South32 Stock

Thank you for standing by, and welcome to the South32 2026 Full Year Results Investor and Analyst Conference Call. [Operator Instructions] Today's call will begin with opening remarks from South32 CEO, Matt Daley, followed by Q&A. [Operator Instructions] I will now hand over to Matt Daley, CEO. Please go ahead.

Thanks, [ Kaley ], and hello, everyone. Thanks for joining us today as we discuss our financial results for FY '26. On the call today with me is Sandy, our Chief Financial Officer. It's a really exciting time for our business with our positive operating performance and repositioning to base metals driving strong financial results. There's a clear pathway to substantial value-accretive growth in copper and zinc with 55% production growth expected from projects under construction or approved and a pipeline of growth and life extension options beyond this that can drive further value and returns for our shareholders.

Before I run through our financial results, I just want to take a moment to speak about safety. The most important measure of our success as a company is the safety of our people. In FY '26, we didn't live up to the expectations that we set for ourselves. The death of our colleague, Simon Mukwarami, in an incident at Worsley Alumina in March 2026 had a really profound impact on everyone at South32, particularly our people at Worsley. Simon's family, friends, and colleagues remain in our thoughts.

We have taken steps to further enhance awareness of Worsley's existing procedures and controls for working at heights, and we continue to look for opportunities to design tasks in a way that eliminates or reduces from-height risks. As South32 CEO, I'm unwavering in my commitment to a workplace free from fatalities. So turning to our financial results. Our base metals business drove strong earnings and cash flow with strong operating performance, enabling us to capture the benefit of commodity price tailwinds, while active cost management mitigated the impact of our industry-wide inflationary pressures.

Group underlying EBITDA increased by 28% to $2.5 billion, and underlying earnings increased by 55% to $1 billion. Group cash flow from operations (sic) [ Group free cash flow ] increased by $352 million to $610 million after investing $700 million to grow future base metals production from Hermosa. Our balance sheet remained strong with net cash of $283 million after returning $327 million to shareholders during the period. Reflecting our strong financial performance and disciplined approach to capital allocation, the Board has today resolved to pay a fully franked ordinary dividend of $0.054 per share or $242 million in respect of the June 2026 half year.

We've also extended our capital management program to September 2027, with $209 million remaining to be returned to shareholders. On the 1st of July, we announced the sale of our aluminium value chain assets to Alcoa for an enterprise value up to $5.6 billion, plus the assumption of related rehabilitation provisions of over $1 billion. The transaction will unlock significant value for shareholders and reposition South32 as the leading base metals company on the ASX. We have high-margin assets in Tier 1 jurisdictions, a transformational growth pipeline, and a strong balance sheet to deliver this growth and shareholder returns.

We're working with Alcoa and other stakeholders to satisfy the conditions for the transaction with expected completion in the second half of FY '27. Looking forward to FY '27, we're progressing a pipeline of projects under construction, approved, and in study phases that are expected to substantially grow our base metals production. At Sierra Gorda, this week, we announced a 61% increase in the Ore Reserve to 1.1 billion tonnes, an extension of the initial reserve life by approximately 5 years to 19 years, which just highlights the scale, the quality, and the long-life ore body at Sierra Gorda, which is still open at depth.

Sierra Gorda is expected to deliver production growth of 5% in FY '27 and a further 2% in FY '28, supported by higher planned copper grades. Beyond this, the recently approved fourth grinding line project is expected to increase production by approximately 30% from 2031. At Cannington, we've upgraded expected ore processed with the inclusion of our low-grade stockpile material to utilize available plant capacity. Life extension work from both underground and open pit sources is continuing, with the open pit development option offering the potential for further ore feed and life extension of the complex.

At Hermosa, we are focused on delivering our large-scale, long-life Taylor zinc-lead-silver project. Sinking of the ventilation shaft is advancing really well and in line with our recent project update, and key processing infrastructure such as the primary and secondary mills, the flotation cells have now all been installed. Once completed, Taylor is expected to deliver attractive financial returns for decades to come and support further growth phases at Hermosa. This includes Peake, where exploration and study work is continuing to support the potential for future copper production with an integrated development with Taylor.

We're also progressing an exciting portfolio of exploration options in base metals. Ambler Metals boasts district-scale exploration potential in Alaska's unexplored and highly prospective Ambler mining district, where our summer field work season is currently underway following progress on permitting and stakeholder support for the Ambler Access Road. This really paves the way to unlock value from Ambler's high-grade copper and zinc options.

So in closing, our operations are performing really well. We're generating strong cash flow to underpin our base metals growth and shareholder returns. The sale of the aluminium value chain business will reposition South32 as a simpler, higher-margin business with a strong balance sheet and peer-leading growth, making South32 a leading base metals exposure for investors. I'm going to pause there and happy to take any questions.

[Operator Instructions] Your first question comes from Ian Rossouw with Barclays.

First question, just on Hermosa, obviously, with the sort of CapEx and time line reset you've announced earlier this year. Just curious to hear how that project is progressing, specifically on the, I guess, cycle times from the contractor's shaft sinking. And I guess just how you're tracking to the sort of budgets and how much of the contingency if there has been any sort of consumption of that? Just keen to get an update on that, please.

Yes. Thanks, Ian. Thanks for the question, and good to hear from you. So Hermosa is progressing really well. The shafts are on track with our updated schedule. We are getting very close to the bottom of the ventilation shaft. And in the next couple of months, it will be at shaft bottom and the main shaft is actually tracking the vent shaft now really well as well. Decline extension into Taylor ore body is progressing to plan. And of course, that allows us that early access to ore that's really important.

And as I mentioned in my opening comments, the surface infrastructure is all coming out of the ground well. Mills are in place, float cells are now in place and substations, which is really important in the context of the build-out of infrastructure in the U.S. 5 out of the 6 substations are now installed, including the major substation allows us to bring primary grid power into the project. In terms of contingency, it's still all intact as we stand here today.

It's only been 3 or 4 months since the project update, but very comfortable, happy to say that it's all intact and very much looking forward to taking yourself, Ian, and others of our investors and shareholders on a site tour in September, where we can show you all the great progress that we've been making.

Great. And then just a follow-up on Cannington. Obviously, you've talked on the overnight call about the low-grade stockpiles at Cannington. And could you maybe just give us a sense of what's the differential in the grade of the stockpiles versus what you mine to get a sense and just how we should think about the proportions as you -- I guess, you mentioned sort of trying to push above the 2.1 over the medium term and how that proportion from the stockpiles will change?

Yes. Thanks, Ian. So we did around 200,000 tonnes of low-grade stockpiles through the plant last year. We really saw that as a test. And some of the key things we were checking for is how recoveries were through the plant and how we interacted with our paste fill system. So we built confidence through that test work. It gave us confidence to, again, put that into this year's guidance. It's performing really well. We potentially have some upside. As we've talked around in the past, we have a plant there that's done historically up to 3 million tonnes. We've got a guide of around 2.1 million. So there is some potential to push more through, and we'll continue to update the market as we progress.

In terms of the grades, the ratio is probably about 2 to 2.5:1. So the grade is quite variable given it a historical stockpile. So preferentially, we're always going to put the underground material through the plant. But where we have opportunities, this is -- it's already been mined. It's already been paid for, sitting very close to the existing crusher. So it's just the cost to transport it and then push it through the mill. So that's how we're thinking about it for this year.

[Operator Instructions] There are no further questions at this time. I'll now hand back to Matthew Daley for closing remarks. Pardon me, we do have a question from Tim Clark with SBG Securities.

Just 1 or 2 quick questions from me. Just first of all, on the new capital allocation framework. I just -- I suppose I was interested to understand how franking credits and the transformation of the portfolio comes into the thinking on growth and dividends. So perhaps just maybe if we can get some -- a little bit of color on that, Sandy, it would be really helpful. And then just a second one, have you given us the amount of cash that's sitting in the lockbox as we run towards the end of this deal? Sorry, I might have missed it in the details, and I didn't see it in the main announcement. Have you given us that lockbox number?

Yes. I might answer the second part of that first, which is we have provided an update on the lockbox at 30 June, and that was around $100 million that's sitting in the lockbox representing that deal value through to 30 June. The third part of the question, I think then just relating to the capital management framework. So the current capital management framework will remain on foot until deal completion. So you will see a 40% payout of our underlying earnings, which includes those earnings from the aluminium value chain right through until completion. So that's perhaps just the first point to make.

And then post-completion, we'll look at that transition on the capital management framework. Of course, you can hear from the conversations in the presentation, we are shifting the capital management framework to be more in line with the business we'll be on the other side of the transaction, with a bigger focus on growth going forward. Certainly still maintaining safe and reliable operations, capital, a strong balance sheet, but you will see our committed growth projects sitting next to the stack. So that's Taylor, fourth grinding line for now, and then more opportunities as they mature.

And then really seeing that competition for excess capital sitting above that, including dividends, acquisitions, and other shareholder returns. So really seeing the shift in the capital management framework in line with the shift in our underlying business. As to the dividends and franking credit balance, we certainly recognize the value of dividends and of course, franking credits to the Australian investors in particular.

We do have a $1.6 billion balance there on franking credits. Some of that will be distributed as part of the upfront distribution of Alcoa stock, which we'll be doing by way of an in-specie distribution of half of that fully franked. And so that will be one way in which we'll be distributing that and obviously, shareholders taking value from that. Of course, future dividends, we'd look to frank as appropriate going forward as well.

Okay. Super. Just while I've got the mic, if there aren't other questions. May I just ask on GEMCO on Groote Eylandt, just the -- a little bit of color, if you could give us to us on water, just in terms of dewatering and what you need to do to achieve that, what the sort of parameters are to advance some of that dewatering. And then maybe if we could just sort of ask on life there, presumably, the reserves are sort of finalized now going into the year-end. And just how much life there is that's fairly easy to get out of some of the leases? What we should -- what you would be modeling if you were us on life of mine with existing capital installed?

Yes. Thanks, Tim. Good question. So the operations up there have actually started pretty well this financial year, but we are in the dry season, and it's important to recognize that. And we've guided a range because of the uncertainty that sits around water and weather coming into the next wet season. So we've had a couple of years of cyclones and very high rainfall that certainly limited access to mining areas. So in response to this right now, we're working with both the NT Government and traditional owners to get a number of different permits in place to allow us to discharge larger volumes of water through a number of different mechanisms that will -- and we'll continue to update on a quarterly basis how this is progressing.

The kind of capital works we're looking at doing is mainly around additional pipe installations that allows us to move volume from different parts of the operating lease. The NT Government has been giving us great support, but the reality is that some of these processes do take time, and hence, we've got that range in our guidance. In terms of the life of mine, at the moment, we have a life of mine of about 6 years out to 2033 at the current mining rates.

There is potential, and the team is looking at that potential right now actually in terms of the northern leases and options to the East and South. The north requires us to do some early exploration work. It's a very shallow ore body. So it's not like exploration work in a big copper mine. That said, at the moment, our life of mine is just modeled out to 2033.

Your next question is from Ian Rossouw with Barclays.

I just wanted to follow up on a question from Tim. Sandy, you mentioned the lockbox contains about $100 million. I was just curious, Alcoa was saying on their Q2 conference call, they were estimating it to be over $200 million. So just curious what could be the cause for that delta?

Yes. I mean, we're obviously going to have access to their modeling, but I would suggest it could just be to do with the tax overlay on the profits from Hillside would be something that would be akin to that value difference there, Ian.

There are no further questions at this time. I'll now hand back to Matthew Daley for closing remarks.

Thank you, Kaley. I just want to thank everyone for joining the call today and for all the questions. We're really pleased with our results for FY '26. FY '27 is off to a good start, and we're taking that momentum from last year into this year as we really focus on delivery from our existing operations and then a really exciting growth portfolio across Hermosa, Sierra Gorda, and life extension at Cannington. So thanks again for everyone for joining. We'll leave it there.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the South32 2026 Full Year Results Investor and Analyst Conference Call. [Operator Instructions]

I will now hand over to Matt Daley, CEO. Please go ahead.

Thanks, Kaley, and good morning, everyone. Thanks for joining us today as we discuss our financial results for FY '26. My first is South32 CEO. And of course, on the call today, we have Sandy, our Chief Financial Officer. So it's an exciting time for our business with our positive operating performance and reposition of base metals driving strong financial results, a clear pathway to substantial value-accretive growth in copper and zinc with 55% production growth expected from projects under construction or approved and a pipeline of growth and life extension options beyond this that can drive further value and returns for our shareholders.

Before I run through our financial results, I do want to talk about safety. The most important measure of our success as a company is the safety of our people. And in FY '26, we did not live up to the standards we set ourselves. The depth of our colleagues, [ Simon Mokari ], in an incident at Worsley Alumina in March 2026, had a profound impact on everyone at South32, particularly our team at Worsley. Simon's family, friends and colleagues very much remain in our thoughts. We have taken steps to further enhance awareness towards the existing procedures and control of working at heights and we continue to look at opportunities to design tasks in a way that eliminates or reduces fall from high risks. As South32's CEO, I'm unwavering in my commitment to a workplace free font fatalities.

Now turning back to our financial results. Our base metals business drove strong earnings and cash flow with strong operating performance, enabling us to capture the benefit of commodity price tailwinds while active cost management mitigated the impact of industry-wide inflationary pressures. Group underlying EBITDA increased by 28% to USD 2.5 billion and underlying earnings increased by 55% to $1 billion.

Group cash flow from operations increased by $352 million to $610 million after investing approximately $700 million to grow future base metals production from Hermosa. Our balance sheet remains strong with net cash of $283 million after returning $327 million to our shareholders during the period.

Reflecting our strong financial performance and disciplined approach to capital allocation, the Board has today resolved to pay a fully franked ordinary dividend of $0.054 per share or $242 million in respect of the June 2026 half year. We're also extending our capital management program to September 2027, with $209 million remaining to be returned to shareholders.

On the 1st of July, we announced the sale of our aluminum value chain assets to Alcoa for an enterprise value of up to $5.6 billion, plus the assumption of related rehabilitation provisions of over $1 billion. The transaction will unlock significant value for our shareholders and reposition South32 as the leading base metals company on the ASX. We've got high-margin assets in Tier 1 jurisdictions a transformational growth pipeline and a strong balance sheet to deliver this growth and shareholder returns. We're working with Alcoa and the stakeholders to satisfy the conditions to the transaction and expect completion within the second half of FY '27.

Now looking forward to FY '27, we're progressing a pipeline of projects under construction, approved and in study phase are expected to substantially grow our copper and zinc production. At Sierra Gorda, this week, we announced a 61% increase in the ore reserve to 1.1 billion tonnes, an extension of the initial reserve life by approximately 5 years to 19 years. This highlights the scale, the quality and the long-life ore body at Sierra Gorda, which is still open at depth. Sierra Gorda is expected to deliver production growth of 5% in FY '27 and a further 2% in FY '28 supported by higher planned copper grades. And beyond this the recently approved fourth grinding line project is expected to increase production by approximately 30% from FY '31.

At Cannington, we've upgraded expected ore process with the inclusion of lower-grade stockpile material to utilize available plant capacity, life extension work from both underground and open pit sources is continuing, with the open pit development option offering the potential for further ore feed and life extension. At Hermosa, we are focused on delivering our large-scale, long-life Taylor zinc-led silver project. The thinking of the ventilation shaft is advancing in line with our recent project update and key processing infrastructure such as the primary and secondary mills and flotation cells have now all been installed.

Once completed, Taylor is expected to deliver attractive financial returns for decades to come and support further growth phases at Hermosa. These include peak where exploration study work is continuing to support the potential for a future copper production within an integrated development with Taylor.

We're also progressing an exciting portfolio of exploration options in base metals Ambler Metals, both district scale exploration potential in Alaska's unexplored and highly prospective and a mining district, where summer field season work is underway following progress on permitting and stakeholder support for the Ambler Access Road. This paves the way to unlock value from Ample's high-grade copper and zinc options.

So in closing, our operations are performing well. We're generating strong cash flow to underpin our base metals growth and shareholder returns. The sale of our aluminum value chain business will reposition South32 as a much simpler, higher margin business with a strong balance sheet and peer-leading growth, making South32 a leading base metals exposure for investors.

I'm going to pause there and happy to take any questions.

[Operator Instructions] Your first question comes from Paul Young with Goldman Sachs.

Matt, can we firstly focus on Sierra Gorda and just the outlook, which is pretty positive for '27 to '28 and implying a good improvement on might and recoveries, and that's actually after a pretty challenging FY '26 on both those items. So just want asking if you could step through the confidence around the high mill throughput and higher recoveries. Is it related to digging into the mine plan a little bit of the changes you made there and the fact that Phase I or Phase 8 in the pit have less clay?

Yes. Thanks, Paul. Appreciate the questions, and you're spot on. So we've done now around 85,000 meters of drilling, which gives us a lot more confidence in understanding the mine plan and the reserve. So obviously contributed to the 61% uplift in our reserve that we've announced this morning. And as we move into these phases into Phase 7 and 8 and the majority of the tonnes for FY '27 and '28 are coming out of Phase 7. We're seeing higher copper grades, and we are seeing better mineralogy. So with lower play, you start to have more favorable processing conditions which sees an uplift in our ability to push all through the mill, but also improve our recoveries. And that's giving us the confidence in the next couple of years.

Okay. And just further that, just -- can you just step through the changes you made to the mine plan? Because I know that the reserve upgrade wasn't based on a higher copper price. Just if you could step through just high level what you've done there?

Yes. Yes, happy to, Paul. I guess to reinforce your point, it hasn't been the commodity price change that's given us the increase in reserve. In fact, we've used quite a conservative price deck that I say sits below consensus. What's really supported the upgrade now is the additional drilling that we've done over the last couple of years, so 85,000 meters of drilling. That's obviously allowed us to convert and upgrade the confidence from the mineral resource to the mineral reserve allowed us to run new pit shells new pushback designs which have incorporated this higher confidence in the orebody.

So that gives us both a life extension, and it really underpins the decision we've taken around the fourth grinding line when you have a long reserve life, what you want to do is bring that cash flow forward and the 2 combines a big serve longer life and now have a higher throughput through the mill from FY '31, all comes together to improve confidence in the asset and produces more cash flow over a longer period of time.

Right. And just quickly on Cannington. Looking at the guidance, it's good that you -- I think you're under promising on the on the unit costs in my view, considering you're pricing more low-grade stockpiles. Can you just run through how much low-grade stockpile you have and what your -- what's baked into the guidance for '27?

Yes. Certainly, Paul. So I mean, if you step back and just have a look at the full ore body potential at Cannington. We have around 70 million tonnes in resource and only around 11 million tonnes in reserves. So the obvious question there for us is how do we convert more of that resource into reserve, and even is there more potential to look at the resource and how do we start to fill up this mill capacity. So the low grade certainly plays into that strategy. It's part of the puzzle for us. We had really successful trials in last financial year, and that's really starting to build the confidence now for us into this financial year. So we'll continue to update the market as that work continues.

We do think there's an upside that we'll be able to push through some more tonnes on an instantaneous basis. We have pushed the mills up now towards that 3 million tonne run rate. There's a bit of work just to go through to understand what the grade does to our paste filling system, but that confidence is building, and then we'll continue to update the market as we progress through that, along with the more broader studies that we're doing. So at the moment, we're progressing the feasibility study on the open cut and the open cuts being looked at for some time.

But what's really different at the moment is we're looking at how we could run the open cut and the underground in parallel. So really integrated mine plan that we believe is going to give us potential to convert more of the underground resource into reserve and give us a life through the open cut that will push well into the end of next decade and maybe even beyond that. So that's the work that's currently underway. The low grade is certainly part of that strategy. When you have a mill that can do 3 million, and we're only doing 2.1 million, there's obvious opportunities there for to push our volumes through the mill, generate more cash for the business.

So that's a piece of work that we're very busy on at the moment. we'd like to think we'll be coming back towards the end of the year, the latest at the half year results to update the market on that study work.

Your next question comes from the Rahul Anand with Morgan Stanley.

2 questions from me, first one on Australian Manganese, if I may start there, understand the water issues that have been ongoing and were covered a bit in the quarterly report as well. But just wanted to understand, you've obviously had an impact in FY '28 as well as to sort of what the critical path items are here in terms of the rectification? And then if you can marry that up with the approvals that you require in sort of what the time lines look like there as well? I'm just trying to think about the asset FY '28 and beyond and sort of whether the guidance is conservative? Or is there more that we need to think about there?

Yes. Thanks, Rahul, for the question. So Australian manganese at [ Gemcom ] the operations started the year really well, but we are in the dry season. We've guided that range due to the uncertainty around water and the weather coming into the next week season. So we've had a couple of years of really high rainfall and certainly limited access to some mining areas. In response to that right now, we're working with both the NT government and traditional owners to get permits in place to allow us to discharge larger volumes of water through a number of different mechanisms. So those initiatives, in some place require some capital and hence some construction work. We're getting some really positive support from the NT government but these processes do take some time, and hence, why we're guiding to that range.

The other one to mention Rahul is and you're probably reading about in the newspapers. There is a super El Nino that's being forecast. This could have a very positive impact and that we could see a later wet season, which would see us definitely pushed towards the top end of that guidance. But we really have to wait and see how that plays out over the coming years. So a number of moving parts there, weather, El Nino, looking on some additional permits. That's why we've guided the range and we'll just keep updating as that work progresses over the coming quarters.

Just a quick follow-up there then. So I take it, it's mainly the approvals and the infrastructure and sort of the water discharge related infrastructure should be fairly quick to build, right? There's nothing major to think about there?

Yes, it really is pipe work, is the key part of the construction work we're having to do quite and very large volumes of order that we're dealing with, really have all the principal pumps installed now. So it's really about pipe work outlets. And there's a number of different ways we manage water, a number of different mechanisms for which we discharge it after it's been settled. And that's essentially the work that all requires a permitting process like a really great support, but it does take some time to work through those different options.

That makes sense. Okay. And then the second one is for Sandy. Sandy, Slide 19, you put forward your capital allocation framework. You are due to put out an updated framework post transaction, and I appreciate that I guess you have mentioned there on the slide that you're looking to design it to maximize per-share value over the long term. Just wanted to understand, has there been any further thought go into sort of what you're trying to solve for, obviously, acquisitions, capital returns, buybacks all remain to your disposal. But any further thoughts that you can provide to us as to how we should think about it? And how do you solve for long-term value? I mean, is that -- does that mean if acquisitions are not available, then you perhaps switch more towards buybacks so that you retain some of that value?

Yes. Thanks, Rahul. So you're spot on in saying have shared our updated capital management framework, which will apply post completion. So for now, the current framework is in play with our 40% payout ratio, and we'll continue with that format right through into completion. Post completion, when the new capital management framework does kick in, you'll see us continuing to prioritize that safe and reliable capital as we have done and a strong balance sheet. So a little bit of a change there in terms of the way we talk about balance sheet relative to being investment grade. So we do expect to see a change there in our positioning, and that will reflect the different type of business will be on the other side of the transaction.

We'll continue to allocate capital, continue towards our committed growth and life extension projects. Of course, for us, that means tailored where we do have a significant pipe there. And then as you touched on, we'll have that competition for excess capital. And then we'll need to contemplate the particulars at the time whether or not the best per share value is through dividends or share buybacks or looking at growth in growth options. Of course, we do have a number of organic growth options that we're really committed to pursuing as Matt already touched on. So that will be an important part of the decisions we have ahead of us.

Got it. Okay. And is there at all a net cash balance that you had sold for or just the investment-grade rating, as you said?

We haven't put out a net cash position or pursuit of a debt cash position. That's not part of our framework for all. Obviously, it's lastly we sitting in that position right now given the task of we have ahead of us. So good to have the strong balance sheet, but not committed to that going forward. We do expect to see the business evolving. And really, the position is to have a strong balance sheet.

Your next question comes from Kate McCutcheon with Bank of America.

If I look at the '27, '28 outlook, I guess, the key asset that is a little bit weaker than expected was around manganese. And you've said that manganese isn't core. Are there any stage gates or catalysts to work through before we strategic review or something similar? Are you expecting the [indiscernible] change anything, just thinking about the core portfolio moving forward?

Yes. Thanks, Kate, and thanks for the question. So the focus for us at the moment is really running those assets safe and stably. We've talked around the border challenge likewise, we're always managing the logistics constraints that sit in South Africa. That's a combination of rail and trucking. We've very much talked around our preferred commodities being in copper and zinc. And so you'll see capital allocation decisions to move towards growth in our preferred commodities in that area. Our focus for manganese is really safe and stable operations.

Okay. Got it. And then just the MOU with Spence, are there any kind of expected upticks coming? Or how do we think about I guess, something quantifiable on that agreement there with the partners.

Yes. Thanks, Kate. We're quite excited about the MOU between our partners. So [indiscernible] is a really strong partner with us on Sierra Gorda and obviously now working with BHP. I've talked about in the past some really great examples of where these these industrial synergies play out across mining operations that are very close to each other or 10 kilometers away from Spence. And of course, [ Callable ] Northeast sitting between the 2, which is a really exciting exploration target for us. I think all the partners right now are directionally aligned to keep moving this opportunity forward. It will start with the discussions, which are well underway, and then we moved into some technical work.

So that's very, very pleasing for us. the opportunities, the most obvious sitting there is the oxide opportunity. We've obviously mined and have that stockpile and spent has capacity through the they're leaching an SXEW plant, but the opportunities are quite varied beyond that. So looking at the sulfides, the complex as one big infrastructure, also the obvious runs around economy of scale that it with things like consumables, explosives, power, energy style contracts and also what we can do with the tailings between the 2 operations. So these things can move slowly until they don't, Kate. But I think what's really important now is all the partners are working really well together to progress this.

Your next question comes from Thiago Ojea with Citi.

My first question, I want to go back to the capital allocation framework, Sandy, if you can. I understand there will be a new framework post the transaction. But should we think that the 40% payout is kind of a floor going forward as well? And also thinking back on the spend MOU, I understand that probably you're starting with like procurement supply kind of limited scope. You mentioned now tailings. Could this be going forward like to use or in processing facilities from 1 another and perhaps even future JV. Like there is any limitations with KGHM that would prevent you to do future broader JV with Spence?

Thanks for that. With regards to the payout ratio, we're not committed to the 40% payout ratio going forward. Of course, that represents a business where South32 was when we demerged and what we've maintained over time. representing a scale of that business and the focus of that business in terms of yield generation. On the other side of this transaction, we are a growth-focused company, critically seeing the increase in volumes in copper and zinc. And with that, we'll be looking at a different way of allocating our capital and our excess capital. You'll see in the updated framework in our pack that we will be seeing dividends competing with other growth alternatives for the best value for South32 shareholders going forward. So the 40% payout ratio will not be a floor. We will not have a fixed payout ratio. We're not intending to a fixed payout ratio. What we will be doing is looking at that flexibly for the best value for our shareholders.

I'll hand to Matt for the second question.

Yes. Thanks, Sandy, and thanks, Thiago, for the question. I think your question had a lot of the answers contained within it. We'll certainly there's a whole lot of opportunities for us to look at, and that's what the MOU starts to set up that opportunity to work constructively between the different operations with all the partners aligned. There's some low-hanging fruit, you'd say, around opportunities like consumables and definitely the oxide is one of those opportunities. to understand the full potential that could sit there by sharing the processing infrastructure and having a single mine plan that requires both teams to put some data into a data room effectively and you start working through where there's any fatal floors and then progress to some technical work.

So partners recently got together. They've all aligned with the direction. There's a logical way you get about doing this. You probably want to get up to some quick wins first, and that's where we're focused. But certainly, we'll progress that work over the coming quarters, and we'll be certainly updating as it progresses. And I think there's a really exciting opportunity there for the 2 complexes.

[Operator Instructions] Your next question comes from Glyn Lawcock with Barrenjoey.

Maybe just to push you on Kate's question on the manganese sell firstly. You did say you were just waiting for Anglo to have the bandwidth engage on an approach you'd had. Has Anglo now, I mean, they've closed the coal sale. They're only waiting on one deal or one regulatory approval now for the tech deal to close. Have they got the bandwidth reengaged with you on a sale of SA Manganese?

Yes. Glyn, good to hear from you. We haven't updated in the last -- since we last talked around Anglo's position on that. We're likely to catch up with Anglo in the coming months at one of the conferences or certainly the ICM, that will be an opportunity potentially to have those discussions. But I think they are very focused on closing out the tech deal and we've certainly got our focus on our growth, our operations and closing out the aluminum deal. So at that stage, I say there's no real update, Glyn.

That's understood. And then just your thoughts, Matt, around -- obviously, you want to grow the business. I mean, you're not going to have much left post the Ali sale and if you give it a manganese as well. Just your thoughts, could you move now or do you need to at least get the shareholder vote behind you, so the proceeds are coming? Like could you move now? Or do you need to wait?

Yes. Thanks, Glyn, for the question. Our focus will, I guess, my focus for the organization and in the coming 12 months is really clear. I'm keeping it really, really simple. So first and foremost, it's always around running these operations really well, the biggest value creation opportunity in our business comes from running safe, stable and predictable operations. Secondly, for us, it's successfully hitting the aluminum value chain transaction. Of course, a part of that, we're resetting the operating model is to become a simpler and and more focused business. And yes, there's a number of steps to get through that shareholder vote and then moving through some of the regulatory approvals.

And then third, the focus is absolutely on delivering the growth that's in front of us, particularly most and Sierra Gorda. So that's the focus for us in the near term really to ensure that we're a high-performing base metals company. It just creates a lot of value for our shareholders and our employees and our stakeholders. We'll continue to look at opportunities that are out there. in the market, but by no means is there a need to replace one asset desperately with another one. For us, it's all about value rather than growth for take of price, and that's the way we're thinking about it.

Yes. No, understood. I mean it's a very different company and a lot more exciting, I guess. Just on the dividend, I heard Sandy say obviously no minimum payout anymore, but -- and obviously, it will depend on use of cash. But do you still see yourself as aiming and liking to pay a dividend every 6 months? Or could we now expect periods where if you bought something in the balance sheet is indebted that you would even suspend the dividend? Or you still want to have be seen as at least a regular paying company?

Yes, it's a great question, Glyn. I mean, well, we certainly see the value our shareholders put in a regular return of capital, and it's really important that we balance as we think forward in what our shareholders each need. We have been balanced historically in the way we've distributed our cash flows. If you look back over time, we've certainly thought to invest in the business in growth and,of course, in returning capital to shareholders. We do see that as really important. It creates a great tension point for us as well in terms of excess capital and competition, which our shareholders a value, right? They want to see us really pushing our business to get good returns. So we certainly see that as an important part going forward of the overall proposition for shareholders, Glyn.

Your next question comes from Lyndon Fagan with JPMorgan.

Just wanted to focus on the Sierra Gorda oxide opportunity. Are you able to quantify the copper production that you're looking at from that?

Lyndon, thanks for the question. Not at this stage, it's certainly -- it's part of the MOU work that's going on now. I think the market knows quite clearly that spend in terms of the oxide does have capacity through their leaching and SX-EW. That requires some technical work. There's obviously transfer of that. There's commercial elements that have to be worked through. I think from memory, there's about 300,000 tonnes of contained copper sitting in the 110 million tonnes of oxide stockpile. So it's a very nice opportunity to get after. But in terms of what that could look like on a go-forward annual basis, I can't share that at this time, it really requires us to progress that technical work.

Right. And are you able to give some color on the Cannington open pit project in terms of what we're waiting for? And I guess, again, there's obviously going to be some latent capacity in the process plant, like what sort of incremental silver equivalent production you're looking at?

Yes, yes. Really exciting project for us. The status of the study at the moment is where into the final status of our pre-feed study, many components in that as you start to look at the ore body, the reserve, the scale of the pit, the sequence. And this is the first time we've actually looked at parallel integrated plan with the underground. So the underground pit doesn't impact any of the surface infrastructure in terms of the plans for office facilities or existing tailings. It does how have an impact on the underground. Obviously, you're creating a big funnel for water sitting on top of the the underground and you also have a ventilation and power reticulation constraints.

So we're working through what that looks like also on the permitting front. Real potential we see at the moment basis the study work is to maximize the capacity we've got in the mill through a combination of the underground and the low-grade material. Then probably around the end of the decade, you'd look at the open cut coming in, in parallel with the underground, and that's really for us, a big life extension opportunity. So the cash flows we're seeing today, you'd like to think you'd keep really strong production out of the combined entity through having higher throughput through the existing mill and pushing out towards the end of the decade.

So we're at the point now, we're in the final few months of closing out that study work. And like I said, we look to update the market probably around the half year results. in terms of what that study is looking like.

There are no further questions at this time. I'll now hand back to Mr. Daley for closing remarks. .

Thank you, Kaley. I just want to thank everyone for joining our call today and for all the questions. I'm really pleased with the results for FY '26 with a lot of positive momentum going into FY '27 as we really focus on our key priorities of safe and stable operations, our growth projects and closing out the aluminum value chain transaction into the first half of next calendar year. So we might leave it there. And just thanks again, everyone, for joining.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you. Good morning, everyone. Thank you for joining our call to discuss this morning's announcement of our agreement to sell our aluminum value chain assets to Alcoa for up to USD 5.6 billion, repositioning South32 as a leading upstream base metals focused company with high-margin assets and transformational growth.

I'm joined on the call today with Matt Daley and our Chief Financial Officer, Sandy Sibenaler. As you have also seen, Matthew has today commenced as CEO and Managing Director, marking the completion of our leadership transition. Before we go into questions, I'll provide some opening remarks on the transaction and hand over to Matt to speak to South32's future portfolio. Under the transaction, Alcoa will acquire our interest in Worsley Alumina, Hillside Aluminum, the MRN bauxite mine and the Brazil Alumina refinery and smelter.

This transaction will deliver significant value for our shareholders. It represents a premium value for our aluminum value chain supported by attractive transaction multiples and unlocks value from our share of material synergies from combining our respective alumina businesses in Western Australia. The transaction provides significant upfront cash and equity proceeds while retaining upside to commodity price strength through price-linked consideration.

The transaction has an implied enterprise value of up to USD 5.6 billion, comprising $3.1 billion in upfront cash consideration, $1 billion in Alcoa shares approximately, USD 750 million in net debt and lease liabilities to be assumed by Alcoa and up to USD 700 million in contingent consideration linked to alumina and aluminum prices to 2030.

In addition, Alcoa will assume USD 1.2 billion of rehabilitation provisions associated with the assets. Lastly, the transaction enables us to reorganize and streamline our business, driving an expected USD 125 million annual overhead cost saving, unlocking further value for our shareholders. Transaction completion is targeted for the second half of 2027 financial year, subject to the conditions precedent, including South32 shareholder approval.

Following completion, we will deliver a return to South32 shareholders of half the Alcoa shares received in consideration through an in-specie fully franked special dividend. Additional shareholder returns will be considered following transaction close. With that said, I'll hand over to Matt.

Thanks, Graham, and good morning, everyone. This transaction is a major milestone for our business. It repositions South32 as the leading ASX-listed base metals focused company. Our portfolio was built on high-margin, long-life assets in favorable jurisdictions, leveraged to attractive market fundamentals, with 85% of pro forma earnings from copper, zinc, silver and lead and approximately 55% production growth from approved projects.

Turning to these in a bit more detail. Sierra Gorda is a large-scale, long-life copper mine with multiple growth and life extension options, including the fourth grinding line project, which I'm very pleased to announce was approved for execution today.

This high-returning brownfield plant expansion will increase our share of copper production by approximately 30%. At Hermosa, our Taylor project is expecting to deliver high-margin zinc, silver and lead production across multiple decades, effectively doubling our current annual silver production.

Taylor represents the first phase of a regional opportunity at Hermosa with the infrastructure being developed to benefit what comes next, including debottlenecking of Taylor, copper from the Peak deposit and a highly prospective regional land package.

Our Cannington mine remains a high-margin operation with potential to extend the mine life into the 2040s through underground extensions and open pit development options. And I'll have more to say about this in the next 6 months. In Alaska, we hold 50% of the Ambler Metals joint venture, which has the potential to be a district scale base and precious metals opportunity. Positive momentum is continuing with this project with Arctic deposits acceptance into the FAST-41 permitting program in the U.S.

South32 will be a much simpler business. This transaction enables a leaner support model with reduced overhead intensity, unlocking $125 million reduction in annual overhead cost, delivering ongoing value. Further, our simpler operational footprint, including a complete exit from refining and smelting enables us to focus exclusively on upstream mining operations and our growth projects, positioning us to drive additional value from a relentless focus on operational excellence. Today is an exciting day for South32.

This transaction realizes significant value for our aluminum value chain assets and reposition South32 as the leading ASX-listed base metals focused company. We've got a strong balance sheet, a leaner operating model poised to deliver our peer-leading funded growth projects in copper and zinc. Thank you, and I'll now hand back to the operator for questions.

[Operator Instructions] Your first question today comes from Paul Young with Goldman Sachs.

Graham, it sounds like a spring in your step. Good to announce such a big transformational transaction on your last day. So well done. Just a couple of questions on some of the differences between Alcoa's summary of the transaction and yours that there's some differences on multiples, the price outlook, rehab liabilities, views on synergies, and that's always the case.

Just wanted to hone in on a few of those. First one is on the alumina price, it really comes down to the contingent payment. I see that there's a trigger there at around the $450 a tonne mark on alumina, which seems like a pretty high number, well above the marginal cost for alumina. Just curious around, is that just high level what was assumed by Alcoa for alumina prices going forward in this transaction?

Yes. Look, Paul, obviously, hard to sort of comment on what alumina's long-term price is not something that would necessarily share. Look, from our perspective, we believe we've captured a portion of any price upside if there is to be a significant flare up. We believe that protects our position to a degree around that flare up. But in saying that, we probably have a more challenged view of alumina for the next couple of years.

We certainly see additional supply coming on in Indonesia that is putting pressure, if you like, on the price. And we're probably of the view that focusing on the aluminum for us was probably more where some of the value was in the short term. The challenge with any kind of obviously, divestment is you want to basically sell it at the high and buy anything at the low. And while not necessarily at the peak, we think when we look at the metal side of the things, we've got our timing right in that space. Paul, you said you had a follow-up question on rehab.

No, not on rehab, Graham.

Actually, just more around, the next one is just around some of the longer-dated options in that portfolio, which the market has been focused on for a very, very long time, to be honest, around extending the Hillside power contract, but also the ability to actually creep and actually put more digestion chains--trains, I should say, at the Alumar refinery in Brazil and all those longer-dated options. How much work did you actually do on those longer-dated options from a value perspective out of interest?

Yes. Look, absolutely. I mean, obviously, we have a long-term model that we update on a regular basis for all those operations. We understand what the synergies and opportunities are in the businesses that we own and operate, but also what Alcoa has been operating.

And certainly, when we looked at the price versus our own internal valuation, getting a share of some of those synergies was important about how we considered the valuation, recognizing that not all those synergies will happen on day 1.

They will happen over time, but we're certainly comfortable that we've got an appropriate share of those shares, and we thought about what the consideration price was.

I would start by also saying, look, I think both Worsley, Hillside world-class operations. And I think the teams there do a superb job. I just think when we think about commodity markets, we see medium to long term and even to be honest, short term for alumina, there's more attractiveness in the zinc copper space for us closer to the resource than there is down the smelting and refining side.

Your next question comes from Rahul Anand with Morgan Stanley.

Congratulations on the transaction. Look, can I just get a bit of a read in terms of -- it's a bit hard for, I guess, the market and analysts to kind of get a clear picture of the rehab side.

So if you could just help me with that to start off with because that does help kind of square away the transaction. So if I understand correctly, as at first half '26, you were at $1.7 billion in provisions. And then post transaction, you're $0.5 billion. Is that right? So basically, that's a like-for-like because I only have the 31st December '25 numbers.

Yes. Well, certainly, that the last set of numbers we published were halfway through our financial year. And when you talk about that, we talk about a total closure rehab number for the group of about $1.7 billion, of which the biggest components of those relate to some of these assets.

For example, the aluminum value chain that we're selling to Alcoa, it's worth $1.2 billion of the provision that we had on the 31st of December 2025, of which Worsley would be the largest component of that.

Got it. Okay. And just a follow-up on that one to close that off, Graham. Is there any impacts that we should bear in mind in terms of sort of forecasting those rehab provisions as we close this year, I guess?

So we wouldn't expect any material movements from our side in that, understanding how the lockbox works from that defined date. But certainly, you might have the normal kind of impacts of FX that obviously is a bit more of a variable. We have planned rehab that we'll continue to execute as per the agreement with Alcoa. But outside of FX, I wouldn't be expecting any kind of movements in that from our side.

Brilliant. Okay. Look, and the second one is, I guess, a question for Sandy and Matt and perhaps yourself as well in terms of where you go from here.

Firstly, in terms of your capital allocation framework, how does that look going forward in terms of your targets for, I guess, net debt, shareholder returns post transactions.

But then importantly, your Slide 40 puts forward a long list of potential opportunities. Is there a simpler way beyond Ambler to give us a couple of names that you think are most prospective in terms of the ones that are coming up earliest in terms of that potential future development?

Yes. Look, I'll pass that on to Matt to talk about the opportunities and where he sees the company going, which is appropriate. And Sandy can then talk about the balance sheet, but I can tell you, if I was in Matt's position to have that balance sheet, that set of assets and that opportunity, it's super exciting. But over to you, Matt.

Yes. Thanks, Graham, and thanks for the question.

So near term, focus for us around project delivery is clear. The Hermosa project in Arizona, which is currently in execution, the announcement today of the fourth grinding line at Sierra Gorda, which will, once completed, increase our copper production by 30%. That's our share. And then we are working very hard at the moment on Cannington life extension and open pit. So I'm going to have more to say about the next 6 months, but that's taking a look at the ore body with a very new lens and looking at opportunities there around things like stope sizes, cutoff grades, and how we optimize and integrate an open cut and underground transition with all the associated work that comes with that.

So that's extremely exciting for us, and we've talked about a life extension there out to 2040s. Beyond that, the Ambler project in Alaska is incredibly exciting for us. The good news there, as I mentioned in the opening comments, is that's recently -- the Arctic deposit has recently moved into the FAST-41 process, which is the same process that we had for the Hermosa Taylor project in Arizona, which is seeing us move towards getting federal permits there within a couple of years.

