA in FY2026, with a 53% operating margin. However, payable zinc-equivalent production declined 12%. Its 11Mt underground Ore Reserve supports approximately seven years of production to FY2033. South32 plans to invest US$65–80 million in FY2027–FY2028 to support potential underground mine-life extensions.

Manganese — Operational and Cost Pressures

Australia Manganese produced 3.03 million tonnes of saleable ore in FY2026, while sales reached 3.60 million tonnes. However, groundwater inflows and wet-season conditions constrained mine access. Production guidance for FY2027 and FY2028 is 2.65–2.90 million tonnes, while unit operating costs are expected to rise in FY2027.

Shareholder Returns and Capital Management

South32 returned US$327 million to shareholders in FY2026, comprising US$292 million in dividends and US$35 million in share buy-backs. Its capital management programme was increased to US$2.6 billion and subsequently extended to September 2027, with US$209 million remaining to be returned at the time of the announcement.

Mineral Reserves and Mine Life

At 30 June 2026, Sierra Gorda had 679Mt of Ore Reserves and an estimated reserve life of 14 years. Cannington held 11Mt of Ore Reserves, supporting approximately seven years of production. Hermosa’s Taylor deposit had 99Mt of Ore Reserves, with a 25-year reserve life in the annual report’s summary table, while the updated project estimate indicates an operating life of approximately 33 years.

Portfolio Transformation and Future Production

Following the proposed aluminium asset sale, South32 intends to focus on copper, zinc, lead, silver and manganese. Projects under construction or approved for development are expected to increase production volumes by approximately 55% on a copper-equivalent basis. Delivery depends on project execution, capital discipline, commodity prices and operational performance.

Fundamental view and valuation

Dividend & Fundamentals

South32 reports a P/E of 14.22. The final dividend is US$0.054 per share, yielding 2.75%, fully franked.

Financial Forecasts

South32’s forecast revenue is approximately A$7.52 billion in FY2027, A$8.00 billion in FY2028 and A$8.83 billion in FY2029. Sierra Gorda copper-equivalent production is forecast at 91,800 tonnes in FY2027 and 94,000 tonnes in FY2028. Cannington’s zinc-equivalent production is expected to remain around 290,000 tonnes annually.

South32’s estimated net profit is approximately A$1.61 billion in FY2027, A$1.51 billion in FY2028 and A$1.64 billion in FY2029. With 4.483 billion shares outstanding, estimated EPS is A$0.36, A$0.34 and A$0.37, respectively. These estimates depend on commodity prices, production and operating costs.

Valuation

For South32 (ASX: S32), a P/E range of 12–15x is reasonable, assuming sustainable analytical EPS of approximately A$0.35. This implies an estimated share value of A$4.20–A$5.25. The range reflects earnings volatility from commodity-price cycles and operating costs, balanced against growth opportunities in copper and zinc. Stronger production and project execution could support a higher multiple, while weaker metal prices or cost inflation would justify a lower valuation.

Estimated total value by reserves is estimated A$32.5bn, or A$7.24 per share, based on 4.483 billion shares.

Sierra Gorda Valuation

Total copper resources are approximately 6.89 million tonnes, including 4.31 million tonnes of reserves, leaving 2.58 million tonnes of additional resources. At US$14,630/t copper and A$1.54/US$:

Reserves: 4.31Mt × A$22,530/t × 30% valuation factor × 90% success probability × 45% ownership = A$11.8bn.

Additional resources: 2.58Mt × A$22,530/t × 20% valuation factor × 10% success probability × 45% ownership = A$0.52bn.

Total estimated value: A$12.3bn.

Other mines valuation

Cannington (silver, lead, zinc): Reserves: A$2.5bn; additional resources: A$0.7bn.

Hermosa/Taylor (zinc, lead, silver): Reserves: A$15.3bn; additional resources: A$0.6bn.

Ambler Metals: Additional resources: A$1.1bn.