South32 (LON:S32) reported higher earnings and cash flow for FY26 as its base-metals operations benefited from commodity prices and operating performance, while the miner outlined plans to sharpen its focus on copper and zinc following the proposed sale of its aluminium value chain assets.
Chief Executive Officer Matt Daley, speaking on his first annual results call as CEO, said group underlying EBITDA rose 28% to $2.5 billion and underlying earnings increased 55% to $1 billion. Cash flow from operations rose by $352 million to $610 million, even after the company invested about $700 million in the Hermosa project to support future base-metals production.
Safety and Aluminium Sale
Daley opened the call by addressing a fatal incident at Worsley Alumina in March 2026, in which employee Simon Mukwarami died. Daley said the event had a “profound impact” on the company, particularly the Worsley team, and said South32 had taken steps to reinforce procedures and controls for working at heights.
“As South32 CEO, I am unwavering in my commitment to a workplace free from fatalities,” Daley said.
On July 1, South32 announced an agreement to sell its aluminium value chain assets to Alcoa for an enterprise value of up to $5.6 billion, plus Alcoa’s assumption of related rehabilitation provisions exceeding $1 billion. Daley said the transaction would simplify the company and reposition it as a base-metals-focused business with higher-margin assets in tier-one jurisdictions.
The company expects the transaction to close in the second half of FY27, subject to required conditions and approvals.
Copper and Zinc Growth Pipeline
Daley said South32 expects 55% production growth from projects that are under construction or approved, led by development work at Sierra Gorda in Chile and the Hermosa project in Arizona.
At Sierra Gorda, South32 announced a 61% increase in ore reserves to 1.1 billion tons, extending the initial reserve life by roughly five years to 19 years. The company expects production to rise 5% in FY27 and a further 2% in FY28, supported by higher planned copper grades and improved mineralogy in mining phases seven and eight.
Daley said additional drilling, totaling about 85,000 meters, improved confidence in the ore body and allowed the company to convert mineral resources to reserves. He said lower clay content in the planned mining areas should support improved mill throughput and recoveries.
A fourth grinding line at Sierra Gorda, which has been approved, is expected to lift production by approximately 30% from FY31.
At Hermosa, the company is advancing the Taylor zinc-lead-silver project. Daley said ventilation-shaft sinking was progressing in line with the company’s latest update, while primary and secondary mills and flotation cells had been installed. South32 also continues exploration and study work at the nearby Peak deposit, which could support potential future copper production through an integrated development with Taylor.
Cannington Expansion Studies and Manganese Challenges
South32 is also evaluating ways to extend the life of its Cannington operation, including processing lower-grade stockpile material to make greater use of available mill capacity. Daley said Cannington’s mill can operate at an annualized rate of about 3 million tons, compared with current throughput of roughly 2.1 million tons.
The company is progressing a feasibility study for an open-pit development option and is assessing how an open pit could operate alongside the existing underground mine. Daley said an integrated plan could support additional resource-to-reserve conversion and potentially extend mine life into the end of the next decade or beyond. South32 expects to provide an update around its half-year results.
Meanwhile, Australia Manganese’s GEMCO operation faces uncertainty related to water management and the timing of the next wet season. Daley said South32 is working with the Northern Territory government and traditional owners on permits to discharge larger water volumes. Required works largely involve pipework and water outlets, he said, but permitting will take time.
Daley said the company’s primary focus for manganese is safe and stable operations, while capital allocation will increasingly favor copper and zinc growth.
Capital Allocation to Become More Flexible
Chief Financial Officer Sandy Sibenaler said South32’s existing 40% payout ratio would remain in place until completion of the aluminium transaction. However, she said the company does not intend to retain a fixed payout ratio after the sale closes.
Under the post-transaction framework, dividends will compete with buybacks, growth investments and other uses of excess capital based on their potential to create shareholder value. Sibenaler said South32 would continue to prioritize safe and reliable operations, a strong balance sheet, and committed growth and life-extension projects, including Taylor.
The company has not set a target net-cash position for the future. Sibenaler said South32 sees value in maintaining regular shareholder distributions but will assess capital returns alongside investment opportunities.
Daley said the company’s near-term priorities are operating assets safely and reliably, completing the aluminium transaction, and delivering growth at Hermosa and Sierra Gorda. While South32 will continue to examine market opportunities, he said it was not seeking acquisitions simply to replace divested assets.
“For us, it is all about value rather than growth for the sake of growth,” Daley said.
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.