So that's really exciting for the Arctic project. You mentioned the slide on Slide 40 in the pack. That talks to some of our, I'd say, a little bit longer-dated exploration potential. There's a few really exciting ones in there for us like the American Eagle Gold NAK project, where we currently have about a 50,000-meter drilling campaign. That's looking at a large-scale open cut potential ore body. And we'll continue to evaluate how we allocate capital in the near term to those options and some of the exciting long-term options that exit there as well, but very exciting for us.

I'm going to hand over now to Sandy to talk about the balance sheet and capital allocation framework.

Thanks a lot, Matt. So with the $3.1 billion in upfront cash proceeds, this does result in a pro forma balance sheet of $3.8 billion net cash. As we've touched on following completion, half the Alcoa shares received as equity consideration will be distributed to South32 shareholders as an in-specie fully franked special dividend, and that will provide an initial return of approximately $500 million.

Eligible shareholders will receive franking credits as additional value in relation to this distribution, and then we'll consider more returns following completion based on our disciplined allocation of capital and our commitment to a strong balance sheet. And we'll continue obviously to execute our growth projects as touched on in zinc and copper, in particular, building out Taylor and Sierra Gorda's fourth grinding line, which you would have seen the FID on this morning.

The potential for additional returns is supported by a healthy dividend franking credit balance of $1.6 billion. And I think it's important to remember that prior to completion, the assets will continue to form part of our underlying earnings. And accordingly, the calculation of dividends under our 40% payout ratio dividend policy. So they'll be maintaining the earnings and dividends per share leverage to the assets through to completion.

Your next question comes from Mitch Ryan with Jefferies.

I think you somewhat answered it, Sandy, but I was just interested around that lockbox impact on earnings and dividend, but then also on cash. So if you could sort of help us get a rough feel for how much cash is built inside that over the 3 months to the end of June would be appreciated.

Yes. Look, clearly, when it comes to the lockbox, those cash flows are effectively owned by Alcoa and the job of the team here is to deliver the budget safely. We obviously have the ticking fee that will kick in from the AGM, which is basically, if you like, a 5% cost of equity return, if you like, on those cash flows.

I think, look, the cash flows you'll see very soon. It will be when we announce our results, very dependent on price. And obviously, it's been a reasonably strong period in terms of aluminum price, but a relatively weak period in terms of alumina price. I don't know, would you add anything, Sandy, to that?

No. I mean the principle here is under the lockbox mechanism, Alcoa is entitled to the asset cash flows from the 1st of April. And as Graham touched on, there'll be that payment of a ticking fee 5% per annum on the upfront cash consideration from shareholder approval.

Your next question comes from Robert Stein with Macquarie.

Congratulations on the deal. First question, holding the $500 million worth of Alcoa script, what's the rationale for that given that the fully franked distribution is quite attractive to Australian shareholders?

Yes. Look, the way I think of Yes. And look, we recognize that. And obviously, the first $500 million, we are treating as in special dividend. And if you have the entitlement to fully franked, obviously, that's something we provide. I think the next $500 million, while there are no constraints on how we do it, it's in an orderly way. And I guess from an Alcoa side, it's about managing how much movement they see in their shares in a short period of time.

The $500 million upfront, I think, is also advantageous for our shareholders because it gives them the choice. They can make a choice to hold on to the stock and have more exposure or they can make a personal choice to sell. It's up to them.

Okay. That clears it up. And just a follow-up. Look, just noting 80 -- I can't remember the exact number, 80-something percent of earnings, copper, zinc, but manganese was excluded from that number.

Does that mean that we're now looking potentially to even further, I guess, purify the portfolio into that growth-oriented base metals mix going forward and see that true multiple expansion that we could see versus comparables overseas?

Yes. Really good question. So just to confirm, 85% of our pro forma earnings on a go-forward basis will be from copper, zinc, lead and silver, certainly commodities that we find very attractive, good underlying structural elements there. And you'll see our growth, 55% growth will be in those commodities, and that's delivered through our Hermosa project, the fourth grinding line at Sierra Gorda. And we're yet to talk about, but in more detail, put the numbers, but the potential life extension and using the full capacity of the mill at Cannington.

So on a go-forward basis, we can talk about manganese business, the assets in Australia and in South Africa, but where we're really looking to allocate and grow our business is in those core commodities of copper and zinc.

And sorry, just one last follow-up just on funding mix. So the $3.1 billion cash or is that going to basically cover Hermosa off in terms of its capital commitments and then Sierra Gorda fourth grinding line, I would expect somewhat the cash flows from the asset to fund that. So how should we think about the internal allocation of that capital through the South32 capital allocation framework?

Sandy?

Yes, certainly an element of capital recycling into the preferred commodities that we've talked to. So that's definitely a piece of it. So looking to fund Taylor and other organic growth options. Sierra Gorda itself, as we've touched on, will predominantly be funded at the joint venture level.

So we have aligned with our joint venture partner there on external funding sources, which will then be topped up with some modest operating cash flows in the back end of that build. So really recycling the capital combined with our shareholder returns.

Your next question comes from Lyndon Fagan with JPMorgan.

Well done on this deal. The first question is just to drill into the operational cost reductions or the corporate cost reductions. $125 million just seems like a pretty big number. Where is that coming from?

Yes. Look, I'll get Matt to work through that, obviously, Lyndon, because he sort of has designed a lot of that for the go forward. But I would sort of take a step back first and say, if you think about who we are as an organization pre this transaction, we are quite a complex business with multiple offices, multiple commodities. And historically, with the aluminum value chain as well as what we used to have in Cerro Matoso around refining and with the closure of Mozal, a lot less operations and also moving far closer to the resource, less intensive on some of those other pieces. But Matt, maybe you take.

Yes. Thanks, Graham. A really good question. So we're looking to embed a new operating model across the organization. We'll see a leaner center and we will reduce those overheads by around USD 125 million. Looking to move decision and accountability for delivery much closer to the ore body while strengthening the technical capability for mine planning, processes and geoscience.

These are the core disciplines that we want to be known for that deliver real value to our stakeholders. So you'll see that focused technical expertise. There will be a simplification in our systems and processes, and that runs through IT, looking at standards. We're now concentrated into a downstream base or upstream base metals mining and processing company.

We don't have to now carry capability around the smelting and refining business. And again, as Graham mentioned, a much smaller corporate footprint. So looking at rationalizing our offices where our people are located across the globe to really pull those costs out and position us really well for the leverage growth we have in the commodities that we really like.

I was just going to say, I mean, is that $125 million embedded in the EBITDA for the aluminum assets? Or when I look at the divisional accounts, where is that $125 million sitting -- because it seems more than the corporate costs.

Look, I'd consider it's not embedded in the aluminum assets. We're talking about what's left, if you like, in our business, and it's currently embedded in our current operations that will exist as part of some of its a corporate charge out.

Some of it basically is pure overhead functions that we will have. To give you some numbers, Lyndon, to help, I mean, when we started the demerger, we had 16 operating sites half of the year, we had 8. We're now going down to 4.

Things like Clover at closure and rehab provisions at the half year, we had $1.7 billion. The new pro forma will be about $0.5 billion. And if you think about things just like your Scope 1 and Scope 2 emissions, we're going to go from roughly being around 23.4 million tonnes down to 0.5 million. So some of those things we have to do at the corporate side no longer have to be done in a simplified, more focused base metals company.

Okay. Maybe I'll take it offline. The follow-up I had is just on the pro forma balance sheet, there's obviously a lot of money there. We've got to fund Hermosa fourth grinding line is internally funded.

I mean, can we talk a bit about capital management and M&A in a bit more detail? Obviously, not the focus of this transaction, but obviously, number one question on investor minds is what happens to that cash? Matt, just any initial comments on your attitude towards M&A and capital management potential?

Yes. No, good question. So near term for me, I've talked about project delivery, operational excellence and embedding this new operating model are the real near-term key focuses inorganic growth, listen, definitely look to pursue opportunities that we see are value accretive, that are strategically aligned and maintain our financial strength, but they're going to have to compete for capital with the organic pipeline again, which I think is incredibly exciting when you look at what's near term, looking at the Ambler project, optionality we have across the portfolio.

So certainly open to ideas, but really important that they are value accretive for our shareholders. And of course, the bar is pretty high for any kind of transaction.

And just from a capital management framework perspective, you'll observe in the pack, Lyndon, that we have updated that in light of the different structure we'll have post the transaction. So we've updated that capital framework, continuing to prioritize the safe, reliable operations.

You'll note a strong balance sheet continues to be a core part of our strategy and then the allocation of capital towards that committed growth and life extension projects and then competition for capital, which is a principle we've had since demerger, and we'll continue to have that as a way to make sure we do maximize per share value in the long run. And looking at that as a combination of factors to consider between dividends, buybacks and considering our growth-focused portfolio.

[Operator Instructions] Your next question comes from Jit Ming Tan with Barclays Bank.

Congrats on the transaction. A quick question on the pro forma net cash of $3.8 billion. I see that you assume repayment of the U.S. dollar bonds, the $700 million bonds -- can you share a bit more color on your plans in terms of timing and whatnot?

Yes, we are expecting to execute on that at completion. So that's really just a fairly simple early redemption, $700 million 144A/Reg S bonds that we have in place, and we expect that will be one of the uses of the cash position we have.

Your next question comes from Glyn Lawcock with Barrenjoey.

I'm in-transit, so apologies, I've joined late if I've missed anything.

Firstly, Graham, it's been a long journey. I think that's 11 years and 1 month to the date almost. You've now managed to, I guess, bring us back to a mining business finally, got rid of all your downstream. So well done, congratulations and all the best for the footy season ahead.

My first question is to Matt. Matt, just you've been gifted now a good company, strong balance sheet. Is there anything left in the portfolio that you don't like or you think needs to be looked at as well? Or are you happy with what Graham's left you?

Yes. No, thanks for the question, Glyn. And I think Graham over the last 11 years has done a fabulous job to reposition the portfolio into the commodities that we like and growth optionality that sits there. For me, every single asset has got to earn its place in the portfolio. So you want to be generating cash, of course, looking for optionality as well across the portfolio.

So that's how I look at it. Everything has got to earn its spot, and we'll continue to review. The obvious ones to look at there is the manganese business. Not a core part of the portfolio for us. You won't see us putting in growth CapEx into that part of the business as we're very much focused on the copper and zinc growth that I've talked about today. I think there is lots of opportunities that sit in the existing portfolio, particularly around operational excellence.

And now we're able to focus the company's resources on base metals mining, no longer spread right through that aluminum value chain, smelting and refining. So a big focus on things like mine productivities, processing plant performance and just looking at more optionality that can exist in the ore body. So that's how I'm thinking about it, Glyn, a big focus around the commodities that we like and project delivery over the next 12, 24 months.

All right. And then just the second question is to Sandy. Just on the lockbox, Sandy, I'm sorry, I haven't had a chance to read through everything. But is there anything special at all about it? Is it just simply the cash goes in? Is there a minimum you must pay them? Is there a maximum? Because I mean, if we get a spike in aluminum and it goes crazy, is there anything special about the lockbox -- or like will we just lose all the cash as a shareholder from 1 April?

It's a fairly vanilla lock box mechanism, Glyn. So the kind of principle is that they are effectively the kind of beneficial owners from the 1st of April and then they take operational control at completion. And then consideration as we think about it, has been framed around that. So that's really informed the proceeds and the consideration price that's accounted for.

As I touched on, obviously, the ticking fees, the other piece of that's return on the cash consideration from the shareholder approval. So that's recognizing, of course, the funding of those cash flows. So pretty vanilla structure, to be honest, Glyn, there's not really much about it. There's obviously lots of elements of that ensuring that we are delivering our commitments as a safe and reliable operator. You'd expect that in any of these types of transactions, but there isn't any standard elements on that.

And so what if there was an operational hiccup in the next 12 months and you -- and things went awry, who wears that? Is that all borne by Alcoa then if it's an operational hiccup? How does that?

So operational hiccup would sit on Alcoa. So we obviously have obligations to run it well. But in terms of the cash flow outcomes of that, absent some kind of very serious event, it would be sitting with Alcoa.

That's kind of the principle of the arrangement. And of course, we'll do everything we can to run these operations very safely and reliably on their behalf.

[indiscernible]

Sorry, Glyn, just on the flare-up, just to touch on, we do have that contingent consideration kicking in as well, just to your point on potential price flare-up, which is what we've looked to manage through that contingent consideration.

Yes, I was more worried that if there was an operational hiccup, we wear it, but it's -- I guess we've got all that -- we've got upside with no downside potentially [indiscernible] .

Your next question comes from Paul Young with Goldman Sachs.

Again, I don't want to drag this call, but just seeing as you've approved the fourth grinding line at Sierra Gorda, I thought we'd celebrate this a little bit and just talk about it a little bit.

First one is for Matt. Matt, you've obviously had a lot of experience executing projects at Anglo with Quellaveco and seeing on that journey and managing big engineering projects. I'm just curious around the first production mid- FY '30, which is like a 3.5-year journey from here. I know that this is a big project. It's complex. There's a lot of times involved with the existing plant, et cetera.

But it does seem a touch conservative. I'd be interested in your views on the timing, Matt, just with your experience on that project. And then probably the second one is around the MOU on the JV with Spence, which got dropped within the Chilean press a couple of weeks ago. I'm just curious around your initial thoughts, Matt, around where the synergies lie with the oxides, tailings, water procurement, et cetera. Anything you can share on those 2 things?

Yes. Perfect. Thanks, Paul. So the 3.5-year build time for the project is right basis my experience. Engineering is really well progressed. We're at 60% into detailed engineering, which really helps derisk the project. It's almost a copy and paste of the existing 3 lines.

So there's no new technology involved. But you still are doing a new expansion within existing plant. So all the tie-in complexities that you have as you continue to operate the plant. Yes, 3.5 years is right. We'd love to obviously bring it forward. We'll be working very closely from day 1 with the joint venture management team to make sure we deliver on time and any opportunities to bring that forward.

At the same time, making sure we position the mine so that when we have the expanded throughput, we have the right capacity to make use of that. We'll be updating in terms of resource and reserves at the end of the year into next year for the ore body and the drilling continues to impress us.

So the expansion plays into what we see as an expanding reserve base and the Catabela Northeast project as well, drilling is continuing there. So really long-life asset, and this expansion plays into that full scope of that region. Going across to the MOU with Spence, some great industrial synergies. You've got 2 assets, which are 10 kilometers apart with another ore body, the Catabela Northeast exploration target sitting between them. So you can imagine the synergies are very similar to what Anglo has talked about with Codelco between Andina and Los Bronces and of course, QB and Collahuasi.

So you've got differentials in grade, you've got feed opportunities. We've got 110 million tonnes of oxide sitting there with no plant to feed it into. And obviously, Spence's got that capability. So it's a start of a conversation. It's early days. Industrial synergies are often win-win for both parties and of course, opportunities across water and other elements you talked to as well. So excited about those.

They come often with very low to no capital cost to exploit the money that sits there. We've got a great partner in KGHM who's willing to explore these opportunities. And obviously, BHP is seeing the same potential there. So early days, Paul, but the start of the right conversation, we'll make sure it continues and update the market as it progresses.

There are no further questions at this time. I'll now hand back to Mr. Kerr for closing remarks.

Look, thanks, everyone. Really appreciate the time and support today. To sort of talk a little bit about Glyn's point, I mean, if you think back to 11 years and when we started as an organization, we were given names like ShipCo, RapCo, and we also had some feedback that we were so complicated to actually model that made people's life really difficult.

I do think the team has done a great work to sort of get us to where we always wanted to be, which should be the premier base metals opportunity in the Australian market and one of the few mid-tier mining companies. And I think with the strong balance sheet, the suite of assets we have, the growth potential that we have, I look forward to seeing what Matt, Sandy and the rest of the team can deliver. I think it's a super exciting time. But thanks, everyone, for your support, and we'll see you on the road.

I'm Kate McCutcheon. I look after the metals and mining research based in Sydney, Australia. I'm pleased to welcome our next CEO, Graham Kerr of South32. This conference might be Graham's plus 20th conference with us. So Graham, today, has chosen a hybrid format. So I'll hand over to Graham to present some slides, and then we'll have a fireside chat, and we'll leave some time at the end for audience Q&A. Thank you, Graham.

Thanks, Kate. Appreciate it. Good afternoon, everyone. It's a pleasure to be here with you again at the Bank of America's Global Metals, Mining and Steel Conference. This year marks my 11th as CEO of South32, but as Kate pointed, there's many more before that. This will be my last one as CEO, as Matt Daley sitting in the front here, will step into the role later this year. I'll be handing over to Matt with the business well placed for its next phase of growth with a transformed portfolio supported by a strong balance sheet.

Over the past year, we've continued to deliver on our strategy by streamlining our portfolio to focus on higher-margin base metals businesses. Our reliable operating performance backed by commodity price tailwinds is supporting strong cash flow generation, giving us a compelling platform to invest in further growth in copper, zinc and silver. This includes our multi-decade Hermosa project in Arizona, which is expected to deliver first production from Taylor in H2 FY '28.

We recently provided an update on Taylor's construction progress, which reaffirms its potential to deliver returns from its low-cost production of zinc, silver and lead over an initial operating life of around 33 years, and I'll provide more details on this shortly. Our portfolio has been repositioned to focus on base and precious metals and aluminum, which are expected to benefit from long-term structural tailwinds around renewables, electrification and AI growth. Our strong operating performance for the financial year, coupled with higher commodity prices has seen us generate strong earnings and cash flow, providing earnings momentum and a robust balance sheet from which to deliver growth and returns.

Our growth pipeline has the potential to underpin significant long-term base metals production. At Cannington, we're working to extend its high-margin zinc silver production beyond the current reserve life of around 7 years by pursuing both underground and open pit options with the open pit development recently advancing into pre-feasibility study. Sierra Gorda is progressing multiple options to grow our future copper production, including the Fourth Grinding Line expansion project, which is expected to be the subject of a joint financial investment decision in the coming months.

Beyond these, we're advancing our Hermosa and Ambler Metals projects in the U.S. At our Hermosa project, Taylor will strengthen our portfolio by increasing our production of base and precious metals. It's the first stage of what we anticipate will be multiple phases of growth and production and will establish significant shared infrastructure for future growth phases. This includes the Peake copper deposit and elsewhere across Hermosa's highly prospective regional exploration package. We're seeing strong momentum at Ambler Metals in Alaska, a district scale base and precious metals opportunities with permitting progressing for the high-grade Arctic deposit and USD 42 million to be spent together with our joint venture partner in calendar year '26 to progress drilling and development studies.

At Sierra Gorda, which is our high-margin copper asset, it holds a number of options to grow volumes and extend life. The Fourth Grinding Line has the potential to increase throughput by around 20% and as a brownfield expansion that will benefit from existing power and water availability is expected to be capital efficient and value accretive. A joint final investment decision is expected in midyear 2026. We're also working through life extension options we have, including announcing initial exploration target for Catabela Northeast, while we're looking to unlock further value from 110 million tonnes of stockpiled oxide material.

We now turn our attention to Hermosa. Hermosa is a regional scale critical minerals project in Arizona, a Tier 1 mining jurisdiction. It increases our exposure to attractive commodities like zinc, lead, silver and copper. Taylor will add sizable volumes of zinc into an expected market deficit that will require the equivalent of 3 Taylor sized mines each year to meet projected demand and will almost double our annual silver production.

Our recent update reaffirmed its quality and returns potential underpinned by a substantial ore body that continues to grow. Successful in-drilling programs at Taylor have extended the initial mine life by 5 years to around 33 years with the deposits still open in several directions, providing further upside potential. In the December 2025 quarter, we completed the exploration decline of the co-located Clark deposit, which highlighted the potential to use Clark's decline for additional Taylor body ore access. Subsequent work has confirmed this opportunity, which is expected to unlock value by enabling first production ahead of shaft sinking, improving operational flexibility and increasing ore handling capacity by 25%, which together with surface infrastructure debottlenecking has the potential to support higher mineral production.

As a result of this change in scope and our expectation of delayed completion of the shaft due to contractor underperformance and productivity challenges, Taylor's schedule has been updated. First ore mined at Taylor will now come from Clark's decline mid FY '28 with first production expected in H2 F '28 and nameplate capacity expected in FY '31. As a result of the scope changes, revised shaft construction costs, materially higher inflation, industry-wide cost increases in key inputs such as steel, piping, concrete and electrical and U.S. tariffs, our estimated growth capital expense for Taylor has been increased by approximately $1.1 billion. Even after these updates, Taylor continues to show its quality as a long-life, high-margin project that will substantially increase our production of zinc and silver and deliver returns for decades to come.

Based on our updated assumptions, we expect an annual steady-state EBITDA of around USD 650 million and an NPV of around USD 3.1 billion. And this is all before considering the substantial growth potential from near-mine exploration targets such as our Peake copper deposit and the highly prospective regional land package. Our unchanged capital management framework has supported the transformation of our portfolio, while balancing investment in our business and delivering shareholder returns. Our balance sheet is strong and is supported by cash generation due to consistent operating performance and commodity tailwinds, leaving us well placed to continue delivering returns, while investing in our pipeline of high-quality growth options to increase our exposure to base and precious metals.

In summary, we've done a lot of substantial work to transform our portfolio and upgrade it for both now and for the future. Today, we have a portfolio of high-quality operations leveraged to attractive commodities that are generating strong cash flow, coupled with great growth options in copper, zinc and silver. Before I close, I'd like to thank you all for the trust and support over the past 11 years. I know South32 will be in very capable hands with Matt, and I look forward to seeing the next phase of growth unfold. Thank you.

Thank you, Graham. There's a lot of growth projects to talk about. So maybe we'll start with Hermosa. This morning, all the presentations have been focused on the dearth of copper supply. But if I think about zinc, Hermosa will be one of the first major zinc projects that the Western world has brought online in some time. What do you think is different about the outlook for zinc now or what has changed?

Yes. Look, absolutely, Kate, good question. But maybe I'll start with, to your point, I think one of the things the team has done well over the last decade when we were first demerged from BHP, we had very little growth options, short life on things like Cannington and GEMCO, which were about 6 years. I think the team has done a really good job extending the life of our existing ore bodies, but also creating a suite of options in those commodities we find attractive. And to your point, we like copper like everyone else, and we like zinc. And obviously, silver at current prices is super attractive to us, underpinned obviously by a strong aluminum business.

Look, zinc from our perspective, probably has a very similar kind of story behind copper. There's a story of strong demand. Demand continues to grow. If you think about where zinc is used today, galvanization in places like India and China is still way behind the Western world. And as you think about new applications that are coming for the demand of actually zinc, you're actually starting to see that it's getting picked up in things like wind turbines, et cetera, which are probably a new market. I think the other one for us is the ability to recycle zinc is very different from copper.

So you can't do the same amount of recycling. And I think the threat of substitution where you go from copper to aluminum doesn't actually exist in zinc because the replacement of galvanization of the zinc is like a 4x additional cost. So I think on the demand side, that positions zinc very strongly. If you talk about the actual supply side, now it's probably been a commodity that hasn't been loved for a long period of time. But I think what you have seen over many decades is a lack of investment around exploration and project development. A number of mature projects continue to sort of get older, deeper, the grade continues to decline. So you're starting to see that supply-demand gap actually grow.

In fact, we think over the next decade, you need 3, if you like, zinc deposits the size of Taylor to come online to actually meet that gap. And obviously, for us, we've got the added bonus of silver. If you add what we're going to pull out of Taylor versus what we're going to bring out of Cannington will double our silver production across the Group. And the other attractiveness for us around Taylor is at the moment, we've got a mine life of about 33 years. We grew that since the FID by about 5 years by simply some infill drilling.

We've got a lot more infilling drilling still to be done. And we've also got a lot of extensional drilling to do because Taylor is open in multiple directions where it's not closed off. So I think from our perspective, love the commodity, love the jurisdiction and love the fact that we believe it can be a mine that's around for 40 to 50 years.

Okay. And let's stay on Hermosa. You mentioned in your opening remarks some of the things that have changed since the FID, including tariffs. And then you mentioned the upside around the mine life extension there. What are the key things that you didn't anticipate when you FID that project?

Yes. I think buying and developing a project always comes with risk and opportunity. If you think about the risk for us at the time of buying it, obviously, there's a lot of uncertainty around the geology and the resource. There was an early surprise in the early years around the amount of water we thought was going to be vastly more than we expected it was going to be. And then obviously, you build and study a project over probably 5 to 7 years by the time you do it. And obviously, permitting risk in the U.S. is generally talked about. Whereas, if we sort of tackle these one by one, and then I'll come back to where we're at today, if you have to think about permitting risk, we're on track to get our record of decision in the back half of this calendar year.

We can actually build Taylor today and run it for 10 years, but the federal approval will actually -- because that's all state approvals, and we already have those, but the federal approval will allow us to build the next tailing facilities in about 10 years. It will allow us to actually connect power, if you like, across the Coronado state from National Forest, which gives us cheaper access to power, potentially renewable power. But it also allows us to start exploring more, in depth, things like Peake and there's probably about another 15 targets we want to explore on the property. So that's the importance of the federal approval for us.

We were the first project in the U.S. mining industry that got into the FAST-41, and it's been a fantastic process for us. It's a dream process. It doesn't change the amount of work you do. There's probably a lot more scrutiny on it, but it certainly accelerates the program and it puts you in a really good position to handle litigation when it comes because of the depth of work that's done. So permitting has been a big tick for us, which is a risk at the start. Water funnily enough was one of the delays and one of the capital cost increase when we actually went to the FID decision for Taylor. It turns out now that we actually got the water wells running, we're probably only going to have about half the water we thought we're going to have, which is great going forward. So less free handling and less worrying around the risk. So I think that's a positive.

The resource, like I said, continues to grow at Taylor. If you think about something like Cannington, [ I'll share my age I was even ] when we actually built Cannington. We talked about Cannington has a 15-year mine life. It's probably been going now for about 28 years. We're talking about another 7 to 8 years easily and probably extending another 4 or 5 potentially on that. Taylor has the ability to grow longer and stronger than that and also at a very good production rate of about 4.3 million tonnes through that operating mill.

But over time, we think we can probably grow that by 1 million tonnes as well. So I think it has all the optionality, how you make money in our industry. It's a large resource. It's expandable. It's in a good commodity and it's got growth options and [indiscernible]. And that's before we even think about Peake, Clark and the other things that are around it. So I think the resource has been an upside. What has been a challenge for us is sinking the 2 shafts. The shafts have grown slower than we actually expected, not because of geotechnical conditions or water. It's been more a challenge around contractor performance, productivity sort of been more challenging for us.

I think if you ask me about how the surface infrastructure was going 4 weeks ago, I would have said that's going really great. So the surface has sort of broken up into 4 packages. The first 3 packages of which the last one we led in February have all come in exactly on the fit estimate. The last one that's come in and also for the underground workshop, steel, concrete, et cetera, we've seen inflation hit in a big way where -- we're seeing cost increases, for example, on installed steel about 2.5x, concrete, electrical all ranging between 2 and 2.5x. Quantities are the same, the prices spiked, while not directly attributable to tariffs, our exposure there has been about $60-ish million. It's been more the general inflationary environment and tariff impact on steel, et cetera, that's had a big increase in our capital costs.

But we think we've got that covered now with 80% of the project actually being committed or contracted or priced. And probably the 20% left, there's a large chunk of that, which is owner's cost and about a $230 million contingency and some minor equipment for the underground. But obviously, we need to execute and finish that project as well now.

Yes. And so Graham, you'll have all what South32 will have all this building mine expertise and permitting expertise in the U.S. In what scenario are you able to make the stars align so that team could possibly roll into the Trilogy JV and your Roosevelt project?

So that would be the ideal world. I mean, particularly already, we're having some transfer of skills around the permitting side and working with our JV partner there and trying to leverage some of those skills about how we accelerate that. That's an easy win to get today. I think the fact that you have to build an all-weather road that connects the Dalton Highway to the Ambler district is something in between that we didn't have to do it, Taylor. So I think the execution of that road, the permitting of that road will take a bit more time. It's got really good momentum now with basically AIDEA, which is the Development Corporation of Alaska investing money into the design, but also the permitting.

We've got an MOU with the 2 large First Nations Corporations up there about how to take the road forward. That's all positive, heading in the right direction, but I think building that kind of all-weather road will take a period of time. So there's probably a bit of a gap between when we'll finish building at Taylor to when we're probably ready to start building at Ambler. How we fill that gap, I think, is going to be Matt's challenge.

Good. So let's pivot and talk about aluminum. It's been the best-performing commodity year-to-date, and we've seen the highest consensus upgrades. You've got tailwinds from higher pricing. Hillside was a really key cash contributor during the quarter, and it's about 60% of your Group emissions. How is that relationship with Eskom? And how do we think about the future of that asset post 2032?

Yes. Look, I mean, maybe a couple of comments on the commodity. Aluminum for us has always been an attractive story around demand. Demand has never been an issue. And I think that demand continues to increase. It's always been more about oversupply coming out of China. We're a firm believer in that cap of 45 million tonnes is real. We certainly don't see the government deviating from that. And some people ask us, do you think price will make a difference? The answer is no. I think they want to use their energy in a very considered way and exporting energy is probably not the intent of what the government is trying to do.

I think that cap will keep tension. You'll see new developments in places like Indonesia, but you'll switch from a world where for probably the last couple of decades, 80% of the development of new smelting capacity has come out of China, where now it's going to switch to ex China. And while you will see some capital compression that the Chinese can take to Indonesia, it's not going to be to the same magnitude. And certainly, you're not seeing subsidized cheap power that you're seeing in China.

So I think that reinforces you need a strong aluminum price to sort of induce new supply. In the short term, obviously, in the Middle East, what's going on in Europe is sort of pushing prices up. And potentially, that's got another 18 to 24 months to play out, which for our side, we will continue to see attractive pricing and to your point, will generate strong cash. I guess our one downside is we'd love both Hillside and Mozal to be running because they're both strong cash flow generators in this environment.

If we talk about Hillside and take a step back, actually, just came from Hillside's 30-year anniversary. And at that 30-year anniversary, the original opening of Hillside had the passed away President Mandela opened that and talked about the economic transformation of the country. We were really pleased that President Ramaphosa came down for the opening as well as 2 of these big cabinet ministers and a whole lot of other important people that form part of the ANC and [indiscernible] politics.

The one message that came out of that from the President and the Energy Minister was a strong belief around how Hillside continues -- has to continue to operate and a key component of that is going to be affordable, lower carbon power. And we have some great photos of the Energy Minister and our CEO, Noel, if you like, on the stage, having a hug. So I think the sentiment was really positive. From our side, Hillside can run for another 30, 40 years. It's technically despite load shedding runs at its technical limit.

I think it's some of our best people across the business. makes a really big difference in the local economy, so that's well supported by people there. I think the key is can we get another power contract. The power contract expires in 2031. We've been working with Eskom on this on joint working groups now for about 5 years, and absolutely feels like it's heading in the right direction, but obviously getting pen to paper is the next opportunity.

Okay. Got it. So let's go back and talk about the other hot commodity, copper. Let's talk about Sierra Gorda. So 2 questions for you there. Are we still on track for that FID for the Fourth Grinding Line by the middle of the calendar year? And then how do we think about Catabela East? That exploration target, it seems to have a much higher grade than the current resource, but it seems to be a bit steeper.

Yes. So a couple of good questions. I'll start with what's the one thing we'd love to own more of Sierra Gorda, not because we don't like our partner, KGHM, but we just think it's an asset in the right jurisdiction. It's the right commodity and it has lots of opportunity to improve, not only today's performance around productivity, but also how you can grow that business. To your point, you've got the Fourth Grinding Line now, which is on track to be approved by both joint venture partners midyear this year. We've completed the technical review from both sides jointly. We've had good strong dialogue.

It will be self-funded by the joint venture. It's pretty much a no-brainer to actually do that project. So that's the first, if you like, piece of growth. On top of that, we've got about 110 million tonnes of oxide material sitting on the surface, which obviously that's an opportunity for us to sort of take that to the next step. Catabela itself is the current pit. And before we talk about Catabela Northeast, it's worth noting that Catabela itself is still open at depth. So there's an opportunity to grow that. But to your point, we have had a large discovery next door called Catabela Northeast. The grades look attractive at about 0.45, it's about a 1.1 billion tonne resource. It's still open at depth in multi-directions. Our plan over the next 6 to 12 months is to do more step-out drilling to really understand the potential of what we have there.

So you've got Catabela, you've got the Fourth Grinding Line, you've got the oxide material. You've got Catabela Northeast, which looks like a very large resource, and that continues to push towards Spence. So there's obviously the question about do you do something together in that shape. That's something that we think over time is worth pursuing as well.

Okay. Got it. And under your watch, the portfolio has been transformed and cleaned up. You've got less assets. You've cleaned up the commodity mix. You've changed the regions where earnings are coming from. Is there anything that you still see as noncore in that portfolio? Or is that something you're handing over to Matt?

Yes. Look, I mean, I think there's always more to be done. To your point, when we started from the demerger from BHP, obviously, we had no growth options, but we also had some challenging assets. We've actually sold out of energy coal, South Africa. We've sold out of manganese alloys, South Africa, manganese alloys Australia, Cerro Matoso, Illawarra. We've brought in more exposure to green aluminum. We bought in Sierra Gorda, bought in Arizona. To give you a sense of that portfolio change in numbers, when we started the business, it was probably 50% bulks, thermal and met coal and 50% predominantly aluminum.

Where are we today? It's probably about 80% exposure to base metals, including aluminum, but growing still all the time. But also geographically, it used to be about 50% -- probably about 45% Australia, 40% Southern Africa and the rest is in South America. If you look at where we're going to be in the next couple of years, more than 50% of the earnings will come out of the Americas. And it's a very changed portfolio. There's still things to be done on that space. I mean I think longer term for us, we look at our manganese business, we like GEMCO. It's the best asset in that industry, has been for a long time. Obviously, been a place that's been in with a number of cyclones over the last couple of years and more rainfall than we've ever seen, probably in a year we've got than we've seen in a decade we've had any year.

So we're dealing with some water issues on the island at the moment. But it's a Tier 1 asset in that industry. Our South African business, there's always a question about is that better held in someone else's hands around consolidation potentially. But at the moment, our partners in that Ambler not interested in pursuing that. So we're sort of working our way through how do we make the best of what we have -- most of what we have. I think the challenge for Matt and the team going forward is how do we continue to add more copper and zinc units because everyone is chasing pretty much the same thing.

Yes. Got it. I'd like to hand over to the floor for Q&A, just cognizant of time. If you ask a question if you raise your hand and we will get a microphone to you. So while we're waiting for questions, Graham, you're due to step down as CEO and hand over to Matt. What are the key takeaways or advice that you're leaving for him as incoming CEO?

Yes. Look, I think that's an interesting question. I mean, I guess what I've been focused on is how do I set Matt up for success. As you've been in the role probably 12 years almost now and obviously was involved in the set up in the early days emerging from South32. So I think for me, it's a different portfolio than what we started with. It's a different business than what we started with. I think as we go forward, there's still things to be done on the portfolio. But I think my advice to Matt would be to play to his strengths and Matt's strengths really are around his engagement with people, his technical capability and how we can squeeze more out of the operations and make things like Taylor the best it can possibly be.

I mean that's really where Matt cut his teeth at things like [ man eyes ] at time. So I think that's the stuff that's really going to create a lot of value for our shareholders. I think we have some really great people for the journey. But obviously, as you move into that next stage of delivering on major projects into operation and commissioning, that's some new skill sets, so we have to continue to update.

Question at the back.

Graham, I remember sitting at a Melbourne Mining Club dinner in London more than a decade ago where Lionel Barber cheekily said to you, how does it feels to be CEO of CrapCo. I'd love to hear what you tell Lionel today with the benefit of hindsight.

Yes, I remember that. I mean that felt like a long time ago now. And in fact, on day one when we demerged, I got interviewed by the ABC in Australia by a lady called Ticky and shared words with her around run Shipco. So I think the names around ShipCo and CrapCo, I mean, obviously, are names that stung at the time, and I think that gave our people some drive to actually make a difference. Look, I think what I would say, today, is the portfolio is very different. It's long in growth options. You've got exposure to the right commodities, to the right jurisdictions. But let's be honest, this industry is not an easy industry. If you think about that transformation and Karen Wood, who is our second Chair, but on the Board pretty much in day 1, stepped down recently, and she found an old note that I wrote about these are all the things that we need to change on the portfolio.

And she sort of took a great pride in saying that you've done all those things you said day one. I won't tell you what that one is. But then I said, yes, but I said I could do it in 5 years. It took me 11 years. So it's just a reminder in our industry how hard it is to actually move, change your portfolio base. It's not easy. I think we have been blessed when we demerged from BHP that CEO at the time, Andrew Mackenzie sort of gave me open slather on people, which is great for him. So we really have some high-caliber people run our business that I think have made a real difference over that period of time. And I think what I'd say to Lionel would be, look, the quality of the people, I think, has made a real difference here in sort of upgrading the quality of the portfolio. Still more work to be done, but I think it's been a quantum change by those people, and I'm thankful for that what they have done.

Before we wrap up, thank you, Graham. I'd just like to have a plug for our cocktails at 5:00 p.m. on Level 2 at the rooftop terrace if you want to chat to us some more. Please join me in thanking Graham for his incredible career, and thank you for coming.

Thank you.

Thank you. Good morning, everyone. Thank you for joining us today for an update on our Hermosa project in Arizona, following this morning's announcement on progress at Taylor. With me on the call today is our Chief Financial Officer, Sandy Sibenaler; and our President of the Hermosa project, Pat Risner.

In February, we advised that an assessment of Taylor's project milestones and capital expenditure would be completed during this half. I'll go through today's update before handing back to the operator for questions. Hermosa is a regional scale critical minerals project in Arizona, a Tier 1 mining jurisdiction in the United States, approved for development in February 2024.

Taylor is the first stage of what we anticipate will be multiple phases of growth and production at Hermosa. It was the first mining project added to the United States Fast 1 program and remains on track to have all federal permits by the end of this calendar year. Before I unpack the details of the update, I'll outline why I believe Taylor will be an important contributor to the South32 portfolio for decades to come. Designed as a modern, large-scale operation, it is expected to deliver returns over multiple decades from its low-cost production of zinc, silver and lead.

Once in execution, Taylor will almost double our silver production and produce sizable volumes of zinc into a structurally short market. We see zinc as a structurally attractive commodity with the equivalent of 3 Taylor sized projects required to be developed each year to meet projected demand over the next decade. As a long-life development, which today stands at 33 years, Taylor is underpinned by a large ore body, which has continued to grow and remains open in several directions, providing further upside potential before considering further growth from our Peake copper deposit and the highly prospective regional land package.

Moving on to today's update. With the change in scope to include additional decline access, revised shaft construction costs and impact of inflation, industry-wide increases in key input costs and tariffs on recently priced packages, we have today announced an updated estimate in capital costs for Taylor. As a result, we have increased our growth capital estimate by approximately $1.1 billion when compared to our final investment approval to approximately $3.3 billion. With this, and as I've touched on, additional decline access has added approximately $100 million, revised shaft construction costs have added approximately $450 million and a further $500 million due to higher-than-expected inflation, together with industry-wide cost increases for key inputs and tariffs.

I'll now unpack each of these components. In the December 2025 quarter, we completed the exploration decline of the co-located Clark deposit on schedule and budget. Decline construction benefit from better-than-expected ground conditions and water flow rates, highlighting the potential to utilize Clark's decline for additional Taylor ore body access. Subsequent study work has confirmed this opportunity, which is expected to unlock value across the life of the mine by enabling first production ahead of star sinking, improving operational flexibility and increasing ore handling capacity to approximately 25%. This additional ore handling capacity, together with service infrastructure debottlenecking has the potential to enable higher metal production.

First ore mined at Taylor will now come from the Clark decline in mid-FY '28 with production expected in the second half of FY '28 and nameplate capacity by FY '31. This reflects our expectation of delayed completion of the shafts due to contractor underperformance and productivity challenges. Targeted measures have been implemented to improve shaft construction productivity, which have delivered improved shaft sinking rates. However, our latest assessment has determined that these measures will only partially mitigate the impact of contractor underperformance, and we are moving to a more gradual ramp-up to nameplate capacity.

Since we sanctioned Taylor in 2024, there has been major inflationary shocks and supply chain challenges, the war in Ukraine, U.S. tariffs and recent Middle East conflict. These external pressures have recently intensified. Compared to our estimated pricing and our final investment approval, installed steel prices are up by more than 2.5x, installed piping prices are up by over 2x and concrete prices are up by around 2x.

Looking ahead, with over 80% of capital spent contracted or finally priced, the capital risk profile from here is significantly lower with the remaining shaft development being delivered under unit rate contracts and detailed engineering further advanced. While today's update is not the outcome we had anticipated, Taylor is still expected to deliver returns for decades to come as a high-margin, large-scale operation with steady-state EBITDA of $650 million per annum. In addition, demonstrating significant leverage to prices.

At spot, steady-state EBITDA becomes about $800 million per annum. This is before the substantial upside from the Taylor deposit, which remains open, the Peake copper deposit and Hermosa's highly prospective regional land package. Stepping back, we have transformed our portfolio, establishing a platform for base metals growth, and Hermosa remains an important contributor to achieving this. It builds on the work already completed in bringing copper production through Sierra Gorda and our pipeline of growth options. Beyond Hermosa, we're working to grow our production of base and precious metals by extending the life of Cannington, progressing a low-risk copper expansion at Sierra Gorda and advancing our Ambler Metals project in Alaska. Looking ahead, with a strong balance sheet, we remain well placed and focused on executing Taylor and successfully delivering first production. Thank you. I'll now hand back to the operator for questions.

[Operator Instructions] Your first question comes from Paul Young with Goldman Sachs.

Graham, you obviously disappointing update. I'm trying to think about the right place to start here. Maybe can we just dig into the CapEx, just the increase, and I know you stepped through all those, the breakdown of inflation and what's come through. But I guess you're only 1/3 of the way through the spend. And I know you've locked down the work packages and I know you state in there around you factored in contract underperformance and unit rates are locked in on that on the shaft. But what I'd like to know is within the revised budget, what have you factored in for ongoing escalation contingency, owners costs, et cetera, those sort of components that are still sort of unforeseen?

