South32 (LON:S32) CEO Graham Kerr used a conference session to reflect on the company’s portfolio transformation during his tenure and to outline key operational and growth priorities across its asset base, with a particular focus on base metals exposure, project execution, and capital discipline.
Portfolio shift toward base metals and the Americas
Kerr said the company has undergone a major reshaping over roughly 11 years, emphasizing that the progress was driven by the people and talent built inside the organization. He contrasted South32’s starting point—about 45% of value in Australia and 40% in Southern Africa, with roughly half of the commodity exposure in thermal and metallurgical coal and half in base metals (predominantly aluminum, with some zinc)—with its current positioning.
Cannington: life extension work and open pit concept
Discussing the Cannington operation, Kerr said the mine has been running for almost 29 years and continues to achieve average margins of 40% to 60%. He said South32 extended the underground mine life by another two years, taking it to FY2033, and the team is assessing whether it can be extended to FY2035.
He also said the company plans to complete a study this year on an open pit concept that could potentially extend operations beyond FY2040, with an update expected toward the back end of the year. Kerr described Cannington as a standout asset in terms of longevity and cash flow generation.
Sierra Gorda: expansion studies and oxide opportunity
Kerr said the acquisition of South32’s 45% interest in Sierra Gorda has worked out well and would be “much more expensive today.” He noted the asset is jointly controlled with partner KGHM, which he called a strong partner, and said both parties see additional potential.
He outlined several options under evaluation:
- Fourth grinding line: Kerr said a fourth grinding line could increase processing throughput by about 20% to roughly 58 million tons, lift copper production, and lower costs. He said the partners are conducting technical reviews and expect to take the project to their respective boards by the end of the financial year for a decision to move into execution.
- Oxide material: He said there are about 110 million tons of oxide material on the surface averaging around 0.36% grade. South32 is considering a low-cost leaching facility or toll treatment options with neighboring operators that have capacity.
On timing, Kerr said a fourth grinding line would typically take about three to four years to build following a final investment decision, with production following soon after completion.
Hermosa: Taylor progress, federal approval timeline, and Clark funding support
Kerr described Hermosa (formerly Arizona Mining) as having three main sources of value: the Taylor deposit (lead, silver, and zinc), the Clark project (manganese-rich and shallower), and a broader land package with multiple targets. He said the asset has been a “rollercoaster” in terms of understanding water management and orebody access, but called it an “amazing ore body.”
For Taylor, Kerr said the deposit remains open in multiple directions and could ultimately have a mine life in excess of 40 years, with a position at the low end of the cost curve. He said the company is on track to receive federal approval in the current calendar year, and that construction is about 48% complete.
He also discussed an assessment that South32 plans to complete in the back end of the financial year, which he said is being driven by the level of spending and commitment as contracts are finalized. Kerr said the company has been handling less water than expected—about 2,000 gallons per minute versus an expected 4,000—but emphasized that risk remains until the shaft is completed and dewatering is fully proven. He also flagged uncertainty tied to tariffs and domestic U.S. steel costs, citing fluctuating tariff rates affecting equipment sourced from India.
On Clark, Kerr said a decline was completed ahead of schedule and on budget. He added that the project received a grant covering about one-third of that capital expenditure, and that if South32 proceeds to the next stage of building a processing facility, it expects similar grant support for roughly one-third of that cost.
Operations, costs, capital allocation, and energy constraints
On cost inflation, Kerr said the most acute pressure is being felt in Chile, particularly for project execution and equipment. He said the U.S. is beginning to see tariff impacts in areas such as steel and piping, while conditions in southwest Western Australia have been comparatively stable. He added that competition for specialist labor—such as jumbo operators used at Cannington—could intensify due to higher pay offers in the Western Australian gold sector.
Kerr also addressed the company’s aluminum value chain exposure, which he estimated at roughly 35% to 50% of value depending on alumina and aluminum prices. He said aluminum has been a good cash-flow contributor that helps fund growth investments, while noting that affordable energy availability is a long-term challenge for the sector and that alumina prices are “quite depressed” even as aluminum prices are high.
On asset performance, Kerr said stability improved after selling Illawarra, which he described as having operational variability. He added that most of South32’s remaining assets have historically met production guidance, with variability driven by factors such as grade sequencing at Cannington and extreme weather events like the cyclone disruption at GEMCO.
Kerr said GEMCO has returned to full production after Cyclone Megan, which brought unusually high rainfall and damaged infrastructure including the ship-loading berth. He said insurance proceeds covered property and equipment damage, and while the site is still managing more water than normal, operations have recovered and stockpiles are being rebuilt. Kerr said the operation has about six years of reserve life, with potential to extend to about eight years by converting southern leases resources, and the company plans to start exploring northern leases after gaining access from traditional owners.
In Mozambique, Kerr said South32 has no choice but to place the Mozal aluminum smelter into care and maintenance due to power constraints. He said the smelter requires about 940 MW of continuous power, but after two years of severe drought the Cahora Bassa hydro system can supply only about 10% of requirements. He said restarting a smelter is difficult and expensive, but the government believes power could return over the next four years as rainfall improves and refurbishments occur. Kerr estimated care and maintenance costs at about $5 million in 100% terms.
On capital allocation, Kerr said the company prioritizes a strong balance sheet and maintaining an investment-grade credit rating, especially with peak capital expenditure expected over the next 18 to 24 months. He said South32 continues share buybacks, adding another AUD 100 million this year, and noted the company has repurchased about 15% of its stock over time at an average price around AUD 3.
Regarding M&A, Kerr said the company remains “match fit” from past transactions and continues to screen opportunities through a value lens, with copper and zinc as preferred commodities.
He also discussed energy resilience in South Africa, saying Hillside uses about 1,140 MW and remains the largest paying customer on the network. Despite improvements in the broader system, Kerr said Hillside still experiences record load shedding and is used to help balance the grid. He said South32 is confident it can extend its power contract when it expires in 2031 and expects the composition of power to shift toward nuclear and renewables to support a “greener” contract.
In closing remarks, Kerr said his advice to incoming CEO Matt was to meet and listen to the company’s people. Kerr said Matt’s operational and technical experience—across organizations including Glencore and Anglo, and early experience at Mount Isa—should position South32 to further optimize operations following the portfolio reshaping, which Kerr said still has more work to do.
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.