Yes. Thanks, Paul. And look, I appreciate the question. Look, maybe if I start with the broad, if you like, perspective of how we sort of talk about this and maybe go through the 3 major changes that are sort of driving the increase in the capital spend. One is clearly, if you think about the interrelation of the shafts here and the Clark decline and the growing ore body, all 3 have a role to play. One of the things we have seen at Taylor is the ore body continues to grow predominantly through infill drilling to date. That infill drilling has allowed us to actually access ore that is closer to the shaft system and requires less lateral development. So while there have been some challenges that we have spoken about for a while around productivity performance by the contractor on the shafts, that growing ore body has offset that.

At the same time, Pat and his team have been very active in actually putting in a number of different measures, if you like, to sort of continue to improve the performance of the shaft sink -- to be clear, we are not seeing major geotechnical issues, and we are not seeing major water issues. This is about engineering delays. This is about productivity performance, not technical challenges. We've got to the point now that we believe that the rates that the contractor has talked about are not achievable, and we have adjusted those rates. But keep in mind, the vent shaft, for example, we're probably going to be finished at somewhere around July to continue where the schedule is.

And we're passed, if you like, for both shafts, the major first mining level of development and making good progress on that side now. I think the advantage of Clark is that Clark allows you to derisk the shafts of the critical path. It allows you to continue on some of the good work we've seen in that Clark decline where we've delivered ahead of schedule and budget and the water issues have been far less than what we expected, which allows us the flexibility to now think about tailoring the context of you have 2 shafts in there, a main shaft and a service shaft and you now have the access to drive down, if you like, the decline, which allows you to access ore quicker to commission the plant compared to what you would do with other shafts.

But over time, it will allow us to increase our ore handling capacity by roughly about 25%. And if you think back to somewhere like Cannington, Paul, which started out as a concentrator where you're probably talking about 1.5 million tonnes and has got well over in excess of 3. We believe that 24% ore handling capacity over time can serve the basis to do the work over the next 12 months to debottleneck the process plant and achieve more throughput, which is where the money will actually be made. But if we go specifically to those capital increase, the increase in the actual scope around the Clark decline is about $100 million worth of CapEx.

If we sort of go then to what's happening, if you like, on the actual process plant, that's where we've really seen some movement, if you like, in some of the key input costs. To be clear today, we already have -- and I was actually at Hermosa last week, we already have a large piece of the equipment on the ground in terms of consumables and spares now to sort of build the facility. It is actually the construction of the process plant and surface infrastructure is tracking to plan.

In terms of capital costs, it is that real spike that we've probably seen over the last couple of months that had a big impact. The surface infrastructure is made up of 3 packages. The first 3 and the most recent, which was finalized in February -- sorry, I'll come back. There's actually 4 packages for the surface infrastructure. The first 3, the most recent, which was finalized in February have all been in line, if not slightly below the fit estimate -- what we're seeing with the fourth one, admittedly the last package is we've seen a real shift in pricing. And if you look at the number of the index in the U.S., that's sort of reflected by the jump you've seen in the last 3 months.

To give you a sense of how much these external pressures have intensified and if you compare that back to our estimated pricing and our final investment approval, we've seen installed steel prices up by more than 2.5x, installed piping prices up by over 2x and concrete prices are up by around 2x. So when it actually comes, if you like, to the processing facility and surface infrastructure, that is all driven by pricing of external events, nothing to do with timing or change of scope.

The shafts themselves, as I mentioned, sort of just unpack that a little bit more. There has been a lot of work we've done around mitigating actions, contractor leadership, specialist consultants, changing some of the scope to bring it in-house to sort of reduce the risk. And while we're seeing some positive results, and we talked about the growth in the ore body and the advantages of the decline we get out of Park, we're just not seeing the rates that we want to see sort of to complete the shafts, which is why we've adjusted the CapEx on there. Does that help, Paul?

No, it does. I'm sure we get some more questions on CapEx, Graham. Can I just talk about actually the mining rates that you're targeting? I mean you've come out with the revised CapEx today, OpEx today, we can digest that and interpret that and factor in what we want. But can I just ask a question around the confidence around the mining rates actually of 4.3 million tonnes. I know the haulage shaft can do or thereabouts 1500 tonnes a day. I think Pat from -- if I recollect from the site visit, the decline will probably do 800,000 tonnes a million and maybe you can push through more through the processing plant. But just wanted to dig into the mine design and your confidence around that 4.3 you're actually doing more than that gram. I know you've based the stope design and all the long and stoping sort of design of Cannington. And I think the stope sizes are actually still pretty big. I think you've got 17% dilution in there and around the edges of the stopes, which could come back into -- actually could come back into reserve, which could be a nice little kicker. You said geotech is you confident about that. But just can you step through just your confidence around actually being able to achieve 4.3 from the main mine? I know you've got the ore at the top, which is decline access. But just overall, what comments you can provide us around the modeling around the ability to achieve 4.3 or higher?

Yes, Paul, look, I think a good question. And maybe I'll give you 2 responses and one, while we're going to focus on the underground with your question, it'd be remiss to sort of not talk about why do we have confidence in completing the shaft, the process plant. I mean if you look at the work we've got left to go, we're about 85% engineered. It's a class testament of 1 to 2. Procurement of large items is virtually complete. We've got contingency about $232 million, and we've done a P80 for contingency ranging. So that sort of gives you a sense of the capital left to spend some confidence.

When it comes to the underground, I always start with the reserve resource. What you have seen between this development is obviously. And when we originally approved the FID is a large increase, if you like, in our knowledge of the ore body and see more confidence in particular in the reserve reflected by infill drilling and more understanding of geotechnical conditions. But also as we've spoken about previously, we've seen a significant shift if you like, in the water required to be moved and to be managed on an ongoing basis.

So those things like resource quality, geotech issues and water, we're much more confident they've all moved towards our favor. The other thing I'll talk about, if you recall, one of the advantages of Taylor is when you have the shafts up and running, you are really mining from 4 independent mining areas. So unlike where we are at Cannington today, we're quite boxing with limiting flexibility.

Here, we have large-scale untapped areas where we can actually effectively run 4 separate kind of mines underground and use some of that shared infrastructure, the ability to add the decline allows you to have all the benefits, if you like, of at least a 25% increase in ore handling capacity coming out of the underground. So you can do a math of 4.3 to 5.3 and probably some more upside on that side, understanding we need to do the work on debottlenecking the process plant, which will take about 12 months to understand that.

But certainly, I see a lot more upside coming out of the mine versus potential downside. The stope design is an interesting one. I mean, look, I would say at the moment, there's probably upside on the stope design as we get in there and do more work. But let's get the team to do more work as we understand the resource. But the growth in the reserve and resource that we've actually seen, which is significant between the fit and today is purely based on infill drilling. We're yet to actually continue to push out, do bit drilling. Once we get the federal permit, we'll be able to do more, if you like, on the size of Taylor.

And I think that will continue to grow. So I think on that space, we have a lot of, if you like, optionality underground today, and that's going to be increased by the client decline. There's still the other benefits of potentially changing how we think about workshops underground. The decline will give you the ability to actually move equipment up and down for major rebuilds, et cetera. That's all stuff that the team is still working through at the moment. I think what we will have a look at, obviously, as we get closer as you think about things like the crusher bottlenecks underground, we'll do a bit of work around that. But generally speaking, we're confident in having the multiple mining areas open. Does that help, Paul?

Yes, it does, Graham.

Your next question comes from Rahul Anand with Morgan Stanley.

Look, I just wanted to do, firstly, a quick follow-up to Paul's question. In terms of the potential to lift production above current design rates that you've talked about in terms of surface infrastructure, debottlenecking, additional ore handling capacity. Just wanted to understand, I mean, how much of that work do you think is already reflected in the $3.3 billion CapEx that we have today? And I mean, is there an easy way for you to define that upside perhaps with clarity in terms of production/throughput? I know you've answered part of that already with Paul, but if there's any more color, I'd appreciate that.

Yes. Look, I mean, let's break this into components. When you think about the ore handling spend in terms of the shafts and the decline, we're pretty comfortable that the capital we're spending today is giving you that optionality. Hence, we talked about the 25% increase. The plant itself, obviously, when we build a plant and you commission a plant, if you look at the history of these kind of facilities, and there's a lot of them across the globe, they will have natural creep that exists in that business as we work through that.

And we build a facility, which actually has obviously, some safety factor built into it, which allows us to actually work through an increase naturally in the plant throughput. There will probably be some small amounts of capital that the team will have to work through around debottlenecking. I don't see that as significant yet. But in fairness, we've got about 12 months' worth of work to work our way through that. If you were to do a sensitivity, and again, we took about 25% increase out of the ore handling facility from the underground, and we think it's more than that because we said greater than.

If you could add 1 million tonnes to the facility, it's probably worth about $1 billion NPV if you can keep topping up the resource. We will do that work over the next 12 or so months. Obviously, our focus at the moment is getting to where we need to finalize, which we have done, completing the construction, getting our approval in the first half of this year. And then as we do that, we'll kick off a separate team over the next 12 months, which we have to do the work around that debottlenecking. But Cannington started at about a 1.5 million tonnes operation, low CapEx spend in the plant, debottlenecking got you to over 3 million.

Yes. No, absolutely. And that sensitivity is very helpful. Look, for the second question, just a general one around the reserve. Obviously, you've increased that in size. I noted that there was no change in terms of the NSR cutoff as well, which is good, I guess. But I wanted to understand what's driving those grades lower then? I mean, have you had more dilution assumptions going into that reserve? Or is the additions into that reserve basically the key culprit for the reduced grade profile and also the reduced grade in the reserve?

So the NSR did actually slightly move up, and that's really a reflection, if you like, of what our operating cost is. And the major increase in the operating cost to be clear, is rebasing and the other one is around electricity that comes off the grid. And it's a regulated power supply that comes out of Arizona, which basically sort of drives that increase in the price that you see.

Look, the reality is the movement in grade is actually very gradual. It's not a huge move that we've actually seen. You've added significantly about 5 years' worth of mine life purely based on infill drilling. You've got a lot more confidence about what the reserve looks like in terms of that. And as I mentioned earlier, we think Taylor is still open in multiple directions before you even consider Peake where we've seen a 33% roughly or 32% increase in that actual -- the growth in Peake over the last 6 months, and we continue to drill holes there because that's open in multiple directions as well.

So I don't think grade and tonnage is going to be a challenge for us over time. It's going to continue to grow. I'd expect to see as we get our federal permitting approval, we'll do more work on Taylor to understand the pure size. The challenge for the team is even pre-Peake you continue to push where you get to a 40-ish year mine life and then things like Peake on top of it. And that sets the business up for many decades to come with a very strong cash flow generating asset in a Tier 1 jurisdiction and fully permitted in the U.S.

Your next question comes from Kate McCutcheon with Bank of America.

So steady-state zinc production is down 7% or so because we've got the lower grades. I get that we've added the 5 years to mine life, but usually, you want to frontload that metal for a better NAV where you can in the mine plan. Can you just talk me through what is driving the lower long grades? I didn't quite catch that answer before. Is it more drilling of that increased portion of M&I and reserves? Or is it mine sequencing driven? And net-net, did that longer mine life give you better cash flows?

Yes. Look, really good question, Kate. So if you think about how the mine set up, as I mentioned, there's multiple mining areas that sort of make up production, if you like, that will come out of Taylor over time to give flexibility. There's 4 high-grade areas that are actually very close to where the shaft is going to be. When it comes to Clark, we're going to access [indiscernible] going to extend that into an ore body, that is actually slightly lower grade and lower value, if you like, than the other 4 areas that are closer to Taylor.

That's actually not a bad place to actually be because Paul is on the call, will also remember his time at Cannington in the early years, as you sort of commission one of these plants, there's always going to be some uncertainties that you want to understand if you don't put your best material first through where you're actually commissioning the plant. So effectively, through Clark, we access a different zone called J, which has an NSR or has less grade, if you like, than some of those high-grade areas. That's a big driver of what the average looks like in the early years. Again, I would expect the resource to continue to grow over time, more optionality even before we consider Peake.

Okay. Cool. That's clear. And then just on the shaft delay, Graham. So in January, execution was described as tracking to plan. You've got visibility over sink rates. Can you talk us through what specifically changed after that point that's driven the circa 18-month delay to this time.

Yes. Look, I'm pretty -- look, we've been pretty consistent on how we've talked about it. We've talked about the shafts are actually progressing. We haven't seen geotechnical issues that have been concerning. We haven't seen water issues. Water has been less than we expected to be. What we've actually been saying probably for about 9 months is contractor performance has been more challenging than we expected.

And certainly, the productivity of what we're getting from the contractor is not what we're actually hoping for when we signed the original agreement. I think the counter for that along the journey has been, like I mentioned earlier that you've actually seen -- the resource continued to grow as we've done infill drilling closer to the actual, if you like, shafts, which has meant the capital spend that you might have to spend more on the shaft is more than offset by a reduction in lateral development you need to do.

So that's why we weren't concerned about where the capital or what the schedule looks like. I think it's probably been more as we've come out of the first mining level, we've done all these interventions, and this is recently. We've put in some more of the infrastructure to manage water as we've gone deeper we haven't seen the contractor still deliver the rates that we would expect. At the same time, you've got the interplay of the decline was finished towards the back end of last calendar year for Clark.

Ground has been really good there. Progress by the contractor, which is a different contractor has been really strong. It just made sense for us to continue the Clark decline, around derisking the shafts of the critical path, but also the ability to actually access ore earlier, but that ore handling capacity of a 25% greater increase over time just makes perfect sense before you even consider the potential benefits of workshop design, underground, et cetera. So look, it's sort of a tale of 2 cities, if you like. Contractor performance on the shaft has actually been disappointing, but contractor performance on the decline has been really strong.

Your next question comes from Rob Stein with Macquarie.

Can you just perhaps give us a bit of a deeper understanding about contractor productivity. We want to know essentially how much of the expected scope remaining is still at risk, whether there's other productivity issues that we can expect to drive capital estimates higher from here and what effectively fixed from a quote point of view? And I've got a follow-up question around depreciation.

Yes. I'll put note Sandy on depreciation question. Look, if you think about -- let's start with the shaft, it's probably the most important place to start with. If you actually talk about the ventilation shaft, that's about 75% complete at 618 meters as of the end of April. Assuming actual achieved rates to date, that means you're probably going to finish that around July.

So there's not a lot of risk left, if you like, in the component of the shaft. The production shaft itself or the main shaft has performed actually stronger than the actual bench shaft. It was always planned to be started later. But a lot of the lessons we learned out of the bench shaft have been easily transferred across to the main shaft. The main shaft itself is about 53% complete at 478 meters, and we have actually seen them come out of the first mining level as well. So now we're into contract unit rates as we continue to progress down to the bottom.

Again, geotechnical water issues, we haven't actually seen of any significance or materiality. It has been around productivity performance, and it's certainly something Pat and the team are on every single day. What we have done to derisk some of that is to basically also take out some of the scope on the surface and manage that through the owners team, which is progressing well. If you think about where we're up to with the process plant and the surface infrastructure, far more comfortable around that because majority of the engineering has been done. Large amount of the lead time items are basically in terms of big places like [indiscernible], et cetera. They're all on site or on the staging area, so not far away.

And certainly, if you look at the -- how we're tracking on the process plant, that's tracking exactly to plan. What we haven't got to yet, obviously, is the underground lateral development, and we haven't got to the mining excavation for the underground workshops. That is obviously another piece that's been hit by inflation, as we mentioned in the announcement today. That work is in with the team and currently being evaluated, and we've got pretty firm pricing on that.

But as the market has sort of been reflected in the U.S. with the timing of work between the fit to the Clark work to where we are today, we've certainly seen a shift, if you like, in the lateral development rates and also seen a shift, if you like, in some of the underground excavation. But that is built into our estimate reflected about where we are if you like, in terms of the engineering work done, but also the contingency we're carrying, if you like, in the latest estimate.

And on depreciation, is there -- I mean, with the impact of tariffs and the like, is there extra concessions available? Can you get some accelerated depreciation? What's the -- is there any clawback in terms of what we're seeing in terms of project...

No. Sorry, the answer to that is no. I mean we've sort of talked about tariffs for a while, and I think we've been estimating the range of $70 million to $90 million from day 1. And that's probably the range we're sort of sitting at the lower end of the range at the moment. The good thing because of other issues -- it's less of a moving piece at the moment, but obviously, we watch every day. We do have less exposure.

For example, mobile equipment is ordered most of the surface equipment for the -- is already ordered. The big piece of the kit. So we don't think we have as much exposure going forward on the tariffs. I think what you would have heard me talk about the last 6 or so months is when we've talked about that tariff exposure, I've always been more worried about what does it actually mean for inflation in the U.S. And it's things like concrete, steel, piping, which is a function of steel, electrical items, that's always been my worry.

And that's where we really see -- if you look at the indices since probably about December, November last year, we have seen a significant spike in those quantities. And that's reflected again back to my earlier comment where we see there's 4 surface packages of work that need to be completed. The first 3 of which the last one was actually finalized in February, they are rather smack on the bid estimate or slightly below.

It's that last one where we've seen a real jump in steel prices, piping prices, concrete prices, and it's just sort of come back in that last estimate of a real big shift. And again, to be clear on that, that's not about quantities, that's price. So to give you a sense, our steel that we're inputting will probably be about 30% down on an engineered basis. This is all driven by price, price, price. And that's reflective at the moment, if you look at what's happening to steel prices in the U.S., but also the timing and availability. And even now -- even with the tariffs, you've got people thinking about is it easier and cheaper to actually import steel.

And sorry, just on the contract -- back on the contractors, I mean, is that price? Or is that tool time or hours utilized to do a task?

So again, let's just focus that on the shaft because that's where we're seeing the challenges. And if I take a step back and maybe have a couple of broad comments first and then get into some of our specifics. I think what I would say as an industry, if you think about coming out of COVID, the one thing you've seen across major engineering firms and major service providers is a real loss of actual capability in terms of the experience great guys. And I think we have had productivity things around implementing the engineering on time and as a consequence, what does procurement look like.

But then there's also been challenges around leadership. It's something Pat and his team are on, on a constant basis. We've had leadership changes from the contractor. We've also had interventions on a regular basis. There has been milestone points about the first precinct versus the first mining development and then where are we now? And clearly, now we're in that unit rate piece, so they carry the risk, if you like, on delivery.

But we just haven't seen the productivity we would have liked to actually see. I think the flip side to that is our experience on the Clark decline, a function of less water, a function of better geotechnical conditions. That's been a positive for us. And I think the contractor on that side, different type of work has actually performed really strongly.

Your next question comes from Kaan Peker with RBC.

Two from me. Graham, you mentioned that there isn't any issues with the shaft or structural issues of the shaft, but the scope change suggests there's a parallel access to the system. Obviously, this suggests that the shaft is riskier than initially anticipated. And we're getting a scope change so late in the project. So is the decline a mitigation for shaft risk? And how do we get confident that there won't be any further schedule slippage.

Yes. So that first question, I think, is a good one and a good one for us to clarify. If you think about when we started the Clark decline, we were just starting the dewatering at Taylor. And you would have heard us talk on a regular basis that the dewatering has been significantly lower than we actually expected. So not only have we had good progress, if you like, from the productivity of the contract to do in the Clark decline, we've encountered less water.

We've continued to dewater the mine and have a better understanding of where we are. The geotpec risks on that side have been better. So when it comes to the decline, it is opportunistic. And it's information we clearly didn't have at the time we started the shafts. It's opportunistic in the way that it also allows you to add, like I said, more than 25% ore handling capacity out of the underground. It allows you to obviously derisk if there was something wrong with the shafts because you can still access ore at an earlier time from different directions.

And over time, I think it's just going to give the team flexibility underground, including how we design our workshops. To be clear, we have not seen issues in the shafts that basically actually have geotech issues or water issues, it's productivity performance. We benchmarked that at the time of actually doing the shaft, so we're comfortable around that. And clearly, you've got the added benefit.

Historically, the bench shaft used to be the critical path item to provide ventilation for underground work. The decline actually allows you to actually remove that as well from the critical path. So the decline is all about opportunistic. It's all about you can increase over time. It's all driven by much better information than we had versus 12 months ago. And this is the thing with Taylor.

This is not a static ore body as we continue to do more work and we've only done infill drilling. We understand more about the geologies. We've dewatered it. We know that the water is not probably as bad as we initially thought it was going to be. As a consequence, we're not running the water treatment plant up to its full capacity. We don't expect to potentially be ding underground now as we go forward as well.

So I think there are lots of positives coming out of the ore body that check and water. The shaft is about productivity performance. Now in saying that I've been in the industry long enough to see that I'm never going to be completely comfortable to that shaft completed at the bottom. But I do think the rates that we've got in there, the way we have slowed the ramp-up reflects what we've seen in past performance to be clear. It's not ambitious. It's not targeting.

Sure. And then just continuing on the shaft, I sort of understand the shaft sinking unit rate contracts. But I mean, what fundamentally will change contractor productivity? And again, how do we get confidence that this performance will change? And is there any point of escalation.

If you think we haven't been using escalation over the last 12 to 18 months, you don't know Pat and the team. So they're all over this. I think what I would say is, again, the shaft is made up of 3 different parts of the work. We are now, if you like, past the first mining level of straight shaft escalation. What we're using to predict performance going forward is actually past performance that we've seen over the last couple of months.

So there's no hero assumptions. They're confident they can still higher productivity rates than what we've put in the plan. We're just making sure we've got a plan that we think is achievable. Now there has been a lot of work to be clear here in taking some scope off of them to reduce the risk. There has been some -- a lot of work done on cycle times. We have installed some ability to handle it. There was more water ahead.

So there's some more water infrastructure on the actual [ galloways ] et cetera. So there's been a lot of actions taken. We're just looking at their productivity rates that we've actually seen be delivered, and we're using those going forward rather than forecast.

Your next question comes from Lyndon Fagan with JPMorgan.

So Graham, what protections have you got in place for any further underperformance from the contractor? I guess to what extent can you sort of assure the market that this is the last CapEx blowout that we'll see?

Look, again, I would sort of say, if you start with the processing plant facility, you've got a processing plant facility where you've largely engineered all the work. You've got large pieces of actually the equipment already on site or in the actual laydown area offsite ready to be transported. And they're tracking on exactly planned for basically the schedule, engineering, et cetera, and it's about 85-ish percent engineered.

So I think you're in good shape on the processing facility. The underground decline that we've added the additional scope from Clark is actually an extension of the current decline, and it's the same contractor who's already set up there ready to go. They haven't left site since it's going to keep punching down. I think when you think about the actual contracting approach with the actual service provider for the shaft, again, we're using actual rates, not what they're forecasting for rates.

So obviously, we're looking at what we've achieved and using that as a basis. At the same time, we have a team that's engaged every single shift on ship with our contract actual provider there to make sure they deliver. We've got regular engagement with the senior leadership. Obviously, if it's a unit rate contract, it's now at their risk as well in terms of money they're actually exposed to. And in the estimate, we carry a contingency of about $232 million.

And I guess the other question I had was just on the Peake copper deposit. So I mean, what's the latest thinking around bringing that into the mine plan? And when would that make sense?

Yes. Look, it's a good question. I mean, obviously, when you look at the design of the underground, it's always going to be about the NSRs, and that's going to be a little bit in terms of the value, that's going to be a big dynamic. If you look at silver price today and if you look at the 4 high-grade zones that are near the shafts when you get them up and running, that's always probably going to be the most attractive material on site if the silver price stays where it is now.

I think what is good to see, if you think about Peak, it continues to actually grow. We announced today a 32% increase in the mineral resource to about 33 million tonnes at 1.78% copper equivalent. It is still open in multiple directions. We still think there's a fair bit more work to be done there in drilling. We are limited today about how much work we can drill from the actual, if you like, the state leases or the patent leases.

Once we get that federal approval, we'll be able to increase what we do in Peak. My expectation though is the silver prices actually stay roughly where they are today, you're probably more likely to see Peake come in somewhere around year 8 to 10. But the silver price has shifted and as we do more drilling, if there's higher grade copper and prices move, we'll shift that. So it will be dynamic.

I think the positive is and while we've got more work to do, if we think about the ability to add a copper circuit to the processing facility where we allow space to do that, that estimate is still low. It's in that range of $50 million to $60 million, and we've done a lot more work to get a greater understanding and engineering of cost there. So you're really talking about a low capital cost option driven by pricing.

The resource today will continue to grow and grow. I think the other thing that we don't talk too much about is Taylor is still open in multiple directions. But even we did the original ore body for Taylor, there are a large number of stopes that we didn't bring into the current mine plan that are copper rich because we did have copper circuit. If you add that to Peake and you add that to what you've got at Taylor, I think that's going to allow you to continue to extend the mine life out. And again, it might change your economics.

I think the challenge with Pat and the team as we build this is to have a mine model over time that allows you to actually within constraints of development to get out to the ore bodies to actually evaluate on a real-time basis, what does it look like the silver price versus copper price because what you have in this mine compared to what we have in other parts of that business today is large amounts of optionality.

Your next question comes from Lachlan Shaw with UBS.

I just wanted to again come back to total material movement out of the mine. So notwithstanding potential for higher material movement out of the mine overall, given you're now talking to the Clark decline complementing shaft capacity, you have left planned mining rate unchanged and trimmed payable metal production. So I'm just wondering how do I align these up consistently? Are you just being conservative? Or is there an implicit downgrade on shaft capacity here? And second thing is just OpEx. So you have increased OpEx. Does that factor in the OpEx of the Clark decline or just lifting costs from the shafts? And I'll come back to the question.

Let's answer a couple of components. One is we are not declining -- putting a downgrade on the ability of the shafts to move materials. While you do see that grade in the early years is actually down, that's more driven again by the decline in accessing some lower-grade material for a period of time. Once the shafts are up and running, it's actually accessing high-grade material, particularly over the first 10 years to be very clear.

I think why we're sort of focusing, if you like, on still work to be done. We've just completed all this work around the Clark extension, what does it look like? How does it fit into the ore body. We know the ore handling capacity is going to be greater than the 4.3 million tonnes. It's greater than 25%. To give you a sense of that sensitivity, again, if you can add 1 million tonnes, it's probably about $1 billion. If you can continue in NPV, if you can continue to add up on the resource.

What we haven't done yet is the debottlenecking work at the plant. We all know that -- if you look at history of this, it's the common thing where you actually move through the debottlenecking. That will probably take us about 12 months' worth of study to be focused to sort of be completed to understand how you actually do that what the focus of the team at the moment is obviously completing the construction, getting the actual approvals where we're going through the federal approval now, and we expect that by the end of this half of the -- sorry, the end of this calendar year.

And at the same time, in the background, we'll start the work, which will take about 12 months to understand what we can get out of the process plant. But certainly, I think there's upside in that space. Again, once we get that federal approval, we'll also be doing some more work on understanding, a, how big Peake could be. We're continuing to drill at Peake, but I think the step-out drilling will come from when you get federal land.

And likewise, when we get the federal land, we can -- and we get all underground access, we can start drilling more at Taylor to understand how big that could be. So look, when it comes to the reserve resource grade for both Taylor and Peake, there's more upside than downside, and we're excited about that. Shafts are absolutely going to deliver on what we said. I think Clark with the work we've done on the [ geotech and award ] the progress to date by the contractor is an absolute no-brainer.

Right. That's helpful. And then just a second question. So yes, just curious, you've spoken to some in-housing, taking some scope of the contractor with the shaft, for example. Just more of a general question. How do you feel about your internal capability, your technical capability in terms of, I suppose, a, monitoring, but also b, having the capability and capacity to sort of win and deliver some of these parts of these projects?

Yes. Look, I think great question. If you think about where we are as a project today, there's probably another project in the U.S. that will get a federal approval in the time frame that we've done. If you look at the support we've got from some communities and First Nations, if you like, in our area compared to many of our peers, I think we're at the top tier of that.

If you look at the performance around the decline, it has been great. If you look at the ore body knowledge and growth, I think that continues to improve in a really positive trend. I think as we mentioned for the process plant, we've got most of the major equipment either on site or in the laydown area offsite and the engineering and the building of that is progressing exactly to plan. It's been more external issues around inflation that has sort of driven that increase.

I think the challenge for us has actually been around the actual shaft. The shaft is a very one-off specialty task. That is an area that we've actually had some challenges, obviously, with the contractor around productivity improvement. But if you look around the quality of people we have on the team, I think we are one of the few projects that's actually progressing in the U.S. So attracting people from our peers has actually not been a challenge.

So we've added plenty of capability over the journey. And as we get into the piece of commissioning and operating the underground, we're confident not only we will attract good people, but we'll also be able to use some of the expertise that we've built over time at Cannington similar product from a processing perspective, similar mining method. We're always doing some work on that around the exchange of information and lessons learned. And Tucson is a pretty good place to live.

Your next question comes from Mitch Ryan with Jefferies.

Just Graham, what's the scope for financial remedy with the contractor given the productivity and performance to date from them?

Yes. Look, it's an interesting question. I mean there are probably -- the challenge now, I guess, if you're into that unit rate of the contract is while it will hurt us potentially on time, it hurts them on exposures for the direct costs more than it probably hurts us from a few dollar perspective in terms of money flowing out the door immediately.

So there's obviously a strong incentive for them to continue to actually finish that work. I think some of the early works around the precinct because of the uncertainty of the precinct, and this is probably like all shaft contracts, that's more a reimbursable basis.

There will be some things, obviously, we continue to engage them on around some claims. But I think there's not a huge amount of scope on that space. It's about how do we focus on productivity improvements going forward, understanding that we've been in the unit rate period now for a while. So they sort of bear the cost on that in terms of direct cost.

Perfect. And then just can you help remind me, do the existing and the pending approvals allow you to increase the mill capacity materially? Or are there any constraints on how high that could go without a new approvals process?

So we're going through the federal -- keep in mind, we have all the state permits today, which allow you to basically build, tailor and operate for the first 8 years. The advent roughly depending on tailings and the rate. What we actually have in the federal approval process, the benefit is it allows us to do more drilling on the ore body. It allows us to do the last 7 kilometers, which connects a power line into the actual operation for cheaper power and allows you the next tailings facility.

Look, we're going through that federal approval process at the moment. It's a rigorous process. On that, you've actually got to put in, obviously, what you plan to produce and all the associated things like water, air emissions. That's what we're going through working through the federal government now. We expect and we're on track to get approval by the end of the calendar year.

If you look at every other operation out there in the U.S., they change over time. It means you put in an updated mine plan of operations. You don't only do that after you've done the work, and that's the work we'll do over the next 12 months to understand the debottlenecking the implications, and we'll go through that process. It's not like a normal process to be clear. It is a normal piece of business, but we still need to do that work and then file that adjustment to the updated mine plan of operations.

[Operator Instructions] Your next question comes from [ Alex Sue with MLT. ] We might just move along. He was the last question in the queue. There are no further questions at this time. I'll now hand back to Mr. Kerr for closing remarks.

Thank you. Look, I want to thank everyone for taking the time today on such short notice to actually talk through this. What I would start by saying, well, look, this is not the result we expected today in terms of the movement in the capital number. Reiterate, there is a component around scope changes, Clark. There are some uncontrollables, obviously, around inflation we're seeing in the U.S. when it comes to the surface plant and some of the underground infrastructure.

But the shafts have been the part that obviously we continue to focus on delivering. I think on the positive side, we continue to actually see an investment in a Tier 1 jurisdiction in a commodity that we find attractive in terms of zinc in an operation that over time will be absolutely in the first quartile on the cost curve. It's also a business when you look at it, it has life in terms of duration, it has the ability to actually grow not only Taylor through extending the drilling and infill drilling, but also Peake.

And then on top of that, you've got the other 12 or so highly prospective pieces of land that we can access when we get that federal approval. So from that perspective, I think that positions South32 and its shareholders to benefit from those rewards over the many decades to come. I look forward to engaging you when we see you over the next couple of weeks on the road shows. So thank you, everyone.

Good morning, everyone, and thanks for joining us today. On the call with me is our Deputy CEO, Matt Daley, for his first call; our Chief Financial Officer, Sandy Sibenaler; and our Chief Operating Officer for Southern Africa, Noel Pillay.

I'd like to start with safety, where we're seeing improvements in key measures following our sustained effort to improve performance through our global safety improvement program. During the half, we achieved further improvement in significant hazard frequency, which demonstrates improved hazard awareness and a more proactive reporting culture. We're also seeing positive reductions across our lag indicators. While the data is encouraging, we're determined to continuously improve on our safety performance.

Turning to our financial results. I'm pleased to say that we have delivered strong financial results for the half, underpinned by our operating performance and higher prices for base and precious metals. Our FY '26 production and unit cost guidance is unchanged across our operated assets off the back of our continued focus on delivering safe and reliable operating performance. This performance enabled us to capture the benefits of positive market conditions for our key commodities. We delivered underlying EBITDA of USD 1.1 billion with a group operating margin of 28.2% and growth in underlying earnings to USD 435 million.

Group free cash flow improved to USD 57 million after growth capital investment of USD 338 million at our regional scale Hermosa project. Our balance sheet remains strong with net debt of USD 25 million at the end of the period, enabling us to invest in both high returning growth and deliver returns to shareholders. Looking ahead, commodity price tailwinds, coupled with the planned drawdown of entries at Mozal Aluminium is expected to add to the group's cash generation in the second half.

Our strong financial performance is translating into higher returns for shareholders with today's announcement of a fully franked ordinary dividend of USD 175 million in respect of H1 FY '26 and USD 100 million increase in our USD 2.6 billion capital management program with USD 209 million remaining to return to shareholders.

We're continuing to work to increase our production of copper, zinc and silver into structurally attractive markets. During the half, we advanced construction of our large-scale long-life Taylor zinc-led silver project and across our broader Hermosa complex, we returned further high-grade copper exploration results from the Peake deposit, which supports the potential for a continuous copper system connecting to Taylor. As part of the scheduled project execution at Taylor, an assessment of project milestones and capital expenditure will be completed in H2 FY '26, and will be informed by the pricing of additional underground and surface infrastructure packages scheduled to be awarded during this period.

At Cannington, we announced a 28% increase in the underground ore reserve while also targeting further potential growth through both underground and open pit development options. Sierra Gorda progressed options to grow future copper production. We've defined an exploration target at Catabela Northeast adjacent to the Catabela pit, ranging from 1.1 billion to 2.9 billion tonnes, highlighting the potential for future mine life extension. In addition, the feasibility study for Sierra Gorda's fourth grinding line is nearing completion with an independent review of the feasibility study to be completed by the joint venture partners to support a potential joint final investment decision in mid-calendar year 2026.

We are also pursuing further growth in copper and zinc through our Ambler Metals joint venture in Alaska, with the U.S. government's decision to issue federal permits for the Ambler Access Road, a key enabler in unlocking the potential of this highly prospective unexplored region.

In closing, I'd like to thank our teams around the world for their work to deliver these results; our operations are performing to plan, capturing the benefits of high commodity prices; our balance sheet remains strong and our performance is translating into increased returns for our shareholders. Looking ahead, we're focused on continuing our positive momentum into the second half of the year and delivering our growth projects in base metals.

Thank you. I'm now happy to take any questions that people have.

[Operator Instructions] Your first question comes from Paul Young from Goldman Sachs.

Also Matt, welcome today and look forward to meeting in due course. Graham, first question is on Sierra Gorda. And it's like, I guess, the last 3, 4 months has sort of all been about copper in the market. And I know you're still studying the fourth milling line, which has been under study for probably 3 years now. And I know there's been a lot of changes at the JV level in country and in Poland as well with respect to management. So just curious around what do we need to see to actually get this project approved? That's the first question.

And then just on Catabela Northeast, you said it's about possible life extension, really interesting as far as the exploration target is concerned because it could be as big as Catabela. So what's the forward look now as far as studies and the high-level thinking on this?

Yes. Thanks, Paul. I maybe start with Catabela Northeast first. I mean we drilled about 8.5 kilometers in H1. And in that, we've had intersections of significant copper, moly, et cetera, including 830 [ mills ] at about 63% copper or 76% copper equivalent. And as we mentioned, we have came out with the exploration target today of 1.1 billion tonnes at about 0.48% copper to 2.9 billion tonnes at 0.45%. The ore body itself remains open in all directions and at depth. So we're doing, if you like, in the calendar year '26, we plan to do further step out exploration to sort of understand how big the ore body could be. That will determine then the options you have. Is it an open pit? Or do you look at maybe accessing from the decline of the open pit in Catabela to access it early?

Understanding that resource is going to be probably the most important piece. But I think it's exciting about what that looks like, particularly as you think about the fourth grinding line and extending the life of that operation. And relatively speaking, brownfields, as we know, is always far more capital efficient than greenfields.

Look, on the fourth grinding line, there's maybe a couple of things we'll need to see. And you rightly point out, there has been a fair bit of change more in the joint venture that sort of slowed this a little bit down. In particular, we've changed out the GM a while ago now about 6 months ago. And we also changed out the fourth grinding line Project Director. The GM, I think, has got -- he's got his feet on the ground. He understands the operations well. And we're certainly far happier as a joint venture owner about the new Project Director and what we think he can bring to the table.

The attraction of the fourth grinding line is its ability to increase the concentrator capacity by about 20%, obviously, has the impact of increasing copper production and lowering unit cost rate. So that's very positive to us. Look, the detailed engineering work is about 63% complete, and we expect that to sort of be ready for a joint fit by second half of '26.

We still look at roughly a 3-year construction time line. There's a few things that we've been doing in between around we've talked historically about the ability to achieve 62% solids in the tailings thick is a permanent requirement that the team have been working on. And that's a lot of progress being made in that space. Your question around the other piece we look for, I guess, it will take both partners to approve this. And obviously, we can't speak on behalf of our joint venture partner. But certainly, in the committee meetings that our people attend, they've been positive. And publicly, they've talked about the need for growth in copper. So I think we'd expect them to be aligned with the project if we see it as value add. They've certainly been very aligned around some of the work we're doing around Catabela Northeast, about also looking at what can you do with that material we have sitting on the ground in terms of that oxide material. So we'll keep working it along, much happy with the capability we've got on the ground and expect you to see it by the end of this financial year, Paul.

Let's see if it gets approved midyear. And then a question on Mozal, Graham, like obviously, a lot of discussion on this still in the equity market and also probably more so the commodity markets, et cetera. It seems like the ship sale from your perspective, like you've done everything you can, and you've made that pretty clear. And it now seems like it's really between the government and Eskom to not out an agreement around that sort of 5-year offtake on the power. So where do you stand now? Do you just sit back and wait for the Mozam government? And I know they've been -- it seems like the panic set in from their side, this week at least. Do you just let them sort of negotiate with Eskom? Or -- and if they did come back with a tariff, a discounted tariff on the current agreement between Eskom and Mozam, what would you actually need to see from a power price perspective? Because obviously, we can't bank $3,000 a tonne forever. You can't hedge more than 18 months. So how do you see like what needs to come back to you on the table for you to actually engage?

Yes. Look, and maybe if we take this in parts, Paul. We're obviously very concerned about the 2,000-plus people that work for us on site and about another similar number in contractors, and the knock-on impact of something like 20,000 people in Maputo. It's probably 1 in 3 manufacturing jobs and just under 4% of the GDP. And this has been a long difficult, if you like, group of discussions because the government of Mozambique with the Cahora Bassa having severe drought just hasn't had the power to basically supply us.

So it has involved us trying to work with the government of Mozambique as well as the government of South Africa and Eskom. And I think as at the end of last week, we've probably had 80 interactions, and I've seen the government of Mozambique in New York, in Dubai, in Abu Dhabi, in Maputo, in Joburg, London, just about everywhere you can think of. I think unfortunately, from our perspective, while we only have about 34 point pots offline from the current 576 at the end of January, the reality is we've run out of things in the next week or so of pitch and coke. And even if we found a power contract today, Paul, that could not be delivered to us in time to keep the plant running. So we're definitely heading for care and maintenance in March, and that's just not changing.

Look, where we got stuck, if you like, on the power contract, like I said mentioned earlier, we just haven't had any power available from HCB via Cahora Bassa. So we have been talking to Eskom. The way the current tariff system works in Eskom, their ability to sell across border is effectively a Megaplex rate. Megaplex rate is about $100 a megawatt hour. We could probably afford around $51 a megawatt hour. And if you think anything above $50, even at these -- pre these prices that you're seeing at the moment, outside of China, there's probably less than 1% of the global supply that has a power contract above $51 a megawatt hour.

So from our perspective, that was a limit we had. Eskom can't match it, and never even got close. We've ran out of raw materials. So we're now sort of just running the plant down to the end of its life and managing our people, obviously, which is a huge impact. But it's incredibly unfortunate circumstance to be in and one that's not where we wanted to be in any shape or form.

I do think there's been -- despite a lot of work we did, and we've been talking about this power contract for 5 years, intensively for 12 years. And even though we've been through it numerous times, I think there's still this conception that you can just turn an aluminum smelter on and off, and it is not that easy.

Your next question comes from Rahul Anand from Morgan Stanley.

Look, I was going to take the conversation perhaps to Hermosa, Graham. Just wanted to get a bit of an update. Obviously, you put out some updates around where you're sitting in terms of the shafts progress and also your CapEx. And you've got that assessment coming up in the second half of FY '26. So how are you tracking so far in terms of budgets, both construction and spend? And I think you've highlighted the peak deposit potential. So should we be thinking about the second half as perhaps a bit of a rework of the plan in terms of having those two integrated and then that being a bit accretive, but then you potentially have some critical items in the CapEx side as well that need to be worked on or rather reworked?

Yes. Look, I would start, and we'll come back to where we're up to on the capital. This, if you like, work we're doing around the schedule and the capital is a normal planned event because we'll probably be roughly around 80% of the project committed, and that's just the timing of letting out the work. So we have always had that in our time line to be completed when we got to that threshold. So that's the first signal I'd be giving people that this is an ordinary course of business that we expected to do at this time.

If we talk about physically where we are today, we take the processing plant, the initial foundations work for the primary miller were completed in quarter 1. All other foundational work on the process plant is tracking the schedule. We started to put in the belt racks, if you like, across the site. I was there just before Christmas. And certainly, the surface already, you see a massive difference. There's four packages related to the surface, two have come in, and they've absolutely been in line with our fit estimate.

We're waiting over the next 3 months or so that we'll get the other two in. So that gives you a sense we're up to the processing plant. If we talk about the vent shafts and the shafts, I'll be honest, are going to be always the things that worry me, and we've said that from day 1 that the shaft you're never really comfortable to you finished, and they have been challenging and Redpath has not had the easiest time.

The vent shaft at the moment is 459 meters of 824, so 56% complete. We actually completed the first lateral development on the first mining level on the 3680 level, and we're about to go back into sinking on the vent shaft, and that went absolutely to plan in terms of that lateral development. The main shaft, which is always scheduled to be behind, is about 370 meters of a planned 898 meters or 41% if you like, complete.

One of the big issues we've always talked about is dewatering. Good to know that our dewatering is certainly tracking ahead of schedule in terms of volume we're seeing is much lower than we expected. We talked about expected flow rates of about 4,000 gallons a minute, and we've seen at best about 2,000 gallons a minute. So that's a lot more comfortable from that perspective. Part of the reason we'll do, if you like, the schedule and cost review is over the next couple of months, we get the remainder of the surface contracts in. We expect in the second half of this year to get the actual lateral development tendered out. And we also expect not long after that to do the final pieces of the underground infrastructure out to the market, which tells you what's the appropriate time to go back and look at schedule and cost.

It is an interesting challenge in the U.S. at the moment because every week, tariffs seem to change. While we haven't had a material impact yet, as we start bringing in mobile equipment and processing equipment, that's the one we're watching to see what the rules look like. But to date, it hasn't been material, but the rules change every single day.

What I would say on Peake. Look, Peake, we announced 14 new holes. And in that, we're seeing some really high-grade copper results, including 143 meters at about 2.1% copper equivalent and 162 meters at 1.42 copper equivalent. We've got a lot of more work to do on this, and we expect Peake to actually grow. We again -- we do expect that we can add a little circuit to the process plant because we actually allowed space for a copper circuit, which will probably be around CapEx of $50 million, $60 million.

I would expect that the copper material, depending on how it grows, probably won't be the first piece of ore we touch because the NSR and some of the zinc stopes and silver stopes that are close to the shaft will be very hard to beat. But I do see a world where Peake could add potentially another 10 years to Taylor and might be the third zone or second zone that we get into mining, but we'll know more about that probably in the first half of next calendar year.

I would say on the Clark side, we actually completed the decline in quarter 2 of FY '26 and the decline to give you a sense of underground work there in terms of lateral development and mining. That was completed ahead of schedule and below budget. And we also did the first bulk sample in December 2025. At the same time, keep in mind, about $20 million of that was funded by the DoD. As the mine matures and we look forward, we'll continue to look at some of those synergies between Clark and Taylor. That's not something that we talk about in the current numbers, but we think over time, there's some really big synergies in that space, but we'll look at that at a further date.

And probably lastly, just for an update, FAST-41 for us in the U.S. has been a fantastic process. The draft EIS was published in quarter 4 of FY '25. We expect the final EIS to come out probably in the second half of this financial year, and we're still on track to get our record of decision in the first half of FY '27, but it has been a great, if you like, permitting process that we're seeing. So that's been a real positive for the team. That's probably a lot of an update on Hermosa, but happy if you want to dive into anything in more detail.

No, that's exactly what I was asked. So thank you for that. And I might move on to Cannington perhaps for the second one. Obviously, silver prices have been buoyant to say the least. And you've had good production this year, but we do have production falling off '26, '27. There has been a mine life extension there as well. I guess I wanted to touch a bit upon whether you see potential there perhaps in the open pit again? And how are you kind of thinking about '26 and '27 production, where there's any sort of upside potential there? And how do you think about the asset as you kind of close your innings here? Do you see that as a core asset in South32 or a noncore one? A bit of color there would be great.

Yes. Look, I would start by saying that I've probably said this a million times, but I was lucky to be there when we actually built Cannington 28 years ago now. When we inherited Cannington as part of the demerger, we had probably about 6 or 7 years on the mine plan. As one of the slide pack shows in our presentation for this half year results, I think the team has done an amazing job in terms of extending the life of that operation because even today, if you're looking for a base metals mine and focusing on zinc and silver, can be right up there. And it continues to be a gift that keeps on giving, but we won't shy away from the fact that we recognize that as the mine gets older and the stopes get smaller, we are going to see variability in results. And you're probably never going to get back to the same throughput rate you used to be able to produce at, but it's still a highly value-accretive mine even before you've seen this big jump, if you like, in the silver prices.

What was pleasing to see this year is that we are basically extending the ore reserve life by about 28%. So that adds about 3 million tonnes or another 2 years. So it takes the underground out to FY '33. It does require us to invest about $65 million to $80 million in further ventilation and electrical work in FY '27 and '28.

We still believe with some of that capital spend, that will potentially open up a little bit more upside of converting, if you like, the resource to reserve, where there's about 45 million tonnes. And we'll continue to do that work with the hope of adding another couple of years over probably the next 12 months and maybe a little bit more after that.

Now we have been relatively conservative on our prices that we have used to run the extension in the underground and look at the open pit. So we use a silver price of way less than half of what it is today. So we do think there is obviously some upside to the underground, but also some upside to the open pit. I think what we've talked about in the past is having the end of the life of the underground. And then perhaps you go into a large open pit model, which is quite capital intensive. With some of the work we're doing now, it's probably more of a focus potentially, if you like, on an open pit that might sort of have a bit of an overlap with the underground, but also a smaller pit but a more economic pit in many ways.

So we'll continue to do that study work, and we expect to sort of complete a PFS study by calendar year '26. And we're pushing the team to see how quickly could we get into execution realistically with the work we'd have to do around mine design integration, you'd probably be looking at an execution in FY '30, but we would also be talking about a capital number that is not massive because it's a much simpler open pit. So I think Cannington has still got a lot of life to live, a lot of value to create for our shareholders. But like every single asset in the portfolio, if someone offers us more money than we think it's worth, we're always looking at selling it. But at this stage, we see a lot more value in it.

Excellent. Okay. That's very clear. And I guess when you're trying to work on that new plan in terms of underground and open pit together, you're basically going to be looking at blending of the ore so that you can have a bit more throughput and grade. Is that the right way to think about it?

Yes, potentially. I mean, I think there would be an overlap. There might not be -- what I would say is they're not mutually exclusive. I think there's probably going to be potentially a little overlap in between, not necessarily massive. I think the other thing the team has done a lot of great work on is we do have a lot of low-grade stockpiles historically on the surface at Cannington that we haven't actually processed through the plant because of some impurities contained there. I think the team has done a fair bit of work on what can we do with that to make that accessible to sort of get the throughput up, lower mining costs because it's coming from the stockpile and maybe managing out the open pit and the underground. Still a bit more work to do on that, but I think there's a bit more potential in that space as well.

Your next question comes from Rob Stein from Macquarie.

Graham, before, I guess, I'm assuming this will be your last result. So congratulations. Stock is approaching all-time high. So it must be a good point to sort of be leaving the company in. I'd be interested from Matt if he's got any color to add around the opportunity, how he sees his role emerging as the company grows and seeing what sort of lens he's going to provide on sort of leadership of the company going forward? I know it's early days, but some initial insights, I think, would be appreciated by the market.

Yes. Look, I'll throw it over to Matt in one second, but I would give Matt a little bit of room there. He had his first week -- last week with South32, where we obviously had a Board meeting in Johannesburg, where he got to spend time with all the Board. This is his first week sort of -- and certainly, the way we're set up is we're setting up Matt at the moment to have total accountability for the operations to understand that part of the business. He will be going on the road show for the next 2 weeks to meet all our investors. But maybe with that said, I'll hand over to you, Matt, to sort of give you initial thoughts.

Yes. Thanks, Graham, and thanks, Rob, for the question. Listen, really great to be here and looking forward to meeting everyone over the coming weeks and months. Rob, naturally, you formed some impressions in talking to the Board, leadership team and reading everything I'll get my hands on, but I'm pretty cautious to draw conclusions too early. I feel like I'm really well prepared, but definitely keeping an open mind. What stood out to me so far is you've got a really good asset base, there's some real seriousness around how the team applies discipline to capital allocation. And I'm starting to understand the depth of the operational capability that sits in the business that I think is a real competitive advantage. So I guess the opportunity I see is to build off the really strong base that Graham and the team has built, continue to improve operational performance, ensuring we allocate capital to maximize returns for shareholders and manage risk really proactively.

Over the coming weeks, my focus is quite simple is to better understand the business. So lots of getting out, listening, spending time on sites, learning, visiting all the assets and clearly also supporting Graham and Sandy and the team to execute the strategy. So excited to be here and looking forward to meet you all.

Thanks, Matt. And Graham, maybe just an asset-specific question while I can with Mozal running to care and maintenance and Worsley feed being opened up to new offtake. Is there any strategic thinking around how that feed is placed into market, knowing where alumina prices are? Is there an opportunity to draw some commercial arrangements with others, whether it be a JV on the producer side or finding some strategic offtakers on the demand side? Just interesting how that allocation gets thought about going forward.

Yes. Look, absolutely. So look, from our perspective, the Worsley Alumina has always been well sought after. As you are aware, we have sold into Mozal. It's the old LME-linked legacy contracts that haven't always been the most attractive from our perspective. So that alumina that we have previously provided to Mozal has already been spoken for and is already placed in the marketplace. So I wouldn't expect to see more downward pressure on price. If you look at today's price, probably 60% of the cost curve is out of the money if you're an alumina producer. This material will end up, if you like, in the Middle East will probably more than end up with a slightly higher margin than what we're selling into Mozal.

Your next question comes from Kaan Peker from RBC.

One question on Hermosa. I know you've provided some great detail on CapEx spend and understand 50% of CapEx has already been spent. But what percentage of total CapEx is now committed versus exposed to inflation? And then on the main shaft thinking, how is that tracking to feasibility study assumptions? And I'll circle back in a second.

Yes. Look, thanks for that. And as you expect, we're going to get a lot of questions on Hermosa over the next 6 months as the project gets into that, if you like, critical component. Look, the spend, I'll talk to you first about. So the spend is probably where we spent USD 1 billion. And the actual FID schedule had a spending at about this time, about $1.145 billion. So we're about 48% on a spend. If I looked at a committed number, it's probably getting close to 58-ish kind of percent around that mark. So there's still a fair bit of work to be done on that side in terms of committing those packages. But as I mentioned earlier, we'll commit the remaining 2 surface packages and the lateral development in this second half of FY '26 and the underground infrastructure won't be far off of that, and that's going to take you probably to 80% of the, if you like, work committed.

The ones that I'll focus on there very much are going to be around the lateral development, particularly is that will usually be a unit rate kind of contract, whereas lots of the other ones are probably CMAR contracts for the surface where you sort of have a guaranteed maximum price. As I mentioned earlier, tariffs at the moment, we're not expecting a big impact so far, but we'll continue to watch that as the rules change every single day. Look, the main shaft itself, we're about 370 meters of the 898 meters planned, 41%. The speed at which we've been going at the main shaft has certainly been a challenge for us. It's been a challenge in terms of Redpath performance. What we have seen is we've gone into the -- sorry, that was the vent shaft, I meant to say, is that 459 or 56% complete. That's the one that's been a little bit more challenging as we've had some lessons to learn.

What I am pleased to see is when we've gone into the main shaft, those lessons have been applied very quickly, and we have made up a lot of speed on that site. What we will have a sense of, again, by the time we have all that work committed around that 80% of what the schedule and cost looks like, and then we'll give the market an update from then. I would be honest and say, look, shafts always worry me. You never know what you have to get to the bottom, and they're always a unit rate. So it's always a little bit more challenging.

Sure. And on Catabela Northeast, a number of questions there just -- but on the exploration target, is that supported by indicated style drilling density? I assume not. But -- and then on the ore, do you know if it's compatible with current Catabela ore? And I suppose where it's leading to, it's more the conceptual development path is the ultimate bottleneck at Sierra Gorda, the fourth line? And I suppose how are you thinking about that?

Yes. Look, I would start by saying, look, it has similar ore characteristics. So there's nothing that's majorly different, and it is virtually a stone throw away from where we are today. So no issues in terms of processing that through the facility. I think what I would say at the moment is we're in the early stage of Catabela. We haven't -- it's an exciting opportunity for us. And as I mentioned earlier, it's still open in multi-directions. So the primary focus is on really understanding the size of the actual ore body and the grade of the ore body, but pretty happy to have an exploration target that ranges about 1.1 billion tonnes to 2.9 billion tonnes, and it's still open in all directions and at depth, and it's sitting right next to an existing mine and right next to existing processing facility.

Look, we have a number of drill rigs at site, and we'll split our time between infill drilling versus exploration. And certainly, from our perspective, there's more work that needs to be done to make it a JORC resource, et cetera. So we're in the early days of this, but I think it's such a great opportunity we want to share with the marketplace, but it could absolutely extend the life of Sierra Gorda materially, but a lot of work still to be done.

And just maybe on the ultimate bottleneck at Sierra Gorda post the fourth line?

Look, I think post the fourth line, the ultimate bottleneck will be still the processing facility. I couldn't tell you which part of it off the top of my head, but my guess it's going to be very similar where we're putting the fourth growing line in today because that's what we're expanding to remove the current bottleneck.

Your next question comes from Lyndon Fagan from JPMorgan.

Graham, you mentioned the silver price assumption in the Cannington and Hermosa reserves. I'm wondering if you can provide some sensitivities around price and perhaps tonnage or mine life. Obviously, if we double the price that's been used in the reserve calculation, the next update should see some pretty positive changes. Is it possible to quantify some of that?

Probably -- I mean, the one thing I have a slight caution on that, Lyndon, that you can model some of this as much as we can. But the one thing we're seeing in silver at the moment is huge volatility, double-digit changes up and down over a couple of days. So we're slightly cautious to commit a long-term capital investment program just solely on a silver price, it's a speculation. When we looked at the open pit and the underground extension at Cannington at the time, we were probably using a number just south of $40 in terms of silver to give you a sense. So that tells you that there is a lot more upside in that space.

I would say the Cannington open pit extension is not hugely capital intensive, but it will be super sensitive to silver price. So certainly, one of the challenges we've given the team is to have to think about our commercial team is, is there a way you could somehow try and capitalize on the silver price today to help fund the future, but it's early days on that and probably difficult to lock anything in because you don't quite know yet how big the pit is going to be, what is your production profile look like. But they are all the options that the team will look at.

But certainly, to your comment, if you think about silver and running across our sensitivity of our group, we have silver, obviously, at Hermosa. We have silver at Cannington, and we also have silver at Sierra Gorda as well. So from that perspective, it's certainly an important part of our portfolio. And I think I saw a quick number on the sensitivity that was -- if you run at a price -- spot price the other week, it's probably about $1.1 billion EBITDA, but that fluctuates every time. That's assuming all the operations are running up at one time. And obviously, Taylor has still got a fair bit to go.

Okay. The other question I had is just on Ambler Metals. So obviously, since you last reported, there's now a pathway to development. I'm wondering if you can step through some of the time line perhaps that's been put out there? Or I'm just wondering when are we going to get some proper information that might be able to crystallize some value in the share price for this opportunity?

Yes. I mean, I guess the one way to look at this is an interesting one because you clearly have an entity that's traded purely on this project in terms of Trilogy, which is listed in the TSX. They currently have a market cap -- sorry, market cap, the 10th of February about USD 800 million. I think the critical piece from our side has been that ADA has received the right-of-way permits to the Ambler Access Road and has allocated $50 million to the engineering and permitting, which means that road work starts to move forward. At the same time, NANA, Doyon and AIDEA and Ambler have signed an MOU establishing a framework to negotiate access on the road and how the road will work. So that's a lot of momentum we've never seen in that space before.

What we will do from a joint venture perspective in calendar year '26 is that we will -- we have approved about USD 35 million to get back in there and do further exploration work and studies. We obviously paused a bit of that when the road was frozen under the Biden administration because it didn't make a lot of sense, but we'll restart that work. We plan, if you like, in the current year to drill about 4,500 meters at Arctic, and that's designed around geotech work and condemnation drilling work, which will then allow us to basically complete the PFS for that some probably in calendar year late '26.

The other one we shouldn't underestimate is we talk about that road and that road is about 340 kilometers from where we are in the Ambler joint venture to the Dalton Highway. But we also have Roosevelt 100% owned, which is about 100 kilometers east of Ambler, so closer to the access road. And we will actually do about 2,500 exploration drilling programs or 5 holes in this calendar year to understand that as well. So look, I still think it's -- Arctic itself would have been developed anywhere else in the world today. It's a 43 million tonne resource, 2.93% copper, 4.3% zinc, and it's open pit to a depth of about 300 meters, so relatively simple, but you just need that road to be put in place. But I think this is a good first step. I think the agreement we've actually struck with the U.S. Department of War means that their second lot of equity that comes from Trilogy and our holding in Trilogy is requires the road to be built before that happens. So I think we've lined up all the incentives and the signpost heading in the right direction. But I still think, Lyndon, it's a longer-term kind of play and the first critical piece for us now that the road is moving is to really understand the resource and the resource potential in that region because it's largely untapped.

Your next question comes from Lachlan Shaw from UBS.

Congratulations again, Graham, and good luck in what's ahead. So I've just got a couple to, I guess, clarify. And thanks very much for all of the detail you've given us around Taylor, Hermosa. It sounds like a lot of moving parts there, quite a lot on target to schedule, ahead of budget. But clearly, you've got that review. I suppose my question is, when you think about some of the broader inflationary pressures and some of the outcomes we've seen projects for your peers, do you have a sense around -- are we talking here sort of relatively modest kind of updates in terms of the capital? Or are you sort of thinking that there could be some -- maybe some more sizable changes to come? And I'll circle back with my second question.

Yes. Look, if I gave you honest answer today, if the team run the trending data and they look at the schedule data, there's nothing that's dramatically different from our FID number. But I'd come back and say when we talked about the CapEx spend, we spent about 48% of that. So we're not even over the halfway mark in terms of spend rate yet. So I'm also going to be super cautious until we get this piece of work in because we will go from 48% probably up to about 80% committed to the project. So I think that's why we're doing the schedule review at that time. That's when we'll have a greater sense of the information. And that will be the remaining packages for the surface we'll know. We'll also know the underground, if you like, lateral development. And obviously, the shafts have had a fair bit of work coming out of the next 3 months. So I think that's when we would be a good place to talk about it.

Now what we didn't contemplate at the current numbers or in the FID was obviously tariffs. At this stage, as I mentioned, the rules keep moving. We are getting into the stage of bringing in, if you like, equipment, processing equipment from India and also bringing some mobile equipment in from Europe. And those rules tend to move favorably in the last couple of days, but we'll keep -- last couple of weeks, we'll keep watching that data. But we'll have a much greater estimate when we do the schedule review. To date, looks on track, but it's only 48% of our capital spend. So I'm never going to be overexcited to have done that work. Again, I would always come back to the point is the single biggest challenge in this project was going to be the dewatering, which is ahead of schedule, looking less than what we expected. But then the next biggest challenge is always going to be the shafts. And the shafts are unit rate contract. And until you get to the bottom, I'm never going to be comfortable around any kind of shaft work, and we're doing 2 of them.

Got it. That's helpful. And then look, just from my second question. So -- and again, just on the portfolio, maybe for you, Graham, maybe even if Matt's got a view. But just on the manganese assets, so obviously, the projects in South Africa versus GEMCO, there's the JV structure there. How do they sort of fit maybe in the portfolio in terms of thinking about where you want this business to be in 3 to 5 years' time?

Yes. So good question. I'll probably help Matt out a bit here because obviously, Matt -- he's had a couple of days in the office and a Board meeting, so I'm not going to sort of throw him under the bus. So give him a chance to have a look at the operations and make his own assessment. We'll always start with the position that, look, the way that joint venture works between ourselves and Anglo today is that those 2 operations are stapled together. You can't sell one without the permission of the other. And you can't actually put one to the market or even your share to the market without the approval of the other joint venture owner. So you're walking lockstep together.

But if we take a step back on 2 fronts is, one, manganese, we think, is an attractive commodity, unlike met coal and iron ore where you recycle steel, you have to actually have in manganese again because it gets burned off in part of the process. GEMCO and probably Gabon are the two best operations in the world. And if you look at the margins of the businesses, it's an attractive business. So it's hard to sort of dispute that one. I think when it comes to HMM in South Africa, it is a little bit more challenging because generally, the materials of a lower grade. The rail infrastructure and the transportation to the port basically doubles your mining costs versus what you'd have in Australia. So I think that makes it a bit more of a challenging business all the time, which is why you have a lot of margins. We never typically make a lot of money at HMM, and we probably never lose a lot of money in HMM.

Now in saying that you look at the margins over time, and this is reflected, we've probably made margins between 55% and 35% in Australian manganese and the margins in South Africa have ranged from 20% to 5%. So it gives you a sense of the 2 businesses are quite different. But at the moment, Anglo has been very clear that they have got no interest in doing anything in their share of the operations or the portfolio. So that sort of leaves us in that position as well.

Your next question comes from Glyn Lawcock from Barrenjoey.

I just want to circle back to Mozal and just some of the comments you made. You said it's definitely heading to care and maintenance. Eskom is not able to match on power price. So I'm just curious, what if Eskom does, what's the time line to restart? Or is it in your mind, this is a permanent closure?

So if I sit back and look at a couple of the key consumables, pitch and coke, they probably take 5 to 8 weeks to get them to the site, Glyn. We're probably by the next 10 days, we're going to run danishly low to having nothing left. And it's highly unlikely to see that change. We couldn't physically get the shipments now. We did a lot of work trying to extend the time frame over the Christmas break, but that window is well and truly pass. We're closing the operation down. Look, the restart is never going to be easy. It's going to be expensive. I think the flip side, you can look at what's going on with Alcoa and Alumar. It has not been easy for them to restart that smelter in terms of losing critical skills in the workforce, restarting and in terms of the availability of things like cranes, stability of power, et cetera. A smelter is like a finely balanced machine.

Once the stop starts goes out of kilter, it's very difficult to restart in a well-controlled way. And I guess the question is, what power contract would you use to do that? Because clearly, what Eskom has got available to sell today is not economically viable. I think you can wait for maybe the Cahora Bassa to sort of recharge back to the levels it needs, but they indicated to us that they could only provide low levels of power for probably the next 2, maybe the next 4 years. That would be a long time for Mozal to be out of action and then try to restart it.

Okay. And what happens to the asset, do you think? You transitioned to care and maintenance. Does it sit on your books and we spend money? Or what do you do next with it?

Yes. So we're being quite open about that transition to care and maintenance, which number has already been included. The ongoing care and maintenance costs are about $5 million a year. So they're not hugely significant from our side. We will have the ability, if you like, to sort of go into care and maintenance. Our closure rehab is probably about USD 119 million because it's a relatively controlled small site. We probably need to work through with the government of Mozambique, what that looks like because they might want to keep the option around. They might want to wait to 2030 would be our expectation to see what HCB looks like because they don't have anywhere for that power to be used.

You're probably using about 940 megawatts at Mozal on a continuous basis. It has a standby was. It's virtually running 24/7, 365 days a year. So that's a really large power load to offload to someone else. So they might want to decide when they have power back on or enough power coming out of HCB to try and restart the smelter. It would have to depend on the economic conditions at the time. They're probably not in a position to make that decision to probably about 2030. Between now and then we'll probably spend about $5 million to protect the site and do the basic care and maintenance stuff.

Okay. So yes, it's closing and then it could restart, but there's a lot of water to find under the bridge.

A lot of water will be under the bridge, and this will be a kind of decision, but it would be basing on our and you're doing this in Mozambique and losing all that talent, that would be really tough.

So your first hand ball of the season. Okay. Cannington, lots of discussion already. What do you think -- she's got 28 years ago, she was built. You're going out another 7 years from today to 2033. But I mean, like are we looking at this well beyond 2040, do you think?

Look, I think the potential exists here to get out to 2040 with the open pit and continued underground extensions. So I'll be honest, probably 2 years ago, I didn't think we could get much more out of the underground, but they've come off a couple of different areas and we've done a bit of work. It's going to cost us a little bit of capital I mentioned earlier, to open that up, but that sort of gives you a little bit more option to add maybe a couple of other years after that. But I think the open pit, a little bit early to sort of say, but probably by the end of this calendar year, I think we'll have a much greater sense of what that would look like.

Okay. And then just finally on Cannington. I know you always say and you have done for years, everything is for sale at the right price. But I mean, silver where it is, precious metals companies trade at big premiums to the poor old diversified miners. I mean, surely, right now, this asset is worth a lot more to a precious metals company, silver company. I mean, do you actively look to try and monetize what could be another 15 years of life today? Like do you actually go out and do that? I mean, are you just sitting back and waiting in case someone knocks on your door? Because I would have thought there's a great way to unlock maybe a lot of value and not have to go through the heartache of all the open cut development studies if someone can pay you upfront who obviously can afford to pay more.

Look, I think you're continuously looking at those options. And to your point, we're always looking at the portfolio to try and maximize value. For me, there's probably 3 questions you need to answer is, one, do you understand -- do you even have an open pit that's a possibility? And can you extend the underground, which obviously creates a lot more value to anyone who actually acquires it. The second piece is, is there a way that potentially we can access some of that cheaper money to unlock the open pit in terms of upfront capital or long-term sales so you can lock in the current silver price of today. And then the third piece is outside of the crazy money, there are a number of people who continually knock on the door for us at Cannington. So those 3 options, we're always continuously evaluating.

Your next question comes from Ellen Miller from Blackwater Partners.

Your next question comes from Paul Young from Goldman Sachs.

You can't get two cracks, Paul. What's if...

Graham, a question on Brazil Alumina and just the whole strategy there. Interesting transaction 1.5 weeks ago with Chalco and Rio getting -- taking out the bauxite stake, which is interesting just on the whole Atlantic Basin sort of strategy for alumina, I think, in general. If I look at the -- your Brazil alumina assets, I see you didn't spend much on during the period. The smelter is not running so well. The alumina refinery is running well. But you've got this big capital call on MRN and the extension there on that mine life extension. Can you just update us on that? Because I think the last CapEx estimate was about USD 1 billion or something, and you got a 33% stake. It's an equity accounting unit. So it's just a washing machine on the cash, right? Obviously, it funds it internally, but you might have to tip in. But can you just update as far as what you're thinking is around the timing on approvals and the capital calls that you might receive on MRN?

Yes. Look, absolutely. I mean I would start with the performance of Brazil Aluminum has been incredibly disappointing from our side. We -- the team there experienced -- well, Alcoa experienced some instability in December 2025 and basically had unplanned 80 pots that have been taken offline. And obviously, that's not where we want to be after the difficult ramp-up in this period of time. So it does mean that if you think about the 565 plots online, that's a total -- if you think about the total pot 710, it means they're only 80% where they need to actually be.

Now Alcoa have deployed a specialist team from their technical center of excellence. They have guided us on that revised plan. We've taken our own look on that plan because obviously, this will be the third time that there's been a review on that. And it's disappointing to see the guidance we gave out today. We've got a guidance for FY '26 of 135,000 tonnes, 140,000 in FY '27, yet the full capacity, these are all our share is 179. So that's very disappointing from the smelter side. And it goes back to my earlier comment, it is Alcoa is an aluminum company with large degrees of expertise in this place, and they've had challenges restarting Alumar.

Look, if we sort of move on to MRN, the work is underway by the operator to finalize all those studies. This will be a key milestone for MRM to sort of understand the schedule and the cost and up to date. Look, we think it's probably going to be our share of capital around $200 million. The focus at the moment, if you like, is on the license we need to operate to go forward to sort of set this up. We get a chance to evaluate that as we get closer. But the project itself for the West Zone is pretty simple. It's a mine expansion. It's a transmission line to get access to cheaper and lower carbon electricity prices, and we'll get a good chance as they finalize that work to make a decision. But I'll be thinking circa share of capital for us would be $200 million if we decide it's what we want to invest in.

Okay. When is that decision? When is FID?

The FID on that, give me one second, Paul. It's late calendar year 2027, so calendar year 2027.

That does conclude our time for questions. I'll now hand back to Mr. Kerr for closing remarks.

Thank you. Thanks, everyone, for your questions today. I'd like to thank you, again, our teams around the world for the work they did to deliver these strong results. I would say, look, our base business, our operations are performing to plan. They're absolutely catching the benefits of higher commodity prices. Our performance is translating to increased returns for our shareholders. And as you look ahead, we certainly have some positive momentum on the price basis, but also the progress we're making on some of our growth projects and options in base metals and look forward to seeing most of you over the next couple of weeks and introducing you to Matt. But thank you, everyone.

Good morning, everyone, and thanks for joining us today. On the call with me is our Deputy CEO, Matt Daley; our Chief Financial Officer, Sandy Sibenaler; and our Chief Operating Officer for Southern Africa, Noel Pillay. I'd like to start with safety, where we're seeing improvements in key measures following our sustained effort to improve performance through our global safety improvement program. During the half, we achieved further significant improvement in significant hazard frequency, which demonstrates improved hazard awareness and a more proactive reporting culture. We've also seen positive reductions across our lagging indicators. While the data is encouraging, we're determined to continuously improve our safety performance.

Moving to our financial results. I'm pleased to say we have delivered strong financial results for the half, underpinned by our operating performance and higher prices for base and precious metals. Our FY '26 production unit guidance is unchanged across our operated assets off the back of our continued focus on delivering safe and reliable operating performance. This performance enabled us to capture the benefits of the positive market conditions for our key commodities. We've delivered underlying EBITDA of USD 1.1 billion with group operating margin of 28.2% and growth in underlying earnings of USD 435 million.

Our balance sheet remains strong with net debt of USD 25 million at the end of the period, enabling us to invest in both high returning growth and deliver returns to our shareholders. Looking ahead, commodity price tailwinds, coupled with planned drawdown of inventories at Mozal is expected to add to the group's cash generation in the second half. Our strong financial performance has translated into high returns for shareholders with today's announcement of a fully franked ordinary dividend of USD 175 million in respect of H1 FY '26 and USD 100 million increase in our USD 2.6 billion capital management program with USD 209 million remaining to be returned to shareholders. We're continuing to work to increase our production of copper, zinc and silver into structurally attractive markets. During the half, we advanced construction of our large-scale long-life Taylor zinc-lead-silver project. And across our broader Hermosa complex, we returned further high-grade copper exploration results from the Peake deposit, which supports the potential for a continuous copper system connecting to Taylor.

As part of the scheduled project execution at Taylor, an assessment of project milestones and capital expenditure will be completed in H2 FY '26 and will be informed by the pricing of additional underground and surface infrastructure packages scheduled to be awarded during this period. At Cannington, we announced today a 28% increase in the underground ore reserve while also targeting further potential growth through both underground and open pit development options. Sierra Gorda progressed options to grow future copper production.

We have defined an exploration target at Catabela Northeast adjacent to the Catabela pit, ranging from $1.1 billion to $2.9 billion -- billion tonnes, sorry, highlighting the potential for future mine life extension. In addition, the feasibility study for Sierra Gorda's fourth grinding line is nearing completion with an independent review of the feasibility study to be completed by the joint venture partners to support a potential joint final investment decision in mid-calendar year 2026. We're also pursuing further growth in copper and zinc through our Ambler Metals Joint Venture in Alaska.

In closing, I'd like to thank our teams around the world for their work to deliver these results. Our operations are performing to plan, capturing the benefits of higher commodity prices. Our balance sheet remains strong, and our performance is translating to increased returns for our shareholders. Looking ahead, we're focused on continuing our positive momentum into the second half of the year and delivering our growth projects in base metals. Thank you. I'm now happy to take questions.

Your first question comes from Izak Rossouw from Barclays.

Just a follow-up on what you were saying in the previous call, Graham, around Sierra Gorda. Just wanted to better understand some of the changes you've made there around management, what's driven that? And I guess, obviously, there's been some delay on the engineering and sort of approvals of the fourth grinding line. So just wanted to get a bit more of a background on that.

Yes. Thanks, Ian, and I appreciate the question. Look, Sierra Gorda for us, obviously, is an asset that we think gives us the right exposure to copper. It was one that we believe when we acquired it was undervalued in terms of its current performance, but also its future options. And those options include the fourth grinding line, that oxide material sitting on the surface, but also exploration potential. So it's great to see the work that's been done to sort of get towards Catabela Northeast, and I think there's a lot more work to be done on that.

And obviously, the oxide facility is something we'll have a look at once we settle on the fourth grinding line. The fourth grinding line itself had a number of issues we had to resolve around some work around additional thickness and bringing the thickness up to scrap where we can get a solid state of about 62% to be able to get to that next level of licensing to basically expand the facility. But if I was going to be honest, look, we -- both ourselves and Sierra Gorda probably weren't quite happy with the project Directors' performance. And as a consequence, that probably reflected on the person who is leading the Sierra Gorda business at the same time.

So we agreed to make a change about halfway through last calendar year. And as part of that, we brought in a new asset leader as well as a new project director to sort of move into that fourth grinding line role. And obviously, both of them have bought a little bit of a fresh perspective on the project, certainly got it moving in the right direction now, which we're far more comfortable with.

Now it's the case of finishing the engineering, having an independent review and then going back to both partners to basically approve it going forward. I wouldn't say materially, there's been a major change in technical capabilities or project execution. It's more been about the quality of the people leading the project, which I think were in much better shape today, plus some of those conditions precedent around the solids, et cetera, that we had to do.

Okay. And then just a follow-up on Hermosa around the awarding of some of the surface contracts. You said you're going to do a few more of the underground and surface in the second half. How are we tracking so far against budgets and time lines? You'll do a reassessment in the second half, but just wanted to get a sense of how are we tracking at this stage?

Yes. So the second half, we always plan to sort of do this review based on when we knew the packages of work were coming in. So to date, if you look at the total spend to date, you're talking about just over $1 billion, and that's about 48% of the schedule we had in the budget. What has worked really well for us has been the first 2 surface packages have come in at the price that we would have expected as part of the estimate. What's also worked well is things like the mobile equipment at the same time.

I think the shafts themselves, we just finished the first piece of lateral through development on the 3680 level for the bench shaft, and that was executed slightly ahead of budget and on cost. The shafts, if you look at the bench shaft, that's about 56% complete, so 459 meters of 824. Now that we've finished that first underground mining at 3680 level, we'll start resuming the sink in quarter 3 FY '26. The bench shaft has had some challenges along the way in terms of steel supply, but probably more importantly, a little bit of water at the start, even though water is less than what we expected and some underperformance by Redpath on their side.

Main shaft, we're at about 370 meters versus 898 meters. So it's about 41% complete. And the main shaft has certainly taken some valuable lessons from the bench shaft and continues to make much better progress. In saying that when we look at the schedule to date and the trend lines, we don't see any major movements in dates and production -- expected production and capital costs. But again, I'm always saying until we get to the bottom of those shafts because both of those contracts will be time and materials, I'm always nervous.

And as we get in the second half of this financial year, we expect to have come in the next 2 packages of surface construction work. We will also have the quote in for basically the underground lateral development. And by the time we start our review, it means probably 80% of the capital would have been committed which sort of puts you in a much better position to do a complete rebaseline. Not certainly raising alarm bells at the moment. It's a normal part of the process. The one unknown besides the shaft for us is also around the tariffs.

To date, we haven't seen any material impacts. But in saying that it just bounces around from day to day, never quite knowing where it lands, but that's the environment we're operating in for a period of time. What I would say, what is going really well, all the foundations work on the process plant, the cable trays are all in. And at the same time, our approval, our draft EIS came out in the fourth quarter of our financial year '25. We expect to have the final EIS out in this half. This is our second half of financial year '26. And we're still expecting to have a record of decision, so full federal permits for Taylor, Clark and Peake in the first half of FY '27. So that's been a real great process for us.

Great. And then maybe just lastly on the labor side. Obviously, you've previously said where the project is located, there isn't much competition for sort of skilled labor. Is that still the case? Is that still been okay from, I guess, competing against some of the other projects in the north?

Yes. So I think -- the way I think about it at the moment, we have seen very low rates of turnover in our professional people. We still managed to attract good quality people as the project grows and we start thinking about commissioning and operating and getting prepared for that. People has not been an issue for us. And while there's a lot of projects in the U.S. talked about, there's very few that are actually in the midst of execution like we are.

I also think Tucson is not a bad place to base yourself. And the project itself has certainly got a lot of momentum in the U.S., which I think is super helpful compared to other projects that have self started. And I think most people in the industry over there appreciate that we're going to get a federal approval within 4 years, even though we don't need it technically to 8 years into production.

Okay. And then maybe just on Brazil aluminum. What were sort of the underlying issues around the performance there? Obviously, it's not something -- an asset you're operating, but just wanted to get a bit more color there.

Yes. Look, from outside, it's incredibly frustrating because it has been a long, painful drawn-out process, and we've got our third piece of, if you like, revised guidance from Alcoa over the journey of the restart. The most recent event is they experienced some instability in December last year, where they had an unplanned, if you like, outage of 80 pots that need to be taken offline. So that means at the moment, we're back to about 565 pots online versus a capacity of 710, which is about an 80% capacity.

Alcoa have deployed a set of specialist people from their operating center of excellence, and they've worked from down there. They provided some more supervision. They've revised the plans. Disappointing to see now the production guidance for '26 has been guided down to 135,000 tonnes. at 140,000 tonnes in FY '27 versus the capacity of 179,000. These are obviously South32 share. We have offered to provide some assistance if we can, particularly as you think about Mozal, Portuguese speaking, a very well-run smelter. It's up to [indiscernible] want to take it on. They certainly are the operator. They certainly understand that we're frustrated and disappointed in this performance.

[Operator Instructions] Your next question comes from Myles Allsop from UBS.

Maybe -- obviously, it looks pretty clear that with Mozal, it's beyond the point of doing a U-turn and it's going on care and maintenance. I mean what is the estimated cost of restarting it just to give us a sense as and when we come through. Also just on Hillside as well, obviously, there's a bit of a kind of clock ticking towards the power contract renewal. You've talked about decarbonizing Hillside in the past. And if you can't get a green power source, then it may not be part of the portfolio. Could you just give us a quick update on the Hillside side as well?

Yes. So maybe start with the basics around Mozal just for people on the call. We use about 940 megawatts an hour, 940 megawatts in terms of capacity of power. The smelter is on 24/7, 365 days. So it's a perfect load for utility. We have generally drawn all our power from the Cahora Bassa, which is owned by the Mozambique government by an entity called HCB. Around this time last year, they started to tell us that after 2 years of severe drought that they were lacking the ability to provide Mozal's power needs.

That would be at least probably 2 years for the basin to recharge and then they have some maintenance that they need to do, which means we're probably not going to have full power somewhere between the next 2 to 4 years, a little bit unknown. The challenge for that is you need power. It's 1/3 of your cost base, no power, no aluminum smelter. We've been trying to engage to actually get some power off of Eskom. There is no real incentive for Eskom to do that. If you look globally today outside of China, less than 1% of Western smelters have a power contract in excess of 50.

The current regulatory environment at the moment and the only formal offer we've seen from Eskom is for us to pay megaflex, which is closer to USD 100 megawatt hour, which makes it totally untenable. So that does mean we have been talking about this for a while about going into shutdown. We were hoping, obviously, that we would have maybe some breakthrough by Eskom. That gives a big impact for our people, roughly 4,000 to 5,000 people that depend on this in terms of contractors, our people and another knock-on impact of about 20,000. People are impacted. It's about 1 in 3 jobs in Maputo. It's probably about 3.9% of GDP.

So it will be a significant loss of the government of Mozambique and the Mozambique's economy. So we are planning to go into care and maintenance even if you got me a power contract today that was affordable, it made sense. We have run out of pitch and coke over the next couple of weeks and the lead time on those items are somewhere between 5 to 8 weeks, which you're never going to get it in time to keep the pots running when the power contract runs out. We made the decision in December to stop buying materials because we did not see a breakthrough coming, if you like, on the power contract, and hence, we didn't want to keep pouring money out the door that you were never getting back.

Now to actually keep the smelter in care and maintenance, you're probably talking about an ongoing cost of about $5 million a year, 100% terms. The closure and rehab estimate is about $119 million. We wouldn't be looking -- obviously work closely with the government of Mozambique. We wouldn't be looking to go into full closure mode until the HCB power contract and future was understood because once they do come back online, they've got a lot of power and not a lot of offtakers. So this could become viable going forward. The challenge I would say is as you've seen with Brazil, restarting a smelter over a number of years is very difficult. It's not like a mine. So that will be the challenge.

Now when it comes to Hillside, Hillside is powered by Eskom. Today, we're allocated pretty much coal-fired based on the grid factor. The reality is Eskom every single week and year is making progress on renewables and nuclear coming into their network. We are working closely with them over time to get a more balanced solution. What we do have is time in that space. We have time because the current power contract doesn't expire until 2031. From a regulatory environment in South Africa, unlike exporting power to Mozambique, there is what's called a heavy industrial tariff that allows Eskom to be more flexible, if you like, on power, considering what impact that has on the country, but also their own performance.

The other thing is we sell roughly 30% of our aluminum from Hillside downstream, which goes to people like Hulamin and other, if you like, suppliers who make products out of it. There's a hell of a lot more jobs dependent on this in South Africa and particularly in an area that's sensitive to the ANC around KZN. So we have a lot more confidence in how Hillside is going. And I think certainly, the interactions with Eskom have given us no reason to doubt that they see Hillside is an important part of the equation for them going forward.

That's helpful. Just maybe in terms of the transition with Matt, can you give us a kind of a quick update on the timing when you'll be handing over the keys? And what advice are you giving that over the next kind of sort of 3, 6 months?

Yes. Look, absolutely. So Matt joined us last week for his first week, and I'll get him to say a couple of words in a second. Matt had his first week with us in South Africa, where we had a Board meeting for most of the week, he visited HMM. Obviously, this week, he's been in our head office and also going through results presentation and he's on this call. He'll be coming on the road with me for -- on the East Coast to meet all our investors, and he'll be doing the U.S. and other places around the world. And in between that and over the next couple of months, he'll be visiting all the operations.

So Matt now has accountability for all the operations reporting to him, and that gives him a chance to understand our business very quickly. And the reality from my side, my #1 objective is to set Matt up for success. So when he feels comfortable and he's ready to go, well, he showed a run going forward. I guess the piece of advice I'd always give him is the key, I think, for our assets because of the geographic spread, because of the age and some of the complexity.

Yes the focus there is on making sure that, a, we run our business safely and reliable. The base business needs to deliver on its safety production costs and cash flow commitments to fund the growth of the business. And the next piece for me is delivering on our growth projects because once you come out the other side of Hermosa and Sierra Gorda, you'll be very longed in cash. You've also got some other options in the growth pipeline that I think will be super exciting like Ambler, Catabela Northeast, Clark and some other exploration. But maybe, Matt, a good chance for you to say a couple of words.

Yes. Thanks, Graham, and nice to meet everyone. Looking forward to getting to see some of you in the coming weeks as I travel with Graham. Listen, early days for me, definitely only week #2, but focus at the moment is getting a really good understanding of the business. So lots of listening and learning, visiting the assets and talking to people across the company. What stands out thus far is you've got a really great quality of assets in the portfolio, generating cash, lots of optionality and obviously, the organic growth projects that Graham has mentioned.

And I think the way the team thinks about investment decisions with a real focus on value has just been really, really pleasing. Opportunity for me going forward is just to build off that really strong base, right? So to focus on improving operational performance, managing risk and allocating capital really well. So yes, excited to be joining the team, and thanks very much, Graham.

Thanks, Matt. Does that help with questions?

Yes. No, that's very helpful. Maybe one last one because we're getting asked by investors as well around the potential for consolidation in Alumina in Western Australia. And do you think there is a lot of value that can be created? Or do you feel that you're in a relatively much stronger position given where you are with the permitting?

Look, I think, obviously, we're in a great position in terms of having the approvals for our next series of mine developments. Alcoa was going through that process, which was a long painful process. And obviously, they have different landholdings than we do, some water issues to deal with that we don't. So they're better to comment on that. But certainly, we're very pleased to be past that piece and actually executing on our projects going forward, and they're actually going well.

Look, I think in the Southwest, there's been a long history of engagement around things like land swaps, technology exchange. Do I think potentially there is more synergies to be had there? Look, I think that is a conversation absolutely worth revisiting over time. But probably like we were very focused on getting our next approvals. I'm sure Alcoa are very focused on that in the short term.

Your next question comes from Alexander Robert Pearce from BMO.

Graham, you've previously highlighted the potential upside from the Sierra Gorda oxide project. Have you got any update on where this project stands at the minute? And has the recent improvement in copper prices made any difference to kind of bringing that study forward?

Yes. Look, I mean, we probably -- if you think about the order priority, I guess we're sort of focused on the fourth grinding line first because that 20% production throughput increase, I think, is important, lower cost, more copper, et cetera. Catabela Northeast is to understand how attractive could the fourth grinding line to be to feed it. I think the oxide material, we've still got some work to be done on that. There's some early thinking done on it, but I guess we're trying to focus our best people on the other 2 opportunities first.

But if you think about that opportunity, that oxide material, we got about 110 million tonnes stockpile there, and it's probably got a grade of roughly about 0.38. I think what we're looking for at the moment is we're completing a feasibility study to understand what we could do around lost low-cost heap leaching. And I think at the same time, there's a number of other operators who are close by that potentially have some capacity. So the key for us is to understand what would it cost to do it ourselves versus what could we do in terms of toll treating it through someone else's plant and what are we willing to pay. And hopefully, we have a greater sense of that towards the back end of this calendar year.

[Operator Instructions] You do have a follow-up question from Ian Rossouw from Barclays.

Just a follow-up on that, Graham, around the Sierra Gorda, Spence and some of the other operations in the area. I mean, is there an opportunity for more sort of operational, I guess, synergies? And I guess, as you say, using some of the other capacity, but sort of a more regional consolidation. Just wanted to get your thoughts on that.

Look, in all these things, there's 3 obviously mines that are super close within the stone throw of each other. If you had your time again, you'd sit back and say, why didn't they sort of do one major piece of infrastructure and then actually use the different products to actually feed that mill would have made the best economic sense. Obviously, that decision was made a long time ago by different people who don't sit in the chairs now.

I do think longer term or even medium term from our perspective, there is opportunities to explore synergies between those existing operations and one would clearly be the oxide material at Spence. But also as we understand Catabela Northeast and how big that could be, that gets closer and closer towards Spence. So I think there is a discussion to be had there when the time is right. The challenge in all these things is when you have more and more players involved, it's a bit harder to sort of get, if you like, to a position where everyone feels comfortable.

Your next question comes from Tim Clark from SBG Securities.

Congrats on the results. I'm just interested in just a little bit more color on Cannington. You've had a nice reserve increase, which is positive. And then there was a bit of commentary around underground resources and seeking open cost and underground opportunities. There's obviously been quite a big move in the silver price. And in the past, you've spoken about having a very conservative silver price sort of forecast in the mine plan. I wonder if you could just give us a little bit more color on how you're thinking about Cannington and how you see it evolving over the next year or so?

Yes. Look, I'd start with a couple of points that I think are worth sort of drawing out and some of these were including in our slide presentation today. And the first one is when you look at Slide 11 in our pack, we talked about the zinc-lead-silver margin, which obviously today is Cannington despite the fact that Cannington is almost, what, 28 and a bit years old, and it tells you how old I am because I was a graduate when we were actually building that and I was working there. We're still making margins between the last 3-ish years, 46% to 53%. So it is a high-value business. You've already got the capital infrastructure there. You've got the workforce in place.

So anything we can do to extend the life of Cannington I think, is super important and a low-cost option and a return for our shareholders. We would be fair to say probably 18 months ago, I was probably less optimistic about the team's ability to extend the life. This isn't driven by what price in terms of what's happened with the silver price, and we'll come back to the silver price in a second. This has probably been more around the discovery of bit areas of new, if you like, sources of material we can bring to the underground. It does require us to spend a little bit of money in the short term. So over '27 and '28, we will spend roughly USD 65 million to USD 80 million, and that's on some ventilation electrical shaft infrastructure, but that does potentially allow us to increase even further the underground.

So what we did announce today was about a 28% increase in the Ore Reserve from 3 million tonnes to 13 million tonnes. And that adds about 2 years life, if you like, to the underground. We think there's more work to be done on that could potentially open up more ore to be added and extend the life of the underground. And one of the slides I did love in the presentation that we shared with people today, again, when you go back to the age of Cannington and you think about when we actually started our journey some of the short life assets from day 1, everyone was asking, well, how long is Cannington going to last for because our Ore Reserve in FY '15 was only 21 million tonnes. We've already mined out 26 million over the time frame to today.

We've added back in another 17 million, and we've got 13 left to go. So that sort of gives you a sense of the work that the team has done. And the underground resource itself has about 45 million tonnes. So the job of the team is going to be how much can we extend the life out. We have also done a bit more work on the open pit to have understood the potential of the underground. That allows us to redesign the pit in a different way and probably focus, if you like, on a more value-add way to take it forward as well as we've done some work on some of the remnant old low-grade stockpiles that existed on surface that have been historically difficult to process through the concentrator and the team have found a way through that they can manage that far better.

So I think that what that does mean is Cannington has a lot of optionality, if you like, on the base production and how we can continue running it. That's before you consider the silver price. So we would have probably been using a silver price south of $40 when we did all this work. The question is how long does the silver price last for. But certainly, we would expect to complete more work on this over the next, if you like, 12 months and be in a much greater position to know what the future looks like at Cannington, but it certainly is looking optimistic.

Very useful. And thank you very much for all of your support over time if we don't get to catch up with you again. It's been much appreciated.

There are no further questions at this time. I'll now hand back to Mr. Kerr for closing remarks.

Thank you, and thank you, everyone, for taking the time today. I'm sure you're all very busy. I would like to take the opportunity to thank our teams again around the world for the hard work they've done to deliver these results. I think we are running our operations to plan at the moment. We are, therefore, capturing the benefits of higher commodity prices. As always, we pride ourselves on our capital decisions and our balance sheet remains strong. Our strong performance is leading to increased return for our shareholders as our model is designed to.

And looking ahead, if you look at some of the spot prices versus the first half, there's more upside. We haven't changed our cost or our production guidance. And at the same time, we've got a series of growth projects in our base metals business to continue to reshape our portfolio. But thanks, everyone, for your time today, and have a safe day.

[Presentation]

Welcome, everyone, and thank you for joining us for South32's Annual General Meeting. My name is Karen Wood, and it's my great pleasure to chair today's meeting.

Before asking Barry Winmar to come forward to offer a welcome to country, I'd like to start by acknowledging the traditional owners of the lands on which we are located today and the lands on which South32 conducts its business around the world.

In the spirit of reconciliation and respect, we will continue to support initiatives that strengthen the unique cultural and spiritual relationships that indigenous and tribal people have to the land, the waters and seas and their rich contribution to society and to ensure their legacy continues and extends for future generations. Would you now join with me in making Barry welcome as he conducts the welcome to country on behalf of the Whadjuk People. Thanks, Barry.

[Foreign Language] I'll begin by acknowledging my elders past and present. And this morning, we're gathered on my ancestral set your land. This is the land of the Whadjuk Noongar people. I represent a civilization with the longest continuous connection to this place with some 65,000 years. I represent elders and leaders that are welcome visitors to these sacred lands, for more than 3,000 generations.

I welcome to country is a sign of mutual respect. I acknowledge and pay my respects to South32 for including a walk in the country as part of the AGM and Board meeting this afternoon. [Foreign Language]

From the beginning of time to the end, this is Noongar country. Noongar people have been grateful keepers have a nation for many, many years. [Foreign Language] We respect the earth our mother and understand. We belong to her. She does not belong to us nor her beauty we find comfort and she is now a place for everyone to become keepers of Noongar country.

[Foreign Language] We ask you look, listen, understand and embrace all the elements of Noongar country. It is forever our home.

Good afternoon, ladies and gentlemen. It's on proves to be here today in one of the most diverse countries on the planet. And obviously, it's a beautiful city of Burley Perth, Western Australia. We're so lucky that we have so many cultures and nations that bring that knowledge and the strength to this particular land. And we all work is walk this land together now together hand in hand as 1 united, all the Australians and as Western Australians.

We also acknowledge that the global citizens that we have become and companies that represent the global connection to all those ancient civilizations from around the world have called Perth home. But the responsibility bestowed upon me by Noongar elders and I welcome, everybody here today and know that we stand strong, tall and proud and united as we are in this place today with the strength of my ancestors.

I asked the strong spirits to look after in every one of you while you're here. And if you traveled here to ensure safe passage back to the arms of the families and your loved ones. [Foreign Language] Hello, and welcome. My [indiscernible] happy as we gathered here. [Foreign Language] this afternoon. Welcome, everybody. Thank you.

Thank you, Barry. We're sincerely grateful to you for being with us. I'm joining you today from Perth along with our Chief Executive Officer and Managing Director, Graham Kerr; and our Company Secretary, Claire Tolcon.

Joining me on the stage from my far right are Non-Executive Directors, Carlos Mesquita, Futhi Mtoba, Xiaoling Liu, Wayne Osborn. And on my far left, Sharon Warburton, Jane Nelson, Frank Cooper, Mandla Msimang and Stephen Pearce.

Members of South32's leadership team are also attending today either in person or remotely. We have Jane Bailey from KPMG, the company's auditor; and Rod Somes from Computershare Investor Services, who's been appointed returning officer for the meeting and scrutineer of the voting. I can confirm that we have a quorum and now formally declare the meeting open.

I'll ask Claire to start by reading some procedural matters. Claire?

Thank you, Karen. Today's Annual General Meeting is being conducted as a hybrid meeting, enabling shareholders, proxyholders and guests to attend in person or remotely via the online platform. For those shareholders joining us in person, please take note of the emergency exits and the evacuation information displayed on screen. If you would like to ask a question, when prompted, please raise your hand and introduce yourself to one of our microphone attendants. All physical voting cards will be collected at the end of the meeting.

For those shareholders joining us online, in the event of an emergency in the room, please stay connected and an update will be provided via the online platform. Written questions can be submitted via the Q&A icon on your screen or by dialing the telephone number, which will connect you to the audio question line. Once voting opens, you can cast your vote by pressing the vote icon before the meeting closes.

If we experience any major technical difficulties during the meeting, updates will be provided via our website and relevant stock exchanges.

Questions received in advance of the meeting will be read out by our moderator, Belinda Truman. And if multiple questions on the same topic are received, we may group them together when we answer.

I'll now hand you back to the Chair.

Thanks, Claire. As stated in the notice of meeting, voting will be conducted by way of a poll on all resolutions, and I now declare voting open. So you may begin recording your votes.

Some of you may recall that last, at last year's Annual General Meeting, one of our shareholders asked that we release the proxy position on each item of business before the meeting. While I understand this isn't a general practice, we have decided to trial it this year and those proxy results were released to the ASX prior to the commencement of the meeting, together with the CEO and Chair addresses. As in prior years, we'll also display the proxy position on each item of business before a call for questions on that item. We'll review this practice ahead of next year's AGM.

This year marks South32's tenth anniversary. And while much has changed over the last 10 years, our steadfast commitment to improving safety performance remains. This year, we failed to ensure that everyone went home safe and well to their loved ones. Some of you may recall that at our 2024 AGM, I spoke about the loss of José Luis Pérez, on the 17th of September 2024 while he was working at our Cerro Matosa nickel operation in Colombia.

I want to reiterate what I said at the time that we cannot be truly successful unless we eliminate fatalities and serious injuries from our business. And again, I want to offer our sincere and heartfelt sympathies to Mr. Pérez's family, his friends and of course, his colleagues.

Graham will provide more detail about the progress we're making on improving our safety performance shortly. Also unchanged is our strategic focus on producing minerals and metals critical to the world's energy transition. The company today looks very different to the 1 founded in 2015. We now have a stronger portfolio of assets having divested lower-margin, capital-intensive operations in coal and manganese alloys. We have also grown our base metals production and aluminum value chain. We've done this through investments in the Sierra Gorda copper mine, the development of our Hermosa project in Arizona and the restart of the Alumar smelter in Brazil, together with our partner, Alcoa. Collectively, these steps have provided additional balance sheet flexibility and supported returns to shareholders.

Throughout the year, the Board again visited some of our operations. I've spoken in the past about the opportunity this gives each of us to test critical cultural aspects of our company, including the way our people are approaching safety. These opportunities are invaluable for all Board members, and we see them as a key part of our governing role. We visited our Hermosa project in Arizona in the United States in December Hillside Aluminum in South Africa in February and Worsley Alumina here in Western Australia in May.

At Hermosa, we saw firsthand the progress of construction and had the opportunity to meet with local stakeholders. We also learned about the workforce initiatives being developed to support our goal of 80% of Hermosa workforce being recruited from the local community when fully operational. This will be a significant economic boost to that local area.

At Worsley Alumina, Directors visited the site of the mine development project, which was the subject of the primary state and federal environmental approval processes that concluded in February. The visit provided an opportunity to better understand how we are complying with the conditions attached to these environmental approvals and view the progressive rehabilitation of previously mined areas.

This year, the geopolitical instability we've seen has resulted in a decline in the international collaboration once relied upon to tackle shared global issues. We've also seen uncertainty and significant market volatility due to trade tariff announcements. Unfortunately, our business is not immune from the impacts that arise.

Despite these challenges, our strong operating results for the year, coupled with recent portfolio improvements, enabled us to deliver underlying earnings attributable to members of USD 666 million. We returned $350 million to our shareholders, including $294 million in fully franked ordinary dividends and $56 million via an on-market share buyback.

At the end of financial year 2025, our $2.5 billion capital management program was 94% complete. Consistent with our disciplined approach to capital management, the Board has resolved to extend the program until 11 September next year with $144 million to be returned to shareholders ahead of either its extension or its expiry. These allocations bring the total capital allocated since 2016 to $18.7 billion.

In line with the 3 priorities of our capital management framework, approximately 36% of this was spent on maintaining safe and reliable operations, 20% returned by way of ordinary dividends and 41% invested in the business through acquisitions, exploration, share buybacks and special dividends.

Sustainability has been central to our strategy since the formation of the company over a decade ago and remains key to the long-term performance of our business. It is simply not possible to responsibly operate in the resources sector without addressing sustainability issues like climate change, water use and biodiversity protection.

This year, we published our second climate change action plan that builds on the plan we put to you in 2022. Our plan outlines how we've continued to position our portfolio for the energy transition and highlights the work that we're doing to reduce our operational emissions and support emissions reduction across our value chain while also strengthening the resilience to physical climate risks. We've matured our approach to climate change to reflect the progress that's being made. The lessons we've learned and the risks and opportunities it presents.

The intervening 3 years have given us deeper insight into the commercial and technical challenges constraining emissions reduction, particularly at Hillside Aluminum and Worsley Alumina, our highest emitting operations. So often, of course, these challenges require collaboration, which, when led by governments around the world, can be a critical enabler in addressing complexities in a sustainable way that achieves a just transition for people and communities.

What is apparent is that changes to our climate will result in shifts in climate extremes. And as we continue our climate change journey, there will be challenges to overcome in decarbonizing our business and ensuring the resilience of our operations.

To strengthen our approach, we are managing present day risks and embedding climate adoption and resilience plans in our systems and decision-making.

Over the course of the last couple of years, the Board has been focused on succession, both for management and for the board. In May, we announced that Matthew Daley will be joining us as Deputy Chief Executive Officer in February 2026 and that he will assume the role of CEO when Graham steps down, an event we expect to be late next year.

It's important to note that February is not a CEO succession event. It's the beginning of a period that will allow Matt to get to know our people, our assets and our shareholders. This timetable has been led by me and carefully planned by your Board. It reflects the fact that South32 is a complex company, with operations that span underground mining to world-scale alumina refining and aluminum smelting. We have a diverse commodity mix and a geographic spread.

In many of the countries in which we operate stakeholder relationships are critical to our success. Many of those relationships have been led personally by Graham and have been developed over more than 10 years. As they transition to Matt, they will be handled, as you would expect, with care and respect.

This is very important to our business around the world and therefore, to the preservation and protection of shareholder value. It will take some time. And during this period, Graham will lead the company with the same level of focus and commitment he's shown from day 1. This is a rare opportunity and one that's only possible with 2 people, Graham and Matt, who see this as a unique opportunity to set that up for success and for Graham to leave the company that he's been so effective in leading in the best possible shape.

Just as a decade on, it was inevitable that there would be a plan put in place for management change, so too have we continued to refresh the Board. We've done this in a methodical way by staggering retirements to ensure South32 continues to benefit from a mix of long-serving directors and those who are new to the company, bringing with them fresh perspectives.

Today, we farewell to founding directors, Frank Cooper, and Futhi Mtoba. As the inaugural Chair of our Risk and Audit Committee, Frank brought deep expertise in finance, in accounting, in compliance and risk management to guide us through our first decade. He's provided strong and steady leadership and help the Board steer our strategy and capital management with confidence.

Futhi has brought her deep knowledge in finance, economics and public policy to strengthen the work of the Risk and Audit Committee, who's strong voice in corporate social responsibility, along with her South African perspective, has been important to our work. South32 has been better for their contributions, and I thank them both for their tireless work. Would you join me in doing that?

As we farewell Frank and Futhi, we also welcome 2 new directors, Stephen Pearce and Mandla Msimang. Both are seeking your support for election today, and you'll shortly have an opportunity to hear from them.

And finally, on succession. We announced this morning that after 8 years on the Board and almost 7 is Chair when I retire this will be my last Annual General Meeting, and that Stephen Pearce will assume the role in February of 2026.

The decision to implement chair succession at this time reflects the timing of CEO succession that I laid out earlier. It means that Stephen will have the opportunity to work with Graham for a significant part of next year and then oversee the transition to that when that takes place. This will mean we'll have continuity in the lead-up to CEO succession and beyond.

It is our view that this is the best way of ensuring we have a well-ordered succession transition for these 2 leadership roles. It reflects careful consideration of what we believe is in the best interest of South32 and all of its stakeholders, including, of course, our shareholders.

Stephen has more than 35 years of financial and commercial experience in the mining, oil and gas and utilities industries and is well equipped to lead the Board of South32 moves into its second decade. Importantly, he brings a skill set that is complementary to Matt's, and I'm delighted to be passing the baton to him.

For my part, my work with South32 has been nothing but a privilege, and I thank you for that honor. That work was made easier by the governance foundations put in place by our first Chair, David Crawford, who sadly passed away at the end of last year, by our founding directors, 3 of whom are on the stage with me today and of course, by all of the members of the Board.

We celebrate the 10th anniversary of South32 with a sense of pride for what the company has become and excitement about the opportunities which lie ahead. Our industry has important role to play to supply minerals and metals critical for the world's energy transition. And at South32, we are focused on playing our part. We embraced the challenge and the opportunities it brings for our people, our business and our communities right around the world. Of course, we cannot do that without the support of our investors. And for that, I thank you.

My thanks to all of our stakeholders and the communities where we work. Most importantly, my thanks go to the people who come to work each and every day to safely deliver on our purpose, which is to make a difference by developing natural resources, improving people's lives for now and generations to come.

Thank you. I'll now hand over to Grant.

Thank you, Karen. I also acknowledge the traditional owners of the land in which we meet the Whadjuk people of the Noongar nation and pay my respects to the elders, past and present. Thank you for joining us today.

2025 has been a significant year in our 10-year journey. As Karen mentioned, the South 32 you see today is very different to the one that was formed in 2015 from 50% of our underlying revenue coming from our aluminum value chain and base metals compared to approximately 90% today.

But one thing that hasn't changed is our focus on safety. In September 2024, we were devastated by the death of José Luis Pérez, a contractor who was fatally injured after he fell from height at Cerro Matoso. I speak for everyone at South 32, when I offer my deepest condolences to Mr. Pérez's family as they grieve their loss. I visited Cerro Matosa after the incident and the sense of sadness and loss among the team was profound.

Together with Mr. Pérez's employer, we have provided canceling and support, including to his family. The investigation was carried out following the incident and the finding and lessons learned have been shared across our operations. We owe it to Mr. Pérez to learn from this incident and do everything we can to prevent incidents like that from ever happening again.

Embedding a culture where the health, safety and well-being of our people is at the heart of everything we do is essential. We do this through our safety guarantee which aims to create a sense of chronic unease, reducing complacency and our tolerance to risk. We also do this through our global safety improvement program, which includes our lead safely everyday program, which seeks to build safety leadership across our business. Almost 16,000 of our people have taken part in this program since its launch. This includes over 95% of leadership roles at front line and frontline employees FY '25, and it has contributed to sustained improvements in our safety performance.

This year, our lost time injury frequency and our total recordable engine frequency, both decreased by more than 25% compared to FY '24. And our significant hazard frequency increased by 61%, which indicates a more proactive reporting culture and improved hazard awareness.

As well as physical safety, we also recognize the importance of psychosocial safety for our people, and we've developed a new framework to manage psychosocial risks, which we're rolling out across our operations in FY '26.

As Karen't mentioned, Matt Daley will be joining us as Deputy CEO in February 2026. Matt is currently the Technical and Operations Director, Anglo American, with extensive operation and leadership experience, and I'm confident he's the right person to take our business forward as CEO when I stepped down later in 2026. In the interim, I'll continue to lead our business, including our work to deliver our global safety improvement program and the ongoing transition of our portfolio.

Since 2015, we're focused on positioning our portfolio towards minerals and metals critical to the world's energy transition. In the first quarter of FY '25, we divested Illawarra Metallurgical Coal for up to USD 1.65 billion, which has reduced complexity in our portfolio and unlock capital to invest in our higher-returning growth options.

In July, following a strategic review in response to structural changes in the nickel market, we announced we had entered into a binding agreement to divest Cerro Matoso with the transaction expected to complete in late 2025, subject to the satisfaction or labor of certain conditions.

We invested USD 517 million at our Hermosa development. We have commenced sinking of the main and vent shafts and construction of the process plant at the large-scale, long-life Taylor's lead-zinc-silver project.

In May, we reached a key milestone in the FAST-41 Federal permitting process when the U.S. Forest Service released a draft environmental impact statement with the final EIS remaining on track for the second half of FY '26.

Hermosa has bipartisan support to help meet the United States critical mineral supply. Beyond Taylor, the Clark battery-grade manganese deposit has a potential to support an emerging North American EV market. We're also progressing exploration at Hermosa's regional scale land package. We upgraded the mineral resource to the Peake deposit, where exploration results support the potential for a copper dominant mineralized system. And we're continuing studies on the potential to add copper production from Peake using the infrastructure established for Taylor.

At Sierra Gorda, there is potential to grow our copper reduction through brownfield expansion projects, at the Catabela Northeast exploration project, where all 18 exploration holes have intersected significant copper mineralization.

Looking outside of South32, we have seen geopolitical tensions, complex and trade wars contribute to market volatility. We continue to focus on the factors we can control, by delivering strong operating performance and through our disciplined approach to cost management and capital allocation.

We increased our production of commodities critical to the energy transition and exceeded FY '25 production guidance, underpinned by annual production growth of 20% in copper and 6% in aluminum. This has enabled us to capitalize on improved commodity prices with our underlying EBITDA increasing by 7% to USD 1.9 billion. And we finished the year with a net cash position of USD 123 million.

In August, we announced we are limiting investment in Mozal Aluminum as we do not have sufficient confidence that we'll have sufficient and affordable electricity supply that will be secured by March 2026 when the current agreement expires. Despite our efforts, negotiations have not progressed to provide the confidence. Without the required electricity supplier, we expect the Mozal Aluminum will be placed on care and maintenance at the end of the current agreement.

We completed the safety recovery of operations and resumed export sales in Australia manganese following the extensive damage caused by tropical Cyclone Megan in March 2024. More than 317,000 hours were invested in the wharf recovery and rebuild with more than 970 tonnes of steel and 740 tonnes of concrete remove from the seabeds, and a critical bridge connecting the northern pits of the Western Leases mining area and the processing plant was also rebuilt.

With the operational recovery plan now complete, shipments have ramped up in quarter 1 FY '26, and we're now working on options to extend GEMCO's mine life.

At Worsley Alumina, primary environmental approvals received during the year have enabled us to start mining new bauxite areas under the Worsley Mine Development Project, which is expected to sustain production until at least FY '36. We remain focused on growing our base metals production, and today, we're directing 100% of our capital expenditure to transition metals.

We've also invested USD 35 million in our greenfield exploration opportunities in Australia the U.S., Canada, Argentina and Namibia as we work to discover our next generation of base metals mines.

Karen spoke about the relief of our second Climate Change Action Plan or CCAP. Climate change is fundamentally reshaping our industry from the commodities we produce to how we produce them. While this brings opportunities for us to increase demand for critical minerals and metals, it also brings risk given the energy intensity of metals processing. And in many cases, the technologies we need to reduce hard to abate emissions don't yet exist.

Our second CCAP sets out our approach to addressing the risks and opportunities that climate change presents, we have analyzed our portfolio's resilience under 2 scenarios: the sector-specific 1.5-degree scenario and a 2.8-degree scenario. And our analysis indicates economic growth and the energy transition are likely to drive demand growth for almost all our commodities under both scenarios, except for lead.

We have maintained our focus on reducing operational emissions and supporting emission reductions across our value chains. In FY '16, we set a goal of achieving net 0 operational emissions by 2050. And in FY '21, we set a target to half our net operational emissions by 535 relative to FY '21 levels.

Despite our FY '25 operational emissions been 1.5 million tonnes of carbon dioxide equivalent lower than FY '21, drought conditions in this Zambezi basin resulted in the undersupply of hydroelectric power to model aluminum, increasing our lines on coal-fired electricity, which has led to a 2% year-on-year increase in total operational emissions in FY '25.

The year-on-year increase in Scope 2 emissions linked to Mozal Aluminium, more than offset the 12% reduction Worsley Alumina Scope 1 emissions during FY '25, following the conversion of 2 boilers from coal to gas during the prior year.

Our portfolio transformation has reduced transition risk and contributed to lowering our scope through emissions by about 80% since FY '19. In FY '25, our Scope 3 emissions were 58% lower than FY '24. This is largely due to the sale of Illawarra Metallurgical Coal in August 2024 and improvements made to the tracking of alumina and manganese sales together with updated emissions factors.

Since our first CCAP, we built physical climate risks into our business risk management processes, and we strengthened our capabilities in adaptation and climate resilience. We're implementing a 3-year climate adaptation and resilience plan to improve these capabilities and continuously improve climate risk management. We are also taking action to support our communities to understand their physical climate change vulnerabilities, which we can support more effectively in our planning process.

I'd like to offer my thanks to our stakeholders, including governments around the world where we operate for their continued support.

And to our people, thank you for your continued commitment to deliver our strategy and live our values.

Finally, I'd like to take the opportunity to thank Karen Wood for a service to South32. It has been a privilege to work alongside Karen on the Board for the past 8 years and benefit from her counsel as Chair since 2019. I want to recognize Karen's outstanding leadership of the Board, ensuring it is well placed at the right mix of skills and experience to guide our strategy. Karen's deep industry knowledge, legal and governance experience and strategic oversight has positioned South32 for the future. Our work to engage our stakeholders has been key to how we've evolved our approach to sustainability during her time as Chair and responded to our changing business context.

We've been incredibly fortunate to have some one-offs Karen's caliber and experience in the role, and I know her legacy will continue to shape South32 for years to come.

As we enter our second decade, our outlook is positive. We're focused on maintaining safe and reliable operations while remaining resilient as we navigate potential market uncertainty with a strong balance sheet, we're well positioned to increase our supply of minerals and metals critical to the world's energy transition and deliver returns to our shareholders. Thank you. I'll now hand back to our Chair.

Thanks, Graham. We'll now move to the formal items of business. Each resolution and the explanatory notes are outlined in the notice of meeting dated 17 September 2025. As well as consideration of the financial statements, the business before us today includes 6 ordinary resolutions. As set out in the notice, other than in respect of resolutions in which they have a personal interest, the directors recommend shareholders vote in favor of all resolutions. I intend to vote all undirected proxies that I hold as Chair in the same manner. We'll work through each resolution in order, and as I mentioned, we will display the summary of proxies received for each item of business. I'll also invite questions on each resolution.

The first item of business is to receive the financial report, directors' report and auditors' report as set out in the company's annual report for the financial year ended 30 June 2025. While we're not required to approve these reports, we are tabling them for discussion. As I mentioned earlier, we have Jane Bailey from KPMG with us and available to answer questions relating to the audit.

Before I move to ask if there are questions or comments on the financial report, the directors' report or the auditor's report, I would like to respond to questions submitted by shareholders prior to the meeting. Let's go across to Belinda, who's collected those questions and ask her if you would Belinda to take us through.

Thank you, Chair. Our first question is from Mr. David Timothy Bras in relation to the federal government's list of critical minerals. What minerals that South32 produced would fall on that list of federal government critical minerals?

Thanks, Belinda. It's been a good week for critical minerals around the world. Look, the Australian government does classify 31 resources as critical minerals, and we produced one of those in Australia. That's manganese, but we produce another 2 elsewhere, nickel and million. The government also in addition to that list of critical minerals also has a strategic minerals list with 5 key materials and South32 produces 3 of those: aluminum, copper and zinc. So we think we're well positioned.

Thank you, Chair. Our next question is from Mr. James William Hiland. Following the divestments of Illawarra Coal and Cerro Matosa that South32's remaining portfolio is increasingly concentrated in jurisdictions such as Australia, Southern Africa and the Americas. How does the Board evaluate geopolitical concentration risk? And are there criteria in place to guide future investments or divestment decisions based on sovereign stability, trade exposure and ESG standards?

Thanks, Mr. Harlan for your question. This is all part of the analysis that the Board does on anyway that it deploys capital. And obviously, that deployment of capital is consistent with our strategy, which is all about the commodities required in a low-carbon world.

As we do that, we're always guided by what options we might have available for high-quality operations in commodities that have both a strong and a sustainable outlook and in jurisdictions where we can operate not only in line with our values and our code of business conduct, but also the way in which we approach our environment, social and governance responsibilities. And we think we do that.

Well, I mean notwithstanding the concentration that you mentioned and that is right. We still remain geographically spread, diverse with multiple opportunities, both in terms of projects and commodities in the United States, in Chile, in Argentina, Brazil and Canada.

Our next question is from Top Rock Australia. On Sierra Gorda, given copper near USD 5 per pound, what are the production and grade assumptions underpinning FY '26 guidance and how sensitive is EBITDA to plus or minus 10% copper price changes?

And on Hermosa, what percentage of the project's capital budget has been committed? And when does South32 expect commercial production has management stress tested Hermosa's economics against current U.S. cost inflation and permitting delays?

Thanks, Belinda, and thanks to the folks from top rock for asking the question. I am going to ask Graham to comment on the specifics of the copper question from Sierra Gorda. Just before doing so, though, say that the acquisition of our interest in Sierra Gorda has been incredibly positive. I mean you've seen the contribution it makes to results. So we're delighted to have that exposure, and it's performed well and we expect it to continue to do so. Graham.

Thanks, Karen. Look, Sierra Gorda, I think it's, we bought Seracare because obviously, we have a strong interest in copper. And if you look at the supply-demand fundamentals over time, we do expect there will be grade degradation in existing operations, operations that go out of business and the supply for copper is strong, which is going to provide attractive pricing.

We have got our guidance out there for Cerro Gorda this year. The way I think about Sierra Gorda is where over the next couple of years, we have relatively consistent production, but we do have the opportunity to increase our production by about 20% by investing in what's called the fourth grinding line at Sierra Gorda, which will lift up production by about 20%. Likewise, as I mentioned in my opening speech at Catabela Northeast, we've had 18 holes we've put in the ground. That have all intercepted high-grade copper, which means we have the option to extend the mine life of Sierra Gorda as well. And on top of that, we have about 110 million tonnes worth of oxide material on the surface, which has a grade of about 0.36 that we're looking at different ways to process that.

So I think, Karen, in response to the price, we'd expect a strong price to continue, but plenty of opportunities to grow as that continues to go in that direction.

Thanks, Graham. The second part of that question was to do with the Hermosa project, where we have awarded a considerable number of the capital packages all consistent with the final investment decision that we published at the time of approval. But clearly, there's more to come before that project is complete. We remain confident about first production for the second half of FY '27.

To date, we haven't seen a material impact from either U.S. tariffs or indeed U.S. cost inflation, although we continue to look at that and as you would expect, monitor it very closely. On permitting, you might recall, Graham mentioned when he gave his address about being the first mining company in the United States to receive FAST-41 status. That has been tremendously important to us, came in with the Bard administration has been continued under the Trump administration. And basically, that has allowed us to expedite the approval process. So Federally, that's been incredibly important.

We do have all of the state permits that have now been received. And the U.S. Forest Service has released the draft environmental impact statement, which is obviously a key planning milestone.

Thank you, Chair. Our next questions are also from Top Rock Australia, on Cannington and silver leverage with silver at 14-year high, what is Cannington's realized silver price versus spot? And what hedging or sales constraints limit upside? How long is current mine life at Cannington at existing cutoff grades and is a reserve upgrade expected? Is South32 evaluating expansion or processing upgrades to capture higher silver prices?

And on capital allocation and shareholder returns, given the significant rise in cash flow, will South32 reinstate or expand the buyback program in FY '26? What payout ratio will govern dividends of EBITDA exceeds USD 2.5 billion this year and how will management balance reinvestment in growth assets versus distributions during a commodity super cycle?

That feels like a board agenda for a year, doesn't it? I'll get Graham to just comment on the order of magnitude about silver prices. But look, on today has a reserve life of 6 years, but the team are doing a huge amount of work to see if that might not be extended. It has been a magnificent asset, for South32, I mean, not least because of the silver prices that we've been enjoying more recently. So a huge amount of work going into making sure that we can continue that operation for as long as possible.

Our silver there is sold at market prices. We don't hedge consistent with our portfolio risk management policy.

Let me just jump to some of the capital management questions. And then, Graham, I'll come back to you, if you don't mind, just to talk about that order of magnitude on prices. Our capital management framework has been unchanged since the formation of the company. First priority, maintain safe and reliable operations and an investment-grade credit rating. Second, to distribute a minimum of 40% of underlying earnings as ordinary dividends. And then third, to put other opportunities to internal competition. So by that, I mean, how do we use excess capital? Do we reinvest in new projects do we acquire new assets? Do we do greenfield exploration? Do we spend some on share buybacks? Do we spend some on special dividends? So that's the hierarchy in which we go through our capital management. And as I say, it's unchanged since the formation. But Graham, silver.

Yes. Thanks, Karen. Look, so was an interesting one. If you look over the last 3 months, it's probably up about 2% Today, it's trading at about $48.55. Obviously, it follows gold as a proxy. And in terms of uncertainty there's large movements.

Our shareholders, we don't hedge to Karen's point, we're probably net TCs were about 1% of the index price that you see out there. So we pretty much realized the full price benefits of that.

Last year, we probably run at an average silver price of about $31.90. So obviously, it's positive at the moment, but volatile commodity. I think more importantly, for us, it's about how do we extend the life of Cannington. Cannington has been around now for about 27 years. I was actually there when we built Cannington and funny enough, we had a silver price of $4.50. So yes. our commodity prices can actually move.

I think we shouldn't discount that Taylor also has volumes of silver. It's a zinc, lead and silver mine. And the other commodity that's moving strongly over the last 3 months is zinc, which is up by about 18%, and certainly, a commodity that we believe over time has the same fundamental opportunity is copper in terms of supply dropping off and demand continuing to increase. And again, if you look at the economics at Taylor today and you run the current zinc and silver price to considerably north at the time when the Board approved the project.

Thanks, Graham. Belinda.

Thank you, Chair. Our next question is from Ms. Natasha Michelle Lee. The total significant hazard frequency has increased from 122 to 196. Could you advise what has caused this increase and what actions are being taken to reduce hazards?

Thanks, Ms. Lee, for your questions, sort of somewhat counterintuitively, that's actually a good outcome and an outcome that the Board feels very positive about. Taking account of significant hazard frequency is a leading indicator. And it's leading because it gives you some insight into the extent to which people at the operations are identifying hazards to enable us to address them before they become serious issues. And I think this is showing how well entrenched the focus of the program Graham spoke about earlier, the lead safely everyday program is actually being rolled out around the business. The fundamental piece of that program is for each one of us to be able to guarantee our own safety and the safety of those with whom we work. And when that becomes how you approach everything you do, in your work, then we think you've got to be more alert to the themes that might be hazardous to get them reported and to get them dealt with. So the Board has taken a lot of confidence by the increase in that frequency rate, and it's obviously something we need to continue to monitor.

I did speak earlier about the visits we make to our sites around the world. And one of the really important pieces of that is the opportunity we all have, as members of the Board, to talk to people. They might be contract gardeners or they might be people running some of our complex pieces of machinery. But when you're able to meet them on-site and talk to them about how they're thinking about safety, what the guarantee means to them and how they're thinking about identifying hazards, as I say, it gives us a great deal of confidence that this program is really gaining traction around the business.

Our next question is from Mrs. Angela Newton. Is there a proposal in the future to buyback small shareholdings from investors.

Ms. Newton. Again, thank you for your question. No, we don't have a plan to do that. I spoke earlier about the on-market share buyback that we have in place, but we don't have a facility to buy back small shareholdings from investors.

Our next question is from Mr. Thomas Roe and relates to reinvestment options to be included in the company employee share scheme.

Look, I know a lot of companies do have dividend reinvestment plans, and I assume that's what you were meaning Mr. Roe. We think that's a costly way for us to raise capital, so we don't have a plan of that kind. But of course, shareholders can apply the dividend payment to buy shares if they wish to do so.

Thank you, Chair. Our next question is from Mr. Michael Lancaster. Why are these shares doing nothing?

Thanks, Mr. Lancaster for your question. look, share price is influenced by so many factors. I mean, if you were just watching the market this week following the very successful meeting our Prime Minister had in the United States. We can see what happens as a result of some of those international factors. So commodity prices obviously move around broader economic conditions have an impact on this.

What we have to do as a Board is to focus on maintaining our operating momentum and capitalizing on the transformed portfolio, about which both Graham spoke earlier. We have to do that to deliver growth and returns for shareholders. So over the last year, we have seen an enormous amount of geopolitical tension that has increased. Volatility, we did the trade tariffs on their own, certainly did that in a very significant way earlier in the year. But I would say that despite those headwinds, we have delivered strong operating results and continued with that critical work of transforming the portfolio.

Our next question is from Anusha Hashimi. How does the Board justify granting extra awards to the Executive Director and incoming Deputy CEO when shareholder returns remain under pressure? And what proof is there that these awards are tied to long-term value creation rather than internal reward.

Thank you for the question. There are 2 pieces here. The awards to Graham, that is one of the resolutions for consideration today under the long-term incentive plan, and the awards that we're making to our incoming Deputy CEO, Matt Daley, as part of the arrangements we've made for him to join the company. Let me deal with that piece first.

So the elements that we're asking for you to approve today format are designed to partly, and I stress partly not fully, but partly compensate him for benefits that he's giving up as he leaves Anglo American. Some of that is paid in cash. Some of it is in equity. Some of it is time-tested equity, and some of it is subject to our long-term incentive plan. Where the pieces tied to our long-term incentive plan, then obviously, it works against the measures of that plan, currently, 80% tested by relative total shareholder return and the remaining by reference to 2 strategic measures.

The piece that's time-tested is to compensate him for what he's actually giving up in part by leaving Anglo. As we went through this process, we wanted to make sure that we had proposition to Matt that was sensible against the market that, obviously talk the interests of shareholders into account, and that's why we landed on the structure we did.

I should also say that one of the changes led by Wayne as our Chair of the -- where it's when on that side of our remuneration committee, was to increase the minimum shareholding requirement for the Chief Executive. It was onetime salary. That's now been increased to 4x salary or 400%, which we think is a really important initiative to make sure that our leadership roles are aligned to the shareholder experience.

I mean Graham obviously continues to serve as CEO, up for consideration today are the awards for him under the long-term incentive plan. And as I said earlier, they will be governed and judged by the performance over the period.

I should also just add to that, though, that Graham's award that we're asking you to approve today will be prorated down to reflect the actual period of service that he gives up to the date of his retirement when that might be.

Thank you, Chair. Our next question is from Ms. [indiscernible] why grant awards to executive director and incoming deputy. These salaries are already generous and as a new deputy performance record at South32 yet to be established.

Look, I think I covered that in my earlier answer, Ms. Craig.

The next question is from Mr. Thomas Roe. When will the company reduce remuneration packages of Senior Executives and the Board to no more than 10x the annual wage of the lowest paid worker or contractor.

Thanks, Mr. Rowe for your second question. Look, this is a question we often get. And my answer always is we have to structure remuneration packages that are designed to attract and retain the best people in the business. And we think that we've done that. We do need to be competitive. It's the reality of the world in which we operate. And I know there's a huge amount of interest in metrics of this kind, multiples, and I understand why. In fact, that CEO pay ratio is something that we do disclose. If you have a look at our data book, our sustainability data book, you'll find some information about that in there and you can find that on the website.

So I certainly understand the question, but the reality of the world in which we live is that we do need these competitive packages to not only bring people into the organization, to serve the interest of South32 and its shareholders, but also to retain them.

Our next question is from Mrs. Susan. Are you allowing activists to drive a climate change agenda?

Thanks, Mr. [indiscernible] for your question. The short answer to that is no. Our strategy right from the outset, 2015 was to focus on commodities that will have a future in a low-carbon world and to operate our business in a way that contributes for our part to the reduction of emissions. I mean that is just good business sense. It's based on sound economic principles. And you'll see that articulated in the second climate change action plan that we are asking you to consider today.

I mean I think one of the great benefits of a company, if you like, being formed as recently as ours, is that the founding Board and Graham, we're able to think about these critical issues on climate and the role we have to play in the context of the company's strategy. And so they are intertwined. They're linked. And as I say, we think it makes good economic sense for the organization.

Our last pre-submitted question is from Ms. Natasha Michelle Lee. To what extent has the company considered or installed renewable energy such as solar or wind turbines to supplement the electricity supply used in mine sites, excluding the battery electric vehicle trial?

Thanks, Ms. Lee, and I'll get Graham to comment if I miss any of this. I mean renewable energy is a key part of our energy mix. And again, since 2015, assessing renewable energy options has been a key part of how our leadership around the organization has operated. A 3-megawatt solar plant was installed in Cannington, I think, in Queensland, Graham, in 2019?

Correct.

So that's obviously very important. We do have renewable energy supply contracts for the Alumar smelter in Brazil. We have been pursuing options renewable power for our Hillside smelter in South Africa. I mean that's a critically important one for us because Hillside accounts for 58% our Scope 1 and 2 emissions. And so that is one we absolutely have to solve for.

I know work has gone on at Worsley to try and assess renewable options there. What have I missed, Graham?

Yes. Probably the only one would be, Karen, obviously, at Mozal tradition with at a hydro water source there. But at the moment, the Zambezi River been at low levels. we are not getting the same supply. We use about 950 megawatts of Mozambique, and we probably get about 350 at the moment over the next 2 years from the [indiscernible].

Thanks, Graham. Belinda, that's the end of our pre-submitted questions. Thank you.

Before I go on to the remaining items of business, I will, of course, invite questions from the floor as we ordinarily do. But before doing so, if you'd indulge me, I would like to comment the resolution seeking approval for our remuneration report. We announced before the meeting that the report did not receive the required 75% vote in favor from our shareholders. Some of you may be aware that 3 of our proxy firms who advise some of our shareholders recommended a vote against the report. The reasons offered deferred. There was some concern that the measures that form part of our short-term incentive plan and the outcomes were not sufficiently clear. There was also a view that we had too many measures.

Over recent years, we have endeavored to reduce the number of measures and to progressively add to the explanation for outcomes. I know this is work that Wayne is Chair of the Remuneration Committee has had underway. And there has been some considerable progress in that work. But we do accept that there's more we can do. And I know that under Wayne's leadership, the Remuneration Committee, will take the comments that have come back from shareholders into account as they think about what changes might be able to be made to those disclosures next year.

On our long-term incentive plan, there was some commentary, with some shareholders taking issue with the inclusion of the 2 strategic measures that I spoke about earlier, accounting for 20% of that outcome with 80% continuing to be assessed against relative total shareholder return. This was the first year the strategic measures were assessed. They were introduced in 2022 run over a full year period. So this was year 1.

We do respect the differing views on how long-term performance should be assessed. But we think that at this stage of South rises life, 20% allocated to strategic measures makes sense. But as always, we remain open to feedback on the best way of reporting performance against those measures.

And then finally, some shareholders objected to the decision by the Board to increase the Chief Executive's remuneration, Graham's remuneration, in explaining that decision, it's important that I go back to the succession plan for Graham that I spoke of earlier.

While Matt will join us as Deputy CEO in February, he won't succeed Graham until late in the year. Graham will continue to lead the company, giving Matt the opportunity to get to know, as I said earlier, our complex business spanning underground mining to world scale, alumina refining and aluminum smelting and operating in a diverse set of countries with a diverse commodity mix. It also allows Graham to transition some of the critical stakeholder relationships, especially at senior government levels that are so important to our success. These were all important considerations when we made that decision.

What we found was that Graham's pay had fallen behind the market. He's enjoyed only modest pay adjustments since 2015, and none of them were designed to reflect the considerable skill and experience he's acquired over the decade. We know from the work we did in bringing Matt in that his remuneration package was market competitive. And I must say I'm very pleased to see how strongly shareholders supported the grant of awards to Matt as they have for Graham.

Before I move to the remaining items of business, why don't I take some questions, perhaps from the floor first and then Belinda, I'll come to you to see if there are any online. I will, of course, take questions on each of the items of business as we work through them. Anything from the floor? Ms. Wolbak, welcome.

A recent report by market forces identified South32's Worsley aluminum facility as the second largest manufacturing gas user in the country last year, with gas use accounting for just under half of Worsley's operational emissions. South32 states that this interim plan for reducing emissions at Worsley is to switch its coal boilers to gas boilers with this medium-term plan for the 2030s involving a transition towards electrification powered by renewables. This will likely substantially increase gas use at Worsley in the short to medium term. In financial year 2024, WA gas prices were 2.5x higher than they were 10 years ago. This is despite gas production that is supply in WA more than doubling over the same period.

Given the significant financial risks associated with continued reliance on gas as a primary fuel source, including rising gas prices, network costs and ACCU purchases under the safeguard mechanism, is South32 looking into setting quantitative targets to reduce gas use at Worsley Alumina by 2035, 2040 or indeed even earlier?

Yes. Thank you for your question. And as Graham indicated earlier, the transition of the 2 boilers at Worsley to gas was certainly part of the emissions reduction strategy for that asset. We hope to continue that because, frankly, moving to gas does mean that we have a significant reduction in emissions, which is very important. I certainly take your point about prices. Graham, you might actually want to comment on that because it does have an impact.

Yes. Look, Karen, to Karen's point, we have 5 coal fired traditionally boilers that provide us to generate steam for the process. We have converted, obviously, 2 of those from coal to gas, and that a drop of about 10% on our Scope 1 emissions. So the coal to gas made a downward trajectory. So that's a step change in the right direction.

Do we think gas is the ultimate solution for Worsley? No. So we're still committed to halving our Scope 1 and 2 emissions by 2035. So we continue to study other ways to reduce our profile at Worsley.

I think the other thing around Worsley is that coal supply that we actually use, we share with the WA government, they have the same suppliers. So we actually work very closely with the WA government as we actually transition our way out of coal to gas and then another ultimate solution because the economies of scale mean that both the current coal producers need both customers to be viable. We would not like to go, for example, from coal to gas super quick and then have both coal-fired suppliers collapse and then the government's power stations to long have suppliers. So we're trying to work very closely how we transition, but our plans are to half our Scope 1 and 2 emissions by 2035. And we have teams continuing to work on that.

So does that mean you're saying that you quantitative target to reduce gas use at waste alumina is to reduce it by 50% to 2035 to 2040 period?

Across our business, we have the global target, but all our targets are applicable to the assets, and we're pushing to that direction.

Now we still need to develop a plan because part of the solution, well, when I say plan, we've got things in process but it requires the electrification of the grid in the Southwest and some other infrastructure that doesn't exist today, but we continue to engage with various different options around renewables and how that will transition over time. But to be clear, if we each coal fire, we go to gas, and again, gas isn't the ultimate solution drops our emissions profile by about 5% at Worsley.

Sorry, what was that, that 5%.

5% for each one we convert from coal to gas roughly. They're slightly different in configuration.

That's coal to gas.

Coal to gas. Yes.

I'm sorry, can I ask a follow-up question? Is that all right?

Sure.

Has South32 estimated how much the interim coal to gas switching will increase gas use at Worsley alumina over the next 10 years?

So look, if I look at the broad numbers and think about we did the conversions roughly, so these aren't the exact numbers, but I'll give you the ballpark. We did the conversion roughly over 12 months ago, and we used to have probably more than 50% of our power supplied by energy source. So gigajoules would have actually come from coal. In '23, it was up 57%. Gas was 42%. Today, it's kind of switched to the other way, where gas is around 4% last year -- sorry, coal was around 41%, and gas is around 57%.

57%.

Yes. So that's a switch of the two.

So that gives you an idea of what you're going to be doing over the next 10 years? Is that what you're saying?

Correctly. So to continue to reduce it. But again, it will be very dependent on working closely with the WA govern about how they transition down there as well.

Chair, may I introduce Alice Clark.

Ms. Clark, welcome.

My question is the Western Australian Environmental Protection Authority recently received over 59,000 public responses during Alcoa's public comment period, a new state record, which reflects the widespread public concern about deforestation and bio impacts in the northern [indiscernible] forest. How does South32 plan to address the mountain community pressure and environmental concerns about deforestation in the Northern [indiscernible] and reputational risk as a result of bauxite mining, losing a social license in the area.

Thanks, Mr. Clark. I appreciate the question. And of course, I'm not familiar with the Alcoa crisis. But I do acknowledge the community concern that has been raised about this. And of course, we went through a very long process ourselves for the new permits.

We've been operating in that region for more than 40 years. As you know, we're one of the largest employers in that part of the country. And that work that goes on it Worsley is an important part of the production of aluminum, which, of course, is critical to the energy transition.

We did get Federal approval in February, and we think the conditions that are attached to that approval for South32 are strict, and we think that they are designed to avoid and minimize impact to native vegetation and to the habitat of species.

They do require us to progressively rehabilitate the land we clear to put in place protected areas and buffer zones around known habitats. It does include putting 8,000 hectares aside to be restored to create additional habitat for the black cockatoo, which is obviously an important species in that part of the country.

Through that long process, there were a number of changes made before the final permit was granted. The area that was to be cleared of native vegetation was significantly reduced by about over 40% 44%. We certainly agreed that we should avoid clearing land of high environmental value. And the protected areas were increased by a very significant amount, around 90%. So I don't want to dismiss the concerns. I know they're real. I know they're genuinely motivated by care, for this part of the country. But we think we have been responsibly operating there for a long period of time, and we think the new permitting allows us to continue to do that.

Chair, may I introduce Paul [indiscernible]

Hello, Mr. [indiscernible], welcome.

Thank you very much. Very much appreciate and certainly or to be able to speak here on these subjects, but I believe it is very important that South32 understand 4 issues I'm raising here, mostly relating to the -- first, I'll read them out as I've written them. Because of the close relationship with Alcoa will South32 apply to the government to gain benefit from the government as Alcoa has just been awarded $3 million for processing gallium, a critical metal required for FCEV vehicles truly giving 0 pollution as compared with EV that failed to give 0 pollution actually adding pollution. That's the first one.

So we take these in turn. Why don't we do that? Shall we take them in turn and then I don't have to remember the four question. Yes, I'll take this one, and then I'll come back for your second one. Is that all right?

We're still getting our heads around the announcement that was made earlier this week. I mean certainly, it's exciting for alcohol. But Graham, if you've got anything you wanted to add to that?

Yes. Look, obviously, we're watching with interest because we have done some research on gallium as well and also done some of our own work in the Southwest around that. Alcoa is one step ahead of us. We recognize that. But in saying that, we have also been working with the U.S. government on a number of other fronts. For example, as Karen mentioned, we're the first mining project in the FAST-41 for the Hermosa opportunity, the Clark deposit, which is manganese, we've got funding from the Department of Defense in the form of 1/3 of paying for the decline in the bulk sample and they're probably going to contribute somewhere to 30% to 40% of basically the processing facility for that. And the last piece, about 2 weekends ago, we completed an agreement with the U.S. government around them taking an equity stake in our project in Alaska to help build and facilitate a road. So we do obviously have a list of different priorities. We're ticking through those. Gallium will continue to look at and study. But Alcoa probably one step ahead of us on that, but we've probably got 4 other things that are much further advanced.

So you can process?

We have looked at it, it's not without its challenges, to be perfectly honest, but we continue to work through that as an option.

It's the in the Basic mineral Okay. The second question is now Woodside and Japanese agreement has been approved by the WA government to provide liquid hydrogen to Japan. This will open up in 2 years, availability of hydrogen for use in WA. Will S32 change equipment to FCEV set instead of EV that cause pollution.

I think if hydrogen comes into the energy mix in WA, we'll welcome it, and we'll look at all the opportunities that come with that across a broad spectrum of energy generation.

It's a very important issue, though. The next one is Japan has now commissioned an automatic power to drive their desalination plant, providing 24/7 base power has set to consider this issue.

So was that small nuclear.

It's just coming, it's been about a week ago, they announced it.

Yes. So we have looked at things more for the smelters in Southern Africa around small nuclear facilities, which generally have come out of Japan. So we are looking at continued energy sources. Again, we'll have a look at that new one that comes out. We certainly, as I mentioned earlier, particularly in the Southwest, have a medium- to long-term challenge around power supply and security. So all that new technology we have attainments across constantly looking at the opportunities.

So effectively, what it is, it's changing from 1 density to another. And apparently, this causes a extreme high pressure, which then drives turbine, and that generates electricity. So that's a very important issue that's available now if the government might want.

You might want to when we have afternoon tea, NAB Irwin Schaefer, who's sitting here in the front row, and he's going to wave to you. So you know who to speak to, he led a session with the, the Board met this week and Irwin and his team led a session with us on some of the issues that you're raising on innovation and technology. So he'll be able to give you a little flavor for what we're looking at.

That's the fourth one, of course, is geo service plan. The largest in Australia is being built in North Perth. This provides 24/7 base power does not require wind turbines, solar panels has sent to consider this source of reliable power, which is used internationally around the world.

Yes. So we have looked again at geothermal, but more in the Southern African context. I guess we'd have to look at the infrastructure that goes down to the Southwest and see if we could tap that.

The comment I'd make is you're bringing up great ideas, but I think that's a good sign of how this energy space is constantly changing, we're a high energy-intensive business. And obviously, we're looking to reduce our emissions profile. So all these things we look at and we'll continue to look at.

That's why I presented those issues.

Thank you. Thank you.

Chair, may introduce John Campbell.

Hello, John.

Chair John Campbell from Australian Shareholders. We've got, I think, 500 and something shareholders' proxies today for about 5.5 million shares.

I'd like to congratulate both you and Graham. I'm not sure if we'll have the opportunity to say that to Graham this time next year. But in case we don't, I think there's a lot of that should go to you both over the development of South32 over its 10-year history. I think it was widely regarded there's likely to be a basket case when it was launched and demerged from BHP. The share price has increased by about $1 since it's launched. I know that isn't astronomic, but I think there have been benefits to shareholders along the way as well. I'm not sure how it all pans out. But I think the -- given the assets that were demerged into South32 and the difficulty you've had and the demonstration really active management of those has been beneficial to the shareholders is a lesson that BHP should learn.

Thank you, John. I really do appreciate your comments, and could I also just say, what a pleasure it's been to work with you on your association over the last few years.

Retail shareholders are tremendously important to us as an organization, and we've had a number of opportunities to meet. We don't always agree on some of the issues, but the opportunity to spend time and understand the concerns of retail shareholders that you so ably represent has been very important. And we all remember the names that will come to a call. Don't we?

Well, I think, too, I should thank you for the time that you give to us because it is appreciated, and we do our best. So my concern would be with Hermosa. The grade there being somewhat less than Cannington, I think, I know it's different minerals involved and different grades there. The investment in Hermosa is going to be about $5 billion, I think in total. It won't be a peer that on the balance sheet because you've already written off $1.3 billion of that. But by the time you get a Taylor into production that's going to be there. You're going to have a change, a new Chairman, you're going to have a new CEO and new brooms like to sweep covered bar, and that's at the expense of shareholders. And I'm just worried about that. I worry about the effect that the temptation that they'll be there because of the marginality of Hermosa to make big impairments.

I wonder if the remuneration plan is really adequate to deal with that, whether, it envisages that issue and whether we shouldn't have some form of net profit gate threshold that needs to be met before any financial benefits anyway come from short-term incentive. So I'd like to leave that one with you, if I may. I don't know if it's too late to change the plan to accommodate these things, but certainly, we've got the opportunity with a negative strike. If I get what you said earlier, as being the case. The -- I must say we're supporting your remuneration plan. We think it's fair and reasonable. But I guess that we differ from our competition in the proxy advice department.

So perhaps if I could have comment on Hermosa. And I've got also a couple of other questions to ask.

Very pleased to comment on Hermosa, and you rightly say, there are different views out there about what's the best way of measuring performance. I mean what I'd say at the outset is that this is a long-term business. All of us sitting on this stage, all of the executive team here today know that the decisions that we take today are going to be, we hope, reaping benefits for the generations of management teams and Board directors to follow because projects in this sector take a long time. They take a long time to identify. They take a long time to develop. They take a long time to come into their own. And so we think long term about these things. And it's one of the reasons why the long-term incentive plan runs over that 4-year period, why 80% of it is attached to relative total shareholder return. So we get that alignment between the experience shareholders have and the experience management will have. So yes, Graham will retire next year. But he will take equity in South32 into retirement with him, and he will either prosper as all shareholders will as a result of that investment in Hermosa or not. And we think that alignment is so important. So I mentioned earlier, John, the grants that we're asking shareholders to approve today will be prorated down to reflect his period of service but he'll take that into the future.

Now it is true to say the long-term incentive plan has not been lucrative for executives over the last 10 years. It has only vested on 3 occasions, only once at 100%. Once at 38%, and this year at 15%. So it is something that we think means executives and shareholders are aligned.

The Hermosa project is tremendously important for the future of South32. And as a Board, we remain very confident about it. It's important, I think, to remember that there are 3 parts to that project. There's the Taylor deposit, the silver-lead-zinc deposit that is under construction at the moment. And we next go up there in early December to look at the progress over the last 12 months.

There's the Clark deposit of manganese, and we believe there's a very strong future for manganese. It's one of the critical minerals. So we ran confident about that.

And then there's the broader land package that Graham spoke about earlier and where he shared some of the excitement about what might emerge there from a copper perspective. So we remain committed to the project. We think it's the right thing the future of South32. And we think the structure of the remuneration arrangements in terms of long-term incentives aligns those interests. But as I said earlier, there are so many different views about what the right performance measures should be for a long-term plan. There are those who think 100% total shareholder return should be, there are those who think we should run with a total return on capital invested metric. There are those who think we should have a gateway. There are those who think we shouldn't have strategic measures equal to 20%, but they should be higher. So we have to make the decision that we think is right for us, and we think we've done that.

Okay. I think my concern really relates to the short-term incentive more than the long term. The fact that you're using underlying profit as underlying earnings as the yardstick and adjusted underlying earnings at that reduces the transparency of it, and it allows the situation to occur where the impairments in particular, are excluded from the calculation. And if we have a new room that decides that he's going to write-off all of Hermosa, then there will be short-term implications for long-term gain because the long-term cost of production would be reduced by the amount of the impairment, and it varies me that there's no real protection there against that eventuality.

And John, I obviously don't can't speculate on what might emerge down the track, and Graham has just indicated, if he'd like to add a comment. But let me just say a couple of other things. And no one shies away from the fact that not everything has gone perfectly with this acquisition. We had COVID, of course, which curtailed the development, really had a huge impact on us in 2020 and 2021. There was the delay of about 2 years as a result of the dewatering work that had to take place and of course, some inflationary pressure that we've seen.

But on the other side of the equation, there are a number of things that have gone very well. Graham spoke earlier about the entry into the FAST-41 process, which has been tremendously important to us, as has the fact that we do have all state approvals now, the work Graham referred to earlier for the Peake deposit, the adjacent copper deposit for peak, and the funding that has been provided by the U.S. administration. So there are negatives, there are positives. But Graham, you wanted to add a comment?

Maybe just a couple of ones, John, that's always interesting one as a CEO and obviously a board to approve to make a decision around an investment because it's, to your point, it's very easy to protect the short term and not take a risk for the future. And yes, when we talk to investors about optionality, generally the sell side, they will love you to have growth options, they hate it when you go into execution and they're discounting an then they love you when you come out of the other side. And part of that reason is you're building a large mega project over 4 years in the world can shift in terms of inflation and impacts.

I think why I would always give Hermosa a tick, and would we buy it absolutely again, yes, in saying that I think the cost would probably be 3 or 4x what we paid today. It has a long life. Taylor at the moment is 28 years, and it's still open in multiple directions. You're right, Cannington has higher grades, but it doesn't have the life and it can't do the throughput. So I Cannington its best can get up to 2.8 to 3 traditionally throughput. This will be 4.3 to start with.

It has 20 years life, it will probably easily add another 10. Then on top of that, you've got Peake, which is a copper deposit, and all the approvals we're getting now and all the infrastructure layout Peake in at probably around a $60 million CapEx cost, and you'll have a copper concentrate come out as well.

And then to Karen's point, Clark probably has, it's a manganese product designed to go into EVs. EV penetration under Trump's administration has slowed down in the U.S. versus what you've seen around the rest of the world and what was happening under Biden, that they're going to come. And Clark potentially has a 6-year mine life. And on top of that, we've got 12 other exploration projects on the property, which are mainly zinc and copper, but we actually can't touch those until we get our federal approval.

So once we have those, it will be a much broader program. So if we go into production just for Taylor without all the add-ons, it will be in the first quarter of the cost curve. It will generate strong margins for probably 30-plus years for our organization. And like Cannington has done in the first 10 years, it will probably underpin a lot of our cash flow and growth.

The challenge within impairment is it's at a point in time. And the one thing you can't include in the impairment is or the optionality and length of the mine that I spoke about.

Second question on [indiscernible]. I noticed the U.S. government decision to make the road into the area. And to enter your joint venture partner there. I was trying to understand what the impact of that was on your shareholding in the quarterly report that you just released. So I'd be interested to know what it will be after the things that won't start. But I'd just be also very interested to hear what Graham thinks about the prospects there and how long it would take, how much it will cost, what sort of minerals that you're able to extract there? And what we like living up there to do the job?

Well, that's one thing I can talk to you about because I lived in the Northwest territories at Canada for 3 years in the diamond mine. So I know at minus 50 looks like.

Look, I would describe that Amla district in the northern part of Alaska is largely unexplored territory. And if you think about OECD countries, it's probably one of the last few basins. Now at the moment, we have done some early work-up there around the deposit called Artic, and Arctic has about 43 million tonnes. It has copper, zinc high grades, it's shallow, [indiscernible] is a much larger open and underpin underground deposit, slightly lower grades. Anywhere else in the world today, those deposits would have been developed. The challenges are about 211 miles or 340 kilometers, if my math is right, from what's called Dalton Highway, which is what you need to access it.

Because it's an unexplored territory and articles a VMS-style deposit, we believe there's multiple deposits up there. Hence, we pegged a whole lot of land with our partners around Ambler, but we also have another project, about half way down with the roads coming, which is called Roosevelt, which we have 100%.

The time line of this, to be clear, is not tomorrow, the next year. You're probably at best looking about going into some kind of development, 7 to 10 years down the track. The focus for the next 2 years is exploration to try and grow the resource and find more deposits. I think the advantage of having the U.S. government as a partner and this is a commitment to actually build a road, which opens up that district. And it's always been, do you want to spend more money on exploration? Or do you want the road to come? Now we know the road is coming, we can spend more money on exploration.

I think the important thing is where the government has taken the stake is Ambler is a 50-50 joint venture between us and our TSX Company in Canada called Trilogy. We owned 11% of Trilogy. We've actually sold 5% of our shares to the U.S. government. They have sold 5% of their shares to the U.S. government. So they have 10% in Trilogy.

At the end of building the road, they increased their stake up again based on completion of the road. The money we both made out of the sale to the U.S. government goes to fund our exploration programs for the next couple of years. So for me, it's been a good example of a win-win scenario.

Thanks, John. Why don't we go Belinda to the telephones to see if you have any questions.

Just one question on this item. Thank you, Chair. From Mr. Stephen Mayne, when was the external audit contract last competitively tendered, and when will it next be competitively tendered?

Frank, when did we do the last tender?

We haven't done a tender as such, but we have done a detailed review of the audit relationship at the time of a changeover of the audit partner. So we have been through a pretty thorough process, I think, in terms of us verifying that we are very comfortable with the independence of the auditor. We've ensured that we get a fresh eyes look with the new partner coming in together with management that has changed over time. So we're very comfortable with the relationship as it stands. We do acknowledge that from a governance point of view, at some point, a tender will be appropriate, but it's not going to be driven by any necessity that we see at present.

Thanks, Frank. Thanks, Stephen, for your question. Anything else?

No further questions.

Okay. Then let's move to the next item of business, which is resolution 2A, which is for the election of Stephen Pearce as a director of the company.

Stephen was appointed to the Board on the first of February of this year and has served as a member of the Nomination and Governance, the remuneration and the risk and audit committees. And as I said earlier, Stephen has received the unanimous support of the Board to succeed me as Chair of South32 when I step down early next year, a decision which, as I said earlier, I'm very pleased in our role I know he will comfortably fill.

He's a highly experienced public company director, and his deep expertise in resources, finance and commercial matters and of course, his operational leadership is highly valued by the Board. We're delighted that Stephen has joined us, and I'd now like to ask him to address the meeting. Stephen?

Thank you very much, Karen, and good afternoon to everyone. Since joining the South32 Board in February, I've had the opportunity to get to know my fellow directors, meet many of our senior leaders and visit a number of our operations. I've also completed a thorough induction to both the Board and the company and I've actively met with members of management through Board programs and as part of my broader induction.

In addition to South32, I'm currently a Non-Executive Director of ASX-listed Ampol Limited and LSE listed BAE Systems plc. My previous executive roles have included Group Chief Financial Officer and Executive Director at Anglo American plc, group CFO and Executive Director at Fortescue Metals Group and CFO of Alinta Energy. I'm delighted to have been appointed to the South32 Board, and I hope to receive your support for my election today.

I'm also incredibly honored to have received the unanimous support of my fellow directors to assume the role of Chair when Karen steps down in February 2026. I look forward to building upon her outstanding legacy in that role in due course. I'll now hand back to the Chair.

Thanks, Stephen. Any questions on this resolution? Doesn't look like we have any in the room. Belinda, anything on the phone?

Just one question from Mr. Stephen Mayne. Congratulations to Stephen Pearce on being announced as our new Chair today, commencing in February next year. He's obviously a quick learner after only joining the Board in February this year. Was Steve recruited last February to be the next Chair or was it a competitive internal process? Today's ASX announcement mentioned a formal process to select Steve as a Chair? Was a search involved in the process? And did the process includes searching for external candidates? Did the formal process extend to presentations from multiple internal candidates and a formal internal vote of the Board? If so, did Chair, Karen would run that process herself? Could Steve please comment on his experience of the recruitment process that got him on to the Board in February and the recent Chair succession process that now seem sees him elevated to the top job?

Thanks, Stephen for your question. And I will cross to Stephen to allow him to comment, but let me just comment on the pieces relating to the process and the Board.

So we announced Stephen would join our Board back in December of last year. He didn't start until February, but we certainly made that announcement in December of 2024. And we had a process underway using a recruitment firm to try and identify people who might make suitable candidates for our Board.

I might say this is something that is ongoing. We don't sort of stop and start a process. We're constantly looking at what our combined skill set is, what some of our challenges are going forward, what skills we might need to replace as we methodically retire people off the Board, where we're doing our business, whether we need to enhance, for example, geographic representation. So that's a process that goes on all of the time in terms of bringing people on to the Board.

Now it wasn't a difficult decision for the Board to make to invite Stephen to join us. He's just had an outstanding career working in all the areas that are absolutely critical to us. I mean it's not just the 35 years, some of which has been in resources, also in other sectors that are absolutely critical to our business like energy, oil and gas, like utilities.

He's worked around the world in the places where we conduct our business. So as I say, that was an easy decision. But consistent with the way in which we've brought everybody on to the Board, we went through the process with external advisers each member of the Board had a significant opportunity to spend time with Stephen and then, of course, we made the decision to appoint him. Always, as chair when you're recruiting people to the Board, you're thinking about succession and you're thinking about succession to the Chair. So it's not true to that we brought Stephen on to the Board to take over the chair. But it is true to say that as we were having those conversations, my Board colleagues and I said, when the time comes, he looks like he would be a very good candidate. And that has proven to be, as we've worked with him over this time.

The process to replace me as chair was not conducted by me. It was conducted by Wayne Osborn. He stepped into the role as Chair of the Nomination and Governance Committee. I stood aside from that process, as you would expect, that is an appropriate way to handle the governance of a significant event of this kind. Stephen? Anything you want to add?

Yes. Thanks, Chair. From my point of view as the person coming in from outside, it was the normal complete professional process than I would have expected. As Karen said, I had a terrific opportunity to meet with each of the directors, each of the senior management team to make sure that it was a great fit from my point of view as well as from the company's point of view. So a very normal process in that space.

As you know, you only take on 1, 2 or 3 of these sort of roles at any point in time given the workloads involved. So you do choose carefully as a candidate coming in. And I suppose I was really attracted both because of the South32 business, but also because of the people and the values that I see in the organization and they resonated very strongly with me, and that was part of the reason why I said yes from my side. Thank you.

Thanks, Steve, and thanks, Steven, for your question. Belinda, anything else on the phone?

No further questions.

Okay. Could I now ask you then please to enter your vote on Resolution 2a?

[Voting]

I'm now going to move to Resolution 2b, which is for the election of Mandla Msimang as a director of the company. Mandla was appointed to the Board on the 1st of February this year and has served as a member of the Nomination and Governance, Risk and Audit and Sustainability Committees. Now I'm embarrassed to tell you had a typographical error in our notice of meeting, referencing Mandala's membership of the Remuneration Committee rather than the Risk and Audit Committee. So my apologies.

Mandla is a highly regarded executive and nonexecutive director, and her appointment brings valuable expertise in regulation, in public policy information and communications technology to our Board. It's a great pleasure to have Mandla join us. Mandla, would you like to address the meeting?

Thank you very much, Karen, and good afternoon to everyone. Since joining the South32 Board in February, I've had the opportunity, just like Stephen, to meeting, to engage meaningfully with my fellow directors to build relationships with senior leaders and to spend time on-site at several of our operations with our teams and with our communities.

My induction to both the Board and the broader company has been thorough and have connected with key members of management through the Board programs and throughout my induction.

In addition to South32, I am currently the Chief Executive Officer of Nozala Women Investments, a female-owned private equity firm. I'm also a nonexecutive director at JSE-listed Telkom South Africa Limited. And since the publication of the notice of meeting, I've resigned as a Nonexecutive Director of Exxaro Resources Limited. It's truly an honor to join the Board, and I look forward to your support as I stand for election today. Thank you, and I hand back to Karen.

Thanks, Mandla. It doesn't look like any questions in the room on this resolution.

No questions online. Thank you. Thank you.

Thanks, Belinda. So I can now ask you, if you would please to end your vote on resolution 2b.

[Voting]

Item 3 refers to the adoption of the remuneration report for the year ended 30 June 2025, about which, of course, I've already spoken. You can find a copy of that report on Pages 135 to 1.64 of the annual report.

Let me just make a few comments about the reward framework for the year. That framework remained unchanged.

In considering the 2025 financial year remuneration outcomes, the Board is satisfied that they reflect overall business performance, the contribution that executives have made and the shareholder experience. Short-term incentive outcomes for our executives are determined by the business scorecard, the business modifier and an assessment of individual performance. Our business scorecard is designed to focus and reward executives for the delivery of key priorities for South32 that are within their control. While we delivered strong performance on most metrics last year, our aggregated financial and major project delivery outcomes were below target. Overall, the business scorecard outcome for the 2025 year was 100.8%, out of a total of 150%.

Our short-term incentive plan provides the Board with the discretion to apply a business modifier to reflect factors that are not specifically contemplated in the scorecard. The Board reduced the business scorecard outcome this year by 20% for the chief executive to reflect the tragic loss of our colleague, about which we spoke earlier, José Luis Pérez at Cerro Matoso. Negative business modifiers were also applied to other members of the executive team. The Board awarded Graham an individual performance outcome of 120% and in recognition of his strong personal leadership in delivering critical business and transformation initiatives during the financial year. As a result, Graham received a short-term incentive outcome of 65% of the maximum available under the plan.

As I mentioned earlier, this year was the first time we assessed performance against the 2 strategic measures in the long-term incentive plan that were both introduced in 2022 portfolio management and our response to climate change. The Board determined a total outcome of 15%, 8% for portfolio management and 7% for climate change. The remaining 80% was forfeited as the company did not meet the total shareholder return hurdle despite delivering a TSR of 19.6% for the full year performance period.

Let me now go to questions on this resolution. Belinda.

There's one question online from Mr. Stephen Mayne. Thank you for the change of practice this year to disclosing the proxy position early to the ASX along with the formal addresses. This allows for a more fully informed debate about the 32.5% remuneration strike. Thank you also to the Chair for his summary of the remuneration issues. Could she please name the 3 proxy advisers, which recommended against? And were there any proxy advisers, which recommended in favor of the report? Also, how many proxy advisers recommended against the Board's recommendation on the other remuneration issues, items and the climate transition plan, which was opposed by the 9.6% of voted proxies?

Thanks, Stephen, for your question. And look, I agree. I actually think it isn't an enhancement release the proxy results first. So we appreciate that suggestion on your part, and we're very pleased to do it.

Look, the 4 proxy advisers, there are others internationally, but the 4 main proxy advisers, if I set aside the Australian Shareholders' Association. And John already spoke about that earlier, having supported all of the resolutions. So institutional shareholder services, ownership matters and [indiscernible], so the Australian Council of Superannuation Investors, all were critical of aspects of the remuneration report. And as I said earlier, the criticisms deferred from proxy adviser to adviser, some related, particularly ISS related to the way in which we structured and reported short-term incentives and the way in which we included the 2 strategic measures in the long-term incentive plan. They were not criticisms from the other 2 proxy advisers, ownership matters and [indiscernible]. But all 3 raised an issue with the decision we took to increase grams remuneration for this current financial year.

I think it's best I can understand the concern about that. It was that he was leaving sometime late next year. So why would we increase his pay.

What has been helpful is that I, with my Board colleague, Wayne Osborn, Chair of the Remuneration Committee, had a lot of opportunity to talk not only to proxy advisers, but also more perhaps more importantly, to shareholders about that decision. And when we were able to explain that Graham is actually in the job doing this job for the whole of the financial year and beyond and how important that piece of the transition plan is. So I think a great many of our shareholders recognize that as key to the overall succession plan.

CGI Glass Lewis recommended a vote in favor. So not all of the proxy advisers recommended a vote against. I think I've picked up all of the elements of that question. But Stephen, if you're still online and I've missed anything, let me know.

[indiscernible].

Thanks, Wayne. Yes, thank you for that reminder. The ISS proxy advice was also against the grant of awards to Graham and to Matt's awards. No?

No, Graham's, I think.

Just Graham's. I'm sorry. You're right. It's just a gray, Apologies.

No further online questions.

Thanks, Belinda. Nothing in the room. And could I ask you to end your vote, please, on Resolution 3.

[Voting]

There are voting restrictions attached to this resolution. And of course, they're set out in the notice. I now will move to resolution 4. The purpose of which is to seek shareholder approval for the proposed grant of rights to our Chief Executive Officer.

The rights relate to the deferred equity component of Graham's short-term incentive award for the 2025 financial year and the long-term incentive for the '26 financial year. 80% of the long-term incentive will continue to be assessed using relative total shareholder return over a 4-year performance period.

As an outcome of a recent review of our executive reward framework, one of the total shareholder return comparator groups, the Morgan Stanley Capital International World Index, will be replaced from the 26th financial year by the ASX 100 constituent group. We made that change to be consistent with peer companies. There's no change to the other total shareholder return comparator group, which will remain as the constituents of the S&P Global Mining Index.

The 2 strategic measures will continue to each account for 10% of the award. And again, these measures will be assessed by the Board at the conclusion of the full year performance period, which ends in June 2029.

Further information on the measures and how performance is assessed is set out in the notice. So let me go to any questions on this item.

No online questions. Okay.

Thanks, Belinda. Nothing online and nothing in the room. So I can ask you, if I may, please, to end your vote on resolution 4 And again, there are voting restrictions attached to this resolution, which is set after the notice.

[Voting]

I'll now move to Resolution #5. The purpose of this resolution is to seek shareholder approval for the proposed grant of rights to our incoming Deputy CEO, Matt Daley. As I mentioned earlier, Matt will join South32 as Deputy CEO at the beginning of February, and we'll transition to the CEO role late next year.

The Board is seeking shareholder approval to grant Matt equity awards as part of his commencement benefits. These benefits are being offered, as I indicated earlier, as partial compensation for benefits he forfeited when he ceased his previous employment. The awards also provide alignment of Matt's long-term interests with those of shareholders. Almost half of the equity is being granted under South32's long-term incentive plan and further information about how that plan works is set out in the notice.

The Board considers the quantum and the terms of the proposed awards to be appropriate to attract and retain an executive of Matt's caliber. Can I now go to please any questions on this item of business. Nothing in the room. Belinda?

No questions online.

Thanks, Belinda. I'll now ask you, if you would please to end your vote on Resolution 5. and move to resolution 6.

[Voting]

This is the nonbinding advisory vote on South32's climate change action plan. which is available, of course, on the company's website. Our Climate Change Action Plan for this year does build on the foundation of our inaugural plan, which we put to you in 2022 with the strong support of shareholders, addressing the risks and opportunities presented by climate change has been central to our strategy since formation. In this updated plan, we reaffirm our commitment to climate action and outline the steps we are taking to continue to position our portfolio for the future to reduce greenhouse gas emissions and strengthen resilience to physical climate impacts.

Over the past decade, we've transformed our business to focus on the production of minerals and metals critical to the world's energy transition. By bringing copper into our portfolio, expanding our aluminum production capacity and progressing development of Hermosa, we have increased our exposure to attractive base metals. We continue to work towards our target to halve our net operational emissions by FY '35 from FY '21 levels and our goal to achieve net zero by 2050.

Our immediate focus remains on Hillside Aluminum where we are pursuing a comprehensive and affordable energy solution. At Worsley Alumina, our focus is on fuel switching, as we talked about earlier, and steam electrification initiatives.

Our portfolio transformation has significantly lowered our Scope 3 emissions. Nevertheless, we remain committed to engaging with our suppliers customers and other stakeholders to identify and pursue collaborative solutions to shared decarbonization challenges.

We recognize that intensifying climate variability and extreme weather will continue to affect our business. To address the challenges, we're implementing a climate adoption and resilience plan, which focuses on strengthening present-day resilience while preparing for future climate impacts. Since releasing our inaugural plan, we've deepened our understanding of the commercial, the technical and the policy challenges that constrain progress on climate action. We recognize that alongside strong governance and effective risk management, multi-stakeholder collaboration led by governments worldwide will be critical to achieving a just transition for people and for communities.

The purpose of this resolution is to provide shareholders with an opportunity to discuss and provide feedback on our approach to climate change. As I said, this resolution is advisory only and does not bind the directors of the company. However, as you would expect, the Board will take into account any shareholder feedback when considering its future approach to climate change. Can I now ask if there are any questions, please, on this resolution?

Chair, may I introduce Alex?

Hello, Alex, welcome.

Hello, thank you. In 2022, the intergovernmental panel on climate change identified the Northern [indiscernible] forest as one of a handful of Australian ecosystems at risk of collapse due to climate change. However, they noted that this risk could be substantially reduced by rapid, large-scale and effective mitigation and adoption to avoid and reduce forest degradation. The most immediate and [indiscernible] immediate [indiscernible] in line with this is to halt further clearing of native forests in the Northern [indiscernible] forest. Despite this, under ministerial statement 137, you recently received approval for the WA government to destroy a further 3,855 hectares of critical number and black cockatoo habitat for your Worsley Alumina operations in the Northern Jarrah Forest, which is in addition to the 13,663 hectares of previously approved extended mining area, totaling 6,019 hectares. The clearing of mature native vegetation, as part of this represents a permanent loss of carbon storage capacity, increasing the likelihood that the Northern Jarrah Forest will transition from a net carbon zinc to a net carbon source.

Rehabilitation is a critical component of your mitigation and offset strategies, yet your 2025 Climate Change Action Plan only references rehabilitation once. Your Climate Change Action Plan also states, we are committed to providing clear and meaningful disclosures and transparently reporting our sustainability performance, including in relation to how we are addressing climate change. Additionally, under the conditions of ministerial statement 1237, you are required to produce under condition B14-2, a rehabilitation performance report by December 20, 2025, and condition B14-3, and annual rehabilitation plan by September 30, 2025, and under condition D2-2, an annual compliance assessment report by the 20th of March 2026. Given your commitment to transparent reporting, a lack of clarity in actionable outcomes in your Climate Change Action Plan and the conditions of your Worsley Mine expansion on condition B14-2, has the rehabilitation performance report being submitted? And if not, when do you intend to do so? And will the report be made publicly available?

Thanks for the question. And again, I just want to preface my comments, and I'll ask Graham to comment on this also with the comment I made earlier. We do understand and we respect that there are different views about how this work has progressed in the Southwest of Western Australia. So I don't, for a moment, ride over the concerns that you have, and it's why we have taken such a long time to make sure that the permitting process we've been through is one that is consistent with the 40 years of operation that we've had there that we think is a very responsible operation.

I mentioned earlier our obligation to progressively rehabilitate the site. I mentioned earlier about the protected areas in the buffer zones. that we've put in place. I talked about the reservation of the 8,000 hectares that came through that approval process. So we do feel very confident about the work we do, and we stand by our record on that. We've been down as Board directors and looked at the work that's gone on and feel very confident that the team on the ground there and beyond have the sort of objectives that you're talking about, which is obviously to minimize damage up almost in their mind as they go about their work.

On the lodgement of that plant, I don't know the answer to it.

On the top of my head, but we can get someone very quickly out of this to do it. But obviously, we operate in line with the improved environmental plans, flora and fauna, consultation and also construction environmental management plan. Since 1984, we rehabbed about 4,039 hectares. A lot of the areas we're now mining in a new area are actually recycled forest as well, but we can have someone go through some of the detail, if you like, at the break. We also do offer regular tools down there for people to have a look at some of the rehabilitation we do.

Okay. That would be great to get the details on when that report will be ready. The next question is on condition D2-2, are you working towards a deadline of the 20th of March 2026, for the annual compliance assessment report? And will it be made publicly available? In the spirit of transparency since the issuing of ministerial statement 1237, has there been any reported noncompliance?

I can't imagine we're not working towards a deadline. But again, I don't know the specific answer to that. You probably don't.

I have, again, more follow-up, but I've just had confirmation from one of our people not here that we have submitted our report in line with the deadlines that you asked, and we'll continue to do that.

And will those be made publicly available?

I have to understand what we can and can't do by the actual license, but we'll get back to you on that one as well.

I just one more question on that.

No problem. So if you're committed to being transparent about your reporting, why wouldn't you be making these reports publicly available?

Again, we have to work with the regulator about what they want as well at the same time.

Okay. Great. I do have one more question. That's a in more than one more. We've had reports that the Department of Water and Environmental regulation are currently investigating reports of bores going dry, water mounting and dying eucalyptus from farming properties surrounding your saddle-back mine. This would be a breach of ministerial Statement 1237 condition B16 in land waters. Will there be compensation for surrounding farmers who are now unable to operate their farming business because of water impacts from the Mount Saddleback Mine?

Yes. Look, again, I can't give you that detail. I haven't seen any of those come through to my desk, but I do know we engage directly with all our local stakeholders, including the farmers. And we do have well monitoring in place across all the business. I haven't heard of anything along those lines, but we'll follow that up for you and I can circle back.

Okay. So if DR are investigating, is that not something that would be made aware to you?

Not that I'm aware of that is occurring, no.

Thank sitting next to you is [indiscernible]. She might not be the person who can give you all the answers, but she'll tell you who can in the break. Pleasure. Any other questions on this resolution from the room? Belinda.

Thank you, Chair. We have a question from Jane Barlow. Our company alongside approximately 200 others is required to reduce its emissions of CO2 by 5% each year, 30% by 2030. Could you inform us of the additional cost this year and last year of this in terms of both, one, internal reductions of emissions over and above those that predate the Safeguard Initiative; and two, purchases from third parties on emission credits? Could you indicate what estimates you have made for these extra costs over the next 2 years?

I think I'm going to ask Graham if he's got some contribution he can make in terms of cost. But it is important to recognize that our approach to addressing the climate change is integrated with our strategy. I'm often asked how much money are you spending on emissions reduction? And I say our capital spend is going into executing the strategy operation by operation. So for example, at Hillside, any work we're doing in trying to reduce the emissions from that asset, and I indicated earlier, it's a very significant one for us because it accounts for 58% of our Scope 1 and 2 emissions, is all designed to reduce emissions that there is a market for the aluminum that comes from that operation. In other words, that we can continue to export that aluminum to countries who have concerns about emissions and who put an impost on importation of the product where emissions haven't been reduced. So it's economic sense for us to do the work we're doing.

We don't think about this as a cost that doesn't flow through to the profitability of our commodities and therefore, our company. Graham, anything you wanted to add to that?

Yes. I mean, to your point, Karen, the, if you think about the 3 biggest contributors for us, they'll be the aluminum smelters, if Mozal's not running on hydro, and then it's Worsley. And obviously, it's power long-term contracts that drives the smelters. We're currently trying to renegotiate an extension of a hydro contract for Mozal, and we've committed to beyond 2031, and we're working closely with Eskom and the South African government to sort of make our smelter there. more green and rely on renewables. So they're more medium to long term, well, mostly else more present, but he sides more of a medium to long-term action, but there's lots of work going on.

But Worsley, probably the big capital spend will be around the 2 boilers that we've done. The boilers is 5 in total. They're slightly different in configuration, but you're probably talking about a CapEx number of USD 20 million to USD 30 million, each over time to basically convert those. Each one is worth about a 5% reduction. That's where the capital would be for us, Karen.

Thanks, Graham.

And in terms of the other piece, what have we purchased or it's minimal around $3 million.

Thank you.

One final question from Mr. Stephen Mayne. The annual report says that we have 230,908 shareholders, but less than 2% of them will have voted today, including on this important climate transition plan resolution. Politicians wouldn't tolerate a 98% no show in elections. So why do we? One way of tackling chronically low retail shareholder voting rates is to disclose how many shareholders actually voted for and against each item of business like with a scheme of arrangement at core ARB and Stockland all did this for the first time at their AGMs this month. joining the lights of ASX, Qantas, Myer, Suncorp, Tabcorp and many others. It's very well to reveal that only 9.96% of directed proxies opposed the climate transition plan, but it would be useful to see where retail shareholders sit on this issue by disclosing how many shareholders voted for and against. If you don't disclose this data, many of us, small shareholders, will give up and stop voting. Also, thanks for voluntarily offering this climate vote, and will you do it again next year.

Thanks, Stephen. We talked about the earlier part of your question last year, and I know I said at the time that we would certainly look at it. We have looked at it. We haven't done it this year. We made the decision not to do that, not because we don't obviously respect important role that retail shareholders play in our company. It's a very important role, and we have many of them in the room with us today. And for that, I thank them.

I mean, John, from the Australian Shareholders' Association spoke earlier, about our numerous engagements. That is a very important part of the way in which we communicate with that group. And I suspect that John tries to encourage his members to exercise their voting rights. And certainly, we do that when we're having those sorts of conversations.

Look, the Climate Change Action Plan, we have committed to update us every 3 years. We think that's important so that we can just share with our shareholders the progress that we've made and outlined any challenges that emerge over that period of time.

We haven't taken a decision yet on whether we will put that to shareholders for a vote. But obviously, that will be a decision that's taken closer to the time. So thank you again.

No further online questions. Thank you.

Thanks, Belinda. Could I ask you then to please to end your vote on Resolution #6?

[Voting]

We've now considered all of the items of business, but before I close the meeting, I did just want to give another opportunity for shareholders to ask any other question if they would like. Belinda, anything from your end?

Nothing further questions.

Thank you. Nothing in the room either. Look, if you haven't already done so, would you please complete your voting cards and place them in one of the ballot boxes being passed around or into your votes online.

[Voting]

The poll will close in 10 minutes. The results of the poll will be released to the stock exchanges and of course, published on the company's website as soon as possible.

That brings us to the end of our Annual General Meeting. And on behalf of the Board and all of us, at South32, I do want to thank you, shareholders and guests for joining us and look forward to your continued support in the coming year, particularly that support under Stephen's chairmanship.

On a personal note, and as I step away from the Chair, I do so with immense pride in what we've achieved together, including with our shareholders and with deep gratitude for the trust you've placed in me.

I thank my Board colleagues, the leadership team and everyone at South32, all of our stakeholders for the privilege of serving as Chair of South32. It's been the greatest honor.

I'd now like to invite those shareholders who are with us in the room to join us for some refreshments. Subject to the finalization of the poll, I now declare the meeting closed. Thank you.

Hello, everyone. Today's presentation has been released to the Australian Stock Exchange and is available on our website. This webcast is being recorded and will be available on our website after the event. Our Climate Change Action Plan will be subject to a nonbinding advisory shareholder vote at our AGM in October, and we look forward to the opportunity for questions following today's presentation.

Before we get underway, I draw your attention to the important notices on Slide 2. I'd now like to hand over to Graham Kerr, Chief Executive Officer.

Thanks, Susie. Hello, everyone. Welcome to today's presentation on our second Climate Change Action Plan, or CCAP. Before we begin, I'd like to acknowledge and pay our respects to the indigenous, traditional and tribal peoples of the lands, waters and territories on which South32 is located and where we conduct our business around the world. Thanks for joining us and for your continued support of South32. I'm joined today by Kelly O'Rourke, Chief Legal, External Affairs and Sustainability Officer; and David Clift, Vice President, Sustainability.

Today, we will highlight the progress we have made since we released our first CCAP in 2022, what we've learned since then and how we're incorporating these lessons into our response to our climate risks and opportunities. Climate change is fundamentally reshaping our industry from the commodities we produce to how we produce them. While the energy transition brings opportunities for us through increased demand for critical minerals and metals, it also brings risks given the energy intensity of metal processing and that in many cases, the technologies we need to reduce our hard-to-abate emissions don't yet exist. It also brings risks -- sorry, the geopolitical landscape for climate action is also changing. And with that, the energy transition is becoming more disorderly from a more globally coordinated and urgent call to action on climate change 3 years ago to increasingly fragmented global perspectives, which increases uncertainty.

At South32, we're concentrating on what we can control and have matured our approach to climate change to focus on positioning our portfolio for the energy transition, reducing our operational emissions to mitigate transition risk and protect value, supporting emissions reduction across our value chain and strengthening our resilience to climate impacts. Sustainability has been central to the development of our strategy since day 1, which together with our purpose has underpinned the development of our CCAP. We recognize as a global mining and metals company that we have a crucial role to play in responding to climate change by producing minerals and metals critical to the world's energy transition and responding to climate-related risks and opportunities in a way that protects and creates value in the near and long term.

We have maintained a strong focus on climate change since our formation. In FY '16, we committed to supporting the goals of the Paris Agreement. In FY '21, we set a target to half our net operational emissions by FY '35. We also set a goal to achieve net zero operational emissions by 2050 and expanded this in FY '23 to include Scope 3 emissions. We evaluated options for establishing a short-term operational emissions reduction target, but because decarbonizing Hillside Aluminum and Worsley Alumina is both technically and commercially complex, we were not confident we would achieve sufficiently material emissions reduction within the time frame of a credible short-term target.

Throughout this briefing, Kelly and I will cover what we've done to address climate change since our last CCAP.

Turning to our portfolio. Over the past 10 years, we have repositioned our portfolio towards the commodities critical to the world's energy transition. When we were established in 2015, less than 50% of underlying revenue came from our aluminum value chain and base metals compared to approximately 90% today. By adding copper to our portfolio and growing our aluminum production capacity, we have increased our exposure to base metals. More recently, we have commenced development of the Taylor deposit of the Hermosa project, which is expected to deliver attractive returns for decades to come by producing zinc, lead and silver, 2 of which are federally designated critical minerals. We have future growth options at the Sierra Gorda copper mine in Chile and Hermosa's Clark battery-grade manganese deposit, and we are actively exploring for the next generation of base metals mines.

We've also focused on reducing complexity by exiting capital-intensive and lower-returning businesses, including the sale of Illawarra Metallurgical Coal, where we've unlocked capital to invest in base metals growth. At the same time, we're thinking about how we can sustainably develop new mines. Our Hermosa project in Arizona has been designed using low-carbon design principles. We are preparing for fleet electrification and we're actively engaging with utilities and independent power producers to evaluate renewable energy and firming solutions. We will look to apply these design principles as we advance our pipeline of base metals development options and exploration projects. We stress test our business model and value chain through scenario analysis to understand our transition-related risks and opportunities.

This year, we've tested 2 scenarios, a sector-specific 1.5-degree scenario and a 2.8-degree scenario. Analysis of our portfolio's resilience under both scenarios indicates that GDP growth and the energy transition are likely to drive demand growth for all our commodities under both scenarios, except for lead. Aluminum's ability to conduct electricity and durability makes it useful for renewable energy infrastructure. It is also increasingly being used in EVs to enhance fuel efficiency and reduce weight. Base metals, including copper and zinc, are expected to benefit from the rapid rollout of EVs and the deployment of renewable energy. With zinc, demand is expected to grow due to its role in galvanizing steel, which makes it useful for renewable energy infrastructure and climate resilient construction.

With the depletion of last projects and a lack of new discoveries, zinc supply growth is expected to be limited, which we see supporting higher prices and its limited ability to be recycled given the intensity of the process means demand growth is expected to exceed supply in years to come. On the back of our portfolio improvements, today, we're directing 100% of our capital expenditure to transition metals as we invest in our high-quality operations and growth options in base metals, our aluminum value chain and manganese and increase our exposure to high-returning businesses producing critical minerals in structurally attractive markets, which is expected to deliver enduring value for shareholders.

Our capital management framework prioritizes safe and reliable operations and an investment-grade credit rating through the cycle. We then distribute a minimum 40% of underlying earnings as ordinary dividends. Following this, our remaining options compete for excess capital. This includes investing in our business, decarbonization projects, acquisitions, exploration and capital management. We have allocated excess capital to portfolio improvements, including the acquisition of our interest in Sierra Gorda and the acquisition and development of Hermosa's Taylor zinc lead silver project.

I'll now hand over to Kelly to talk about the work we're doing to reduce our emissions and strengthen our resilience to the impacts of climate change.

Thanks, Graham. Hi, everyone. I'll start by talking to our operational emissions, of which more than 90% come from our aluminum value chain. More than half of this comes from Hillside, where we predominantly source coal-fired power from Eskom, South Africa's national electricity provider. Mozal Aluminum is largely powered by hydro from the Cahora Bassa Dam. However, this year, drought conditions in the Mozambique Basin have impacted hydro availability, requiring additional backup power from Eskom, which has increased our operational emissions. At Worsley Alumina, our operational emissions come from the use of coal and gas to produce steam and electricity, which I'll talk to in more detail shortly.

CCAP outlines our preferred pathway to achieving our FY '35 emissions reduction target. You'll see that while we have and continue to study and invest in decarbonization projects, achieving our FY '35 target depends on securing a low-carbon, affordable energy solution at Hillside and continued fuel switching at Worsley with limited use of offsetting. If we take a closer look at Hillside, it accounts for just under 60% of our operational emissions. We've invested in AP3XLE energy efficiency technology with over 50% of pots having been relined, delivering improvements in emissions intensity. However, our focus is on Scope 2. As I noted earlier, almost 90% of Hillside's operational emissions come from the use of coal-fired power supplied by Eskom.

To meet our target and protect Hillside's future market competitiveness, we need to find a long-term affordable low-carbon energy solution. This is a complex challenge because of Hillside's large continuous electricity baseload demand, the high cost associated with firming and the substantial upgrades that are required to South Africa's electricity network to support large volumes of renewable connections to the grid. We need a solution that preserves value and maintains access to key markets like Europe, particularly given carbon prices are currently expected on aluminum imports into the EU from FY '26. Hillside is also important for South Africa more broadly as it's an integral part of the Eskom grid, providing stability to the network. As the largest aluminum smelter in the Southern Hemisphere, it makes a significant contribution to the economy, supporting the local automotive industry, which also exports to Europe.

Clearly Hillside's future is a shared challenge that requires a multi-stakeholder solution, and we continue to work with the South African government and Eskom. There is goodwill on all sides, and we are aligned in our ambition to find a solution, and we have time. Now if I can turn to Worsley, its higher-quality bauxite places it in the first quartile of emissions intensity for alumina, and it accounts for around 16% of our operational emissions. Conversion of the first 2 boilers from coal to gas has contributed to a 12% reduction in FY '25 Scope 1 emissions relative to an FY '21 baseline. Most of these emissions come from burning coal and gas to produce high-pressure steam that's used in the Bayer process.

As part of our decarbonization efforts, we are studying steam electrification and recently secured a AUD 4.4 million grant from the government, an amount we are matching. Our preferred pathway to achieve our target includes further coal-to-gas boiler conversions to continue to lower operational emissions and maintain energy security while we work on a longer-term transition to electrification. Decarbonizing Worsley depends on the development of an affordable pathway to electrify steam production, technology to enable low-carbon calcination and investment in the broader electricity network and renewable generation infrastructure. Progress will also depend on the availability and affordability of domestic gas, carbon pricing, supportive government policies and market conditions and adjust transition planning for Collie.

Like Hillside, this is a multi-stakeholder effort, and we continue to work with the state utility provider, industry and other stakeholders to find ways to expand renewable power transmission capacity to the refinery. If I turn now to our Scope 3 emissions. As we have transformed our portfolio, we have reduced transition risk and contributed to lowering our Scope 3 emissions by around 80% since FY '19. In FY '25, our Scope 3 emissions were 58% lower than FY '24 levels. This was largely due to the sale of Illawarra Metallurgical Coal in August 2024 and improvements in the tracking of alumina and manganese sales together with updated emission factors. Our goal to achieve net zero Scope 3 emissions by 2050 recognizes our responsibility to contribute to the reduction of value chain emissions. For us, these emissions are predominantly concentrated in the processing of products we sell in our aluminum value chain.

Over the past 3 years, we've learned that pursuing emissions reduction partnerships with suppliers and customers who are in different stages of decarbonization planning is challenging. In light of this, we have evolved our approach by setting 2 measurable objectives to engage with 80% of our key upstream suppliers and downstream customers with a focus on aligning decarbonization goals, improving climate-related data and knowledge sharing and identifying opportunities for collaboration to reduce emissions.

Now to our resilience to climate impact. We started looking at the physical impacts of climate change early, publishing our first physical resilience analysis in FY '18. Over the past 3 years, we have built physical climate risks into our business risk management processes and moved from understanding physical climate risks to strengthening our capabilities in adaption and climate resilience. We are implementing a 3-year climate adaption and resilience plan to improve our present day resilience, strengthen capabilities for the future and continuously improve physical climate risk management. On present day, we are working with operational teams to improve the information tools they use in decision-making related to extreme weather and climate and feed what we learn into our insurance program. For future resilience, we will update our processes and upskill our planners, engineers and operational leaders to factor climate risks into daily decisions.

We are also taking action to help our communities understand their physical climate change vulnerabilities, which can support more effective planning. And finally, before I hand back to Graham, in our first CCAP, we published our just transition guiding principles to support our decarbonization planning. The application of these is most relevant at Hillside and Worsley. Our focus is to further embed these principles into our sustainability governance documents, deliver on our social investment plans, which include investments in community climate resilience and implement the community-related components of our climate adaption and resilience plan, recognizing that the best outcome is to navigate this transition so that these operations and their surrounding communities can continue to prosper in a low-carbon future.

Thanks, Kelly. In conclusion, addressing the risks and opportunities of climate change has been central to our strategy since day 1. We're focused on repositioning our portfolio to critical transition minerals and metals, which has lowered our transition risk. We're investing to grow our base metals production in structurally attractive markets. We're advancing low-carbon solutions through multi-stakeholder collaboration while continuing to strengthen our resilience to physical climate impacts. As we look ahead, we're committed to transparently reporting on our progress and working with stakeholders to address the challenges and opportunities presented by climate change.

Thank you for your time. We're now open for questions.

[Operator Instructions]

First written question comes from [ Akaash Sachdeva ] from [indiscernible] Akaash's question is, the 2025 CCAP considers the lessons South32 has learned in the past 3 years. Based on what you have learned, what can we expect in the next period that will be different from what you've done so far? What does South32 need to do more or less of in the next 5 years to hit its targets?

Thanks, Akaash. I'll probably pass that one across to Kelly.

Sure. Thanks, Akaash. I think it's probably important to highlight that our approach from our first CCAP is broadly continuing. That is we continue to focus on the evolution of our portfolio to position it for the commodities needed in the energy transition, which also reduces our transition risk. We're going to continue our decarbonization efforts at Worsley through fuel switching from coal to gas as an interim step. As I mentioned before, we've done 2 boilers and have reduced emissions as a result. And we're looking at the -- we're studying the other 3 with the intent to move towards electrification long term, which, as I mentioned in our opening remarks, we're studying alongside an grant from ARENA.

We will continue to pursue low-carbon energy and implement energy efficiency technology at Hillside. I think what's probably different or what we need to do more of is we've become a lot clearer on the importance of multi-stakeholder collaboration, and we're very focused on working with Eskom and the South African government to secure low carbon power for Hillside. And as I said, beyond the boiler conversions, the approach for Worsley is really to study steam electrification, which we're doing with ARENA, and that will guide our next steps.

I will now hand over to the operator for any verbal questions.

[Operator Instructions]

We're showing no audio questions. I'll hand back to Susie.

The next written question we have is from Michaela Jamison from Jarden Group. Michaela's question is, given that Hillside represents 60% of South32's operational emissions and the CCAP explicitly states South32 may need to reevaluate Hillside Aluminum's ongoing market competitiveness and strategic alignment if affordable low-carbon electricity isn't secured by 2031, what specific milestones and decision gates has South32 established between now and then? How is South32 balancing the significant social impacts of 2,500 direct jobs and 29,000 indirect jobs with decarbonization imperatives?

Yes. Look, I'll take that one. Thanks, Susie and Michaela. Look, I think it's a great question. If you think about the context of Hillside, a couple of points just to sort of pull out there. As pointed out in the question, it is a very large employer of people in that part of the region directly. It probably contributes close to over 2,500 direct jobs and roughly around 30,000 indirect jobs. But also on top of that, we sell about 30% of our product downstream for further manufacturing of parts, predominantly going to the auto industry. So that's a very big part of KZN the province in an area that is largely impoverished and high levels of unemployment. So we're very conscious as we think about that operation and how we run it. Today, we have a power contract out to 2031. And clearly, we've made a commitment to half our operational emissions by 2035, of which Hillside is 60%. So without a doubt, our single largest contributor to our emissions -- operational emissions.

Look, in regards to the question of specific milestones and decision gates, it's important to recognize that there are 2 elements at play here with our impact -- which impact our business in different ways. The first is affordable electricity and the second is around low emissions electricity. It's important that we secure affordable electricity to ensure that the operation can continue, and we have been working through a variety of different scenarios on that. And it's a combination of economics and politics and our operation milestones are really driven by the timing of the current contract and our engagement regime that we have with Eskom and the government of South Africa. But also having a low carbon solution is about strategic fit.

So while the solutions require a longer lead time, the decision points for us are also more flexible. If we get towards the end of our current agreement, which expires in 2031 and have secured an affordable secure electricity supply that isn't green, that doesn't necessarily trigger closure, but it will trigger a review of the strategic fit within our business, which we have had time to execute. It gives us an opportunity to think about our commitment if we decided to divest it, but it will also trigger a rebaselining if we made that decision. But I think, again, I'll come back to the important point I made at the start.

There is a real balance here of considering the social impacts versus the decarb objectives. And for us, it's a lot about obviously our people and the community impacts. And for me, getting that balance right of affordable, reliable electricity that is low carbon is important for Hillside to continue to prosper and grow because that smelter could run for another 50-plus years. So just to sort of summarize in my decision -- in our decision-making, it isn't really about tension between decarbon community.

A second question -- written question is, while the CCAP provides detailed operational physical climate risk mapping, there's limited discussion of financial implications. Given the significant increases in extreme events projected for several operations, what is the estimated financial exposure from physical climate risks? And how is this being incorporated into asset valuations and closure cost estimates?

David, do you want to take that one?

Yes. Thanks, Graham, and thanks, Michaela, for the question. So whilst we don't yet need to disclose the financial implications of climate change with AASB S2 requirements only commencing for our next reporting period, we will be uplifting our disclosures on this going forward, and this is a focus for FY '26. Importantly, we're not starting from scratch. So we have data available, which we're already using to assess the physical risk of climate change and our insurers also provide an independent view of their assessment of this risk as well as assessing the effectiveness of our controls. So we already account for physical risks in our climate closure estimates, and these assessments will continue to mature as we progress these studies.

In terms of how we assess the financial implication, we focus on those risks which are most material, which we analyze through the lens of the hazard and our vulnerability to it. Further details on how we assess physical risks are outlined in our climate-related risk methodology, which we published as part of our annual reporting suite.

Next written question we have is from [ Patrick Vertu ] from The New South Wales Treasury Corporation. What internal or external signals would prompt South32 to adjust its climate strategy? For example, accelerating decarbonization, revisiting capital allocation or escalating engagement with governments or suppliers?

Yes. Look, thanks for that question. And look, from our perspective, obviously, the world continues to change and evolve. As we mentioned, since the demerger, we've had a big focus of actually rebalancing our portfolio to the minerals and metals that we think are critical to that low-carbon future. And that adds 2 elements as we think the zinc, silver, copper, aluminum are all very attractive as the world continues that energy and decarbonization transformation. Particularly in those elements, the Scope 1 and Scope 2 emissions or operational emissions are much smaller than what we've historically seen in refining and smelting of aluminum. So the first thing for us is to continue to move our portfolio in that direction.

I think the second thing is we're going to have to continue to engage heavily both in Worsley and the Southwest of WA and in South Africa with Hillside with the governments as they both work towards the energy transformation, moving away from predominantly coal-fired, maybe gas is an intermediate product, but finally, what does it look like for an energy solution. In the Southwest of WA, while it's not Hillside, there are large community issues and there's a codependency on the coal generation at the moment that is used to power the West Australian grid. And obviously, as I mentioned earlier with Hillside, there's a function of managing the community employment expectations and working closely with Eskom about how they continue to push towards renewables on their network and the allocation of those renewables. So I think we have plenty of opportunities to manage these, but it's about close engagement with our communities, but also the various government stakeholders.

We have a follow-up question from Patrick Vertu from New South Wales Treasury Corporation. South32's first major decarbonization milestone is FY '35, but there is no quantified breakdown of how specific levers will contribute to the target. Given the uncertainty of the decarbonization of Hillside, Mozal and Worsley, how should investors measure the credibility of the decarbonization road map?

Look, it's an interesting one to sort of point out. I think the advantages we have is we don't have to spend a lot of capital in the short term, which comes with its own set of risks of execution. We also have time before 2035 to actually hit those targets. The key milestones I'd be looking at is, for example, for Mozal, can we secure another contract that is predominantly hydro driven that takes the smelter beyond 2030. And we'll probably know that in the next 6 to 9 months. The one for Hillside is a longer-term action plan. I would look at 2031 as the next key milestone when we sign the next power agreement to take us forward. But don't underestimate the team has been doing a lot of work with Eskom around things like nuclear options, but more importantly, lots of studies on renewable and how we could use solar and wind, in particular, with the combination of firming from Eskom to sort of give from Eskom to Hillside that renewable power source.

And for us at Worsley, we've already made progress. I mean our major progress -- major element of carbon footprint there is around the boilers. We have 5 boilers that basically we use to generate steam. Of those 5, we've already converted 2 from coal to gas. And then we've already got options to convert the other 3 as we work with the government around transitioning out of coal, but more importantly, doing some work about what does the future electrification look like so we can move away from actual gas as well. So I think they are the milestones I think about.

Next written question we have is from Kendall Fraser from AustralianSuper. Could you explain why the CapEx on decarb for FY '25 was significantly lower than that of FY '23 and FY '24? What is the outlook for this in FY '26? And how is this level determined?

Look, maybe I'll get -- David can talk about some of the specifics of the spend at the moment, but I'd start by talking about, again, if you think about where the majority of our challenges are, 60% is basically in Hillside, then the next biggest piece is actually at Worsley. It's more about how do we convert those long-term power sources to more renewable sources. We are doing some work, for example, at Hillside, we spent money on energy efficiency by using what's called AP3XLE technology. We haven't quite finished that, and we're probably about 3/4 of the way through. And obviously, at Worsley, we've already converted 2 of those coal-fired boilers actually across the gas. But maybe, David, you can talk about specifics of dollars.

Yes. So certainly, in FY '25, we invested $11 million in capital expenditure but across the period of the last climate change action plan. So FY '23, '24 and '25, we invested $71 million. I think the key point that you've made, Graham, is in the short to medium term, most of our decarbonization focus is on Scope 2, which we're not pursuing to do that through our balance sheet, but rather through commercial agreements.

The next written question we have is from Mark [indiscernible] from the Public Investment Corporation. What specific infrastructure upgrades or resilience measures in South32 planning -- is South32 planning or implementing across its operations to address increased risks directly or indirectly from extreme weather events such as cyclones, floods, droughts and heatwaves. Could you kindly provide examples by site or region?

Thanks, Mark. I'll pass that one across to David.

Yes. Thanks, Graham. Thanks, Mark. Yes, probably one of the key risks that we do see is with our tailings storage facilities. So in terms of the containment breach or failure. So we've done a significant amount of work on those over the last 3 years to deeply understand the causal pathway to a failure and have done a significant amount of work to make sure that they do remain safe through extreme weather events and as climate change -- changes the hazards associated with those. The next second one is probably damage to infrastructure. And obviously, some of that is within our control and some of it sits within the value chain. So that within our control. We've also assessed the impact of extreme weather and the resilience of those -- so those 1 in 500, 1 in 1,000 year flood events, particularly.

In terms of some of the infrastructure that we don't own that we use, we know some of that is vulnerable, and we've seen examples of that with cyclones in Queensland, for example, that typically do take out rail for a period of time. That will continue to be a risk. And obviously, our plans account for that in terms of disruption to infrastructure and the operators of those assets manage that risk and do a reasonably good job of that. Power supply disruption is another key risk that we have across our operations.

And again, we have some controls that we are able to manage within the gate and then obviously, with providers of that energy outside the gate, particularly transmission lines and extreme wind events are one concern. And then obviously, exposure to bushfire is another risk that we see with transmission. And the final one that we manage is raw materials inbound is probably another example of the risk that we see. And again, most of our contractual commitments to procure that account for some of the risks that we're exposed to and then how we manage those stocks within our own operations such that we're not exposed to outages for the impacts to raw material supply.

There are no further questions at this time. I'll hand the conference back to Graham Kerr.

Thank you, everyone, for joining us this afternoon and for your questions. If you have any further questions, please get in touch with Susie. And again, thanks for your time today.

Thank you. Good morning, everyone, and thanks for joining us today. On the call with me is our Chief Financial Officer, Sandy Sibenaler; and our Chief Operating Officer, Vanessa Torres; and Noel Pillay.

Before I give a summary of our financial results FY '25 I'd like to acknowledge the tragic loss of our colleague, Jose Luis Perez, who was fatally injured at Cerro Matoso in September. Our thoughts remain with Mr. Perez's family, friends and colleagues. An investigation into the incident was completed, and we shared learnings across our business with actions taken to prevent a similar incident from happening again. During the year, we continued to implement our safety improvement program, which is supporting measurable improvements in our safety performance. While it's encouraging to see a positive shift in our leading and lag safety indicators, we remain focused on continuously improving and embedding safety leadership across our organization. Nothing is more important than our people going home safely at the end of every shift.

Turning to our FY '25 results. We increased our production of minerals and metals critical to the global energy transition, delivering annual production growth of 20% in copper and 6% in aluminum. Our strong operating performance enabled the group to capitalize on improved commodity prices, with underlying EBITDA increasing by 7% to USD 1.9 billion and underlying earnings increasing to USD 666 million. Operating free cash flow increased by USD 272 million, and we improved our net cash position by USD 885 million to USD 123 million, supported by proceeds from the sale of Illawara Metallurgical Coal. At the same time, we invested USD 517 million to grow our future base metals production at Hermosa and returned USD 350 million to shareholders. Reflecting our strong financial performance, today, we've announced a fully franked ordinary dividend of USD 117 million or USD 3.06 per share in respect to the June 2025 half year at a 12-month extension of our capital management program with USD 144 million remaining to be returned to shareholders.

We are focused on maintaining our positive operating momentum into FY '26, we are developing new bauxite mining areas at Worsley Alumina after securing primary state and federal government approvals to extend the operation's mine life earlier in the year. Improved bauxite availability is expected to support a 4% increase in production in FY '27 and improved operating unit costs as refinery turns towards nameplate capacity. Brazil Alumina is expected to operate near nameplate capacity in FY '26 and unit costs are expected to trend lower due to reduction in planned maintenance and lower bauxite prices from MRN.

In aluminum, Hillside continues to test its maximum technical capacity. And in Brazil, volumes are expected to increase by 16% in FY '26 and a further 3% in FY '27as the smelter continues to ramp up. As announced earlier this month, due to the uncertainty of electricity supply, we have stopped pot relining at Mozal Aluminum and currently expect that the smelter will be placed on care and maintenance in March 2026 when the current agreement expires.

Turning to our base metal operations. FY '26 production guidance at Sierra Gorda is unchanged, and we expect a 5% production growth in FY '27 due to [ higher ] copper grades. Sierra Gorda continues to progress, brownfields growth options to increase future volumes and unlock the exploration potential of the Catabela Northeast prospect. At Cannington, we have completed our mine plan review designed to manage more complex underground conditions and deliver reliable mining rates.

We are working to embed further cost savings as we optimize contract and equipment requirements and advancing options to extend the current reserve life of 6 years with the remaining underground resource and open pit opportunity providing significant potential. At Australian Manganese, we have completed the operational recovery plan following the impacts of Tropical Cyclone Megan with export shipments on track to reach full capacity this quarter. With the recovery plan now complete, work is underway on options to extend GEMCO's mine life. We continued our portfolio transformation in FY '25, realizing significant value through the sale of Illawarra Metallurgical Coal and exiting lower return businesses. This has further streamlined our portfolio toward higher-margin businesses, reduce complexity and unlock capital to invest in our high-returning growth options in base metals.

At a regional scale, Hermosa project in Arizona we achieved key construction and permitting milestones for the Taylor zinc-led-silver project in FY '25 and construction activity for the shafts and surface infrastructure is set to increase in FY '26. Costs for packages awarded to date for Taylor have been within FID expectations. While we have not seen material direct impacts from U.S. tariffs, we continue to monitor potential inflationary pressures as we progress through remaining packages.

We are progressing work to unlock value across Hermosa's highly prospective land package and today announced an upgraded mineral resource for the Peake deposit. Exploration results in Peake support the potential for a copper-dominant mineralized system and we are continuing to study work on the potential to add copper -- copper production from Peake, leveraging the infrastructure established for Taylor.

In closing, we have simplified and improved our portfolio. Our operations are performing well. Our balance sheet is strong. Our pipeline of base metal options has the potential to underpin significant growth and our unchanged capital management framework is designed to reward shareholders as we capitalize on increasing demand for the minerals and metals needed for the global energy transition.

I'll now move to questions.

[Operator Instructions]. Your first question comes from Jason Fairclough with Bank of America.

Two quick ones for me. One on Sierra Gorda and one on Cannington. So on Sierra Gorda, can you just maybe talk to us a little bit about the pathway to first metal production from the fourth grinding line? And is that going to be just a carbon copy of the existing grinding lines? Or will it actually be upsized?

On Cannington, I was interested if you could talk a little bit about the decision to derate ore production. And I'm wondering, is there a possibility here just to get some of those open pit tonnes going through the plant in the near term?

Thanks, Jason. And maybe if we start, obviously, at the Sierra Gorda piece. Sierra Gorda, as you know, is a jointly controlled asset between ourselves and KGHM. So it will require both shareholders' approval to actually obviously progress support grinding line in addition to the other improvement opportunities that we actually have. Probably the critical pieces as we think about that fourth grinding line because essentially what it will do a move throughput up to about 58 million tonnes per annum. And it really is concentrating capacity by adding a fourth grinding line and a flotation line.

Obviously, you get the copper equivalent production uplift and you get a reduction due to costs. The big one in terms of getting success there is we've installed a third thickener so we have three. And as part of the mining conditions to sort of expand the facility, we need to increase the solids, if you like, or the CP that's going out to the tailings. The first new thickener is actually achieving those on a regular basis now. The other two are sort of a still a little bit hit and miss. So we're doing some work on those around the power recharge and the source of how we actually do that and some general maintenance of sort of fine-tune how we use those.

We're expecting to make progress on that, which allows us then to bring forward the study work by the end of the calendar year for the 2 joint venture partners to opine on and make a decision if we want to actually approve the project. From our perspective, we think the project makes sense it's sensible. Logically, there's value in it for us. We've had the same impression from KGHM to be clear. But obviously, as we get closer, that's something we'll get the second writing from them.

Just to push you on that, Graham. So first metal, what's the earliest we could think about it?

So the way I think about it, usually, it's -- we expect that the feasibility and the FID expected in the back end of this half year. Generally, you're talking about a 3-year construction period. CapEx is saying like this is probably somewhere in 100% terms of which would have a 45% exposure around $700 million. The Cannington one, look, is an interesting one. I mean, one thing to always keep minding with Cannington is Cannington, I was lucky enough to be there when we built that, and it tells you how old it is because I was a graduate. That project at the time was designed to run for 14 to 70 years. We're probably in year 28 now. This time last year, we talked about a 5-year underground mine life left. Now we're talking about 6 years, even though we've been through another year. That's about a 2 years addition from where we were. We still think there's potential to maybe add another 2 to 3 years underground.

And we do think there's the ability to potentially process some lower-grade stockpile material and do some work in the open pit that potentially opens up the open pit option, which historically has probably been hugely dependent on silver price, whereas now we've got a bit more optionality around it. I think the challenge we've had, Jason, to give you a sense of Cannington is, obviously, we've gone through that transition over the last couple of years where we stopped using the shafts, and we stopped using a shaft because of the age and deformity and the cost to keep them up didn't make any sense. And we've also moved higher up the ore body. So we moved to trucking about [ 2.5 ] years ago. That's worked quite well for us. I think the challenge for us has been the number of stopes that we need to sort of put into action. So for example, if I go back to FY '14, '15, we were probably running at about 50 stopes. '18 to '23, we're up to 64. '24 we got to 80 stopes. This year in the plan, we've got about 70 -- we did about 71 stopes. And next year in the budget, we're talking about getting back up to 80 stopes.

We originally thought it was possible to do about 109 stopes, but the reality is when we're getting in there, the stopes are fragmenting and breaking because the way you are on the mine now, you've got the number of balls covered by paste fill. You've got no more solid rock walls. So you don't have the same stability or ability to actually muck it out as quickly, plus you have to apply more pace than we have in the past. So we're working on some efficiencies in that space. So while we have downgraded the throughput, we have extended the life of the underground. We also believe there's more optionality in the open pit that we probably thought before because of some of the metallurgical work we've done. We'll know more about those 2 items over the next 12 months. What we're now turning our attention to is lower throughput, changing mine life cycle. We haven't actually looked at the cost structure yet. That's a piece of work we're just kicking off now. Does that help, Jason?

Your next question comes from Tim Clark with SBG Securities.

Good evening, everybody, and thanks very much from our side for doing this later call. Perhaps I can start just my first question just on GEMCO. Very interested to see those northern leases appearing. We didn't know much about those before. We've been speaking about the southern leases. Perhaps I wonder if you could just talk about the process that you're expecting and what you think can be done in terms of elongating the life of GEMCO. And perhaps just with traditional owners, if you feel like there's better momentum after the recent interruption?

And then just my second question on exploration. You guys were the first movers, right? You got into good joint ventures early. You were first movers on exploration. It feels like some of the exploration is just taking the whole industry a lot longer. And I just wondered if you could highlight to us any areas that you think are advancing now or where opportunities are perhaps coming a little bit closer to maturity in your portfolio?

Yes. Look, absolutely. So maybe if we sort of -- and we'll come back to exploration. If we start with GEMCO first. If we look at GEMCO, what I would like to call out is I think we've done a complete rebuild of a wharf in a very pristine environment where you've got a very tiny, small special purpose lease that allows you to use the infrastructure there. And we've still got more to be done, but done the majority of the deepwatering. And for this quarter, we'll be back up to full shipping rates and full production rates. So I think Vanessa and her team have done a great job in actually getting GEMCO back online. Insurance is progressing pretty good. We've had some consistent payments along the way and hope to settle it by the end of this calendar year, but I understand that's always a negotiation.

I think when it comes to what do we have left on GEMCO today because while it's getting older and more spread out, that and Gabon are still probably the 2 best assets in the industry by a country mile. If you think about the life today of GEMCO and we sort of focus on what we have, we have about 6 years that's currently in the reserve, which is the Western leases and about 1.5 years for the Eastern lease South. Then there's probably another easy 2.5 years that we think we can take from the resource and convert to, if you like, reserve. And that's really the eastern leases North, and it's also the southern areas. So that sort of gives you a life at the moment about roughly 8.5 to 9-ish years. We've got large pieces of the southern areas that to date have not been accessible to us based on the traditional owners, if you like, their view, if you like, on cultural significance, waterways, white sand, et cetera. That's an opportunity for us to engage with them over time. But for the first time and how it works on the island is obviously, it's the TOALC's Island. We need their absolute permission to do anything.

The northern leases was something that was probably talked about 10, 15 years ago. And when you can't come to an agreement, it goes into a concept, which is called moratorium up there, which means you can never talk about it until it's released out of that time. It got released probably around February, I think, this year. So we started having some discussions with traditional owners. And they've certainly given us access, as you can see on Slide 24 of the pack to a part of the northern area to do some exploration work. There's actually a much bigger footprint at the moment for the northern areas, which is not available for access today. Over time, obviously, in line with what they would like, we would like to understand the northern areas, not only the area of interest, but the broader land package, and we still think there's a potential on the southern areas.

But we should be clear on both of those areas. This is really land that hasn't been touched drilled before. So it could end up adding 3, 4 years. It could end up 2 years. It could end up having 10 years, it could end up nothing. We haven't done the work there. What I would say is during COVID, obviously, we make large royalty payments for the right to be on the island to the ALC. No revenue, no royalty. So they certainly felt the pain like we did. We work very closely together to sort of manage our way through the cyclone. We think we have a really good relationship with the ALC. There has been a little bit of change over the last 12 months where their long-serving Chairman passed away they're looking for a new CEO. So there'll be little bit of vacuum at the moment, but obviously, they're waiting for some of those key positions to be filled. And certainly, would like to talk about how we extend our stay on the island. But always understand it's absolutely at their discretion and making sure that we have a good strong relationship with them every single day of the week.

Yes. Look, on the exploration side, yes, I would say we were quite lucky when we sort of came out of the old owner when they made the decision not to do any exploration. So we had access to a lot of information, some of the best mines around. So we sort of got it when I say, mines, exploration mindsets. So we got very early into those exploration plays. What I would say is, geez, it's got super competitive over the last 4 or 5 years. In the early days, you can get good terms, good earnings and a clear pathway to control. That's much harder now where some of our peers I think, are signing interesting agreements, which probably make. They set new benchmarks move it's challenging. Outside of easy brownfield ones such as what we've got at Sierra Gorda with Catabela Northeast, which you released last year. I think the most prospective one for me, from a pure resource perspective is the Ambler Metals Distric where we have got the joint venture Ambler Metals with basically Trilogy and Roosevelt.

Arctic today, if you look at the Arctic at 43 million tonnes of that grade, that strike anywhere else in the world it would have been developed. It's just in the middle of nowhere. That's one of what we hope is a number of VMS style deposits up there. Roosevelt got similar kind of signatures, had probably less work done on it. It's certainly an area where we've not had a focus for the last 3 or 4 years because COVID originally, but also then the Biden administration talked about never opening that area up, whereas you know, the Trump administration is funding up is probably trying to go in there too fast. We think there's a balance between the 2 that will unlock a largely unexplored area, but an area with a hell of a lot of potential. So that would be one of the ones that I'd say that, look, we get quite excited about.

Obviously, some of the work we've been doing in Argentina is advanced in terms of resource and size. You're into the next stage of understanding, for example, at Chita Valley, what do the economics look like? Is it for us? Is it for someone else? More work to be done in that space. That would be another one. And the other one, which I think is particularly interested in some of the work that we're starting to do in Namibia and Botswana with Noronex. I think that Kalahari belt, obviously, has got 2 producing assets in there today.

But generally speaking, it's been largely underexplored. So we think that's another opportunity. That's ignoring again some of the brownfield more stuff like at Sierra Gorda with Catabela Northeast. Short term, the one that I think will be most interesting is going to be around the Peake deposits at Taylor because, a, it will be approved under the current structure. Two, it is outside of the site copper circuit. In deepwater, you've done the shaft, you've already got 95% of the plant in there. It's just about how big the resource is going to be. It's been a fourfold increase with this reporting period and I think there's probably something similar still left to be discovered there.

Your next question comes from Alex Bedwany with Canaccord Genuity.

I was a little bit surprised to hear you say that you haven't been seeing material inflation for the Taylor project. Just on that, how much of the budget has or how much of the project has been progressed in sort of percentage terms, would you say and do you think there is scope for things like steel imports and what have you to impact the overall CapEx budget? And then I've got a second question, but I'll come back to that.

Yes. Look, absolutely. I mean maybe if you take a step back and let's talk about what the positives are of Taylor. One is it's great to see the approval process continues to go through its speed and probably this time next year, we've already got all state approvals. We'd expect to have almost all our federal approvals to allow us to do the tailing facility and connect to power or run a power line through an easement area of the Coronado Forest. So I think that's a real positive. Obviously, we spoke about Peake, there's Flux, there's Clark. There's a whole lot of other things on top of Taylor.

On Slide 28 in the Peake, we actually talked about where we are in terms of the project itself. The absolute critical path has been dewatering, which has gone to plan and probably better than we expected. The second thing I'd say is when you look at the vent shaft and the main shaft, they're now the 2 items on the critical path. The process plan for us is less on the critical path. It's more about the vent shaft and the main shaft. We're probably at this stage, if you think about the vent shaft, that's the one we've been the most advanced on, and we've made pretty good progress on that one.

We're probably about -- I think it's -- I just find the exact number. Yes, we're about 47% complete and the main shaft are about 7%. So for the vent shaft, we've done 370 meters of 824 meters. The main shaft, we've done 7 meters of 898 meters. We have laid the foundations, if you like, for the surface process plant facility. We are at the moment building the admin support facilities. We've got the first package out for the processing plant, which is -- and it's 4 packages left to go on top of that for underground infrastructure, axillary infrastructure and lateral development. So far, we're seeing that the estimates are holding to our FID. Keep in mind that our FID estimate was done post COVID.

What we're seeing today is the steel that we got for the vent shaft and the main shaft and we've already sourced a fair bit of steel for the actual process plant, that sort of come in pretty well as we expected. I think our risk now is on the remaining pieces of work because we probably only spent about 33% of the capital. The remaining pieces of the work is -- there are some impacts around tariffs. But as you can appreciate, tariffs are changing every single day. I think what worries me more is a general impact on tariffs and what does that mean for things like labor rates? What does that mean for concrete? Ultimately, what does that mean for steel, if you have to buy it in North America, we've already seen some of the windows start to push out.

Now outside of the windows for steel pushing out, we haven't really seen any increases in the first pieces of packages we've let around labor rates and concrete. But as you know, projects occur over multiple years. If the tariffs do become a push on inflation, that's something we will have to watch. To date, not overly concerned, but we're watching it very closely. What I would probably focus on all the time is based on experience of seeing other people do this, vent shaft, main shaft feels comfortable at the moment, but we've got a long way to go. You never feel comfortable in either shaft here at the bottom.

Okay. Fair enough. And just the second one is a quick one. What do you reckon is the drop dead date for a deal on the Mozal power contract?

I'll be honest, as every day goes by, it becomes harder and harder because obviously, there's a series of raw materials such as pitch and coke that we need to provide. But also, while we absolutely see value with Mozal from an economic sense, we see value consistent with our purpose around jobs and employment opportunities. There is strong demand for Worsley's Alumina out there. And ultimately, we're going to think about how we place that. So I think as we get closer towards the back end of the calendar year and the start of new calendar, we'll have to start making some decisions. Not where we want to go. But at the moment, there's probably not a lot of -- we're as much involved in the deadlock or an impasse as we were 2, 3 weeks ago when we made the announcement.

Your next question comes from Myles Allsop with UBS.

Maybe just on Mozal, could you give us a sense as to where the bid and ask is for the power cost? How that compares to Hillside. And could we have the same issue with Hillside over the next kind of as we go to 2029, '30 as the power contracts start to get renegotiated there? Is there a similar risk that could come through that power becomes overly expensive and you can't green the power, you can't sell the assets and it's just another big impairment? That's the first question.

Yes. So maybe I'd sort of [ Myles ] break that it into what's difference between the 2 first, and then I'll dive into them. But obviously, the Hillside contract runs to 2031. The challenge we have at Mozal that's really appeared in the back end of last financial year is originally, it was all about, could you agree at a price of the government of Mozambique who effectively controls Cahora Bassa, which is the hydro source. Even though that power is wielded by the infrastructure in South Africa, it comes back to us and it's nominated for us. So you thought you're dealing with one counterparty where you want to agree on a price. So price is an issue for that, and we're stuck with the price on NIM.

But probably the bigger concern for me is of the 950 megawatts that we need, they now Cahora Bassa for the next 2 years have indicated that they can only provide 350 megawatts. And that can only provide 350 megawatts because of that 2 years of severe drought and the dam was at really low levels. So that means not only have I got a challenge around price with the government of Mozambique, I need to find another 600 megawatts to come out of the Eskom system. And if you're South Africa [indiscernible] selling power into Mozambique for Mozal and job creation and protection there, what's in that for them? So I've got 2 challenges, 1 around price and 1 around quantity. And I wanted to make that point of difference because I think when it comes to Hillside, it's quite different. There are some benefits to Eskom about Mozal, I'll come back to.

But when you think about South Africa in terms of a country, we're a large employer. We're in KZN, which is one of the more politically sensitive parts. We sell about 30% of the product downstream, which is another whole lot of industry. So the job impact is much bigger than Mozal, and it's consistent with the industrialization policy in South Africa. But when it comes to Eskom, we're the largest paying customer in the country because a lot of people have jumped off the network and built their own self-sufficiency. We also provide the interruptibility of power in terms of load shedding and the reverse battery backup, if you like, as their network becomes more challenging. We have an outstanding relationship with Eskom. We managed record load shedding with them at Hillside. I see the CEO and their team all the times. It's a relationship with both people recognize the value of each other.

The last contract at Hillside also went through a process where an independent regulator appointed by the government said, look, the cost of production for residential is very different in terms of the cost of production for a smelter because the smelter has virtually almost 100% load factor and what it does to the network. So that goes through a process where they were very comfortable that what we pay is a fair price to Eskom and is certainly above their cost of production. We have been working with Eskom very closely about potentials to green the network over time and done a lot of joint studies together. But I could not give the relationship with Eskom a bigger tick than what it has today. And that's not just today. It's been over a long period of time.

So going back to Mozal, again, the challenges around the price of Mozambicans government is willing to sell at and it comes back, can you get quantity at the same price i.e., the balance of the 950 you need from Eskom. So that's where we're going with the discussions. It's become much harder. We would probably -- if you think about where you sit on cost curves, Hillside today probably sits third quartile of the cost curve, may be pushing to the upper end of third quartile. Mozal is lower than that. So we appreciate that we're probably looking for a contract that's similar to what you have at Hillside, which is quite an increase on the power cost. If you look on Wood Mac or CRU, they would talk about the highest cost smelter ex China for a power contract is probably $50 a megawatt hour, and they really struggled to survive and they're all in and out with problems. Fair to say the first off, we've got from Governor Mozambique is well in excess of that. What we can't do is operate a smelter that loses money every single day, week, year.

That's super helpful. And then maybe 6 months to go, what are the key priorities? And for Matt, as he sort of steps in, what do you think his biggest challenges will be with the business?

Look, I think Matt obviously starts in February. Matt has the benefit of if you think about his work experience, working at Mount Isa, working with Glencore, working with Anglo, he knows the majority of jurisdictions tbat we work in and operate in our commodities. Maybe aluminum will be a little bit new for him, but everything else he has got a good understanding of, but he certainly knows the context of country discussions in somewhere like South Africa, Botswana, et cetera.

Look, I think he's an initial -- his initial phase would plan for us very much to get out and see the operations and the assets to meet the people, deep dive into the strategy of where we're going, meet our investors to hear what's on their mind. But Matt is super smart, he is super hard working, he is great with people. He'll pick it up very quickly.

And I think if I have a chat to him today, and hopefully, it's the same chat later, he would also say, look, our opportunities, first and foremost, to deliver the successful execution of Taylor, deliver on the fourth growing line and growth options at Sierra Gorda continue to actually manage the group, see what you can do to extend the life of GEMCO and Cannington because they're world-class assets. And at the time of the demerger of 10 years ago, they probably had a useful life of 6 years or maybe 10 for GEMCO. But we continue to push those out. And I think also is how do we grow our business in attractive commodities being copper and zinc.

[Operator Instructions]. Your next question comes from Jason Fairclough of Bank of America.

Graham, just one follow-up for me. And coming back to manganese. I think in the past, you've said if Anglo were a seller of their stake in the JV, you might be a buyer for the right price, but you wouldn't pay a premium for something you already run. How do you think about this business now? I mean is this a core South32 business? Or is it -- it's an okay asset, and we'll run it for cash, and that's kind of it?

Look, I'll start by Jason saying we're not a purist. We just to create money for our shareholders. So everything is to sell at the right price. Whether it's Taylor, Cannington, Worsley, you name it, you've got the right dollars, we exist to create value for our shareholders. We think, look, manganese is an interesting one. The business in South Africa doesn't tend to make a lot of money or lose a lot of money. It's a swing producer. But GEMCO can generate a lot of cash, has higher margins. It and Gabon by far, the best assets in the industry for many different reasons. So I think if you are going to sell that, you'd have to actually realize a fair bit of value for your shareholders.

Now in the past, it's been [ plated ] that with what Duncan is doing around his simplification strategy, that manganese is not a FID for him. That is a decision for him, but he'd have to come and talk to us about it before we could market that. And as you'd expect, would have some rights under the agreement. But my philosophy would be if you're buying an asset you can control, you recognize there's a control premium for the benefits you get of control. The reality is today for both HMN and GEMCO, it's South32 people, South32 shorts, shirts, we market 100% of the product, a really good relationship with Anglo, but we're the operator.

So for us to buy out their share besides value, there's no operating synergies. There's no further control where you could actually make things go better. I think the opposite of that would be Sierra Gorda, where it's a generally controlled asset, and we have a really good relationship with KGHM, but because it needs to be in the joint venture requires both partners to regularly work, discuss and move and probably would go slower than I'd like it to go, that something we'd be interested in adding more of.

So just again on the manganese business, could you frame for us how you think about the value of this business? I mean I'm just looking at the segmental reporting in your annual report, if I look at those book values, do you think those are a fair reflection of the value of those assets?

I would start by saying, obviously, book value is a historical point of view. But the book value itself, obviously, if we think we've got a value lower than the book value or the book value is lower than what we think the realizable value is, we need to impair it down to what that value is. Clearly, we're not doing that. So it tells you the book value is below where we think the value is. When you talk about manganese as a commodity, it is the one commodity when you recycle steel, you have to add manganese back in, you can't recycle it. Two is we think there is a fair bit of potential for growth in batteries when it comes to manganese that we continue to monitor and watch. Probably the flagship effort for that at the moment is in the U.S. mostly because of proximity to where we think some of that growth is going to come from. But both GEMCO and HMM longer term potentially add value in that space for different regions as well. But absolutely, we think our -- if you do discounted cash flows, they're well in excess of the book value.

[Operator Instructions]. Your next question comes from Myles Allsop from UBS.

Great. Thanks for the follow-up. Just maybe on alumina, you're going to be more materially net long if Mozal, assuming that Mozal closes. In terms of the commodity, it does seem pretty challenged with the structural oversupply in China. I mean, what's your sense in terms of near-term outlook for alumina prices long-term kind of outlook? I mean where is the bull case in alumina itself? And who's going to buy the -- you're saying there's interest for the Mozal alumina. Where are you likely to sell that?

Yes. So look, today, if you think about our total alumina sales, we sell about 52% to the open market. 48% goes into our own smelters. Alumina is interesting because it does have the ups and downs in terms of the tight supply chain. And it just takes a little bit of disruption at somewhere like bauxite production in Guinea or [ Alunorte ] to be out for a period of time and the price skyrockets. So it generally has been a tight market. But I guess, to some degree, you got to also look through the bauxite to alumina to the aluminum market to understand where the value is not necessarily where the ultimate value is achieved in what part of the process, but how do you have the flow back and forth.

Look, alumina is interesting because, obviously, you're seeing the smelting refining continue to move out to the coast in China. You're continuing to see more bauxite come out of China to go to those Western Coast refineries. But we do believe that aluminum smelter cap of 45-million-tonne is real in China, and they're heading towards that. But we also recognize the growth of securing in Indonesia. Potentially on the bauxite refining and the smelting side. And we think that's going to continue, but I don't think they will get exactly the same capital compression that you actually see in China and Indonesia, although get some of it. And there are some other challenges, which means it's very difficult to sort of say, alumina in Indonesia is the next nickel in Indonesia, and that's around industrial parks, type of mining, BRDA, red muds, et cetera.

So look, I wouldn't say we're super, super bullish on aluminum, and I think we are slightly above consensus pricing in our view, and that hasn't changed. To your question around alumina, yes, there would be a bit of a alumina that obviously hits the market. Mozal was to actually close. That lever in itself certainly would be particularly out of Worsley have been higher demand stay predominantly from the Middle East who are looking to secure their own sources. You've obviously seen EGA lose their leases or lose their leases in Guinea around bauxite. They're one that we know is looking for FID long term and are willing to look at a premium. They're not the only one in that space.

There are no further questions at this time. I'll now hand back to Mr. Kerr for closing remarks.

Thanks, everyone, for joining us this morning. Looking closing, we have continued to simplify and improve our portfolio. Our operations are performing well, our balance sheet is strong. We have a pipeline of base metal options that have potential to underpin significant growth. Our approach to the balance sheet capital management framework remains unchanged. And we look to continue to capitalize on the increasing demand for the minerals and metals needed with the global energy transition. And thanks for your time today.

Good morning, everyone, and thanks for joining us today. On the call with me is our Chief Financial Officer, Sandy Sibenaler; and our Chief Operating Officers, Vanessa Torres and Noel Pillay.

Before I give a summary of our financial results for FY '25, I'd like to acknowledge the tragic loss of our colleague, José Luis Pérez, who was fatally injured at Cerro Matoso in September. Our thoughts remain with Mr. Pérez's family, friends and colleagues.

An investigation into the incident was completed, and we shared learnings across our business with actions taken to prevent a similar incident from happening again. During the year, we continued to implement our safety improvement program, which is supporting measurable improvements in our safety performance. While it is encouraging to see a positive shift in our leading and lagging safety indicators, we remain focused on continuously improving and embedding safety leadership across our organization. Nothing is more important than our people going home safely at the end of every shift.

Turning to FY '25 results. We increased our production of minerals and metals critical to the global energy transition, delivering annual production growth of 20% in copper and 6% in aluminium. Our strong operating performance enabled the group to capitalize on improved commodity prices with underlying EBITDA increasing by 7% to USD 1.9 billion and underlying earnings increasing to USD 666 million.

Operating free cash flow increased by USD 272 million, and we improved our net cash position by USD 885 million to USD 123 million, supported by proceeds from the sale of Illawarra Metallurgical Coal.

At the same time, we invested USD 517 million to grow our future base metals production at Hermosa and returned USD 350 million to shareholders. Reflecting our strong financial performance today, we have announced a fully-franked ordinary dividend of USD 117 million or USD 0.026 per share in respect of the June 2025 half year and a 12-month extension of our capital management program with USD 144 million remaining to be returned to shareholders. We are focused on maintaining our positive operating momentum into FY '26. We are developing a new bauxite mining areas at Worsley Alumina after securing primary state and federal government approvals to extend the operation's mine life earlier in the year.

Improved bauxite availability is expected to support a 4% increase in production in FY '27 and improved operating unit costs as the refinery returns towards nameplate capacity. Brazil Alumina is expected to operate near nameplate capacity in FY '26 and unit costs are expected to trend lower due to reduction in planned maintenance and lower bauxite prices from MRN.

In Aluminium, Hillside continues to test its maximum technical capacity. And in Brazil, volumes are expected to increase by 16% in FY '26 and a further 3% in FY '27 as the smelter continues to ramp up. As announced earlier this month, due to the uncertainty of electricity supply, we have stopped pot relining at Mozal Aluminium and currently expect that the smelter will be placed on care and maintenance in March 2026 when the current agreement expires.

Turning to our base metals operations. FY '26 production guidance at Sierra Gorda is unchanged, and we expect 5% production growth in FY '27 due to higher copper grades. Sierra Gorda continues to progress brownfield growth options to increase future volumes and unlock the exploration potential of the Catabela Northeast prospect. At Cannington, we have completed our mine plan review designed to manage more complex underground conditions and deliver reliable mining rates.

We are working to embed further cost savings as we optimize contractor equipment requirements and advancing options to extend the current reserve life of 6 years with the remaining underground resource and open pit opportunity providing significant potential.

At Australia Manganese, we completed the operational recovery plan following the impacts of Tropical Cyclone Megan with export shipments on track to reach full capacity this quarter. With the recovery plan now complete, work is underway on options to extend GEMCO's mine life.

We continued our portfolio transformation in FY '25, realizing significant value through the sale of Illawarra Metallurgical Coal and exiting lower returning businesses. This has further streamlined our portfolios towards higher-margin businesses, reduced complexity and unlock capital to invest in our high-returning growth options in base metals. At our regional scale Hermosa project in Arizona, we achieved key construction and permitting milestones for Taylor zinc-lead-silver project in FY '25 and construction activity for the shafts and surface infrastructure is set to increase in FY '26.

Cost of packages awarded to date for Taylor have been within FID expectations. While we have not seen material direct impacts from U.S. tariffs, we continue to monitor potential inflationary pressures as we progress the remaining packages. We are progressing work to unlock value across Hermosa's highly prospective land package and today announced an upgraded mineral resource for the Peake deposit.

Exploration results from Peake support the potential for a copper dominant mineralized system, and we are continuing study work on the potential to add copper production from Peake, leveraging the infrastructure established for Taylor. In closing, we have simplified and improved our portfolio. Our operations are performing well. Our balance sheet is strong.

Our pipeline of base metals options has the potential to underpin significant growth and our unchanged capital management framework is designed to reward shareholders as we capitalize on increasing demand for the minerals and metals needed for the global energy transition. I'm happy to take questions from here.

[Operator Instructions] Your first question comes from the line of Rahul Anand with Morgan Stanley.

I am sorry we might have lost that first question, so we might go to the next one. Thank you, operator. Can we go to the second question, please?

Second question comes from the line of Paul Young with Goldman Sachs.

Graham, hope you can hear me?

Yes, can hear you loud and clear, Paul.

Excellent. Graham, first question is on Mozal. Obviously, a pretty tough situation over in Mozambique, not easy conversations. But just wanted to dig into that because there's no sort of firm update with this release, I know you've already written down the asset, and you sort of reached a bit of a stalemate it appears.

So just curious around how wide the spread is between the demands on that power contract. If you can just flesh that out a little bit. And also more so, what power increase can you absorb at that smelter, if you can guide to a megawatt hour, $1 per megawatt hour or $1 million? Or like what are we talking as far as the spread here between your demands and the government's demands?

Yes. Thanks, Paul. And look, obviously, a question on lots of people's minds. I'd start by saying, look, we're proud of our 26 years plus of Mozal in Mozambique. Indirectly, directly, it's over 5,000 jobs. It's about 3.5-ish percent of the GDP. We believe it's a big contributor to the economy and the social fabric around Maputo and the broader Mozambique. And it's tough for our people, obviously, managing their way through this indecision or if you're at the stalemate we're at.

To put it in perspective, we use about 950 megawatts that come from the Cahora Bassa effectively. Of that 950 megawatts, traditionally, we obviously have an agreement around price and quantity. The current contract expires in March next year.

And up to probably 4 or 5 months ago, we thought we only had one challenge, and that challenge was around agreeing a price for the contract extension to 2030. What has developed late in the end of last financial year is the Cahora Bassa has had a severe drought and it's probably running at some of the lowest levels ever when it comes to the water levels, probably about 20-ish percent of capacity. As a consequence, we not only have a price, we have a volume challenge. So coming out of the Cahora Bassa, we're being told that we could secure about 350 of the 950 megawatts that we need with obviously the balance will have to come from probably the South African grid. So you've got the complexity of two different sources and then pricing.

What do we think is a reasonable power contract that allows you to get a return, it's probably something similar around like a Hillside kind of rate. What do we think is [ untenable? ] Well, put it this way. I think if you look at the Wood Mackenzie CRU cost curve, any smelter that probably has a power contract in excess of USD 50 a megawatt hour is not making any kind of money. And at the moment, the government request is in excess of that.

So there's quite a large gap on price. And also, we've got to secure volume not only by HCB but also Eskom. So we've got the complexity of that. So that's the reason we're in the stalemate. That's the reason we're starting to prepare for care and maintenance of the smelter, which is not the outcome we're looking for, but there is actually a lot of challenge in front of us to resolve this.

Yes. Okay. Good detail. And maybe switching to Hermosa. And I know you've provided an update on just construction progress and some of the awarding of some of the contracts. There's been a bit of a discussion around projects similar to this in the U.S. experiencing cost increase due to tariff-related issues with underground mining equipment and cabling and other processing equipment, et cetera.

So can you maybe just provide some comfort as to where contingencies at and also the progress of the project from a contract award? And what gives you the comfort that the budget is intact? Or is it more the fact that as we stand today, there are risks with that CapEx?

Look, I think, Paul, if you've got to be absolutely open, I think any project that runs over 3 or 4 years, you have the risk of things shifting over time. Have we seen any of that to date? No. If we think about the progress of where we are, we still have a number of contracts to be awarded on the surface and lateral development.

Obviously, what we have got at the moment in execution is both shafts and we started the foundations or the first piece of package on the actual surface work. And those to date, the surface work that we've done on foundations and Phase 1 have come well within the FID estimates. So we're comfortable on that side.

A shaft to me is always -- having enough experience with shafts, I never get too excited until we get to the bottom of a shaft, and we make lots of progress. And we've got a fair bit to go on that yet before we call success. What I can say is a positive, the ground conditions at the moment are holding up. As we expected, the water has become a nonissue.

The bench shaft are probably about 370 meters complete of the 824, and the main shaft are about 70 meters of the 898. That's 47% of the shaft for the bench shaft and 7% of the main shaft, so still a long way to go on that piece. But to date, we haven't seen anything that's giving us concerns, and we feel like we've got enough contingency and escalation to cover this.

I think what I would take away is the other positives that are easily forget, you're right around capital increase across North American projects. But I think the positives for us is we remain on schedule to meet the FAST-41 milestone. The draft EIS was published in quarter 4 FY '25. The final EIS is expected in H2 FY '26.

And we expect after that, that we'll quickly get our federal approval. We have all our state approvals now, and we're obviously in construction. I think the other advantage for us, as you saw with Peake, we had a substantial increase in the resource. We've got more drilling to be done on Peake by the end of the year to understand the size of that. And then how it fits in the mine plan sequence. Clark itself is ahead of schedule. The baseline is about 71% complete.

And obviously, we continue to get some funding assistance from the DoD on that. And like everything in the U.S., we're going back through the DoE funding, but we expect to keep that at the same time. I think if I sit back and say one of the things that I watch with the project with interest, great people there, I think, making great progress with community, so that's not an issue. But to me, it's going to be the shaft because there's still a long way to go.

And the other one for me is while the direct impact on tariffs does not seem material at this stage, there is a lot of uncertainty around them. And the one thing we're watching with interest are some of the early indicators around steel, concrete and labor rates. So while we haven't seen that dramatically shift yet in terms of unit costs, we have seen some of the windows start to push out on steel considerably. We secured all our steel for obviously the shafts because they're up and running and the first piece of the processing facility.

But obviously, watching steel, cement, labor rates, I think, is going to be the bigger driver for us if there is inflation that takes off in the U.S. driven by tariffs. Does that help, Paul?

Yes, it does, Graham.

Your next question comes from Rahul Anand with Morgan Stanley.

Can you hear me now?

Can hear you now, yes, thanks.

Look, two questions from me. Perhaps we start with Worsley. Look, last, I guess, the first half financials, you did talk about how FY '26 was going to be a transition year for the asset, obviously, given the mining challenges that you had there and FY '27 should see improvements.

And if I go back a bit in time, I think you added about $5 a tonne to your previous guidances for the asset, and I think you landed up at Worsley for '25 to '28 averaging around $275 to $295. I guess given where we sit for '26, how should we think about that medium-term range? Is this a good time to kind of be revising that a bit? Or do you think it's a bit early to do that today?

Yes. So maybe if we go through a couple of things. I think first and foremost, it was great to get the approvals finally, which basically give you another reserve life of 11-plus years, keeping in mind the complex has 50-plus years in resource. We started mining in the new areas in the fourth quarter of FY '25.

So that's Nullaga. And we've got -- we expect to get that ore from that area more around FY '27. As a consequence, we'll see volumes increase in FY '27 to sort of talk about that. The number that we gave around USD 275 to USD 295 was real U.S. dollars at that time. So obviously, there's a little bit of inflation. There's obviously a little bit of exchange movement.

If I sort of take that back and focus on what would be the key messages I'd give you, this year's guidance versus last year, we've seen about a $10 increase, of which $3 is FX and $6 is gas prices in WA. But I do expect -- in FY '27, we expect to benefit in costs from obviously the increasing production that will come through, which I think will sort of push that price back -- the cost back down again.

Got it. Okay. So still healthy that guidance range, I guess, within the bounds of inflation and gas prices, of course.

Correct.

Okay. Great. And look, the second one was Sierra Gorda. Obviously, we're getting close to that FID expected this half now. So I guess two things to touch upon there from my end would be if you can help us with any sort of latest update in terms of, obviously, that detailed engineering and study work on the tailings thickener and how that performance has gone. But obviously, that was the key bottleneck there. And then anything on the capital side as well in terms of any sort of changes?

Yes. Look, I would say when you think about the FID, obviously, the first piece we've always spoken about is getting the CPs of all three thickeners up to the required level that we need. We are seeing improvements in that. In the newly installed one, we've seen it hit the target on a regular basis.

Of the older two, one sort of been floating around, there is a bit of work we're doing on repowering to sort of get that up to where we need it to actually be. So we expect to start seeing those results flow through the second half, which leads us into a decision on the FID towards the back end of this calendar year, but it is very dependent, obviously, on the economics, which we think should stack up strongly, but very dependent on achieving the CPs that we need there.

Obviously, it's going to take two for tango. We need our partner to also agree to support this project. Nothing tells me that they're not going to my last discussion with the CEO. But obviously, we're still going to have that discussion when they bring the case forward. The guidance we've given in the past is that generally, you'd expect a project like that and keeping in mind it's not finalized yet the study, it would have about a 3-year construction phase.

And typically, the CapEx, if you escalate about what you're seeing in the current marketplace, you're probably looking at somewhere in 100% terms around $700-ish million. I think what I keep in mind, that capital intensity is still very low compared to what you're seeing in that region with other projects.

So we'll continue to progress that work, and we're certainly expecting to try and have it finished by the end of this calendar year, but noting it is dependent on our JV partner being on the same page, but also obviously getting the thickeners and the CP out where we need it to be.

I think the other positive from Sierra Gorda is you did see -- in FY '25, the improvement in the moly, which allowed us to lift grades and recoveries. And particularly as we get into FY '27, we expect to see jump in grade at Sierra Gorda. And some of the work we're doing on Catabela Northeast continues to sort of indicate the strong ability there to continue to grow that business.

Your next question comes from the line of Kaan Peker with RBC.

One is on Cannington. I know you've given FY '26 cost guidance. But just wondering, given the age of the asset and the ore body, should we assume that unit cost to continue to sort of structurally shift higher? And will there be additional lumpy CapEx required to ensure reserve life is achieved?

Yes. Look, maybe if we take one step back and certainly recognize your point that Cannington itself is probably 27 years now in operation. It certainly got more complex as time has gone by, but certainly got a very healthy EBITDA margin still and cash flow strong generator.

In terms of CapEx, there is some normal structural integrity CapEx we continue to spend because it has gone past its useful life, but I wouldn't say that's material. I think what we are going to still see month-on-month, quarter-on-quarter is variabilities because the stope sequence we have going forward is going to pretty much be what it is. And in that stope sequence, we see strong variability in grade from individual stope to stope.

I think a couple of positives I would sort of add is the one I'd start by saying, look, I do think there is potential to take more costs out of the actual business. We've been very much focused to date on what do we think is an achievable mine plan turnaround of stopes, pace, et cetera. The team now is just starting to look at that cost base. But I think the other thing I'd say is, look, the reserve life of the underground, we were talking this time last year about 5 years.

You've actually gone by a year, and we're now telling you it's 6 years. We've also done some work on some other areas in the mine, and we'll finalize that over the next 6 to 12 months. But there is the potential, I think, to squeeze another couple of years on top of that 6 out of the underground. We've also been doing some work on some lower grade material that sits in stockpiles and various parts of the open pit and underground shells, and we think we can actually -- we've done some work that we think will potentially allow us to extract that lower grade material, whereas previously, that's been challenging.

So I think there's actually probably more hope in the open pit than I thought there was probably 12 to 18 months ago. I think it's still very dependent on silver price, and we don't take today's spot silver price and take it forward to sort of make our economic justification. But I would expect more costs to come out of the business, an extension of the underground, maybe another couple of years on top of the 6 and a bit more potential on the open pit than I would have said maybe 12 to 18 months ago with some of the metallurgical work we've been doing.

Sure. And maybe a second one on sort of the dividend. I know without earnings from GEMCO, the franking credit generation wasn't as significant this year. How much did that play into the thinking around the dividend and the buyback sort of trade-off, especially given the buyback has been going slow this year?

Sandy, CFO, you want to take that one?

Absolutely. So from a franking balance perspective, we're still carrying a very positive position. It didn't [ feed ] into the decision at all around where we sat with capital management. Obviously, we have the same position we've always had with that 40% underlying payout ratio.

And then we're complementing that with the buyback, which we've extended as was expected, I think. At this point in time, in terms of our franking balance, we do expect to have that sort of capable for franking out to the end of this decade for sure.

Your next question comes from the line of Rob Stein with Macquarie.

Just a quick one on Cannington, some increased sort of disclosure and optionality around what you're looking to do there. Is this part of trying to increase the life of the asset to potentially sell the asset or demerge it or something along those lines in sweeping it up for sale? Or is this something that you're critically focused on given that it's been a core asset in the portfolio for quite some time and you'd like to see it extended?

Yes. Look, I think it's more the latter. It's a core asset in the portfolio. It has a high margin. This has been -- if you think about the transition in Cannington over the last couple of years, we've gone from the shaft to trucking and then we've gone to far more stopes. So I think this is a natural evolution of that work plan that's been in place for a period of time.

So I would certainly say we see it as an attractive asset, but I'll be open like everything else in the portfolio from Taylor to Hillside to Worsley to Cannington, everything is to sell at the right price. If someone is willing to pay us more than we think it's worth, absolutely, we'll sell it.

And just similarly on GEMCO, the -- I guess the -- talking up the resource beyond the existing mining leases and the Southern area and the Northern area that looks to extend the life there, noting the 60-year reserve life. Is that an asset that you see having a life beyond the mid-2030s, 2040s? And how core -- how -- sorry, and how was the recent shut, how did that change perceptions in the local community and the importance of mining in the area?

Yes. Look, I mean that's a good question. For us, GEMCO is one of the Tier 1 assets in that industry. [indiscernible] is the other one, obviously, the [indiscernible] high quality, very low, if you like, the materials that have an impact on processing close to the customer, low-cost base, et cetera. For us, it's always been about how do you add more areas.

So the Western areas and the Eastern areas have always been in the plans. The Southern areas is something that we had to seek and get approval from the traditional landowners. It's their decision if we want to mine it or not. We have been given, if you like, a portion to access there, and we've been doing some work on that. So between that and what we believe we have in the rest of the Eastern leases, so the Eastern leases, North and the Southern areas, on top of the 6 that's currently in the reserve, we probably think there's another 2.5 that will come through on the study.

I think for us, the Northern leases has been in moratorium for a number of years which means that we're not actually even allowed to talk about it with anyone. That came out of the moratorium recently. And obviously, as soon as it did, we wanted to engage the TOs on this because it's been a land that's never been explored or looked at before. So we'd like to do some exploration to understand the potential there.

And obviously, we have received permission to actually do that, not for all the Northern areas, but a portion of the Northern areas, which I think is a good starting point. Look, our relationship with the ALC and TOs, I think, continues to be strong. I mean obviously, we work together closely recovering from the cyclone and supporting each other through that process. In the end, it's their land.

They make decisions about what we can and can't do. So it's important we keep that positive engagement. No doubt, physically, they would have felt like we did the pain of cyclone Tracy over the last 12 months and not producing. But I think for us, it's more alignment on the potential we can grow there.

Now if we can add 5 to 10 years at GEMCO, I think it continues then to be the world's -- one of the world's leading manganese suppliers, and we -- that's our focus, I am trying to do that.

Your next question comes from the line of Lachlan Shaw with UBS.

A couple from me. So firstly, I just wanted to, I guess, reflect pleasing free cash generation in the year, which is good to see. I wanted to test your thinking here about next year. Obviously, CapEx is stepping up. But you've got Cannington, the downgrade there, Mozal going into care and maintenance. And obviously, GEMCO is back for a full year contribution.

Can you just sort of help us think about what you're thinking or how you're targeting or what you're thinking you can manage in terms of free cash generation for '26. I'll come back with my second.

Yes. I'll get Sandy talk a little bit about that, knowing obviously your view on price. Obviously, it is a big driver of that, knowing the prices, if you like, have probably been so volatile with what's going on in some of the tariffs and other movements at the moment.

I would say, first and foremost, without a doubt, we see this year and next year, as was put out in the FID case for Taylor, these are the two peak CapEx periods, and there's even a step-up this year. But maybe, Sandy, you can go into the rest of it.

Yes. I mean we're looking forward to a positive outlook on cash working profit. We've got strong operating momentum going into the year. We expect both refineries through -- Alumina refineries to be operating near their nameplate capacity. We've got aluminium ramp-up on Brazil. We expect that to be close to breakeven or at breakeven. Hillside maintaining their strong performance. Sierra Gorda, obviously maintained their discipline there in operations and expect sort of grade to be elevated as it was in '25.

GEMCO, we do expect to see it returning to normalized production rates. We won't have that CapEx draw, and we are anticipating a settlement on insurance during the FY '26 year, which will be a pleasing outcome there. And of course, as you touched on Cannington, we'll have that revised mine plan, but we do expect it to be cash flow generative for the group, and we'll have that ongoing optimization of cost, as Graham touched on.

So we do anticipate some really good positives coming through there into the cash flow. Obviously, we do see that peak capital period now with Taylor, but we have set ourselves well with the balance sheet where it's positioned. And obviously, we are confident in our operations through the year as well.

I think the other thing I'd add is, obviously, with the Illawarra portfolio and also Cerro Matoso is on track to be out by the end of this calendar year, you continue to see simplification of the group in terms of how we are. If you go back to FY '16, when we effectively started, we've gone from 16 to 9 operating sites, we've gone from over 14,000 employees down to 8.

Our margins have increased and also our ROIC has increased, so I think our ability to sort of take out those low value-add businesses that were high capital intensity will set us in a good position around free cash flow generation going forward. But noting there are some uncertainties around, obviously, the key one being commodity prices, but also what happens at Mozal.

Got it. That's great. Helpful. Second question is, I guess, a bit of a question on the Alumina market. We're seeing sort of signs increased supply ramping up out of Indonesia. Guinea is taking a lease out of the Indonesian strategy there, and China is issuing new bauxite mine licenses in Shanxi and Henan.

I'm just -- I suppose my question is, how are you guys seeing the Alumina market on a short to medium term? And do you think -- are you sort of alert to the possibility of cost curve flattening there?

Yes. Look, maybe a couple of things we'd say is, we obviously sit down every couple of years and we sort of put together what we think the price forecast is going to be for our key commodities, I should say every [ another ] couple of years. What I was going to say is our view on alumina probably has remained unchanged for a number of years.

And that has what we're talking about, the movement of refineries from inland to the coast, the ramp-up of production in bauxite out of Guinea. And I think, in particular, the developments that we're seeing in Indonesia are probably going at the pace that we expected them to go. So we haven't shifted our medium, long-term view on alumina. We do have a belief that historically, we showed it on Slide 33 in our pack, you do actually see alumina price can be highly volatile depending on supply disruptions, which we have seen in 2021, which we've seen in 2024.

So I think the market, while there is some new production coming, I would say, look, today, it just takes one of those projects to fall out or to have a supply disruption and you actually see quite a spike in price. Now to your point in Guinea, absolutely you're seeing some new licenses being put out there, but some of them are revoked licenses from people like EGA. And it's forcing while only a small amount, they are forcing some further processing in country, not material, will probably shift the needle.

So look, I would say our long-term view on alumina probably hasn't changed in the last 5 or so years. It is kind of playing out how we expect. But I guess the one that I will watch probably most closely will be more around developments in Indonesia. And the challenge we have ourselves is can they do in alumina, what they've done in nickel. We're not -- we think they'll get obviously more developments in Indonesia.

We think there'll be some capital compression, not the same as you see in China, but some capital compression. But I think compared to nickel, it's quite different in terms of they don't have the ability because of how you mine, it's like large-scale gardening, you don't have the same capability to build large industrial parks, plus you have to deal with the BRDA/the red mud. So I think there are some complexities which will limit scale in Indonesia as well.

[Operator Instructions] Your next question comes from the line of Glyn Lawcock with Barrenjoey.

I know you've given us a lot of detail around Mozal and the numbers and everything. But just -- I know it's only been a number of -- a matter of weeks since you put out your announcement and made all the disclosure. Has that forced or changed discussions you're now having with the government or too early to say?

Look, I think, it's -- as you'd expect, it's ramped up the discussions and a bit of rhetoric on both sides. Obviously, our job is to sort of keep that in check. We understand in the end, the government of Mozambique needs to make a decision about what it wants to do with its power.

I also think the South African government with their connections into Mozambique, one of the largest trading partners, but also there's over 209-ish-plus companies that sort of provide services to Mozal. So there's a lot of connection.

There's a number of parties involved in this place. We obviously have ongoing discussions with the government of Mozambique. We also -- there's some work going on we know now between the government of Mozambique and the government of South Africa centering on Mozal. So there is some catalyst, if you like, for discussions and movement. How that plays out, Glyn, we'll have to continue to watch and see.

Things don't particularly move at a fast pace when we talk about a contract expiring in March next year, that feels like a long way away if you're dealing with short-term issues and coming out of civil unrest and a challenged fiscal. So we continue to work with the government, but certainly not making material progress at the moment.

Yes. All right. Well, good luck there. I know Sandy talked a lot about operating cash flow, but I look at working capital, you unwound a lot of it in the second half, but still ended up overall negative for the year, negative the year before. Are we at a balanced state of working capital now, do you think? Or is there more you can do over the course of '26? And will we see that typical build first half, unwind second half again?

Sandy?

Yes. So look, I do think other than the GEMCO finished goods, the Australian manganese finished good inventories, we are at normalized levels, Glyn. So good question. Definitely seeing that normalizing this half. We do expect GEMCO to unwind though. So obviously, now we've got that Wharf up and operational, and we are putting all those volumes to market.

We do expect to see that unwind in the half. Not anticipating a particular trend line around sort of material shifts in what we're holding. As you know, that is quite variable just basis the trade flows that we have in the business and just the nature of aluminium in particular, which is just a high cost inventory. So when it clears, you can see quite a bit of volatility in the working capital over time...

One of the most congested ports in the world is Richards Bay. And we continue to sort of watch that with interest.

Yes. All right. And any comments, Graham, you'd like to share? I mean you talked in detail about alumina, but there's the rest of the business at aluminium level. Does that view change there?

Look, again, I wouldn't see we'd have a dramatic change in our long-term price. I think the thesis that we still talk about, obviously, is that cap coming into place in China, which we continue to see. And if you think back over the previous couple of decades, ex China's growth has been something like 20% where the vast majority of growth has come out of China, whereas if you look forward and you sort of take it out another 10 years the other way, it's switched now where you probably need ex-China supply to grow about 90%.

The challenge with aluminium has never been about demand. It's always been to be cheap, low-cost subsidized smelters in China. That dynamic we feel is shifting, which provides price support.

There are no further questions at this time. I'll now hand the call back to Mr. Kerr for closing remarks.

Okay. Thanks, everyone. I appreciate you taking time today. We know it's a busy day. But look, in closing, we have continued to simplify and improve our portfolio. Our operations are performing really well. Our balance sheet is strong.

We have a pipeline of base metal options with the potential to underpin significant growth and our unchanged capital management framework is designed to reward shareholders as we capitalize on increasing demand for the minerals and metals needed for the global energy transition.

Again, thanks, everyone, for your time today and look forward to seeing you on the road.